Pockets..

The only approach following a wild overnight panic in global markets was to gauge to the Futures(ES) decline vs.our Shadowlist as we often do.  The strategy was to watch for..”Dip buyers have been on strike…will they come out on ES overnight panic and buy the early selling pressure in individual stocks (not directly related to Japan and events?). Is this the point (SPX 1262 -December high/early Jan low) SPX 1270-1279 Pivot point support.”.   It was evident in the first hour investors were not fleeing individual stocks in our list.   The losses simply were not on par to the ES and the fact we fell sharply to the SPX 1262 off the open, exemplified the possibility of dip buyers coming off the picket line.   Having a plan and seeing what ensues in relation to it,  allows you the trader to decide what you should do.  If you had sold out premkt/ open, you regretted it by close today.  If you bought something that was down more than you thought it should be off the morning sell off, you made a nice trade (see below for some nice reversals).  Interestingly the 1279 point became resistance from noon until the inline FOMC (w some economy ‘firmer footing’ words) finally pushed the market through this zone.  Of course, if we had a ‘meltdown’ who knows what would’ve happened.. (or will happen), if the nuke situation worsened.

All in, we’re still on shaky ground (have to deal w violence escalation in Bahrain as well), but there are pockets to trade as below illustrates.

Shadowlist

• Commodities-   The solar nuke trade (FSLR,TSL ) introduced here coming into Monday’s trade continued to work and steels links outperformed(although X was sidelined). CMI,FCX  reversed very nicely.  Surprised coal stocks not benefiting yet as coal prices shoot higher last few days.
• Momentum/ earnings/ winners of ’10-   Also entering the week off brutal headlines, we still noted to watch….”some better signs last few days as high growth names bounce NFLX, FFIV.”.  This was the best sign as FFIV  made a big reversal and NFLX  was the star off a GS upgrade note, but this outperformance was evident in many other names such as RVBD, BSFT, IPGP.  APKT continues to find a bid.  JNPR  another networking stock has as well. All in, momo’s acted very well again as bids come in on dips.

heavy dosage of headlines..

This had to be one of the most memorable trading days, one that reminds you of past crisis days in case you’ve forgotten the sea sickness feeling off every ominous headline.

Although the broad indicies were in the red in early trading, a good sign was our Shadowlist was outperforming once again in a big way.  This relates directly to the outperformance of the RUT and gradually through the day this phenomenon was picked up by the media.   As noted past few days, “Pockets”  of strength are visible.  Unfortunately, even this group couldn’t fight off the bombardment of negative headlines that ensued.  All in, it didn’t resemble a minus 25 SP handle day shellacking by close, maybe that’s because most of the action is in the ES/ETF-SPT trading with investors holding tight in certain sectors.  Unfortunately as a bounce ensued from SP1250 late in the day(see SP1250 alert), buyers were noise exhausted and remained sidelined not chasing individual stocks for now. 

Shadowlist

• Commodities-   Yesterday, noted the surprising inactivity in coal stocks, today it was the one commodity linked group that was talked about most as buyers came into the related names.
• Momentum/ earnings/ winners of ’10-   Most of the names noted yesterday led the morning move, APKT  was up 3+ before relinquishing gains, BSFT, IPGP  were strong as well.  Opticals had a bid as well, but came off highs.  Considering most mega/big caps (AAPL ,IBM, ORCL, MSFT) were hit hard,(tech off 2.7%), its good see some tech working.

Dollar store rally day...

Maybe today’s rally will make "SPX 1250 hit, could be low for awhile” hold and stabilize things some, but overall it was a disappointing underlying tape.  It can simply be summarized as a ‘bargain hunters’ bounce as our primarily high beta Shadowlist didn't do much away from commodity linked stocks ( notably coals, GTLS,CRR).   The ‘risk on’ trade was back, but not exactly everywhere you’d like to see it.  Just by glancing at the list, you can decipher easily that investors were looking for value off the consecutive days of selling instead of buying with conviction growth stocks. Considering Friday is OPEX day and macro headlines seem to point to a positive market bias, the bounce may hold and/or continue. Otherwise, we’d say the market is prone to a red day off a tape like today's on any other day.  Hopefully, if today’s tape is seen as some stabilization (a first step), it will bring some confidence for investors to buy higher beta names.

Shadowlist

• Commodities-   The lead into coals past few days carried over as coals outperformed. (WLT ANR CLF  >4-5%).  Tonight good ole' Cramer jumps on the bandwagon.  It’s probably best to get off the solar trade as its shelf life is really uncertain off Japan.
• Momentum/ earnings/ winners of ’10-   As per the above…after noting the outperformance of names in this group during the sell off this week, it was disappointing the see almost all high beta lag the market.   The RUT simply was a rut along with tech.  Part of the lag was guidance (gov’t and defense spending) from SANM (EMS sector) which weighted on opticals and networking/equip communication stocks after killing all the EMS stocks.  This just adds to all the uncertainty related to Japan for Q’s ahead (supply chains etc.).  Next week we will finally see some bigger names reporting that will hopefully clarify the situation.

