..Super 'eps' Tuesday

Just when you think the ‘rally’ is in trouble…’Boom”..you get an explosive reversal as once again an underlying support bid prevails sending the shorts back to the bench.    On this side,   the seemingly momentum crashing day to SPX 833 didn’t crush our confidence.  Instead, we pointed the chance of finding support at those 830 levels yesterday and today led that we may see it get better later in the day.    The premise was shorts were scared to layout new positions over 860-870 recently and instead were covering in this area because of nosebleeds.   What they were waiting and got was a ‘bad news’ day and laid out fresh positions once 840 was taken out.    This confidence on their part extended into overnight and in the morning as they pressed new positions.   It’s the same as longs waiting for higher levels to get into a trade, except this simply works the other way with shorts as far as psychology of a trade goes.   Below 840 gave them confidence to put on more positions into the close Monday.    Thus, ugly close.  Unfortunately,  a reversal started to take shape today and by 840 on the upside they had started  throwing in the towel on their new positions.    We felt this would carry through 840 as more would lose their will and bailout.    This led to SPX closing at 850 +17 day and +23 off lows.   The shorts were a little to eager for a correction it seems.

The naysayer’s were trying to point out the BAC debacle was continuing in the morning by pinpointing earnings from banks ZION BK  KEY  RF.   Yesterday,  we talked about the market coming to it’s senses and realize there is a best of breed or at least those reporting ‘better than feared” than those above that were worse than feared.   Well,  this probably occurred as banks STT CMA HBAN  NTRS .. all started to reverse about 20%+.   USB , was a good one from the previous AMC that was forgotten.  Shorts decided to attack all these on the heels of ZION etc in the premkt/morning and got burned as the bid came into these banks.    Tomorrow morning,  we have more focus on banks w/ WFC PNC and many more reactions to watch.   This is almost over…banks reporting and it will be interesting how all this is digested heading into stress test results.    Hopefully, they will begin to trade on an individual basis than be traded as a ‘basket’ case.   Also, brokers like JEF AMTD are following up on other previous good reports.   In most cases, capitals are not deteriorating as co’s such as STT is showing improvements in the closely followed TCE’s and many are using the ‘stabilizing’ in their CC’s.

We have a few tailwinds in corporate trends and we have M&A spreading from Hcare to Techs!!. BRCM/ORCL.  Also, Geithner helped dispelling market concerns...becoming a cool testifying cucumber.

If we can avoid a ‘BAD catalyst’,  shorts will think twice before pressing new positions once again after today's failure.     On the other hand,   we don’t think there are new buyers around here to step up and push this back to 870‘s,  so we may drift up and down until one side gets the ‘catalyst’.   Most likely, it will be individual stocks/ sector fishing time as in selective stock picking…like ALGT  AKS  the past few days …Stocks/ groups like MYGN APOL ESI  are potential rebound trades.    We have some solar eps coming up, doubtful these will be pretty reports, but there may be an attempt to rally some briefly into reports.    A stock like ILMN that always has good reaction to EPS, may not this time.   A dip would likely bring in buyers lower as some that see disappointment by playing into earnings would leave their shares for real buyers.   A buy on weakness possibility from earnings present this season…CAT today as example.  Anyways,  just some scattered trader thoughts…

.wild wild SPX

A tale of two markets today as we got the drift of up and down in range until one side gets a “catalyst” to drive the market.  We discussed the idea yesterday and it pretty well played out to script.  Despite, MS’  below expectations report that drove the futures lower premkt, the market was able to pounce off the 840 mark  and continue to squeeze the leftover shorts from Tuesday.   This sizeable move takes everything along on the tape with it for a ride.   Unfortunately, the morning and afternoon moves to 860  proved to be a formidable level to knockout.   The reason in our view is as discussed last Journal this bounce is short covering so far and won’t likely see new buyers step in without a noteworthy catalyst.   The shorts have their nervousness and those wanting to go long have their scepticism in catching the SPX 860-870’s and be left holding a white flag.   Left alone fear at the top in a correction.   

Notice the same market move between 9:55 to 10:30am was the mirror image of the swoon from 3:30 to close.   We commented cautiously late this was nothing more than short covering and the financials really took a swan dive in the last 15minutes with volume. 

