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

...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 !.

DJIM #23 2009

Market’s behaviour Friday morning brought back memories of past FOMC/statements where the market behaves wildly in both directions afterwards.    Even our squirrelly possibility of a NFP # below 500 was off the mark as we got a very low 300K number that melted up the SPX futures +15 pts premkt.   Unfortunately,  we saw this market get too bullish (recall we said end of previous Journal, we wanted to avoid excessive bullishness) and most importantly have the report take the $USD for a ride up.  We warned before the open to be ‘careful’ and hopefully, we all avoided chasing and just watched the big fade job of the tape begin immediately at the open.    The highlight of the the day became the very strong USD, unfortunately for many this was too late before the consequence of a low NFP # was figured out.    Still, we finished a 5th day above the 200ma which is quite important as it confirms the breakout for many with a technical view of the market.   We’re still going to be hesitant here for the broad market tape as the market is showing 950 level is formidable, we’d start the week maintaining Fridays premkt note to be ‘careful’.

So..that’s’ one market, the broad market!.    Meanwhile back at DJIM farm, the underlying market of small caps was outperforming as some of it’s animals continued to run freely.  EBS  noted at the beginning of the week as one setting up finished the week up 25%, other notables +4-7% gains Friday..ARUN, STEC, EJ, BWY. 

Despite the commodity linked stocks reaction to strong $USD, a clear trend emerged and that was the early strength in Steels..AKS, SCHN, NUE, CLF, X  held and outperformed the coals, ferts. Oil/ energy.  A little digging and we figure the RIO/BHP deal is beneficial to the US steel producers bottom lines (EPS..especially X) as higher iron ore prices are on the horizon from this massive deal.   We say horizon, not tomorrow or next week.  Right now, we may continue to be at the mercy of a USD bounce in the very short term.

One scenario we possibly see ahead is on a ’psychological’ level that may just rhyme with the technical picture at this point.   We have 3 weeks till Q end and we may have a ‘Little Blue Pill’  theory to keep this market strong and potentially take out 950 to 970-980 range.    The LBP theory is the performance anxiety that must be felt by money managers who have refused to ‘believe’ and will have to show something on their books for this 40% rally.   They are still very underinvested!.   One way to do this and what we would like to see is a ‘sharp’ decline to 200ma  very soon and have them hammer this mark with vigor and vitality.    Once again, we would than see our premise of an underlying bid prevailing as has been the case since March.   Once MM’s are given this entry level they would have even more reason to buy push this market higher to squeeze out better numbers for their books by Q end.

Cautiously optimistic...

Number wise,  market's drop this week has been the biggest since March.    Has it really been that long since we've seen this much downside volatility?  Yes, it has!   Normally, after yesterday's big drop, we'd hope to see some stabilization in this market and find some entry points from our plays, but it just wasn't the case today.  The ' late day' buying has abated this week.  We’ve been cautious heading into the week and gave further caution intraday Monday.   So, we haven’t been stung a bit and those that ’short’ by our market commentary have had a nice few hours.    We noted heading into the trading day that most of our shadowed plays had dropped below 9ema in this slide.   Obviously, the drop yesterday carried through today pushing them lower.    From SPX  side, we did become “vulnerable” even w/o bad news and broke through the short term support at the SPX 920-923 breakout gap and went straight to next support at 911.   The declining 200ma SPX is now at 908 and we aren't that far away from the 900 "psychological" support either.     Remember, a ‘bullet point’  to our premise of a bullish market since March has been an underlying bid prevailing first at 20ma for a few months and most recently at 200ma.  Well,  that’s in jeopardy as buyers didn't come around this time at gap 920-923 and need to show up here at 200ma or we eventually go to April highs (~880) this summer.   After, “losing 929”, we now have it as 929Resistance on any bounce in the near future.

Given this much decline in such a short time frame without much of a catalyst, we feel that a bounce may be in order very shortly. (5% off 956SPX now) is as good as any.   Of course, we remain very cautious at this point because we'd rather see some stabilization first before getting our hands back into plays for any duration.   Still,  this is more of a profit taking correction from jittery longs than shorts getting overly excited and pressing new positions in anticipation of further downside.   Shorts/Bears need ’bad news’ to get giddy once again as they’ve been burned badly for 3 months due to ’upside risks”  ruining their days after they decide to get off the sidelines and press.

