Persistent..

We have always asked ourselves question like this "does a quick rebound back to the previous resistance be trustworthy?"  So far in 2009, nothing behaved in a logical and conventional way.  This also includes the technical side of this market.  We spent most of the day hovering around SPX 1098 and it is exactly where we closed at.   After such a quick and powerful rebound, we just had a 2 day pause without giving back any ground from this market is considered a victory to us.  This is evidenced by the sea of green on our watchlist despite a market pause.

If you ask most traders about what they think of current market,  they'd tell you to be cautious and it'd be risky to chase any move at this point.   We can also tell you that secretly everyone wished they'd load up all of the things at five or ten percent below the current level.  Unfortunately, this game is not about "what you should've or could've done!", and it's all about "what are you going to do now"?  We at DJIM are currently holding enough quality plays with a balanced(as we talked about yesterday) mix that if we get a leg up, we would be happy.  If we have a pullback from here, we'd have plenty of cash to add to the dips as we believe buyers are looking for any weakness.  So, really it is about being comfortable with what you holding.   The comfort level is different for everyone, but we'd imagine at some point every one of us will know what level of equity level would make us sleep well at night.  Basically, at this point, we are feeling confident about the remainder of the year.  Many earning reports have exceeded the high expectation and Econ. data has been up to task as well.  So, this market does not need a super drive up toward the end of year.  All we ask is to hold the recent high level and perhaps make a little progress upwards as we move toward new year.

AMC, we had HPQ pre-announced a slightly better guidance and an acquisition of a tech. company 3Com.   Well, any acquisition in these days are viewed as positive and there has been about 10+ in this tech space recently.   There were also two very interesting earning reports from GMCR & CTRP, which will definitely get some action tomorrow.  While CTRP's report is a no brainer given the AH reaction, we feel GMCR's reaction can be a little misleading.  We remember the exact same event took place for GMCR during last quarter's earning reaction AMC, the stock went up the next day.  If PEET' s is weak in sympathy tomorrow, we won't be hesitant to catch it on the bid. *At this point buyers are not only looking to buy the broad market dips, they also look at individual plays that dip by themselves to get exposure.   The market is probably finished with 5% corrections for 2009, so you have to be selective and look for individual buys if no negative catalytic newsflow comes rest of 2009 to get in.  Example is 24hrs ago, MELI  was under $43 in early trading, today you could have unleashed some near $36, if you bought the dip of a good eps play.  In addition,  we'd be looking at UTA  to see if it can catch any CTRP sympathy trade before it reports next week.   

We have to say things are looking pretty good at this moment.  If financial heavy weights such as JPM or GS can lead the sector with a strong move higher, we'd be looking at SPX 1100 in the rear view mirror in no time.  Unfortunately, today they gave up early gains and market followed suit from new SPX highs.

..nothing to lose sleep over...

Despite a 1% down day with selling picking up late day,  we’re not seeing any conviction on either side. Buyers are simply taking a break / staying put and not chasing further, while shorts are not pressing positions.  

The idea heading into the trading week here was the Bulls had the advantage with no catalysts such as eco‘ data.  They’ve moved the market higher, but sooner than later this wears off and the Bulls need a catalyst of their own for further upside, especially after an almost 3% week heading into day.   The longer you pause as we‘ve done last few days, the more talk of not closing over 1100 circulates and patience runs thin for a few and some selling occurs.   It’s typical and it’s not a concern.  

The focus today is purely technical (eg close over 1100) and $USD.  Today, $USD had it’s biggest move since late Oct. closing at highs and market reacted with nothing else to rely on.  Tomorrow, USD reverses and we’ll still finish >2% SPX on the week, it would be a simple as that!.  In other words, today's action looks insignificant.

DJIM 46, 2009

A week ago today, we were a little concerned whether the rebound that started two weeks ago would run out of steam.     By Friday‘s close, we’re wondering how soon this market finally closes above 1100 and how much upside is from there.  Even though the investors' sentiment changes from week to week, one thing remains clear and that is the market still has strength.  Once again, the shallow down day on Thursday was "nothing to lose sleep over" as the market pushed back to a 1093SPX close.