The day may seem like a wash in the end.  If you went fishing and traded selective stocks/ sectors it wasn’t a wash of a day at all.   We had LVS  put in almost a 20% move, AKS  trading at $11 b/c of a downgrade popped to 12.40 level quickly.    If you have scepticism of the market getting through 860-870’s as we do w/o a catalyst,  you have to take profits on intraday trades or you are simply trading against your own beliefs.   We also mentions (forum yesterday) CMG ESI  APOL CAT and Solar  idea (journal) that run some quick points, some right off the bell.   Just narrow down your shadowlist to follow individual stocks- sectors and any add-ons we toss out to trade on a daily basis until we get a possible catalyst for the market to hold plays longer in duration.

One good thing we have is a bunch of charts like CMG GYMB GES TIF  creeping up on screens for breakout plays recently.  Throw up some more in the forum.

So, the premise remains the same as we watch important levels 840/860.

Initial claims # possible mover tomorrow.

All about EPS to some...

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

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

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

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


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

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

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

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

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

DJIM 17, 2009

Coming into this earning season, many of us just did not have a good understanding on how the corporate America performed last quarter.    Two weeks into this reporting season, now we have somewhat a better idea on how things have been with the economy.    Unfortunately, it's not as easy as a black and white kind of conclusion. Some companies gave encouraging results while some gave a so so presentation.    Overall though,  we have to be pleased with the quality of the reports.     As far as stock reaction goes,  we are even more impressed!.   In last few trading days,  we've spotlighted this broad corporate trend and the market players caught on to it judging by the action.   The SPX climbed from 836 overnight levels to a high of 872,   pretty impressive melt up led early by EPS's like AMZN.    Even,  XLF made nice gains and looked like it would break this formidable low $11's levels,  but came up just short by close.

Sure,  we are still facing all kinds of hurdles from this market.    Everything from the result of "bank stress test" to any unstable corporate outlooks that can derail the optimism that's currently bidding this market.   Frankly,  we'd rather see a balanced market sentiment going forward.    It keeps things in check and keeps extreme end of the emotional reaction out of the picture.    We hope this will be the case from now on.    Without much guidance offered by many companies, market participants can only cautiously proceed with their stocks.    This is just fine by us as we like the idea of trading off "hope" rather than "fear".

Lately,  we have had many beaten down stocks that are showing some incredible sign of strength.    This is completely understandable given the recent development of this market.   At DJIM,  we are continuing to focus on strong earning plays and strong sectors that are benefiting from this new trading environment.   The game of earning plays are slowly creeping back into trader's playbook these days and we are constantly keeping our eyes open for good opportunities.   Also stocks do follow sector breakouts (eg. materials XLB), so watching for sector breakouts going forward as well.   We have tons of mid- small caps this week out with statements.

Bottom line,  we remain buyers off dips on those plays that exhibited strong strength recently.   The earning season still has a few weeks left and there's potentially quite bit of good setups ahead waiting for us to take advantage of.

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Symptoms

Predicting the implications or extent of the outbreak is impossible today.   One thing known is the market will always pick up the fear symptom of itchy sell fingers.   As pointed out,  this scare comes at a crucial time (near recent tops) and a story like this brings out the profit takers/ sellers no matter what,  thus a lower a market.    It is too early and might be a waste in days to dwell on the bug,  so chasing or shorting sub sectors is irrelevant at this juncture.   Also, the macroeconomic landscape was very different during SARS,  plus there is also treatment for this bug.   Any sector experiencing a hit may see those losses vanish quite quickly,  so be careful if playing this evolving story.   Did you know that Airlines actually did well in SARS?  There is some stupid ideas out there,  like online gaming stocks will prosper as people will stay home.  Anyone ever hear of internet ‘public’ cafes where most this gaming takes place worldwide.   This a temporary scenario now and people need to differentiate this from a permanent story.    If this ‘bug ’ever becomes a permanent story,  you won’t need to worry about sub sector plays, you’d just be able to short the broad market!.   Unfortunately,  we’d never be able to leave our homes and travel anywhere with our winnings!.

What we need to avoid now is any other negative headwind  to join this story.   If this occurs,  the market will be getting it’s medicine at support SPX 840  and will see if that underlying bid prevails again.   Today, the market showed its usual resilience and surprised many,  but a close at lows of the day..is a close at lows of the day and a negative.   

