....take off?

Not everything had a bad take-off in NYC today,  maybe if flight 1589 had used runway SPX 820 like Wall Street,  the miraculous event may not have happened at all.    To be completely honest and to put the rally into context,  we were glued to the unfolding events in the Hudson,  not the last 30 minutes of trading on the market!.    As we noted in Journal and early post, the level the watch for action around 820 unfolded later as the oversold market bounced hard off support at SPX (cash) 816-818.   Preparation is always key to trading.    If the market breaks a support level, you say 'oh well (chit)',  otherwise you have to be watching closely & continuosly as a trader to see if something materializes as it did today to profit.     Simply,  everything that had to be done trading was done by 3:30,  which included selling any intraday and/or old positions as this was nothing more than a short covering rally off way oversold levels.    This doesn’t mean this melt -up can’t continue tomorrow,  it just means it has done little so far to make one think it can last more than a few days.    Once SPX 50ema turned up Monday,  it was a very bearish sign to break that level as it finally had just 'turned up' in contrast to breaking support off a downward MA.    There will be lots of talk what turned the market today,  included is the dismissed idea of nationalizing Citigroup,  but it really doesn’t matter what noise helped,  other than realize it was ‘technical’ on all levels!.      We also had, (yesterdays Journal)…’Intraday swings are more likely to return in this environment…up and down”.   Well, the swings are back as witnessed and that just pounds in the fact we won’t be able to sustain a long term move upwards.    This is probably the time again to just watch the sectors/ stocks off our shadowlist and trade whatever is moving that day until (if) we get something to trade off earning reports or just trade the DJIA/SPX ETF’s off major support and resistance levels.

They're back!!...There is an ominous side to the current trading environment and that is hedge fund redemptions have not gone away!.   The headline read, “ Investors pulled close to a net $150bn from hedge funds last month in spite of moves by dozens of funds to halt or suspend redemptions; “We expected December hedge fund redemptions to be significant, but the results are still surprising ... twice the peak equity mutual fund outflows in September at $72bn,” .   This will continue to be an overhang into the market and you have to think any sustained rally will be shot down on more redemptions sooner than later.    As we said day 1 of what has turned into a daily saga, ‘Bernie the Ripper’ will cause investor confidence to shatter and it’s only natural money is now being pulled out of Hedgies hands.

On the bright side,  the recent overhang of the Washington stories... Stimulus, TARP etc got a boost yesterday.   The apple of our eyes was APOL   squeezing the juice out of Citron and its' report,  we spoke in detail of the fact,  we thought APOL was too big of a fish for Citron to hook and sink.   The stock was already performing well today ahead of the released stimulus plan and despite another Citron report on it,  it rocketed as the education part of plan was digested.    The bill was positive for-profit education services companies, with the group’s average rising 8%.  You can attribute the strength to investors’ excitement about the additional pricing power for companies if the bill is passed as is.   The stocks that outperformed the most are the ones with the highest exposure to private loans,  which are not federally backed and remain largely unavailable, such as ESI  (shadow list it) and add to APOL, STRA in this group.   Still, additional steps need to take place before it even gets approved,  but the markets exuberance cannot be contained if there is almost nothing else to trade sector wise.   We'll see.   Market doesn’t always trade on finalized facts,  just like it took all infrastructure stocks up recently without knowing which company will be the big winner or when the money will show up on the bottom line.

Have a good long weekend!.

DJIM #5 2009

It seems every push for the market upwards is a hard grind, while every push is just a slippery and easy fall.   The latest bringing the SPX to 820 levels down from 870’s taking only 2 days and a few hours.   As of close, we are 8.6% down on SPX for 2009!.    A few factors attributed to the decline,  starting with the Washington partisan battle lines surrounding the stimulus, which we noted,  as a possible slowdown in the works.   Second, the ‘FED light’ was a dimmer as in deflation risks and a half ass commitment to purchasing of treasury (long term).  One look at the charts below and you can see to the minute where the slide in Commods’ (CRX) went hand in hand with a higher UUP(USD$) and the broad market declines for the rest of the week (at the FOMC decision/ statement). 