It is sort of ironic.    The more you question the strength/validity of this rally, the more this market is trying to convince you who's in charge.    Granted, we've been bullish on this rally since it started.   However,  being bullish and utilizing a very bullish strategy is two different things.    The detrimental aspect to maximizing anyone's return in the last six to eight months is the frequency of trading.    Thinking back,  why didn't we just hold enough JPM, MSFT, AAPL, GS when they were at a much cheaper level and forget about this practice called trading?    Well, it is been tough being a trader this year, but not as tough if were a Bear.    It's tough in a sense that many long term mutual funds were having just as a good year as most traders.   Normally,  good traders way outperform the lazy funds.    However, so far this year and since the rally started back in March, the worst thing that can happen to a Bull trader is to second guess the rally.    Still, we can't really blame ourselves because there's many times when technicals looked a little shaky and there were many moments when things just looked too out of control, bullish wise.      However, at the end, fact remains that we've got to this point because many investors out there are willing to deploy money and push the market up.    Well,  we're sure that we didn't get this kind of bullishness from the media, at least not always.   In conclusion, regardless what people say or predict about this market,  it's always the action that counts the most.

Right now, action does look pretty good.  We are again at the door steps of SPX 1100 and we are currently in a historically bullish trading month to break it higher.    Some say that this market's all about big caps now and that it's a negative.   We actually would take an opposite view.   When the small caps and many inferior quality stocks start to pop up,  it usually means the end of the bull move.   So in a way, we are glad that only the quality stocks are making the move higher these days.   It takes out the speculation work for us.

Mr. Obama is currently touring China and it'd be interesting if there's any trade development out of it or FX noise.   We also have a number of economic data coming out in the week ahead and that'll keep this market in a good spirit if those reports are positive or even neutral as most recently.    There's still lots of sideline money waiting to be deployed.   It literally doesn't take much to move this market much higher.    With six week remaining in the year, will investors/ managers make a massive push to close the year higher?   We think it's not only possible,  it's very likely.

Before the recent the employment report,  we said the market might be looking ahead to the G20 communique and **Bernanke's speech on Nov 16.  That day is Monday (12:15pm) and the market will be looking for this to serve as a catalyst.

..>SPX1100 close...finally

Not only did we finally close over 1100 finally,  we surged to a new intraday high of 1113.   All eyes were on Bernanke and he didn’t disappoint as he was even more ‘dovish’ than at the FOMC.  Unfortunately, eyes set on M. Whitney later and her comments hit stocks.   Still, as the case over and over again, buyers stepped up to buy any weakness and market rebounded by close.   The importance of closing over 1100 is the idea 'finally believing' money will flow into the market.   Volume has been light in this recent rip higher and MF/HF are sitting on their hands after the late October sell off in which many were closing off their fiscal.   How long will this last before they decide to chase or be outperformed once again?.   Maybe some with fiscal end in November, notably HF’s are waiting to sell this November move at the end of the month before doing something in December.   Still,  we’re only in the middle of the month and don’t have to worry about this possible selling scenario yet, the market has room to the upside and it’s next resistance lies in the 1020 2/3’s of March rebound-1022 (oct 07 50% retrace).

What we like particularly today was the small cap action as the R2K was outperforming an already hot market.  The index was up about 3% and we hope this is sign of mid small caps coming to life and potentially giving this market further lift.    We’ve had some nice moves from recent small cap mentions in journal .eg….WYNN $54's to 70, CLF, $37 eps time to 44 today GEOY $27 to 32 in 4 days, WLT, FSYS.   If this isn’t a one day wonder for R2K,  we may see other names come to life from our list (GMCR) or atleast have some pullback in these names to selectively pick at again.   Yes, some of these names can use a pullback soon.   Still, no matter what the small caps may do,  it is the Financials, notably GS  and JPM , we need to see life for more upside this year.

Story Intact

Every time the market makes fresh high,  investors always want a reality check to see if what's happening in the market is in sync with what's happening in the real world.     This investor real world is comprised of Economic reports, Corporate earning outlook and investor sentiment.     So we made a fresh new high yesterday and today and perhaps next few days will be the period to check if this bull story is still intact.   How do we know if the story is passing the test?   Well, the easiest and logical way is to look at the price action of this market.

