Range Bound...

Let’s just say, it’s nice to see the market continue Friday’s reversal after four days of selling last week and have it’s first green day in October.

There's couple of things to note with regard to today's action.  First, technically ….Before Friday’s trade noted…”..What does it all mean then?    Technically, we broke and than closed below SPX 1035-1038 .  We noted last week this is "important support"."  It sets a stage to test the early Sept gap 1016-1018“.  

After today, we are above the “important support” once again and we didn’t re-test 1019 just above the gap alerted was a ‘good for bounce chance’  Friday.   Next “R” at 1041 and 1046.

Second, today put some ease back into investors' mind after the string of disappointing Econ. data from last week.    More often than not, markets sentiment can swing wildly from one week to next.    Today's ISM non-manufacturing.#,  an indication of the service sector, came out at 50.9 providing some ease  as it was more in-line with recent Q3 readings than last weeks was.  The # helped to built some positive sentiment in the morning on the heels of Goldman Sachs upgrade of WFC and COF which helped the financial sector log a 2% +day.

Overall, breadth is very good as majority if not all of the plays on our list ended in green.   Today's also the first day where we saw some broad based gain from the commodity sector as the result of a weak USD bolded on site last night as a trade to watch this week.    Granted, volume isn't particularly strong across the board,  probably because this is literally the week before earning season.    We are hopeful that today's action can put this market back into the range which we've discussed before, between SPX 1038 and 1060.    We don't expect to make much headway in either direction simply due to the lack of economic events and earning reports wait and see.    However, this doesn't mean that some of the small caps on our watchlist can’t enjoy a good week.   Some of the notable ones on our list include HITK SWM  which made new closing high.  DGW, added last week in alerts broke its range.  TRIT,  is a recent IPO in same group to watch for upside break trade as well.

Last week, we said to keep an eye on China because of their "Golden week"  holiday.  This has been very quiet on the news flow here, but we can tell you retail sales were up over 15% YOY in the first 3 days with tech stuff HDTV / 3G handest exploding off the shelves.  Maybe, early next week the final data will get some 'noise' here.

With a week to go before some of the major companies release reports, we are hoping to find some quietness from this market.   Range bound/ A holding pattern.  This may actually give some of the plays on our list a chance to make a move higher and we'd love to sell some into the strength if that's the case.    Again, we are eyeing the coming earning period just like everyone else and last thing we want is to set another bias/ trend heading into the earning season.

rejuvenated

For the longest time, the earning season is usually kicked off with Alcoa announcing a miserable quarter.    Today, we got quiet a surprise in AH as AA  announced a profit with 9% sequential rev. growth.  Remember the good ole EPS’s days, one thing we always looked for was SEQUENTIAL revenue / eps growth.   Not YOY, but sequential!  So, can this be real?  You betcha!    Although the profit of 8 cents/shr is largely due to aggressive cost cutting, FX, the top line Rev. figure is for real and China is the driver. 

AA’s impressive Q may turn some skeptics on to believing a global recovery, therefore, real money would start to enter the market.  A sentiment change is the key here, now all we need is for other companies to show they are 'rejuvenated'  like AA. 

After yesterday's market "rip",  we'd expected some back pedalling from this market.   What we didn't expect today is the lack of it as we traded in a very narrow range.  Financials  made it back to back to back  >1% days ahead of their big earnings week indicating the street is optimistic.   From the tech land, we had Google's CEO commenting that worst is behind us and he's seeing improvement in the Ad. area.    This is simply great news as more advertising from business means more confidence from Corporate America.   This directly translates that there's more consumer confidence and spending down the road, according to this logic.    Yes, we are still range bound with SPX 1060-1064 as our short term resistance.   However, if we get a decent IJC number tomorrow, SSS Retail #, we are sure to bust out of that resistance and who knows where we'll end up by the end of this week.

At DJIM land,  even though we wanted to be unwinding positions, if we got a reversal last week, we still left the option to day trade selectively.  Once again, our focus on the Holiday China was led by the only 2 stocks we introduced this/last week in DGW +$3/ 9% and TRIT +$2/14% .

