All about EPS to some...

Other than the EPS stories (to DJIM),  there was no dominating noise to explain the market stability and rise today.   As a whole,  this market shrugged off the morning weakness and closed the day near the high.   This is quite remarkable given the weakness we had toward yesterday's late day session.    Technically, we dipped south of SPX 840 intraday, but it’s only bearish if it closes there.   Mkt closed SPX 850, right in the middle of the range we‘ve focused, sort of the battle ground these days.    As we have mentioned the last couple of Journals,  we seemed to be range bound until something catalyst that can drive us higher, or lower.  

The market players are attempting to say such things as, (Briefingcom)…Another factor keeping a lid on rallies right now is that this earnings season is shaping up to be essentially a lot of white noise….Moreover, while the unexpectedly high number of current quarter beats might normally be seen as a positive catalyst for the market, what is keeping a damper on most earnings-fueled rallies is that: 1) stocks already have had extended runs into their reports, and 2) as is typical in a recession, these bottom-line beats are most often enabled by aggressive cost-cutting rather than stronger than expected demand.  

Here at DJIM, we are not looking for another substantial rally, we just want to see the market break this range.   Yesterday before the open (Forum), we noted their was ‘broad’ corporate trends that we felt might give the market a boost.    Considering,  the previous close was ugly, a day with no catalysts and some EPS stories (CC's) during the trading day , we somehow closed at SPX850.  We think earning are playing a quiet backdoor role.    Do you have a better explanation?.  This premise has some credence following AMC reactions to MSFT, AMZN.   Of course, barring any “stress test” negative cataylst, we think the market may abate the “ selling the news(eps)” and surprise many by breaking over 860!.

As far as individual/ stocks, we couldn’t be more pleased with the action LVS  WYNN.  Both continued the squeeze potential we alluded to and were up another 10% early while the overall market lagged.  We also had a nice 3+ move from alerted PENN ,  a “Racino” off earnings, besides the earnings we liked it fit because it fits into the Gaming play.


On the negative side, we’re sorry to see our favorite commodity group since late March disappoint.  NUE, RS, and STLD all moved lower as the concern of the health of this industry lingers.   The ag-chem sec wasn’t so rosy either as POT, did not inspire much confidence either after its report.    This basically gave us the confirmation that you'd never know how this market will respond to certain report/guidance.   On the other hand,  we had a couple of well received statements from the likes of AAPL EQIX.    We were actually quite surprised to see EQIX have such a strong reaction which is very different to last quarter's reaction to a similar report.

Banks, again,  were leaders late carrying the market tape into the green.  We commented BLK  might be gaving reason for optimism later.  It broke out with another 4+ points add on late and  WFC, JPM, GS, STT, (PNC, CS  earnings noted)... just a few on our list that performed exceptionally well.    If the market players can let out a breath, a  sigh of relief on the stress tests, the XLF breaking $11  will cause a nice break to the upside.   The Futures are pointing to a lower open (low 840's), but we think this will change by open.  Euro markets may give signals to market direction early on.

Tomorrow,  we'll get a glance of the criteria that's being used in the all important "stress test".   This is definitely going to be interesting as investors would see for themselves how some of their favourite companies will fare in the test.

AMC, we've had some nice reactions to the corporate trends for Nasdaq tech- linked MSFT, AMZN, JNPR SYNA and even in a financial link, AXP (huge expense cuts).    Unfortunately,  we also had the news that Chrysler is nearing an announcement to file for Chap 11. This should be overshadowed and relate more to sub groups.   The trend lately seems to be favouring the EPS stories in our eyes.    So far, we had quite a few market leaders that showed decent eps reaction, in our view AAPL is not 'selling on news' typical as others seem to be calling it because a stock doesn't jump 10-20%.    This is definitely a high contrast to what happened last quarter as most of the companies were taken down hard after their earning report.  That was selling the news.

At DJIM,  we have been doing some quick trading here and there last few days.   However, we are still waiting patiently for this market to make a major move.    The probability, at this point, still favours an up move as oppose to a down move as 840 seems pretty formidable this week.

'"The Premise"

It’s not a blockbuster film, but it’s the storyline being played out here at Djimstocks for over a month.   The review below, but,...  on to today's action first.

