Too good to be true?

Goldman's report was widely ‘whisper’ anticipated and it only says so much about its own savvy operation ( hedge fund), which does not represent anything from our economy.    Day opened in a good mood follow through as indexes were up slightly, it's a pretty decent showing given the kind of exuberance we had yesterday and it has carried into AMC.  Basically, it's all eyes on Intel tonight!

To make it simple, ‘Chipper ‘ INTC  did not disappoint!   They reported revenue of $8.02 bill and eps of $0.19/shr with a gross margin of 50.8%.   This easily beat the consensus of $7.28 bill revenue, $0.08/shr eps and 46.4% of margin.   To make things better, they guided for a seasonally stronger 2H.   This report looks outstanding and deserves the kind of after hour action it receives.   But,  how does it impact the trading environment?    Being one of the big tech bellweathers,  it certainly affects all of the hardware and software companies out there.   Here's the caveat.   Despite this spectacular number it doesn’t jive yet with evidence of PC demand.    One plus one doesn’t equal two for the rest of the PC/Processor market.  If anything this part will curb enthusiasm at AH’s SPX highs.   End demand is not evident yet in the broad marketplace and enterprise market is quiet.    "A little improvement in consumer spending" was in the CCall,  we`ll see how far "a little" can go in a market wanting growth/ spending or will this story go into an inventory (replenishment) correction file.

Still, we are excited to see INTC kick off the earning season with a bang because it generally helps sentiment.   Having said that, we have always believed, going into this quarter, that the techs may potentially have the best upside surprises from their reports.  We definitely don't expect the same kind of potential from other sectors.   

As last Q…as we go through earnings season , we will compose a Shadow list ‘B’ of reporting stocks that may become inclusions into list ‘ A”.   Basically, it’s a preliminary list, we’ll see if a DDRX BWY STAR STEC ARUN  winner emerges as from last Q’s list.   We’ll add ININ  today, a little software company that came out with decent earning and great reaction.   It did have a pre day move into earnings after an analyst note, so it has 2 days now of gains to digest, so we’ll wait here for consolidation. 

Overall,  we think this mkt may have hit resistance at SPX Futs 911 AH's, which translates to 917 SPcash approx.   Even heavier resistance comes around SPX 920/925 area.   It's way too early to speculate we'd break the latter.   However, we have to remain open minded as this market can trade in a very emotional way  vs. technical  this earning season,  but the reports would need to continue and come in a feverish pitch from the big boys.   Bottom line, the bar has been set and we'll have to see if other companies will follow suit.

...little blue pills

We’ll keep it tidy into Friday’s trade as there is not much we can say,  we haven’t said the past week or this month at lows.  We’ll ignore the Roubini wire cross (later rebuffed) that was credited with the 130pm lift off.  We saw other positives earlier (neg headlines..NOK EPS  shrugged off, CIT  noise again muted) and just before the wire cross (FDX  exploding over 200ma).   Besides,  what anyone says at this point is irrelevant to us!.  Why?.  We’ve believed one thing and we’ve stuck to not being held hostage since NFP report that brought down the house of green shoot cards and pessimism spread like wildfire..we said starting July 6th…“NFP…only a cautious bump as the world’s economies are not held hostage by one U.S payroll data point.  The manufacturing output bounce is still the focus with earnings around the corner to potentially carry weight for the recovery”.  So, nobody can say anything about recession, recovery blah blah…to change our minds and how to trade in the meantime.  In many respects, our 'The Premise'  trading methodology is stll holding true from late March.    If we had swayed any with the market pessimism at/near July lows, we wouldn’t have said what we said in (DJIM #28) and therefore, prepared for what has ensued this week.

A side note...It’s interesting and a good exercise to go back now to around July 6th and see how things played out… a standard correction of 10% on the dot to 869 the day after we noted such, the 2nd re-test of 869 mid day soon and that ‘Golden Cross’ thingy.  You only learn from experience as with anything and we can only say that we/you will and always respect some of these historical/ technical lessons 1-10-20 years from now.   One thing is to read hundreds of pages on trading, another is to experience to them first hand!.  Speaking for myself (Demi), I’ve never touched a trading book,…just picked up pieces off the street you can say, including off Jon and BT.   It’s the StreetSmart's trading book you can say, you’ll probably become a better trader off a psychology book(s) than any trading book(s).

