Dull day...

Other than some heart pounding drills for traders speculating in DNDN,  it was a very quiet day where neither the Bulls or Bears gained any trading momentum.    The Bears stalled at overnight lows of 840  again,  the Bulls topping out in the 860 's.    The dullness was a little surprising considering the initial reaction in the overnight/ premkt action.  On the other hand the BAC/C  credit needs are not a surprise and the ’bug’ didn’t oink as loud.   Simply, the market acted rationally after digesting the newsflow.    For now,  we aren't drawing any firm conclusion, we’re simply monitoring this just like everyone else, but instead of complaining as many about the ~30pts  SPX range bound trading, we’re slicing and dicing individual plays.  Today, CRYP  gave an easy ~10-15% after note.    

We feel pretty confident today seeing that the majority of the "good" financial institutions weren't affected by the BAC-C capital needs.    A good close over $11 XLF  is still a case for going higher in the overall market.   AMC,  ETFC  announced that it needed to raise more capital to meet requirements.  This shouldn’t rattle the banks- brokers,  we think the market is not grouping everything together as a probability discussed here recently...finally!.   The volatile days (double digit % days) of this group seem to have abated.

In terms of earning plays,  it seems many of the recent earning performers are taking today's action as an excuse to consolidate.   This is very healthy and it allows you to build positions again at a reasonable level and at a comfortable pace.     One earning play that bucked the overall trend, though, is NEU .    It has simply acted really well since it reported.    We traded this one many times in the past and it's refreshing to see it back onto our trading list.

Tomorrow,  the FOMC event can potentially excite this market, even if no blockbuster is expected.   We’re not expecting any new credit easing programs and we don’t expect any change to the size of the existing programs.  However, it will be interesting to see if market players can somehow find something in the statement as a catalyst to move this market.

Sell in May...or will it be, Buy in May??....

We officially ended the month with SPX closing at 872 after a sprint from the blocks to 888, today.    Who would have thought the SPX would churn in the mid 800 range most of the month of April.   Back in late March, most market pundits expected a pullback from this market and a retest SPX 780 or perhaps even lower.    Looking back, we just have to say "boy, are glad we made our adjustment quick"!    In the entire month of April,  we didn't even come close to approach the SPX 800 level and that alone is quite an achievement!.   So, while most scream tonight, a 'reversal bar...no follow through day..etc', we're really not concerned as we're not the the panicky type.   Reason is methodology,  we adjusted late March to what got us here and not be tied to every move on the SPY/SPX as most of the market had become.  We've been into individual- sub groups plays and now the market has walked into our hands where earnings plays are making this a ' stock pickers ' market!.   Did you notice the majority of those linked stocks did not act with the market turn?.   So, no big deal!.   Plus, the gains early on any stocks previewed gave you an exit with nice profits if that's your trade.

What do we have to look forward to now that we are out of April?   We expect to see exact same sentiment carrying forward with earning plays dominating the trading screen.    Whether you like it or not,  people have come to believe that we are in the early recovery process.

Right now,  we aren't going to debate or argue against the actual facts with regard to economic recovery.    If this is the sentiment shared by the majority of the trading world,  evidenced by the stock behaviour, then that's what we'll have to stick to.    After all,  this game is about pure psychology.    What you believe and what may actually happen are two different things.    As long as people act the way they believe,  that's how this market will play out which underlines our main trading theme.

Speaking of earning plays,  we had two MONSTER plays from GMCR FSLR  highlighted in last nights Journal.   Did they go limp with the market?   Both stocks simply exploded from the get go and they stayed strong till the end.    It feels like it's 2004,  doesn't it?     As we said, most of the stocks on our trading list finished green despite the softness from the financial sector.    What we are extremely excited to see these days,  is that earnings/guidance once again matters in this market.     This is simply the kind of proven play style we were so accustomed to back in the good days.   We are so glad the "good game" is back.    There have been numerous strong earning reaction as of late.   In addition to the obvious ones,  we're monitoring 'new names' ....AAN CTV IRM LIFE STAR EXPE SFLY ARRS TNDM,  some may become fixtures at DJIM heading forward.    Recent plays like NEU PENN  continued to churn higher.    Again,  when it comes to earning plays,  we'd always be aggressive buyers on first pullback....PENN NEU GMCR RGR CTV DDRX,   still, most 'new names' we're undecided on at this stage.

