Room for Green on Red day

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Earnings, selective sectors mostly

Absorption

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

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

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

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

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

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

a healthy tape..

No big downside follow through, another late day buying, VIX down again. (underlying bid prevails again ~898-900).   These kinds of end of day market commentary ought to be familiar with us by now.   When we breached SPX 900,  it was kind of a quiet moment where people wanted to see if it's going to open a flood gate and sellers drive this market down to SPX 890 range.    Perhaps, in a day or two, we'd be able to see SPX 875 and the inevitable pullback will be done with.   Unfortunately for many,  markets behaviour is hardly conventional for awhile now.  Banks- Brokers, still resilient and absorbed enough that short covering took place in the afternoon before abating into the close.  Not surprising here, the absorption of capital raising  (near $40B in a week) was the blame game for their weakness today.

Well, to sum up, today,  we had another disappointing follow through from a Bear's perspective as selling was contained .  Since April,  we just haven't had "back to back" nasty down days.    Today,  it's no exception.   There's really no real news to pinpoint yesterday's drop nor today's afternoon buying.   In other words,  it's just consolidation within this bull run with profit taking/ short covering taking it's course.     Whether this is a bull market rally or a bear market rally, we don't really care at this point.    All we know is,  it just feels like there's still quite a bit of upside left in this run.    Sure, we still need some positive news/catalyst from economic or corporate front to power this rally further.   From what we've seen the last few weeks,  market has been getting just that.   Yesterday, we alluded to tech analyst meeting/ conferences upcoming and AMC, we had headlines from INTC's  CEO saying the quarter is going slightly better than expected, thus raising guidance.   This is just what market wants and needs to hear, especially the techs which we noted last week as a concern. Today's 30+ confirmed this, hopefully more positive noise like INTC (IBM goes Wed.)

We have many recent earning plays in consolidation mode these days.   Some like NEU, PEGA, ICE may look like they are done consolidating while others are coming around slowly.   In either case, we just don't have a shortage of possible sector and / or individual plays these days.    Whether we are buying setups that are on a verge of breakouts, or setups that are on good pullbacks, or throw in a sector move like Agri. today (*Crop data report), this is a perfect bull trend, still!    What we are hoping for is that this market can spend a little longer consolidating.    At this point, it's not that important whether we hit SPX 890 or 875 as the potential low, we just want this market to trend up in a healthy way.   Last two trading days have been healthy, that's the bottom line.  

Right now, the tape indicates a rotation into defensive sectors (HealthC, staples etc) and away from High beta groups eg. (Casino's /Lodging= drop today).   Media is trying to harp this,  including Briefingcom, doing it's best  but we question rotation at this point in the game!.   This is an Armageddon trade,  we're beyond that!.    We just need consolidation from Tech, banks- brokers,  it doesn't mean a switch into defensive names!.   Look at it this way,  if you were a MF investor would you be calling your broker up now to switch into defensive sectors in what is most likely a start to a Bull market.??  We'd hang up on you;)

We have a Retail April sales # tomorrow morning which can potentially give this market a positive surprise.   Beyond that,  the current tape action is about as good as it gets. 

..just a 'bad dream'

Neg eco data
Yeah, we got a surprise and it wasn't a positive!.   A thud in US retail #’s, a contrast to other inflow of data and implications for Q2 consumer spending down revisions.   Add disappointing Euro & China eco data and global markets have an excuse to take profits.

Absorption
Journal headline the other day has turned into a over supply of new issuance as a influx of paper comes
to market from all corners now (commods’ , casinos, energy etc.) besides all the financial paper.   Nobody
wants to be left out and May has become the largest offering month ever and we’re only ½ way through
the month!.   Can the market absorb all this?.   It’s highly unlikely if more and more comes to the market. This is a concern now.   What we don’t like about this is you need to take out profits from equities to pay for this!   A profit taking rotation of sorts, including into US tsys from equity profits is occurring.