So..what we’ve seen this week is corporate reports not  being hostage by a single July NFP report.  Why would they be?  Think about it logically.   The reports keep coming in solid as witnessed AMC today.  It’s been a steady stream.  China GDP  didn’t slow down last night because of NFP, did it?.  The breadth of the market has been a key to watch on this move, 4th impressive ratio today.   Performance anxiety(PA) pill is working!!.  Strong equities= weak $USD= commodity linked trade (even though, we think coal linked are due for a whipping down the road because of energy divergence).  Of course, China data helps commods as well.   Only slight negative is the move in afternoon was a SPY-ETF's-SPX fut motivated move with little participation from individual equities, but on the other hand individual stocks should digest some of these gains.

Oh boy...would we love a pause, a pullback now, but the market is overdosing on those little blue (PA) pills and wants to go all night and day, so who knows!  We'd continue to love our techs on some weakness from last Q..notably STEC  boom boom today..RVBD, STAR.   So far in this Q, ININ , didn`t need to consolidate as it's got caught up in the mkt tape, we had CSIQ  in forum premarket at 13 pop 8-9% for a quick trade.   HITK , only drawback is its a pharma and those usually dont' have a earning momo' shelf life, but in this market going forward, you may well be able to sell " **** in a shoebox" and get away with it.   We'll see.   Anyways, we're going to be more selective now (go earnings plays forward or scattered fast trade ideas like CSIQ) and go bigger in size on less plays to take advantage of the exuberance.  This way any real market quick downturn here will not include our cash profits.   Simply,  if we get a small cap earning surprise, it should not matter to that stock if the market is down 300 pts at the open or AMC when it's report is released.

Unfortunately,  if mainstream media-analysts get bullish now, we'll have PA investors jumping on the bed, climbing, chasing the SP names and so who knows how fast this emotional trading takes to break 956.   Most importantly here to us is the mood has changed!!.  This is all we ask for going forward as summer lows might not even be 869, but higher at that 884SPX futs level we busted the other day.  A good mood will pay dividends to what we eagerly await and that is the best part…micro small cap earning play possibilities, which will slowly start to come out as we go into July end.

Pints on us!

The solid earnings calls keep coming and the SPX keeps trotting along.  What else is new?.   To tell you the truth, unbelievably the short term outcome of SPX near 2009 highs is of little consequence to us at this stage.  Yes, that’s all the investing public is talking about as we close at a SPX‘09 high, we admit to hardly even glancing at SPX, SPY trading today.   All we see at DJIM is how well our shadow list is behaving and preparing for opportunities ahead for more Pint sized earnings on top of last Q's winners.   Okay, maybe not looking at SPX had to do in part being occupied with watching our premkt HGSI   forum post call at 3.5mln shares/ $10 that sprouted to 123 mln shares traded and a 25% gain from those levels.   But seriously, what excites us is not if the SPX breaks 956 intraday day high this week, but what possibly lies ahead as far as earnings are concerned.  What these solid earnings in the first week are telling us is we are going to get some nice EPS winners in the next 2 months.   Yes, 2 months because most Pint sized caps report for Q’s after all the Keg size stocks report.   Plus these Pint sized caps will have 1 to 2 months of better economy than the ones reporting end of June Q’s now, so earnings may be right out of the park!.  Also, remember half of these don’t even provide guidance which only makes an excellent past Q of relevance.  We should have much more than the (ININ  HITK ) so far this Q to play.

Back at DJIM farm today,  the  drunken’animals were running freely…just yesterday we said…“Even last week, we had past DJIM shadow-listed Q plays putting in new highs at some point ( STEC STAR  CVLT EJ   )”.   Today, we had a few more DJIM shadowed earning stars light up the sky, ( GMCR  PWRD  DDRX ) for 10-15% and some with new highs.  Nobody on the web can be beat that  "Fab 7”  for a few months now.  Also, if that’s not enough, recall in a Journal and later in Forum(06/24) we suggested a pre earnings move will probably come to Casinos after a member asked if it was a time to buy back than.  Well,  with earnings in a week or so these names eg  LVS, WYNN  are acting like earnings winners the past 4-5 days as prospects improve (may need a rest though).  

