Anything but conventional....

So far,  it's been concluded that 2009 isn't a normal trading year.    Unlike last year, where everyone seemed to be on the same page, this year nobody seems to agree on anything concrete for more than a day.     One thing we all have to admit and respect though, is that the market took a gigantic turn from a low of SPX 666 to what we are now at SPX 1025.     We can disagree on many aspects of the recent economic development, corporate development and policy development.     What we all have to agree though is that the public (investment) has one sided agreed that things are improving.   Investment community has been voicing their opinion through  buying and more buying of riskier assets (equities) and that's how we got to this point today.

Strangely, it's still a sceptical vision for some people (bears).    Since we can’t predict what's going to happen the next six months to a year of trading , that conclusion remains up in the air, but we cannot DENY what's happened the last six months.    If people still think it's just a conspiracy by the government and a bunch of big brokerage firm’s artificially propping this market higher, then those people seriously need to check their heads.    Politely, simply that’s our interpretation of those people who have misread the market during last six months.

Ok, having traded this market on the long side during the past few months, we do admit that things aren't easily interpretable from time to time.    In other words, this hasn't been a conventional bull market.     How?   The market itself has consistently beat our expectation and surprised even the most optimistic bulls.    It's a good thing, right?    Well, unless you are a new bull that was born at the beginning of 2009, this might be one of those sweetest year you'll ever encounter.    For those seasoned traders that have "seen it all", we feel the market has outperformed most of them.    For DJIM traders,  we trade and live in a world of probabilities.    We enter a trade often in a high probability scenario and hope to profit from it.    If the trading scenario offers a low probability, we simply wait for better opportunity.    This is our conventional way of trading and why earnings plays work either immediately or simply, sooner than later.    However, what if the market offers nothing but low probability trades and often those trades work out wonderfully?    Well, welcome to 2009!.     Having traded as many years as we have, we just have to say that this year is nothing like the other years.   In other so- so bull years, we'd have done ten times better than we'd have done this year up till now.    Of course,  we may be a bit hard on ourselves, but the whole point we are trying to make here is that this ISN"T a conventional trading year.     It's been a slow and cautious adjustment as well always still full of hesitation and tentativeness.    We simply do not want to throw away all of our previous "know how" experience in order to adjust to the current trading mentality where garbage bin stocks have worked.   This will probably be a repeat of where Joe- Schmo thinks he’s a trader now until the day comes they are taught a ruthless lesson or two to take them where they started from.   We know, down the road, this market will eventually return to the normal mode and our knowledge and experience will apply greatly.    Discipline and consisitency is still our main strength at DJIM, even if it means foregoing some of the "seemingly easy" profit here and there.

Back to this market, we concluded yesterday's Journal that we’d concentrate on individual stocks and let the broad market to what it needs to do at new 2009 highs.  A stock we alerted late last week and said yesterday it should be on top of your trading list,  BCRX  stole the show with a huge lift, we really didn’t even notice SPX action all afternoon thanks to it.   Even though we closed flat,  it's really not that big of a deal considering the week we just had and the fact this is the week people go away for one last break in the summer.    Some other plays on our list such as SWM SXCI HGSI ABVT  from this Q and those from last Q STEC EBS EQIX... exhibited some nice strength through out the day.    Other plays have been firming up the setup as well as noted yesterday.   Overall, we thought it's a pretty good day.   As the market inches higher, we are in the buy on strength mode.  Tomorrow is that 5000 household CCI # to watch for possible market direction , even though we don’t really consider a eco data point.

Not just any 3 pt(gain) day...

Normally, on a day where the market rises 3 whole pts,  there's really not much to talk about other than a big yawn.    However, today's a particularly interesting day for both the Bulls and Bears.    Well, lets start with the Bear camp.    The Bear argument here is that we have stalled at SPX 1030, based on this weeks reaction to good eco' reports,  a sizable pullback was imminent.    They got their wish, at least for about an hour or so it was sizable in comparison as the market dipped as low 1015 ( between the 1013-1018 on our chart as support), which is also 200 mth MA important support level.   As we said beginning of week…” use exaggerated weakness to pick up those most affected from our core“.    Once again,  the shorts couldn’t aggressively and/ or simply didn’t want to press positions. We’re left with another brief and still shallow correction.   Again, ”all talk, no action” , by all the recent naysayer’s!
 
From the Bull camp,  the only thing they have to say today about market after it touched 1015 .. "the rest is history" as the underlying bid prevailed once again!     As bulls, we welcome these kind of dips,  especially on low attendance days and when it's not a news catalyst related event.   You never sell a dull day/ week.   In the current rally environment, you never sell, period!    Ok,  perhaps this is too extreme of a statement, but we are pointing out the fact rather than theory.    Same thing happened when the market was meeting with stiff resistance at SPX 955 and 1k.    While each scenario was different, market was able to overcome with some shaky pullbacks and broke to new highs at the end.   By the way, we aren't talking about distant history here as those levels were taken out just within the last two months.

On the earning side, we again have some very firm reports from the likes of DELL, MRVL, OVTI (alerted AMC) and ARUN.   This is important because these are JULY-end reports and it bodes well for those who reported at the start of earnings season as July business was not included.  These simply show things are even better for those June end reporting companies.  Tech should finally help Financials and lower dollar should help commodity linked stocks tomorrow, especially.   Likely, a trifecta building to melt up over this recent rally cycle high of 1037.

Are we simply waiting for the end of summer trading before the rush of crowd to push this market even higher?.   Perhaps.   What's happening out there isn't the result of a temporary bounce or squeeze, we do have folks putting money at work here.    With the recent change in economic outlook and pickup in production/activity, it's hard to imagine everything would turn around 180 degrees and we head for a double dip recession.    It in theory can happen, but at this point, we'd imagine Vegas bookies aren't taking the bets.

As far as the broad market picture today, we simply had an impressive rally off the low.   What's interesting is that after spending much of the day in negative territory, both techs and commodity group staged a strong come back joining the Financials (led again) who are keeping the market stable.   Late action has a lot to do with the slide in USD, which of course is good for equities and as we push up early tomorrow, the profit taking on moves up this week may turn to buying looking forward to 1044 as buyers stop taking a breather.   Notable plays off our list, paper stocks RKT SWM  made another new high.  PRE, as well.  Techs such as STEC ATHR also inched up as well.  

Bottom line, what's not to like about this market?  Nothing!.  Have a nice weekend!

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.