We are also looking at quite a few commods due to the AA report.   We wouldn't be hesitant to chase a few in pre. market or at open depending on the sentiment holding overnight.

Okay, so a positive start to EPS season...the question is how patieint the market will be before positioning money into other names.   If the tone continues and it is definitely early, our premise of putting money into stocks for pre- eps moves will drive the overall market higher. 

"Golden week" stocks!

A lot of real buying in the morning off AA earnings, Jobless claims #, positive retail curtailed at 1pm off a weak 30yr auction and we finished at SPX 1065.    Well, that’s what the broad market was doing and seeing, we really didn’t notice as our “Golden week’ China stocks had all the fireworks.   Of course, we’re talking about alerted UTA TXIC and TRIT  all running probably with many of the same players behind them. 

There is really not much to add before Friday’s trade,  investors will wait to make bigger commitments when we really kick off earnings next week and begin to get Sept eco data.  

A Giant(s) beat...

Today's the day where you can almost skip the entire regular trading session and go straight to after hour action.   Why?   We hope we don't have to answer that question.    Basically, the day's action is very meaningless despite some not so good earning reaction to JNJ and downgrade of a few financial companies by Mrs. Whitney.    In fact,  SPX lost only three points and the other two indices are unchanged.   

What happened in after hour and what happens pre- mkt tomorrow (JPM ) is probably going to set the tone for rest of this week and beyond….“the official season kicks off Oct 14th with the Financials  and INTC“.   Everything before this was pre-game stuff.. AA etc,   now the real game starts.  As of tonight, the Bulls have led of the game with a lead-off “Homer”.    JPM  will make it back to back dingers, very likely.

INTC, one of the most influential technology company, reported earnings AMC that beat the most optimistic expectation.   In addition, INTC also guided next quarter much higher and with significant higher margin than the consensus.    In all, it's a very good if not a great report from this technology giant.

So, the question is, is this good enough for our market?    As far as Intel and the feeling about tech world, we think it's good enough, especially because of the implications for so many of the tech companies reporting later.  However, we still have many reports from many sectors to consider in the coming weeks.    In fact, we have JPM on deck in the morning to give us a first look in the banking world for the current quarter.    What we think that is NOT going to happen though, is that the market will get sold off like it did after INTC's last report.    Also, now we know who has set the bar now for earning reports as far as big company's are concerned. 

At DJIM land, we highlighted 2 previous DJIM eps listed winners, ININ  and BWY  in our journal last night as both companies came out with guidance.     While BWY did not breakout in a big way (still positive close),  ININ did what we asked for.  Still, the trading ranges for both provided some great entries even for intraday trades.  BWY ($1.70 range low to high/ ININ (3.50 range).   As traders, we just have to focus on the winner of the two going forward.    Based on the volume and reaction of ININ today,  we are expecting follow through in the coming days/weeks.    We are just hoping more institutions take a look at this little company start piling into it.    Also,  TRIT,  this is the one with the kind of trading momentum we look for and love.  AONE, another IPO here had good action late afternoon as well.

Bottom line,  it's going to be a busy week and earnings season.  

..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.

DJIM 48, 2009

First of all, we wish everyone just had a great thanksgiving holiday.    The past week was "supposed" to be a quiet week where the focus was supposed to be on turkey as oppose to the market.    Instead, we had this ‘little ;)’ announcement from Dubai that it's planning to delay the debt payment of its state controlled company, Dubai World.    As we know with news rocked the western world,  hopefully you didn’t react like “Tiger Woods” by panicking and fender bender-ing a fire hydrant and a tree early that morning!   Both the European and Asian market took a hefty beating and our futures pointed to a nasty ripple open for Friday as the sudden return of ‘credit risk‘ returned seemingly.   They definitely picked a right time to do this, eh?

