DJIM #34 2009

As we enter the last week of summer trading, let’s literally throw out a few stocks market ‘almanacs’…”sell and go away in May” and  most recently the “summer doldrums”.   Let’s face it traders can’t vacation;).   The market is inherently unpredictable, but after a credit crisis, maybe we all should have envisioned the craziness of what is now a new market high for 2009 after a heart -wrenching week for the Bears and shorts.  What a week it was!!.  A week, where we thought a summer top was indeed achieved a few Fridays ago to switching our tune quickly and pointing to 3 positives at a gap down support levels of 982, a level shorts would be hard pressed to press after a 20pts gap down.   Simply, these 3 positives carried throughout the week with Financials leading our proposed squeeze from early Wednesday morning (Chart below on site).  A move that carried  for ~40SPX by Friday‘s close making it a bullish weekly reversal. 

Anxiety may really be the buzz word now!.  The so-called correction, yes it was the shortest on record, must make those waiting for a meaningful pullback second guess themselves.  What's new since March really!.   The shorts at this point probably just wonder where to possibly start laying down positions.  The also must wonder if they have any support from their amigos when and if they do or have they turned bullish as well.   Our question is will the ‘almanac’ idea of a weak September and October most are calling for will fall by the wayside like the 2 noted at the top??.

Instead of dwelling on the SPX broad market possibilities tonight,  we think we may be coming to point where the best of the breed will begin to get the money flow.   If most finally believe we are now in a recovery,  why not start putting your money into already worthy EPS stocks as we head into Q4 as these companies are already on track after most recent Q’s.    What we probably liked more than a breakout market was some DJIM earning plays from this Q making new recent highs the past few days.  Stocks like RKT ROVI ATHR MAIL  and sector favourites like WLT.   Others like eg. WMS CTSH THS FIRE EMS SWM  are seemingly not far behind.   Even a couple biotech plays should be on top of your trading list (BCRX HGSI ).

To start the week,  we’ll let others try to figure out the broad market, our concentration will be on the list above as a starting point.

Anything but conventional....

So far,  it's been concluded that 2009 isn't a normal trading year.    Unlike last year, where everyone seemed to be on the same page, this year nobody seems to agree on anything concrete for more than a day.     One thing we all have to admit and respect though, is that the market took a gigantic turn from a low of SPX 666 to what we are now at SPX 1025.     We can disagree on many aspects of the recent economic development, corporate development and policy development.     What we all have to agree though is that the public (investment) has one sided agreed that things are improving.   Investment community has been voicing their opinion through  buying and more buying of riskier assets (equities) and that's how we got to this point today.

Strangely, it's still a sceptical vision for some people (bears).    Since we can’t predict what's going to happen the next six months to a year of trading , that conclusion remains up in the air, but we cannot DENY what's happened the last six months.    If people still think it's just a conspiracy by the government and a bunch of big brokerage firm’s artificially propping this market higher, then those people seriously need to check their heads.    Politely, simply that’s our interpretation of those people who have misread the market during last six months.

Ok, having traded this market on the long side during the past few months, we do admit that things aren't easily interpretable from time to time.    In other words, this hasn't been a conventional bull market.     How?   The market itself has consistently beat our expectation and surprised even the most optimistic bulls.    It's a good thing, right?    Well, unless you are a new bull that was born at the beginning of 2009, this might be one of those sweetest year you'll ever encounter.    For those seasoned traders that have "seen it all", we feel the market has outperformed most of them.    For DJIM traders,  we trade and live in a world of probabilities.    We enter a trade often in a high probability scenario and hope to profit from it.    If the trading scenario offers a low probability, we simply wait for better opportunity.    This is our conventional way of trading and why earnings plays work either immediately or simply, sooner than later.    However, what if the market offers nothing but low probability trades and often those trades work out wonderfully?    Well, welcome to 2009!.     Having traded as many years as we have, we just have to say that this year is nothing like the other years.   In other so- so bull years, we'd have done ten times better than we'd have done this year up till now.    Of course,  we may be a bit hard on ourselves, but the whole point we are trying to make here is that this ISN"T a conventional trading year.     It's been a slow and cautious adjustment as well always still full of hesitation and tentativeness.    We simply do not want to throw away all of our previous "know how" experience in order to adjust to the current trading mentality where garbage bin stocks have worked.   This will probably be a repeat of where Joe- Schmo thinks he’s a trader now until the day comes they are taught a ruthless lesson or two to take them where they started from.   We know, down the road, this market will eventually return to the normal mode and our knowledge and experience will apply greatly.    Discipline and consisitency is still our main strength at DJIM, even if it means foregoing some of the "seemingly easy" profit here and there.

