..may they all be like CRR, FTNT,SFLY,N!

A day of digestion as the market rests on support provided by a ‘positive’ earnings season and a FED that gives and gives.  Most of the incremental gains for the market today are due to managers going after the lagging groups  as is always the case.  Thus, leading sectors in the market today are the Black Sheep groups, while the Nasdaq lags.   This also relates to a note a few days ago…”.bring inflows from the sidelines due to technical (indicies potential breakout)..” . Combined, it is all ‘PA’, performance anxiety into month end.  If the breakout the other day isn’t enough, today the TRANS were making fresh highs, which garners support from the Dow Theory cult. 

Another quiet day tomorrow likely, next week as discussed we will find how long the market can rest on it’s laurels. (earnings / FED).  There is no sign of shorts in the market and it’s hard for the market to go much higher without them being around to get squeezed.  The market would need a lot of money to come in the market to offset their absence.  Maybe, eco data will wake them up next week and/or wake up complacent longs.  Recall, what we said about April PMI's (tagged) showing what March PMI's didn't ( post Japan/Crude price escalation). 

Considering, DJIM has always been an earnings/small cap orientated place,  we still have something to look for as R2K earnings take over from the mega caps.  If today is any indication from Shadowlist (tagged to locate) earning linked plays, we’ll have something to look forward to and initiate new stocks. CRR, initiated last Q at $110, hit $169 today, SFLY, also last Q addition at $40 to $67 today and FTNT  from August at $18 to $48.  All were  >15% pops today off another round of excellent earnings. Makes you wish you were just a buy and hold investor....

Update on Friday, April 29, 2011 at 02:36PM by Demi/ YourPersonalTrader

Nice earnings from small caps, QLIK  play here and others like ACOM (now at of hand), ARBA , but one we played as an IPO in software Netsuite is best, N, headline is nothing # special, but inside is great 'billings growth') and definitely an add to Shadowlist.

DJIM #18 2011

Coming into earnings season, we noted investors need see and find ‘value’ in stocks to keep the market rolling along.  This was essential as there were enough headwinds to knock the sails out of the market. (Japan impact questions/ escalating price of crude/ rehashed sovereign debt / Washington/ SP downgrade/ GDP lowered outlooks off eco data ).

All the above ammunition for the Bears proved futile as earning season has been a success, plus corporations were busy with M&A/ buybacks/Dividends to give investors more reason to find ‘value’ in owning stocks.  The ‘80%’ of surprise beats premise laid out here before this impressive peak earnings week led by industrials has exceeded this threshold in the most of the critical sectors, even in tech despite a handful of blow ups by mega caps.  The ‘top-line’ trends in cyclicals has been very strong and was an unforeseen surprise following crude/Japan impact.  Thus, any weakness in Global PMI’s may be somewhat offset by the strong earnings season.  Also, recent Shanghai weakness attributed to potentially more tightening may now be relieved following China PMI’s.

As far as the trading week, we outlined the shift back to macro from micro  in last Journal.  The outlier in the market for DJIM' is the pick up in mid-small cap earrnings   As we saw on Friday, while the market digests recent newsflow, we’ll have earning linked stocks to trade if the last few days are any indication….ACOM N ARBA QLIK  on the heels of  SFLY FTNT  from Thursday.

Still, let’s not fool ourselves, the FED/USD continues to play the pivotal role for investors risk appetite.  Broad market eyes will likely be glued on the USD.  The market is likely to be back to the days where USD moves dictate the equity price action at these SP elevated levels.

Update on Monday, May 2, 2011 at 05:20AM by Demi/ YourPersonalTrader

Re: Friday Update ....Netsuite is best, N, headline is nothing # special, but inside is great 'billings growth'and definitely an add to Shadowlist.

Barron's article on this point.

Netsuit(ticker: N), a provider over the Web of enterprise software as a service, known as SaaS, reported solid quarterly earnings last week. But the company's decision to cut its profit outlook for the full year by a few cents a share grabbed the biggest headlines.

The slumping dollar is to blame for the damped profit outlook. Roughly half of NetSuite's workforce is based overseas and paid in foreign currency, so a weak dollar eats into the company's profits.

