Ahead of the open, (13-04)

Wonder how many were making lunch plans before the opening bell not expecting much action?.   It probably didn’t look all that promising for ‘longs’ post Initial Claims # coming in higher than expectations, while shorts positioned at yesterday’s SP 1370’s levels were likely thinking Wednesday's intraday flat line and close at lows was foreshadowing a dead cat bounce at (1370) resistance.  Oh well..

DJIA +180, SP +19, NASD +39 day has many ‘longs and shorts’  scratching their heads of how the strong gains extended for a second consecutive day.  I’d like to think it was simple as a lead into ‘Ahead of the open’… “Still, SP 1370 wasn't so formidable on the downside and the same may be true to the upside, if just a little buying comes in the next 2 days.  Any fresh shorts at this level will likely pull the plug quickly”.  The premise was that the break of SP 1370 was too easy.  The fact fresh shorts would come in here would seem natural considering market fell all the way to SP1258.  Also, many shorts were likely caught of guard due to the speed of markets falling this week, so SP1370'ish flat-line yesterday was seemingly perfect to lay out fresh exposure if you missed the fast downside.  But, (if) any good fixes hit, longs would push them to pull the plug quickly.  That’s pretty well what happened today, once the market opened and 1370 was regained early, it didn’t take much time for longs to run the new shorts out to pasture. 

Yesterday, pointed out some  small ’fixes’, today we had EU yields down again, Italian auctions were not as bad as Spain’s recent, calming the market to start the day and some more U.S  ‘fixes’ in upside earnings, TSCO, WAB to start the day, eco data (we pointed out International trade for first time last weekend as an eco' data point /GDP now will be revised for Q1 after today’s #). <Funny, Kudlow opened with this trade# tonight.   But, maybe the biggest ‘fix’ that got longs in and shorts realizing the upside risks were hitting them across the head was China GDP whispers of 9% out tonight after a slew of data overnight came in better.  Also, a WSJ article on coal bottoming also helped the commodity field.  Doubt GDP will come in as high as the whisper above (consensus is 8.4), but if it’s anywhere around 8.5%, commodity linked stocks can be picked at/traded again after taking March off.

This was redemption day for some long traders who didn’t see gains if buying post-opening gap yesterday.  Today, you were generously rewarded for yesterday's buys and/or you could have bought stocks flat or red and come out with nice gains as the market climbed steadily from SP1368 to 1388, start to a strong finish. Complete opposite of Wednesday's action.

Post Tuesday’s abysmal day, we discussed the potential of upside risks if ‘fixes’ started coming in.  Well, some fix has hit every aspect of the Bears case since…China, EU, eco’data/ earnings.   Interestingly, both days had shorts covering in different ways. Those already in overnight after Tuesday’s big losses likely covered at the gap open Wednesday and/or later joined those who threw in fresh shorts in the 1370’s Wednesday also ran today. It’s hard to know how many real longs are into this to get past SP1400.  More data is still needed. 

Also, the first negative turn on Wednesday (before many of the stocks here finally started to see some losses) was the growth retailers that started to pause out in the morning.  Today, this group lagged a second rally day with most generally flat on the day ..LULU FOSL UA RL PVH VFC ULTA KORS.  This retail bunch could be a key to watch for market clues here, maybe China retail #’s overnight will kick these into gear.