Into the trading week, (Jan 3- )

There is no debate that 2011 wasn’t great for the equity investor.  Yet, the volatile environment where the SP travelled hundreds of points up and down intraday gave traders opportunities on a weekly, if not daily basis.  The crazy landscape even mocked the idea of ‘hedging’ as Hedge Funds underperformed greatly.  No doubt, the year was one of changes.  As governments fell one by one globally, we as traders had to change with the times as well.  The reason being stocks became highly correlated forcing us as to change tactics mid-year away from selective stock picking to a more ETF/sector/SP market direction calls.  Hopefully, upcoming earnings in January will allow reverting back to single stock trading as a US recovery takes shape with economic data continuing to come in solid.  This (eco’ data) is the outlier in what has been a very disruptive 2H’2011.  Last Journal of 2011, noted .. “The market will make a smooth transition into the first week of ’12 with a slew of events, notably global PMI’s..”.  Since eco’ data is the one bright spot, we put a lot of hope in it for 2012. It’s seemingly been years since we’ve seen a change in Jobs/housing #’s as recently.  NFP# on Friday is the other ‘big’ event in an important eco' data week.

The data out this morning has not disappointed. China, India’s and Europe’s PMI’s have come in ‘better than expected’, if not ‘strong’ gapping the market over 1260’s resistance.  China moved back over the 50 expansion threshold on the back of new orders/ output components (indicating very good industrial activity), India’s was even better at 54!. Germany/UK also beat expectations.  U.S expectations are for 53.2.  Commodity linked stocks will be the beneficiary.

Nice start to the year with a lot of sidelined money, new funds needing to get in the market early ’12. FOMC minutes later in the day, any talk of a QE3 push will be an early 2012 gift

Ahead of the open, (04-01)

As in recent years, Global markets flew out of the gate upon re-opening in the New Year.  In fact, U.S markets only followed what was a concerted effort by Global markets already underway for 1 or 2 session depending on the region.(Germany up 5% now, Brazil, India >3-4%.  Note, China overnight has started where it left off in ’11 as speculated rate cut didn’t happen.

On many days, market players evaluate newsflows and come up with excuses to understand a big move upwards or downwards.  This worldwide melt up has only one main catalyst and that is the better than expected PMI data as laid out here before open. Overall, the markets were impressed and also just happy that ‘Europe’ was quiet on the sovereign issues allowing it to break through the high SP1260’s cluster of resistance.  There is not much out of this region (like ‘weak’ peripheral countries auctions) this week allowing things to be quiet (unless S&P breaks silence) and attention swayed elsewhere.  This week will continue to be dominated by economic data and may bring late October highs ~1285 into play.

Although, US markets finished off highs, the gains were solid and nothing negative can be taken away. Even a positive FOMC minutes hinting at further actions (QE3), if a communications shift (transparency on interest rate policy)) was coming wasn’t enough for closing highs today, but that may change after further evaluation by the market in the upcoming days. Some of the reasons to like the tape action is the breath. The number of new highs was positive as was the bid for higher beta sectors (materials/commodities Oil/financials.

The largest trailers of ’11 (SP 500 stocks) were the ones getting the best bid.    The question is how much of this high beta action was fast traders vs. real longs stepping up to the plate? Sometimes buying the weakest trailers like March ’09 is a sign of a long bullish cycle, but it’s a different theme now into ’12. Simply, it may last a little longer, but eventually real longs only will have to come in and spread the wealth for this to be viable for an extended time.  Consumer discretionary/retail late weakness is a little ominous (maybe only due to hesitation before Thursday’ same store #’s’).  Anyways something you’d like to reverse in one of the strongest groups last year.

In all, quite a bullish day for the short term.

Ahead of the open, (05-01)

The Eurozone fear mongers were out in full force citing everything and anything to get the upper hand today.  To name a few of many Euro’ concerns: fear over Hungary (debt default?), Spain seeking IMF loans speculation, Greece warning of default if no deal in March, ECB overnight deposits to new highs.  As hard as they tried (to SP1267), it wasn’t enough to knock a market fueled by eco’ data for too long!  Market is about the QE (LTRO etc.) going on in Europe, not these daily ‘peripheral’ stories.  

We need to remain cognizant of the Eurozone headlines, but it shouldn’t be the deal breaker in making a trading decision, right now.

Right now, the market is forward looking/positively to NFP# on Friday as demonstrated by closing flat on the day. A ‘2’ handle (+200k)?. 

Financials & Materials/commodities held up well, adding to the positive bias- sentiment here.

Ahead of the open, (01-02)

The month end window dressing/ FX hedge rebalancing-allocation chop trade continued with SP 1306 holding to create a close in the recent mid -range of the SP.  The low volume trade may not be notable, but the ‘unsatisfactory conditions’ noted in the FOMC grew from today’s economic data.  Since, (late last week), noted weak housing # GDP #,  today Case Shiller, Chi PMI fell short of short of expectations demonstrating some momentum is waning.  The idea of FED embarking on QE solely on weak numbers at this point is a somewhat careless trade.  This seems to be occurring as market shrugs off the data and holds 20MA.

These recent U.S numbers bring into focus what sparked the rally at the beginning of the year.(Dec.Global PMI’s, inc. U.S' ISM).  Those PMI’s set off the first trade of the year with Coals, Metals, Steels, Ferts’ all up 10-15% in January’....”Commodity linked stocks will be the beneficiary”.   The bar has been set leading into January’s data and it might be a touch high.  So far overnight, China PMI at 50.5 beat expectations and Europe’s was pretty well in-line with ‘flash’ data last week, the ES has spiked 10pts overnight with Europe rallying.  If the PMI’s are the sole reason for the spike, it may be short lived with US data coming up given recent data points.  Shanghai was still down 1% despite their number and downside risk in place if US (ISM, construction spending, ADP) doesn’t live up to expectations and/or the +10pt ES move.

• On the earnings front, two familiar names here came in solid (AZPN FTNT)