'Inside the 20'

The trend remains the same as ‘Inside the 20’ (SPX 1260 to 1280) gets churned and churned.  Today, it was clearly the (see yesterday’s Journal) potential Headwind vs. Tailwind battle playing itself out.   In all, the Shorts are unwilling to lay out more exposure near 1260 and ‘dip buyers’ take over.  Still, the ‘Red Zone’ is providing trading oppy’s within DJIM’ Shadowlist.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   Some CES induced carryover as SOX leads again.  FFIV  last week noted as ‘setting up’ had a nice >4pts day to NCH territory.   Added EQIX  back to the trading Shadowlist and it proceeded to have a nice afternoon adding ~2pts to get up to 2 month highs. Some squeezing was felt here, let’s see what a potential breach of $86 brings.
• Commodities- LNN, an add following a gap down earnings report, covered it’s gap in a big way >6%/4pts.  This despite a GS downgrade of Ag’s (CF/ AGU) halting the groups recent run.
• Consumer-  Retail looked better.  Our list includes TIF, PVH, FOSL to trade if this has any follow through.
• Miscellaneous-  added an old favourite at DJIM, EBS  following upped guidance that shows co’ is anticipating a ‘big’ gov’t contract.

Waiting..

An important end-game in trading is not to overthink, contemplate every whipsaw intraday.  This is the ‘space’ we are in (SPX 1260-1280) and a 6bln ES trade that supposedly spooked the market quickly intraday is really just a boring market looking for an ‘excuse’ to sell…”As 1280 invokes ‘R’ for the past week, the market impulsively sells off here and will continue to find an excuse to take some profits”. DJIM#2.   Don’t look too far into reasons for a swing intraday such as today’s unless there is a worthy newsflow headline.   It is what it is….. as seen by the volume decrease from last week and that is a market awaiting earnings and/or a bad sovereign bond auctions coming up (shorts futile hope).    An illiquid market will exaggerate any move, so look at Shadowlist if individual stocks are moving with the SPY/ ES to gauge the significance.  Up or down.   Clearly, today single stocks did not follow the steep drop.   Add the ‘blizzard’ for Wednesday in NY + long weekend ahead and nothing will likely be decided till earnings get rolling post-holiday.

In all,  if some profit taking around 1280 is the game,  get cash ready to use for new earnings plays in the coming weeks instead.  This is also one way to avoid any correction, if one comes in 2H January.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   No noteworthy flow, EQIX  added 2.5 intraday, but a squeeze never materialized.  Action was better on Monday.  Previous DJIM,  ININ  was the notable winner off an earnings guide, but this one has a history of gapping and not doing much for weeks after.
• Commodities-   A thin tape is when a WSJ journal story/ DB group upgrade creates exuberance.  Still, WLT  being DJIM’ fave coal for ages was the biggest beneficiary +6pts, so let it be.. USDA coming up for Ag’s space.
• Consumer-   Retail group still lagging as TIF’s  guide did nothing except get the stock faded off a good open, no follow through…yesterday..(Retail looked better. Our list includes TIF, PVH, FOSL to trade if this has any follow through). LULU  upped  guidance AMC and it will be interesting to see if it holds its gains tomorrow for the whole group.
• Miscellaneous-  a nice guide from a Med-tech HTWR, under consideration to add to list

..hangin' tough

The “Bull” stomped it’s toe early morning to 9ema on the SPX and immediately was helped by dip buyers to get back on it’s course!. The markets resiliency day after day is simply impressive and why shouldn’t it be?.. Just look at today…a strengthening economy as more good Eco data came in, v..good micro # continued, an unwavering Bernanke, a less hawkish Trichet, a surprising consumer who shopped rain or sleet or snow(retail #’s), what more can you ask for?. Okay, just one thing and that is a ‘surprising upbeat NFP# and the market we’ll find itself at pre Lehman Aug ’08 highs.  It will be interesting to see what the market does at this symbolic, if not ironic juncture!

Shadowlist

• Momentum/earnings/“winners of ‘10 –   As discussed , if earnings from “cloud/data..”improve following FFIV’s disappointment, the groups share prices will improve as last Q. FFIV’s past 2-3 days are all you need to see.
• Commodities –  cyclone wavered and commods were hit early, only to make an impressive comeback!. Would not be surprised to see follow through from names like CLF, X (steel linked)
• Consumer – Was today a turning point? If so, we can look at LULU FOSL TIF RL names to trade soon.
• Q4 earnings update –  OPLK, OPNT put in 3-4% days after consolidating post-EPS. AMC, JDSU  put in one of best big beats this season.

..same

Another day, another leech on the back of the Bear!.  If only the trading Bear would do as their namesake and hibernate for the winter to save it’s hide!.   Unfortunately, the Bull is only given incremental up days, one after another as the lack of short exposure doesn’t allow for many ‘big’ up days.  As seen recently (Egypt situation)any short willing to press positions quickly covers at first sign of another failed attempt at downside.   Today, 2 hawkish Fed speaks/ China hike didn’t dampen accumulation of shares in the broad market.  Even though these are not catalysts to us,  it used to be that the market in recent years would gyrate on any small bit of negativity. This just shows the maturity of the market as it’s on one track mind to global economic strength.

