was it really that bad?

Most of the traders echoed this question thoughout the day.   Despite red being the primary color across all trading screens,  the selling activity was businesslike, as in taking profits in a overbought market and not panicky.   It's a strange day, the broad market moved down off news that many thought would not cause such a broad sell off.   This move downward most likely would have continued today on the heels of Fridays selling,  it just decayed more with the negative newsflow.   The biggest and probably the only significant news that started the day (week) was the announcement of rejection of GM/Chrysler plan by the government.    In a way,  this may be the kind of action this market is looking for.     However, the combination of "potential bankruptcy" headline for these automakers, weakness in overseas trading, and just a general lack of buying interest all across the board fueled the decline.

To us,  this might just be healthier than what down 28 points on the SPX suggests at the close.     Market did bounce some off the low and managed to close around SPX 787.    If weakness persists in the coming days,  we think this might be a great buying opportunity.    Earning season is just around the corner and we just can't imagine people would ditch the bet before the game even starts.     A potential move into the SPX 760 area is certainly possible and we'd use that level as a place to build up some meaninful position this time.     Fairly or not,  most of the commodity names have been punished harshly just within the last couple of trading days ($USD helping).  The gains that take days to make evaporate much quicker in this market.    Again, as said here recently,  its' a traders market still!.   Also, last week we noted the planting preview Tuesday and the Ag's sold into it pretty hard.    We'll update in the day for possible Ag' stocks reaction to numbers.   We definitely like the prices much better now than before as it should allow to build a meaningful size going forward in many of the commodity equiites again.   The tech's, SMH off 4% on back of Barrons' cautious outlook, but we are still over last weeks breakout levels.   We have a slew of eco' data tomorrow and if more hints of stabilization are shown we should carry forward with the late move.

AMC,   TBSI  announced a pretty decent report and stock is jumping up in AH trading.   We'd again look for GNK as a sympathy trade in the early morning if this AMC sentiment holds.  Recall, these shiipers are only intraday trades as the outlook is bleak,  but if we get a 1 day move it usually turns to a 2/3 day extension.   Solar play STP did reasonably well given the weakness of the overall market.    It reminds us alot of the small cap runners in the past.    It's going through the consolidation phase on declining volume currently, but price action is firming up.    Once the 9 ema catches up a bit, we can expect another run- up.  MYGN,  was one of the few greens today as it came within a whisper of 9ema and proceeded higher.

Bottom line,   there's not a lot of green stuff today, but we are not discouraged in any way.    This is definitely viewed as an trading opportunity as oppose to the beginning of a long decline.

Added to shadowlist: DTSI,  strategic agreement w/INTC lifting growth expectations beyond initial projections.

Sloppy day!

That is the only way to describe today’s trade…Sloppy!.    Considering trading is a lot about preparation, our premkt lead was the global hints of stabilization in eco’ data posted may carry through to here.   Fortunately,  U.S data was good enough (guess you could see bright spots if you look hard enough) to lift us over the important level of the 50ma at 791SPX early on.      Still,  this seemed like slop trading as the market here was lagging the overnight markets and the FTSE  which was climbing and over 4% near close while we limped along.    We thought this divergence had a reason to narrow and posted we could see our indices climb after the London close.    Well,  the indices did come from the shadows with the SPX climbing nearly 15pts to highs of the day (810 up 3%) in the next few hours,  but the ‘scattered’ action we alluded to in the morning really had continued into 3pm.    Something was array,  today had a feeling of late summer trading.   The biggest problem was despite the $USD getting whacked,  the commodity linked equities were not participating on a lower $USD.     Again, a divergence in an unusual trading day and so the last hour sell off was not that big of a surprise as there were many missing links.    There was no real buying as in conviction to get to 3% gain on the SPX,  this type of activity usually ends bad as in gains being pared by close or overnight.    Only the financials really performed,  but that just looked like more short covering in the works.      We’ll probably see an early continuation down tomorrow with the 50ma an important level to hold by tomorrow’s close.    Also,  did you see the Super-Caps ….MSFT up 6%,  what’s that all about???…Who cares!!...Simply,  things didn’t make sense today and the volatility we prepped to start the week came and we closed back down to SPX 797. 

Sec’s/ Stocks closely followed in brief…

Shippers , ..."AMC,   TBSI  announced a pretty decent report and stock is jumping up in AH trading.   We'd again look for GNK as a sympathy trade in the early morning if this AMC sentiment holds."   In the premkt,  you could see this was not going to materialize as only TBSI was gapping (not the usual action when these can potentially run during day).   Still, being prepped is key, at least you are there if a trading opp’ occurs.     What we got instead was another broken down sector (Solars ) getting a lift of a Jefferies note on CSIQ.    This lifted all the cheapie solars,  we loved and traded hard in the past, CSIQ, JASO, LDK.  We’ll take it, but STP  was already in the process of making a nice pattern  (see chart and caution comments midday ) and exploded from it nicely.    We would have preferred to let it ride by itself, but it seems many firms are willing to take this sector for a ride into earnings.    You could see this by the endless notes in Briefing.com to remind readers of past runs into earnings.    Again,  the trading environment is for traders,  if you accumulated STP in the $10’s, 11’s in the past few days take your gift in the mid $12’s.   That’s 10-20% in a few days and truly a gift when stocks pop 15-20% on a lousy upgrade.     Another stock mentioned constantly the past week was MYGN  and it hit new highs early.   The worst part of this late decline is it took down one of the few outperformers the last few days with it. 