Us disappointed?.  No way, Jose!.  Okay, we didn’t get our expectation of a SPX ~880 coinciding with a XLF ~$11 close as a signal for this melt up to continue,   but it’s only a matter of time!.   We were just a little too greedy late in the day after an already great day!.  SPX875 is the true breakout for most following TA,  873.5,  a new closing high and should be sufficient for more upside as the heavy resistance is in the 866-872.  SPX 860 is support now.  

Okay, does it matter, why the melt -up?.   Recently, we pointed out overnight, *overseas market giving clues to our market day and it didn't disappoint this morning.  *Stress easing over the bank stress test issue.   Preferred to common offers instead of Gov't transfusions.  Watch if some are announced soon, you may have squeezes unfold in C/BAC especially.    **Earnings..Earnings..!.  AMC, FSLR, GMCR  are not curbing markets appetite for the riskier assets.   You want to believe parts of GDP, FOMC were the reason,  go crazy!

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Let’s just review, “The Premise“….it’s not tiresome to hear,  the premise is why we are a whisper from 880.

Encouraging Eco' data

Underlying bid prevailing on pullbacks.

This is probably our most over used, but this why we are smelling ~880.   Last,  this pointed out after Tuesday night futures held 840 twice.  “Excess money is anxious money” as asset managers put money to work as the underlying bid.

Tailwinds outweighing Headwinds, Upside 'news' risks for shorts

Resilience

Shorts not pressing new positions under 840

After getting screwed a day later recently by trying this tactic.  No reason for them to press shorts higher as the fear of tailwinds is always there.  Also, it's almost a technical issue to stay clear now.  Now, as we said late yesterday,  the ones in from April 17-20 should gradually cover as well.


“Anxious excess money + Nervous shorts“…..now equals ~880

Earnings

This has been downplayed by most outlets b/c expectations were lowered so much.  We are just getting over the 50% of reports out this season and the tone is changing to explain the melt up occurring.  We had a different tone last week,   April 23rd,  before the open, …Some encouraging 'broad'corporate trends eg.AAPL CMG EBAY ESI RCL CS PNC HSY...Maybe..just maybe for a day the mkt can stop using the ' stress test' excuse and focus on corporate . trends...April 24th, Going a little on the limb here , but underlying potential for a big day". We got a big rally that day, the premise was earnings that morning.

http://www.djimstocks.com/djim-journal-09/2009/4/24/all-about-eps-to-some.html

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!!..April 14th.


Switch to Selective Individual plays

Concentration, consumer discretionary angle, while the market trades in a tight range on SPX.  This was something we promised back in late march after Treasury news.   At that time, it was the ‘inflation’ trade with Steels the primary trade.   That was successful, but we’ve diverted to a more cyclical recovery trade mixed w/ earnigs  eg. TIF, GYMB .    Following this trend,  we’ve avoided the grind this month of the SPX/ SPY trade that has overwhelmed traders with its boredom.    We’ve a had a trail of stock alerts go up over 20% in a few days the past week,  LVS over 50%, WYNN, PENN, CRYP ~20%  and slowly coming back to earnings plays that was the ‘heart and money’ and why we are here and many of you.  Ah, the glory days!..lol.. We added RGR  today.

After March 23rd close... today we surged through the 50ma and closed well above this 800 mark. (824).   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... ............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?..lol.   "This is isn’t so funny to many a Bull with excess or a nervous Bear now, as the weather gets warmer, this possibility will get much warmer in the next few months!.   We're going to get a correction,  but it may not come when all are expecting one"..April 20th.

Underlying push for the market the past month …It might not be the catalyst headline , but it’s an underlying reason since the ‘whales’, including hedgies smelling this idea since our late March note on it.

Okay.  SPX1000.    We are going there this year and probably even 1100 ,  the hiccup correction  will come, but as we recently pointed out,  what if doesn’t!!.  Well then.. we may just get a "V ' shaped recovery!!.   Now,  that would be a helluva “V” for victory.   The point is,  just keep trading with a “positve bias”  following the premise here at DJIMstocks.   We will have headwinds along the way, we will have sloppy bad days,  but we think the ‘easy’ and best trades are just beginning as we get back to concentrating on the methodology that was us.. ‘individual plays- linked to earnings’.

If we see the above bold/ underlined items falling apart,  you are seeing the beginning of the hiccup correction.  Make a print out and keep this next to your screens as a guide.

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Absorption

Today's tape shouldn't come as a surprise.   Not only did the banks- brokers leaders need to absorb last weeks gains,  they also need to absorb their billions of capital offerings with the market.  