Technical
A number of technical supports taken out in a sweep!.  SPX809, the shortest trend line on gap down and than the 891-894 uptrend many are following. As the market slides further the shorts begin to get comfy in pressing new positions. They did this with NAS100 first. SPX880 is 20MA and next level to watch.  A problem today is as some shorts start to press and there was no evidence of institutional buying support. A double or maybe triple whammy of sorts. Increasing short activity + profit taking (inc. supply issue) + lack of institutional buy (underlying bid) today.

We said,  we’ll only know for sure later down the line if our blow off top note comes to fruition. Looking back 5 trading days when the platform lid up like a XMAS Thursday premkt , including garbage stocks as usual have spelled an end to a big rally and a correction. It’s irrelevant if it’s a blow off top or just a regular temporary top.   A correction is a correction and its hardly a surprise as we outlined this weekend DJIM #19.   So far, we like that fact a 5% correction  has been orderly and a usual correction is 7%-10,  so we could get a bounce very soon around here.  The SPX seemed to base for about 3 hrs yesterday at these levels ~885-880.   Maybe it seems civil to us because we’ve been excluded from most of the downside since as we were apprehensive of the goings on.  Last week,  we warned we didn’t like the action in Tech (Wed-Thur) and wondered who can possibly lead as it’s not going to be the financials or tech at that point.    We also worried about this spreading to commodities and hitting high beta stocks/ groups, which it has.

What is critical is not to have this pick up speed, which would occur with shorts getting cocky, more profit taking and the lack of an underlying bid coming back.

We’d look for any upside bounce to be a traders call and not those looking for the pullback to buy for longer term.  Let's get an under 600k claims tomorrow and throw the shorts entering yesterday for a loop!

..sittings on their hands

Following up on yesterday’s Journal,  a few good points to after..."just a bad dream"

Technical

We had shorts back -up from laying out fresh shorts at 20MA levels and we had a lack of institutional buyside support over 895.   This has been support since rally began in March.  The shorts didn’t press around ~880 to push the market lower and the institutions were not there to push the market beyond 895-900.  What you get is a purely technical driven trading day with no conviction from either side.   Thus, you also get a very quiet low volume day.

Neg eco data  

We  had another bad eco data point, the IJC # bounced higher, but the market blew it off unlike yesterday retail #.  

Absorption

We said yesterday,  secondary offerings are starting to be a concern to us because of the sheer volume and how they‘ve spread to broad market.   Today, we had a quiet day on this front, one or two deals since Wednesday night.   The market needs to work through all these deals and its good to see this slow for a day.  Even the ‘fat cats’ need time to digest this supply and the markets need this activity to ease!.

Despite,  this being a pure technical driven day and despite more sell volume on the downside after messing with 895-900 in the afternoon than on the earlier upside, (see chart), we had buyers go into the rally groups (banks- brokers, techs) and away from the safety trade.   Tomorrow is OPEX day and usually  noise of volatility comes with it.  We usually find these to be one the most dullest events, so we’re not expecting much tomorrow.  By saying this, we hope we jinx the market to do something.    As we said yesterday,  this is a 'traders call' (Eg, Casino's provide a 3-4% short lived rip after an intraday post),  as we bounce within a range.   The late day market selling confirmed it’s too early to jump in with both feet for the longer term once again, but dipping a toe above 20ma won't drown you either.   There is really no point to step in front of a lot of catalytic potential events next week, such as a ton of retail (HD)/ tech (HPQ) equity reports,  a kick off to tech conferences as co‘ will tell how life is after their Q1‘s is going. (recall last Q we pointed out the significance of these and they definitely moved the group after).    Simply,  we are reluctant to get in ahead of next week in any meaningful size with the rest of the market. 

Tomorrow,  we’ll probably see more mixed trade off eco data points, hardly a reason to get off your hands.

DJIM 20, 2009

Once again, we’re at crossroads where traders/ investors are wondering where this market will be a month or two from today.  Yes, we are about to enter the summer trading season and Q1 earning reports are at an end.   The question right now,  is whether we continue to trade this market on the long side or stay on the sideline to forego the uncertainty.  As far as Friday’s trade, it was more of the same technical driven trade we talked leading into the opening bell.  SPX895/  900 to the upside and a close on 20MA. Market pushed to 895-900 before sellers surfaced once again and a lack of institutional buyside prevented a push higher.

