Back door

A nice way to kick off ’11, but still something to be wary of as the 1^st trading day in 09/’10 produced even better results.  Still, despite the >6% rally of December the market hadn’t seen a >1% day since the first days of that month.  As pointed out last week, all the ‘illiquid’ action was irrelevant in respect to inability to cross SPX 1260 “R” and not seeing conviction off eco data to help for that to occur. Today, 1260 was crossed easily as the market rode to 1276 highs until volumes fell off later in the day.

• Catalysts- as noted last week watch for a China PMI, if lower M/M it may wake up the market on ‘coolin’ factors. Importantly, inflation sub group of number fell 7 pts.  Also, Euro/US ISM came in strong signalling a synchronized global acceleration.  The ‘back door’ flow helped as well with most global markets closed.

Shadowlist

• Momentum/earnings/ winners of ‘10 – woke up,  led by an article saying FFIV >3%  RVBD >7% APKT >9% were M&A targets spread to traders chasing other higher beta names for first time in a month.
• Commodities-   Although Ag’s links lost steam after 3 days late in the day, the analysts are raising estimates/tgts on names as we had been looking for.  AGU  on Friday, today MOS (reports Tues.).  Coals , WLT, CLF >4% outperforming on Australian floods.  Steels  should also benefit from floods.  Precious metals, copper rolled over in PM. The ‘rare’ metals stepped up again as Dahlman Rose following in their own footsteps with another outrageous target of >80 on MCP >15%(did this with AUMN late last year, a gold stock we had up). AVL up >20%, REE >6%.   Looking further into OSN, it’s actually a nice growth stock with a ‘Rare’ connection, but notably a ‘steel’ stock that has to do with every China infrastructure aspect from highways to railways etc.  It’s also cheap and a fresh IPO importantly.  Still, it has issues as little China co’ are being exposed to fraud noise since December.  Everything else like CHGS CDII is definitely considered ‘junkyard dogs’ stuff here. 
• NCH's- GTLS, JOYG, VMW, ROVI, HOLI, QLIK, ARB ARUN are just more Shadows putting in new highs intraday.
• Financials- continuing December streak into earnings,  GS  breaking out
• Consumer- Casino  sub group had very good Macau numbers and WYNN  finally got over 105.

Don’t pay much attention / trading decisions based on Global markets, thus the ES to start the day as most markets will be playing ‘catch –up’.  SPX 1280 as next ‘R”

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.

..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.

leaders 'lead'

One again anything that can be construed as negative tilted news was brushed aside by US markets (globally it wasn’t).  We’ve discussed this since the middle of last week as market turns a blind eye, now it’s continuing the trend at window dress up time and ahead of earnings season.  This is same factor at work as when alerted at SPX1250 and said to watch for negative ‘nuke’ news not get sold off any longer, which would be a positive going forward.  Every bit of negative newsflow is seemingly ignored now as investors tolerance has been built up with Macro global issues.  It's perplexing to many.  It could continue until Friday as investors/traders await all the data/QE2 for that day.

The morning ramp can be attributed in part to nobody finding a catalyst overnight (see yesterday's closing note) to close market below the pivotal SPX 1314.  There was no positive catalyst out there this morning.   It was a matter of Performance Anxiety (PA) setting in as managers went after growth/ momentum names.  Remember, these names didn’t participate in the first leg off 1250SPX and really haven’t played a big part of the ‘missing link’ tech (mostly SOX) rush that ensued afterwards.   Momo-linked stocks like FFIV APKT AMZN SOHU and many more simply caught a bid.  As 2pm approached many probably thought the market may repeat Monday’ s late selling due to no positive newsflow, but ‘leaders’ were at work this time with PA being enough of a catalyst and so chance of sticking the SPX gains was a high possibility unlike Monday.  Technically, it was important to get back over SPX 1314 quickly and the icing is a close of 1319, which could be enough for more points as noted in weekend Journal.

