...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 #3 2011

Despite another sell on the report by INTC following in the footsteps of AA +  another RRR hike by China, the market as a whole somehow managed to put in a decent green day on Friday.  A bit of a head scratcher, but more likely a move in part due to… .”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”(last week).  Nothing will be finalized Mon/Tues, but expectation is all sides will leak their intentions on the issue heading into an early February summit.   As long as there is progress, the market should be fine.  If not, watch out.  Watch Euro, you don’t want a sell off in it.

All in,  the attention will shift to earnings as the flow pick- ups in the upcoming week and individual stocks selection begins away from the broader market.  We're officially into 2H January where the quiet period for corp's/govt ends as holiday cheer subsides.  AAPL pulled the first such release this weekend.

Shadowlist

• Momentum/earnings/“winners of ‘10–   The SOX strength has been noted here on a daily basis and INTC’s guide for capex guide fueled the SOX, notably the equipment makers (KLAC types).   Sorry, but getting excited over lagging equipment makers is not in these cards going forward.   The sole DJIM beneficiary was recent addition CAVM, which made a new high to $46.  The momo’s/winners await earnings as discussed.  AAPL FFIV coming up.
• Commodities-  All focus here has been the Ag’s/Ferts’ and despite another RRR hike, the group outperformed (MOS CF up~3%) once again.   Also as warned post ACI report, the coals weakened ANR WLT - off 6-7%.

Advance..

A day on pit road and right back on course racing to take another checkered flag with a close above SPX1333!.  The same catalysts that have motored the market for months were in effect today.  All 3 were pointed out heading into the day.  1) M&A FDO,  2) tech earning /pre-announcements from DELL/KLAC, 3) more strong euro fin earnings (SOCGEN) on the heels of Barclays.   Also, Bernanke (minutes help) didn’t stray from inflation mandate out for 2013.  The tapes color remains the same in respect to resiliency, shallow dips being bought etc.  Gauging by the Shadowlist components accumulation is present, but stocks are not being chased.  The leads to ~1% gains in the majority with a random single stock pop here or there on any given day.

Shadowlist

• Momentum/earnings/“winners of ’10-   previous days losses were negated as noted by Tuesday’s AMC newsflow.  Incremental upside in all sub groups (hardware, semi’s ,networking, opticals).  Incremental closing highs in AZPN IRF,  these EPS’ may not be runaways, but are as safe as they come allowing for greater size buys/ and almost definite dip oppy’s from these 9ema tree huggers.  NVDA,  strong guide, but its been in this momo name of 2011.
• Commodities –  Fresh highs in our closely followed CLF,X and a further 10% pop AMC in CLF following EPS.
• Financials – Euro fin earnings are keeping the U.S linked stocks in the game.(SOCGEN this time). JPM  fresh highs.

Oily patch

Once again buyers showed their new found disdain for stocks as the selling picked up in individual stocks.  Our Shadowlist has provided all the clues since intraday Monday to this continuing as it showed in an uptick in individual stock selling unlike the Egypt sell off which was purely ES driven.  Anything high beta (momo), anything with healthy earnings this Q is seeing money being pulled out slowly generating >5% daily losses across the board.

Yesterday, noted the sell off was only half of the 3% dip in January.  Well, today that was quickly matched as supports fell quite easily and brings up the possibility of 50MA as buyers are in ‘No Rush’ as titled yesterday.  This dip is looking more like the November one to 50ma eventually instead of the January one.  Short term- Saudi Arabia is the wildcard noisemaker here, if this turmoil doesn't spread there, SPX 1295-1300 cluster of support may hold.