The uncertainty we’re referring to is the possibility of this market going to a much lower level.  At this point, without a major negative catalyst or two, we are finding it hard to imagine a market move to a much lower level (below SPX 820 or so).   If this is our mindset, a logical conclusion is that the current pullback ( 5-6% SPX) and next should be favoured toward the buyside.   In all honesty, this market has already defied many strategists' expectation on the path it has taken these last few months.  A stall in the current run-up does not necessarily mean that we go straight down and give up lots of the gains. We do, however, have to be prepared that the market can give up a portion of the gain so the market can be in a healthier state for action down the road.

When the action is going straight up, we have been increasingly hesitant to chase stuff we know isn't capable of sustaining such a pace.   However, the recent market action does give us plenty of ideas what and where to trade this market.   We had a number of earnings play that were well greeted by this market. Having a strong report is merely a start.   Getting a strong reaction off a good report is what matters the most.   We were fortunate enough to see some familiar and some new plays coming to our attention during this earning season.   Sure, there's always the fast play here and there, but the earning plays have always been the bread and butter type for DJIM trading.  As long as the trading action and technical signs stay healthy for the plays on our list,  we are willing to buy into the pullback bits at a time.   Given the rosy reaction, we have to expect that traders/ investors are willing to see these stocks' trend continue into next quarter and beyond, by bidding them up, slowly but surely.   Some plays will undoubtedly fall off the radar, but others will stay.

The coming week is relatively quiet for Eco’ data, but we do have a JPM tech conference kicking off Monday and a few household names reporting to give clues as to April business.   Right now, Tech and Financials are literally in a quiet period waiting for a catalyst.  Potentially, tech can wake up from conference and Banks- Brokers from a determination to repay TARP.

Technically, the next support is around SPX 873 and the major one is around SPX 835. The current resistance is around 895-900 and 929 as the next major one.  We could spend lots of time in between any of those levels which will create many trading opp‘s.  Unlike the uncertain period a few months ago, this time around, we know exactly what to trade.

Triple play rally!

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

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

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

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

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

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

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

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

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

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

Away from the spotlight...

Basically, all of the action today after a triple play rally is not from the usual movers and shakers ,  instead it’s from our boring listed  plays..old (commods’ ) and new (EPS’).  The index may have closed flattish and financials rolled over naer close,  but it's otherwise a pretty swell day around these parts.   The biggest story of the day occurred AMC.   We are referring to the gigantic offering from BAC.     Here's the eye catching number, 1.25 BILLION shares at an average price of $10.77/shr were issued/ sold by BAC.   Over 800 million shares look to have been sold in a large block!!   Wow, this is just something we don't see that often in our lifetime.    Will this massive offering give some more firmer support to the market?    After all, traders were worried that BAC might have trouble raising money,  but it's just not the case.( now ½ done to 33.9 capital plan).    We have to view this as ultra positive    It wasn't a big deal for GS, MS or WFC to raise money,  but a massive secondary raise from BAC(somewhat inferior quality bank), a 10% discount to the daily avg since announced seems to have not been a big deal either.    As much as you'd think this would suck up a lot of cash from the investors, this has to be viewed as very positive development for BAC, the financial industry and this market in general as someone took a huge 2/3 stake of the offering.   

Now..the real action today was from a lot of our recent earning plays and the group plays.    We’ve been highlighting buying pullbacks awhile now as our 'Premise' holds.   Recall, we said many new plays are toying around 9ema, of course this would include most of our plays as we've been in a 5-6% corrective market.  eg. BWY DDRX NEU GYMB  FSLR ICE CTV  LIFE...In addition to the earning plays,  if that's not enough, we also have commods’ feeding off the weak $USD unwind,  GNK JRCC SCHN X  and agri.(POT, MOS ) since we *highlighted crop report last week were gaining more ground today.   

Earlier, we also had EJ , a former gem here, which guided pretty nicely, gained a trade spot quickly on to our playlist.   In fact,  it seems many of the old Chinese plays are heating up here again.    ASIA  SNDA  TSL.. are just some of the plays acting well.   Remember, we have CAF  to basket a further move here.  SOLF  also reported a not so bad quarter and gained some positive reaction today from firms.   This may bode well for solars STP and TSL reports coming up.   Also, NTES SINA SNDA are other China reports shortly.

