Potential change of leadership....

If this market were to continue higher beyond current level (not necessarily tomorrow with important EPS' due),  we feel that there's a very good possibility that we'll need to see a change of leadership.   Up until now,  there's no doubt that the sector that has carried the weight for the recent run up is the financial sector.   If the financials behave well, chances are,  we'd have a strong day up and vice versa. Results will be released May 4th with specific criteria on how each bank will be tested to be released April 24th. 

Today's big event was the earning report from JPM.   Just like most people predicted, JPM's report did not disappoint.  At the beginning of the day, we were hoping to see the JPM reaction would lift the entire sector, if not the whole market.   It was not the case as the financials lagged (GS, WFC  specifically), as we saw some profit taking among various financial stocks right after the opening bell ring.    All day,  it just felt that there's bit of exhaustive action to keep the financial sector in the green.  This is somewhat troubling that despite a very rosy report from JPM,  the selling on news in not abating.  We just can't help but wonder if the good news is "cooked" into the current price levels.   Keep in mind, most of these financial stocks have rallied tremendously from their recent low and it's totally realistic for them to be in "good" consolidating mode after outpacing expectations beginning with WFC.

Clearly, we saw the underperformers (tech) yesterday become the outperformers.   Maybe, it was just a pre-run into a specific stock earnings.   Yesterday, the bankers- brokers squeezed into JPM’s and today the tech into GOOG’s .   Still,  other sectors, the ones that aren't in as much spotlight, or the lagging sectors were picking up the pace as the day went on.  We are referring to our fave commod' group (steel stocks), material stocks, and oil stocks.  Even TIF,  noted a few times in the past 3 weeks in Alerts had one of the nicest breakouts of the day.   When you add them all together with tech, they make up a healthy chunk of the market.  Can these stocks rise to the occasion and take over the leadership?    Can the market move higher without the financials?   We feel it's definitely possible.   As long as the financial stocks hold their ground and consolidate,  there's always a chance for other sectors to step up and take over the lead.   Earning reports will provide such catalysts for such a move.

Tonight AMC,  we had GOOG  report an inline number, but they also guided cautiously for next two quarters.   This is actually fine by us as more and more companies are being conservative and realistic about the economy and market.  INTC did it the night before and now Google did the same.  Can they set themselves for potential upside surprise down the road?   It would be a smart thing to do if that's what they are shooting for.

Tomorrow morning, we have GE  & C  coming out with their reports.  If JPM's report is about the health of our financial sector, then GE's report is about the health of the US / global economy.  Lots of focus will be on to  see how GE’s business is doing worldwide & GE capital.    Yes,  GE is that important once again as years ago and it can potentially move the entire market in a significant way.    Tomorrow, is seemingly the perfect day to begin a much awaited “ sell this rally” correction with C, GE on the podium.

Bottom line,  we are inching higher toward the resistance level in the SPX 870‘s.  Even though the level may or may not be that meaningful,  it seems that's the level many of the traders are obsessed about. “Tailwinds to run over 860??...Of course,  earnings will dictate,  but if we keep getting surprises we'll have the shorts giving up and we can really overshoot 860.   The reason is this is where most of the shorts are set up from mid Jan -Feb!!.”.   We are clearly seeing shorts becoming nervous and covering around these levels. 

Earning season has just started and we have a lot more reports next few weeks. So far, so good and lets hope it stays that way!.  If NOK can have a 90% profit drop y/o/y and pop, it can’t be all bad for earnings going forward.

Global Rip..

As an overnight Global market rip flowed into Europe (most exchanges up 2%),  U.S markets had no choice but to follow.  We were actually quite relieved that 1060 proved to be technically troublesome as this is the top of the ‘range bound/ holding pattern (1038-1060) noted yesterday.  The reason is simple, we don’t want the market to get out of hand before the market has a true read on earnings and cause a sell-off on ‘good earnings news’ down the road.   Either way, up or down we go later,  the strong impetus for the market will be earnings and not Aussie interest hikes, talk of 2nd stimulus talk as was the case today.   The real money is not going to chase the market to new highs on a relief rally,  early afternoon,  we had evidence of this as how easily the market can sell off without conviction buying coming in.  

Most importantly in DJIM land,  this relief rally played out perfectly bouncing 40pts from Friday’s gap support levels to unwind positions and make short lived trades.  After seeing the benign G7 statement this weekend in respect to the USD, we entered the week saying look for a USD weakness trade.  It is incredible to see what has ensued as all focus is on FX with Gold ripping,  Aussie / Canadian dollars at highs etc.  

As far as sec’s, strength was broad based.  Our China’ listed stocks, such as HMIN EJ BIDU  were strong.  One of our few retail stocks, TIF  made a nice run to NCH.

As reports start to trickle out this week, the market will begin to get a read on things and start to get a feel for how to position itself, either for upside or downside.   Every report from PBG today to COST tomorrow morning to AA after hours will be dissected by the real money to begin a feel for what lies ahead.

..nice and quiet day

Just a typical day to torture the Bears and declare another win for the Bulls.  If you saw the Shanghai tape of -3+% day, you’d figure the US markets ES would be down premarket!.   That was the first sign of market just shrugging off things as the ES was pretty tepid.  Other potential poisons were out there as well (home price trends weakened, GDP revisions), but the market just has turkey or is it just Bear meat on it’s mind as a morning sell off was eaten up by the Bulls in a sign of an never ending underlying bid on any shallow pullback.   As trading desks empty, fast money traders lead the market to potential new closing highs on SP this week.   We mentioned a clean breakout might be difficult this week as you need conviction buyers coming and that would seemingly be hard with lots of big money away.   If a breakout happens, the Bears will say it’s a low volume move, we only wonder if any break happens what will ‘holiday’ talk consist of at the table and all weekend as headlines read market at new highs!.  Will they come off the sidelines come next Monday?.  This is probably looking too far ahead, but new highs are a possibility tomorrow if a surprising (notably Initial Jobs claims / but also Durable goods etc. comes in and if Euro data in morning is welcomed as our late alert indicated.  We also noted AIXG again in the alert and hope it pushes to a new closing high.

AMC, JCG  is getting a pop, our fave consumer/ retail store stock TIF  reports in morning and will probably surprise as it has in recent reports.  This may also help the sentiment overall. 

Happy Thanksgiving to all our members and your families!.   Have a great one!