Shadowlist

A stack of DJIM names +>3pts as growth/leaders lead the way today.

• Momentum/ earnings/ winners of ’10-    SOHU +7, PCLN +7, AMZN +5, FFIV +4, (NCH's- SFLY  OTEX)  APKT +3pts  broke trendline.  SOHU, unleashed a huge move, saw no news, only idea of why is…China Unicom's results point to a strong mobile internet ramp in 2011, as BIDU SINA  act well too.
• Commodities – WLT +4pts, MCP +4, CRR nch,
• Consumer-  noted Retail was fine yesterday despite leisure selling,  LULU nch , RL, UA all +3-4pts off recent DJIM PVH +5pt on earnings.

..meandering

As the market meandered near the flat-line in the morning, you as a trader begin to look over the Shadowlist to see any trends developing. What you see today, is what you see many days lately and that’s pockets of strength in stocks linked to any individual news. IE., First hour of trading,MCP  >10% on an acquisition, APKT >5% on target price increases and the flip side SODA down 10% on a 5mln share offering, NVDA on price decrease.  

Unfortunately, a sidelined market consists of days like this as traders jump on anything making news, even if it is as irrelevant as a price tgt increase without an upgrade attached.  Other more important trends were visible and that’s where ‘slower’ money is going instead of ‘fast money’ looking for a quick flip in and out. (see below).  If you pick up the relative strength early on, you can dwindle your Shadowlist trading list from 60 names to maybe 10 to concentrate on intraday.

By trading close, a meandering market continued and the stocks/sec’s noted here kept outperforming and/or underperforming.  Nothing really changed all day.

The SOX once again weighted on the market as the biggest underperformer <1%.  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.

Shadowlist

■Momentum/ earnings/ winners of ’10 – Last week we noted strength in Chinese Internet related names, once again SOHU BIDU, SINA  were up 3-7%.

■Commodities  - Relative strength in Ag’s/ Chems continued to follow through post USDA report.

Update on Tuesday, April 5, 2011 at 04:59AM by Demi/ YourPersonalTrader

Apple Inc. will have its weighting
in the Nasdaq-100 Index lowered as part of changes to the gauge
by Nasdaq OMX Group Inc. to better reflect company market
capitalizations.

http://bloom.bg/gvckYr

Shake, Rattle and Roll on..

Considering the market just rebounded from SPX1250 to nearly year’s highs after an Earthquake, Tsunami, Nuclear fears, you have to believe a 7pt something magnitude quake will only Shake, Rattle and Roll the market back to it's early morning fault line.   This morning’s slide was pure ES/ SPY stuff with little reaction on individual stocks.  Stocks that fell through the crack did so on small volume as bids naturally disappear and scary pants will sell at any level to exit.  As traders, we've lived through enough turbulent moments the last few year’s to know being spooked out of positions is no way to go.  As soon as rationale set in, the market rebounded and was back to the same trends expected here entering the week (waiting on earnings to kick off).  Give shorts some credit for not laying out some conviction by pressing the market off another quake headline.

All in, not a bad day considering Financials only traded inline / SOX succumbed to a little profit taking following Samsung’s report on NAND specifiaclly that hit semi-equip linked stocks, yet SPX posted only an incremental loss.

Shadowlist

■Financials  - Not the best day for rotation to exhibit itself due to newsflow. GS  edged over 50ma as sector heads into it’s earnings. Last few Q’s it’s moved into the reports.

■Momentum/ earnings/ winners of ’10 –  TDSC,KEYN, finally broke out to NCH

”..there is plenty of money to be taken from other sectors and so it may not last long in high beta momentum because earnings are around the corner. Still, it’s best to be prudent if trying to find a buy point as money comes out faster on the way down then up in this group”.  At least it was good see a few momo names snap back, SINA, SOHU.  MCP , did as well but it was purely on newsflow (congress bill)