Also side market note , CY (semi) had the most bullish comments from the often mentioned ‘tech conference’.   Conclusions from conference are more positive than expected and we should see the space continue to get a bid this week.    ADI (semi)had a good report AMC

On the other hand, we also have runaway earning plays like ADY  STEC , which we are patiently waiting for a pullback before making a potential entry.  As we have mentioned before, this market is full of good trading plays and we really appreciate a slow trading day like today.  

Technically, we are currently range bound  (876-929) right now heading into a holiday week.    There's no telling how the rest of the week will play out (FOMC minutes tomorrow), but we do like the action in many of the individual plays on our list going forward.    If this market can nudge higher, our question and answer to “Sell in May or will it be Buy in May?…was correct at SPX 872 as it‘s become a stock picker‘s market ,  dominated by earning plays churning this market higher. 

http://www.djimstocks.com/djim-journal-09/2009/5/1/sell-in-mayor-will-it-be-buy-in-may.html

Roll...

Roll..Roll the equities!.  You never want to see equities rollover midday like today back to overnight SPX futures low (903) after a rip to 923,  but,  since the upside move caught many by surprise,  including longs with profits out of nowhere since Friday when the end of the world call was coming from Bears at 875SPX.    Why not take unexpected profits before a long weekend??.   We doubt shorts were in any condition to lay out fresh positions today considering they just got burned pressing, ironing their shorts on lower highs/lower lows last week.   So, maybe until we get more eco’ data, such as tomorrow's (Phily Fed (May biz) , we really have to stick to the notion of being in a range of (875-929).    We'd rest if we break the recent break to upside levels of ~895-896 , we wouldn't be plucking at dips till lower.

A lot of the attention today was on the breakdown of the Greenback.   This fall has just invigorated the reflation trade further since the treasury move in March.   We don’t mind profit taking,  but when it’s mixed with a failed breakout as seen by the $CRX  daily,  we would caution here for a breather, even,  if the $USD falls further out of bed overnight.!   The FED statements implying more purchasing whipped the USD more, but the commodities- linked trade faltered.  Simply…the persistent weakness in $USD with commodity stocks trade diverged finally in the afternoon.    Also, we didn’t like action or data from CAT.  A little bit of the ‘stabilzation’ talk , one point we were highlighting in ‘The Premise’  to keep this mkt rolling on is getting nicked a bit here.  Thus, we are watching the Phily Fed for a possible downtick # as a cautionary tale.

Ok, when is this holiday?...

Seems the long weekend can’t come soon enough for all the weary worry warts during today’s shenenagins… On a technical basis,  sure, we feel more comfy over 900SPX,  but once again we managed to rebound to the 20ma levels.   We’re still avoiding any meaningful close under this level to ponder any further summer downside. 

It just hasn't looked like this market will make a meaningful move one direction or another before the holiday.   You can't do much with light volume.   Earlier in the week,  we said we’d be in a technical range (876-929) and despite what seems like big moves in both direction this week, we’ve basically just held this range.    From the look of things,  the recent stretch of range bound trading may continue after the holiday if we don't get a meaningful catalyst.

Despite the fear mongering pile on today on the UK/SP potential outlook, “Sell everything..stocks, bonds..buy Gold”. ..everything USD denominated, the market reversed and will probably claw back more points tomorrow..….

Anybody wonder if anything being sold is US denominated, why were the big US banks- brokers  GS, JPM BAC WFC mostly green on the day outperforming everything!.  Also, the Gilt auction in UK went much better than expected following this news.    Both things really makes no sense if this was such a dramatic event.    Even the commods’, which should be the beneficiaries of  more 'falling out of bed' of the USD were hit the hardest today.   Poor CNBC’ Bob Pasani was confused all day trying to figure why commods’ were acting so poorly on the trading floor.    Well,  like we said last night a failed breakout signalled a breather for them in our view and basically that’s all is needed before this trade picks up again.   The point is, we expect lots of back and forth type of trading from many commodity groups which would create many great opportunities for us in the coming months.  