The drop from the commodity sector, in our opinion, is much needed and had become too reliant on $USD lately.   Notice today was the first time the $USD -commodity link correlation did not work and must have fooled a few to step in the morning on the USD weakness only to get stinged.  This gave credence to watching 9ema and avoiding such a trap.   Financials also look very weak and they can potentially wreck this market even further if this group deteriorates further.  Their quietness is a little uneasy.

Despite the fact that the market is under some pressure and with any good newsflow not being used to rally the individual stock and/or market,  we still remain optimistic longer term.    After all, a meaningful correction after such a long bull run since March has always been a possibility.   We've just avoided this belief until this weekends DIM journal.   It's particularly hard to speculate on the trading range now that we've broken the recent 920 gap support   We have to be prepared to widen our SPX trading range to 40 or even 60 points.    Right now,  we are simply waiting out this slide and waiting out the reactions to earning reports this week.   BBY  was really a sell on a good report and so we’ll continue to monitor if our fear from yesterday continues.

Since the market is looking a bit vague at the moment, we have to choose to focus more on individual plays at this moment from our shadowlist.   Today, one must have lid up on top.   You have to like STEC 's guidance and chase some in spite of a 20++% move.   Over the next few days, we are going to be looking for those plays that can reclaim their 9ema.   We are very interested in the decoupling going on now and will be cautious in the very short term, watching if this continues.   What we mean by ‘decoupling’ is good news is sell news and an opposite reaction of commodity linked groups/stocks to USD is occurring.  One or both, can't be too good for market sentiment.

..not bad at all

There is nothing like getting something over with!..?.    Something in this case is a generous meltdown for the Bears that hardly feels like a drop in the bucket for the Bulls.    Despite, a drop of ~6% on the SPX from recent highs to todays low,  we must admit it hasn’t been anything to lose sleep over.   Well, that is if positioned or in this case non-positioned in anything commodity, bank-broker, simply any High Beta liquid equities.    These HB's are always the first to encounter profit taking due to the flock comings and goings as they please due to liquidity giving easy access to such movement.   

How did we get to 200MA and lower intraday so quickly?.  A few notables have occurred, since we alerted Monday, our worrisome view on Banks-Brokers have produced a decline of about 5% from that point and …“As far as individual stocks, simultaneously most we shadow have slipped below 9ema in the past few sessions and if you've been with us since day 1,  you know we view this as a negative until the level is recaptured.   This is a possible show leading the market to 200ma“.    It’s not a coincidence we saw stocks such as EBS STEC CVLT  putting up 5% moves intraday as they have continued to trade above 9ema during these downside days, while the commodity linked stocks under 9ema were given the pile driver lower.    Okay, so what now?.     Barring any terrible eco data points tomorrow,  we’re glad to get  this first leg of a correction possibly over with as we regained the SPX’s 200MA.  We should trade range bound now between  ~903S-920R-929R.     Just like consolidating upside moves, a downside,  should be as well.   

What we like about today is despite what looks like a flattish day,  we broke/ regained the 200ma (meaning little conviction amongst shorts to press) and got a further beating to the commodity/banks- brokers all in one swoop.  (We still feel this correction so far is..  profit taking vs. giddy shorties)   Simply,  we can get cheaper shares now at what could be a short term low put in on the SPX,  possibly leading to a reversal bounce.     So far this week any bounce attempt has been tepid,  either the volatility including those late buying closes are gone (which is fine as we can just grind up to next R), or we’re due for a nice pop, especially in bloodied commodity linked stocks.    Giving credence to such a move coming is the sale sign went down in Techs (Semi’s/SOX) , Retail closes at highs as it saw some buy interest and Transports reversed later in day despite FDX's premkt crappy guidance.  If we’re flat through the morning eco data points,  we’ll look for a tradeable bounce beginning in the morning.   If this is the case sooner than later, you can't ignore buying those 'still on sale today' cheaper shares below 9ema in whatever group leads for a trade to begin with.

