Fizz'

“It’s hardly a touchdown’, played out all day as the markets breakout was put under ‘review’ and thus spent the entire day in the red.   A pullback into the ‘red zone’ (1280-1260) was negated (possibly only for today) by the special teams (dip buyers) coming in near the close.   Until earnings flow picks up, the market will remain in conundrum.

Wary -  Today’s was something discussed here recently…”… inflation number this week as it raised concerns of ECB hiking before Q4.”. 01/07.  At that time we were also watching if Bernanke signalled ‘hawkish’.  Today it was Trichet/ECB making a ‘hawkish’ turn and soaring the Euro and making the markets think a hike before Q4. 

As it’s shaping up, earnings season will have many ups and downs.  Although the lack of pre-announcements this Q should signal a better Q4 over Q3,  it’s really a mixed bag so far with CSTR, INFY  big disappointments and a SAP (Software) upside surprise.  Considering, SPX ~1280 has been an excuse to take some profits, (watch for) don’t be surprised to see this pass to stocks and a sell on the news earnings reaction.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   These linked stocks are waiting on earnings as they are not being chased higher and instead the way to make a point or two off them is to buy an early dip if it presents itself on most days .  INTC  earnings are becoming less relevant as they are behind in the ‘hot’ mobile chip story with NVDA/ARMH  since CES Vegas.   A dinosaur won’t generate excitement off its decent report. CSTR  negative pre-announcement does nothing good for the momo names.
• Commodities-  Yesterday,  we basically left only the Ag’Fert trade on the table short term post ACI (coal) earnings note. Today, even with a weak USD, commodity linked stocks decoupled.
• Consumer -  Shadowlist addition: SODA, was the good market fizz today heading 15%/5 pts higher post -alert and is a reminder of why we want to have cash on hand if this was an earnings report to jump on and also why we don’t want to be holding into earnings in fear of a CSTR.

..jinxed it

It didn’t take long for answers to the negative assertions presented in yesterday’s Journal, including somewhat rhetorical questions…”Stubborn/resilient or (dumb)? ..”How long can this (oblivious) last?....Are stronger (Ahead of) than expected earnings Q4 prints going to be enough to hold up the market?.

A fall of 20ES points from premarket, ~13 SPX /40 Naz day points and notably a ‘cloudy’ after hours session may finally awaken the shorts to participate in this market.   All in,  wish the DOW was off 300 points instead of 12 as it gives a false impression of the underlying tape.  Most of the profit taking now is earnings related, but the ‘wary’  stuff noted here, (policy tightening speculation globally) aspects of the market (inc. 2H January effect) are working themselves into the markets ‘psyche’.    Today was the first day in weeks we’ve seen profit taking pick up as investors have been willing to hold on, but days like today will wake up the complacent ones and may cause more selling down the road along with more confident ‘shorts’ coming back.  So, the strategy of hoarding cash for potential earnings plays remains to avoid any of this today and potentially more.  This also works because after today’s action in financials, tech, ’10 winners, ag’s, we’re left with little leadership to seek for a trade.  Allowing the overbought conditions to work themselves out will be in the best interest of all 2011 Bulls.  It’s been a good 6 weeks without coming close to the 20ma, the market can use a visit.   Recall a trading premise here, if intraday dip buyers do not appear as was the case today, they usually don’t come in the next day.

Technical- Support 1277' ish on a close basis, followed by 20ma pretty easily, if busted. 

Shadowlist

• Momentum/earnings/“winners of ‘10 –   discussion here of the overhang of Jobs outweighing AAPL’s excellent print played out as the stock rolled softly downwards all day from ~450’ish post earnings levels signified no follow through for itself and importantly for those hoping AAPL/IBM could pull the market higher and unfortunately answered ….”Are stronger (Ahead of) than expected earnings Q4 prints going to be enough to hold up the market?. “…But, this was hardly the reason for a 40pt fall, the real reason was..” the component stocks like CREE LLTC had disappointing inventory correction themes”. You can add WDC  to the ‘inventory’ trend (which hurts PC outlooks) and more reports tonight confirm this negative.  The ‘unfortunately’ lack of participation from the FFIV CRM RVBD types hovering at 9ema support yesterday had most breaking this support intraday only to avalanche big time post FFIV earnings AMC.   As we know from early October post EQIX preannouncement,  the whole family gets taken out to the woodshed and that’s definitely the case AMC w/ FFIV off ~30+, APKT off 7, RVBD ~6, EQIX ~5, CRM ~10 etc. 

Interestingly, go back to CSCO’s  report and see what we said may eventually show up and be a negative come January reports!

• Commodities-  the Ag’ play introduced here in December for early ’11 finally curtailed as investors used the Cargil ‘divest’ of MOS shares as an ‘excuse’ to take profits.  An’ excuse ‘ is what is, but that’s all a market needs to take profits and ask questions later.  Tightening spec. globally leaves little to trade now in commodity linked stocks.