Back to this market, we concluded yesterday's Journal that we’d concentrate on individual stocks and let the broad market to what it needs to do at new 2009 highs.  A stock we alerted late last week and said yesterday it should be on top of your trading list,  BCRX  stole the show with a huge lift, we really didn’t even notice SPX action all afternoon thanks to it.   Even though we closed flat,  it's really not that big of a deal considering the week we just had and the fact this is the week people go away for one last break in the summer.    Some other plays on our list such as SWM SXCI HGSI ABVT  from this Q and those from last Q STEC EBS EQIX... exhibited some nice strength through out the day.    Other plays have been firming up the setup as well as noted yesterday.   Overall, we thought it's a pretty good day.   As the market inches higher, we are in the buy on strength mode.  Tomorrow is that 5000 household CCI # to watch for possible market direction , even though we don’t really consider a eco data point.

SPX daily

Just a basic SPX daily with 'R' red noted today as ~1044 and 'S' green lines at 1018 and 1013.

Intact

To kick off the week, we said we’d let the SPX work itself out at 2009 highs while we focus on individual equities.   So far, we haven’t missed much as the SPX has closed relatively flat for 2 days off best levels of day, while 2 biotech stocks we said should be on top of your trading list heading into the week have been 20%+ gainers.   The Bears will probably say the market couldn’t break Mondays highs with 3 positive headlines ( CCI/ Home prices/ Bernanke ), but as far as we’re concerned, these items were pretty well cooked into this recent rally.  The only thing that weighted on the market was a sell off in energy/ crude that took the SPX tape down with it.   This could happen on any day and is hardly an indication of where the market is going.   The rally is in intact and any weakening we're seeing this week is more a sign of the end of summer times.  The Bears are getting all riled up at the wrong time.  This market should go nowhere till post Labor day if this lightly attended market is any indication.   We’d use any surprising sell off in individual liked equities as a chance to add that position either for a quick trade or a longer hold.   

As far as those equities on our list, besides the biotech HGSI, BCRX  moves this week,  most of the stocks we’re following closely are holding up well and everyday there is one or two making new highs.eg. STEC CTSH SXCI EMS  today from our list.   Tomorrow, it might be a few others as been the case.   Off hand, we’d say there is a core of about 15 stocks that we’ve bolded  most recently in Journal that are performing just right and that's where our focus is.

We don’t expect conviction to show up on buy or sell side.  If we do a up move like today again, we would not put too much into it as profit taking will show up again and we’d use exaggerated weakness to pick up those most affected from our core. 

Floating..

The majority view after day 3 of a literally floating market is that the tape is tired with all good eco' data failing to push the market through 1030.   If this is truly the case now,  it should make for a very easy trade to downside with the Bears/ shorts pressing new positions.   Unfortunately, they have little confidence left in themselves or their fellow Bear clan members to join in on such an orchestrated move.  Therefore, we’re left with very shallow and brief dips.  The majority view is all talk and no action at this point. 