DJIM #25 2009

In last weekends, DJIM #24,  we finally conceded to the fact that , “ We need to respect the probability of a profit taking correction finally from those participating since March to allow latecomers a chance now to get in”.   What we didn’t and won’t concede in 2009 is ..“we are still very much bullish longer term on this market”, even though we thought we lost momo`the previous week.

As we come to the end of 1H, this upcoming week,  we look forward to a climate change for risk appetite in equities continuing as the recovery takes us out of recession with manufacturing and financial systems rebounding.    The landscape is definitely changing,  but after a 50% decline with many individual accounts bloodied it takes more than 3 months to rid investors of fear and regain confidence.   What’s occurring now is natural in the process of a recovery.   It is called 2nd guessing,  especially those green shoots as they are known.    Instead of looking at obvious fundamental changes, many are turning to the , ‘what if’ mentality.   This the ‘watching life go by’ way of mentality crowd.   Many are already suffering this from SPX 666 and will only punish themselves further if not looking for another ~20% from this market in 2H 2009 at some point.    Last week,  we got what is now is a 4th consecutive correction of ~5% off SPX highs holding during this rally without what should be sooner than later, a meaningful correction of around 10%.    So….is this the one that declines further or are we going to be questioning the same thing if/ when we begin a 5th consecutive 5% ?.     After, seemingly holding above 200MA, we are beginning to doubt the current correction will allow latecomers a chance to get in.    One thing,  we definitely believe is those latecomers will NEVER be given an opportunity to get in the 600’-700’s, maybe even below 850SPX.   Those in the market will never allow such a gift.   Human ..fundamental nature…say you buy a home and keep putting money into over time.   You’re never going to let someone buy it at your initial investment price are you or lower (unless of course stuck in the recent ordeals).  Well,  same in this equity market,  we won’t be letting the latecomers into this neighbourhood so easy.  It’s gated now.    They’re going to buy this market at a premium!.   Maybe they are getting the message as current inflows into equities are surpassing those at 2003 lows and MF inflows have doubled over the prior 4 week trend.   We`re not talking chump change (9bln vs. 4ln)

Here’s an idea of what may be happening that will not allow a meaningful correction just yet.  We are having an orderly quite transfusion.   A transfusion where those in market for weeks are doing some profit taking, but the selling can’t gain traction as the Bears hope because there is sufficient inflows taking the supply.     In essence,   this is why our premise from March of an underlying bid prevailing keeps on motoring.    Those that have been following the market with us for over 5 years,  you know in the good ole days,  we always said the market will not go down further if declining at that time due to EPS just around the corner.   This theme is also possible now in a 5% correction as the upside risk remains of corporate growth here and there.    We are also up against what could be and actually should be window dressing for end of Q2,  especially with a 5% decline already in place for a buying opp’ for managers.   This all works unless higher powers used the 956SPX early on in June as a time to cash in early.   A game of cat and mouse here as we‘re stuck in June gap resistance last few days.   Simplifying,   we are fine unless we close below 200MA.   To be honest,  we’d accept a terrible and unexpected headline over the weekend to see how strong we are at 200MA around 900SPX.   This would give either side (Bulls-Bears) a belief system.   Bulls..“nothing can stop us now” and the Bears a belief in finally pressing shorts with confidence(maybe).

To simplify more, we’re sticking to this Q’s plays, mostly EPS or story wise until new babies are born in the upcoming Q.   Even though,  the big boys like RIMM may have EPS cooked in,  it should not stop the risk appetite for newborns in the micro-small cap world.    Keep those STEC PWRD CMED ’s upside guidance coming!.   Speaking of,  you might have noticed strength on Friday anything China  related in any sector outperforming, besides PWRD, CMED.   See Shadow list link on site..EJ ADY STP.    Also,  noticed some risk was coming back into our Casino/ lodging... ASCA WYNN PENN HOT LVS WMS  plays,  so look here as well starting next week for possible continution. ( we think these C-L`s are a group that may move best into their earnings given recent slide).    If we see the same reaction (RIMM) going forward....”cooked in..sell news,” in micro/small cap types off earnings,  we’ll now it’s time for a real market breather,  but we doubt it as the risk appetite back for such plays should continue in a recovery trade.    Other than individualé group plays above,  we always have banks- brokers/ commods sector  rotation to take advantage of on any intraday/ short term rallies to dive into for a trade.

