Flawless Victory

Perhaps traders, at least the ones from NYC, are in such a happy mood that the Yanks won the World Series for 27th time,  that they couldn't help but celebrate more by bidding up stocks.   More likely, it was Phillies running out the door short covering before the NFP# upside risk.    No matter how you look at today's action,  it was nearly flawless.    We started strong and kept at it and closed at the high.    All of the groups are showing some healthy gains and even the financials picked up (+2%) the pace in the afternoon to make a possible close at a crucial point in our view ~1067/ ~1063ES. 

As forecasted last night,  we could easily make another move up into NFP# and even make it all back (sell off) with some help from eco’ data.   Well, we even got an unexpected ‘productivity data point’ to make Wednesday's sell off disappear and even more.    Add the positive earning report CSCO and kaboom.   The action is also an indication that people are anticipating a good job report tomorrow, but the reaction to the combination of the Jobs loss and unemployment rate is a guessing game and we can’t even begin to forecast the reaction.   This is like playing the Daily Double at the track…what combo’ may be the winner?  What if rate one is good and the other worse than expected.  This time both numbers are important.    At this point, people are anticipating a very good report with their voting already done the day before.    More importantly,  we like how positively this market has been behaving ever since we started the slide two weeks ago.   If this is the best/most bears can do to damage this market, then they are the ones who'll need mercy sooner than later. 

Technically, we are back near the previous support of SPX 1067, a close over this level almost puts the Bull in charge.  Getting over 1075 breakdown levels and 1100 is in the cards year end. 

As far as plays go, everything enjoyed a healthy day.  FSYS  and MELI, are two plays that came out with earnings/guidance that beat the expectation and got a strong reaction by the traders.   Justified or not, these two have always been interesting plays for traders.   We are keeping them on our list to see if there are trading opportunities down the road.

One possibility not discussed is nothing really happens tomorrow after all the volatility and we get a ’flat’ reaction/ close on Friday.   Why?   Since the FOMC decision eyes may have switched to BEN and his speeches on the 16th to get a better read on the FOMC statement.  Before, we have a G20 meeting/letter this weekend that may play a part next week as it may have USD implications and therefore the markets.   This 'exhaustive' outcome would be best of course!

Bumpy 'holidays' for bears ahead?

Over the weekend, we couldn't help but notice that the general media is a bit worried about the current state of this market.    There were numerous articles citing that we could be getting a bumpy ride over the next few weeks.    This is due to the fact we had two down days last weeks and that was enough to bring out the skeptics once again.     We don't want to read the media comments after today's action, however.    Frankly, we are just a little tired of the media lately and all the back and forth.  This includes every wishy washy regular guests on CNBC that switch sides on a daily basis.   There are many reasons that caused the market go up/gap in strong fashion, but we think the biggest reason is the reason we've been saying all along.   There's underlying bid from the money managers who like to see this market higher, as oppose to lower into year end.

Headlines are plenty today, the weak USD due to dovish comments, China growth forecast of 10% in 4Q, potential FOMC minutes containing upward eco. growth forecasts and European markets were substantially higher due to German/ Eurozone PMI‘s (we noted Euro data as a potential catalyst this week.)    All of these contributed to a quick rise in equity market today as 1100 and 1005 resistance got pummeled.    Are we surprised?   Nope!   Just like on a down day, people need reasons to explain the market action.   For DJIM, a day like today does not shock us because we're 'Bull' prepared due to expectation of a potential underlying bid as this time around 1085.   If you're not a ' Bull' and preparing for a bid, you miss most gains due to a gap like today if you're not invested.   Still, we do have to point out that not all of the stocks were enjoying the kind of gains the indicies are suggesting as the USD decoupled for many commodity linked stocks.   MELI  and AIXG  ( a DJIM add last week) were outperformers though.  Big caps have obviously benefited from the broad market gain, some of the smaller stuff may still play catch up.