In our view, the reason the market hasn’t pushed higher this week is simple as a Supply/ Demand issue.  At these lofty levels you will always have profit takers, every blip higher brings out more of these healthy sellers.  Fortunately, the demand is there to bite on the supply,  unfortunately,  it’s not enough to breakout further.   Either the demand is truly on the beach or it’s just waiting for a new catalyst to kick some Bear butt to test 1044 Oct week highs.

Not just any 3 pt(gain) day...

Normally, on a day where the market rises 3 whole pts,  there's really not much to talk about other than a big yawn.    However, today's a particularly interesting day for both the Bulls and Bears.    Well, lets start with the Bear camp.    The Bear argument here is that we have stalled at SPX 1030, based on this weeks reaction to good eco' reports,  a sizable pullback was imminent.    They got their wish, at least for about an hour or so it was sizable in comparison as the market dipped as low 1015 ( between the 1013-1018 on our chart as support), which is also 200 mth MA important support level.   As we said beginning of week…” use exaggerated weakness to pick up those most affected from our core“.    Once again,  the shorts couldn’t aggressively and/ or simply didn’t want to press positions. We’re left with another brief and still shallow correction.   Again, ”all talk, no action” , by all the recent naysayer’s!
 
From the Bull camp,  the only thing they have to say today about market after it touched 1015 .. "the rest is history" as the underlying bid prevailed once again!     As bulls, we welcome these kind of dips,  especially on low attendance days and when it's not a news catalyst related event.   You never sell a dull day/ week.   In the current rally environment, you never sell, period!    Ok,  perhaps this is too extreme of a statement, but we are pointing out the fact rather than theory.    Same thing happened when the market was meeting with stiff resistance at SPX 955 and 1k.    While each scenario was different, market was able to overcome with some shaky pullbacks and broke to new highs at the end.   By the way, we aren't talking about distant history here as those levels were taken out just within the last two months.

On the earning side, we again have some very firm reports from the likes of DELL, MRVL, OVTI (alerted AMC) and ARUN.   This is important because these are JULY-end reports and it bodes well for those who reported at the start of earnings season as July business was not included.  These simply show things are even better for those June end reporting companies.  Tech should finally help Financials and lower dollar should help commodity linked stocks tomorrow, especially.   Likely, a trifecta building to melt up over this recent rally cycle high of 1037.

Are we simply waiting for the end of summer trading before the rush of crowd to push this market even higher?.   Perhaps.   What's happening out there isn't the result of a temporary bounce or squeeze, we do have folks putting money at work here.    With the recent change in economic outlook and pickup in production/activity, it's hard to imagine everything would turn around 180 degrees and we head for a double dip recession.    It in theory can happen, but at this point, we'd imagine Vegas bookies aren't taking the bets.

As far as the broad market picture today, we simply had an impressive rally off the low.   What's interesting is that after spending much of the day in negative territory, both techs and commodity group staged a strong come back joining the Financials (led again) who are keeping the market stable.   Late action has a lot to do with the slide in USD, which of course is good for equities and as we push up early tomorrow, the profit taking on moves up this week may turn to buying looking forward to 1044 as buyers stop taking a breather.   Notable plays off our list, paper stocks RKT SWM  made another new high.  PRE, as well.  Techs such as STEC ATHR also inched up as well.  

Bottom line, what's not to like about this market?  Nothing!.  Have a nice weekend!

DJIM #35 2009

No Eco’ data, no corporate reports could make the market do anything last week.  By close, SPX was up or down , less than 1% Monday thru Friday. 

We said earlier in the week…“We don’t expect conviction to show up on buy or sell side.  If we do a up move like today again, we would not put too much into it as profit taking will show up again and we’d use exaggerated weakness to pick up those most affected from our core.”. 