Even if the market falls into total darkness from something other than a solar eclipse, we have a ‘Premise’ here that's been working overtime since March and an easy to follow formula to stick to going forward.   Note, the "BAR' has been set high for the Keg sized companies by INTC, GS etc., so the big boys ahead will need to shatter numbers/guidance going forward for a great reaction.   On the other hand, if one of these misses it will lost likely be a very nice short quick intraday trade.  The good thing is our pint sized  earnings focus has "no bar" to play in.   Also, the probability a herd momentum mentality has set in and pints are the best way to cure any performance anxiety over one’s stock portfolio in years past.

Geez, just got all thirsty..luckily it's almost noon in London UK!. 

Cheers'

Bull Eclipse

As the other side of the globe is enjoying a once in a few hundred years event of a major Solar Eclipse, we couldn't help but wonder if the stock market, notably Nazzy days streak not seen for a decade), here is enjoying one of the rarest moment as well.    Yes, we are up again and perhaps it's getting a little tiresome?   Not a chance! :)   The only type of traders who are tired of our current rally are either in shorts or are in cash.    In fact, by visiting a few Bear blogs, you'd be able to find a communities of traders who are filled with disgust and anger with this 'Bull eclipse'  over their Bear dens.    Fortunately, they are the minority at this point, many are just a furball of their old selves and others are in the closet crossdressing as we speak.   We admit that we often visit such blogs as some of you seem to as well.   We do that not visit because we are looking for short plays or trading ideas.    Instead, we simply visit those Bearish sites to get an idea what them Bears are thinking and what their case of a trading argument is.    If a Bear is considered a Bull's enemy, then we have to understand our enemy to the fullest in order to beat them in this game.    Frankly,  it's been a scene of chaos at the Bear sites lately.    Many of the da’ Bears are self proclaimed very good technicians who make mince meat of the naïve or inexperienced traders looking for an edge.    However, at DJIM, we always believe that charting is a supplemental, extension to trading.   Understanding the big picture and understanding the market mentality, individual niches is much more important than looking at charts blindly for a trade.   Most importantly, we’ve always believed the first thing you need is to discover a good fundamental stock and than you chart to your hearts content as a guide for R/S levels.   This is where most of these Bear technical places go array.   Most only look at charts to begin with, probably night after night going over scans alphabetically till they see something that gets their Fibs excited.   They don’t care what stock ABC business niche is or care if eg.earnings are tomorrow.   We’ve seen humorous things such as going long a MOO etf trade, while shorting individual Chem fertilizers stocks and /or the corn futs in the group because charts painted such a picture at the same time. 

As we have been saying, what happens few months from now is anyone's guess.   Bears may argue that we may eventually head for a nasty downfall when all of the things unfold.    This may potentially happen, but come on, seriously, what does a hypothetical theory have anything to do with what's happening NOW?     It doesn't take a genius to figure out what's happening with the market these days.  ASK..Goldmans , Credit Suisse calls this week.  CS actually has just reversed their call into equities from their June call !.  You don`t see CS often in the news like GS-JPM, but believe us they are an integral big player in the marketplace.   

Yes,  the market has been up for more than a few days too many and we may very well pause here for a pullback.   So what?  The Bulls are in charge.  This current rally is the result of people believing and acting that things are improving from credit to corporate.  Yes, the consumer in US is behind, but as recently quoted here, "Build it, he will come".   Some of the major companies we know, have come out with some reports that handily beat the expectation and guided well.    We have discussed this "beat the bar" effect during the last few days, so we are not going to go there again.

Today's EPS winner has to be JDAS  alerted AMC yesterday!   We don't post # reports regularly here because this way you do some of your own DD before making a trading decision.   For those new or inexperienced this is the only way to learn/ decipher and understand what looks like a good trade and what isn't in the future.   We just have to say that the report is that good and that's the only lead we'll give on most plays.    As far as DJIM's strategy goes when it comes to earning plays, we are looking for those companies that delivers a big and positive earning surprise.  Unfortunately, if you just go on a 'headline' number wire cross you will sooner than later be finished as a trader. It's not that simple, you need to snoop around a headline number.  JDAS falls under the category and so did, notably GMCR STEC from last Q.     These are the best kind of earning plays we like because not only they are small enough to run up, they are also liquid enough because many institutions will own them.     On the other hand, eps play such as DDRX, BWY, ININ, HITK are always welcome to our list because they always have the "potential"  to pull a big one due to their float after the discovery process unfolds amongst traders.   In the case of DDRX, it pulled an amazing run-up.   In regards to MAIL post today, due to its thinness, it  may or may not do anything.  You don’t buy a stock like this to put in your top 5-10 holds at anytime.   Just like last Q reporting, we are creating a list of plays to keep an eye on (ININ HITK JDAS MAIL this Q so far) and hope for a portion to be become winners like last Q’s list.    Some will fall off the list as we progress, new ones will be added and some like STEC GMCR STAR, we’ll all be trading into the next Q.    These new ones, we now can follow on the charts, keeping an eye on such things as 9ema pullback to possibly buy again or for the first time.   In addition, we are also paying attention to 'group' earning plays.   A specialty group from a particular sector or country may get some hot attention if things turn for the better.   China plays fall into this group and as well as any commodity groups we might trade. 