USDA prelim #'s did not attract any interest for the Ag’s- chem’s ,  the sector just rode the tide of the lagging commodity equities.     This also was a divergence as the price of grains were propelled by the planting review.    We think this muted reaction may change soon, but energy links are acting terrible and need to pick up to help out.

We’ll watch for eco’ catalysts tomorrow (ISM etc.),  hopefully the G20 doesn’t cause a lockdown on the markets as the city of London is already experiencing.

Positive tone...

Despite a negative close carryover aided by a terrible ADP#,  which lead to a downside gap,  we alerted the ISM # / JPM bond offering might lead to a good tone from here.   The heads up didn‘t disappoint and gradually came to fruition as we slowly moved higher, a desperate attempt to replicate the 3pm action from the previous day by the shorts fizzled.    In fact, we also managed to take out yesterday's high and closed above it.    You do have a sense that this market is hungry for good news since the bad news (ADP) just can't seem to shake it down.   Tomorrow we have this meeting of directors at the financial accounting standards board, which may issue a relaxed mark-to-market rules  for credit securities.   This is evidenced by the strong rally in XLF, and most financial securities in general as the short covering rolls on.   As the saying goes, financials go up, so goes the market.    In the broad market, almost everything enjoyed a healthy day.    Just like we thought yesterdays close may lead to a lower open, we think today's close will lead to a higher open tomorrow.

We know this market is capable of going up and that's why we've been saying use some of the dips to get shadowlisted names in the 'working' sectors.   The trend, as we have been saying for the past few days, is up.   It just pays to go long as oppose to any other strategy.   The commodity group had a pretty decent day, helped largely by many steel and metal stocks rebounding.   We’d concentrate on CLF  X  as always.   Oil stocks, on the other hand, seem to lag the rest of the commodity group.   At this point, we feel oil group will catch up to the rest of the market, eventually.   Being in OIH  is just the easiest way to play the group.  Lastly, the solar plays such as STP  and CSIQ  had another good day as the earnings play noted yesterday tries to unfold.  There's no telling how much further they can go up and we don't believe the run-up will end anytime soon.

Tomorrow morning we have MON SCHN  reporting.    We'll be paying attention/ reaction to these two names as they can very well set the tone to the rest of their peers.   We also have RIMM  reporting in AH tomorrow and that's always the interesting one to watch.    Bottom line, M2M adjustment that's favoured for the financial instituions is a huge deal, in our opinion.   Right now, all signs point to a revision that'll benefit the market.   Basically, the recent market high is literally one piece of good news away from being broken out.

Early Cyclical trade underway..

One thing we haven’t seen for years is the US markets being dictated by overnight global markets, instead we’ve been riding the coattails of intraday newsflow originating from within for what seems like month after month.   This has changed recently,  maybe for the second or third time within a month large gains in Asian markets and even Europe spillover to the US markets.   We just follow.   This really isn’t a surprise,  if you believe China is leading the world out of recession which it is seemingly doing    Today, the worldwide squeeze continued as stocks surged in Asia and Europe with SP futures in tow as the safety bids in FX/ credit/ gold unwind!.     This was the key,  not the M2M fever we were waiting for in the morning.    Judging by the action in financials throughout the day,  you clearly see the M2M relaxer was not the culprit for the melt up.     Basically,  M2M changes are a  ‘middle ground’ compromise.    It’s really a wash as it is a compromise to both sides of the fight for it and against it.    So, the key is what we’ve been stamping in bold on site about eco’ data recently…."hints of stabilization".   This is probably the biggest tailwind  in the markets right now as the financial catalysts die down.   Today it seems everybody woke up screaming the end of the recession is here as we had more encouraging data worldwide!.     This is the underlying trend as eco' data is flattening out….. China March Manu PMI, China output expands finally, better than expected, UK house prices and March Auto Saar numbers probably have indicated a bottom and yesterday we also had the ISM provide a catalyst.     So, it wasn’t the financials leading this market based on M2M fever,  it was a rotation into a ‘Early cyclical’  trade, high beta groups were getting the money and some of it coming from profit taking in financials.    The heavy groups in the early cycle trade were/ are the Industrial, (transports notably, consumer discretionary/ retail / gaming and tech.    The best performing were the high beta/ high short interest equities.    Look at best performers on SP500...ODP, WYN WYNN CBS HOG HOT…can you say junk..junk..junk!     So, if you look at shadowlist the gains are not what you may expect from the individual equities listed as the groups moving today have not been in focus here,  why should they be if this just the beginning of an early cyclical rotation.    Let’s just say,  if this for real and pink or yellow shoe wearing gamblers appear we’ll have the likes of CROX and WYNN back on our trading lists in no time!..lol    Anything in the safe sectors of late, Hlth care/Biotech just lags on days like this as the risk appetite changes.   You have a choice now,  this may continue where the riff -raff may provide nice gains in the short term or just stick to trading the groups we started to again over a week ago in the commodity linked stocks.   Eventually, the USD will falter and these will be favoured all over again in a bigger scope than what we are seeing now.