Overall,  a very quite day on the tape with trading flows light.  We’d concentrate on individual plays/ sec’s as earnings season rolls on this week.  We kept this premise string going (LVS, WYNN, PENN ) by adding MVSN  in the mid $19’s and it made new highs sooner than we thought.

Dull day...

Other than some heart pounding drills for traders speculating in DNDN,  it was a very quiet day where neither the Bulls or Bears gained any trading momentum.    The Bears stalled at overnight lows of 840  again,  the Bulls topping out in the 860 's.    The dullness was a little surprising considering the initial reaction in the overnight/ premkt action.  On the other hand the BAC/C  credit needs are not a surprise and the ’bug’ didn’t oink as loud.   Simply, the market acted rationally after digesting the newsflow.    For now,  we aren't drawing any firm conclusion, we’re simply monitoring this just like everyone else, but instead of complaining as many about the ~30pts  SPX range bound trading, we’re slicing and dicing individual plays.  Today, CRYP  gave an easy ~10-15% after note.    

We feel pretty confident today seeing that the majority of the "good" financial institutions weren't affected by the BAC-C capital needs.    A good close over $11 XLF  is still a case for going higher in the overall market.   AMC,  ETFC  announced that it needed to raise more capital to meet requirements.  This shouldn’t rattle the banks- brokers,  we think the market is not grouping everything together as a probability discussed here recently...finally!.   The volatile days (double digit % days) of this group seem to have abated.

In terms of earning plays,  it seems many of the recent earning performers are taking today's action as an excuse to consolidate.   This is very healthy and it allows you to build positions again at a reasonable level and at a comfortable pace.     One earning play that bucked the overall trend, though, is NEU .    It has simply acted really well since it reported.    We traded this one many times in the past and it's refreshing to see it back onto our trading list.

Tomorrow,  the FOMC event can potentially excite this market, even if no blockbuster is expected.   We’re not expecting any new credit easing programs and we don’t expect any change to the size of the existing programs.  However, it will be interesting to see if market players can somehow find something in the statement as a catalyst to move this market.

'"The Premise"

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

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

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

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

Encouraging Eco' data

Underlying bid prevailing on pullbacks.

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

Tailwinds outweighing Headwinds, Upside 'news' risks for shorts

Resilience

Shorts not pressing new positions under 840

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


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

Earnings

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

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

Tailwinds to run over 860??...Of course,  earnings will dictate,  but if we keep getting surprises we'll have the shorts giving up and we can really overshoot 860.   The reason is this is where most of the shorts are set up from mid Jan -Feb!!..April 14th.


Switch to Selective Individual plays

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

After March 23rd close... today we surged through the 50ma and closed well above this 800 mark. (824).   This close is a big positive and the Bulls finally should have the upper hand going forward.  On a technical view,  the next big TA levels not until the upper 800's... ............What’s the next big catalyst?.  You got a sniff of it late today and that is if bankers- brokers raise capital through private equity deals to exit the TARP!   This is amost a clincher and what will drive this market closer to SPX 1000.    Did we say that..1000?..lol.   "This is isn’t so funny to many a Bull with excess or a nervous Bear now, as the weather gets warmer, this possibility will get much warmer in the next few months!.   We're going to get a correction,  but it may not come when all are expecting one"..April 20th.

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

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

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

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Sell in May...or will it be, Buy in May??....

We officially ended the month with SPX closing at 872 after a sprint from the blocks to 888, today.    Who would have thought the SPX would churn in the mid 800 range most of the month of April.   Back in late March, most market pundits expected a pullback from this market and a retest SPX 780 or perhaps even lower.    Looking back, we just have to say "boy, are glad we made our adjustment quick"!    In the entire month of April,  we didn't even come close to approach the SPX 800 level and that alone is quite an achievement!.   So, while most scream tonight, a 'reversal bar...no follow through day..etc', we're really not concerned as we're not the the panicky type.   Reason is methodology,  we adjusted late March to what got us here and not be tied to every move on the SPY/SPX as most of the market had become.  We've been into individual- sub groups plays and now the market has walked into our hands where earnings plays are making this a ' stock pickers ' market!.   Did you notice the majority of those linked stocks did not act with the market turn?.   So, no big deal!.   Plus, the gains early on any stocks previewed gave you an exit with nice profits if that's your trade.

