..ticking higher

A game of..’You go first’….’No, you go first’, characterizes the market participants (longs and shorts).  A lack of conviction on either side,  although both have reasons to make a move.   A lack of urgency is prevailing, likely due to expectation of a correction.   A correction would give investors who believe more now in a global recovery a chance to enter and the shorts some confidence to try and press the downward shift.   Luckily, we are at the peak of earnings season and all we need to do is concentrate on individual plays and nothing more.  There’s plenty of fish to trade on a one by one basis, whilst ignoring the market gibberish on Dow 12000/SPX 1300.  Eco data- Initial claims couldn't get a move started, now GDP on deck.

Shadowlist

• Momentum/earnings/“winners of ‘10 –  The Q4 earnings reactions are definitely getting better as speculated here recently as seen by NFLX  partying like it’s 2010 all over again.  Also, RVBD  basically in-line call/guide was well received and should begin to take the sting out of the space post FFIV.  (See EQIX note this week).  Importantly,TMRK ,  M&A activity is a boost for the data center related names like EQIX SVVS  etc and just the whole ‘cloud’ area.
• Commodities –  Despite a 5^thstraight down day for the USD, most spaces sold off, likely due to China New Years hikes possibility.  CRR,  a earnings addition to trading list as it continues to make solid earnings in the O&G equipment sec.
• Q4 earnings update – OPLK OPNT, mid –caps on watch for now as 4-5pt gaps are little too eager for this liking. SCSC , as well.

..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.

..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%.

DJIM #17 2011

Kept hearing late in the week,” what a rollercoaster of a week!”.  Well, we’re not sure what all the fuss is about as it’s been straight up ~40 SP handles/ >+3%  since 15 minutes into Mondays’ trading,.. “SPX , approx.~1295 off SP downgrade news likely a buy”.   Must be the dying words of all the naysayer social media guru carcasses seen sprawled out by Friday’s close!.  Of course, majority of the move wouldn’t have happened if it wasn’t for earnings and the reactions changing and coming in ‘solid’ after a disappointing week 1. A big part of trading is preparedness and coming into week we were citing one of the ‘what if’s’  to rally the market laying out the steps ie.....Solid broad Europe earnings, US market sell off reactions would change,etc. to get the rally.  You can’t have the poor reactions we saw early keep coming in, if you have something like 80% of the corporations reporting positively and/or surprising. The averages were unlikely to change as the market went forward, if 16 out of 20 surprise positively, we’ll probably see 80 out of a 100 accomplish this and so on and on it goes.   

Recall,  a big key to keep the upside going and going is for investors to continue and see ‘value’ in stocks as we’ve been saying all month…..”… investors need to see value in stocks to keep the trend in tact for Q2 or market risks a correction later this month, earnings are the big key to that!”.   Okay, so far so good, but the market did generate some fresh headwinds, eg renewed Sovereign debt tension, even Financial links falling off earnings is a fresh concern along with rails/transports lagging the tape. It’s no surprise most investors were caught snoozing on the rip higher with all the negativity around. 

Now the excuse for many will probably be 'technical’  as we close at a cluster of SPX “R” resistance. It’s an endless circle of pessimism regurgitating through the market the last few years.  It’s always something that supposedly keeps real buying on the sidelines before realization hits and PA (performance anxiety chase) ensues.

Into the trading week, earnings can keep the momentum going, but some caution will be ahead of Bernanke’s ‘big day’, which will likely lead the market to consolidate.  The ‘Super Bowl’ hype over his first post-FOMC press conference will likely turn into a non-event with Will and Kate’s wedding likely offering more exciting.

Shadowlist

Broad range of Shadowlist linked stocks performed relatively well intraday, despite market not passing overnight highs as speculated post-AAPL exuberance in AMC.  Names with >3% gains are tagged on site.