Next we got a GDP when digested showed a surprise in the build of inventories highlighting FED`s deflation concerns and finally the `bad bank` optimism was abated by the same culprits (CNBC) that reported we`d have a solution in the upcoming week.  Throw in more realization this earning period that earning power is taking a beating in the U.S and you have a market flirting with Inauguration day lows.  Since the media emphasis is on Obama`s first 100 days, we worry about what the next 80+ days will do to the market!.   At the end of 100 days,  it just might be too late..actually,  it maybe too late if something is not put down and liked by the market this week ahead as we can only bounce off 800 so many times before exhaustion takes over amongst traders.  One negative headline at this crucial point and down we go.  The only thing we can say heading into the trading week is stay put, as on the sidelines, and just follow the Washington headlines to go long or short.   As technical as this trading may seem, it is really Poli-trading with Washington the focus!.

Stag 'nation'

This market, as of late, has become very stagnant in determining a course of action.    Well, this same stagnation can be applied to the government policy makers leading the way.    If you connect the two dots, what it means is that what's happening out there in the market is directly what's happening in Washington.    Since we don't have any inside sources, or anyone who's even remotely close to the circle of people that make the almighty decision for American economy and country, we can only speculate that things are just not as smooth going behind closed doors.     Of course,  they aren't debating on some silly agenda, after all, it's the all important stimulus package as well as a crucial bank bailout plan.    Lets give them some time, shall we?.

Nope!  The more time they are given, chances are, the more likelyhood that nothing will ever get done on time.   It is how things typically work with any government.    Basically, when solving a crisis, and yes we are having a crisis, it's better to hammer things when it's hot.    You can argue that it takes time to perfect a plan to help the economy or banking sector.    Well, we weren't born yesterday and we know that there's no such thing as a perfect plan.     Chances are, even a great plan that was designed in the first place would turn (revised) out to be much much less after many differences in opinion among different policy makers who supposedly represent nothing but the people they are elected for.     In this probably once in a life time economic crisis and banking crisis,  nobody really knows what's the best course of action.    We feel in essence, time is really the thing that can eventually cure the mess and help to recover things.    What we do want to see at this point, is some action from the government.      It's been two weeks since the inaugration and people just want to see some action.     The more time the government waits, the more doubters will come out and start pointing fingers.    As a result, we as consumers will lose confidence in just about everything.     Well, it doesn't take a genius to know what happens then to the market.

Indecies today may show that Naz is supposedly doing "better" than the rest and there's hope in the market somewhere.    Don't be fooled!    We are lucky that many financial institutions did not get rolled over today.    Many of the Dow components, and heavy hitters such as MMM, WMT, CAT, even PG are trading at recent lows.    Sure,  the RUT closed green along with the COMP (we don't care for MSFT, INTC leading), but the all important SPX was still flattish.    If government doesn't do anything or does something that disappoints the market with regard to the financial sector, we WILL test last November lows and chances are, we'd set a new low.    

Right now, we can't see things beyond a two to three day horizon.   It isn't because the technicals don't work or the fundamentals aren't there.    All balls are in Washington's court right now and anything they say or imply or do will affect the market in a great way.     Hypothetically, some form of decision and major annoucement will come from the policy makers within next two weeks.   We just don't know to expect at this point.    Lets be honest here, we all hope market likes what they hear.     This is a very important task for the new administration and it can be viewed as a first test for Mr. Obama as well.   

Trading plan wise, we are sticking to last week's buy on extreme weakness.   So far, we are merely sticking to some selective and quality financials and education services stocks.    If you happened to nab some NTRS, GS, JPM PBCT ESI (nch) APOL  on the cheap,  then you've done alright lately.  Short side, recently we eyed machinery (still getting killed) and than steels (most back at pre-earnings prices) stocks as problems. 

The overall strategy remains that you have to limit your total position size and not let it get out of hand.   Be picky.  Making profitable trades is one thing,  but making risky and greedy trades are something else.

One positive, gone unnoticed, the JPMorgan PMI global manufacturing  rose for the first time in a year!.

..Better than feared..

A better than feared mentality is quietly emerging as January readings are improving in many parts of the globe.  Unfortunately, we can't really do anything about it until Washington makes some positive noise.   Oh well, life goes on and one highlight emerged at DJIM premarket, MYGN.