What do we have to look forward to now that we are out of April?   We expect to see exact same sentiment carrying forward with earning plays dominating the trading screen.    Whether you like it or not,  people have come to believe that we are in the early recovery process.

Right now,  we aren't going to debate or argue against the actual facts with regard to economic recovery.    If this is the sentiment shared by the majority of the trading world,  evidenced by the stock behaviour, then that's what we'll have to stick to.    After all,  this game is about pure psychology.    What you believe and what may actually happen are two different things.    As long as people act the way they believe,  that's how this market will play out which underlines our main trading theme.

Speaking of earning plays,  we had two MONSTER plays from GMCR FSLR  highlighted in last nights Journal.   Did they go limp with the market?   Both stocks simply exploded from the get go and they stayed strong till the end.    It feels like it's 2004,  doesn't it?     As we said, most of the stocks on our trading list finished green despite the softness from the financial sector.    What we are extremely excited to see these days,  is that earnings/guidance once again matters in this market.     This is simply the kind of proven play style we were so accustomed to back in the good days.   We are so glad the "good game" is back.    There have been numerous strong earning reaction as of late.   In addition to the obvious ones,  we're monitoring 'new names' ....AAN CTV IRM LIFE STAR EXPE SFLY ARRS TNDM,  some may become fixtures at DJIM heading forward.    Recent plays like NEU PENN  continued to churn higher.    Again,  when it comes to earning plays,  we'd always be aggressive buyers on first pullback....PENN NEU GMCR RGR CTV DDRX,   still, most 'new names' we're undecided on at this stage.

We may not have closed the day at the high,  but this just gives market enough time/ room to churn higher.   In our opinion,  the sooner we get to SPX 900+,  the sooner the party may end.   Therefore, we'd rather see this market take its time and allow us the traders to re-establish positions as we churn up.

Bottom line,  this market is giving everyone enough time to make a play or two.   It's absolutely crucial NOT to waste any opportunities in this trading environment.

DJIM #18 2009

Just as many begin calling a top…“a reversal bar, no follow through’’ after Thursday’s trading day,  unexpectedly a forgotten player arrives spoiling their exuberance.    We're alluding to the $CRX , MS commodity index breakout,  we noted early Friday morning.   This move should continue into Mondays trade and might leave a few to radio in Mayday on the May Day Holiday! (UK closed Mon.)    The stress tests anticipation is an overhang that leaves the financials in a holding pattern the past few days, but imagine if this CRX move wasn’t just because a ‘holiday trading day’ (most of Europe and a lot of Asia off),  and the commods’ can really breakout with earnings plays by their side!.   Maybe this was a prelude to the weekends, Kentucky Derby where a longshot of earning and commods`lift takes this rally a few furlongs longer!.    Add some possible stress relief (financials) next week and we have a possible trifecta winning ticket to SPX 1000,  a V shaped recovery in a wire to wire finish.   Put your blinkers on shorties.   As we said heading into Fridays trading,  don’t fret the day before action as long as ‘The Premise’ is not showing signs of deterioration…keep trading with a long bias.   As far as we're concerned there is no reason the SPX can’t at least be higher than where it was end of 2008 (900) in the short term.  Things are a hundred times better than they were at that stage globally, so why should we be lower.

The main positives behind the commodity action on Friday was the China PMI  (2nd straight reading suggests expansion), US ISM  and of course because many a pit trader were away or left early Friday.   Still,  if a breakout holds, days..weeks later nobody will say a word about the fact it was a light trading day.   A breakout is a breakout in most TA circles.    Energy led on crude and a rip in a sub commod' group (coals) was due to news of consolidation of a private coal co’,  it fetched half of what it was worth last year,  but a deal is a deal.  This sparked the closely related MEE PCX WLT ANR JRCC.   Also, DRYS.  posted probably better than feared numbers and even though it lost momo`by close,  it was still a quick 4% to highs from early morning post on forum.   Again, GNK  remains our fave in this sub commodity group.   While cost pressures, pricing- demand is anaemic,  the macroeconomic picture is turning to the expectation of a second half recovery.   Simply,  the end of recession view story is being expressed by the market.   Once expansion is signalled outside of China PMI,  a recovery trade will have far to go.   In great part this is because this has really been mostly a short covering rally  with lots of $$$ that will participate after the recovery is signalled to the general investing public.    This is why another say 25% is very possible with a nicely timed correction trade in 2009.    All the horses are seemingly stepping up to the gate for what will eventually be back to the 'Easy'  trade days.