One thing being completely ignored today was a slew of good earning reports for the tech- linked equities.  BRCD, CSC, INTU, TECD, NTAP.  The tech conference went well and reports have been better than expected.  Maybe this will get some attention next week.

A negative we did see was in the Phily Fed # was light and new orders were quiet disappointing.
The ‘stabilization’ recovery story took another nick as sluggish reports continue the past week.

Tomorrow is likely going to be a quiet day where many traders would head out for the long weekend.   We'll be here and we'd view any further weakness off low volume in the early going as an opportunity for entry.

Have a good and safe weekend..

DJIM #21 2009

Friday’s last hour gyrations just exemplified the week that was.   Most notably,  a week of low volume encompassing a triple rally day and a 40+SPX point sell off to close off just where we had opened Monday morning at $SPX ~885-887.   A clumsy week and no promises of the tape improving with little or no news flow expectations in the way of eco’ data points in  a shortened 4 day trading week.   

One area of significance is the 20ma to watch.  We’ve talked about this being the support line for the advancement since March and with Friday’s close under it,  we will watch more carefully.   We don’t want to see any meaningful close under this level in the upcoming week.   The only thing last week accomplished was this 20ma line moving higher day by day, while the market tape accomplished nothing by Friday's close.   Right now, the tape looks vulnerable as it won’t take much to get that negative close.    Basically, any break of Thursday reversal lows at 879 to 875(range low)  will be one of caution.    A huge TSY issuance this week along with an eye on if the FED will pick up the pace of their purchasing will be closely watched.

As far as individual stocks/ groups,  the picture is just as murky as the broad tape with no signs of rotation into a particular group.   The banks- brokers lagged any upside last week and the Techs, despite better than expected results and outlooks went pretty well unnoticed or cared for.   The $USD watch will lead the commod’ trade, most likely.  Also, we'd wait for a $CRX breakout (if) for now to initate fresh positions.

We just have to wait it out here and be selective if going in for a trade.

...taken with a grain of salt

http://www.conference-board.org/economics/ConsumerConfidence.cfm

Honestly, most of us probably don't even have that eco' # marked on our calendar.   Well, maybe some do, but when we said it was a slow week ahead for eco' data points, we certainly avoided this one as being critical as most.    Yup,  all this market needed today was an inspiring "confidence" number coming out right after the market held at support ~879 (Thur low)-880.   Is this too much of a coincidence?   It sure wasn't a joke to the Bears, who can't seem to avoid upside risks!   In any case,  we got a heck of a squeeze/ melt up after the data was released and we closed near the high of the day.

The bad part, unfortunately, is that there's really a lack of any news of any kind besides this eco' data point.  The focus is still on the TSY auctions this week.   It seems the market will use anything as a catalyst these days, keep this in mind,  it could work the other way later in the week on something seemingly not so crucial at first glance.   This is also a shortened holiday week and so volume was still relatively tame.    Nonetheless,  we closed at SPX 910 and we are 19 pts away from the short term top.   So get ready to lighten up on some positions, folks!   Can this market get any more mechanical/predictable than this?   Maybe, maybe not!  Until the day comes that confirms we breakout of the recent range,  we are going to have to treat and respect the recent resistance/support.

It took time, but most groups advanced with the Consumer discretionary  led tape (early cycle recovery groups), including the high beta Casino/Lodging  trade with last Fridays late buy HOT  leading the charge. 

Tech stocks  were led higher today with AAPL/ RIMM  (upgrades) acting great,  while our smaller plays such as STEC  PEGA  EQIX  were holding up as well.  We said techs may get some attention this week based on a better than expected tech conference/ earnings.  The upgrades were a result as this group stood out.

Financials, closed near it's highs.

Commodities opened weak, but closed near/at recent $CRX highs.  At this point,  it doesn't feel like we are brewing for a big move up unless something dramatic develops.   We are treating the recent top 920-929 as a point to lighten up some positions and use any weakness to add back some stuff.  

