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Entries in Upside Risk to shorts (2)


"It's all in the details"

How’s that for ‘Upside Risk’ shorts?.   We told you the weekend leaks were one big risk!.   All we could say is Mr. (yes, it’s Mr. now), not whipping boy, Geithner, why did you ever bother with the sketchy February 10th - 4 point plan,  if  you had no specifics to revive capital????.   It’s all in the details..details !.    That day the SPX closed at 827,  today we surged through the 50ma and closed well above this 800 mark.   This close is a big positive and the Bulls finally should have the upper hand going forward.  On a technical view,  the next big TA levels not until the upper 800’s.   

The premise since late last week was that shorts were leaving the market to figure itself out by not taking new positions.. "shorts are not lining up new positions due to upside risk to news".   Those are the smart shorts, the ones still helping the market go higher by short covering are not so smart looking today.   Last few days as the market slid slowly back under 770,  we believed this was just a healthy tired action as recent market gains were being digested and not relinquished …“The market will do what it needs to do!.    At this point, there are still upside risks as we come into month/Q end for the shorts and that may keep the market from a major pullback and instead break the 800 hurdle later next week….”.  Without going into the small print of the programs introduced (we‘ll send you a PDF file if requested),  we also had positives in the Housing data and more M&A activity as the biggest deal came along since 2006 in the oil sector.   Can you believe that ?.   The good ole days are back of M&A Mondays;).    Okay,  maybe that’s a stretch,  but if you add up a few things this rally is different from all the others we’ve had since all the bailout rallies that failed.    Why?.    A few differences is now we have M&A activity on a weekly basis,  Oil running to 4 mth highs and sentiment is much better.  Confidence is emerging,  but the confidence in your politicians is going to be a possible cloud if they keep sticking their noses into the wallets of Wall Street!. ( a 2:50pm headline helped the rally…Senate could delay debate on its bonus legislation until next month to give more time for consideration).   
In the morning to make the gap work and extend,  we got what we posted premarket as a 'key ' to the plan …White House National Economic Council Director Lawrence Summers said that investors in the Public-Private Investment Program won't be subject to the compensation limits  applied to banks rescued by the government.   Once this headline hit CNBC,  the market sighed in relief and started its move to tackle with 800.

What’s the next big catalyst?.  You got a sniff of it late today and that is if bankers- brokers raise capital through private equity deals to exit the TARP!   This is amost a clincher and what will drive this market closer to SPX 1000.    Did we say that..1000?   We'd definitely buy the market the day we hear news like this.   GS  helped this rally late because the WSJ reported that Goldman was considering selling part of its stake in China's ICBC and would use the proceeds to pay back the TARP.

Into the trading day, we noted Financials will again be in focus if the Geithner plan is liked by the market.  Did it ever (+18% financials)!  The move recently has been great in this group and it's arms,  but there is a lot of upside left, we're only back to February lows.    Long term money flow,  if believing into this market story have a lot of room to maneuver into and profit.   The only thing is now to let some settling take place.   So, while this likely occurs tomorrow,  we'll continue to focus on the commodity, energy trade from last week.   The stalwart (tech) of 2009 is back after a short hiatus and is tradeable once again.

We have more legs to this rally,  we have the upside risk due to events unfolding in respect to, "...with Q end coming it is the perfect time seemingly to get the hedgies to prop up their books".   This is of course now more than ever relates to 'Whales' doing the same (MF`s Institutions).   For potential vibrations in the market this week,  watch out for DC and budget draft resolutions.  As we know, lawmakers can dampen things pretty quickly, but view any negative items as an opportunity to buy on the pullback.


underlying bid prevailing..

Underlying bid prevails today as the bigger fish go fishing...

Just some scattered trading thoughts,  mostly due to fact many aspects of this market/ plays remain the same since late last week.

Two characteristics of the market still showing,

1) Shorts are NOT starting fresh shorts due to upside risk of news.  Ones that pressed with downside were left dazed and confused.  Also we still feel the Hedgies/ Institutions, MF’s pensions (whales) are chasing equities to pretty up their books month end/ Q end.

2) We kept mentioning the underlying bid providing support yesterday, we thought and got it in the morning as we extended higher (helped by durables, housing) after not such a nice close on Tuesday.  We alerted in the afternoon, we were aware of Whale buying the Industrials in the morning (this spurred by eco‘ data), the idea was they would come into the closing broadly.   Remember, this is mostly the time whales buy,  this is why last 30 minutes to a close is such an important ingredient to the health of the market.    Besides, we didn’t think the low volume downside to under 800 or the Treasury auction news was all that important.   Other news providing some headwinds was Trsy asking for authority to seize hedge funds and worries they won't just let banks leave the TARP in near-term.    Almost to the minute of alert,  we got a V-shaped bounce started which scurried out any shorts that pressed into this downside move thinking this rally was broken.     Again, the underlying bid is there for now.   

Remember,  instead of scurrying around the find a stock that may work during/if we get a big move such as this 140DJIA +reversal in minutes,  just go with SPY/SSO or even better go to JPM/GS  to get the most out of a move.    We’re having some trouble getting through  ~820SPX area,   but this kind of close will make everyone think twice..the bulls (encouraged ,confidence) and bears (losing faith, jittery).    This is looking like more digestion above 800 before a move higher, instead of indigestion.  A meaningful break of 820 very possible tomorrow. *eco data tomorow morning.


We had short covering early in the steels , again X  leading the way.   Considering,  we are about a week into the inflation linked equity trade,  we succumed to quite a bit of profit taking as the broad market sold off.    Always remember,  if your stock/sec has been fastest to the upside,  it will be one of the fastest down as the broad market turns.    This trade will have hiccups, so as we answered in the forum last week, everything is still a trade, not an investment, so take profits along the way.   We've all learned the past 12+months this a traders market.    As far tech/Naz related stocks,  we had SMH $SOX  breakout after the opening bell,  but it got taken down with the tape.    $SOX,  we'd like this 230 broken convincingly to attract more interest,  including ours to go into the high beta's stocks.

More tailwinds than headwinds...simple for now.