Missing link..

As for most of Monday’s trade, the market (SPX) traded in tight 5pt band suggesting digestion, consolidation of the 3 day reversal.   Unfortunately, not only did the ‘missing link’ as per yesterday and recent days Journals, the higher beta ‘leaders’ of 2010 and those of 2011, not only didn’t get a bid, but were sold off pretty hard across the board ie.FFIV,APKT, BSFT, RVBD and many more including opticals).  The Japan tech concerns were taking their toll, plus the uncertainties relating to AT&T /T-Mob deal and a blip in spending that may occur years away if approved.  Now, this is silly to think about the possible consequences years away on a deal that may not even get regulatory approval.  The material impact from Japan is unknown and the market is pricing in the worst case scenario without much guidance on the issue from corporations until the start of some tonight.   All in, this disruption will be a temporary hiccup to the semi supply chain and the sub-groups will have a sharp rebound as they did following the Taiwanese quake(a good data point to measure off) over a decade ago.  Also, full year earnings should not be effected by a Q shortfall as it will be made up as demand returns over the year.  After today, the market may be close to have priced in the effect.   A first data point AMC helper was JBL  delivering with an excellent report , but without Japan inclusion, recall its peer SANM did more damage to anything EMS, Comm.equip, Opticals.   Also, ADBE ‘s 50mln guidance impact from Japan is not dropping the stock AMC, possibly giving glimpses of a ‘baked in’ Japan situation coming very soon.

..maybe a start to a sentiment change..

As the market meandered in consolidation mode in the ‘red’ all morning (SPX -5pts at noon),the ‘missing link’ noted here was outperforming with JNPR  (networking) and FFIV  (best on SP 500 tech) were coming out of the doldrums and leading the way.  As the day progressed more and more past leaders joined and a broad market move higher ensued.  The hope is this the beginning of what has been discussed here this week in respect to Japan tech worries being overblown and close to being priced in.  JBL’s  report negated some of the fears for EMS, Comm.equip, optical stocks and late in the afternoon TXN’s CEO said the company would come close hitting street estimates despite Japan.  AMC, RHT and MU  put in strong reports to help the cause and an important day is ahead in earnings tomorrow with ORCL,BBY, RIMM.  Note today’s action took place amid a bunch of negative bits that the market shook off.

Shadowlist

• Momentum/ earnings/ winners of ’10-   JBL helped sentiment overall in this space.  FFIV, RVBD, APKT  all >3-4%. Opticals like OPLK  and notably IPGP , +10% and a NCH.  Also, momo names like BIDU, NFLX do well.
• Commodities-  The coal trade continues for a 6^th or 7^th consecutive day.  GTLS,  continues to be a stand out putting in another NCH along with CRR, another EPS winner here this past Q.