Two of the prominent leaders in this rally were the Techs and Financials.   These comprised 50% of the SPX point advancement.    Last week, we highlighted the lagging tech, today we had the financials naturally pause sucking in the gains & slew of paper.    Naturally,  we pause and succumb to some profit taking as the tape goes with the recent leaders.    No matter, Banks- Brokers still acted resilient considering all they have to deal with.    If 50% of the SPX move is going on hiatus until a positive catalytic event,  we are vulnerable to the beginning of a correction for the market.  

Fortunately, here at DJIM we have focus on EPS stocks &  selective sec's.  Today while the market plays in the red,  we have stocks DJIM linked stocks EBS, (reader forum eps note),  BWY  (buy at BAC/MER today) and the Gaming /Lodging sector plays ( WYNN LVS MGM..) still showing signs of squeezing as more LV and China notes come out over weekend.   This is shown in the "Room for Green..", intraday post.   Some may look to defensive sectors like HCare, biotech etc in event of a correction,  we're fine with concentration on recent earnings which sometimes fall into those sectors anyway.   EBS has always gone against the trend of the market as seen in a yrly chart.   We've talked of eventually the market playing into our hands and the easy trade.  Imagine if today's action in EBS LMIA BWY signals a possible return one day to micro- small caps as we get to an economic trough with attention swinging back to..dare we say it back to IBD type of stocks, where growth matters.   Hey, why wouldn't hedgies exploit this area once again to pamper their books?

Besides FSYS  comeback to our lists,  we have added PEGA  LMIA  to our potential tradeable EPS list.  Like last weeks EPS list,  we watch to see if these make the grade,  most from last week are flirting with 9ema.

As far as tech, we have upcoming analyst meetings, tier1 conferences to watch in the short term for direction.

We held 909, at close, which represents a recent trendline, (898 a recent low-the psychological 900 )is where we want see the underlying bid prevail.

Triple play rally!

What's a triple play rally and what are the ingredients to such?  Well, in our view it's a combination of 3 players getting into the act!.  We clearly had that today!

1- Recent week worth of trading was a week of lower highs, lower lows.   This is a clear sign shorts were starting to press fresh new positions.   Every time there was a blip upwards, the shorts would press positions lower and lower (thus lower highs) as they were becoming a little giddy after not having this opportunity for weeks.   So what happens when this pattern of lower highs/ lows gets busted over ~896 today, including holding overnight support at May 4ht lows.    Yep, you get them shorts scrambling to cover once again.   Ingredient number one is short covering.  (See alert comment around 2:45pm before the next rip up to know where we think we’re probably going now).

2- We’ve talked a lot about 5% SPX correction  as a measuring stick,  it also coincided with 20ma and a great place to find an underlying bid.   Look back to the April's 5% dip that brought out buyers, eventually leading to 930 highs.  Today,  we got this sidelined money  seeing this market doesn’t want to break 20ma and use the 5% as reason enough to get in. 

3-  The sidelined money (longer term $) + short covering equals momentum money coming out   to play and only adding to the fury of buying.    Last week as everyone was saying get into the "safety trade",  we said we’d hang up the phone on our clients if we were brokers asked to switch to such a trade going forward.   Clearly what we saw today was a rush to 'higher beta stock and groups'  as money from the safety stocks- groups was a source of funds to switch in higher beta’s once again.   No better sign of this was in Casino- lodging stocks.   Last Fridays alert buy in to WMS  was timely and others like HOT, WYNN, LVS  and the more spec' MGM  provided big gains across the board.

Of course in order to have a triple rally,  you need a catalyst or 2 …to wake the sleeping giants from their 'quiet period' and we pointed out a few we were looking for.   You probably did not see ours mentioned anywhere as a potential catalysts to reverse this market in the upcoming week. 

1) One part for the banks- brokers was our underlined, determination to repay TARP.    Only near the close did the headline finally come across that GS-JPM-MS  have applied to repay 45 bln in TARP.  STT applied earlier.  If you think our mkt went up all day because of Indian mkts and not the fact this `determination = apply` was making the rounds all day with institutions types,  you’re greatly mistaken.    *Also importantly was Geit`s saying he doesn’t want to see executive comp. limits.    This always makes Wall street happy.   *We also think Barron’s negative article on Treasury’s was a lift to equities as this says go to riskier assets such as stocks!. 

