Expectations rising...

Coming off an overnight low of 1255 ES,  ‘dip buyers’ came in for an impressive ~20pt reversal as investor sentiment was bolstered once again by ‘stronger than consensus’  eco’ data, notably ‘jobs’, ADP numbers on the heels of initial claims last week.  Higher revisions to GDP likely once again..  In all, as concluded yesterday… "..any further broad market hiccup would be buying situations".

Wary- Never hurts for watchful prudence in the markets, even when all is seemingly hunky -dory. Heightened expectations for NFP # now, consensus moving up to approx.. 200+.  If it doesn’t come in 200+K, markets holiday party might be curbed.

Shadowlist

• Momentum/earnings/“winners of ‘10 –  the star of the day goes to recent list add, BSFT +14%  as it fed of all things 4G related coming out of 'CES Vegas’.   This one is ‘nutcase’, so it’s all about entry timing. (eg.9ema).  Newsflow is driving the group as a noted possibity to start the week…QCOM/ATHR marriage, RIMM pushing higher on Playbook unveilings.  Small caps-Software/networking stocks act very all. (APKT CRM FTNT ).   Addition to list: CAVM, this one could have been added easily last year, but there were enough names to trade.
• Commodities -  Nothing new to add here. Even with a precious metals, some base metals in a higher USD environment the Ag’s-Coals outperforming.  LNN,, pushed higher early ~4% to recent gap before fading some.
• Consumer -  Retail numbers in focus Thursday, hopefully wakes up group for some trading oppy. 
• Financials - streak continues after a day off (BKX >3% YTD)

Finally..some volatility

It’s definitely getting a little more volatile this month, a 3^rd consecutive day where the intraday peak to trough is 200pts on the DJIA and ~20pts on the SPX.   Despite a decent open, the market pretty well picked up where it left off last week (selling) , but hitting more sec’s/individual stocks unlike Friday.

The finger pointing is on the Nazzy today courtesy of WFargo downgrade of the semi’s ( down>3% intraday), but in reality this is just more de-risking  in the marketplace taking place.  Firstly, WF didn’t downgrade any individual names (actually raised some names),  secondly, JPM, released a 2^nd positive note in less than a week on the semi’s citing SIA #’s released March 2nd and thirdly, GS raised $ targets on at least 10 Naz stocks incl. high growth FFIV,APKT,RVBD, yet these high growth names were also off 3-4%.  These reco’s should not be responsible for a 70pts intraday loss on the Nazz and so it has to be some other factors at play.(ie. de-risk).

Any further broad market damage was averted by a technical bounce off last week’s lows.  Recall recent notes on 50ma, its crept higher, now at 1297.

Shadowlist

• Consumer-  SODA, last week alerted following sell off on EPS,  exploded 7% early and held on to most gains by close.  Noted last week..”life coming back here today and maybe a good sign forward”, today Euro M&A activity gave high end a lift TIF.  FOSL, had a good afternoon, UA  drifting higher.
• Momentum/ earnings/ winners of ’10-   We’ve talked of the sloppy trading in high growth names, today we saw money flow from the best percentage gainer group since September as well. (SMH).   The Opticals got hit on CIEN  weak guidance.  Likely an overreaction as this could be more of a company specific (intergration issue) than a show of less than robust optical demand ( eyes on FNSR Tues. AMC now)  Networking  JNPR  holding in well,  APKT  may benefit from  BSFT, (+20% AMC rise following earnings).  NVDA, analyst day (Tues.) may bottom the stock.

No Fly Zone 1305-1330

Once again the market indicated it’s in a technical sideways trade as it bounced again off last week’s low’s and found itself in a ‘rally’ of sorts for the day.  A ‘rally’ of sorts because it’s still only a sideways trade until the cap is lifted off around SPX1330.  On a quiet eco data/ earnings week, the market has been focused on Saudi Arabia “Day of Rage”.  The thinking has been if nothing dramatic occurs the contagion will end in the region and the market will respond favourably.  As we get closer to the planned event, the market may have started the pre-run today.  Hopefully, this is the case and/or Shag hitting multi month highs and not BAC investor day that is being called the catalyst today.  Reason is simply the financial group can’t be counted on for more than a few days of leadership!

Shadowlist

• Financials-  We’ll see if buyers step up next few days because today was nothing more than initial short covering.
• Commodities-   Although all noise is around a higher crude, an important development for commodity linked stocks ahead could be the fact Shang is making the highs noted above. If higher crude stymies economic growth, why is the Shang doing what it is? Inflation topping out could be the reason.  -MCP ,  demonstrated strength before EPS tomorrow.
• Consumer-   Retailers act inline with tape. FOSL, UA  tinker with new highs.
• Momentum/ earnings/ winners of ’10-   Only incremental gains today (if any) from ’10 growth stocks (ie. FFIV ) and the mega cap names like AAPL. The momo groups of ’11 in space have exhausted themselves it seems, NVDA disappointed at analyst day and the Opticals  got another shock from FNSR  after CIEN, plummeting all the groups stocks, incl.  JDSU, who got the excitement started with their earnings in early February.  The standout was BSFT hitting $50+,  add here in December in mid $20’s ran another 20% post mornings 20% gain.  Simply the reaction in BSFT and FNSR  are extreme in both directions given the reports. 

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.

DJIM #17 2011

Kept hearing late in the week,” what a rollercoaster of a week!”.  Well, we’re not sure what all the fuss is about as it’s been straight up ~40 SP handles/ >+3%  since 15 minutes into Mondays’ trading,.. “SPX , approx.~1295 off SP downgrade news likely a buy”.   Must be the dying words of all the naysayer social media guru carcasses seen sprawled out by Friday’s close!.  Of course, majority of the move wouldn’t have happened if it wasn’t for earnings and the reactions changing and coming in ‘solid’ after a disappointing week 1. A big part of trading is preparedness and coming into week we were citing one of the ‘what if’s’  to rally the market laying out the steps ie.....Solid broad Europe earnings, US market sell off reactions would change,etc. to get the rally.  You can’t have the poor reactions we saw early keep coming in, if you have something like 80% of the corporations reporting positively and/or surprising. The averages were unlikely to change as the market went forward, if 16 out of 20 surprise positively, we’ll probably see 80 out of a 100 accomplish this and so on and on it goes.   

Recall,  a big key to keep the upside going and going is for investors to continue and see ‘value’ in stocks as we’ve been saying all month…..”… investors need to see value in stocks to keep the trend in tact for Q2 or market risks a correction later this month, earnings are the big key to that!”.   Okay, so far so good, but the market did generate some fresh headwinds, eg renewed Sovereign debt tension, even Financial links falling off earnings is a fresh concern along with rails/transports lagging the tape. It’s no surprise most investors were caught snoozing on the rip higher with all the negativity around. 

Now the excuse for many will probably be 'technical’  as we close at a cluster of SPX “R” resistance. It’s an endless circle of pessimism regurgitating through the market the last few years.  It’s always something that supposedly keeps real buying on the sidelines before realization hits and PA (performance anxiety chase) ensues.

Into the trading week, earnings can keep the momentum going, but some caution will be ahead of Bernanke’s ‘big day’, which will likely lead the market to consolidate.  The ‘Super Bowl’ hype over his first post-FOMC press conference will likely turn into a non-event with Will and Kate’s wedding likely offering more exciting.

Shadowlist

Broad range of Shadowlist linked stocks performed relatively well intraday, despite market not passing overnight highs as speculated post-AAPL exuberance in AMC.  Names with >3% gains are tagged on site.