..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%.

No Fly Zone 1305-1330

Once again the market indicated it’s in a technical sideways trade as it bounced again off last week’s low’s and found itself in a ‘rally’ of sorts for the day.  A ‘rally’ of sorts because it’s still only a sideways trade until the cap is lifted off around SPX1330.  On a quiet eco data/ earnings week, the market has been focused on Saudi Arabia “Day of Rage”.  The thinking has been if nothing dramatic occurs the contagion will end in the region and the market will respond favourably.  As we get closer to the planned event, the market may have started the pre-run today.  Hopefully, this is the case and/or Shag hitting multi month highs and not BAC investor day that is being called the catalyst today.  Reason is simply the financial group can’t be counted on for more than a few days of leadership!

Shadowlist

• Financials-  We’ll see if buyers step up next few days because today was nothing more than initial short covering.
• Commodities-   Although all noise is around a higher crude, an important development for commodity linked stocks ahead could be the fact Shang is making the highs noted above. If higher crude stymies economic growth, why is the Shang doing what it is? Inflation topping out could be the reason.  -MCP ,  demonstrated strength before EPS tomorrow.
• Consumer-   Retailers act inline with tape. FOSL, UA  tinker with new highs.
• Momentum/ earnings/ winners of ’10-   Only incremental gains today (if any) from ’10 growth stocks (ie. FFIV ) and the mega cap names like AAPL. The momo groups of ’11 in space have exhausted themselves it seems, NVDA disappointed at analyst day and the Opticals  got another shock from FNSR  after CIEN, plummeting all the groups stocks, incl.  JDSU, who got the excitement started with their earnings in early February.  The standout was BSFT hitting $50+,  add here in December in mid $20’s ran another 20% post mornings 20% gain.  Simply the reaction in BSFT and FNSR  are extreme in both directions given the reports. 

DJIM #14 2011

As cited Friday post Global PMI/ US NFP#, the market should have been relieved as numbers came out better than feared.  March PMI’s withstood the shock of all macro global issues and NFP# came in solid, but not a big beat to make the latest hawkish case stand up. (*see below for more on PMI's).  The Bears still had a few shots to disturb the day, but US ISM came in line and most importantly, Fed Dudley curbed a week’s worth of ‘hawkish’ (tightening) exuberance by keeping to the ‘big 3 ‘ doves mandate. (Bernanke Monday night speak to follow).   

DJIM expectation was..” All in, the market big $ longs and markets shorts are on hold. The data may do nothing to change.”.   Basically, the market sighed a relief and it moved past “R” from data, but the big $$  is still not convinced to chase this 6.5 % rally off SPX 1250 and closed back below “R” top/ SPX 1335.   Market wannabe participants, (this includes big money longs and shorts) who look at the market rally in disbelief will be left with little to go on this upcoming week prior to earnings season.  Why?.  Simply, we are into a very quiet US economic/ earnings calendar week as SPX nears it's highs for the year.   It looks like the market might experience 'technical difficulties’, as in a market driven by technical analysis as the SPX nears ‘ double top’ ..Bear lingo.(* R2K/DJIA are above it.)  That’s all great chatter and makes use for all the crayon chart drawings you see in the social media stock world, but once the day is done, shorts/Bears are unlikely to do much (conviction) before earnings get into gear and risk more upside from the market.   It won’t be a surprise to see pre-announcements this week, we’ve seen quite a few already.  It will be interesting to see market’s follow through reaction as they hit (how much already baked in?). 

In all, we could be stuck as both sides have little conviction, likely all newsflow will come from outside US markets (ECB upcoming hike, China possible hike).

*While PMI’s held up for March, it’s very possible that immediate impact is not yet showing and April reading's will deteriorate.  It’s a few weeks away, but if a sizable correction is to occur, it will begin prior to the releases later in the month of April.   Earnings will need to offset possible Macro (Japan,Oil) drags ahead for investors to find value in stocks.

Shadowlist

■Momentum/ earnings/ winners of ’10-   If you think window dressing front running doesn’t exist,  just look at a 5 day FFIV chart.  Isn’t it sweet when a house downgrades (FFIV) immediately after a 8-10pts ramp higher into Q end.  This goes back to what we were saying about possible jumping on these missing link laggards into Q end.

Just 24 hrs after a bottom seemed to be formed in the opticals, a mid cap (EXFO earnings) destroys all linked names like JDSU, FNSR.  It’s quiet silly/ridiculuos and shows why it’s a momo’ trade this year as 50mln to 500mln market caps are bringing havoc on 2-4 bln market caps.  This action wouldn’t happen in many other sectors in the marketplace and will eventually be in play again as network builds are not going away in US and China.

As as broad tech, the SOX ‘dislike’ underperformance noted here mid week extends, month end couldn’t do much for a bid into the consumer end tech hardware/semi linked plays.  This is where most pre- announcements will likely occur.

As far as Shadowlist components, Wednesday included a few select winners on site. A few continued to be stong to close off the week.  NPTN  surged to a peak of ~20% next day, TDSC, added 13%, MSTR,  tacked on 3% to 8-10% Wednesday's gains.  WTW,  another 6%/ 5pts. 

■Commodities –  One sector that did have follow through on Friday as per note to watch was the Ferts/Ag’/,equp./chem.  As the coal trade here likely cools off shortly, we’d look for the ferts/ag’s/chem to trade post USDA numbers boosting corn prices. (Thurs.) 