The question is where did the red flags go all of a sudden?.  Here`s a few.  SPX 840-860  should be a difficult barrier to cross,  we saw hints of this today as we approached 840.   Also, the SP financials still have not taken out their  recent highs (march 23rd).   We`d like to see this to have a chance to break 860 and cause shorts to unwind quickly and cause a big run.    MSFT, yeah its not a horseman stock these days, but it reversed and turned red today.     Oh yeah,  here is a wake call potential,  the employment report!.   If the ADP number was close,  this report may not be shrugged off as the ADP was as it comes with the above barriers- question marks.  Jobs are a big lagging indicator, but they still matter providing implications for  Credit trends going foward.   Consumer confidence is the key here and its turning.   Never a bad idea to throw some caution into the tailwinds,  but any substantial dips are a buying opp`.    Nevertheless, sticking to a positive bias and looking for pockets of strength..solars or whatever group pops up.

We have had pre announcements in Med tech stocks already and we’ll watch for spill to other sec’s.  We had somewhat backwards reaction to SCHN (steel) and MON ( Ag’s)earnings.    If you look at the headline results, which would stock/ group would you think would be a better trade today?.    In reality, what do you think will do better going forward knowing what you know of the global eco‘?.   So, the reaction to these reports was surprising and may make it difficult if you want to trade right off a headline number/ guidance as soon as it crosses the wire this earnings season     We also had the RIMM  pop AMC, its not the headline Q #,  it’s the gross margin number the scurried the shorts out.    We’d love for this to be a tale of things to come this earnings season if stocks melt up on earnings, but in RIMM’s case this was pure short covering and is probably not sustainable unless this market melts up on a broad scale.

DJIM #14 2009

Here at the official start of the Q2 2009 with Q1 EPS reporting season upon us,  you can’t help but notice, " we've come a long way in a short period of time (as in a month from what we appropriately named,"Mark of the Beast 666" after the close March 9th)....."Usually,  we have a case of mouths calling the market bottoms, nobody is doing that now at this level and instead calls for 500-600 gravity pulls are all over the place.    We like this as well for a better chance to get a meaningful bounce from the 'Mark of the Beast' 666 level....".   As sentiment fell to depressed levels and no bottom calls evident at those current levels,  began a devil of a rally.

A lot of things have changed!    Most important change of them all, is that the investor's sentiment toward this market has changed dramatically as conditions are falling into place for a 2H09 recovery.   We can still have all kinds of bad news that point to a deep recession, such as the awful Friday Job losses,  but if all investors are looking at is the potential recovery, why argue against them?

Over the last few trading days,  we have sensed bullishness not seen since last September, we even ticked to day highs at Fridays close.     Yes, there's a big fear among the market participants.    The fear is that the market will continue to go higher and not being positioned enough to take advantage of this run-up.     Quite interesting, isn't it?    Basically, what's happening right now is despite the 25% run- up from the March low,  many if not most of the investors/traders are still way "UNDER INVESTED" in this market.    When this market shows no sign of pulling back, whether on bad economic number or GM's potential bankruptcy news or whatever,  there's only one thing on trader's mind.    We got to get on this bull jet with all of it's tailwinds!!    Right now, da'bears are using all kinds of fancy technical jargon to conclude "the end of this run-up must be near".     What we think is that all of us,  Bulls & Bears, are way under estimating the power of "sideline cash"!     We admit, even as bullish as we've been, we've hardly tapped more than enough of our cash.    We can only imagine how many other individuals/ especially institutions are caught in this run-up WITHOUT a good chunk of merchandise.     The more it goes up, on good news or bad news, the more it makes people/ managers feel that we have to buy stuff!     The end result is that dips are being bought aggressively ( the underlying bid is prevailing as discussed more than a week ago ) and there just doesn't seem to be enough selling to satisfy the buyers' appetite.     We feel that the only reason we aren't higher right now is still the cautious nature of the majority of long investors/traders.

The coming week is a relatively quiet week with only AA and MOS  as notable names to report earning.   They shouldn't cause a big ripple in this market one way or the other.    Being also a short trading week, we feel traders would like to position themselves for the earning season.    We saw what RIMM  can do with a promising report.     The one very positive thing going for this earning season so far  is that nobody really expected any company to post decent earning/guidance.    Therefore,  there's a tremendous opportunity for upside surprise here.    If any company, a leader in its sector hopefully, showed signs that the worst is behind us, then you almost have to buy the stuff for the inevitable, which is the recovery process.    Of course,  what we like to see may not turn out to be what we'd actually see.    Market sentiment can and definitely will change throughout this earning season.    However, for now, the trend continues to run with a positive bias!

Commodity- linked stocks

We still feel this is a lagging group as the inflation- linked trade will only pick up in the future.   It is very possible that inflation expectations could lead the consumer to buy now before prices go up and we’d like to be there early.    Still,  these stocks have a lot of catch up to do compared to some of the other groups.    We are still sticking to our usual favourite including X  CLF  OIH  MOS  POT etc.

Financials- linked stocks

Out of all the groups, this one gets the most attention and it's definitely a market mover.   We like some names such as GS, ICE  STT V MA  etc.    You just can't move this market higher without this group's participation.

Technology- linked stocks

RIMM  set the tone for the techs and we will monitor those names that have "high growth" associated with them.    Not all techs get the love,  so we have to be very discriminating with our plays.

Bottom line,  hope and promise can drive this market much higher than we all can anticipate,  just as fear can drive the market much lower than we'd ever thought possible.    Sentiment is extremely good right now and we have to use it to our advantage.   A shortened week and little newsflow catalysts should be a positive for the broad market.