We started day with some not so bullish news.    IP (industrial production) reading came under expectation, TGT gave out a cautious outlook while HD simply issued a somewhat disappointing outlook.    In addition, we had strong USD action which should cause some pressure to the equity market.    At the end, market shrugged off the negatives and closed up a point.   How does that work?   Well, we think despite the somewhat disappointing news in the early morning, there's really nothing that important to change investors' sentiment.   Once again, a shallow pullback/ weakness was bought throughout the day (as yesterday after Whitney comments) and yes, we are somewhat amazed by the strength this market exhibits.    Unfortunately, after the buying on weakness, buyers aren’t chasing for more upside.  As far as our watchlist, it started the day with plays mostly in red and it ended the day with most of them in green.  Coals did well thanks to MEE’s acquisition and keep moving due to China's worst snowfalls in years.   As far as getting serious about the Ferts again (>5%) , a rumor of Buffett buying K+S, a ‘Euro’ is not very American of him and thus unlikely, other reason for the push was a report of a moldy corn harvest,  is just that ..one report.  Give it a few days to see if this is a turning point or not for the commodity sub group.

We have often talked about the importance of Financials plays in the past.   In the wake of recent strength of this market, it appears that one sector is sort of missing in action (along with the lagging mid-small caps).   Yup, the financials and this is one of the reasons the market does not feel very liquid as nobody is chasing the financials.   While it's okay to have technology giants such as MSFT, AAPL or other sectors leading the market, we often feel that financials are also an integral part of a healthy bull run.    We can't say that the financials have been behaving badly, they just haven't gone up relative to the overall market seemingly.    Now, can you imagine if some of our favourite financial names are 5% higher than where they are now?   We'd be seeing SPX at 1135 probably, already.  Maybe, Paulson's investor note citing BAC could double in next 2 years will wake up the big names Wednesday.

In about two weeks, we'd have a first glimpse of the strength of consumer market, the Black Friday sales.   This is often a sign of how the upcoming holiday season will fare for the retailers as this is used as an important gauge of US consumer confidence.  We noted a week or so ago, 5% corrections are likely over with this year.  The closer we get to TK and Xmas holidays, the more this is beginning to feel like a 'seasonal' trade is in effect and the likelihood of a big correction dwindles. 

Same story..

Same story in the markets today leading to a flat day.  A dip on more weak eco data (housing) as previous days,  dip weakness sees buyers step in again and support stocks, but not to chase higher.  Seems conviction buyers missing as are sellers and shorts not eager to press new positions as volume continues to be light.   Put this all together and it’s the same trends day after day.  When you have this ‘stall’ it makes any possible surprising catalyst in days to come a potential market mover as it’s all technical now.  Eyes on 1101 support and 1120-1122 resistance.  Near end of day, it seemed the market wants to atleast test the upper resistance as it’s an important level this week, the action has suggested such.  Still, due to narrow trading range this week, a close under 1101 is a threat. 

Unfortunately,  a possible ‘threat’ emerged out of Brazil AMC, (AGAIN).   See..link on site and see when October top occurred!  Let's hope Jobless Claims are a positive or this Brazil story may turn out to be unwelcomed noised short term.

http://www.djimstocks.com/djim-journal-09/2009/10/21/as-sloppy-as-it-gets.html

Last time this led to FX noise globally for a short period as it makes investors skittish due to the idea more countries could take actions. 

Today, the underlying weakness was in the AMC guidance reports from Nasdaq software..CRM ADSK.  It would seem financials are lagging as well ( if you look at GS JPM), but the sub groups..Banks after Paulson headline crossed, regional banks and REITS are actually outperformers.  Is this a sign of rotation or just a blip this week. 

Brake on or just a break?..

While it looked like the market was having a bit of trouble making any kind of rebound through out most of the day, it did manage to climb up and close near the best level of the session at the end of day.    However, there's really nothing to cheer about because we still ended down almost 15 pts on SPX and closed below 1001.   The  Brazil ‘threat’ noted before the trading day pumped the USD at the open (unexpected) as the futures did not point to such and we went through a sinkhole to about 1090 in the first 15 minutes.  Another big catalyst was the BofA downgrade of chips which is really no surprise because their reason was speculated right after INTC’s report. 

Recall, many times, we’ve said when Bulls are hit by a fast and deep sell off, they do not put an underlying bid/ support until things cool and settle down.   A technical breakdown like today is not the same as the previous days shallow dips that are bought up.  Note, there was not a lot of individual stock hits, usually means mostly a ‘futures’ ETF technical fast money trade.  This means holders were not dumping stock.