DJIM #26

The only trepidation you may have in trading this market is if you’re consumed by technical analysis of the SPX on a daily basis in making trade decisions.   If this continues to be the case,  traders will continue to miss opportunities heading into this earnings season.    Fortunately,  since late March on TSY news from the FED,  we said we’re going back the DJIM basics and going back to individual stocks/ sector picking concentration.  Back to our roots, yep.. back to the days of the Swamp with Lizard King and eventually as moderators for the trading forum in Rev Sharks (www.sharkinvesting.com).    Up to that FED intervention almost everyone was consumed by and fixated on the daily activity of the SPX, including us,  as long opp's were few and far between.    Many traders have stuck to this SPX trade and have missed a beautiful run in individual stocks/ sectors.   The reason we bring this up now is it has become tiresome hearing this is a boring market with little chance to make money due to the trading range last 2 mths.     Besides putting on the commodity linked stocks trade,  we thought if the market continued to act right,  enthusiasm would come back to micro /small caps, focusing on earnings.   Well,   it definitely did as the BWY  DDRX  ARUN  GMCR  ADY  EJ  CVLT  ICE  STEC  EBS  etc. dominated our DJIM platforms with big gains during the recent Q, while supposedly the market produced nothing but a chop trade.    What we’re saying is the market may become more boring in the next 2 months for many traders ,  but we’re looking forward and excited for new opportunities as companies begin to announce earnings for their June ending Q’s.    If things were better for the names listed above last Q,  we expect a slew of new stocks to come on radar with better bottom lines from a recovering economy.  

Until July 13th or so,  you should be drying up some powder in readiness for new stock buying.  You don’t want to be holding stocks that are losing steam or holding any losers if it takes up buying power.  You want to have cash on hand for fresh meat and /or continue for now to be very selective in buying. Your trading proficiency is not measured by how much trading you do,  but by your profits!.   We don't expect any fireworks until next holiday weekend,  we probably did not trade more than 3 or 4 stocks last week with PWRD, DDRX  heading into the week.    It made for a long week,  but at the end of the week it is only your P&L that matters.

...hit the road, Jack!

...but, do come back!...

Nowhere does it say the first trading day of 2H is like a change of seasons in the traders almanac.  Today was just more of the same anemic volume grind,  a day which probably sucked a few in the morning expecting something more than just a market that slowly rolled over by it's close.    If you’re following the script here this week,  you knew the day was probably done by 10:30.   Firstly,  we had a good China PMI overnight that erased all the previous days CCI# losses by premkt/ open as proposed yesterday.   A decent ISM # that continues to show a bottom in manufacturing followed and we came up to our interim top levels of 930-935  quite quickly,  a level that resembled the 4,000 mile long Great Wall as the market stretched along it all day and eventually rolled from it.  Interestingly, the market push to 930 was not accompanied by the commodity linked stocks as is the case most often.  What we had was a decoupled trade with the PMI- sectors that progressed into a bigger one as the USD rolled over later in the day.  Our hesitation to enter a trade due to inactivity of the commodity stocks into the previous days close was not in vain.  

The only stock(s) that garnered our attention was STEC  as it lit up our shadow list/ platforms from the bell, the other was the SAFM  for an 8% bounce from alert yesterday.

