'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.

Waiting..

An important end-game in trading is not to overthink, contemplate every whipsaw intraday.  This is the ‘space’ we are in (SPX 1260-1280) and a 6bln ES trade that supposedly spooked the market quickly intraday is really just a boring market looking for an ‘excuse’ to sell…”As 1280 invokes ‘R’ for the past week, the market impulsively sells off here and will continue to find an excuse to take some profits”. DJIM#2.   Don’t look too far into reasons for a swing intraday such as today’s unless there is a worthy newsflow headline.   It is what it is….. as seen by the volume decrease from last week and that is a market awaiting earnings and/or a bad sovereign bond auctions coming up (shorts futile hope).    An illiquid market will exaggerate any move, so look at Shadowlist if individual stocks are moving with the SPY/ ES to gauge the significance.  Up or down.   Clearly, today single stocks did not follow the steep drop.   Add the ‘blizzard’ for Wednesday in NY + long weekend ahead and nothing will likely be decided till earnings get rolling post-holiday.

In all,  if some profit taking around 1280 is the game,  get cash ready to use for new earnings plays in the coming weeks instead.  This is also one way to avoid any correction, if one comes in 2H January.

Shadowlist

• Momentum/earnings/“winners of ‘10 –   No noteworthy flow, EQIX  added 2.5 intraday, but a squeeze never materialized.  Action was better on Monday.  Previous DJIM,  ININ  was the notable winner off an earnings guide, but this one has a history of gapping and not doing much for weeks after.
• Commodities-   A thin tape is when a WSJ journal story/ DB group upgrade creates exuberance.  Still, WLT  being DJIM’ fave coal for ages was the biggest beneficiary +6pts, so let it be.. USDA coming up for Ag’s space.
• Consumer-   Retail group still lagging as TIF’s  guide did nothing except get the stock faded off a good open, no follow through…yesterday..(Retail looked better. Our list includes TIF, PVH, FOSL to trade if this has any follow through). LULU  upped  guidance AMC and it will be interesting to see if it holds its gains tomorrow for the whole group.
• Miscellaneous-  a nice guide from a Med-tech HTWR, under consideration to add to list