Again,  this is a holiday week so we aren't expecting anything huge to happen.   If a big move does come within the next couple of days,  we'll be here and ready to trade.  In honesty, we wouldn't mind for this market to hold near the upper end of the range till the end of this week.   We'll see how long this CCI has investors/ traders believing in a economic recovery as well?.  At this juncture, we want to see conviction and that would be breaking out of the range before we get as giddy as those 5,000 CCI households !.

...a hissy tsy fit

As Bullish as we‘ve been now for months,  it never hurts to be rational and keep pace with your own strategy even if the markets get giddy as following the CCI#.    Entering the week we were saying the focus will be on the TSY auctions/ FED purchases and warned entering the trading day in regards to TSY’s,…”…It seems the market will use anything as a catalyst these days, keep this in mind,  it could work the other way later in the week on something seemingly not so crucial at first glance.”.    Well,  it certainly came to fruition as out of the blue the market worked the other way ..ramping down on a rare market catalyst!… Despite a successful/ solid 5 yr auction by all accounts,  the bond market spoke out shifting pain into mortgages by putting the ball in the FED court challenging them and their ability to sustain low mtg rates..   (purchasing MBS…What will they do and what will be the reaction?).   The consequences, debates will be in full force now,  we as traders do need to worry about the implications of higher borrowing costs tomorrow than they were yesterday with this spike in TSY yields.    A simple question arises from today‘s events, how will those CCI giddy households feel tomorrow, next week about an economic recovery?

Banks- Brokers,

A steep decline in TSY/ higher mtg rates weighted on the group late and will continue to do so putting the idea of a higher mkt an unlikely event without their participation.   Let’s not beat around the bush here, we all know where the cash came from in WFC BAC , don’t we?  What will the next Q’s look like if this primary benefit to the banks stops?.  

Commods’,

As we’ve been saying,  we’re not going to do anything other than maybe intraday trading unless the $CRX breaks out.  Once again a potential upward tick to the 630 level was thwarted.  A slight positive for steel names from MT, but a neg from MON for ferts/ seeds stocks was the news flow.

Techs’,

Unfortunately this glimmer of a potential leading indicator got caught with broad market tape in the afternoon.  The thesis we put out midday may still hold and so we’ll be watching this sec’ for trades. We got another positive reading as CREE a June Q end EPS preannounce/ guided higher and there were ‘ tracking better’ comments from more companies at a Barclays conference.  Elsewhere,  CVLT, CEO had very positive comments and considering a similar co (DDUP) just got a bid from NTAP is reason enough to tradelist it.  

Simply,  we are still mired in a low trading volume environment and overdone gyrations in the broad market tape continue to be a given , we remain in the larger trading range.   The end of the world was coming last week as supposedly anything in USD was being sold following SP/UK news and than it was all sunny again, and than seemingly forgotten come CCI#.    Heading into tomorrow,  we basically have a bearish- hold- bullish view on the above 3 sec’s.    To us,  that’s a pretty foggy market leaving one to be very selective.  We lost an upside risk  for the time being this afternoon.   The upside risk was not a news catalyst this time as we‘ve had for weeks now frightening the shorts, it was "920-930 levels" , every inch closer put pressure on the shorts.   They have some relief and now we’ll see if they start to press shorts on any upticks,  unfortunately they may not get the volume ammunition from their peers needed end of week.   *Jobless claims 830am

..Memorial 'week'

Since when is this a 2 week holiday?...It definitely has this feel for the markets!

As the market finished near highs (SPX 906) of the day, the overall volume was actually better than last couple of days, it‘s always a better tale if it‘s greater on the upside than downside.    This tells us that more participants are coming back from the Memorial holiday.   It’s about time, it is Thursday!!    Action was pretty good today,  but it was also a bit boring and scattered as the lovefest with '900' drags along.   The focus remained  on TSY and today’s auction  bid up stocks in the afternoon.    As discussed yesterday,   just like the SP/UK doom the ‘hissy TSY fit ‘ evaporated.    What we saw in Treasury’s yesterday was a rare hedging event,  hopefully investors/ traders won’t be consumed of playing equities on every tick up or down on the yield.   We’re even guilty today as we put the $TNX on our trading plat’s!.  BUT! ..in the bigger picture,  the newsmaker besides TSY is crude today, a higher TSY and a higher Oil price cannot go hand in hand.  It will make all our best expectations very gloomy!.