So,  we didn’t muster enough strength to push through 930-935 today and putting all weight on NFP tomorrow to do so is seemingly a lost cause following ADP release today.   Seemingly,  the only probability is some disappointment,  so you might as well hit the road now to avoid traffic out of the city!.   Whatever you’re doing this holiday weekend, enjoy and play safe!.   Oh yeah, speaking of play safe.   You know our number #1 rule since day 1,  we don’t hold stock into earnings!.    As shown this past earnings season,  you can make plenty of money after the release or pre-announcement of a report even after a gap up ..eg. STEC , DDRX,  ARUN…and so on.    You don’t need to gamble for a gap up by holding.   If the last few days are a prelude of things to come,  you are going to be sitting on a potential firecracker malfunction into the ground !….MYGN, BEAT. ILMN SCHN.   Yes, a couple of these are pre-announcements/ one sector and you can’t do anything if you‘re unlucky to be caught in a pre-announcement,  but, believe us!!…this is a sign of things to come if companies disappoint this Q.   You will see huge 20%+ losers all over the place this upcoming Q.

Buy stops kick..

Even before the first influential EPS report this week,  the storyline started to change premarket to a corporate driven one by MW's CNBC appearance, upgrade to GS-bullish preview of bank earnings.  We just said the market must first jump over a hurdle this week with the Banks-Brokers reports and today it got a flying start as it jumped a couple of hurdles at once.  This is good as there will be some messy reports from the group upcoming to not let this short covering move get too far out of hand, too quickly.

Still, this was not what really caught our eye!.  What was equally or even more important was the market's and groups ability to shake off and not wallow in the CIT  unfolding debacle in front of it's eyes.  This CIT liquidity crunch has all the potential to remind the market participants the Credit crisis is not really over.  Will this giddiness last, will the market continue to brush this off or start to worry about this and/ or other potential pitfalls.   As swell as today was, we have to monitor this star crack from becoming a big crack on the markets windshield.   Sentiment can change quickly, we just hope we can move forward from the same issues that broke the market before and concentrate on earnings. The market seemed confident in the gov't solving this problem for today.

At the open,  the CIT fiasco had a tug of war with Banks- brokers news flow, but managed to stage a bounce off lows in the 200ma range.   Last week, we pointed out in an alert to watch SP futures at 884.25 levels for a possible rip due to what we saw as a potential kick off of buy stops on a future re-test. 

As you can see by the ES and SPY charts (by volume spike) below this is exactly what happened.   If you weren't following our lead and or just blinked, you missed the DJIA pop 50-70pts in seconds as these buy stops- covering ignited a market breakout all the way to 901 by close.  At 894, we also put to rest the H & S formation for the time being.

Also important today was some individual stock musings (many from our shadow list) that included earnings, upgrades, estimate revisions and contract news to set a positive tone going forward.  Some include, PHG for earnings,  BBY ROK KFT GOOG upped and/or raised,

DJIM's …GS ARUN PENN LFT raised and-or upped,  STEC  28mln contract, WMS  (Ohio legislation news), helped it make 10% (low 30's to low $33's) since last weeks alert.

Well, it seems waiting with powder for "July 13th or so" wasn't such bad idea recently. Still, we've got a long ways to go (99%),  hopefully, full of good surprises as today.

Pints on us!

The solid earnings calls keep coming and the SPX keeps trotting along.  What else is new?.   To tell you the truth, unbelievably the short term outcome of SPX near 2009 highs is of little consequence to us at this stage.  Yes, that’s all the investing public is talking about as we close at a SPX‘09 high, we admit to hardly even glancing at SPX, SPY trading today.   All we see at DJIM is how well our shadow list is behaving and preparing for opportunities ahead for more Pint sized earnings on top of last Q's winners.   Okay, maybe not looking at SPX had to do in part being occupied with watching our premkt HGSI   forum post call at 3.5mln shares/ $10 that sprouted to 123 mln shares traded and a 25% gain from those levels.   But seriously, what excites us is not if the SPX breaks 956 intraday day high this week, but what possibly lies ahead as far as earnings are concerned.  What these solid earnings in the first week are telling us is we are going to get some nice EPS winners in the next 2 months.   Yes, 2 months because most Pint sized caps report for Q’s after all the Keg size stocks report.   Plus these Pint sized caps will have 1 to 2 months of better economy than the ones reporting end of June Q’s now, so earnings may be right out of the park!.  Also, remember half of these don’t even provide guidance which only makes an excellent past Q of relevance.  We should have much more than the (ININ  HITK ) so far this Q to play.

