Joy and Pain...

Yes, that pretty well sums up the order of the trading day.   It started out with some positive bias thanks to a couple of not so bad economic reports (ISM) and other things.  The other things being the BDI and material sector (China PMI#).   Market was able to run up to SPX 850 before things started to get rolled over around mid day.   Buyers just never chased the rally and we failed once again at 850SPX. The positive news soon was overwhelmed by bad news, what else is new?(earnings hitting the food stocks, uncertainty in Washington and BAC “nationalization?”, all played a role in the late day swoon.

Financials, we had some interesting stuff going on today as names like GS/MS are going the opposite way of BAC.   It just feels like these mega financial behemoths are going to have a tough time compared to the simpler and less complicated ones.   Bank of America, its stock action, is following Citi's path closely these days. This is not good.   It definitely adds that more pressure to those who are drafting up the next bank bailout plan.   Right now, nobody really knows what or when or how anything will be done with regard to these financial companies and their toxic assets. One thing looking more likely though, is that the equity holders will take a big hit whatever Washington has up it‘s sleeve.   We want to stay clear of this sector for the most part, but we will be looking at dip opportunities on the GS/MS/NTRS.

BDI, oh my! ...You either love it or hate it depending on the side of the trade you are on. We were fortunate enough to add GNK  to our books since we alerted a rotation watch on Jan 30th for the sector as the BDI reached October highs.   This was a significant level and timely as the Index has exploded since.   Yesterday, we alerted a follow through- spill over day is a high possibility and today it all paid off nicely by the opening bell.    All of the material stocks all went up on the analogy that if BDI is up (besides China PMI), then the demand for many basic material has to be up as well.   At this point, it's just way to cute to even think that way.   There's just no actual data which says demand for iron ore, or phosphate or any other basic material is getting stronger from Asia.Part of it is because of the end of holidays in Asian and also because of setting up for pricing.   It’s a murky picture in regards to the politics involved.   If the demand is for real, there will be plenty of opportunities to get back in down the road.    We feel today's a good day to cash out stuff in this uncertain broad environment and the fact BDI is up 90% just this year alone.

AMC, we had a couple of interesting reports that will grab market's attention tomorrow. CSCO' s report isn't too bad , but its April guidance is rather disappointing. It will undoubtedly affect tech sector in general, but we feel the effect may be somewhat muted. None of the big tech names have in fact said good things about next quarter and they all have traded off their lows.

Visa also reported some decent numbers and stock is up in a healthy amount in after hour with MA  in tow.  Since MA reports in morning, V’s fate still lies there to a certain degree,  but if you went with our alert,  you'll probably take nice gains off by report time.

Bottom line, all of these earning reports will lead to the most important economic reports of the month on Friday, the job report.   We can only imagine the report will be a bad or but how big of a surprise is anyone's guess.   We have cashed out most things today as we came to SPX 850 and we’ll be looking to rebuild our positions soon enough if 825 holds. Keep in mind, there's never a rush to build position these days and we only intend to buy stuff at the time and price we want.  Usually this means buy on DIPS to sell into strength and resistance like today as we continue to be range bound.   Bear market is, after all, a buyer's market.

Hopefully,  we will not have to re-test SPX850 like the South Korean grandmother that has failed her driving test “771” times.   She’s been trying everyday since ‘95!

Tailwinds to run over 860?

Once again,   DJIM keywords for the state of the market the past while,  prevailed today.  The lead we’ve been going with in maintaining a positive bias consists of the words…tailwinds, underlying bid, resilient.   All these showed up today as stocks closed +2 SPX points after staging an impressive rally off the opening lows.    An underlying bid was again present showing resiliency and signalling tailwinds, mostly in hints of stabilization in eco' data working hand in hand with much better numbers from the banks (WFC).    Leading the market tape today was definitely the financials!.   There was no real catalysts today,  just more tailwinds generated by WFC from last week.    Although,  we did have more positive headlines from China showing trends are stabilizing,  loan growth is going through the roof and gov’t players continue to make positive commentary.

Sector watch

Banks- Brokers linked,  what can you say,  but keep with up the herd.   You know the stocks we like at DJIM.  AMC, all GS  did was set the bar higher for others with a much better expected report in many aspects.  The public offering is quite neutral on a dilution basis (limited risk).   We dipped into the V -MA for stocks linked to financials as the charts look ready for more.    It will be interesting to see the GS reaction, the market might be feeling spoiled and not give this report all it deserves initially.

Commodity linked -stocks

The $CRX  made a new recent high as the USD weakened mostly due to many of the world markets being on holiday.  Basically, if left home alone,  this USD related sector was doing what it wants and some give back may come early tomorrow.   Still, we are specific here lately with what is working,  primarily the Steels  and Ag`s-chems - and our only copper play FCX  has been a standout, even alum' AA  got up to $9.30 since we said this stock should trade up following report.(mid 7`s).  Throw in a little solar (STP ), but we're staying away from the coals.  

China linked - stocks.

A positive is no matter the hiccups the market-SPX may have soon or later,  we are getting back to individual stock- sectors working by themselves.   This was the strategy here if you recall following the Treasury buy news to go with individual- sector plays instead of being fixated with the daily SPX up and downs.    Guess what?..the China theme is seemingly here again as many of old DJIM names are coming up all over daily high screeners.   Stocks like SNDA, NTES making new highs and more to come.  One way to get your feet wet here is with CAF,  if you are not comfortable with that FXI.

Tailwinds to run over 860??...Of course,  earnings will dictate,  but if we keep getting surprises we'll have the shorts giving up and we can really overshoot 860.   The reason is this is where most of the shorts are set up from mid Jan -Feb!!.

A major eco' address tomorrow, "recession to recovery".  Hopefully,  this is just another tailwind-ish` catalyst.