Another possible trade emerged for the week ahead, the 'hedge fund' trade as BX FIG  began to move into earnings for the upcoming week.   This is related to banks- brokers strong numbers in this groups business and is probably mostly fuelled by short covering.   This is only a side show possibility as we have earnings, commods play leading the way.

Looks can be deceiving...

Fortunately, the phrase just does NOT apply to this market!.   How about that SPX 907, eh? . Just in last Journal, we said , “As far as we're concerned there is no reason the SPX should be at least be higher than where it was end of 2008 (900) in the short term.  Things are a hundred times better than they were at that stage globally, so why should we be lower.”.   Talk about short term, as in right here, right now..today!.

With a couple of positive economic data add-ons (Pending Home Sales and Construction Spending) to the already noted China PMI that was getting headlines all day, we got a nice kick off to the trading day.   Since $CRX broke out of six month range on Friday, we might as well get some follow through right away from the commodities as noted in Journal.     What a follow through by commodities though!    Not only did we got a sector (coal) upgrade from Goldman, (you heard about it here first, before CNBC, Briefing) just about every commodity stock you can think of had a really nice gap and finished strong.   

What really pushed SPX index above 900 was the financial squeeze in the afternoon.  WFC up 24%, BAC up 19%, what???    If you look at some of the bank action,  you'd wonder if we had some blockbuster news from the sector today.   Nope, it's just a simple "lets squeeze them hard" type of day from the financial sector and our premkt thesis that the “hope vs. fear“ NYT story was a notable headling to watch for a broker- bank trade.  We thought if fears abate in the market, we have a possible trade in the group.   Later, we noted a Citi headline and in the recent "The Premise“ journal outlined…“Preferred to common offers instead of Gov't transfusions.  Watch if some are announced soon, you may have squeezes unfold”.   Boy, did we ever!.   Why you ask?.   Simply, if this was to happen it meant the C, BAC WFC capital problems would have an easier time raising the moolah than feared.    One way is through Pref's to common.   Also, long ago we said 'equity deals' when on the table would be a time to buy the market.  Another stock offering was announced AMC.  This signals "Capital markets" are opening up!.

Remember what the the premise behind DJIM was and is and why we repeat, quote past lines.  DJIM is to simply to "LEAD' you by giving you what / where we are leaning to/ watching for as traders.  What you do with the information is in your own hands, how you decipher it and how you trade it.

The biggest rips were in BAC, WFC, running on this seemingly "negative" speculation of raising capital.    It doesn't matter if it's a commercial bank, insurance company or a broker, every type of financial stock ended up a healthy amount and the XLF  over $11 close (finally) coincided with the SPX 900.  SP finanical index +10%, abnk index +18%.   WFC,  probably takes over JPM as the strongest performer from the big banks.   GS broke out of recent range and MS is sitting at the recent high.   This is the kind of action that definitely makes you think if we have really entered a new era.    This era, is what we felt as the recovery era.    Of course, it's still too early to even officially announce that we have entered this recovery phase after just one quarter of earnings/data.    What we do firmly believe is that this is what most investors/traders wanted to see or look forward regardless the legitimacy of this belief.

The conclusion is that from now till the next earning period,  we will probably be trading in a golden (hopeful) period.     Things will definitely look and sound promising.   Dips and pullbacks will be bought aggressively in the next couple of months.    This is what we strongly feel at this point.    Most important of all, there'll be lots of great trading opportunities/setups on the long side.

Here are some sector overview...

Commodity linked stocks,   Simply, the China PMI  is rallying the commods'. The dirty Coal stuff, MEE, ANR, JRCC  etc, had some unbelievable short covering action back to back days.  We can add JOYG, BUCY  as a coal -link trade now that is more stable going forward as it touches more sub groups in a recovery trade.    Steel stuff CLF, X, SCHN, RS are the ones that we are also buying aggressively on any dips.  AKS  is up 40% since buy in alert April 21st..   Oil means a lot for our play OIH and many solar plays, FSLR, STP, TSL based on its recent move, we feel are grinding higher. 