This idea lasted all week, the profit taking continued once again on Friday as positive Tech earnings were sold off early in the morning and Thursday weakness to 1015 was bought up.    Unfortunately,  we don’t expect things to get much more exciting this week as this theme should prevail once again.   As disappointing as Friday was because of the failure to even hold 1030 (new cycle 1039 hit), we doubt it is disappointing enough to break 1015 due to vacation season week in full bloom. (FTSE/UK closed Monday).  Still, we have important eco data points this week to possibly sway the market. (ISM #‘s this Tuesday + Thursday, in addition to Friday’s labour report being on deck.

*We'd watch the financials closely, if they can no longer maintain strength this market will correct.  

What can we takeaway from last week?.   We prefer to look at a positive for the whole recovery process emerging in 2H’09 as July end Tech reports have been solid and even a June Q end (INTC) raised revenue guidance.   This is something the market will get eventually and start looking ahead more as analysts will begin to revise forecasts upward and some companies will likely follow up INTC with surprise pre-announcements.

Same patterns..

Today was very much a replay of exactly two Mondays ago.    The overseas market, namely the Shanghai index gets clobbered on worries that China's bank lending will be tightened and more supply of equity being offered to weigh down the market.    We swear we saw the exact headlines two weeks ago and a 187 drop here.    So, you’d expect a very downbeat market from what’s open in Europe and in the US.    Well, it turned out that we only had a hint of that drop today as we actually closed at the best levels as some dip buyers came in late.  The Shang flop was really not in the heads of traders.   So again we say,  Bears could've tried to push it lower, but once again failed as the important ~1015 held (200 month MA).  Even if we slip below this level pre-Labor day,  it is best not to read too much into this market because of it’s light attendance. 

Financials, again are preventing the market from sliding further.  They provided some strong support two weeks ago and they are here to the rescue today.   It was good to see JPM, GS, WFC trade decently.
On average, most of the plays on our list dropped anywhere from 1-2% percent.   It's perfectly understandable given the nature of this thin week and some ongoing fear from overseas.    China is releasing their PMI # tonight and we have our national ISM number to chew on tomorrow morning.  It's especially important to our commodity sector here as they are most sensitive to the Chinese PMI number.

We are still in the digesting mode since we broke out a week and half ago.  This is not aggressive selling or fast money shorting,  it’s a function of buyers taking a breather.  The only difference between today and two weeks ago is that we are actually on firmer ground looking forward.    We simply have had a string of good economic data, corporate reports/ good guidance from INTC recently to support this firmer ground and even a merger Monday that will all add up later.

Again, on a day like today, we are looking at relative performers to trade/add.   Those plays that are down the least or are green simply get our vote before anything else

..Blame it on the Financials...

Today had all the markings of the past week and more of trading, except one thing!.   This weekend, … ”*We'd watch the financials closely, if they can no longer maintain strength this market will correct“.  This was the downside risk today, days end the SP financials were down ~5% causing a slice through important support 200 month MA.   Once this was more than a slip below all the levels we’ve discussed here 1018, 1016, 1013 recently,  it was an inevitable touchdown to SPX1.  There was no concrete catalyst for the financial swoon unless rumors of renewed credit concerns come to fruition.  In all reality, this group was up about 13% in August holding up the market, today was their time for profit taking.  This was especially true in 4 of the most speculative financial- linked stocks..AIG C FRE FNM. Basically, they started the mess and other financials followed suit.   So, this was the only difference in the markets temperament today, other than that, it once again chewed and spit out positive ECO' data from China and US.   We’ll see ISM hit 60 soon, today just being over 50 was not enough, maybe the market wanted a beat of consensus to mid 50’s.   Last week we were saying don’t put too much into up moves as profit taking will come in.   It did and than it got intertwined with the Financials that caused things to spiral out of control.   By close, this was one day where an underlying bid did not appear.  You can hardly blame such after all the technical damage done quickly.  

If you’re of the mindset of what could go wrong,  you’d be still stuck in March 2009.  If you had this renewed fear just hit you today, well, just stay out of the market.  On the other hand, we feel this is a textbook recovery and the path of less resistance is to the upside in the next 4 months.  All these positive ECo' data points that are being sold now will materialize into a much higher SPX level.  Let’s just call this sell good news and /or priced in news, a 'phase' the market is in late summer.  