We had a caution on commods/machinery trade today after CAT  up ~12% premkt pulled the group (JOYG BUCY ) up premarket as we may have “Johny-come-lately” playing here and so we may get sell the news after what we saw in China.  It didn't spill into the overall market, but, note banks( regionals) are not helping this market to break 956 roadblock today.  We can`t have BIOTECH outperform these last few days, most likely if a PB occurs here it will be because of Banks-Commods noise here.  

Most of these 'Machinary/Industrials' gapped and all lost roughly ~$3 off top as seen by JOYG chart below.   As a whole the commodity linked groups/stocks were mixed, notably BTU  (-5%) pulled coals group.   Considering, BTU is top of crop, some parts to their call will seemingly weigh more on other coal stocks down the road than itself.   Tomorrow morning is quite important to these groups as a number of each groups leaders report, so we remain patient here, but not confident any individual and/or group earning plays will emerge,  more importantly to us is what they say will give us signs for the market.

Bottom line,  there's many potential earning surprises from pint sizes down the road and we have to absolutely capture all of them.   It is our mission and our goal for this quarter.    This market may be a little overheated due to market's enthusiasm with earning reports from big companies.   If we get a pullback in the coming days, we'd be sure to get the latest, including last Q's earning plays on the cheap.

More disappointment...

Yes, don't be fooled by our journal title again!    On the contrary, this market has been anything but a disappointment.     We had a "mild" pullback early on into the middle of our 972-966 intraday note for a bid support.    It's considered mild because we really haven't even seen this mkt down more than 7 or 8 pts on SPX intraday in quite a while.  Believe it or not, today’s -2.5 pts SPX decline was the biggest in over 2 weeks!!.  So when this mkt was pulling back early on, we were excited and hoping that we may be able to get some stock cheap for once.  But…

Here comes the disappointment.   Things just don't seem to stay "low" for long these days and you only had a chance for a handful of light dips.  We had plenty of reason to dip (notably CC #), but long demand came in the form of an underlying bid.    Again, this is becoming a normal phenomenon with this market these days.     Little rants aside, this market has once again exhibited the kind of strength that is typical of a strong bull market.    Dip buying will be the game!   Plays like HITK SWI  don’t even give us a chance pause before they inch higher,  these names actually were climbing to 5-10% gains and new highs while market dipped.   HITK, for some reason, turned out to be the best runner among the ones we've covered, so far.     At this point, we do feel it may needs to settle down a bit.    We still have many reports left in the earning season and we won't be surprised to see some exciting reports/reaction surface as a result.   Currently, plays like JDAS  ATHR  ININ  are all developing nicely.  If Nazzy/ Techs come out of their oxygen tanks for some follow through this week these names should benefit.  If there's strength that accompanies a breakout among those plays, we won't be hesitating to chase higher aggressively by adding to positions.

Bottom line, we are pretty choosy as far as plays are concerned.  We do have plenty of earning plays to work with and we'd imagine there's more good ones coming out within the next couple of weeks.   For now, lets just enjoy what this market is offering us.