We may not have closed the day at the high,  but this just gives market enough time/ room to churn higher.   In our opinion,  the sooner we get to SPX 900+,  the sooner the party may end.   Therefore, we'd rather see this market take its time and allow us the traders to re-establish positions as we churn up.

Bottom line,  this market is giving everyone enough time to make a play or two.   It's absolutely crucial NOT to waste any opportunities in this trading environment.

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

June starts with a big bang...

This might not be the first day of summer officially, but, we officially kicked off the "slow" summer trading season with a very loud bang.  The positive China PMI  data led to strong overseas trading, the news of GM Chapter 11 (finally closure), and a couple of upgrades in the morning were enough to gap up the market on top of Friday’s strong close.   We noted the importance of China PMI midday Friday and pointed out the impetus in Journal for a move from the month long trading range today… The “holding pattern“, we think is the market waiting for China to make the next move literally. It’s been pretty quiet lately after the initial ‘leg’ up and now we wait for signals for the global , eco’ outlook from China. This will (if positive) include help for the tech outlook and definitely the commodity picture for the 2nd half of the year".    Today, it was the fuel for the impressive global market melt up, no doubt about it!!.   The US ISM number (5th consecutive mthly increase) came out at 10 am and pretty much sealed the deal for the bulls.   The "deal" we are referring to is the official breakout of the recent ‘May’ trading range.

Mid week around SPX 900, “…….we could be getting rotation into consumer driven NAS/tech coinciding with last weeks positive data points in tech conference/eps. So a close over 1430 $NDX can be very bullish and we could be on way to SPX 950, a clear break can be over 915, 920SPX, it may be useless and be a little late to enter after breakout levels we've been talking (930’s May highs)".   What we are pointing here is the $SPX literally made a move under radar in 1-2 hrs of trading of 40-50 pts to a high of ~947 and you’ve missed it,  if you were not positioned in low’s 900’s last week to take advantage of the stealth move.   Considering, we literally hit that ‘on way to 950’,  it's an excuse to take profits off table and re-position.   We’d welcome a pullback to re-initiate many positions, whether it is tech, commods, china linked stocks.

The volume across the tape may not be as super strong as a breakout volume would've warranted, but we’re pretty sure many still can’t believe their eyes and continue to sit on cash.   Money is sipping into the market slowly,  but the world has literally missed the rally.   The statistics don’t lie as many refuse to believe we are in anything but a mild recovery.   The world is underweight, including hedgies, 'whales' and will eventually lead to more upward pressure on equities in the future.

As we have been pointing all along,  a break to the upside has always been the more likely scenario.   Someone has to give up and there was too much "upside risk"  for the shorts/ Bears weighing in on this market.  Technical this time.   Recently, we've had way more positive eco' data points compared to the negative ones.   The earnings have been better than expected and action in the emerging market lately is nothing short of superb.   This is also coupled with the fact financial issues are somewhat behind us.   Everything that has happened lately is viewed as positive development for this market over the long haul.   Therefore, in our opinion, this breakout was inevitable and hopefully our bullish stance at DJIM has payed off for members lately and since March.

So,  what's the trading strategy now?   Although,  we aren't in a mood to chase anything new today, we are mentally prepared to buy stuff back on any worthwhile pullback.   Basically,  the price level that you've seen a few times when SPX was at 875-880 level may not be there in the next little while.    We have to be comfortable with the idea to 'move up' our own buy trading range.    Earnings plays are still the same and those that showed exceptional technical strength are our favourites.  Techs, Commods and China syndrome are back in full force these days.   Besides the obvious long standing commodity/ tech stocks (most on shadowlist link),  we had some recent add-ons such as lodging play HOT  (last alerted low 20's) for a breakout top range move, EJ, china earning play breakout recent tops, CVLT, a tech play is near 2009 high, slow crawler BWY  is back near $15 highs after a pickup here at ~$11.