Tech linked, we are still sticking with the familiar names these days.  RIMM, EQIX, RVBD  etc. are all on our active trading list.  MVSN  safely creeping to new highs.  CYOU  violently doing the same.   Premkt, we noted basking the results and Asian mkt strength trade via 'CAF '  to avoid chasing the eps gaps,  CAF opened $36's and drove to nearly $40 (+8%), while CYOU/SOHU declined most of the day from opening bell.

Consumer/ cyclical linked stocks,  GMCR  looks like it's going to be ready sooner or later to start another leg up.   GES, GYMB  keep making new highs.   We also really like many casino stocks.   Judging by the recent reaction from PENN, MGM(tonight) etc., this sector may just run longer.    Our favourite are still WYNN and PENN  though.  LVS  has doubled since we took it on as a breakout and squeeze play on gaming April 21 just below $5.  Let's add ASCA  to the group list.

Right now, everything seems to be benefiting from the renewed optimism that economy might be picking up.    It really doesn't matter what sort of play fit your style or timeframe, as long as you play the correct side.    This is the kind of market that does not reward sideline action.    

"All the horses are seemingly stepping up to the gate for what will eventually be back to the 'Easy'  trade days".   This is something we all can look forward to from recent action.

Digestion..

It shouldn’t be a surprise tonight that we don‘t have much to say, we’re feeling a little bloated as we've really tried to press here lately with Journal market commentary, including premkt/ intraday and a flurry of stocks to trade.  Just like the market today,  it’s digestion time!.

This is probably the time to go over a weeks or more of a review of Journals, Forum, Alert- Comment pages to keep a level head and go over stocks and charts of recent plays,  notably many new EPS names and see how they are functioning days after their releases.    We’ll do the same so we don’t get away from our current methodology/ strategy flow.    We don’t want to be swayed by something and /or a stock(s) away from own at this point.   Going back days and reading our own Journals is an exercise we do.    It’s easy to get sidetracked on a boring or a bad market day by having the wrong info purge on your trading brain and go away from what you’ve been doing or preaching in our case.   It's easy to get  manipulated on those boring/ bad days by either watching the CNBC or making appearances at a blog or ten.!.   Stay focused to what you see is clearly working at DJIM, market direction and stocks.  Right now,  let’s keep to, “The Premise “ and the stocks we have.    As far as stocks,  do we really need anymore choices?.    Besides individual equities,  we have groups and sub-groups of those groups to trade.   We can trade commodities- linked stocks one day, we can go banks- brokers the other and vice a versa.  We have new groups eg casino’s.   Even if the market has a bad day,  we all should be okay with new mid-small caps EPS plays that have emerged to hold through.   BWY ,  this new name sprung up today.   Simply, there is something everyday from what we’re following into May,  this boring profit taking day still produced standouts,  the casino’s LVS, WYNN  and the linked play CRYP , also ICE  reached triple digits!.  Oh yeah, FIG ,  noted as a possible trade in Journal going into the week was not a figment of our imagination the last 2 days.

The market should be okay if we go to low 890 levels, we saw plenty of nice bids pushing this market here the other day on SPX futures intraday.   Of course, this excludes any shell-shock surprise from Stress test or employment report.   Also,  CSCO  Thursday AMC, this will be interesting as it is a first April end report,  it will be of importance of how they say things were in April

Update on Wednesday, May 6, 2009 at 07:14AM by Demi/ YourPersonalTrader

CSCO AMC today, not Thursday per Journal.

new EPS' this Q

List comprised of new name EPS' to DJIMstocks (visit site).  Excludes, familiar names, groups we already follow.  MHP,MCO are names linked to credit picture. 

We'll see which make the grade going forward.

Stress (free) Test...

About a week ago,  there was this big buzz around trading community with regard to the upcoming bank stress test.    Even though the official test results will be released tomorrow,  the market has managed to find out most of the results by today.    It is not a surprise, the result as important as this does gets leaked early.   It was done purposely by the government officials and today’s headlines were basically official PR‘s through news outlets.   Why?   We think the policy makers wanted to make this stress test announcement as non-dramatic as possible.     Can you imagine what tomorrow's trading environment would be like if everyone was being kept totally in the dark in regards to the test results?    In most investor eyes, it was definitely the smart thing to do as it's taken out the risk.