** Visit site and the "IntraDay 'LIVE' Trader" link.   We’ve implemented a  ‘test run’ of a live streaming page within the DJIMstocks.com site to provide relevant headlines/ data during the trading day( inc BMO/AMC) and for easy interaction amongst traders/ investors.  In the future,  a live blog may become a 'public' page of DJIMstocks.com.  In no way would it compromise our members interests in respect to what’s inside DJIM ( Journals, Alerts etc.)

how bland!

As exciting as ‘Mayo’nnaise on pre sliced white bread!

Whatever moves happen this 4 day trading week, we won’t put too much weight into it.   If today is any indication this going to be a very quiet week of trading and unless (very doubtful) a big catalyst comes along, we don’t expect to be too busy until next week which is really the start of EPS season with GS.   

A positive bias remained over the weekend,  but with SPX cash over 840 in premkt an influential analysts (Mayo) note on the banks crossed the wire ( see IntraDay Trader link).   Futures started to weaken to high 820‘s, a slight pop at the open before a slow grind to Fridays lows of 822 on profit taking led by the financials.    Mayo’s initiations were not earth shattering and we’d just say it’s a newsflow excuse to take money off table.    There really wasn’t one main catalyst for the action today,  just a bunch small ones that combined led to swings on low volume.  Basically, we just look at today as a day to give back Fridays gains, even the late rebound is really not very noteworthy!.   Breaking 840-860 is a stretch here this week with little news flow.  We need volume, lots of it to crack these levels.   So, as noted in Intraday Trader,  815SPX is the support this week to watch.   A firm bid should originate here, if Fridays lows get taken out.

Besides Financials,  Tech' was off as well (RIMM, AAPL were strong (a few positive firm comments out this am on AAPL) and a lot of it could be due Barron’s over the weekend on both stocks.  Commod’s were pressured by USD$,  despite positive Citi commodity comments and upgrades to mining equipment stocks (BUCY, JOYG).  Still,  both items are good to see.

at support levels...

Well, another low volume day and another low volume sell off.   The only thing different today is that there was no late day rally holding and the market closed near the low falling 20pts to ~815SPX,  a level we‘ve been noting is short term support in our view.    In all fairness,  this week has been very quiet so far and the trading action has been far below average compared to last couple of weeks, still an underlying bid was present today as we reversed late, only to give it up into the close.   The 'bid' should be there tomorrow to keep the steep rally in tact,  it will probably be somewhere between overnight lows on SPX cash and 815 during the day.   Simply, we could just reverse from overnight lows if they come near 800 and go straight up into the trading day.

The only real catalyst played out most of the day.   A TALF headline circulating from premarket and was noise on CNBC all day.    In reality,  we don’t think this is all that important and we are just in profit taking excuse mode after the 25% bubble.   This is still fine as long as we hold tomorrow.

We had some nice action in a few called out plays here today.  EBS , alerted yesterday again in low $12’s rallied to a high of 13.58 today, we still think a contract is around the bend and will generate a gap open, so we’d keep it a hold not to miss.   Before it's first run alerted from $12 to 15, we did say this is a longer term play.   ICE , an alerted buy at $77 recently made it to $88+ (15%) and was noted in Intraday trader today as it came to Jan/April highs at $85 for another trade opp’.   This one is quickly becoming a favorite on any significant pullback to buy back.

AMC earnings, AA  reported an inline number after missing badly the last 2 Q’s and stock action was not so too bad in early AH trading.   A case of looking better than feared.   Liquidity has improved here and estimates should be revised with the stock getting back on it’s recent track shortly.   On the other hand,  MOS  reported a somewhat soft number ( EPS of $0.13 versus Street Consensus EPS estimate of $0.22) and was all over the place AMC.   The negative outlook on potash volumes should pressure it’s shares and those of it’s competitors.    Reaction is what you wait for in this Q.    A few Tech’s JNPR (preannounce), FFIV on mixed reports traded higher.     The good thing is we are not seeing any major ‘blow ups’  so far in pre announcements.


There's not a lot of catalysts in the next couple of days (FOMC minutes tomorrow?) and we feel market should be able to hold at least SPX 800 this week.    Due to the low volume,  it's also NOT unrealistic to see a pop next couple of days.  The first trend change this week should be a pretty good one.    At DJIM, we have added a bit of our favourite names today so we can better position ourselves for the next pop.    Bottom line,  we are feeling more optimistic now that the index is able to consolidate  recently to give this market a chance to move higher.

Stubborn

In market sense this stubborn may look as a positive,  but in reality after a 25% push in less than a month a healthy pullback of 7-10% is necessary in many eyes to go forward.     The premise at DJIM for about a month now, is that an underlying bid  comes into play on most sell offs,  including the same today after a 2 day pullback going into todays trade....  "The 'bid' should be there tomorrow to keep the steep rally in tact,  it will probably be somewhere between overnight lows on SPX cash and 815 during the day.     Simply,  we could just reverse from overnight lows if they come near 800 and go straight up into the trading day".     Despite a hiccup following the ‘FOMC minutes?”,  it still looks like a ‘straight’ uptrend from early premkt into the close on a SPX chart.     Now, we’ll see if the “first trend change this week should be a pretty good one.” comes to fruition tomorrow.     So far, so good, as it’s been about 25 SPX pts.  