2)A wake call for Tech was the possibility of the what comes out of the upcoming tier 1 tech conference.   This provided some positive eco` comments, such as NVDA`s,  'market bottomed..product demand growing and improving from last 2 Q`s'.    Tomorrow, we`ll hear from companies like NOK, IBM, EBAY ,  we also have April Q reports coming from HPQ BRCD ADSK soon to add more clarity to trends after the official Jan thru March earnings season.

3) We even got a 3rd catalyst from earnings side of things.   We pinpointed HD last week, but LOW`s gave enough in a positive beat and raise to guidance before HD`s report tomorrow.

Points 2 and 3 is something shorts are not really expecting as they keep saying earnings season is over with.  They are missing the point these April Q end reports can do some serious damage to their thinking earnings season is done with.   These give a glimpse to what is happening after March and if its good,  it points to a better than expected Q2 reporting season.

We had a good NAHB number today, tomorrow we get what could be as crucial to markets mood as Retail was last week in the form of housing starts and building permits.

DJIM #25 2009

In last weekends, DJIM #24,  we finally conceded to the fact that , “ We need to respect the probability of a profit taking correction finally from those participating since March to allow latecomers a chance now to get in”.   What we didn’t and won’t concede in 2009 is ..“we are still very much bullish longer term on this market”, even though we thought we lost momo`the previous week.

As we come to the end of 1H, this upcoming week,  we look forward to a climate change for risk appetite in equities continuing as the recovery takes us out of recession with manufacturing and financial systems rebounding.    The landscape is definitely changing,  but after a 50% decline with many individual accounts bloodied it takes more than 3 months to rid investors of fear and regain confidence.   What’s occurring now is natural in the process of a recovery.   It is called 2nd guessing,  especially those green shoots as they are known.    Instead of looking at obvious fundamental changes, many are turning to the , ‘what if’ mentality.   This the ‘watching life go by’ way of mentality crowd.   Many are already suffering this from SPX 666 and will only punish themselves further if not looking for another ~20% from this market in 2H 2009 at some point.    Last week,  we got what is now is a 4th consecutive correction of ~5% off SPX highs holding during this rally without what should be sooner than later, a meaningful correction of around 10%.    So….is this the one that declines further or are we going to be questioning the same thing if/ when we begin a 5th consecutive 5% ?.     After, seemingly holding above 200MA, we are beginning to doubt the current correction will allow latecomers a chance to get in.    One thing,  we definitely believe is those latecomers will NEVER be given an opportunity to get in the 600’-700’s, maybe even below 850SPX.   Those in the market will never allow such a gift.   Human ..fundamental nature…say you buy a home and keep putting money into over time.   You’re never going to let someone buy it at your initial investment price are you or lower (unless of course stuck in the recent ordeals).  Well,  same in this equity market,  we won’t be letting the latecomers into this neighbourhood so easy.  It’s gated now.    They’re going to buy this market at a premium!.   Maybe they are getting the message as current inflows into equities are surpassing those at 2003 lows and MF inflows have doubled over the prior 4 week trend.   We`re not talking chump change (9bln vs. 4ln)

Here’s an idea of what may be happening that will not allow a meaningful correction just yet.  We are having an orderly quite transfusion.   A transfusion where those in market for weeks are doing some profit taking, but the selling can’t gain traction as the Bears hope because there is sufficient inflows taking the supply.     In essence,   this is why our premise from March of an underlying bid prevailing keeps on motoring.    Those that have been following the market with us for over 5 years,  you know in the good ole days,  we always said the market will not go down further if declining at that time due to EPS just around the corner.   This theme is also possible now in a 5% correction as the upside risk remains of corporate growth here and there.    We are also up against what could be and actually should be window dressing for end of Q2,  especially with a 5% decline already in place for a buying opp’ for managers.   This all works unless higher powers used the 956SPX early on in June as a time to cash in early.   A game of cat and mouse here as we‘re stuck in June gap resistance last few days.   Simplifying,   we are fine unless we close below 200MA.   To be honest,  we’d accept a terrible and unexpected headline over the weekend to see how strong we are at 200MA around 900SPX.   This would give either side (Bulls-Bears) a belief system.   Bulls..“nothing can stop us now” and the Bears a belief in finally pressing shorts with confidence(maybe).

