'Inside the 20'

The trend remains the same as ‘Inside the 20’ (SPX 1260 to 1280) gets churned and churned.  Today, it was clearly the (see yesterday’s Journal) potential Headwind vs. Tailwind battle playing itself out.   In all, the Shorts are unwilling to lay out more exposure near 1260 and ‘dip buyers’ take over.  Still, the ‘Red Zone’ is providing trading oppy’s within DJIM’ Shadowlist.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   Some CES induced carryover as SOX leads again.  FFIV  last week noted as ‘setting up’ had a nice >4pts day to NCH territory.   Added EQIX  back to the trading Shadowlist and it proceeded to have a nice afternoon adding ~2pts to get up to 2 month highs. Some squeezing was felt here, let’s see what a potential breach of $86 brings.
• Commodities- LNN, an add following a gap down earnings report, covered it’s gap in a big way >6%/4pts.  This despite a GS downgrade of Ag’s (CF/ AGU) halting the groups recent run.
• Consumer-  Retail looked better.  Our list includes TIF, PVH, FOSL to trade if this has any follow through.
• Miscellaneous-  added an old favourite at DJIM, EBS  following upped guidance that shows co’ is anticipating a ‘big’ gov’t contract.

..same

Another day, another leech on the back of the Bear!.  If only the trading Bear would do as their namesake and hibernate for the winter to save it’s hide!.   Unfortunately, the Bull is only given incremental up days, one after another as the lack of short exposure doesn’t allow for many ‘big’ up days.  As seen recently (Egypt situation)any short willing to press positions quickly covers at first sign of another failed attempt at downside.   Today, 2 hawkish Fed speaks/ China hike didn’t dampen accumulation of shares in the broad market.  Even though these are not catalysts to us,  it used to be that the market in recent years would gyrate on any small bit of negativity. This just shows the maturity of the market as it’s on one track mind to global economic strength.

Shadowlist

• Momentum/earnings/winners of ‘10 –   The risk in CSCO’s outlook exists following last Q and is keeping the movers at bay.  The only fuel for the Bears this week is the underperformance (2^nd day)of SOX to the tape, but this might be only a condition of some profit taking from the best group so far in ’11.  Air out of the NVDA’s semi types is a good thing.  On the hand, we are seeing  rotation as pointed out in the last few Journals to the consumer sec since late last week and financials as of Monday, which the Bulls can offset with.  As far as the fiber optical plays,  consolidation is continuing after big up day on Friday and so watch for another entry soon if this has any legs as a trade in ‘11
• Commodities –  Under hike cloud today.
• Financials – day 2 of being one of the market leaders.  As per Shadowlist ,we concentrate of GS/JPM and/ or RKH (ETF) for Regionals to trade.  But, honestly with earnings plays this Q and retailers this week the plate is pretty full to get overly involved in a trade here.
• Consumer –  Our retailers/ goods are still moving inline with the tape.  Since pre-Friday trade listed DJIM’s are up 6-9% eg.  LULU  $73 to 80;s, FOSL  73’s to 78’s, RL  108-115’s, PVH  59’s to 63. 
• Q4 earnings update -  this is just a good safe stock that has constantly come across, but because it’s a crawler and unknown it has never been added to trading list.  Until now,  AZPN  is a nice safe stock at 1.3b cap in the software space following a good report.

DJIM #7 2011, Shadowlist update

The trading backdrop remains as we left it last week, except the markets will have a host of eco’ data to deal with this week, focus on ‘inflation’.  The week culminated in a big finish Friday with the ‘Opticals' stealing the show (JDSU, NPTN >12% , FN up ~8%),  a trade we were in front of all week in the Journals along with the ‘Retailers’, 8-12% on the week,(LULU, FOSL, RL).

An updated Shadowlist (below, visit site) is the only place we’ll need to look for the next ‘pocket(s)’ to trade away.  We’ve added many new plays (mostly earnings 10-15) to this year’s first list via mentions on Journal/Alert-comments since Jan 1, while removing winners from '10 eg. MOTR, ROVI in order to narrow the Composite to about 60 stocks to monitor the breath/rotation and individual stock picking. 

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.

pile up..

Hey, what’s one more negative (SP downgrade) headline to toss into the market, adding to the pile we discussed in this weekend’s DJIM #16.(escalating weekend Euro debt situation already had ES down 10pts.)

As ‘panicky’ wire headlines hit at 9am and spread into the open thanks to S&P threat to downgrade US debt in the future, most probably couldn’t decipher what it means to TSY’s/Treasuries, USD and definitely the equity market as it fell fast and furiously.

