Where's the new 880?

Yesterday we talked about the resistance of SPX 1014 replacing the old 950.    Today we have to give some thoughts on the new support as in the old SPX 880.    Despite today's gain,  we’re hard pressed to think that we can challenge the recent high anytime soon.    Right now, even 1K SPX seems an oceans away, we didn’t see any real conviction buying today and so this bounce may evaporate quickly.

Pretty light volume bounce can be attributed to a couple of things we’ve discussed,  the Financial  led the way(+1.9%), which was a direct result of Mastertrust CC #‘s (AXP, BAC, C, JPM) and the simple fact 982 was not an easy place to press fresh shorts after missing a 20pt gap.    Today's minor rebound doesn't necessarily invite anyone to add to their long positions,  it only gives shorts a more comfortable level to lay down positions above 982 at higher resistances to SPX1K.   After Monday’s pile driver, the longs are hesitant and tentative, including us.  

Looking forward to any potential long positions, rebounds like today give us an idea which plays are following the index more than the others.    Some plays are battled back toward the 9 ema, which is good, others have climbed back above 9 ema, which is even better.   To us, today's a day to paint a mental picture of what plays to add on potential weakness in the coming days.   On the other hand, if this market breaks out off some catalysts, we'd know exactly what to chase as well. 

Just to give an idea of plays that are above 9 ema, among the ones on our list include ABVT FIRE FSYS MAIL ROVI STEC TBI WLT.   Things really don't look that bad out there and we are using our recent theme "wishing for a pullback" to treat this particular scenario.    Now we are getting what we want, we have to start taking advantage of a good pullback.    In a worst case (pullback)scenario, we feel the support is around SPX 940 to SPX 952 area.    However, just because index is capable of pulling back down that many points,  it doesn't mean that all of plays on our list will suffer the same dramatic decline.    Relative performance is the key when it comes to adding on weakness.    No matter how much we liked a play prior to the pullback, how it behaves during the decline will determine which play gets the most of our attention.  In short, we can all be surprised by which plays stand out the most.

Earning season is grinding down and there's really not much else to look forward to other than the weekly Econ. data.     Fortunately, we have less than a couple of weeks before the fall trading season starts.    Bottom line, the best thing we can hope for is the healthy consolidation of this recent rally before we head into post Labor day trade.    So far, things are rolling on target, recall we've always said before 1K SPX was hit, we don't want to spend much time over that level this summer in order to have another run later in the year.

....Humble Bull...

Even though we got what we wanted in the past 3 trading sessions..”We said we won't get bullish unless we get over 1015, we can add now over low 1020's and we think it is inevitable we go higher than recent high cycle“,  we have to remind ourselves this market can humble you quickly!.  Therefore, we choose to lighten up positions as all the strength in the market was in the 3 groups we were on top of…Commods, China, Gold.   We don’t need to be overly bullish now,  it doesn’t matter really considering we’ve been on right side anticipating a bounce since late last week with the right stocks.  So, right now, we’re taking a breather as the market should by lightening up.  If we can just eke out a slight green day tomorrow, it would be a positive.  

Interestingly, we gapped all the supports we’ve been noting by opening at 1018!. Clearly, this gap at supports (1016-1018 ) is even more important now and we’d be using it as support going forward.   We’re hardly TA experts, but this seems to be quite the bullish gap for a retest of 1039 at least.

As far as individual plays/ sectors, we’d still concentrate on the 3 sec's above and EPS plays.  We had a few making new highs,  ININ and ATHR  premkt was up to $29.  If you were frustrated by ATHR's lacklustre performance after we alerted the gap after earnings, you missed a 25% gain now this Q in it.  Clearly, if we go with an EPS play here the best past is you likely won’t be losing money, you just need patience sometimes for the results to come in and a good entry.   Others lining up might be, ROVI, CTSH, STEC  bounced nicely today again and should have follow through.  HITK  moved into earnings.  Many of the newer EPS stocks we liked this Q,  will move into their next dates and not just a few days before.  It’s not pre- earnings runs, it is simply the course of things these days as earnings winners don’t all go like MAIL , but take another route which means they get valued into next report.

Today, we had FSLR  for a possible max of 10 points as a day trade.  We knew a senior Chinese delegation was visiting the company over the weekend /late last week in the US and thought a deal of some kind would be in the works and so played it.  You don’t go all that way just to do nothing.   In the afternoon, a deal was announced for a major solar plant in China.  CTRP  was upgraded today by GS, but UTA  was the big winner as it’s run now 20%+ since alerted as a secondary play around $9.30.  We like this segment of China, also they are possibly opening up their skies to more business and becoming more friendly as far as flight plans/taxes.

After INTC guide recently,  we pointed out that their raising of guidance will lead to many more upside surprises going forward in tech.   We are getting glimpses of this daily with stocks such as MCHP  last night.  Reason, we are pointing this out now is that are fewer and fewer negative preannouncements in all sectors than in other years going forward and more upside.  This should lead to an interesting EPS season, yep, it’s close with RIMM  reporting Sept 24!.

...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.

What to cheer for?

As soon as the 10am CCI# was out, our window dressing bid pretty well came to end.  Following a positive Michigan # on Friday, this CCI was a disappointment.  By close we gave back a portion of yesterday's gain on heavier volume,  still a pretty good showing given how light the volume was yesterday.    What concerns us now is what happens as this Q window dressing winds down and what October has in store.   Well, we may have a pretty good taste of that on Friday from the NFP report and tomorrow (ADP).

Technically, we reversed right at 1057…(yesterday‘s journal)‘..technically impressive is we closed above (1057 Sept 21 low)”.  Not a coincidence today, an important level to watch intraday in your trading this week.

As a whole, this market is holding up quiet well heading into earning season.    What we think is that people have learned their lesson from previous earning Q’s where selling before the earning season is simply a bad idea.    Whether people believe an Economic recovery is at hand or not is somewhat irrelevant nowadays.  Traders are more focused on the fact if companies can deliver positive surprises top- line/bottom line.    Why not?     Since, no one really has any grasp or firm idea how the economic recovery is progressing, the probability is pretty high some companies can deliver some impressive reports while others will not.    In a way, this is fairly rewarding for those who bet on the right kind of companies.  We just won’t do that by holding into reports and instead will look for a move prior to report day.   At this point, two different companies in the same sector can deliver entirely different kind of results.    To deliver good reports, it has a lot to do with management execution, cost control, and grabbing back market share against all of the competitors out there etc..    Therefore, we feel any companies that deliver good surprises have to be rewarded by investors.    On the other hand, you can also forget about those companies that aren't executing.   Cough-cough (RIMM ).  Simply put, not every company can ride the coattails of an early economic recovery environment.

Plays wise, we have …ROVI RTI CTRP  making NCH’s while other plays such as HITK SWM  are setting up.    Keep an eye on AONE  as well, it's a play that can get some excitement easily.   Even though our stance is somewhat cautious, it doesn’t mean trading opp’s are ignored.  Just don’t get caught with too many positions or sizes too large to handle.  At the opening bell, we alerted a possible move in the Shippers (GNK DRYS ) due to Cosco words.  By close these names were the near the top of our shadow list by % gainers as this report spread on wires.