• Financials-  ..”A ton of names to report on Wed. (inc GS WFC) to potentially (hope) negate C’s print.” . The ‘hope’  didn’t materialize one bit as GS  and many others in space disappointed with earnings and as in recent Q’s the sector runs into earnings and falters(selling) soon after.

...holding up

Market reaction to what may be construed as negative tilted newsflow (crude price, a few Eco data points, lowering of GDP forecasts ) continues to be limited by long holders. One of the underlying reasons is a tick up in broad market M&A activity ranging from telcos to semi action last night.  Most other market times, a $6.5 bln deal in the Semiconductor space would propel the Nasdaq to hefty gains, but not this market today!. Unfortunately, we are in somewhat of a hold mode as Japan and some overall softness in consumer hardware space gets digested and investors wait on earnings to commence and/or pre-announcements  (a few more mid -caps today, but nobody large) to unfold.   As shorts watch the market edge higher for almost 3 weeks now, a fear of more upside has left them sidelined.

The only space shorts have tried to take advantage of is the Semi space and the TXN deal screwed them of their only home.  We would have seen market gains instead of another meandering day, if ‘conviction’ buyers entered the market. 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.  The market needs leadership and if a trough is around the corner for the semi’s, it might get some money off the bench and a follow through to chase higher beta growth would likely follow.

In all, the anticipation here heading into the week is unfolding as the market is seemingly on summers hours working off the rally in horizontal fashion before earnings.  As the R2K beats on higher, it welcomes a move higher from more of the market as digestion occurs near 1335PX.

Update on Wednesday, April 6, 2011 at 11:20AM by Demi/ YourPersonalTrader

Hard pullback to note from open-10am on momo', notably internet linked names with mkt green.  Some kind of profit taking or/and rotation?..Financials JPM bid, Semi's trough?....we'll see

SINA SOHU BIDU TZOO PCLN APKT NFLX AMZN OPEN LULU  all over~5-10pts down reversals.

Opticals trying that bottoming again from last week, outperforming

..U.S a little too respectful maybe?

Firstly, DJIM covered that earning worries were slowly being put to rest in Europe (>2% today) with solid & broad earnings over the last 2 days.  Unfortunately for many trading US markets this was put under the rug as all media reporting was on CDS spreads widening in Europe and poor reactions to US earnings that came in, good or bad.   What was supposed to be an important micro week turned to the Macro until earnings/outlooks from many market behemoth’s hit Tuesday night putting many worries (Japan impact/ death of the PC) to rest on this side of the pond.  Naturally, we’ll still see misses and not so rosy outlooks this Q, but it will be company specific issues. Not all management is created equal and this Japan tragedy definitely tested some CEO’s grit.   Besides, misses, bad outlooks occur every Q, not just after a crisis situation.

This (earnings) is one ‘what if’s’  we discussed in DJIM #16 as an Upside risk  and reason to rally.  Knowing the ‘Upside risks in the market plays into alerting SP1295 was likely a buy point while market digested SP downgrade Monday morning.  Considering, the market has melted up 30 SP handles and about 5 more post AAPL-EPS in 3 days since,  it has caught many on their heels.  The question is will they step forward and help push the market over SP1340 or will we continue to be range bound?

Well…not to spoil the exuberance, but we may see overnight ES highs be the highs tomorrow.  Recall, we noted we may have exaggerated moves in either direction this holiday-shortened week.  When a move is fast and furious as this one is with all focused on an overnight supposedly ‘healthy’ semi/tech, it is very easy to overlook a few things in the underlying market.  A few of these are negative, a very heavy bank index (multi month lows as loan growth is disappointing, Mortgage insure biz as well) and the Rails to a lesser degree. Add the fact not all think semi concerns are over with and once a lot of the short covering is done with, expect longs to take this gift rally profits instead of buyers to come in with conviction.  Also, those who have vacated their desks early this week will be in line.  Note, semi sec is still way off Feb Highs with many underwater waiting for a life boat. This rally might be it.

Of course, there is the endless supply of ‘Macro’ headwinds on the table, at least Micro won out for a day this earnings Q.

Shadowlist

■Momentum/ earnings/ winners of ’10 –  Semi’s up ~4.5% led the buying in broad market, DJIM’s '10 momo names were led by VMW  earnings supporting peer names here like  CRM  APKT  FFIV,  >7-9%.  JNPR  was one stock where a disappointing guide still found buyers (this was noted as something important to look for in Tuesday’s AMC reports), helping FNSR and peer optical plays.

■Consumers-   Our lux apparel FOSL UA  RL TIF  >2-4% had very nice morning with all hitting intraday fresh highs. WYNN  was the highlight off earnings.  Noted broad strength in an update would likely include Autos linked stocks, components up 4.5%, Auto 3%.  PII - Polaris Industries, Inc. earnings standout.

■Commodities –  Action could have better considering USD was getting whacked. Ag’s Ferts/Steels under the tape.  ALB -  Albemarle Corp. , old DJIM standout Earnings in materials.