MYGN,   something must be in the genes for this biotech to produce another strong Q!  Once again, we alerted this shadow-listed stock highlighting that even if it gapped it had room to roam and did ever.  After being 74-75 at premkt alert it gapped to $77--78 and by noon it was eyeing $85.   No matter your entry in the morning,  MYGN should have been a good friend to DJIM members once again.  EPS of .43 beat the street consensus .32 handily, excellent sequential revenue growth as well.   Estimates will be raised here and targets should follow.  On a day where no leadership emerged in a rally, MYGN clearly stood out.   We will continue to trade MYGN,  but after such a robust day, we'll wait for a pullback to trade it again, just like last Q.

Speaking of no leadership in a rally of 140 points!.  No financials, no familiar high beta tech.  We received a few emails, read some trading blogs and heard the same question of where were the financials-banks, most notably.  This led many to question and ask how did indexes move so much.   It`s quite simple,  if you just look at the recent declines of the SP Finacials-Banks, down 27% and  38% respectively and you understand they don`t always follow or lead.    It`s not a question of is this rally day sustainable because all are clearly waiting for Washington,  we realize breaking 850 is most likely not doable without a positive Washington spin.   Today, PNC,  brought the regional banks and the sec down, we also had questions arising about BAC`s credit levels and dilutive equity sales to the gov`t.  This space is clearly underperforming all year and so did today!.   Today's move was ETF and Options driven,  not by any one stock!.   Throw in some broad short covering and nothing stands out.   This is why this move was a head scratcher to many when you look at stocks individually and see miniscule gains. 

A few market bullet points,

Washington, it’s a sector in itself now.  Geithner interview, words of a very aggressive, quick stance on  fiscal stimulus and Republicans alternative plan that would include a corporate tax cut helped the market.  Neither is very meaningful and enough to move the market like it did.   We just think a push higher to protect 8000 was starting when we tossed out the SPY chart yesterday.

Shippers,  we noted this sec late last week, we gained more interest today off the Baltic Dry Index advancing another 4.5% to over 1,100.  Iron ore-China noise flow the reason. 

USD$ was selling off across the board.  Big pullback.  We recently put up charts of UUP-$CRX correlation.  At this point bumps in the dollar and you begin to look to trade some commodity stocks-sectors.   Many steel stocks acted right.   Industrial related stocks performed well off some of the sec earnings..UPS one of them.

Resistance=  around 850SPX

Eco data, including yesterdays note on the PMI, better than feared data flowed some more (pending home sales beat, but with price falls)

CSCO  tonight, market never seems to do well (afternoon of) as a precursor to a big tech report last few Q`s.

Mercy call!

It’s getting to point that we’re lost for words as we measure the toxicity of this market and it’s surroundings.  It is sad that companies- banks are getting destroyed without any leadership standing up and putting an end to it.  Where's the cavalry?.   There are ways to do it, but nothing is being done and it's causing an uproar!.   Some of it you see in the media,  some of it is underground.  The one place it's evident for all of us is in the market where displeasure is seen with everything coming out of D.C.  It's loud and clear!   The market is in a desperate state, even the techs were finally succumbing to some pressure.    An act of desperation was seen in the previous days rally as the markets here relied on global influence only to have the rug pulled out beneath it by morning.    Simply, Chinese premier pulled a 'Geithner' move and left us asking who is responsible for making up these stimuli new spending measure rumors.    It makes no sense the market did what it did because of China, GM`s K filing or Moody's downgrade of JPM.    You would think by now any downgrade is priced into the financial stocks.   Moody's and peers are always behind the curve and it shouldn't be a surprise when they downgrade the sector players.    So, once again we had what amounted to miniscule short covering rally.   This market is only tradeable for intraday scalpers.    As previously said this week…The shorts have no reason to cover and take profits as they see a market with no buyers lining up.  Shorts just press until proven otherwise.

The concerns are mounting regarding if D.C can halt the steep decline in the economy!.   If all this fear, frustration this week is just a lead up to the labor report (expectation 650k loss), we'd be surprised.   It's much more than this.    If a rally of sorts occurs Friday off the report,  we'd simply use it as a trading vehicle like all the rest recently.

The DJIA is now down 20% since inauguration day.  D.C, do you see or hear?