Shadowlist

• Momentum/earnings/winners of ‘10 –   The risk in CSCO’s outlook exists following last Q and is keeping the movers at bay.  The only fuel for the Bears this week is the underperformance (2^nd day)of SOX to the tape, but this might be only a condition of some profit taking from the best group so far in ’11.  Air out of the NVDA’s semi types is a good thing.  On the hand, we are seeing  rotation as pointed out in the last few Journals to the consumer sec since late last week and financials as of Monday, which the Bulls can offset with.  As far as the fiber optical plays,  consolidation is continuing after big up day on Friday and so watch for another entry soon if this has any legs as a trade in ‘11
• Commodities –  Under hike cloud today.
• Financials – day 2 of being one of the market leaders.  As per Shadowlist ,we concentrate of GS/JPM and/ or RKH (ETF) for Regionals to trade.  But, honestly with earnings plays this Q and retailers this week the plate is pretty full to get overly involved in a trade here.
• Consumer –  Our retailers/ goods are still moving inline with the tape.  Since pre-Friday trade listed DJIM’s are up 6-9% eg.  LULU  $73 to 80;s, FOSL  73’s to 78’s, RL  108-115’s, PVH  59’s to 63. 
• Q4 earnings update -  this is just a good safe stock that has constantly come across, but because it’s a crawler and unknown it has never been added to trading list.  Until now,  AZPN  is a nice safe stock at 1.3b cap in the software space following a good report.

DJIM #7 2011, Shadowlist update

The trading backdrop remains as we left it last week, except the markets will have a host of eco’ data to deal with this week, focus on ‘inflation’.  The week culminated in a big finish Friday with the ‘Opticals' stealing the show (JDSU, NPTN >12% , FN up ~8%),  a trade we were in front of all week in the Journals along with the ‘Retailers’, 8-12% on the week,(LULU, FOSL, RL).

An updated Shadowlist (below, visit site) is the only place we’ll need to look for the next ‘pocket(s)’ to trade away.  We’ve added many new plays (mostly earnings 10-15) to this year’s first list via mentions on Journal/Alert-comments since Jan 1, while removing winners from '10 eg. MOTR, ROVI in order to narrow the Composite to about 60 stocks to monitor the breath/rotation and individual stock picking. 

..Prove it

Following the early week slide, we noted…”Considering very good eco data is irrelevant as today showcased, anything more than a bounce into a probable good NFP# can’t be expected”.  Well, we might have to rethink the ‘irrelevant’ part following today’s ‘bounce’ right to this week’s highs,( if ) the whispers of 250k-300k jobs are hit or not!.  Will it bring conviction buying if hit or will we continue sideways trading going forward.  Guess we’ll see soon enough and so take it a step at a time.   Anyways as discussed yesterday again, a ‘bounce’ possibility existed thanks to the combination of a big sell off day w/ the chance crude would ease off following a big >2% day would generate optimism into the jobs #.  Truthfully, it might have generated a little too much optimism putting aside everything (crude >100, Libya, Saudi Arabia etc. ) for the day.

Shadowlist

• Q4 earnings update-  some of the best action was from this DJIM shadowlist sub group. TDSC >10%,OPNT >9%.  On the less volatile’safety’ side, SXCI, TBL  traded in NCH(new closing high) territory.
• Consumer- life coming back here today and maybe a good sign forward…WYNN (nch) and FOSL,UA,TBL 4-5% higher.
• Commodities –  many sources as per Briefingcom/CNBC all over ‘coal’ today. What took you so long?. CLF  tacked another ~4pts climbing back over $100. WLT,ANR  also put in ~4% days
• Momentum/earnings/“winners of ’10-   A few like RVBD  had decent gains, but overall still sloppy considering the huge rally as the NFLX,FFIV,CRM  hardly showed up.   Opticals were mixed, some like OPLK, FNSR, FN  performed ~4%.

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. 

DJIM #13 2011

Last week's 2.74% SPX recovery rise is pretty well summarized last Journal.  Friday’s action did not nothing to deter from the trading premise here with tech earnings being the missing link in a move higher post consolidation early in the week.  The ease the market broke through 1314 ‘R’ in early trading  before wavering some in the afternoon makes you think it’s just a question of time before we test February highs. There’s a cluster of “R’ around 1313-1319, but once a close occurs over, the market will have higher sights in mind and it should happen this week.  Simply, the recovery reversal of nearly 70pts trough to peak is only 7-8 days old and many are behind the ball on it (as in surprised).  This coming into a month end/Q end is where a PA pill (performance anxiety) will likely be swallowed by managers to play catch up.  This non-participation is also evident in the rally’s volume, this negative may turn into a positive as some larger managers may chase.  As Traders you can’t predict any further macro shocks, so you work with what’s in front of you and window dressing is it as we enter a corporate quiet period before next Q earnings.  A few notable eco data points Friday (Global PMI’s,NFP#) coinciding with QE2 hitting the street.