Considering a threat is just an idle threat until exercised, we followed up quite confidently 15 minutes into the trading day that if SP~1295 hit, it would likely be a buy point for today after dissemination of the downgrade.  Of course many would not suggest buying a gap down and a falling knife, but all you had to do was look at the Shadowlist components and see individual stocks were not being sold off.   This glimpse as usual allows you to make a decision even if you don’t know the consequences yet of any seemingly negative newswire that may have hit.  Can’t say we’ve seen one (outlook downgrade) to the US before to know what it may bring upon equities, so today it was best to rely on good old Shadowlist for guidance.  Besides, didn’t we all downgrade US debt long ago!  This doesn’t mean you jump and buy stocks (some names below worked) as much as it means you don’t panic and sell.   Soon after follow-up, market fell another ~10pts to 1295, a re- test and later a decent push to 1307H in the afternoon.  What the early trade demonstrated was it’s an ES/ETF trade again with investors holding on to individual stocks while fast traders play.  

*Although an important week, the holiday-shortened trading week with desks emptying by the hour as we go forward , we can expect exaggerated moves in either direction that don’t mean much as positions in all asset classes get squared away before the holiday.

Shadowlist

■Commodities – Keep seeing excellent numbers in Ag-equipment stocks recently, LNN, VMI, (TITN  initiated today in follow-up section).  So far this month not much is loved as earnings get sold off in most cases good or bad(LNN VMI) in this space, but sooner than later money flow will go into what is showing growth for rest of ’11.

■Consumers- LVMH , luxury goods out of Europe gave an upbeat report after overseas market close helping retailers here, notably LULU, but overall outperformance seen in group.

■Momentum/ earnings/ winners of ’10 –  Very nice reversals in AAPL, PCLN, each 10pts and hopefully a leading good sign.  WYNN, IPGP  as well back to high levels, while  SINA  really popped. Also, like LVMH, Infineon a chip from Europe helped earnings sentiment as it pre-announced AMC in Europe.  Unfortunately, TXN did nothing AMC as most US corps’ so far this earnings season.

Europe respects solid earnings

Heading into the trading day, cited strong European earnings from a lux retailer and a semi.  This was followed by broad range of companies today… another lux’ retailer, a beer co, a cosmetics co, a drug co powering European markets by US open.  Hum???...Gains despite an escalating European debt crisis ?    At least someone has the right sense, while here in US investors continue to fickle through reports as seen by GS blowout number. (TAG below :’fickle investors’ for more).   Europe results/reactions have probably signalled a change coming here.

As speculated sooner than later this selling phenomenon will end if solid earnings keep coming in. (outside of banks/brokers as it’s a sector ‘want’ within Financial reports that isn’t showing up and doesn’t relate to other sectors). ..”Talk about a fickle crowd again!.  What is occurring so far in earnings might be described as’ sell on the news’, but it’s not the typical we’ve seen in Q’s past.  Market should get over this phase, if earnings keep on coming with solid guidance.”

In all, a good sign was the early morning gains that disappeared, reappeared and tracked on even more in the afternoon to close at day highs..  Many of the names noted from Shadowlist yesterday exploded out of the gate and/or had significant follow through days. Even though the RUT underperformed the indices , the Shadowlist components had very good action as seen below.

Shadowlist

■Commodities –  Yesterday’s alert on Ag- equip names had a decent day adding on to yesterday gains, MOS POT~4 NEU LNN   will squeeze nicely if this group action keeps up from it’s basing here.  OSN +20%  today. After getting beat up due to all China fraud/ guilty by association, it reported nicely last week with 20% +guidance numbers.  The PE on this steel name is crazy so keep watch for bottom feeders here possibly.

■Consumers-   LULU   followed through to over $100/4% at the open,  UA  hooked on a for a ride to NCH as well/~4%., RL intraday high.  All these names fall into luxury ‘apparel’ . Burberry earnings today followed LVMH.

■Momentum/ earnings/ winners of ’10 –  Chinese internet names covered here almost daily outperformed again, SINA 12 pts intraday, SOHU, BIDU.  IPGP,  here as well yesterday tacked on 4pts/6% NCH.   As far as ’10 momo’s, there is hesitation on names like FFIV APKT VMW ahead of earnings, even after RVBD upside pre-announcement.  Most of these networking/telecom related names were down ahead of JNPR results tonight.  FNSR  was the outperformer linked name as it trades well recently eyeing gap.  QLIK- nch

Big night ahead for tech results, watch if any disappointment EPS' get bought into or we see a ‘baked in/better than feared scenario for signs of semi’ tsunami ending.  LLTC has a big Japan impact, so will watch how it reacts to what it says about the impact.

*Note : you can click TAGS below on site for '11 notes on stocks/ sectors etc.

Update on Wednesday, April 20, 2011 at 05:03AM by Demi/ YourPersonalTrader

US market finally showing 'respect' for 'solid' earnings.  Note, 1st round is going to be short covering as semi space has been in the woodshed for awhile.  We need to see conviction buying step up afterwards, something we've covered on recent upticks (short coverings) that failed due to sidelined money(conviction).  If market finds it, we will see it in a big day with last weeks SPXhighs falling first. See Friday's update.

Commodities, Autos likely will be secondary in plays for a broad move.

..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.