You see a pullback in these improving conditions will make shorts cover, sure more gains will make them cover as well,  but shorts don’t think that way after 25% gains and will wait for a pullback.    If you go by historical evidence this pullback should come.     A healthy one is good for both sides,  it allows the shorts to cover at a better price and a door for real money to enter.    Institutions (whales) are not going to get in on the market with sidelined money after 25% gains, you’d think!.    So, this is turning into a puzzle and could even be frustrating to many a Bull.   

So, how may this be different???.   We have run out of catalysts from the gov’t many a Bear will point out , but what might be the current silver lining until stress test results or private equity deals for a financial or two, is “Earnings season’ surprising.     A big positive is we’ve seen no  "blow ups"  in pre announcements so far from any noteworthy company/ sector.    We have a good chance the majority of banks- brokers reports being decent, but you can see from the action this week many are cautious with this sector into next week.    Another we saw today as all the stocks noted in Journal reporting from AA MOS  to JNPR  had more 'decent than bad' calls and all finished GREEN.    Let's add all the consumers earnings today from BBBY  to FDO  to the mix!.

Why the price action?.   Mostly shorts are seeing these reports are not going to send these stocks sharply lower and are forced to just give up and cover.   We will have to give these more than a day to see if real money comes into buy,  you can't tell a day into it as it could be a squeeze lasting a few hours or days.

Watch  for opp's heading forward for big 1st day gains on a report due to shorts covering, even on just decent reports like these above.   A big beat report could be twice as hard!!

Bottom line...with light volumes this week we can easily move higher,  we were stuck in 815 to 825 range today.  Let`s bust thru' 825 and close the week off with a good tone into what will probably be a very decisive upcoming week with C GS GS INTC GOOG  and a slew of other reports.   Right now, we are just going with the flow into tomorrow and will wait for the eggs to hatch next week.   Many will be sunny side up, but expect a few scrambled ones in the mix.

Happy Holidays!

DJIM #15 2009

First of all,  we hope everyone had a great holiday.   Market‘s action last week,  definitely helped!  There's no doubt that many of the trading/investing community were discussing the recent market activity over their dinner tables.    The resurrection of the market!.   We can also imagine that many of them had the such comments as,  "Why didn't I buy the market in the last couple of weeks?"  "I wish I had these stocks in my portfolio!"  etc.    There is a very good reason for many investors/traders to fear these days.    The fear, of course, is that the market is moving higher without them on board.

As early as a week and half ago,  we just couldn't help but notice a swift change in investors' mentality.  It's not something what you can pick up easily by visiting various financial sites/blogs or by watching CNBC.    Many of the places you visit frequently were presenting a very cautious, and sometimes a very bearish tone.    It's true!   Those bearish things you often hear these days do present a real worry.    However,  we noticed something else at the same time.    Despite a 20+% surge from SPX666, and despite the recent flurry of bad economic news, the market was holding up remarkably well.    In addition,  every little piece of good news was viewed as extremely positive.    We just felt this market was only in a pause mode before heading higher and we've been highlighting all the reasons in BOLD over the site.    We definitely needed a catalyst.    To our surprise,  the latest catalyst came early as in a pre announcement on Thursday.    WFC , one of the biggest banks in the media spotlight announced that things are going well with its business,  especially in the mortgage origination area.  ” Watch  for opp's heading forward for big 1st day gains on a report due to shorts covering, even on just decent reports like these above.   A big beat report could be twice as hard!!.   WFC was it and we hope it's just the beginning where shorts run.    This news can mean a number of things to this market,  most importantly, they are all positive things that the Bulls love to hear. 

Now,  we highlighted last week the potential of a “ first trend change this week should be a pretty good one.”…and it definitely was as the market climbed from overnight lows of around 802 to 856 in 2 days.  Now, we are going to need a confirmation signal this week to carry forward.    In the coming week,  we have a number of market moving financial companies such as GS JPM C  reporting.    We also have other heavyweights such as INTC JNJ etc. on deck.     This week will be a test of the recent strength.    In our view,  we feel we have a very good probability that this market will set up for a further run-up.    Things may just not be as pessimistic as many would fear.    Also, we have many "underinvested" traders/investors that are waiting to get into this market, eagerly!     As long as the general consensus becomes that the "worst of financial crisis" is behind us,  there's a good probability that we will not see anything close to 700SPX.

At DJIM,  we were quite busy buying last week and we held pretty much all of our stuff over the long weekend.    Right now, we just can't help but feel good about this market.    We are still using any upcoming weakness in the market to accumulate more of our positions.    Until the underlying sentiment changes,  we will remain with a positive 'long' bias. 

The plays are all there on our shadowlist.  If its Bankers- brokers linked running, just go GS, JPM, NTRS, ICE etc.   If Techs keep rolling, we have the RIMM's  and EQIX's..  If its commods, you go with the latest sec's we're discussing.     If there's any play that we feel particularly good about, we'd definitely note one right away like WFC, NTRS, FCX on Thursday, but many daily alerts- comments/live trader are for those daytrading,  longer term investors have the shadowlist to fall on.     Bottom line, next couple of weeks are looking to be very opportunistic if earnings avoid 'blow ups'

Tailwinds to run over 860?