DJIM #12 2001

Although Friday’s tape roared out of the gate on positive macro issues developments (Yen intervention, some Japan hope, ceasefire noise), it gradually declined throughout the day as the high beta and/or tech came under pressure.  Post- lunch media conversation turned to this lagging market aspect discussed here as ‘disappointment ‘ heading into the trading day.  What was noted as ‘value’ seeking bounce continued into Friday’s trade and picked up speak of rotation from Tech to Financials(following dividends) as well.  It wasn’t pretty, but it was another step towards ‘stabilization’ after ‘step 1’(Thursday).  Basically, the market has been buying time while the nuclear story stabilizes....”… watch if mkt starts to ignore headlines from here as positive” from SPX 1250 alert.  This was the case Friday even though headlines were still negative, the market did not whipsaw as previously.

Heading into the trading week with positive developments in Japan’s nuclear saga weekend/ tonight, we are watching for corporate earnings to better the situation for high beta/ tech anxieties to possibly dampen the negative sentiment.  This is likely to be the focus and most important factor in continuing this reversal.  It starts with TIF  with has been under big pressure on Monday morning with ORCL JBL RIMM RHT BBY types to follow.

Update on Monday, March 21, 2011 at 08:15AM by Demi/ YourPersonalTrader

Chip, Infinineon, AIXG getting tech bid (Japan demand fear receding for now) in Euroland. TIF here.

Recovering

Probably the most unspectacular 3- day/ 50 pts move as still high beta/ growth names (only a few did) find it still difficult to get a bid.  Still, today may have been the start.  This is the missing link, if the market has thoughts of getting over the “R” 50MA/20MA (almost a cross here), it needs to find this bid and join in.  All in, the unknown Japan drag is likely overblown, but optimism isn't back here yet.  

We cited the strong moves in Euro chips premarket as a prelude to today’s upside move (SOX >1.8% and semi equip led in US), add TIF and M&A activity and we had a gap followed by a tight ~5 pt range rest of the day

At least today as nuclear fears abate, some corporate fears relating to earnings receded as well with TIF’s report, but we need to see some comforting tech words ahead this week so investors see value oppy' here next.  Simply, this where we'd look now for a long trade to materialize.  

.

Missing link..

As for most of Monday’s trade, the market (SPX) traded in tight 5pt band suggesting digestion, consolidation of the 3 day reversal.   Unfortunately, not only did the ‘missing link’ as per yesterday and recent days Journals, the higher beta ‘leaders’ of 2010 and those of 2011, not only didn’t get a bid, but were sold off pretty hard across the board ie.FFIV,APKT, BSFT, RVBD and many more including opticals).  The Japan tech concerns were taking their toll, plus the uncertainties relating to AT&T /T-Mob deal and a blip in spending that may occur years away if approved.  Now, this is silly to think about the possible consequences years away on a deal that may not even get regulatory approval.  The material impact from Japan is unknown and the market is pricing in the worst case scenario without much guidance on the issue from corporations until the start of some tonight.   All in, this disruption will be a temporary hiccup to the semi supply chain and the sub-groups will have a sharp rebound as they did following the Taiwanese quake(a good data point to measure off) over a decade ago.  Also, full year earnings should not be effected by a Q shortfall as it will be made up as demand returns over the year.  After today, the market may be close to have priced in the effect.   A first data point AMC helper was JBL  delivering with an excellent report , but without Japan inclusion, recall its peer SANM did more damage to anything EMS, Comm.equip, Opticals.   Also, ADBE ‘s 50mln guidance impact from Japan is not dropping the stock AMC, possibly giving glimpses of a ‘baked in’ Japan situation coming very soon.

..maybe a start to a sentiment change..

As the market meandered in consolidation mode in the ‘red’ all morning (SPX -5pts at noon),the ‘missing link’ noted here was outperforming with JNPR  (networking) and FFIV  (best on SP 500 tech) were coming out of the doldrums and leading the way.  As the day progressed more and more past leaders joined and a broad market move higher ensued.  The hope is this the beginning of what has been discussed here this week in respect to Japan tech worries being overblown and close to being priced in.  JBL’s  report negated some of the fears for EMS, Comm.equip, optical stocks and late in the afternoon TXN’s CEO said the company would come close hitting street estimates despite Japan.  AMC, RHT and MU  put in strong reports to help the cause and an important day is ahead in earnings tomorrow with ORCL,BBY, RIMM.  Note today’s action took place amid a bunch of negative bits that the market shook off.