Back at DJIM farm today,  the  drunken’animals were running freely…just yesterday we said…“Even last week, we had past DJIM shadow-listed Q plays putting in new highs at some point ( STEC STAR  CVLT EJ   )”.   Today, we had a few more DJIM shadowed earning stars light up the sky, ( GMCR  PWRD  DDRX ) for 10-15% and some with new highs.  Nobody on the web can be beat that  "Fab 7”  for a few months now.  Also, if that’s not enough, recall in a Journal and later in Forum(06/24) we suggested a pre earnings move will probably come to Casinos after a member asked if it was a time to buy back than.  Well,  with earnings in a week or so these names eg  LVS, WYNN  are acting like earnings winners the past 4-5 days as prospects improve (may need a rest though).  

Even if the market falls into total darkness from something other than a solar eclipse, we have a ‘Premise’ here that's been working overtime since March and an easy to follow formula to stick to going forward.   Note, the "BAR' has been set high for the Keg sized companies by INTC, GS etc., so the big boys ahead will need to shatter numbers/guidance going forward for a great reaction.   On the other hand, if one of these misses it will lost likely be a very nice short quick intraday trade.  The good thing is our pint sized  earnings focus has "no bar" to play in.   Also, the probability a herd momentum mentality has set in and pints are the best way to cure any performance anxiety over one’s stock portfolio in years past.

Geez, just got all thirsty..luckily it's almost noon in London UK!. 

Cheers'

Bull Eclipse

As the other side of the globe is enjoying a once in a few hundred years event of a major Solar Eclipse, we couldn't help but wonder if the stock market, notably Nazzy days streak not seen for a decade), here is enjoying one of the rarest moment as well.    Yes, we are up again and perhaps it's getting a little tiresome?   Not a chance! :)   The only type of traders who are tired of our current rally are either in shorts or are in cash.    In fact, by visiting a few Bear blogs, you'd be able to find a communities of traders who are filled with disgust and anger with this 'Bull eclipse'  over their Bear dens.    Fortunately, they are the minority at this point, many are just a furball of their old selves and others are in the closet crossdressing as we speak.   We admit that we often visit such blogs as some of you seem to as well.   We do that not visit because we are looking for short plays or trading ideas.    Instead, we simply visit those Bearish sites to get an idea what them Bears are thinking and what their case of a trading argument is.    If a Bear is considered a Bull's enemy, then we have to understand our enemy to the fullest in order to beat them in this game.    Frankly,  it's been a scene of chaos at the Bear sites lately.    Many of the da’ Bears are self proclaimed very good technicians who make mince meat of the naïve or inexperienced traders looking for an edge.    However, at DJIM, we always believe that charting is a supplemental, extension to trading.   Understanding the big picture and understanding the market mentality, individual niches is much more important than looking at charts blindly for a trade.   Most importantly, we’ve always believed the first thing you need is to discover a good fundamental stock and than you chart to your hearts content as a guide for R/S levels.   This is where most of these Bear technical places go array.   Most only look at charts to begin with, probably night after night going over scans alphabetically till they see something that gets their Fibs excited.   They don’t care what stock ABC business niche is or care if eg.earnings are tomorrow.   We’ve seen humorous things such as going long a MOO etf trade, while shorting individual Chem fertilizers stocks and /or the corn futs in the group because charts painted such a picture at the same time. 

As we have been saying, what happens few months from now is anyone's guess.   Bears may argue that we may eventually head for a nasty downfall when all of the things unfold.    This may potentially happen, but come on, seriously, what does a hypothetical theory have anything to do with what's happening NOW?     It doesn't take a genius to figure out what's happening with the market these days.  ASK..Goldmans , Credit Suisse calls this week.  CS actually has just reversed their call into equities from their June call !.  You don`t see CS often in the news like GS-JPM, but believe us they are an integral big player in the marketplace.   

Yes,  the market has been up for more than a few days too many and we may very well pause here for a pullback.   So what?  The Bulls are in charge.  This current rally is the result of people believing and acting that things are improving from credit to corporate.  Yes, the consumer in US is behind, but as recently quoted here, "Build it, he will come".   Some of the major companies we know, have come out with some reports that handily beat the expectation and guided well.    We have discussed this "beat the bar" effect during the last few days, so we are not going to go there again.