The NYT notable headline we ran before Monday’s ..”more hope than fear”, quoting gov’t officials was the opening of the faucet.

The question now arises, will it be a sell on news event?    Based on today's reaction though, tomorrow is going to be less of an event than most people would like to have believed early this week.  After today’s 7% rip,  SP financials are almost flat for the year.  One way or the other, investors voted with their money, many expecting capital needs would be a negative are left scratching their heads.    At this point, we shouldn't argue whether the up move is excessive or not.   All we have to know is that,  the reaction so far is positive as it helps the overall market sentiment going forward.   It's a turning point in that sense..

Speaking of the rest of this market, we had another strong day in some of the commodity stocks.    Results from ANR simply moved the entire group up and the strength in oil related names helped a lot of plays on our commod’ linked  plays.    Solars, coal, oil, shippers are all directly or indirectly benefited by this theme.  The inflation trade idea here following Treasury moves in late March has really picked up steam the past week, but might need a dose of cold water very soon.    Other sectors including casino, some techs and some earning plays have been consolidating today.   We remain buyers of our favourite ones on pullback.

In after hour action,CSCO  reported some decent number and stock is up a little.   For the longest time, CSCO hasn't really mattered in this market.  It was good to see a mild positive initial reaction,  but , Chambers didn’t give a glimpse for growth over the horizon rather only a stabilization word.   Is this good enough (stabilization), or is this going to get  'old' as we've been hearing a lot of it.

The sell on the news/ cooling off period has 3 reasons to occur this week, 1) Stress test  2) Employment report following today’s ADP both being cooked in, 3) CSCO no growth in sight all statement at SPX 921 / 3 day RSI at extremes  may give the market a reason to take a breather.   Anyways, it doesn’t hurt to be sceptical late in the week.   Most care with high-beta, fastest flyers, they would succumb to more profit taking than the rest on any sell -off,  if one occurs.

..blowing off some steam

Most days premarket trade flow consists of a few ETF’s,  maybe a sector and/or selected stock(s) on news.  Today it looked busier than most lunch hours trading as the trading platform lit up with action coming from every direction into 'very' green.    A carnival atmosphere...quite out of hand and a little fishy to a Bull.    The gut feeling was if this exuberance continued any higher, approx SPX940’s into and beyond the opening bell,  we’d possibly get a blow off top.   This is nothing we want to see!.   Definitely a steep decline did occur after the market drove higher into the bell,  a -350 DOW, a -70 NASD  from day high to low is not pretty,  but this wasn’t a blow off top as the SPX didn’t get any loftier than 930 as in premkt and the selling was quite orderly throughout the day and importantly we closed off the lows today and yesterdays lows on SPX to 907.   Remember, we recently said there were nice bids pushing the market just over the 900SPX  futs area the other day, well, today this 'strong hand' action gave glimpses of the underlying bid around this level as we held pretty well here all day.    Simply,  we think the market blew off some much needed steam without blowing off it’s top party hat.     SPX900 ,  hopefully it will become a psychological level,  if we close lower in the short term it will probably signal a start to a civil correction.    No matter what you call or will call today's action days later if it becomes a top to the recent rally,  a steep sell off, is a sell off that hits the recent high beta flyers the hardest.   Hopefully our premkt note on top of the Journal saved you some dollars or even made you some more off the early gap upside to sell into.

At this point the 900SPX should be looked as an opportunity to buy the dip.   Bulls don't diet.  The question is what groups(s).   Now that the stress test is seemingly resolved tonight,  we can’t see the banks- brokers leading us higher just yet.   The worst part today despite all the ‘positive’ noise on CNBC to it..was CSCO linked.   Our view that the market may see the ‘no growth on horizon’  played out!.   As we alluded to yesterday, the market  may have had enough of ‘stabilization’  buzz words and wants to hear growth juice.   It's quite funny to see this stabilization ringtone all of a sudden prevail in a sell off after we use it last night.   Stabilization is priced in now,  it's old, especially in the tech group.  A worry might be if it is going to spread to eg. commodities as the question becomes not what have you done for me lately, but what will we you do for me going forward.