Oh yeah, were you a good trader and monitor these potential earnings plays we put up early May in a secondary shadowlist?   Some nice pullback buys emerged in what many called a terrible chop trade in May, but as we said it's a stock pickers market going forward and many were making fresh highs today...eg, SFLY, STAR, TNDM, CTV.   Stocks on list like DDRX  NEU PENN GMCR  were already in play at DJIM and are likely on our shadowlist link.   Patience is a virtue and pays off well if you have the right earnings stocks.  It is also quite a safe trade and lurking a good pullback works well.

http://www.djimstocks.com/djim-journal-09/2009/5/6/new-eps-this-q.html

Oh yeah, did anyone catch the AH news that EMC is coming out a competing bid for DDUP?  Remember, we picked up CVLT  last week as a secondary play here.  To be honest with you, we haven't seen this kind of action in the tech land in a long time.

Summer trading, fortunately is also slower paced and has lower than average trading volume.   This is actually better for us to not have to worry about chasing some wild strength.   We don't believe this market is capable of going straight up at this point, so there'd be plenty of opportunity to get in on this leg.   However, when the setups do present themselves, you don't want to be shy away either.   Bottom line, we are feeling very confident and comfortable with what may come the next couple of months.   Summer trading, once again may become fun.

DJIM #43 2009

So far, this earning season is coming nothing short of expectation.   Sure, we still have many companies from SP500 that have yet to report, but many of the bigger V.I.P names have already done their showing.    What a showing it‘s been!   From technology companies such as GOOG, MSFT, AAPL, INTC   to retailer giant like AMZN, financial companies such as JPM, GS  and commodity names such as FCX  and AA.   Just about every one of these V.I.P’s has beaten the analysts' expectation in a marginal way, both bottom and top line and has allowed the market  to bang at SPX 1100.    So, as far as the earning reports are concerned, everything has hit the mark so far.

Ok, now lets talk about this market outside of the earnings.    Before the earning season started, we were hoping that this round of earning can give investors some extra optimism and perhaps give this SPX >1100 a a run for it’s money.    So far, we have been trying to break the 1100 wall off the back of great earnings of some of the best companies in America.   The result?   It isn't very successful.    Right now, we have to be mindful of the action that took place last couple of weeks.    Yes, we have been praising AAPL, we bolded AMZN’s  great numbers/ big price target increases to come before Friday’s giant squeeze and as of Friday morning MSFT's great earning has helped these individual share prices. Unfortunately, this isn't translating into overall market advances.   There is no sympathy plays or index action to go hand in hand.   This was evident Friday, we didn’t even come close to a battle at SPX ES 1100 due this fact and the fact the financials couldn’t put the back to back days of needed out performance as discussed.    The fact we closed the week down near the SPX 1080 acts as a little reminder that even meeting high expectations may not stop this market from having a pullback. But, as every time before it may not be happen at all or just not be severe.   We’ve stalled after clearing SPX 1090 two weeks ago, we’re leaning towards a general pullback from this market unless we clear ES1100.  A pullback we think may be the best thing for long term.     If we absolutely needed to have some positions in this market now, we'd not hesitate to find some big names to park some cash into.

This market has acted great despite a few things, including lack of action from the small cap side.  It’s surprisingly lagging,  but earnings are still ahead for this class of stocks.  In the meantime,  if we can get can get some nice points off AMZN or BIDU maybe or AAPL without having to worry about giving back 10% the next day, we'll take this opportunity.    Right now, the focus is still on the big names as the recovery theme carries the most significance with them. 

Bottom line, until the mid-small cap world starts to report, most of our attention will be focused on the bigger names or sector plays.  (Only small caps that come to mind off our list with excellent EPS last week were NEU  ATHR ).     We've had two important innings of earning season thus far and we have a few more innings to go.