But that really isn't the story. NetSuite is finally starting to grab traction as it begins to attract more customers. The San Mateo, Calif.-based company is winning bigger customers and charging them higher prices, which shows that its business model is starting to work after several years of investment. Billings, an important measurement of growth for SaaS companies, rose 30% for the quarter.

Into the trading week, (Nov7- )

US vs. EURO'world

Although SP gave up >2% on the week on rapidly changing European headlines, bias/direction remains to the upside for risk markets. Market is seemingly taking Euro risks in stride last week(fatigued) on lack of concrete announcements/progress from last weeks summit, life goes on seems to be prevailing as it has since this all began 2 years ago (esp. relating to Greece/EFSF leveraging). A fresh and likely biggest wary to look at is Italian bonds/yields. ECB is intervening holding it below critical 6.5%, if it gets above it may trigger margin increase changes and the consequences (financial stresses) are inevitable and are unknown. After filtering all the Euro noise out this is likely most critical. Still, amazingly market is not so alarmed by Italian yields at these high levels giving credence to calmness/taking this in stride as well, which allows for any positive developments on this front to rally market.

Despite October rally, risk is underweight as most remain bearish. Performance chasing in risk is a good possibility into year-end, if European downside risk is reduced or at least the perception that it is for the time being. Improved US economic data and earnings is also offsetting Sovereign debt crisis noise as US double dip/recession fears have receded, while larger European economies confirmed a slide into recession last week (as expected this Q). (again)Italian 10yr’s must be kept in check for the offset to continue.

SP technical look for (limited) upside with a decisive break over 1275, Italian yields below <6% would likely calm fears and allow such a move. On downside, SP 1220-1230 and afterwards 1193 is the level to watch for support.

Earnings related stocks from last week:

N, SBUX, HANS, IACI, CVLT (cloud names N,FFIV, DTLK etc. acting well since EPS’), SIMO, MELI, FIO (caution: thin volume and competition coming make it volatile), EL, MDRX, CLH. *Some of these names are at double top levels.

Ahead of the open, (22-12)

Leading into the trading week,

” Earnings come from the softies’, ORCL RHT, TIBX. After all the negative announcements from the ‘hard’ware types, software is usually the ‘safe’ haven in tech, so these companies will be closely watched for tech contagion. If (ADBE) is any indication from last week, this group will provide relief”. 

Coming off a 3% melt up with all focus on ECB’s LTRO, holiday cheer was dampened as noted heading into today’s trade.. ...”Unfortunately, this last positive (LTRO) is out of the way now and euphoria should subside….. A rare miss from ORCL will be defended, but will have an impact as some factors mentioned by management will definitely effect other co's”. RHT, reported after ADBE earlier in the week and didn’t meet expectations setting up the table.

Considering ORCL has been a can’t miss earnings stock for years and with money loaded into the software space for anyone wanting tech in their books (especially post all negative guidance in hardware types recently), a volume tick up slaughter ensued in the sector with many linked stocks down ~10% in the first couple of hours with many of our favorite names over the past year(s)included.  (CVLT N FTNT VMW QLIK TLEO FFIV CRM CTXS BSFT even IBM ). Investors caught on by the opening bell and headed for the exits realizing ORCL’s call “will definitely effect other co’s”. Despite NASD shaving off ~25 pts by close as selling subsided by noon, this caught many of guard and the bounce is likely more of a function of selling stopping and quick traders going in than longs only stepping up.  Doubtful these kind of market revelations last for only 3 hours. AH’s, TIBX report was somewhat a relief, but isn’t a Goliath market cap like ORCL to change view overnight. Worry dust needs to settle here.

In all, the broad market was lopsided. As speculated, the euphoria of LTRO died off despite coming in at higher end of whispers numbers, but the market didn’t sell off (positive) and closed above 20ma/50ma, even as Euro sov’ yields went up (see ‘watch’ note yesterday). The debates on the LTRO started premarket and will linger on.

 In this view, just add it to the Eurozone band aid alphabet for now, EFSF,ESM,SMP and go on.