To simplify more, we’re sticking to this Q’s plays, mostly EPS or story wise until new babies are born in the upcoming Q.   Even though,  the big boys like RIMM may have EPS cooked in,  it should not stop the risk appetite for newborns in the micro-small cap world.    Keep those STEC PWRD CMED ’s upside guidance coming!.   Speaking of,  you might have noticed strength on Friday anything China  related in any sector outperforming, besides PWRD, CMED.   See Shadow list link on site..EJ ADY STP.    Also,  noticed some risk was coming back into our Casino/ lodging... ASCA WYNN PENN HOT LVS WMS  plays,  so look here as well starting next week for possible continution. ( we think these C-L`s are a group that may move best into their earnings given recent slide).    If we see the same reaction (RIMM) going forward....”cooked in..sell news,” in micro/small cap types off earnings,  we’ll now it’s time for a real market breather,  but we doubt it as the risk appetite back for such plays should continue in a recovery trade.    Other than individualé group plays above,  we always have banks- brokers/ commods sector  rotation to take advantage of on any intraday/ short term rallies to dive into for a trade.

...NCH for SPX coincides with 10+ earnings plays

We'll start things tonight with this little biotechnology company called Vivus.  Some speculation into our diet.　Some of you may have heard of this company at one time or another, but we are sure that most of you have heard of this name tonight. What's so special about this play other than the fact it's finished up 70% off 75 million shares? Here's the thing, take a look around you and see how many of your own relatives or friends that are overweight? Ok, we are just going to stop right here. Basically, VVUS  came out with their phase 3 trial results on their obesity drug Qnexa showing significant efficiency in reducing patient's weight. According to many analysts, they've set the golden standard for this type of drug. This ought to get people very excited because at this point, at little over $800 million market cap, there sure is a quite a bit of room on the upside considering also this was stuck under $10 for years now. We have seen it with DNDN, and we have seen it with HGSI. In our opinion, this VVUS story is better than both of other stories. Therefore, we started a somewhat sizable position today and will continue to add off any dips. One thing about this company though, is that it's also heavily followed by institution.  From what we hear 'holders' were adding longs even with 70% lift. Once the initial fever is gone, the play will trade much more stable and have the potential to move much higher. We are currently treating this one as a longer term play for our portfolio.

Now onto the market!　Ok, here's the thing, it takes not ONE, but TWO attempt of correction to make most people realize how powerful and vigorous this bull rally is.The most recent pullback, despite that one day massive volume, is over with on higher lows. Right now, we are expecting new highs to be breached on any given day now. As we said Thursday night, it will be inevitable once ~1020 reached.

Many plays on our DJIM earnings linked watchlist screen were showing some impressive individual action that are moving in tandem with the index. Most impressively, COMP, or the technology index has broken out today. 　This strength is displayed throughout our technology linked names, including many bolded into yesterdays trading, CTSH +4% , ARUN +4%, ROVI +2.5, STEC +5% ININ +4% . Also making news highs on our list including  EBS +11% EMS CTRP WYNN PWRD FSYS CVLT. So, is this the type of market worth chasing at this point? If we do break SPX 1039 , we think it's worth every bit to chase this market. When you have a consecutive blowout report like HITK (we bought some) had today, its making alot of players to look forward to the next round of earning season. 

As far as commods', we've turned our eyes from coal to steel as SLX looks to breakout.  Still, we'd caution at this stage for the whole group and keep positions small and on a tight leash to turnover.  As we saw late in day, they can rollover quickly as the USD rallied off lows.  The correlation is very strong now between USD and these stocks.

China  linked stocks, slew of key data coming up Thursday night.

All of a sudden, Sept. is looking to liven up trader's screen for a change. If August proved to be somewhat boring, we sure aren't getting any of that drowsiness from the market so far this month. Bottom line, we are looking to add more stuff if we get some mini dip opportunities next few days as the breakout of this market just seems imminent.

..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.

Rage behind the rally...

After few more days of straight rally, we finally settled down a bit/ maybe only paused today with market ending just about unchanged.    Interestingly enough, we are right at the resistance of SPX 1095, which is the level we've talked about last couple of nights.   As discussed it’s a slow eco’ data week, so we think it’s favourable to the Bulls cause, therefore even 1095 looked vulnerable today/ this week.   It seems the theme with the market so far this year is that the harder it pulls back,  the quicker it rebounds.    For those of us who have played this game for a long while, this kind of market behaviour does make you go ummm!.