The actual ‘leverage’ exposure, as far as the US banks is concerned, is very minimal and we think this is containable.    The fact we had a huge gap down at the open on Friday morning was inevitable due to the overseas weakness.    Also, there's also the so called "flight to safety" trade where people taking on safer investment while losing some risky ones.    For DJIM, we had one question in our mind this holiday.     Didn't anyone see this coming from Dubai?     To us, Dubai is nothing more than a glorious version of "Vegas".    With the number of projects they have going on over there, they'd better hope that they can attract more than just the rich folks.    By now, we know that most of the exposure are from the European banks and that is something reassuring to know for the U.S. market.

The biggest question right now, come Monday, is whether this Dubai news would continue to shake investors' confidence in the equity market and flee to other safe assets.    If Friday was a good indication of how things would come in the coming week, we are pretty confident things won't be bad.    The volume on Friday looks pretty good, given the fact the market only opened for half a day.    Had the market opened for the full day,  we would have some very healthy volume and turnover.    This to us, means that many folks were being pulled from their holiday and back onto their ‘blackberry’ trading desks to deal with the market.    No doubt, many folks saw this as an opportunity to buy into weakness while others would see this as a reason to park it in for the year.      For DJIM, we see this weakness as an opportunity as we don't believe U.S. market participants would be as concerned about Dubai as the European players.     On the other hand,  there's really no other alternative investments to pile your money into.   The so called "safety assets" don't really earn you much and if this Dubai debacle turns out to be nothing but a short term manageable headache, we believe the funds will flow back into the equity market.

As far as plays go, some of our latest plays behaved really well on Friday.   RINO and TRIT  even managed to tack on some respectable gains.    Other plays such as AIXG, CLF, CTRP, MELI,  GMCR... all traded as if the market was down just a couple of points.     Coming Monday,  we'll have most traders back from the holiday and we'll see how they digest the recent events.    We also have data from this Black Friday sales event which will give traders plenty of catalyst to vote their opinion.   In addition,  we have job report in the coming week,  so this will be a pivotal week for the remainder of the trading year.

Jitters dissipate..

As the market hovered in and around important support 1088 (20Ma) and 1085 Fridays low our jitters were abating as a downward breakdown was becoming less likely.    Our jitters were not around Dubai as our previous Journal stated, but the back to back to back to back end of month selling we’ve been seeing in the market the last part of the year.   This Nov. month’s end is almost as crucial as last month due to fiscal selling possibilities by HF’s.  Fortunately, they probably don’t have much left to throw away after October as they’ve been sitting on their hands supposedly not participating in new buying and probably because they better hold what they have into year-end or face underperformance anxiety again.  

What we saw today, we haven’t seen in a while and that is Financials  outperforming, especially, it was almost a shock to see GS  and JPM  up, finally!.  This was bullet point #1  as to why we felt this was a good day and we should’ve been up nicely as alerted in afternoon because it showed Dubai fears were diminishing.  The last hour close points to a ’nicely’ open and was not just ‘marking up’ by managers in stocks to close off month according Cramerhead tonight.  This move should extend in morning in our view.

Next, bullet point #2  was not the China overnight gains as US markets rarely follow up or down the last few months (instead Europe), but what they were ‘pledging’ and that was to stick with stimulus efforts into 2010 and so this abates change of policy worries as been the case of worry in world markets, including US.    Part of this was the early morning alert  idea of CAAS , which went from mid 18’s time of alert to $20+ pretty quickly as  ‘passenger vehicle’ tax cut schemes were positive and we thought this was the best play (sub-sector) to jump on. (WATG TXIC may be others if this has life).  A few other DJIM china plays also played along, notably CTRP, TRIT, RINO.   On the speculative side, SEED  on Journal during Thanksgiving week regained momo’ for a big day.

Bullet point #3  was the Semi numbers out over the weekend.  Recall, BOA recently cracked the chip sector with a downgrade well, today JPM boosted '09 sales forecasts following better SIA sales showing sales are tracking or above expectations Q4 with solid demand.   We have AIXG  (ADR), our recent fave here making new closing highs in Germany and in US.  ** Note, there is a CFSB conference this week and companies may provide more positive updates signs for the sector and drive NASD.