Technically,  we’ll get support 975 Aug ES lows  to-980, this mark a 5 to 6% correction off the high in our books.   As you probably remember this has been the norm for corrections going back to March.  No reason to be bullish now unless we close over 1015.   Until, do what others are doing and that is take profits on any new positions you may start or old positions on any melt ups/ bounces.

Problem of this recent rally...

Up until couple of days ago,  most were engrossed in the sentiment that this market should go much higher.   After last few days action, signs are beginning to surface that this rally will take longer to materialize.  This is a good thing, right?    Well, if you happened to load up lately and were looking for SPX 1100 in quick fashion, you'd more than likely be disappointed.     The problem is, there were many people looking for this type of scenario since last correction.     Ideally, this market would sky rocket to SPX 1100 by this week and we can all sell and wait for the inevitable pullback to start the cycle again.     This type of sentiment is displayed from the recent sell off (prior to this week) where dips were immediately bought and new highs followed.    In reality, this just can’t go on forever.    We were also guilty of buy the quick dip and so you can say that we were all part of the problem.   Being part of the problem is also the fact we’ve saying profit taking will come on any move higher since last week, thus setting all of us to do same.

A problem, you ask?   The problem is that we aren't allowing this market to properly digest its move.    First of all, this is a bull move, even if we pull back 10% from the high.    As long as the trend is going higher over a long period of time, we'd consider this a bull run.    Lately, positive econ. data and positive corporate news headlines aren't giving this market a jolt to the upside.   This makes a bad eco' data point that much more riskier for the market ahead.    Even with all the positive news, we aren't seeing more money flowing into this market and chasing the beta stuff higher (other than 3-4 financials linked stock taking up 1/5 of the volume).   It looks as if when we got over SPX 1000,  people just become cautious for a change.    We know there's tons of sideline money out there still.    The fact that investors have become "smarter" for not chasing this market into a very over valued state, is a good thing.    If this is the case, we have to respect it and move our game plan accordingly.

What now?    Equity market was sold pretty hard on Tuesday based on the massive volume (SPY).   Normally, this indicate that the selling is not done and it may attract more selling in the days if not weeks ahead.   This is what we are expecting.    The first line of major support is around SPX 980 area which is basically one day's worth of selling away.    The next big support is around SPX 950 area and we are very confident that it'd be the "worst case scenario" pullback area.   Why?    Economic trends don't suddenly turn 180 degrees and corporate guidance doesn't change over a week or two.    At this point, we are hard to see any major negative catalyst heading our way before the next round of earning start.    You can say anything you want about  September being the "worst trading month" but it will not trade in a disconnected way to the current environment.    Yes, we expect it to be choppy this month, but our theory for SPX support should be logical.

What to do?    Now that we are fully aware that a pullback(meaningful one) is the best thing for this market, we ought to prepare ourselves for it.    Keep in mind, a pullback does not necessarily mean that we hit 980 or 940 next day or two and get it over with.   It can last days, if not weeks and it'll have mini rebounds in between before a final turn merges and a steady upturn follows.    So, between now and the our major support area, we'd be doing less buying and more trading(flipping).   We'd hold some core position and will only add if some individual play become very attractively priced.    As the market draws near the major support area, we'd get aggressive on buying and we'd most likely focus on the ETFs such as SSO  BGU as oppose to individual plays.

As far as sector moves, we'd be very aggressive in chasing any on a short term basis (China linked stocks is one we're watching closer today, followed by commods').   Gold's move today, on the other hand is not something we'd want to get into just yet.   This safety theme here can be become a very crowded volatile trade as it stems from a global market perspective fears of a market correction coming in September.    Bottom line,  September has started to look like a turbulent month.    However, as long as we are clear about where we are and where this market may go, we can come up a sound trading strategy to move us through the month smoothly.