We don’t like the action in (tech) the last 2 days (below 200ma now) and if we don’t have financials or the techs to lead, who will?.    Energy is a big % of the SP, but crude is coming up to resistance.  Do we really want to see it breakout here?.   Well,  maybe as traders with potentially nothing to do say yes,  but,  ideally nobody wants to see higher costs coming at this stage of a recovery.

We think the best is let the weekend come in peace and research what we really want to hold going forward.   The decision will be probably come to recent earnings plays in the not-so volatile sectors.

Have a good one!

DJIM #19, 2009

Can we make it #10 in a row?   In case you aren't familiar with the potential 'ten-peat', we are referring to the consecutive week roll the market is currently on!   Right now,  we aren't going to 'high 5' or cheer on the kind of move we've had up to this point.    We have been very adamant on the kind of strategy and premise we are using to trade the past weeks and look to carry it forward.  

What we care about the most right now, is that if we can continue to go higher, but necessarily this week.   A high percentage of Pensions, Fund managers, even retail investors remain long cash.   Since this 9-week ran began,  retail investors have withdrawn 10 billion and stuffed almost $40bln into corp. bond funds, most Pensions have been consulted to the same and allocate into corp. bonds and not to allocate into equity on an uncertain equity outlook since start of 2009.  This why we favor a V recovery now close to pre-Lehman levels, get the pullback and let the above come into equities.   Basically, this run has left the majority flat footed, even those in the market every day are caught flat-footed at times, disbelieving what they have been seeing!.

In actuality,  whether the upcoming pullback/correction occurs at what level isn't that big of a deal to us.   It's going to happen one day, sooner or later as we are in very short term overbought levels.    What we really care about is if we can continue to have upside momentum AFTER  the upcoming pullback.     A bull market is not really marked by the number of points it has tacked on,  rather,  it's marked by the number of days that the market's in bull mode.   If we believe this market will continue to perform to the upside at least till the next earning period, then the upcoming correction should be bought aggressively.   This is, what we are trying to focus on in our current trading strategy, which includes scaling into earning stocks slowly for SPX 1000-1100.   Looking ahead.    Yes, stocks have had some incredible gains last few weeks and it's inevitable that we'd see some pullback,  however minor it might be.    We are currently at SPX 929 and the next logical area of resistance should be around SPX 945, which is not that far off.     If we manage to break out of that major resistance, which was the top back in Jan. of this year,  we can very well give it a run to SPX 1000-1100.    If that ever happens,  then this may be one of the most talked about run-ups in the longest time.

As we move higher,  the risk of entering long positions are increasing at the same time.   Even though the market sentiment and trading environment is much more optimistic than before and many stocks are still trading at a very compelling value, we still can't ignore the fact we are in the recession and a full recovery in the economy still needs months of data to confirm.    We may have had some early signs of a bottom, which is good, but it doesn't mean that we should go reckless in chasing stuff.     This is why we are very adamant on sticking to earning plays.    Keep in mind, the last three months may be the toughest quarter some of the companies had to face in the history of their existence.   If companies are showing some good number/growth/profit margin etc., we have to give them full credit.    Basically the thinking is this,  if the companies can report some decent stuff during a very harsh economic time, then they should greatly benefit when the economy does turn better.

Last week, we had some dramatic action from the financial sector.   It's a result of the conclusion of the government's "stress test"!    It's pretty obvious that most financial institutions were greeted with flying colours by investors.   This is definitely great news.   We all knew that "Confidence" is everything in regards to the financial system.    If these companies can manage to raise capital from private sector with no trouble at all,  we have to draw a reasonable conclusion that the worst of "financial crisis" is well behind us.     What matters now among the financial institutions are the future earning power.    Some of our favourite names like GS, JPM, WFC, PNC... are still tradable/investable, but we'd much prefer buying them on our own terms, not on a day when every long hedgefund in the world wants a piece of the action.

What is so good about this market right now is the supply of trading opportunities/plays that are on our list.    A couple of months ago,  we probably don't want to trade anything other than ETFs.   Right now, we have many many individual plays/sectors that can be traded with a bull setup.    We are just glad that we are running with many options on a daily basis.

The upcoming week is filled with some retail data that will further demonstrate the confidence of  consumers.    We also have many smaller companies to report which may give us a surprise or two based on the recent trend.    

Bottom line, we aren't worried/ scared of the upcoming pullback/correction and we'd view it as a good opportunity to go long heading into the summer months.