Shadowlist

• Momentum/ earnings/ winners of ’10-   JBL helped sentiment overall in this space.  FFIV, RVBD, APKT  all >3-4%. Opticals like OPLK  and notably IPGP , +10% and a NCH.  Also, momo names like BIDU, NFLX do well.
• Commodities-  The coal trade continues for a 6^th or 7^th consecutive day.  GTLS,  continues to be a stand out putting in another NCH along with CRR, another EPS winner here this past Q.

..in techs hands to continue..

Clearly, Tech is showing relative strength and leading the way as the next leg in the recovery from 1250SPX. The DJIM premise entering the week,…”we are watching for corporate earnings to better the situation for high beta/ tech anxieties to possibly dampen the negative sentiment.  This is likely to be the focus and most important factor in continuing this reversal”.   The dominos have fallen in sync to what has been cited this week..”we need to see some comforting tech words ahead this week so investors see value oppy' here next.  Simply, this where we'd look now for a long trade to materialize.” (pre-Tuesday trade).  JBL initiating the better sentiment followed by RHT,MU and tonight ORCL/ACN paving the way as the Japan overhang has began to recede.  Also, as noted yesterday market shrugs off negative newsflow once again today, always a good sign.

Shadowlist

• Momentum/ earnings/ winners of ’10 -  Cited the the damage from SANM, naturally JBL report has reversed this as Opticals had a 2^nd good day as FNSR, JDSU  +5% days on the heels of IPGP  big day yesterday. Although, previous days leaders APKT RVBD  etc lagged today, others momo’ likes CRM VMW  and even '11 momo' NVDA took over with ~6% gains.  Simply, the earnings and what management is saying on the little material impact it sees in regards to Japan tech worries is causing collateral bids in tech linked names. 

DJIM #13 2011

Last week's 2.74% SPX recovery rise is pretty well summarized last Journal.  Friday’s action did not nothing to deter from the trading premise here with tech earnings being the missing link in a move higher post consolidation early in the week.  The ease the market broke through 1314 ‘R’ in early trading  before wavering some in the afternoon makes you think it’s just a question of time before we test February highs. There’s a cluster of “R’ around 1313-1319, but once a close occurs over, the market will have higher sights in mind and it should happen this week.  Simply, the recovery reversal of nearly 70pts trough to peak is only 7-8 days old and many are behind the ball on it (as in surprised).  This coming into a month end/Q end is where a PA pill (performance anxiety) will likely be swallowed by managers to play catch up.  This non-participation is also evident in the rally’s volume, this negative may turn into a positive as some larger managers may chase.  As Traders you can’t predict any further macro shocks, so you work with what’s in front of you and window dressing is it as we enter a corporate quiet period before next Q earnings.  A few notable eco data points Friday (Global PMI’s,NFP#) coinciding with QE2 hitting the street.

Shadowlist

• Momentum/ earnings/ winners of ’10-   The Nazzy/ R2K outperformed the SP by a full 1% this week, this sums up this Shadowlist group as corporate profits led the way, so plenty of linked names from leaders and oversold opticals to look at for more trading. Networking related names were weak post AT&T-T-Mob deal, but private Lightsquared is drawing attention as it makes deal after deal .  This equals more network build up, not less.
• Commodities- as per recent activity, coals,  GTLS, CRR,  MCP, names noted most here keep on trading well.
• Consumer- retail/lux DJIM names hanging in well, FOSL  keeps making new highs.  Some rotation late in the week into our casino names (WYNN, LVS)  to watch further.

..still ignoring negative tilted newsflow

A seemingly directionless (sector wise), a lagging tech/naz trade still had the market surprisingly pushing to last week’s highs in the first hour.  The next few hours were going to rest on tech shoulders for the broad market as it was still .5% off its highs of last week.  You always want lagging indicies to confirm a further move by following. ( ie. follow SPX highs today).  As it played out with tech still the sidelines by midday, it was no surprise to find the tape wavering slowly throughout the day, closing at lows after being stopped at the top of noted cluster of “R”.

In all, no catalyst for morning move higher and no catalyst for late slippage. (a Roubini downside risk update hit wires might have been culprit). 

Shadowlist

• Momentum/ earnings/ winners of ’10-   Spotty mixed performance among networking/equip comm’/ momo’s, some networks linked names like APKT, (around down trendline March break) and ALU were outperforming peers by wide margin.
• Commodities – Once again coals here (WLT CLF)  did well, GS helped with an upgrade of WLT. Intraday, MCP , hit 2 month high, CRR a nch and now up ~25% since a DJIM earning addition in late Jan.  Late day broad market selling took most of the above down to trade more inline w/SP for the day, but overall these names still act well day after day.
• Consumer-  MAR’s #’s weighted on the leisure sector (a upcoming earnings question mark now ) and therefore, no follow through for casinos.  Retail was fine,  LULU  breaking out to a NCH by midday.