A few takeaways from today is a surprising failure for the Shorts to press the market lower.  If you have a big day like Tuesday,  they should be stepping up to the plate the next day.  It should be a kick them when their down, mentality!.  On the other hand, Bulls still not providing an underlying bid to bounce this market.  Why?.   Simply, as we said yesterday, the technical damage done is a little risky right away to get into.   Today was simply a draw.   We haven't had 4 straight down days since May,  it may lead to a technical bounce before the weekend.

Update on Thursday, September 3, 2009 at 09:08AM by Demi/ YourPersonalTrader

Below: Gold/Silver (incl. NCH's cheapies) linked stocks watchlist.

..a race to 1050..SPX vs. GOLD

Our concluding takeways from Wednesday action played themselves out today.   Once again, the shorts disappointed by not pressing new positions to bring the Bulls to their knees.  Well, really it’s not a disappointment if you’re a Bull,  but it could be a lost opportunity for the Bears in the very short term.   We also discussed the failure of the Bulls to get an underlying bid going for a few days.   By end of day they asserted themselves somewhat.   Still, we think it was hardly conviction buying, but more of a technical driven bounce starting we said may occur before the weekend.   Considering ECO data has been a non event,  tomorrow's NFP will probably be more of the same and this should allow the market to bounce higher.  If we bounce off 1000SPX overnight a few times, it should signal we go higher tomorrow.   We said we won't get bullish unless we get over 1015, we can add now over low 1020's and we think it is inevitable we go higher than recent high cycle.    Still, let's not lose the conservative side of things and bearishly think we'll correct in September until we see those levels noted.

In the meantime, as said, we'd concentrate on sector moves  at this point, which means EPS plays are only going to work again if the market outperforms everyone`s expectations in September.  …"we'd be very aggressive in chasing any on a short term basis (China linked stocks is one we're watching closer today, followed by commods').   Gold's  move today, on the other hand is not something we'd want to get into just yet".     While the market meandered and flatlined on the major indicies,  the China stocks outperformed thanks to commentary out of officials overseas and commod`s (notably coal) are maybe going to be focused on some more as the 'ìnflation' buzzword has re-entered the market after the 2 ISM's this week.   One look at the final prices of the Gold-Silver  list we put up before open and it's quite evident this is where the current money flow is going.    In less than 48 hours, this is being made out to be the next bubble in the market.   We've despised Gold stocks in the past,  but if the herd wants to gather and storm and truly create a Gold rush, we have no choice left but to play some as well.  

If this is truly a one time/ breakout event over 1000,  we have to give some of the Gold stocks a feel,  but we don't want to get out of hand just yet as this could just be another fake signal.  If there is another group acting well like today in China... commods',  you really don't need to get into the riskier Golds.   Simply, we may have a race to 1050 with SPX vs. Gold and some money on 'both' sides is probably the best bet. 

Have a great long weekend..

DJIM 36, 2009

First of all, we sincerely hope that everyone had a great Labour day weekend.   We sure did!    Coming into September,  it's definitely a welcome time for us to rest our minds for an extra day or two in order to prepare what may be one of the busiest fall trading season in a long time.   The feeling this September of going into a fall trading season excites many traders.  For us,  prior to any market exuberance towards SPX1, we said we just want to get to 1000-1050 for the summer before pulling back for a breather and than taking the market higher by years end.  It’s almost playing out perfectly as we didn‘t go any higher, we just aren’t sure if this recent pullback was IT?   Before Thursday’s trade,  we were anticipating a ..” it may lead to a technical bounce before the weekend”.   Next day, we said if we hold/bounce overnight at SPX1,  it should signal we go higher.   We bounced Thursday night a few times there and Friday's move came to fruition.    Well, as we always say trading is about preparing and anticipating and we closed the week off at the important 1016.  This, just a few hours after breaking downside supports at 1013,1016, 1018,  is impressive once again.     As discussed, the Bears were simply 'Blowing it' by not pressing the Bulls with new positions to their knees!.  Sooner or later, the underlying bid was going to come back.  The sudden drop early in the week, just scared it for a bit and the Bears failure to act upon it was the door opening for the bid to come in a safer feel environment.  Simply' da' Bears did not have such a nice 3 day break and will dread waking up on Tuesday.  That feeling, we remember as that is day we went back to school!

