RUT of a day..

A few things to be wary of heading into today’s trade played out.  One was not getting overzealous off the 1st day rally as it’s been the case the past 2 years, this coincides with not chasing the open based on Global markets that would be up playing ‘catch-up’ and finally, the real market ‘noise’ today was the steep rollover continuation of…”..Precious metals, copper rolled over in PM”,  down 3% on the day.   The open was the high 1274SPX and it was all downhill to last week’s highs for ‘dip buyers’ to come in.   The 1260-1263 support might be thin ice as it was generated through the ‘illiquid’ holiday market, so 1254 might the real support test (approx.between 9ma -20ma gauge).  The probability of a need to test 1254 is due to a wary and it wasn't the precious metals selling.

• Wary-  the ‘big’ underperformance today of the “RUT”, which had been the leader during December’s grind higher.  Something to watch, but, maybe just a natural performance spread narrowing between RUT/SPX. Interestingly, the Shadowlist which is comprised of mostly smaller caps held up much better(with reason).

Shadowlist

• Momentum/earnings/“winners of ‘10 –  held up (reason) due to anticipation of “CES Vegas” and possible news flow.
• Commodities-  Our list unaffected by the steep commodity ($CRX) decline due to our focus on AG’s/ Coals (75% AUS. Mines halted).  Favorites in the groups such as MOS, POT, CF, CLF> 4%, WLT  all outperformed. LNN (irrigation) >4% had a noticable bid to any dip.  MOS’s earnings AMC should generate more of the sector upgrades we’ve been noting.
• Consumer-  WYNN, LVS  >3-4% continued to move off…(Casino sub group had very good Macau numbers and WYNN finally got over 105)

All in, the trading notables off our list held up with reasons, any further broad market hiccup would be buying situations.

...hardly a TD yet

Earlier in the week, Euro markets positively decoupled from sovereign fears.  Today, following a successful ‘Portugal’ auction the US markets finally played some catch up to the Euro markets move of the past 48 hours by breaking a YTD consolidation (20pt range).   The ‘Peripheral’ wary has been diminishing as China, Japan are speculated to be buying into these debts (inc. China into Spain’s on Thursday).  This ‘helping’ participation is why noted here yesterday…” or a bad sovereign bond auctions later this week (shorts likely futile hope)”.    As important or more today was the ‘speculation’ of Monday’s European Finance meeting and an expansion of the bailout fund to get the market going.   A week so far of little economic/ few earnings and so a ‘relief’ catalyst from Europe allowed this market to move easily as it's the only happening around.   The market moved out from ‘inside the 20’, but it’s hardly a touchdown.

Why, not a TD? ...Even though the move was broad with all sectors up, it was more of the same ES/ETF driven move continuing from Tuesday, plus the ‘leaders’ didn’t play along.  (See below in Shadowlist updates).  It was hardly a perfect tape, but with Peripheral worries abating the market can let earnings decide its fate.   The lack of participation today of the ‘winners’ could just be a symptom of this wait game for earnings and nothing else.  All in, need to see a follow through into weeks end.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   Why more ETF/ES?.  Just look at the performance of leaders,  AAPL AMZN FFIV VMW CRM NFLX…(.5% down to 1.2% up) on a ‘supposed’ breakout day with Nazzy up and SOX up another 2%.
• Commodities-  Entering the week ….” USDA reports mid-week to possibly feed Ag space some more”.  The report was bullish and fed the stocks linked as most were up between 3-5%, CF MOS AGU LNN POT NEU.  Going back to the ETF-ES trade, if it wasn’t for this Ag’/Fert group there would hardly be any individual stock action anywhere.  Meaning up >1% and/ or down 1%.   As far as coals, despite the CLF  M&A,  the group might have reason to become fatigued  post-ACI  EPS and smaller  coals reporting softness on other exchanges.
• Financials- the streak continues from December following JPM’s CEO appearance AMC and WFC upgrades.

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.