Last we talked (pre-Thursday trade), cited,..”overhangs being slowly removed”…”Market will likely hold 20ma, if not SP1300 into the long weekend. ….. This continued as the latest batch of PMI’s, (Chic/Milw) offset the poor ISM’s in the front half of the month and as usual CHI' PMI foreshadowed the eventual US ISM reading on Friday that consequently pushed the market another 32 SP handles the last 2 days to close at SP 1339. The US ISM should not have been a surprise due to Chi #, but by this point week long ‘joyriders’ decided to stay put instead of taking part in profit taking, which was the high expectation. Of course, this expectation is even greater now as most expect a pullback due to technical levels hit end of week.
“All in, a decisive break somewhere over low 1300’s will only change the trend in many minds. As of now, longs have every excuse in the book to remain sidelined”. (pre-Tuesday trade)
We didn’t talk of any resistance after low’s 1330’s were breached and we won’t talk ‘R” now as you just don’t know what will occur with market feeling ‘comfortable’ with overhangs removed for the short term. This is especially true, if no pre-announcements hit this week and/or estimates lowered by analysts as discussed last week. The big question heading into the trading week is how much buying was short covering vs. longs (institutions, retail) coming off the sidelines. Volumes are the likely answer, but if little in pre-announcements/ or cutting of estimates that may change. The severity of the week’s rally still kept many ‘longs’ away. As week wore on, day by day many were disbelieving their eyes and there’s no fault in that. You only think short covering and re-asset allocation to last so long. This rally effort just lasted longer and longer, pulling in some of those who think this was a ‘game changer’ last few days and let original fast traders/joyriders hang on and not jump off yet. All in, it’s likely enough to think 1250 lows are no longer in the cards for awhile as Bulls reclaimed agenda over 20ma in a healthy manner during the week. Still, we need confirmation of ‘longs’ coming back after a terrible few months, even if many excuses to stay sidelined have been removed and a trend change was underway.
.“Still, a few things to watch as potential drivers ahead of June 20 week, a few noted last week.. debt ceiling progress, any seemingly minor data coming in better than feared before major PMI's early July and a few more in TSY's bottoming at these levels/ reversing and crude capping intervention.”. July 14th
A lot of the above has occurred….of course besides Greece relief, we had a surprising stimulus in crude intervention, China soft landing, Japan V-shape IP numbers/ Financial sector relief noted Thursday, better than expected eco data recently and notably Q2/month end window dressing coinciding with an epic TSY beating and asset allocation into equities. Also helping market Friday was rumoured progress on debt ceiling giving hope for deal by July 22,
As far as Friday’s single stock trade, although many momo/ small cap winners did well on Friday with broad market, once again many didn’t like OPEN VMW CRM closing red. This is similar to early in the week action when other momentum types didn’t move either. It’s hardly a perfect underlying tape and suggests hedge funds picked a few stocks a day to run during quiet attendance. It’s something to watch as this action suggests window dressing was dominant.
All in, the importance of last week is we get 'macro' relief and can concentrate on earnings linked stocks ahead (which should be strong) without all the noise and worrying about the consequences of cracking SP ~1250.