Once again,   DJIM keywords for the state of the market the past while,  prevailed today.  The lead we’ve been going with in maintaining a positive bias consists of the words…tailwinds, underlying bid, resilient.   All these showed up today as stocks closed +2 SPX points after staging an impressive rally off the opening lows.    An underlying bid was again present showing resiliency and signalling tailwinds, mostly in hints of stabilization in eco' data working hand in hand with much better numbers from the banks (WFC).    Leading the market tape today was definitely the financials!.   There was no real catalysts today,  just more tailwinds generated by WFC from last week.    Although,  we did have more positive headlines from China showing trends are stabilizing,  loan growth is going through the roof and gov’t players continue to make positive commentary.

Sector watch

Banks- Brokers linked,  what can you say,  but keep with up the herd.   You know the stocks we like at DJIM.  AMC, all GS  did was set the bar higher for others with a much better expected report in many aspects.  The public offering is quite neutral on a dilution basis (limited risk).   We dipped into the V -MA for stocks linked to financials as the charts look ready for more.    It will be interesting to see the GS reaction, the market might be feeling spoiled and not give this report all it deserves initially.

Commodity linked -stocks

The $CRX  made a new recent high as the USD weakened mostly due to many of the world markets being on holiday.  Basically, if left home alone,  this USD related sector was doing what it wants and some give back may come early tomorrow.   Still, we are specific here lately with what is working,  primarily the Steels  and Ag`s-chems - and our only copper play FCX  has been a standout, even alum' AA  got up to $9.30 since we said this stock should trade up following report.(mid 7`s).  Throw in a little solar (STP ), but we're staying away from the coals.  

China linked - stocks.

A positive is no matter the hiccups the market-SPX may have soon or later,  we are getting back to individual stock- sectors working by themselves.   This was the strategy here if you recall following the Treasury buy news to go with individual- sector plays instead of being fixated with the daily SPX up and downs.    Guess what?..the China theme is seemingly here again as many of old DJIM names are coming up all over daily high screeners.   Stocks like SNDA, NTES making new highs and more to come.  One way to get your feet wet here is with CAF,  if you are not comfortable with that FXI.

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!!.

A major eco' address tomorrow, "recession to recovery".  Hopefully,  this is just another tailwind-ish` catalyst.

SPX 864 likely new top

If you go by the title, "Recession to Recovery” of what is highlighted as an important economic address by the President and get nothing more than old rhetoric,  including a sense of distaste for Wall Street.  What do you get??.   Nothing but disappointment is the answer!.  The markets held on after the surprisingly bad eco’ data,  but lost all it’s will during/ after the address.  Once again, a D.C cloud rained on the market.  

Finally,  we got some headwinds headlines outweighing all the tailwinds.  We now have to consider that Monday's highs (864) is the short term top as we didn`t top Feb SPX870`s levels!.    If drifting lower is the case in the 2nd half of April,  it would set up for a better May -June as we get out of this overbought rally.  Watching 833 now as very short term support.

Equities,

Financials deteriorated throughout the day; SPX financial index closed off more than 7%,  big wave of profit taking following a huge surge in financials (as of Mon night, the SPX financial index was up 85% since bottoming on 3/6).   Yesterday, we said the bar set by GS might be too high for others coming up.
WFC and GS both reported strong earnings & expectations now are very high; traders worry it will
be tougher to surprise financial investors at this point.  Red flags in the numbers, we 've pointed out as all earnigs are not great.  A bunch of the regionals have been weaker (CBSH was dwn 15% today after earnings, SIVB and SUSQ have both issued large profit warnings for the Q).

GS became the first major financial firm to raise common equity from investors outside of the US Treasury (GS priced 40.65MM shrs @ $123.  While the GS pricing had been telegraphed in the press for weeks, the fact a financial was able to come to market should be taken as a positive,  (recall Bernanke in his 60 Min interview a few weeks back had said one of the things he was looking for to confirm a recovery was financial firms raising private equity)

Watch those credit trust numbers tomorrow, if AXP  is above 10%,  it's a short idea again.

AMC,
INTC - revs pretty inline; EPS much better, but they get a lot of help from tax rate, lower
charges, lower investment losses; June rev guidance flat probably a disappointment.

All eyez on JPM

For a while today,  it looked like we may be heading even lower,  led by the Nasdaq (INTC eps) lag.   It never happened,  instead we got another familiar round of "late day" underlying bid buying that closed the market at day high.     Perhaps,  traders were looking ahead to ‘more important'  earning reports late in the week.    Of course,  we are referring to JPM  & GE ,  two of the most important reports for this week as their business covers more segments.     Sure,  GS 's trading reaction yesterday was a bit disappointing as it brought down the entire financial market (-7%)    We feel this probably has a lot to do with the fact that the financials have gone up so much (selling on the news), as opposed to a general disappointment of the GS report.    Today, the banks- brokers squeezed strong into the bell.   We’ve signalled out GS/ WFC  the last few days and thought a pullback was a nice buy opp’ yesterday,  today’s open  provided even a better opp’.    What we liked today was these outperformed even before the 2:30 squeeze.   The $BKX  was up 5% alone after 2:30.    Hopefully, we are seeing, "best of the breed" action and investors will just simply go with best going forward.


JPM 's report should carry more weight (than GS/WFC) because of it’s much wider impact for the financial sector.   It’s very diverse covering a wider spectrum.    What's good for JPM is pretty much what's good for ALL of the financial sector.   As far as INTC reaction goes, we feel it was fuelled by GS sell reaction leaning traders to sell the news mentality.    This is perfectly fine with us and the tale will tell if this continues or not after the reports late this week.    Realistically,  the market probably needed a day like yesterday to prolong a market run-up.

