Momentum raid...
Wednesday, May 4, 2011 at 05:35AM If the Japanese earthquake shifted the earth’s axis, today’s profit taking in…commodity plunge (energy, crude), silver annihilation, a R2K high beta slaying, China crumbling wall did the same to the underlying core of the market. Yet, anyone just glancing over the market final boxscore, they’d think it was just another boring day, DJIA flat, SPX -4.
What does the drubbing to the underlying market mean is the question at day’s end?. Is it rotation, hawkish exit strategy (CNBC report) diverging from last weeks statement /QE link or just the fact we passed ‘peak’earnings with mediocre eco’ data coming in at these elevated SPX levels. All this, while coinciding with go away in May seasonality hitting everything that has been in the recent ‘winners’ circle. You pretty well had nowhere to hide to avoid being hit unless you’ve been bunkered in ‘financials’ and mega PC caps related stocks that have lagged badly. Risk was unwound big time, money left high beta momentum, included was rotation into big PC linked tech from high beta mid-small caps. As far as the widespread China internet clubbing, we pointed out the main culprit in the afternoon, which after all the frauds in mid-cap space over the last 6 months, Renren IPO audit revision gave an excuse to raid this sector. Briefingcom didn’t run the story till 3:25pm to explain what most didn’t understand all day, it takes a few shouts out to them quite often.."…the revision did act to remind investors and traders that there has been increased scrutiny regarding some of these Chinese companies' auditing procedures and financial controls.". Maybe when this is digested overnight and Renren IPO goes off decently (and/or) traders will realize it is stupid to box the BIDU’s/ SOHU’s with the recent China crap, MOBI (new piñata today).
A lot of the movement has been USD based as speculated here heading into the week. It’s found some support this week, but it really needs to rally for the risk trade to be off long. Until, a chill pill is likely in order as USD did not become the ‘safety’ trade overnight. (so continue to watch the USD closely). Doubt today’s action is real rotation starting, just a matter of not wanting to sit in cash and so money flows went into financials/ old school PC nasdaq stocks.
Also, probably best to stay away from fresh earnings now as the majority of decent reports will be sold off ie. IPGP in the morning and many AMC that may seem okay at first glance may succumb to profit taking/faded. If the co’ the misses, the stock is in in big trouble. Lots of big declines in high beta AMC, LVS FSLR OPEN. A shift from micro back to macro was clearly underway.
Demi/ YourPersonalTrader
SPX now at 1347, Feels like SP 1338 support in the cards, although wouldn't give a signifcant bounce a chance before going lower. Kinda looks like the start to correction fearing here once April data hits.
in cash and not calling for bounce like last 2 times here at 1250/ 1295.