Shadowlist

• Commodities –  Since noise is around $100 crude, it is surprising plays around coal are not being used.   Look for trading opportunities here on the energy play as this quiet reaction should change. (CLF, WLT, ANR ).  After peeling back sharply since mid-Feb, Ag’s Ferts were the first to see a buy interest reversal.
• Momentum/earnings/“winners of ’10-   Last week…".While some momo’10 names notably lag today in a melting up market, (maybe something to monitor for broader mkt)".  This has turned to not only lagging, but selling in 2010 ‘winners’ this week and now this Q’s winners are hitching a ride.  Hope is PCLN  EPS reaction AMC generates some buy interest on this pullback.

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.

..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.

..headwinds headlines

Despite Global markets weakness (>1+% off) overnight, markets here opened only a few pts lower at the higher end of the gap at SPX1321.   It was just a matter of time before a catch up to the world would ensue and the ‘cluster’of “S” would be tested.   Soon after the Bears got the upper hand as ‘demand destruction’ headlines from IEA,  SaudI Arabia weak demand comment and GS follow up to their basket commodity long trade close’ yesterday, adding crude to experience pullback to $105 was too much too handle for the Bulls.   Most of the emphasis was placed on GS’s call in the media, but in reality the steep selling should have occurred on Tuesday when the first commodity basket close hit the wires. In this view, it was the ‘destruction’ headlines that spooked investors, not GS, which is infamous for their direction call shenanigans as they change course quite quickly.

A few probably scratched their heads as to why a lower crude would not be beneficial to the broad market at this point.  The key is simply ‘demand destruction’, which is goes beyond the shopper pumping gas to go the mall. Only airlines/retailers benefited today.  The commodities deteriorated late Monday off the GS note and the selling just picked up steam as ‘destruction’ headlines hit.   Add, below par AA earnings, a bunch of tech linked mid caps earnings giving poor outlooks and the Bulls had a lot of headwinds to overcome today.  Techincally.. SPX1310  was about all the Bulls had left today as 20Ma was hit early and market stabilized intraday  As usual in the marketplace, an important technical level is compromised with a ‘catalytic’ event of some sort, this time we know what's ahead and that is earnings with JPM and a few notable Naz/tech links reporting shortly.

In all, considering all the negative’s above and below in Shadowlist components, add the fact Washington (debt ceiling) is a tailwind as well, it wasn’t that bad a final boxscore today for the Bulls. Any good news now will likely have the market continue the bounce off ~ 1310.

Shadowlist

■Commodities – A sizable ~3% shellacking with XLE, OIH breaking below the bottom of a trendline that starts from September’10.. Entering April 4^th trading day,”….. As the coal trade here likely cools off shortly,…”, Since WLT,CLF  faves here off 10% and a victim today of being a high beta energy trade casualty. Not much in commodity linked space to consider in the very short term.

■Financials  -  Wednesday’s start to financial earnings will likely decide if 20ma holds tomorrow, banks/brokers held up today despite GS cutting a few names, primarily holding due to JPM’s EPS hours away.

■Momentum/ earnings/ winners of ’10 –  It’s not a surprise the ‘smells like rotation’ from early last week didn’t materialize to anything but a bad odour... “ AMC, TXN bought a grandfather of a semi stock for a huge premium.  It will likely be a very temporary boost as pre-announcements possibilities are first and foremost in investor’s minds”.   The SOX  (off ~2% today) rally fizzled and today hit multi week fresh lows proving it was nothing more than short covering …” The initial ramp in Naz, semi’s was pure good old fashioned short covering as their semi home got raided.  Post-short covering, the conviction buyers simply stayed away despite all the upgrades in semi’s”.  

Mid caps earnings so far continue to be a headwind (MCRL latest relates to Samsung) and therefore anything wireless related gets hit today.  Coupled with Japan uncertainties on outlook weighing on group and the tech sector is in need of some good news. Bigger names, ASML/ADTN reports will be watched BMO.

Still ,some pockets of life today  in NVDA/ Networking/optical were not bad today as the well known opticals names like ALU CIEN did alright, while RVBD, which has been smoked for the last month put water on Wells Fargo negative preview of it's EPS after market closed.