Now sectors..

Financial- linked ,  as we have said above, tomorrow's JPM report will give financial bulls a good reason to bid the sector higher.    Although it's tough to guess the reaction at this point, we just don't believe JPM will come out with a disappointing report numbers wise.   It will be in what "Jamie Dimon' says!.  The strength was pretty broad today among financial linked equities,  even the credit cards posted better than feared metrics.   AXP did not go above 10% fear level headline noted yesterday,  it’s stabilization should be a good sign for the card division at JPM.   An equity offering from a regional bank and brokers (SCHW- PJC) reports were more good signals.

Commodity- linked,   not all commods are created equal,  we've pointed out recently be selective in the sectors/ stocks.    Coal plays got dumped as BTU  gave a pretty disappointing report and guidance.    We'll definitely keep staying away from this group.   On the other hand,  steel and precious metal plays such as X, FCX, RS  showed some good strength throughout the day.     As far as oil goes, we are waiting for OIH  to make up its mind.   It's either going to break out of the range which held it for so long or it's going to drift back down for some better entry for us.

Tech'- linked,  although INTC didn't ignite any excitement in the tech land,  it did not cause any big damage in the area either.    We have GOOG  reporting AMC tomorrow and it can give some much needed excitement to the sector if there are good signs in the report.    We are still very much being company specific in terms of our play selection.    Not all tech plays are equal and their treatment would vary as well.

Bottom line,  we held around the SPX 833 (overnight lows) noted as the support to watch today and we are back above SPX 850 for a potential shot toward the SPX 870's breakout levels depending on earnings reactions.     We have earnings catalysts that can provide us with a nice up move...

...........but selling the 'good news' reports needs to abate!

Potential change of leadership....

If this market were to continue higher beyond current level (not necessarily tomorrow with important EPS' due),  we feel that there's a very good possibility that we'll need to see a change of leadership.   Up until now,  there's no doubt that the sector that has carried the weight for the recent run up is the financial sector.   If the financials behave well, chances are,  we'd have a strong day up and vice versa. Results will be released May 4th with specific criteria on how each bank will be tested to be released April 24th. 

Today's big event was the earning report from JPM.   Just like most people predicted, JPM's report did not disappoint.  At the beginning of the day, we were hoping to see the JPM reaction would lift the entire sector, if not the whole market.   It was not the case as the financials lagged (GS, WFC  specifically), as we saw some profit taking among various financial stocks right after the opening bell ring.    All day,  it just felt that there's bit of exhaustive action to keep the financial sector in the green.  This is somewhat troubling that despite a very rosy report from JPM,  the selling on news in not abating.  We just can't help but wonder if the good news is "cooked" into the current price levels.   Keep in mind, most of these financial stocks have rallied tremendously from their recent low and it's totally realistic for them to be in "good" consolidating mode after outpacing expectations beginning with WFC.

Clearly, we saw the underperformers (tech) yesterday become the outperformers.   Maybe, it was just a pre-run into a specific stock earnings.   Yesterday, the bankers- brokers squeezed into JPM’s and today the tech into GOOG’s .   Still,  other sectors, the ones that aren't in as much spotlight, or the lagging sectors were picking up the pace as the day went on.  We are referring to our fave commod' group (steel stocks), material stocks, and oil stocks.  Even TIF,  noted a few times in the past 3 weeks in Alerts had one of the nicest breakouts of the day.   When you add them all together with tech, they make up a healthy chunk of the market.  Can these stocks rise to the occasion and take over the leadership?    Can the market move higher without the financials?   We feel it's definitely possible.   As long as the financial stocks hold their ground and consolidate,  there's always a chance for other sectors to step up and take over the lead.   Earning reports will provide such catalysts for such a move.

Tonight AMC,  we had GOOG  report an inline number, but they also guided cautiously for next two quarters.   This is actually fine by us as more and more companies are being conservative and realistic about the economy and market.  INTC did it the night before and now Google did the same.  Can they set themselves for potential upside surprise down the road?   It would be a smart thing to do if that's what they are shooting for.

Tomorrow morning, we have GE  & C  coming out with their reports.  If JPM's report is about the health of our financial sector, then GE's report is about the health of the US / global economy.  Lots of focus will be on to  see how GE’s business is doing worldwide & GE capital.    Yes,  GE is that important once again as years ago and it can potentially move the entire market in a significant way.    Tomorrow, is seemingly the perfect day to begin a much awaited “ sell this rally” correction with C, GE on the podium.

Bottom line,  we are inching higher toward the resistance level in the SPX 870‘s.  Even though the level may or may not be that meaningful,  it seems that's the level many of the traders are obsessed about. “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!!.”.   We are clearly seeing shorts becoming nervous and covering around these levels. 

Earning season has just started and we have a lot more reports next few weeks. So far, so good and lets hope it stays that way!.  If NOK can have a 90% profit drop y/o/y and pop, it can’t be all bad for earnings going forward.

DJIM #16 2009

Is it really the banks that are facing and undergoing a ‘stress test’…or is it the trader/ investor, retail or institutional that is going through the real ‘stress test” now?. 

