Ahead of the open,(12-01)

As one skims through a financial daily and sees another directionless trading day, one also sees a modest 2.7% SP gain YTD.  But, that’s hardly the story as the real strength continues to be in underlying (sector) market.  As covered here since the start of the year, the market internals began rolling and keep on doing so .."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" ..Jan 4....."Traders (mostly) putting money on economic/cyclicals......and away from a highly correlated market trade ..." , led by financials, housing, materials etc. cyclical/beta sectors and out to single linked stocks.  There is no single robust catalyst for this year’s gains, just the solid and improving eco’ jobs/housing data while Europe sleeps giving U.S equities a chance.  As said late ’11 about ECB’s actions being ignored, they are no longer as it is seen being ‘accommodative policy’ now!.  This is why it feels like Europe is sleeping even though this is a busy calendar week, which so far has been a non-event(s). The Euro drops/ ECB balances hitting fresh records daily are now risk positive.  This is exactly what was a ‘ahead of the open’’ for days here, plus we’ve had China underperformance wary disappear for now.  So, while the broad market benchmark SP is up 2.7%, the BKX is up ~10% and subjects traded here JPM, GS are up $10% YTD (Either trade the BKX or GS/JPM has always been the way here), while housing/ materials/ industrials are up 6-10%..  The BKX related dips are incremental so far and are still being bought give this move a resilience ‘feel’. (dips were discussed last week).  If you take profits, you have to come back sooner than you thought as the sector keeps grinding higher day after day. Earning kicking off Friday for financials will test the rally.

Most are underweight equities as noted previously, catch up mentality may propel market to low 1300’1315 SP, but that may be all (at the May to July down trendline), as we had ‘junk’ going up big today with the higher beta trade expanding to a 'loser' trade.  Every time we’ve seen ‘junk’ move in years past, we were nearing a short term top. 

Today, the solar (TAN) frenzy >10% is a wary with cheap China’ related moves spreading out even further and speculative biotech’s in favor this week.  If you want to trade cheapies, go on twitter to try and make money on these types.  It’s never been a trading methodology here and today’s rally won’t change that because the China solar news catalyst may be seen in a different light as soon as tomorrow.   If you need to be day trading these make sure you have allotted daily time to flip.  

Although, we participated in the Solar ramp up a few years ago and initiated other groups very early like Shipping stocks (DRYS, TBSI) and ‘LED’ momo’s like CREE,VECO, we also never had these groups in the Shadowlist this past year while they fell steeply off a cliff and don’t think any loser group will be reinstated to Shadowlist in the near term.  As said early January, last year’s trailers were being picked up and now this has spread to the real losers of 2011 as seen today.

Ahead of the open, (02-03)

After an eye opening commodity slide Wednesday morning, all the market needed was a good night’s dream about buying the good ole’ dip.   Of course, it wasn’t all that, but when you’re an investor/trader confused about ‘free money’ awash in the markets vs. economic growth dilemma going forward, hey just buy the dip and move on!.   The above question will linger on; can markets live with one and not the other and/or how much of each is sufficient to keep markets rolling.   This should be enough to drive one crazy with over analysis in the weeks to come.  In this view,  …”Overall, accommodative policy is still very much in place”…and economic growth is sufficient enough at this point, so not going to fret over it.  Sort of like the premise here for months of being cognizant of European headlines, but don’t let it keep you away from equities.

An interesting reaction to eco' data today. As said for days, economic ‘better than expected’ has probably had its day in the short term.  Besides the Initial claims today, (whose 4 week average has dropped by a significant 20K since the end of January), other data in the US is coming in softer this week.  Yes, the US ISM was a surprise considering almost all regionals were strong in February.  Durable goods, real consumption were softer too, yet market tried to hit fresh highs intraday signifying a belief by investors of the recovery holding.  Recall, noted earlier Global PMI gains would need to be consolidated following last ‘flash PMI’s and that’s what it looks like has happened again, here and abroad…. “… It (PMI’s) won’t be enough to buoy the markets, but aren’t a concern as last month’s jump needs to be digested….” Feb 22.  All in, it looks like it’s all about ‘Jobs, Jobs’ into March 9 allowing ‘softer’ data to be a blip for now.  Today’s tape almost going back to yesterday’s highs intraday is almost a disappointment as chance for a shallow pullback to buy into NFP# was short lived as Bears were unable to stir things up for longer than an hour or two. (after no promises of morphine and what could have been construed as disappointing data today.)  Instead, a potentially robust NFP# becomes the focus giving little chance to a pullback beforehand now and instead likely more upside risk.

Overall, the day started very encouragingly. Transports continued the reversal noted last week, single stock action in the RUT was very good with many names followed hitting fresh 2012 highs or flirting with such on 3-5% gains, which have become a rarity… ie.WYNN PII LULU UA IACI FOSL LVS FTNT and outside the group the momo/earnings, GS JPM might be prelude to more upside ahead in the Financials.  This is the kind of action you like to see and the type we’ve been waiting for as discussed lately. (including disappointing RUT vs. SP performance of late.)  Unfortunately, RUT gave up 10pts after 2pm and ended up lagging once again, while SP, NASDAQ managed to keep gains.  Still, as long as closely followed stocks here perform, the mixed signals even in the RUT are better ignored.

Ahead of the open, (24-04)

Any surprise to see fresh European complications emerge and set the market tone?. No, but yes when it’s the ‘Dutch’ turning the trick after failing to reach a budget deal.   Late last week, noted, “Unfortunately, besides Spain woes likely to continue, market is beginning to focus on upcoming elections (France, Greece).   Well, it seems the Dutch jumped the gun and put itself in the middle of the political uncertainty landscape.  No doubt the downfall of an ally ‘AAA’ government is significant, but to draw U.S market conclusions is too early.   Today’s fear is Germany will lose 2 ‘debt crisis’ leader allies in France/ Netherlands and things will unravel. Also, EU PMI’s showed contraction picked up in April and compounds the fiscal budget/ GDP picture. Although billions of market cap were wiped out in Europe (~3% DJ Euro’ Comp), SP managed to pare losses off April lows and close at SP1366.  

Of course, “China who?”, flash PMI gets overlooked.  Although still under 50, inside there was broad improvement.( ie.new and export orders)

Instead of a bad close or volume intraday ramp down through supports (wedges, flags), we got a gap down, which allows for a gap fill trade.  As for intraday, the gap forced some to cover and lifted market well off lows.  If the wedges, flags were broken intraday, shorts would have pressed and more longs would have exited.  Instead, today was slow and not panicky, Shadowlist components held up well, (Financials, GS/JPM were flat decoupling from Euro financials and quite a few growth retailers/ consumers did okay, KORS LULU PVH VFC)

All in, we’ve probably seen nothing yet as far as volatility this week.