In our view,  these bullet points were positives that were overshadowing in the morning any negatives eg. Dubai (positive news in pm) or holiday retail stats (actually improved in afternoon as more data came out /24% to 11% YOY from early am data).    As the news in afternoon on Dubai and Retail improved,  it pushed the market away from the important support levels all the way to 1095 on the back of already positive news flow we’re highlighting. 

It's all good...

So long, Dubai!   Since the Dubai news hit, we suspected that the news just would not be able to bring down this market. ..“we see this weakness as an opportunity.“..“Dubai stuff is really a non story here..”(alert Monday).   Today, all the talk is what we’ve been saying, except many who were drawn into the fear hype are only hearing these words in the media today, sidelined with many missed SPX points and individual stocks making new highs.  Getting in tomorrow for a Dubai trade is a little too late.  The past couple of trading days have been great to our latest bolded stocks as they've been making new highs....AIXG (CREE/VECO  alert Nov 24),  RINO , Nov 20th (new adds to DJIM, AIXG , RINO ) to our dip list either because we know what they are capable of on a good day(s)..MELI, CTRP TRIT CLF…and CAAS  20+% in a few days.  

As we have pointed out over the weekend and yesterday,  Dubai is likely an isolated agenda which is “containable” and regional.    The overwhelming appetite for equity market is the most important theme we have in this market right now.  That’s why the premise of the never-ending underlying bid is and has been the overwhelming theme here for months.  Simply, this has meant buyers are there for support and any sell offs should be used to buy your favorite DJIM stocks if they get hit or not.   

As of the closing tonight, SPX stood at 1108, smacking against the recent high.    We have mentioned couple of days ago that investors have this urge to get returns off their cash.    Well, you aren't going to get any return from money market or treasury bills.   Nor you can get any return from sitting on the sidelines and watch every single one of your favourite stock go up without your involvement.     Even though we aren't the big money managers,  we can understand EXACTLY how they feel if they are underperforming.    By sitting in cash, or being cautious, the money mangers are under performing even the least experienced yahoo traders who flip SEED  as a hobby.   This may sound harsh but the message is clear out there, "You have to be IN this market to get SOME return!"

Now we got our message off our back, we'll talk about some of our plays.    On our second thought, there's really not much to talk about other than the fact most of our plays are cruising.    Sure, some of the plays may act a little overheated, but we still have to be thankful for the kind of  excellent action they've given us.    Some of the Chinese (bullet point#2), more positive data here today and plays continue to be very hot and that's a very positive development going into the year end.   We’re also adding CAGC  to our trading list as Ferts are hitting new highs.

Only disappointment today is the GS/JPM  Financial bullet point from yesterday.  The more we think of it... this sector may lag for rest of year and not stop the market as long as the group just holds flat.   Bullet point #3 from yesterday, SEMI’s  (up 3%)led the move today with more companies (ALTR eg.) providing market boosting updates and  2010 forecasts out this morning.  

However, we also want to mention that it's ok to trim off some of the extended positions here.   We have done so today, but we'll remain on the aggressive end on any more pullbacks.  Due to what we see in the market today, we will look tomorrow at getting possibly back into a casino 'trade' with WYNN, LVS , the two names we play here.  We also see shippers  turning here and into year end as alerted today.    The market may consolidate some tomorrow, but we think it's a stock pickers market going forward and so individual groups will still attract attention, even if the broad market tape is not doing much. 

Before you know it,  this market may leave you behind once again so you have to absolutely have some holdings going into the year end.     We still like the idea of a balanced portfolio although we have been tilting our weighting toward the smaller stuff over the past few days.

Bottom line, we have a job report to look forward to this Friday and based on the market sentiment, the number may not even matter that much.   Folks, we are right against the recent high here and maybe we can just get lucky this time.