*“We said we won't get bullish unless we get over 1015, we can add now over low 1020's and we think it is inevitable we go higher than recent high cycle”.  This will hold true if we close above say 1023, new cycle highs are coming on this 2 day leg, we think.

Many trader's profit is made or lost in the next few months.    Why?   Historically, fall trading is the most volatile trading period and there can be lots of positive or negative surprises.    This simply creates plenty of trading opportunities for those that are on top of their game.

Exactly one year ago today, we were faced with nothing but uncertainty.   The theme of our journals at the time was mostly "sitting on sideline", "holding cash", "wait and see" type of phrases.    Last year, we wanted to see how bad the credit crisis will get, how bad the recession will get and how much the stock market can drop.    Exactly one year later, we'd feel we are in the exact opposite end of the spectrum.   Right now, we want to see how much corporate profit can improve, how much further this economy is recovering and how much higher this market can go.    Ironic, isn't it?     What's so different now compare to 1930s or 1980s when we had some tough time with our economy?    Simply put, the U.S. economy isn't just U.S. anymore and it's dependent a lot more on other parts of the world.     In the old days, a U.S. based company couldn't perform well in a recession filled environment, if its business is solely in U.S.   Right now, any household name can't survive, period, if it doesn't have heavy international exposure.   So,  in the conclusion, other countries, let it be China or Brazil, are doing their part to quickly lift U.S. out of a potentially nasty recession.     It helps for other country to buy up U.S. assets, it helps for them to buy U.S. treasury, and it also helps them to continue the busy export/import routine with U.S.    So this is the big picture.

It's very reasonable to believe we'd get some carry through from Friday's strength come Tuesday morning.  Focusing on China/ Commods'/Golds last week here turned out to be a good idea and this will continue to be our focus.   Our last alert on China's CTRP  produced a quick 4pts/ 8% and UTA  wasn't a bad secondary idea.  Our Gold  watchlist was a dart board.   We also had quite a few EPS plays that are behaving nicely with the broad market.    Again, now that the long weekend is over and vacation trading is also officially over,  we have no excuse to get real direction from the market participants.    This is a particularly important/ interesting/ busy week as it can set the tone for the rest of this month.    At this point, we are betting that we go higher from here.

....Humble Bull...

Even though we got what we wanted in the past 3 trading sessions..”We said we won't get bullish unless we get over 1015, we can add now over low 1020's and we think it is inevitable we go higher than recent high cycle“,  we have to remind ourselves this market can humble you quickly!.  Therefore, we choose to lighten up positions as all the strength in the market was in the 3 groups we were on top of…Commods, China, Gold.   We don’t need to be overly bullish now,  it doesn’t matter really considering we’ve been on right side anticipating a bounce since late last week with the right stocks.  So, right now, we’re taking a breather as the market should by lightening up.  If we can just eke out a slight green day tomorrow, it would be a positive.  

Interestingly, we gapped all the supports we’ve been noting by opening at 1018!. Clearly, this gap at supports (1016-1018 ) is even more important now and we’d be using it as support going forward.   We’re hardly TA experts, but this seems to be quite the bullish gap for a retest of 1039 at least.