Today's EPS winner has to be JDAS  alerted AMC yesterday!   We don't post # reports regularly here because this way you do some of your own DD before making a trading decision.   For those new or inexperienced this is the only way to learn/ decipher and understand what looks like a good trade and what isn't in the future.   We just have to say that the report is that good and that's the only lead we'll give on most plays.    As far as DJIM's strategy goes when it comes to earning plays, we are looking for those companies that delivers a big and positive earning surprise.  Unfortunately, if you just go on a 'headline' number wire cross you will sooner than later be finished as a trader. It's not that simple, you need to snoop around a headline number.  JDAS falls under the category and so did, notably GMCR STEC from last Q.     These are the best kind of earning plays we like because not only they are small enough to run up, they are also liquid enough because many institutions will own them.     On the other hand, eps play such as DDRX, BWY, ININ, HITK are always welcome to our list because they always have the "potential"  to pull a big one due to their float after the discovery process unfolds amongst traders.   In the case of DDRX, it pulled an amazing run-up.   In regards to MAIL post today, due to its thinness, it  may or may not do anything.  You don’t buy a stock like this to put in your top 5-10 holds at anytime.   Just like last Q reporting, we are creating a list of plays to keep an eye on (ININ HITK JDAS MAIL this Q so far) and hope for a portion to be become winners like last Q’s list.    Some will fall off the list as we progress, new ones will be added and some like STEC GMCR STAR, we’ll all be trading into the next Q.    These new ones, we now can follow on the charts, keeping an eye on such things as 9ema pullback to possibly buy again or for the first time.   In addition, we are also paying attention to 'group' earning plays.   A specialty group from a particular sector or country may get some hot attention if things turn for the better.   China plays fall into this group and as well as any commodity groups we might trade. 

We had a caution on commods/machinery trade today after CAT  up ~12% premkt pulled the group (JOYG BUCY ) up premarket as we may have “Johny-come-lately” playing here and so we may get sell the news after what we saw in China.  It didn't spill into the overall market, but, note banks( regionals) are not helping this market to break 956 roadblock today.  We can`t have BIOTECH outperform these last few days, most likely if a PB occurs here it will be because of Banks-Commods noise here.  

Most of these 'Machinary/Industrials' gapped and all lost roughly ~$3 off top as seen by JOYG chart below.   As a whole the commodity linked groups/stocks were mixed, notably BTU  (-5%) pulled coals group.   Considering, BTU is top of crop, some parts to their call will seemingly weigh more on other coal stocks down the road than itself.   Tomorrow morning is quite important to these groups as a number of each groups leaders report, so we remain patient here, but not confident any individual and/or group earning plays will emerge,  more importantly to us is what they say will give us signs for the market.

Bottom line,  there's many potential earning surprises from pint sizes down the road and we have to absolutely capture all of them.   It is our mission and our goal for this quarter.    This market may be a little overheated due to market's enthusiasm with earning reports from big companies.   If we get a pullback in the coming days, we'd be sure to get the latest, including last Q's earning plays on the cheap.

...How'd we get here?

‘Here“…is seemingly nowhere as we sit below SPX1K again and many jumping on the train last week are asking this question.   Before the 1st trading day of August, we discussed a break of SPX 1K was inevitable after painting a Bullish outside month to conclude July.   Once we accomplished this feat in short time, we immediately warned that an overshoot spike would be the beginning of a reversal if 1014 was hit and the market would “blow off some premium steam”.   Since Fridays intraday high spike to todays low..(26 pts < 3% has been blown off).   Today as the SPX futs touched down to 990/ 993 Cash important support, we were in danger of this reversal continuing to next 982S and than even 970S later on.   Simply,  we feel stops are laid out just below 990 and this would induce a further drop.   We’re watching this level closely this week,  today’s volume was quite low in all probability awaiting FOMC.   FOMC, not much is expected,  still it should swing the market either way just because we sit at support.

