RUT of a day..

A few things to be wary of heading into today’s trade played out.  One was not getting overzealous off the 1st day rally as it’s been the case the past 2 years, this coincides with not chasing the open based on Global markets that would be up playing ‘catch-up’ and finally, the real market ‘noise’ today was the steep rollover continuation of…”..Precious metals, copper rolled over in PM”,  down 3% on the day.   The open was the high 1274SPX and it was all downhill to last week’s highs for ‘dip buyers’ to come in.   The 1260-1263 support might be thin ice as it was generated through the ‘illiquid’ holiday market, so 1254 might the real support test (approx.between 9ma -20ma gauge).  The probability of a need to test 1254 is due to a wary and it wasn't the precious metals selling.

• Wary-  the ‘big’ underperformance today of the “RUT”, which had been the leader during December’s grind higher.  Something to watch, but, maybe just a natural performance spread narrowing between RUT/SPX. Interestingly, the Shadowlist which is comprised of mostly smaller caps held up much better(with reason).

Shadowlist

• Momentum/earnings/“winners of ‘10 –  held up (reason) due to anticipation of “CES Vegas” and possible news flow.
• Commodities-  Our list unaffected by the steep commodity ($CRX) decline due to our focus on AG’s/ Coals (75% AUS. Mines halted).  Favorites in the groups such as MOS, POT, CF, CLF> 4%, WLT  all outperformed. LNN (irrigation) >4% had a noticable bid to any dip.  MOS’s earnings AMC should generate more of the sector upgrades we’ve been noting.
• Consumer-  WYNN, LVS  >3-4% continued to move off…(Casino sub group had very good Macau numbers and WYNN finally got over 105)

All in, the trading notables off our list held up with reasons, any further broad market hiccup would be buying situations.

..a full table

Due to ‘better than expected eco’ data’ in US/ Europe the past few weeks the market is quietly worrying about ‘easy money’ being cut off following in the footsteps of China.   This was first evident in the Precious metals sell off / strengthening USD post hotter Euro inflation number this week as it raised concerns of ECB hiking before Q4.  The US escaped this by FOMC minutes this week as ‘no end’ to QE2 was signalled, but a lot has occurred since meeting in the way of US data points.  On Friday, it is not only the NFP# that might be a market mover, but maybe more importantly, Bernanke coming in front of the Senate at 930am that will put the QE2 issue at the forefront. 

Wary- 1) Bernanke any sign of ‘hawkish’ remarks (any signs of QE2 not being entirely fulfilled).

 2) NFP#- a big beat (1 forecast 400+) will likely cause QE2 fear ending sooner than 6mths.  This may result in a note here from late Dec….” Starting to think the way to derail this rally and correct……In this scenario, the market rallies off a good catalyst, but it becomes evident there is no conviction force behind it and the rally peters out.  Something to watch for later.” . 

 3) Heightened expectations for NFP # now, 200k is whisper (consensus 170K). If # below ~160, it may disappoint and cause selling.  November revisions will also be in focus.

Positive-   reporting season is around the corner and that may cause Shorts from being too aggressive in laying out exposure if things don’t go the Bulls way with the above.

Shadowlist

• Momentum/earnings/“winners of ‘10 –  Outperformed again as Software, clouds ,networking stocks work. RVBD  new high, FFIV  looks to be setting up and CAVM  popped another 5-6% intraday.
• Commodities -  Once again Ag’s/Chems do well led by a big POT  day.   USD strength/ Euro technical breakdown.. 1.26 next??? is an issue. If this continues it will likely begin to curb all commodity linked groups not affected yet.  “Rare”  stuff got a beating as reports Japan got more of the stuff last year than was expected.
• Consumer - a pretty big disappointment (off >1%) on same store sales.
• Financials - off 1%, mostly on downgrades in Banks.  Overall Financials are coming up to technical resistance of note.

...hardly a TD yet

Earlier in the week, Euro markets positively decoupled from sovereign fears.  Today, following a successful ‘Portugal’ auction the US markets finally played some catch up to the Euro markets move of the past 48 hours by breaking a YTD consolidation (20pt range).   The ‘Peripheral’ wary has been diminishing as China, Japan are speculated to be buying into these debts (inc. China into Spain’s on Thursday).  This ‘helping’ participation is why noted here yesterday…” or a bad sovereign bond auctions later this week (shorts likely futile hope)”.    As important or more today was the ‘speculation’ of Monday’s European Finance meeting and an expansion of the bailout fund to get the market going.   A week so far of little economic/ few earnings and so a ‘relief’ catalyst from Europe allowed this market to move easily as it's the only happening around.   The market moved out from ‘inside the 20’, but it’s hardly a touchdown.

Why, not a TD? ...Even though the move was broad with all sectors up, it was more of the same ES/ETF driven move continuing from Tuesday, plus the ‘leaders’ didn’t play along.  (See below in Shadowlist updates).  It was hardly a perfect tape, but with Peripheral worries abating the market can let earnings decide its fate.   The lack of participation today of the ‘winners’ could just be a symptom of this wait game for earnings and nothing else.  All in, need to see a follow through into weeks end.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   Why more ETF/ES?.  Just look at the performance of leaders,  AAPL AMZN FFIV VMW CRM NFLX…(.5% down to 1.2% up) on a ‘supposed’ breakout day with Nazzy up and SOX up another 2%.
• Commodities-  Entering the week ….” USDA reports mid-week to possibly feed Ag space some more”.  The report was bullish and fed the stocks linked as most were up between 3-5%, CF MOS AGU LNN POT NEU.  Going back to the ETF-ES trade, if it wasn’t for this Ag’/Fert group there would hardly be any individual stock action anywhere.  Meaning up >1% and/ or down 1%.   As far as coals, despite the CLF  M&A,  the group might have reason to become fatigued  post-ACI  EPS and smaller  coals reporting softness on other exchanges.
• Financials- the streak continues from December following JPM’s CEO appearance AMC and WFC upgrades.