Good ole days ...

At least, judging from the performance of this market during the last few days, we got a glimpse of what the market was like back in the good ole days.   No matter how you see it,  the trading lately has been just crushingly painful for the bears (shorts).     Maybe, they are also responsible for this never ending rally we are currently enjoying.    We closed at SPX 833, going out near day highs.   Everything except the financials rallied today and the action was pretty broad based.   It's great to see others step up to the plate and lead today.  Transports broke through 50ma and the $SOX SMH  passed the hurdle noted yesterday (good signs, now hold!).   With regard to the financials, we aren't worried a bit because the monstrous gains they had during the past two weeks really need to be cooled off a bit.   Today the best performers of late and those that surged late yesterday took the day off, some profit taking, some rotation into other arms such as Asset Managers has been seen lately.    Even today's alerted stock ICE ($77 to $81 day high) benefit from recent headlines as they will eventually play a major role in the CDS clearing markets.   As long as the financials consolidate in a good range, everything has a chance to go up.    This is pretty much the underlying theme for this market lately.

At this point, we don't really care how high it can go or how much longer it'll last.   Until the market sentiment changes, we are staying on the long side.    Believe it or not, for the longest time, it felt this market had unlimited sell supply and therefore neverending selling pressure.    The last few days felt money is being poured back into this market.    We really haven't had such "late day rally and take out day high" kind of action in a long while.    For this market to demonstrate this kind of behaviour in spite a recent 25% gain already, it's just remarkable.    This is where we have to make up our mind and perhaps change our mentality towards a more neutral, if not a somewhat bullish stance on the outlook for the remainder of this year.     Financials so far have been stabilized as a result of more money being put into the system.   It may not be the best solution, but at least most of us agree that given time, it can work.    With recent news that home sales are picking up slightly, that's also another positive sign for the bulls.

Commodities, all of us must be loving them these days.    Everything from FCX  to POT  to CLF  are having a great run recently.    We already discussed this in detail last week on why we like this sector and this week has been proved to be nothing short of great action.    If you look at the 6 months charts on plays such as MOS MON POT (BHP for POT??)  *( March 31st is a very date/ USDA supply and demand planting preview), OIH or the index itself $CRX,  it's as if we are on a verge of a major breakout.    The potential is there and we just have to wait to see how it plays out.    However, we do have to keep an open mind here because alot of the news lately has been quite bullish for the sector.    If the breakout is going to happen,  now is actually a good time.

Approximately a week into April, we'll officially kick off the earning season.    This means we'll get a more in depth look of the corporate earning front and as well as gauge the investor reaction off those reports.  We have a strong feeling that we might actually get a few nice earnings winners this time around.   Considering how bad equities have been beaten down, we might get a nice surprise or two and ignite some serious buying interest.   

A few days still left till Q end and todays broad action was a sign of performance anxiety from the 'Whales'.

Oh yeah, speaking of good ole days, today's Solar frenzy  is assuming the best, important details are missing in the China paper.  Also, a China subsidy would not be a revenue pop for US based solar co's as it would favor 'in- house' co's.   A short play possibility here as firms most likely to knock this.

a healthy tape..

No big downside follow through, another late day buying, VIX down again. (underlying bid prevails again ~898-900).   These kinds of end of day market commentary ought to be familiar with us by now.   When we breached SPX 900,  it was kind of a quiet moment where people wanted to see if it's going to open a flood gate and sellers drive this market down to SPX 890 range.    Perhaps, in a day or two, we'd be able to see SPX 875 and the inevitable pullback will be done with.   Unfortunately for many,  markets behaviour is hardly conventional for awhile now.  Banks- Brokers, still resilient and absorbed enough that short covering took place in the afternoon before abating into the close.  Not surprising here, the absorption of capital raising  (near $40B in a week) was the blame game for their weakness today.

Well, to sum up, today,  we had another disappointing follow through from a Bear's perspective as selling was contained .  Since April,  we just haven't had "back to back" nasty down days.    Today,  it's no exception.   There's really no real news to pinpoint yesterday's drop nor today's afternoon buying.   In other words,  it's just consolidation within this bull run with profit taking/ short covering taking it's course.     Whether this is a bull market rally or a bear market rally, we don't really care at this point.    All we know is,  it just feels like there's still quite a bit of upside left in this run.    Sure, we still need some positive news/catalyst from economic or corporate front to power this rally further.   From what we've seen the last few weeks,  market has been getting just that.   Yesterday, we alluded to tech analyst meeting/ conferences upcoming and AMC, we had headlines from INTC's  CEO saying the quarter is going slightly better than expected, thus raising guidance.   This is just what market wants and needs to hear, especially the techs which we noted last week as a concern. Today's 30+ confirmed this, hopefully more positive noise like INTC (IBM goes Wed.)

We have many recent earning plays in consolidation mode these days.   Some like NEU, PEGA, ICE may look like they are done consolidating while others are coming around slowly.   In either case, we just don't have a shortage of possible sector and / or individual plays these days.    Whether we are buying setups that are on a verge of breakouts, or setups that are on good pullbacks, or throw in a sector move like Agri. today (*Crop data report), this is a perfect bull trend, still!    What we are hoping for is that this market can spend a little longer consolidating.    At this point, it's not that important whether we hit SPX 890 or 875 as the potential low, we just want this market to trend up in a healthy way.   Last two trading days have been healthy, that's the bottom line.  

