thank..Jennifer Hudson's waistline..

..for WTW and/ or my recent TBL' (Earthkeepers) purchase to get through another winter!

Coming into the week we noted ‘inflation’ would be the key ‘word’ and it has proven to be as all the market noise is related it.  Everything else, including Iranian boats and some overnight ECB buying (fat finger?), the market is turning a blind eye to as we see by recent trading day's 'green' closes.  Note, if Journals do not contain mentions of eg. boats, Middle east tensions or whatever heading into a trading day as every other media outlet,  it’s because we’ve turned a blind eye to it and are trading away the Shadowlist components.

A simple question now is does the US /global have an inflation problem?.  Okay, if so, why are the emerging markets on fire this week (>3%)?.   Sure, they’ve have beaten up so far in ‘11, but you can beat them up more on inflation fears!.   Yesterday, FOMC related forecasts didn’t change (positive)   So, this is the noise, the fear mongering, but what do you do as a trader?.  Consider this…What if inflation points ease down the road, you’ll beat yourself for not using your cash this EPS season!. That's as simple as it gets.  What we’ve been saying this Q (if not years now) is trade the earnings stories/ rotations and ignore almost everything else.   

Shadowlist

• Q4 Earnings update-  Look at today’s ~40% pops, WTW TDSC TLB, (picked TBL to alert today, but you can add all 3 to Shadowlist for now).  These are almost historical earning reaction gaps and incredibly there is more follow through intraday (see IPGP  comments recently).

• Momentum/earnings/“winners of ’10-   While some momo’10 names notably lag today in a melting up market (maybe something to monitor for broader mkt),  this year’s inclusions  to DJIM consisting of opticals/ EPS’/ new potential momo’s carry on.  NPTN, FN  alerted here at ~ $14/ $25, respectively are near highs of $21/$32.   When you catch momo, you really catch it!.  Buyers who missed the ride earlier got on board of NVDA (up >10% from red lows), despite many bearish analyst comments.   AZPN  got a $22 price tgt.

..another pack

It was a actually a good underlying tape to market naysayers as a few ‘defensive’ sectors led the market higher, but as far as DJIM’s underlying ‘Shadowlist’ tape, it was a second consecutive day of managers swallowing PA pills of mid/small caps as evident in the R2K's 2:1 outperformance of the major indicies. (*DJIM not liking SOX performance for a NAZ up >20pts intaday).  Yesterday’s winners rested and a fresh batch of DJIM plays took over. (see attachment on site). R2K is at 2007 levels. So all cool here today, but broad market is probably signalling a halt coming due to some internals today.

We entered the week in anticipation of …1) “…many are behind the ball on it (as in surprised).  This coming into a month end/Q end is where a PA pill (performance anxiety) will likely be swallowed by managers to play catch .. (many thought it was done with prior weeks gains because many times front running the final week occurs). 2) There’s a cluster of “R’ around 1313-1319, but once a close occurs over, the market will have higher sights in mind and it should happen this week. 3)  rally…”It could continue until Friday as investors/traders await all the data/QE2 for that day.”. 

Taking into account all 3 have taken place this week, today was another 11-12 SPX at day’s peak to March highs, so thoughts of continuation over new "R" into Friday morning is a little too much to imagine.  All in, the market has set itself up (disappointment?) Friday’s eco data, notably Global PMI’s and the effect all the Global macro issues (Libya-oil/ Japan) have had on the numbers.  The NFP# shouldn’t be as important, but if it surprises big to the upside it will likely be a negative for market as Fed comments have become more ‘ hawkish’, as some today.  Note, we are another “R” cluster to low 1330's-1335, still a break is clear sailing to years highs.

Smoke... but where's the fire?

It seems every asset class had had a major reversal recently, USD, commodities and even TSY’s are on the cusp of saying something is wrong in the economy with yields at recent lows.  You can throw in weaker Global equity markets w/ China recently, Russia down 10% =correction territory and even today as example, Europe was comparatively weak vs. US markets.  Still, US equities clings range bound since early last week.

Take into account the 'red flags'...the poor GDP, more GDP downgrades, Jobless claims, non-manufacturing data for the US economy recently and you seriously have to wonder how the equity market is hanging in Q2!.  It’s hard to sit by idle at this point as it looks like the market will show it’s resiliency once more as we’ve pointed out month after month since ‘09.  But note, every correction since the rally began has been a one-time event and/or natural disaster that you know the market will reverse soon as history proves.  This is why shorts have been gun shy to press as they’ve been burnt time and time again.  This time may prove otherwise as a greater question mark lurks and that’s the ‘economy’, transitory or not. Market is literally hanging on a thread (our health  20MA benchmark) and one more ominous  headline and it could be a slippery slope due to all things already coming up as ‘red flags’.

In all, as far as today, it was bounce day for commodities off a USD decline post 99bln market value beating last week. It wasn’t much of a surprise as all major players pumped commodities to recoup some of the huge losses.  The strength in the market was ‘narrow’ as the majority SPX top gainers were all commodity linked. (Transports/Financials/SOX) all underperformed the tape showing how narrow the strength was.

Nice to see RUT outperform for Shadowlist as some went after real beaten down ones like CRR WTW  and others in our retail composite ie LULU ACOM GTLS QLIK AZPN  look decent overall.