Yes, we closed below the 1001 level which invites room for potential further downside.   Will today's move signal some more turbulent days ahead?    We'd think unlikely as today's move may have taken most of short term excessive bullishness down to a reasonable level.  Still, we'd preferred to have tested 1085.

After today,  it does feel that we are not obligated to chase some plays at an extremely uncomfortable level anymore.   In a way, it's somewhat of a relief to see this market come down once in a while.    Remember, healthy bulls runs will consist of many up days and a few down days.    Even though the down days may be dramatic in action, it is a natural occurrence as we‘ve all witnessed.    What we have to do now is to take advantage of some of the pullback to add to our existing position or start new positions on those plays we'd feel uncomfortable to play a couple of days ago.

Story is the same and strategy is no different.   There may be some headlines out there blaming this and that for this particular day but end of day it’s really not relevant as market will forget and move on to new headline.    Also, everytime we have a down day, you'd hear more cautious comments from analysts, but they always quickly disappear once the market resumes the uptrend.     Like we said in previous Journals, we strongly feel that investors, and especially institutional investors, are locked in their mind to bring this market to a higher level to finish up their year.    There's really not many potential negative events between now and end of this year that can come in and change the amount of bullishness we have out there.    The once in a while profit taking days are merely acting as a reminder that this is still a risky business.

As far as plays wise, of course, the safest thing to add on a day like today are the mega caps like MSFT and AMZN.   Still, we aren't excluding smaller plays that have taken hits lately like PEET CTRP GMCR (new adds to DJIM, AIXG RINO ) to our dip list either because we know what they are capable of on a good day(s).    Bottom line, tomorrow is the option expiry day for the month and there isn't anything on the Economic calendar.  A close over 1093 escapes a downside reversal week,  break of 1085 and we may eventually be testing the gap of 1070-1072 discussed a while back.  We’d watch 1085 to bring out the underlying bid if it has time to flatline there and not be reached because of a negative catalyst.

Yesterday's alert 'short' on shippers produced some ugliness in the group eg. GNK -11% EGLE -13% EXM -12% DSX -7%,  we would stay clear of being long and/ or anticipating bounce in this group for the short term.

DJIM #47 2009

The most important thing on Friday was to see following a fast sell off, a hold of 1085 and preferably a close above 1093 to avoid a bearish reversal week.   Narrowly, the Bulls lost as we closed 1.5 pts below this pattern, but with a traditionally 'bullish' holiday week ahead,  it may be just enough for the Bulls.   As we've constantly noted, the Bulls wait for a sell off to settle before giving an underlying bid and seemingly a hit to the futures premarket to 1083ES, may have been the test and go ahead as the market got some bid, we especially noted one in beat up NASDAQ (2 days off chip downgrade & Dell), just after noon.   This action off 1083 ES, which is about 1085 cash confirms our belief this level is the support we are going to be monitoring on any weakness ahead (…"..We'd watch 1085 to bring out the underlying bid if it has time to flatline there and not be reached because of a negative catalyst…/  still, we'd preferred to have tested 1085". ).  A break at this level and 1070 will be quick and 1050 will not be far behind.

Heading into the short week, we continue to say the story remains the same and the rally is intact.  JPM boldly raised SPX to a 1160  close on Friday, so we're not the only Bulls looking for a good end to the year.  The strategy remains the same, accumulate some favorites, and buying your favorite stocks on any sell- offs as last week provided.   Despite a holiday week, (Mkt closed Thusday, 1pm Friday), we will have some eco data, including FOMC minutes to watch.  Also, European data (PMI's ) may matter more than usual.   So, we continue to be at the mercy of the USD and volume is indicative of no conviction buyers and no sellers.   This might be advantageous to making a move as the sparse sellers will allow buyers to move stocks quite easily with trading desks emptying more and more as of last Friday.

Bumpy 'holidays' for bears ahead?

Over the weekend, we couldn't help but notice that the general media is a bit worried about the current state of this market.    There were numerous articles citing that we could be getting a bumpy ride over the next few weeks.    This is due to the fact we had two down days last weeks and that was enough to bring out the skeptics once again.     We don't want to read the media comments after today's action, however.    Frankly, we are just a little tired of the media lately and all the back and forth.  This includes every wishy washy regular guests on CNBC that switch sides on a daily basis.   There are many reasons that caused the market go up/gap in strong fashion, but we think the biggest reason is the reason we've been saying all along.   There's underlying bid from the money managers who like to see this market higher, as oppose to lower into year end.