Anxious excess money + Nervous shorts

What are we talking about?.   Well, it’s simple the market is going higher and higher for weeks now and everybody is seemingly waiting for the historical to happen!.   The historical is based on data that every run -up of such +% we’re witnessing is followed by a correction (usually 5-10%) alomost 90% of the time.   Those underinvested or not participating day -to- day are crying out for this to occur so they can buy on the correction and than be in the market for the next leg up later in the year.     As well,  shorts are in a 'nervous' position in the high 870’sSPX levels as this is where many of them are set up from early in the year.   It’s a break point for them of sorts,  most are just waiting for this correction to get out with some profits that have evaporated in the last month or so.     We feel they are starting to run for cover as we push forward,  we’ve been noting this in previous Journals.    So,  here’s the stress test for the traders/investors!.    What if the ‘historical’  doesn’t happen and the market just continues higher and doesn't make a final low before pushing higher to 1000SPX!.    Most of the noise of a correction, especially in the media is comprised of ‘ Bulls’....Yes, Bulls, not Bears!.    Why? .. Well,   these are ones suffering from performance anxiety as their books will be questioned by their clients if they do not mirror the market’s rise.   Also,  they have to deal with those burning 2008 results.   There is a big discrepancy in the market and you don’t know who to really believe!.    This is essential for the markets health in the long run and that is we need the ‘whales’  participating with all the dry powder on their books.    The hedgies are playing here,  but are the MF’s and Pensions playing?.   That's where the real money is!.   We know the hedgies are here because most of the move is being led by the 'cheap' stock/ sectors and is quite narrow.   An example of this 'whale' watch' is late last week,  we had a a STT note headline, “institutional investors are backing this rally…. flows into U.S. equities were close to the highest they have been in 12 years”.    On the other side,  we have the NYXE CEO,  make rare comments saying, “the rally was driven by short-term traders trying to take advantage of high volatility and not by large institutional or other long-term investors…The real money investors are still waiting”.   Who to believe?.  

All we know is the market is going up,  sure the volume indicates it’s mostly short covering still,  but every market move is started by short covering and we just need to go with the flow.     What we do know is,  no matter who is telling the truth (everyone has an agenda) is that we are near a boiling point!.    A boiling point over 880 where the ‘correction’ thesis might be tossed out the window by ‘both sides’.     Right now,  excess money, is anxious money  for asset managers.   Those that need to cover and those that can’t wait any longer will need to step into/out the market with both feet!.   This could be huge as in a capitulation trade of sort,  not at a bottom as always discussed, but at a new short term high!.


Simply,  this could be a sustained rally that has more legs than anyone is envisioning now.   We’ve survived  some ‘mega cap’ earnings so far  (40 companies in the S&P500 have reported results, 60% beat expectations) and we have a flood of reports this week to eye.   Notwithstanding, poor bank stress test results or something dismal coming out of earning reports going forward,  we have to remain with a long trade bias.  

One possibility now regarding the underlying bid we’ve been talking about constantly, is the excess cash is probably having second thoughts about a correction sometimes and just buying the market on small pullbacks (a day or 2 worth) putting some of the cash to work instead of waiting on the 5-10% correction.   Therefore, we have this underlying bid always prevailing!

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.

Ouch!

It was ugly!   For a number of days, we were wondering what it would take to bring down this market, we wondered prior to Friday’s trading day, “Tomorrow, is seemingly the perfect day to begin a much awaited “sell this rally” correction with C, GE on the podium”. 

Well,  a day off, we got a legit catalyst (BAC) today that simply spooked just about every type of investor and every sector,  Notably, $BKX( bank index) >15%,  Materials were under big pressure led by crude <8% on a very strong $USD.  Industrials, Tech>3% (semi’s >6%).,   There wasn’t an escape clause (sector) if invested over the weekend.  You simply get hit!

BAC ,  the once hated bank among the investors, is back with a "NOT so inspiring" earning report (big deterioration in credit). This may just be enough to put the "we are still not out of the financial crisis" agenda back on radar with stress tests results coming.    It is somewhat unfair though, especially after what companies like WFC JPM GS  BBT  have said in their report.     This may just be a company specific issue, we all know BAC isn't a five star quality anymore and hopefully the market comes back to it‘s senses and understands there is a ‘best of breed‘.    However, this is exactly (any excuse) what sellers wanted and were waiting for at these overbought levels to roll this market over.  Rollover they did!

We closed at SPX 833, which is below the low of last few days.  We'll see if any bounce occurs around here,  it didn't look like a possibility with the ugly close.    The next major support is around SPX 815 area and it isn't that far away.    Without some major positive catalyst, we think the shorts will press below the 840 level to test that 815 area this week.    It is therefore, extremely important for us to stay level headed and accept this as a fact.    We have to play defensive on this sell-off until some more meaningful trend is established.    Can today's action derail the recent up move?  It certainly can and as a matter of fact, many bears even confirmed today's action as the "tell" to go short.    We are not so eager or quick to jump on the bear wagon, but we do have to respect the opinion on the other side.   We have to let this market settle and we have to see where this market will find its footing.    When it settles, we'll then decide whether to play the recent earning stand outs or a specific sector.    It is just too early to jump to any firm conclusion after just one day.

On the bright side,  we do have ALGT ,  we’ve been watching it as it hit highs last week. Performed really well today after their conference call.    This play has a particular high short interest/small float, so that may have something to do with its strength today as well.   

Bottom line, we aren't going to be buying on dip on anything at this point and we will let this market settle down after today's ugly session.  We have lots of Dow components, Banks reporting tomorrow morning and a few tech statements tonight for the market to decipher.