The Friday SPX failure to close over 1014 is reminding us of the June attempt to get over 950.  A break to SPX 956 and than a close of 944.  We think the trade going forward may resemble the aftermath of that day.  Have a look at the daily.

What’s important to understand for future reference are some points to recognize as a trader to be a head of the curve.   Once we broke SPX1K, we titled a journal “ PMI= SPX1= Market too Giddy”.  That day global PMI pushed the market higher as all of a sudden these PMI’s were the holy grail as seemingly every  Johnny come lately’ was coming in bullish.   We wondered if this investor was really that behind the curve and now the smart money would begin to sell off to them over SPX1 (Aug 4).   This relates to the overall bullish sentiment getting too high, thus too giddy.   Other bearish points we have discussed recently are the mid/ small caps earnings winners not going higher which signals a short term top for us and most recently the failure of the COMP all leads to our cry here…’we want broad particpation’ and we’re not getting it.   Also our NYSE A/ D line is turning.

A few earning plays from this Q did look good today.  FIRE  continues to make new highs,  PWRD  made a nice one day reversal after selling off on excellent earnings.  EJ  beating on top of Aug range ahead of EPS.  ABVT, consolidating, flat lining well since EPS.  SXCI  and even STEC  is starting to shake off the offering.    But as noted yesterday, breakouts are a concern and just as we noted TBI  breakout was vulnerable as it gave it all back.   We’ll feel much more comfortable with our niche once this action stops. We also added some TXIC  today due to earnings, China and business related make the float even that more attractive to go higher.    Anyways, today a few more of our niche plays are looking better, hopefully a sign of things to come.

Today,  financials down 3% with banks down 5% being the weakest sub group, we have Tech doing nothing since MSFT earnings and Commods  needing a well deserved rest all intertwining here.   Not simple to figure out we need someone to pick up the slack.  

....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.

..Tales(s) of the tape

It’s what’s inside that counts, the saying goes!.  You can apply this to the market today.  On the surface the market grazed (off only 3.5 SPX pts) above the 1060-58 gap of October 8th,  yet the underlying market was terrible with widespread deterioration.

Weekend`s edition, we said stick to ‘bigger names’ ..small caps lagging action.  Yesterday…avoid (high beta cheap-outperformers) micro-mid-small caps.  Unfortunately, what we want to avoid is mostly what our DJIM trading list is comprised of.   Today, the selling continued and got aggressive with many of the EPS out performers being rocked…ININ, HMIN, FUQI, TXIC, TRIT, BIDU, WYNN, STEC, AONE  etc.  Some were new earning report related, others sector realted (China), some IPOs.   In the broad market, the TRAN breakdown has the SOX as a partner.    Also, even though we've avoided commodity linked stocks recently, we can't help but notice the damage done in sub groups like steel today.   This type of selling is reminiscent of the days when HF`s dumped at the end of a month(s) in 07-08. As we said yesterday, they are locking in profits as fiscal year end for many is Oct-Nov.   While the selling seems to have abated on the surface, buyers are hesitant to step up until the market finds its support level.  You should as well, if your time horizon for a trade is more than a day.   If you can flip intraday, some names will provide a trade, possibly even tomorrow after their beatings.   A stock like WYNN  that is $20 off highs and has ability to squeeze at anytime is starting to look attractive even as a longer term hold possibility, other smaller beat up names don't have the same characteristics yet.

Also from yesterday…"…be careful jumping into excellent reports with both feet immediately.  Wait for reaction to confirm buyers will still eat up growth stocks".     Today, we alerted a stock with a cautionary…'see if it catches on'.    What we see clearly now from this stock and others is even small caps are going to have a hard time catching a bid from an EPS report in this current environment.  The 'sell on the news' is spreading and we again caution about getting in on a stock early from an EPS report at this point.

SPX has been down 6 of last 8 days and 3 in a row and 1060-58 might be ST support, but the market awaits GDP (Thur) and homebuyers tax credit news/ financial bill etc.   So, while the market box score may look okay on the surface tonight,  there are ominous signals internally that require the above trading basics to stick to.