Ok, after five straight up days, we didn't really have that much time to review the force behind the latest rally.   It just seemed that everything happened so fast and all are scrambling to play catch up, to a certain degree.    So how did we go from a low of SPX 1027 all the way to SPX 1095 in a mere six days?    As we have written before, last week's FOMC and NFP#/rate had enough of a positive catalyst and it's partially responsible for the drive.    Also, if you look at some of the recent EPS winner, especially from the mega caps side, then you'd have a real answer as to why we are back at this point.   GOOG at new high, AAPL back over $200, MSFT back at $29.... and these are only the technology stocks.   There are also many other stocks from many sectors that are doing just as well.   Commodity stocks, credit card co., Casino... and than just about every stock that had good earning are trading near their recent high again.      Still, the message is pretty clear.    The bigger cap stocks are doing what they can to keep this market elevated.    We don't fault the money managers for quickly chasing those companies back to their current level.    When Fed made clear that interest rate is going to stay at "zero" for an extended period of time, the reality is setting in that equity is still the place to be for the foreseeable future.    Coupled with the "attractive" level we were at from that pullback, it just doesn't take much for those fund managers to bid up the names we mentioned in a ferocious fashion.   Recall,  during the late October MF’ sell off, we said what better time than to put money back in the market early November at lower prices...'Wouldn’t you as a money manager pack it in last week and start fresh next week putting cash back into the market." . We are definitely seeing some of this during this rally. A lot of the the guru media is talking this now heading into year end.

At the same time, we were hoping that some of the smaller earning plays would tag along the wave too.   Although most of our smaller plays are up and near the high, but we think the story of late definitely belongs to the mega caps.    Therefore, we think it's prudent to have a balanced holdings in our portfolio.    It's hard to believe but do we sound like a fund manager even these days?  :)    Whether we hate playing the big caps or not, we feel this is the best way to maximize our return.    In other words, it pays off to buy some AMZN, AAPL, JPM, GOOG  or even MSFT  last week as well as some of our favourite smaller caps.  A few commods’ like CLF  recently off earnings (WLT always liked here), or a high beta yet a consumer play in WYNN  is now $10 dollars up since late October..(." is $20 off highs and has ability to squeeze at anytime is starting to look attractive even as a longer term hold possibility..").   Even a stock like FLR (44.38 close) beat up recently and after earnings looks like a bargain going into year end as its a great company at very low levels and should look good to managers to put back in their books.  Underperformers will likely be chased as much as the winners, but should have more immediate gain potential.

As far as the financials discussed last, the reports out of UK were fine and the B of A conference is helping credit card names as there were "consumer positives" come out of AXP.   It should help sentiment broadly if it gets some noise.  So, we'll keep eyeing them financials for upside kick to the market.

We still have nearly seven weeks of trading before the end of year.    No matter how this market behaves, we absolutely believe that market participants are locked in a high spirit to move this market higher.    So, if we get any more dips, and lets pray we do, we are sure that you know what to do!

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. 

..getting close

The bullet points to tonight’s Journal relate solely to what we alerted in the afternoon as they are the most important trends visible.  It is also what we were crying for in the late week’s trade when nothing moved in our trading universe, yet stocks like DIS were making new highs and creeping the DOW 30 higher.  Today a wide range of mid-small caps from our shadow list performed very well….from China (HEAT UTA CAGC etc. to Casino’s ..LVS WYNN  (thanks to Dubai 10bln resolution) to commods’, notably steel..X..

First and most important is the small cap index was outperforming, thus DJIM shadowlist and finished the day to multi week highs (+1.5%).   Second, the economy sensitive sectors, notably the transports  up 1.7% and a break to new 52wk high and through >4100.  The SOX  closed right at 340 and is not just yet conclusive of the daily double we are looking for further upside.   Still, we closed at 1114, another new closing high on SPX, yet off 1119 intraday high.   C ’s larger than anticipated capital issue made the financials lag as this left some overhang,  still other important names made a nice recovery later in the day as DB  made positive comments that helped improve the tone and morning’s weakness was bought up.

Close, but no cigar just yet to break north of 1115/1120, setting up for FOMC 16th to settle the score or just the anticipation of not much change to break north before the decision.  At this point, you cannot trade on your heels in anticipation if the FOMC statement language will change,  even after the recent strong jobs report.  Minutes down the road may play a bigger role.   We think Bernanke gave enough clues recently that no big changes will be present (sorry Bears),  yet some tweaks/adjustments should be inevitable after the strong jobs. 

We just can't picture the FOMC in grinch mode and pissing off vacationing important trading players/ desks.