As far as individual plays/ sectors, we’d still concentrate on the 3 sec's above and EPS plays.  We had a few making new highs,  ININ and ATHR  premkt was up to $29.  If you were frustrated by ATHR's lacklustre performance after we alerted the gap after earnings, you missed a 25% gain now this Q in it.  Clearly, if we go with an EPS play here the best past is you likely won’t be losing money, you just need patience sometimes for the results to come in and a good entry.   Others lining up might be, ROVI, CTSH, STEC  bounced nicely today again and should have follow through.  HITK  moved into earnings.  Many of the newer EPS stocks we liked this Q,  will move into their next dates and not just a few days before.  It’s not pre- earnings runs, it is simply the course of things these days as earnings winners don’t all go like MAIL , but take another route which means they get valued into next report.

Today, we had FSLR  for a possible max of 10 points as a day trade.  We knew a senior Chinese delegation was visiting the company over the weekend /late last week in the US and thought a deal of some kind would be in the works and so played it.  You don’t go all that way just to do nothing.   In the afternoon, a deal was announced for a major solar plant in China.  CTRP  was upgraded today by GS, but UTA  was the big winner as it’s run now 20%+ since alerted as a secondary play around $9.30.  We like this segment of China, also they are possibly opening up their skies to more business and becoming more friendly as far as flight plans/taxes.

After INTC guide recently,  we pointed out that their raising of guidance will lead to many more upside surprises going forward in tech.   We are getting glimpses of this daily with stocks such as MCHP  last night.  Reason, we are pointing this out now is that are fewer and fewer negative preannouncements in all sectors than in other years going forward and more upside.  This should lead to an interesting EPS season, yep, it’s close with RIMM  reporting Sept 24!.

...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.

1044

A week ago in the midst of what was the much ballyhooed ‘correction’, we made what you have to admit was a ballsy call of an inevitable new cycle high outlining the steps to watch for in order for such to happen.  First, the inability and missed opp’ by shorts to bring the bulls to their knees, a technical bounce beginning possibly after Bulls catch their wind,  becoming bullish over 1015/16, inevitable new cycle high if we get over 1020-23 and a what had to be a bullish gap at 1016-1018 previous support.   Of course, this ladder program could have broken down if we had some negative catalyst, but the thing for a trader is to be prepared.   As a Bull, you better be prepared for the upside and not thinking ‘what if’ this and/ or that happens.  We hate the obsession with SPX, but there's a lot of you here that trade the SPX ES, SPY and so it`s become a natural trend here the past year.   For us, we just like to see earnings and stocks with deserving higher prices become more in focus as it should in a recovery process and hope to continue to toss out trades like SWM  yesterday, steel commodity focus (X ), FSLR, CTRP-UTA,  GOLD  that have worked quickly coinciding with this SPX move.  All this while maintaining our earnings- sectors plays which includes most of those names for the longer term trader.

Today, now up over 40pts since last week,  we closed or you could say painted the close at the 1044 Oct week high.  To be honest..so what!.  “So what?” is seemingly also the  attitude of the market as there is no real aggressive  buying volume leading to this new rally cycle high, ‘potential’ breakout.   This will be the cry of the shorts…‘no volume' today or the past 4 days of this rally‘.  Geez..this should be a top 10 hit song for the past few months!.   Let’s give up waiting for it and just move on.   Today's volume was the recent trend of around 9 bln traded, at least the volume is not all AIG BAC FNM etc as it was recently.  Also, a lot of the big money is sitting in on conferences all over the country.  We have the Cit tech, BAC media and many Retail open houses at GS- Barclays.   Do you know what this money is hearing?.   Nothing, but good stuff as you can see by the numerous analyst upgrades and companies raising numbers at the tech conferences (JNPR today as example).   As long as we stay grind higher or just consolidate over SPX1, we’ll have earnings starting soon and last months Bear cry of no Revenue growth will not be an excuse this time around, but will likely be the fuel for the market.  

So, what now…hopefully, we hope we avoid a gap up or down in the morning from any surprise China data (noted yesterday) and just consolidate/ grind this recent move.