Headlines are plenty today, the weak USD due to dovish comments, China growth forecast of 10% in 4Q, potential FOMC minutes containing upward eco. growth forecasts and European markets were substantially higher due to German/ Eurozone PMI‘s (we noted Euro data as a potential catalyst this week.)    All of these contributed to a quick rise in equity market today as 1100 and 1005 resistance got pummeled.    Are we surprised?   Nope!   Just like on a down day, people need reasons to explain the market action.   For DJIM, a day like today does not shock us because we're 'Bull' prepared due to expectation of a potential underlying bid as this time around 1085.   If you're not a ' Bull' and preparing for a bid, you miss most gains due to a gap like today if you're not invested.   Still, we do have to point out that not all of the stocks were enjoying the kind of gains the indicies are suggesting as the USD decoupled for many commodity linked stocks.   MELI  and AIXG  ( a DJIM add last week) were outperformers though.  Big caps have obviously benefited from the broad market gain, some of the smaller stuff may still play catch up.

Then there is the coffee frenzy.   PEET  was originally a stock we played due to their announced "acquisition" of DDRX, (a stock we covered since high single digits.)    Remember, a while back we concluded that the price PEET offered to buy DDRX is considered an outright steal.   Today, GMCR , the other favourite EPS/coffee stock here thought the same and outbid PEET.   Naturally this type of an event causes a sell off as a bidding war is a negative for the original bidder.   PEET, raised the offer, but will probably lose DDRX all together was the sentiment.     This superior GMCR offer puts PEET in a very difficult situation.    Despite the fact PEET announced to raise their offer with a mixture of cash/share, it still doesn't come close as good as GMCR's offer of ALL CASH.    As of the closing price today,  PEET's offer is effectively lower than GMCR's offer on DDRX.    Why are these two fighting for DDRX?   We have discussed here many times before, it's all about the growth of k-cup.    In our opinion, the bidding war, if it continues, will be unfavourable to PEET and we decide it's no longer an attractive play based on the current event.    At this point, it's even hard to say if anybody ELSE may come into the picture and give DDRX a fresh bid.     You have to remember, the bidding war between the two may actually draw out other potential interested party.     As it stands, even at $30/shr, it's only $172 million.    The reason we gave this a lengthy paragraph is that we wanted everyone to understand our logic to go long PEETin the first place and why we think PEET is no longer a play going forward.  This is not a 'weakness' , we buy, as it’s news flow related.    Do we still like GMCR?   Yes, of course, especially now that it has a chance to grab DDRX.

One of our readers also mentioned SEED,  a stock that doubled up today off volume that's four times its own float.    As of right now, we don't really know the long term impact of this particular announcement.   Bascially there's no telling of what it means for SEED as far as dollar amount is concerned.    What we do know, however, is that this stock may just be the favourite stock of the day traders and speculators for this holiday week.    It might be worth to trade this thing for as long as the story lasts, but ideally it's best to stick to what you know heading into year end.

This is a shorted trading week and many traders are away on holiday as we all know.    Today's volume is relatively low, but it's still pretty decent given the circumstance.    It might not be realistic to expect this market to break out of recent high cleanly, but we do think there are some trading opportunities worth participating in.

..nice and quiet day

Just a typical day to torture the Bears and declare another win for the Bulls.  If you saw the Shanghai tape of -3+% day, you’d figure the US markets ES would be down premarket!.   That was the first sign of market just shrugging off things as the ES was pretty tepid.  Other potential poisons were out there as well (home price trends weakened, GDP revisions), but the market just has turkey or is it just Bear meat on it’s mind as a morning sell off was eaten up by the Bulls in a sign of an never ending underlying bid on any shallow pullback.   As trading desks empty, fast money traders lead the market to potential new closing highs on SP this week.   We mentioned a clean breakout might be difficult this week as you need conviction buyers coming and that would seemingly be hard with lots of big money away.   If a breakout happens, the Bears will say it’s a low volume move, we only wonder if any break happens what will ‘holiday’ talk consist of at the table and all weekend as headlines read market at new highs!.  Will they come off the sidelines come next Monday?.  This is probably looking too far ahead, but new highs are a possibility tomorrow if a surprising (notably Initial Jobs claims / but also Durable goods etc. comes in and if Euro data in morning is welcomed as our late alert indicated.  We also noted AIXG again in the alert and hope it pushes to a new closing high.