Then there is the coffee frenzy.   PEET  was originally a stock we played due to their announced "acquisition" of DDRX, (a stock we covered since high single digits.)    Remember, a while back we concluded that the price PEET offered to buy DDRX is considered an outright steal.   Today, GMCR , the other favourite EPS/coffee stock here thought the same and outbid PEET.   Naturally this type of an event causes a sell off as a bidding war is a negative for the original bidder.   PEET, raised the offer, but will probably lose DDRX all together was the sentiment.     This superior GMCR offer puts PEET in a very difficult situation.    Despite the fact PEET announced to raise their offer with a mixture of cash/share, it still doesn't come close as good as GMCR's offer of ALL CASH.    As of the closing price today,  PEET's offer is effectively lower than GMCR's offer on DDRX.    Why are these two fighting for DDRX?   We have discussed here many times before, it's all about the growth of k-cup.    In our opinion, the bidding war, if it continues, will be unfavourable to PEET and we decide it's no longer an attractive play based on the current event.    At this point, it's even hard to say if anybody ELSE may come into the picture and give DDRX a fresh bid.     You have to remember, the bidding war between the two may actually draw out other potential interested party.     As it stands, even at $30/shr, it's only $172 million.    The reason we gave this a lengthy paragraph is that we wanted everyone to understand our logic to go long PEETin the first place and why we think PEET is no longer a play going forward.  This is not a 'weakness' , we buy, as it’s news flow related.    Do we still like GMCR?   Yes, of course, especially now that it has a chance to grab DDRX.

One of our readers also mentioned SEED,  a stock that doubled up today off volume that's four times its own float.    As of right now, we don't really know the long term impact of this particular announcement.   Bascially there's no telling of what it means for SEED as far as dollar amount is concerned.    What we do know, however, is that this stock may just be the favourite stock of the day traders and speculators for this holiday week.    It might be worth to trade this thing for as long as the story lasts, but ideally it's best to stick to what you know heading into year end.

This is a shorted trading week and many traders are away on holiday as we all know.    Today's volume is relatively low, but it's still pretty decent given the circumstance.    It might not be realistic to expect this market to break out of recent high cleanly, but we do think there are some trading opportunities worth participating in.

DJIM 48, 2009

First of all, we wish everyone just had a great thanksgiving holiday.    The past week was "supposed" to be a quiet week where the focus was supposed to be on turkey as oppose to the market.    Instead, we had this ‘little ;)’ announcement from Dubai that it's planning to delay the debt payment of its state controlled company, Dubai World.    As we know with news rocked the western world,  hopefully you didn’t react like “Tiger Woods” by panicking and fender bender-ing a fire hydrant and a tree early that morning!   Both the European and Asian market took a hefty beating and our futures pointed to a nasty ripple open for Friday as the sudden return of ‘credit risk‘ returned seemingly.   They definitely picked a right time to do this, eh?

The actual ‘leverage’ exposure, as far as the US banks is concerned, is very minimal and we think this is containable.    The fact we had a huge gap down at the open on Friday morning was inevitable due to the overseas weakness.    Also, there's also the so called "flight to safety" trade where people taking on safer investment while losing some risky ones.    For DJIM, we had one question in our mind this holiday.     Didn't anyone see this coming from Dubai?     To us, Dubai is nothing more than a glorious version of "Vegas".    With the number of projects they have going on over there, they'd better hope that they can attract more than just the rich folks.    By now, we know that most of the exposure are from the European banks and that is something reassuring to know for the U.S. market.

The biggest question right now, come Monday, is whether this Dubai news would continue to shake investors' confidence in the equity market and flee to other safe assets.    If Friday was a good indication of how things would come in the coming week, we are pretty confident things won't be bad.    The volume on Friday looks pretty good, given the fact the market only opened for half a day.    Had the market opened for the full day,  we would have some very healthy volume and turnover.    This to us, means that many folks were being pulled from their holiday and back onto their ‘blackberry’ trading desks to deal with the market.    No doubt, many folks saw this as an opportunity to buy into weakness while others would see this as a reason to park it in for the year.      For DJIM, we see this weakness as an opportunity as we don't believe U.S. market participants would be as concerned about Dubai as the European players.     On the other hand,  there's really no other alternative investments to pile your money into.   The so called "safety assets" don't really earn you much and if this Dubai debacle turns out to be nothing but a short term manageable headache, we believe the funds will flow back into the equity market.

As far as plays go, some of our latest plays behaved really well on Friday.   RINO and TRIT  even managed to tack on some respectable gains.    Other plays such as AIXG, CLF, CTRP, MELI,  GMCR... all traded as if the market was down just a couple of points.     Coming Monday,  we'll have most traders back from the holiday and we'll see how they digest the recent events.    We also have data from this Black Friday sales event which will give traders plenty of catalyst to vote their opinion.   In addition,  we have job report in the coming week,  so this will be a pivotal week for the remainder of the trading year.

It's all good...