■Consumer-  the retail sec is not getting much market attention, but DJIM earnings related retail/ lux plays continue to make new highs during a big week/month.  SODA,+6%nch FOSL, TBL, WFMI, UA surged Friday.  RL next for highs?. See table on site attached.  Also, casino (WYNN LVS )  on watch again since last week had nice day as March Macau numbers were excellent, the comps were very hard to beat, but they did so in record fashion.

..real buyers still absent

A negative ‘Greek’ tone over the weekend carried into European bourses down >1% and US open.  Numerous wire hits related to European sovereign issues started to peter out early morning (some positives on Ireland/ Greece /Italy ) and European markets reversed/ Euro rallied and US market followed to day highs by lunch hour.   Simply…that’s all folks!.  Nothing else and nothing more.  Although, wires headlines were positive, there was nothing substantial in respect to Tuesday’s ‘vote’ or anything new and/or significant on bailout package. Market traded sideways once Europe was closed.

All in, the same trends exist  - buyers are not going to work (volume was ‘holiday’ like )and market couldn’t push to day highs by close showing single stocks are still not of interest.   Still, some nibbling is taking place 1279-1249, so a constructive bottoming process continues seemingly.

It seems there is always something curtailing a broad sector move, today it was tech (SOX) related as far as important leadership sectors go.  DJIM’s 20% +EPS growth retail plays ( LULU, UA, FOSL>4-5%) were outperformers.

If market gets through Greek ‘vote’ safely (optimisim grew today/ PM securing support), focus hopefully will turn to FOMC /Bernanke press conference and afterwards a kick off to some earnings (FDX, ORCL types) to monitor corporate America for a change.

'Hope' rally

As been repeated for weeks, the market is a headline watching match for the fast traders.  At least this time it favoured trading to upside on what was really ‘empty’ macro headlines with some micro page turning.

It all started with Europe in the morning with some finance ministers ‘opinions’ (nothing more) raising optimism towards an agreement at the summit (July 20-21).  This enthusiasm was surely to be curbed by Merkel’s comments at the US market open, but market stayed giddy with Housing sale # surprise . In the afternoon another upside leg ensued as “Gang of 6’ debt ceiling proposal made the rounds. Once again, empty headlines with nothing concrete and possibly just more proposals amounting to nothing as usual.  All in, market ran on Macro ‘hope’, but likely rekindled some on earnings follow through from IBM, WYNN last night into the morning with PII,HOGS (disc. spending),OMC,KO and Hermes in Europe. 

In all, nothing macro resolved, but market tested the important 1295 successfully and it coincided with a better earnings picture emerging pushing market back over 20ma benchmark.  It’s too early to draw conclusions on earnings and/or turning away from political ‘macro’, but a rally is a rally and we’ll take it. Another hope is that many were flat footed today and come out to chase despite uncertainty abound. Remember, first leg is always short covering, especially as seen in SOX components today after just hitting fresh lows.

Shadowlist

Consumer - As alerted in morning for TIF FOSL LULU UA  all NCH’s, Hermes earnings put bid on high end, Adidas comments and potential end to NFL strike helped out UA. 

Earnings Q3 linked-   WYNN  post earnings succumbed to profit taking in regular trading hours, but it’s not going off list and will be a buy again.  This sell off possibility was noted to watch following EDU.  PII  added late June at 109 before running 11% to $122, once again put in a very healthy Q   (SHS  ran up as high 23%. Since pulled back, so keep eye out for EPS date).  http://www.djimstocks.com/djim-journal-1h-2011/a-few-names-to-list-into-q3piishsplcm.html.

IBM big catalyst earnings put bid on Mega caps, but also software Shadowlisted CRM  MSTR  to NCHs.

AMC, FTNT, RVBD  demonstrated high beta stocks ran or are running into earnings calls and if expectations are not handily beaten, you’ll be slapped down.

Ahead of the open (15-12)

Heading into the trading following a ‘big’ market up Summit day, cited underneath Eurozone mess, the market was paying no attention to the unfavorable guidance coming out from ‘tech’ specifically, which relates to markets complacency towards the ‘real’ economy effect from Europe(growth). The profit warning list from this weekend has been topped up generously this week.

A few days of slow selling has turned into a market rout overall with the underlying tape seeing a liquidation crush in commodities, tech indicies filling November gaps and high beta-momo’ performing much worse than the closely followed major indicies (DJIA, SPX). 

Today’s down tape confirmed all warnings noted a couple of days ago…a break of 20ma (DJIM benchmark), a ‘death cross 20/50ma with the loudest market noise being the plunge in the Euro/ Gold markets last few days, which was foreshadowed by Monday’s note on Euro and Gold selling off simultaneously.  The selling in commodities (copper,crude) is simply growth concerns finally showing up. The selling in Gold, silver is realization no global QE is at hand. This is not the type of selling we are accustomed to.  It’s not from pure Eurozone fear/panic with large one day drops spaced out (sov’bond yields ok, ECB measure from Thurs a help as noted), but instead a sell off that is grinding away (intraday as well) at every risk class, a small piece at a time. Now, we’re even seeing our long time, growth high end retailers, which have preserved all year taking it on the chin in the last few trading days.(TIF, VFC, PVH,RL,LULU, UA), indicating growth prospects are in question and spreading. Seemingly, this is the perfect group to go short as it’s one the last shoes to drop, if the real economy is in deep trouble.

The downward pressure on EURO continuing (likely), makes the idea of an equity rally remote into year end

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Morning Update:

Global PMI’s better than feared. After yesterday’s haywire action in EURO, commods’, the PMI’s may settle the unwind trade down a bit (as in hours, not days). Waiting on S&P and what it does to France’s rating (2 notch cut would be worst outcome), others might be bought by market.