Shadowlist

• Momentum/ earnings/ winners of ’10-   The Nazzy/ R2K outperformed the SP by a full 1% this week, this sums up this Shadowlist group as corporate profits led the way, so plenty of linked names from leaders and oversold opticals to look at for more trading. Networking related names were weak post AT&T-T-Mob deal, but private Lightsquared is drawing attention as it makes deal after deal .  This equals more network build up, not less.
• Commodities- as per recent activity, coals,  GTLS, CRR,  MCP, names noted most here keep on trading well.
• Consumer- retail/lux DJIM names hanging in well, FOSL  keeps making new highs.  Some rotation late in the week into our casino names (WYNN, LVS)  to watch further.

DJIM #14 2011

As cited Friday post Global PMI/ US NFP#, the market should have been relieved as numbers came out better than feared.  March PMI’s withstood the shock of all macro global issues and NFP# came in solid, but not a big beat to make the latest hawkish case stand up. (*see below for more on PMI's).  The Bears still had a few shots to disturb the day, but US ISM came in line and most importantly, Fed Dudley curbed a week’s worth of ‘hawkish’ (tightening) exuberance by keeping to the ‘big 3 ‘ doves mandate. (Bernanke Monday night speak to follow).   

DJIM expectation was..” All in, the market big $ longs and markets shorts are on hold. The data may do nothing to change.”.   Basically, the market sighed a relief and it moved past “R” from data, but the big $$  is still not convinced to chase this 6.5 % rally off SPX 1250 and closed back below “R” top/ SPX 1335.   Market wannabe participants, (this includes big money longs and shorts) who look at the market rally in disbelief will be left with little to go on this upcoming week prior to earnings season.  Why?.  Simply, we are into a very quiet US economic/ earnings calendar week as SPX nears it's highs for the year.   It looks like the market might experience 'technical difficulties’, as in a market driven by technical analysis as the SPX nears ‘ double top’ ..Bear lingo.(* R2K/DJIA are above it.)  That’s all great chatter and makes use for all the crayon chart drawings you see in the social media stock world, but once the day is done, shorts/Bears are unlikely to do much (conviction) before earnings get into gear and risk more upside from the market.   It won’t be a surprise to see pre-announcements this week, we’ve seen quite a few already.  It will be interesting to see market’s follow through reaction as they hit (how much already baked in?). 

In all, we could be stuck as both sides have little conviction, likely all newsflow will come from outside US markets (ECB upcoming hike, China possible hike).

*While PMI’s held up for March, it’s very possible that immediate impact is not yet showing and April reading's will deteriorate.  It’s a few weeks away, but if a sizable correction is to occur, it will begin prior to the releases later in the month of April.   Earnings will need to offset possible Macro (Japan,Oil) drags ahead for investors to find value in stocks.

Shadowlist

■Momentum/ earnings/ winners of ’10-   If you think window dressing front running doesn’t exist,  just look at a 5 day FFIV chart.  Isn’t it sweet when a house downgrades (FFIV) immediately after a 8-10pts ramp higher into Q end.  This goes back to what we were saying about possible jumping on these missing link laggards into Q end.

Just 24 hrs after a bottom seemed to be formed in the opticals, a mid cap (EXFO earnings) destroys all linked names like JDSU, FNSR.  It’s quiet silly/ridiculuos and shows why it’s a momo’ trade this year as 50mln to 500mln market caps are bringing havoc on 2-4 bln market caps.  This action wouldn’t happen in many other sectors in the marketplace and will eventually be in play again as network builds are not going away in US and China.

As as broad tech, the SOX ‘dislike’ underperformance noted here mid week extends, month end couldn’t do much for a bid into the consumer end tech hardware/semi linked plays.  This is where most pre- announcements will likely occur.

As far as Shadowlist components, Wednesday included a few select winners on site. A few continued to be stong to close off the week.  NPTN  surged to a peak of ~20% next day, TDSC, added 13%, MSTR,  tacked on 3% to 8-10% Wednesday's gains.  WTW,  another 6%/ 5pts. 

■Commodities –  One sector that did have follow through on Friday as per note to watch was the Ferts/Ag’/,equp./chem.  As the coal trade here likely cools off shortly, we’d look for the ferts/ag’s/chem to trade post USDA numbers boosting corn prices. (Thurs.) 

■Consumer-  the retail sec is not getting much market attention, but DJIM earnings related retail/ lux plays continue to make new highs during a big week/month.  SODA,+6%nch FOSL, TBL, WFMI, UA surged Friday.  RL next for highs?. See table on site attached.  Also, casino (WYNN LVS )  on watch again since last week had nice day as March Macau numbers were excellent, the comps were very hard to beat, but they did so in record fashion.