So long, Dubai!   Since the Dubai news hit, we suspected that the news just would not be able to bring down this market. ..“we see this weakness as an opportunity.“..“Dubai stuff is really a non story here..”(alert Monday).   Today, all the talk is what we’ve been saying, except many who were drawn into the fear hype are only hearing these words in the media today, sidelined with many missed SPX points and individual stocks making new highs.  Getting in tomorrow for a Dubai trade is a little too late.  The past couple of trading days have been great to our latest bolded stocks as they've been making new highs....AIXG (CREE/VECO  alert Nov 24),  RINO , Nov 20th (new adds to DJIM, AIXG , RINO ) to our dip list either because we know what they are capable of on a good day(s)..MELI, CTRP TRIT CLF…and CAAS  20+% in a few days.  

As we have pointed out over the weekend and yesterday,  Dubai is likely an isolated agenda which is “containable” and regional.    The overwhelming appetite for equity market is the most important theme we have in this market right now.  That’s why the premise of the never-ending underlying bid is and has been the overwhelming theme here for months.  Simply, this has meant buyers are there for support and any sell offs should be used to buy your favorite DJIM stocks if they get hit or not.   

As of the closing tonight, SPX stood at 1108, smacking against the recent high.    We have mentioned couple of days ago that investors have this urge to get returns off their cash.    Well, you aren't going to get any return from money market or treasury bills.   Nor you can get any return from sitting on the sidelines and watch every single one of your favourite stock go up without your involvement.     Even though we aren't the big money managers,  we can understand EXACTLY how they feel if they are underperforming.    By sitting in cash, or being cautious, the money mangers are under performing even the least experienced yahoo traders who flip SEED  as a hobby.   This may sound harsh but the message is clear out there, "You have to be IN this market to get SOME return!"

Now we got our message off our back, we'll talk about some of our plays.    On our second thought, there's really not much to talk about other than the fact most of our plays are cruising.    Sure, some of the plays may act a little overheated, but we still have to be thankful for the kind of  excellent action they've given us.    Some of the Chinese (bullet point#2), more positive data here today and plays continue to be very hot and that's a very positive development going into the year end.   We’re also adding CAGC  to our trading list as Ferts are hitting new highs.

Only disappointment today is the GS/JPM  Financial bullet point from yesterday.  The more we think of it... this sector may lag for rest of year and not stop the market as long as the group just holds flat.   Bullet point #3 from yesterday, SEMI’s  (up 3%)led the move today with more companies (ALTR eg.) providing market boosting updates and  2010 forecasts out this morning.  

However, we also want to mention that it's ok to trim off some of the extended positions here.   We have done so today, but we'll remain on the aggressive end on any more pullbacks.  Due to what we see in the market today, we will look tomorrow at getting possibly back into a casino 'trade' with WYNN, LVS , the two names we play here.  We also see shippers  turning here and into year end as alerted today.    The market may consolidate some tomorrow, but we think it's a stock pickers market going forward and so individual groups will still attract attention, even if the broad market tape is not doing much. 

Before you know it,  this market may leave you behind once again so you have to absolutely have some holdings going into the year end.     We still like the idea of a balanced portfolio although we have been tilting our weighting toward the smaller stuff over the past few days.

Bottom line, we have a job report to look forward to this Friday and based on the market sentiment, the number may not even matter that much.   Folks, we are right against the recent high here and maybe we can just get lucky this time. 

...running out of headlines

The story and the trading premise remains as we hit fresh rally highs today!  Part of the premise has been an undeniable underlying bid always present and a part has been no conviction buying or selling.  Therefore, the failure today to accelerate and breakout the November closing high of ~1113 as we still can’t can’t find the conviction buying/volume.  Does it matter?.  Not really to us as we’ve been concentrating on select stocks/ groups that keep on getting a bid…our LED stocks VECO/ CREE  had big days and joined AIXG in making higher highs, CTRP, MELI  keeps rolling on the AMZN theme, CAGC  alert had a sensational day as it tagged the Ferts  group noted yesterday (MOS POT MON) in making new highs.   We've added HEAT  noted in forum yesterday by a member to our trading list (IBD write up today).

Even though the rally seems to keep losing momo’ in this range up to 1120,  we’re not listening!.  Yesterday, we said it will be a selective stock/ sub groups pickers market going into year end and we’ll stick to that!  R2K  big outperformance up >1% of the market maybe a clue of things to come.    Our view as far as groups/ sectors are concerned is China stocks, Casinos and  Shippers  will start to attract interest to close off the year as these are pretty high beta groups/stocks fast money likes.  A few upgrades on these groups or specific stocks and these will get going…that’s all it will take!.  

We had BAC news AMC and this surprise may remove a big overhang and therefore is a positive.  So, before the NFP# on Friday,  we’re hoping this news lights a fire of sorts under the underperforming, lagging Financials..well, maybe for a day as it seems they can’t put up back to back up days for over a month now, specifically GS JPM.