...NCH for SPX coincides with 10+ earnings plays

We'll start things tonight with this little biotechnology company called Vivus.  Some speculation into our diet.　Some of you may have heard of this company at one time or another, but we are sure that most of you have heard of this name tonight. What's so special about this play other than the fact it's finished up 70% off 75 million shares? Here's the thing, take a look around you and see how many of your own relatives or friends that are overweight? Ok, we are just going to stop right here. Basically, VVUS  came out with their phase 3 trial results on their obesity drug Qnexa showing significant efficiency in reducing patient's weight. According to many analysts, they've set the golden standard for this type of drug. This ought to get people very excited because at this point, at little over $800 million market cap, there sure is a quite a bit of room on the upside considering also this was stuck under $10 for years now. We have seen it with DNDN, and we have seen it with HGSI. In our opinion, this VVUS story is better than both of other stories. Therefore, we started a somewhat sizable position today and will continue to add off any dips. One thing about this company though, is that it's also heavily followed by institution.  From what we hear 'holders' were adding longs even with 70% lift. Once the initial fever is gone, the play will trade much more stable and have the potential to move much higher. We are currently treating this one as a longer term play for our portfolio.

Now onto the market!　Ok, here's the thing, it takes not ONE, but TWO attempt of correction to make most people realize how powerful and vigorous this bull rally is.The most recent pullback, despite that one day massive volume, is over with on higher lows. Right now, we are expecting new highs to be breached on any given day now. As we said Thursday night, it will be inevitable once ~1020 reached.

Many plays on our DJIM earnings linked watchlist screen were showing some impressive individual action that are moving in tandem with the index. Most impressively, COMP, or the technology index has broken out today. 　This strength is displayed throughout our technology linked names, including many bolded into yesterdays trading, CTSH +4% , ARUN +4%, ROVI +2.5, STEC +5% ININ +4% . Also making news highs on our list including  EBS +11% EMS CTRP WYNN PWRD FSYS CVLT. So, is this the type of market worth chasing at this point? If we do break SPX 1039 , we think it's worth every bit to chase this market. When you have a consecutive blowout report like HITK (we bought some) had today, its making alot of players to look forward to the next round of earning season. 

As far as commods', we've turned our eyes from coal to steel as SLX looks to breakout.  Still, we'd caution at this stage for the whole group and keep positions small and on a tight leash to turnover.  As we saw late in day, they can rollover quickly as the USD rallied off lows.  The correlation is very strong now between USD and these stocks.

China  linked stocks, slew of key data coming up Thursday night.

All of a sudden, Sept. is looking to liven up trader's screen for a change. If August proved to be somewhat boring, we sure aren't getting any of that drowsiness from the market so far this month. Bottom line, we are looking to add more stuff if we get some mini dip opportunities next few days as the breakout of this market just seems imminent.

..Here we go...

Since the NFP report on October 2 and a test of the gap 1016-1018,  the market has seemed ‘bullish’ towards this earnings season or has this rally just been a function of the weak USD ??.   Today, we got up all the way up to 1079, a point off the Sept intraday high with inconclusive  evidence this high is deservingly so, if based on earnings expectations. 

So far, AA  beat forecasts but its ~6% pop was met by sellers (the stock closed up ~2%). RPM  struggled despite beating and raising.  According to Barron’s, “in recent weeks, analysts have raised their estimates for 641 companies and lowered their marks for 383, bringing the positive-to-negative differential to 258 companies, or 17.2% of the S&P 1500.  That's the most bullish in nearly two years. 

Once again we moved higher on a low volume day (under 6bln),  ES traded about 50% of its 10 day average,  as investors wait for week 1 reports which will will be dominated by tech and financials. In tech land, there will be a slew of semis (INTC, AMD, XLNX, ALTR, CY, FCS, ASML, and others), as well as the first major enterprise firm (IBM ), and internet company (GOOG ). In financials, there will be only a few names, but they are some of the industry’s largest (JPM ) starts things off on Wed, GS/C  come Thurs morning, and BAC/GE  are Fri before the bell).  There will also be some important health care companies (JNJ on Tues). 

Interestingly, while we wait for big name earnings, a few DJIM's EPS' were in the headlines AMC with earnings related reports.

ININ – preannounced earnings; sees revs $32-34MM and EPS .28-.31 (St was .15 and $31MM). "Product and services revenues contributed to results for the quarter, both increasing compared to the same period last year," said Interactive Intelligence founder and CEO, Dr. Donald E. Brown. "We received two license orders that were each more than $1 million and eight other orders each worth more than $250,000. Company results were due to strong revenues and continued expense
management."

BWY   acquires BLL’s plastic pail biz, raises guidance – Ball Corp announces sale of plastic pail plant to BWAY Corp for $32MM. BWY guides 4Q and FY adj EBITDA and EPS to high end of guidance range provided in early August; also sees adj FCF exceeding $50MM vs prior guidance of $46-48MM