AMC, JCG  is getting a pop, our fave consumer/ retail store stock TIF  reports in morning and will probably surprise as it has in recent reports.  This may also help the sentiment overall. 

Happy Thanksgiving to all our members and your families!.   Have a great one!

DJIM 48, 2009

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

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

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

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

Jitters dissipate..

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

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

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

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

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

It's all good...

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

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

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

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

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

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

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

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

...running out of headlines

The story and the trading premise remains as we hit fresh rally highs today!  Part of the premise has been an undeniable underlying bid always present and a part has been no conviction buying or selling.  Therefore, the failure today to accelerate and breakout the November closing high of ~1113 as we still can’t can’t find the conviction buying/volume.  Does it matter?.  Not really to us as we’ve been concentrating on select stocks/ groups that keep on getting a bid…our LED stocks VECO/ CREE  had big days and joined AIXG in making higher highs, CTRP, MELI  keeps rolling on the AMZN theme, CAGC  alert had a sensational day as it tagged the Ferts  group noted yesterday (MOS POT MON) in making new highs.   We've added HEAT  noted in forum yesterday by a member to our trading list (IBD write up today).

Even though the rally seems to keep losing momo’ in this range up to 1120,  we’re not listening!.  Yesterday, we said it will be a selective stock/ sub groups pickers market going into year end and we’ll stick to that!  R2K  big outperformance up >1% of the market maybe a clue of things to come.    Our view as far as groups/ sectors are concerned is China stocks, Casinos and  Shippers  will start to attract interest to close off the year as these are pretty high beta groups/stocks fast money likes.  A few upgrades on these groups or specific stocks and these will get going…that’s all it will take!.  

We had BAC news AMC and this surprise may remove a big overhang and therefore is a positive.  So, before the NFP# on Friday,  we’re hoping this news lights a fire of sorts under the underperforming, lagging Financials..well, maybe for a day as it seems they can’t put up back to back up days for over a month now, specifically GS JPM.

Ugly 30min close..

Well,  it looked like a good start to the trading day as we hit new intraday highs on the heels of the financials (GS JPM notably higher) off BAC news leading (which included numerous upgrades).  Soon after the ISM disappointed many, even if we think most of the smart money expected such.  This produced another failed day where the highs couldn’t hold, later the financials rolled over which eventually led to an ugly 30min close and more signs the market is losing momo as it nears 1120SPX.   It's the fact that important sectors reversed intraday that is frustrating to the traders, including us,  which led to our alert of "more caution"  30 minutes before the selling hit.

As we mentioned in the most recent journal conviction buying (volume) is needed to break this market out of the recent range.   Having the financial group, (yep, once again),  breakdown intraday worries this market.   We're simply getting used to it after seeing failures of putting even a back to back positive day consistently.   The sector as a group is trading near the recent low and we'd very much like to see them to hold this support.  Even the one positive all day and week, the SEMI's  hit new highs, but couldn't hold it.   This failure in the SMH  around 2:45pm was the final straw for us after already witnessing the financial group failure earlier in the day in issuing a cautionary alert.   Note, MRVL  reported a terrific Q report AMC and it will be interesting to see if this group can try to reclaim highs soon.

Will tomorrow's NFP report given investors a reason to cheer this market?   At this point, we don't expect a big surprise from the job report in either direction.    However, we do think that we need a big positive surprise to get this market over the recent high.  (A close between SPX1115 to 1120 is needed badly to even think of a breakout eventually).   On the other hand, even if we get sold off from an unfriendly job report,  we'd think there's still a strong underlying bid from the buyers, but do recall what we always say and that is fast sell offs need to settle down before the bull bid comes back. 

We are definitely seeing some good flow out there this week.    Just remember, exactly one week ago today, we were faced with news from Dubai that spooked many around the world.   Right now, things are back to normal and we are back focusing on the Economic side of things.    As long as things are within expectation, this bull market is still intact and our trading strategy won't change in part due to the what is usually December bullish seasonality.