Absorption

Today's tape shouldn't come as a surprise.   Not only did the banks- brokers leaders need to absorb last weeks gains,  they also need to absorb their billions of capital offerings with the market.  

Two of the prominent leaders in this rally were the Techs and Financials.   These comprised 50% of the SPX point advancement.    Last week, we highlighted the lagging tech, today we had the financials naturally pause sucking in the gains & slew of paper.    Naturally,  we pause and succumb to some profit taking as the tape goes with the recent leaders.    No matter, Banks- Brokers still acted resilient considering all they have to deal with.    If 50% of the SPX move is going on hiatus until a positive catalytic event,  we are vulnerable to the beginning of a correction for the market.  

Fortunately, here at DJIM we have focus on EPS stocks &  selective sec's.  Today while the market plays in the red,  we have stocks DJIM linked stocks EBS, (reader forum eps note),  BWY  (buy at BAC/MER today) and the Gaming /Lodging sector plays ( WYNN LVS MGM..) still showing signs of squeezing as more LV and China notes come out over weekend.   This is shown in the "Room for Green..", intraday post.   Some may look to defensive sectors like HCare, biotech etc in event of a correction,  we're fine with concentration on recent earnings which sometimes fall into those sectors anyway.   EBS has always gone against the trend of the market as seen in a yrly chart.   We've talked of eventually the market playing into our hands and the easy trade.  Imagine if today's action in EBS LMIA BWY signals a possible return one day to micro- small caps as we get to an economic trough with attention swinging back to..dare we say it back to IBD type of stocks, where growth matters.   Hey, why wouldn't hedgies exploit this area once again to pamper their books?

Besides FSYS  comeback to our lists,  we have added PEGA  LMIA  to our potential tradeable EPS list.  Like last weeks EPS list,  we watch to see if these make the grade,  most from last week are flirting with 9ema.

As far as tech, we have upcoming analyst meetings, tier1 conferences to watch in the short term for direction.

We held 909, at close, which represents a recent trendline, (898 a recent low-the psychological 900 )is where we want see the underlying bid prevail.

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. 

...taken with a grain of salt

http://www.conference-board.org/economics/ConsumerConfidence.cfm

Honestly, most of us probably don't even have that eco' # marked on our calendar.   Well, maybe some do, but when we said it was a slow week ahead for eco' data points, we certainly avoided this one as being critical as most.    Yup,  all this market needed today was an inspiring "confidence" number coming out right after the market held at support ~879 (Thur low)-880.   Is this too much of a coincidence?   It sure wasn't a joke to the Bears, who can't seem to avoid upside risks!   In any case,  we got a heck of a squeeze/ melt up after the data was released and we closed near the high of the day.

The bad part, unfortunately, is that there's really a lack of any news of any kind besides this eco' data point.  The focus is still on the TSY auctions this week.   It seems the market will use anything as a catalyst these days, keep this in mind,  it could work the other way later in the week on something seemingly not so crucial at first glance.   This is also a shortened holiday week and so volume was still relatively tame.    Nonetheless,  we closed at SPX 910 and we are 19 pts away from the short term top.   So get ready to lighten up on some positions, folks!   Can this market get any more mechanical/predictable than this?   Maybe, maybe not!  Until the day comes that confirms we breakout of the recent range,  we are going to have to treat and respect the recent resistance/support.

It took time, but most groups advanced with the Consumer discretionary  led tape (early cycle recovery groups), including the high beta Casino/Lodging  trade with last Fridays late buy HOT  leading the charge. 

Tech stocks  were led higher today with AAPL/ RIMM  (upgrades) acting great,  while our smaller plays such as STEC  PEGA  EQIX  were holding up as well.  We said techs may get some attention this week based on a better than expected tech conference/ earnings.  The upgrades were a result as this group stood out.

Financials, closed near it's highs.

Commodities opened weak, but closed near/at recent $CRX highs.  At this point,  it doesn't feel like we are brewing for a big move up unless something dramatic develops.   We are treating the recent top 920-929 as a point to lighten up some positions and use any weakness to add back some stuff.  

Again,  this is a holiday week so we aren't expecting anything huge to happen.   If a big move does come within the next couple of days,  we'll be here and ready to trade.  In honesty, we wouldn't mind for this market to hold near the upper end of the range till the end of this week.   We'll see how long this CCI has investors/ traders believing in a economic recovery as well?.  At this juncture, we want to see conviction and that would be breaking out of the range before we get as giddy as those 5,000 CCI households !.