What is so fascinating about this market is its trading range of late.  It literally takes one day to go from top of its range to the bottom of its range, and vice versa.    One good day,  we are back near the top while a bad day will get us to the bottom of the range.     This has been going on for almost the entire month of May.   Someone has to give up eventually, we say!    To us, regardless what happens to the outcome of this consolidation,  we feel the upside potential far outweighs the downside risk.    While we can see the down side risk to SPX 825 to SPX 840,  we just can't see the upside limit at this point.    Basically, the longer you consolidate at the current range, the more likelihood we'd go into some new territory if we break out.    This is under the assumption that this market stays in the current sentiment.   If the sentiment improves, even better.   

The ‘ holding pattern’,  we think is the market waiting for China to make the next move literally.  It’s been pretty quiet lately after the initial ‘leg’ up and now we wait for signals for the global , eco’ outlook from China.   This will (if positive) include help for the tech outlook and definitely the commodity picture for the 2nd half of the year.

We remember last summer's action was a bit brutal.    All of the momentum stocks were taken down hard last summer and we were literally out of stuff to play long .    But, now it’s a different game as the economic trough  nears this summer.   This time, with the current earning period at an end,  we have an abundance of earning plays on our list that we can play for and from what we can see Q2 won’t be bad at all for Technolgy co’s    Generally,  healthy sentiment toward the equity market is all we really need for our strategy to work in this summer,  even if the market doesn’t power beyond SPX1000,  we feel it will provide a sector/ group play.   It might be Tech, Commods, China with EPS the coating feature in those or others.

Tomorrow is the last day of this ‘Memorial week’ and we definitely can tick a little higher tomorrow based on today's picture.  This will set up for the possibility of getting a volume break…NDX, CRX and ultimately the SPX very soon.   As we said the other day in Alerts-comments,  the break should be already underway in the vicinity of 915-920.    Right now,  we feel that bulls definitely have an upper hand heading into the weekend.    According to the Bears, we should be at least a hundred points lower than where we are now.    As long as the Bears see the upside risk in the SPX break levels and with many people still on sideline,  we have a really good chance to do some damage on the upside going forward..

DJIM #22 2009

The majority of those interested in the market just look at Fridays box score and see a good close near May highs.  This is all that matters!.  A minority since 4:00pm Friday were trying to reach Oliver Stone and give their conspiracy theories to the action in the last few minutes of the market as seen in the above chart.   Some of their proposed movie scripts include Rogue trader fat buy finger,  hedge fund imploding,  TARP monies flooding the close,  GS painting the close,  Robots as in computers only doing the trading etc….. Our view is simple...who cares as all the above fits into one thing we’ve been painting here and that is the ‘UPSIDE RISK'   was of creeping closer to 920-930 levels.    This involves Bears covering,  Bulls chasing the same scenario/levels no matter which of the above conspiracy theories you may include.    Last Wednesday with the SPX below 910,  we said a clear break should be underway in the vicinity of 915-920 and that it would be a little late (buying) at those 930’s breakout levels all eyes were on at the time.    Judging by the ES futs chart we got exactly that from 910 to a high 927.75 in a few minutes.  We have to admit it was quite hilarious and exceeded our best expectations of a move to May highs.    So what now?.   Well,  yesterdays (Friday) is history and tomorrow is a mystery!…Well, it’s actually not a mystery to a start Monday thanks to tonights China PMI number.   Expansionary threshold very much in tact with this reading!

In Friday`s Journal, we discussed the probability the market was in a holding pattern awaiting new and further signals from China.  We hope the PMI is a start,  it should at least give us a good open to flirt with 930 levels.    If this PMI was not good,  we might’ve seen a blow off top in Friday‘s close.    More importantly,  our inflation trade with commodity linked stocks since March looks to continue forward.   Keep in mind when the market basically skips 20 points such as on the SPX,  it will look for a reason to pullback and so keep a close eye on the US ISM survey num’  in the morning.  

A jam packed week with eco’ data points, crude, $USD, TSY’s, all providing plenty of news flow at critical potential breakout levels!.