Right now, the tape indicates a rotation into defensive sectors (HealthC, staples etc) and away from High beta groups eg. (Casino's /Lodging= drop today).   Media is trying to harp this,  including Briefingcom, doing it's best  but we question rotation at this point in the game!.   This is an Armageddon trade,  we're beyond that!.    We just need consolidation from Tech, banks- brokers,  it doesn't mean a switch into defensive names!.   Look at it this way,  if you were a MF investor would you be calling your broker up now to switch into defensive sectors in what is most likely a start to a Bull market.??  We'd hang up on you;)

We have a Retail April sales # tomorrow morning which can potentially give this market a positive surprise.   Beyond that,  the current tape action is about as good as it gets. 

Away from the spotlight...

Basically, all of the action today after a triple play rally is not from the usual movers and shakers ,  instead it’s from our boring listed  plays..old (commods’ ) and new (EPS’).  The index may have closed flattish and financials rolled over naer close,  but it's otherwise a pretty swell day around these parts.   The biggest story of the day occurred AMC.   We are referring to the gigantic offering from BAC.     Here's the eye catching number, 1.25 BILLION shares at an average price of $10.77/shr were issued/ sold by BAC.   Over 800 million shares look to have been sold in a large block!!   Wow, this is just something we don't see that often in our lifetime.    Will this massive offering give some more firmer support to the market?    After all, traders were worried that BAC might have trouble raising money,  but it's just not the case.( now ½ done to 33.9 capital plan).    We have to view this as ultra positive    It wasn't a big deal for GS, MS or WFC to raise money,  but a massive secondary raise from BAC(somewhat inferior quality bank), a 10% discount to the daily avg since announced seems to have not been a big deal either.    As much as you'd think this would suck up a lot of cash from the investors, this has to be viewed as very positive development for BAC, the financial industry and this market in general as someone took a huge 2/3 stake of the offering.   

Now..the real action today was from a lot of our recent earning plays and the group plays.    We’ve been highlighting buying pullbacks awhile now as our 'Premise' holds.   Recall, we said many new plays are toying around 9ema, of course this would include most of our plays as we've been in a 5-6% corrective market.  eg. BWY DDRX NEU GYMB  FSLR ICE CTV  LIFE...In addition to the earning plays,  if that's not enough, we also have commods’ feeding off the weak $USD unwind,  GNK JRCC SCHN X  and agri.(POT, MOS ) since we *highlighted crop report last week were gaining more ground today.   

Earlier, we also had EJ , a former gem here, which guided pretty nicely, gained a trade spot quickly on to our playlist.   In fact,  it seems many of the old Chinese plays are heating up here again.    ASIA  SNDA  TSL.. are just some of the plays acting well.   Remember, we have CAF  to basket a further move here.  SOLF  also reported a not so bad quarter and gained some positive reaction today from firms.   This may bode well for solars STP and TSL reports coming up.   Also, NTES SINA SNDA are other China reports shortly.

Also side market note , CY (semi) had the most bullish comments from the often mentioned ‘tech conference’.   Conclusions from conference are more positive than expected and we should see the space continue to get a bid this week.    ADI (semi)had a good report AMC

On the other hand, we also have runaway earning plays like ADY  STEC , which we are patiently waiting for a pullback before making a potential entry.  As we have mentioned before, this market is full of good trading plays and we really appreciate a slow trading day like today.  

Technically, we are currently range bound  (876-929) right now heading into a holiday week.    There's no telling how the rest of the week will play out (FOMC minutes tomorrow), but we do like the action in many of the individual plays on our list going forward.    If this market can nudge higher, our question and answer to “Sell in May or will it be Buy in May?…was correct at SPX 872 as it‘s become a stock picker‘s market ,  dominated by earning plays churning this market higher. 

http://www.djimstocks.com/djim-journal-09/2009/5/1/sell-in-mayor-will-it-be-buy-in-may.html

DJIM #26

The only trepidation you may have in trading this market is if you’re consumed by technical analysis of the SPX on a daily basis in making trade decisions.   If this continues to be the case,  traders will continue to miss opportunities heading into this earnings season.    Fortunately,  since late March on TSY news from the FED,  we said we’re going back the DJIM basics and going back to individual stocks/ sector picking concentration.  Back to our roots, yep.. back to the days of the Swamp with Lizard King and eventually as moderators for the trading forum in Rev Sharks (www.sharkinvesting.com).    Up to that FED intervention almost everyone was consumed by and fixated on the daily activity of the SPX, including us,  as long opp's were few and far between.    Many traders have stuck to this SPX trade and have missed a beautiful run in individual stocks/ sectors.   The reason we bring this up now is it has become tiresome hearing this is a boring market with little chance to make money due to the trading range last 2 mths.     Besides putting on the commodity linked stocks trade,  we thought if the market continued to act right,  enthusiasm would come back to micro /small caps, focusing on earnings.   Well,   it definitely did as the BWY  DDRX  ARUN  GMCR  ADY  EJ  CVLT  ICE  STEC  EBS  etc. dominated our DJIM platforms with big gains during the recent Q, while supposedly the market produced nothing but a chop trade.    What we’re saying is the market may become more boring in the next 2 months for many traders ,  but we’re looking forward and excited for new opportunities as companies begin to announce earnings for their June ending Q’s.    If things were better for the names listed above last Q,  we expect a slew of new stocks to come on radar with better bottom lines from a recovering economy.  

Until July 13th or so,  you should be drying up some powder in readiness for new stock buying.  You don’t want to be holding stocks that are losing steam or holding any losers if it takes up buying power.  You want to have cash on hand for fresh meat and /or continue for now to be very selective in buying. Your trading proficiency is not measured by how much trading you do,  but by your profits!.   We don't expect any fireworks until next holiday weekend,  we probably did not trade more than 3 or 4 stocks last week with PWRD, DDRX  heading into the week.    It made for a long week,  but at the end of the week it is only your P&L that matters.