Ahead of the open, (02-02)

Nothing new or catalytic caused the gap up.  Global PMI’s just reiterated the consistent ‘growth’, but risk related assets actually lagged some early and then led equities lower by close.  Bank stocks in Europe and here don’t lead off PMI’s as was the case today.  Maybe every financial was rumored to be running the Facebook IPO!.  In all, it wasn’t the standard rotation trade of 2012 as the safety sectors had money flow as well.  Maybe it was just fresh money being deployed broadly and indiscriminately at the start of the month, just to be in the game.

As far as PMI’s, U.S inline numbers were a win –win situation.  If we had ‘better than expected’ headlines, it may have invoked some QE debating.  A weak number and QE aspirations would rise because it would suggest growth is waning.  In those two scenarios today, the market likely would not have gone higher, thus just being inline was enough as it keeps all factors of 2012 going as far as economy (is strong enough) and QE speak (eco’ not robust enough) is concerned.  An example is probably China’s #, it’s PMI curbed easing chatter and it’s market fell 1 % off the ‘better than expected’ print despite ‘hard landing’ off the table.   This chance was noted last week in “better than expected” PMI’s selling off.  The fact it was only China, selling luckily only stayed in Asia.  All in, the bullish macro landscape from December still exists today with CB accommodative policies helping ‘risk on’ around the world, especially in fixing Europe through LTRO, which has brought down Italian and Spanish yields greatly and kept Eurozone economies from falling into pieces.

As good as today seemed, (maybe because it’s one of the few nice gains since the first trading day of the year), we are still about 10 handles off the recent top and in a range tug of war.  

• As far as mid-small cap earnings:  IACI, added last Q and LQDT  had solid earnings in the morning. CVLT also here in November was okay.  MKSI  AH’s was solid.

Ahead of the open, (03-02)

Post Wednesday’s close, noted the very broad based rally that touched even the 'safety' sectors.  The consensus view into the overnight markets was for a follow through day based on the PMI's and Financial leadership (Wednesday) touched on here.  This stretched out to chartists due to RUT, SMH outperformance 2:1 vs. DJIA, SPX , to fresh high's and overall volume pick up indicating accumulation.  The runway was clear for an upwards move.  Yes, these indicators (above) are the usual suspects we’d usually like to see and/or usually see create a breakout (eventually to SPX 1350’s this time, if it occurs).  But, as pointed out since 1333 SPX was hit last Thursday morning and yesterday, the market is in a range tug of war and churning away.  (Do note 1333 trend-line has inched down to 1327’ish), so a take -off seemed imminent, but instead the market decided to take another pause.(ES volume was well below average).   Still, sometimes too much digestion /consolidation leads to fatigue setting in after an elongated range trade.  We could be coming up to that with Friday’s NFP# serving as a catalyst, although it’s not a critical number.  Also, despite evidence of fresh money coming into market yesterday at the beginning of the new month as discussed, it is not necessarily an indication this is the same money that will chase another potential leg up, but instead one that just wants be in the game and live with the little risk in the market.  This type of money also prefers to buy the dips to add.  Considering no market day has had more than a half percent SP downside since December, it’s been a pretty safe environment in 2011, so why not be invested is what that money was likely thinking.  Also, as discussed in early January, it’s best to be invested or miss any good day now as most of market day gains are from morning ‘gap ups’ with little action afterwards like yesterday showed again.   Although, belief is we will break out eventually, it would be healthy if it was later after a correction and not just a shallow pullback (~1.5%) like we’ve seen to the 20ma/1300SPX. 

A few things have played out since 1333 was hit a week ago and the noted top chance:

• Jan24: “..pullbacks will be shallow and will be bought..” (we hit 1300/20MA),..Jan 26, “…SP 1315 close becomes support”..(mkt never closed 1-2pt lower…”closing at ~1315 level negating any real technical damage”..Jan31);. Into Jan 30, “pullback depends if 1306 is defended”..(it’s bounced a few times off this level this week).  These market actions just confirm the markets resilience and presence of dip buyers, also we’ve added 8-9 stocks off earnings to trade off during this range as was the idea until the broad market settles itself…”In this environment, it is probably best to lessen exposure if holding all month and concentrate on single stocks coming out with earnings going forward.”. Jan25.

So while the broad market deliberates, we comprise a list of stocks to trade based on individual earnings in the 1st Q .  We can trade the names now and with confidence further into the year and not worry if the broad market breaks out or not here.  Names accumulated this Q off earnings are mostly previous inclusions; (IACI AZPN  FTNT  LQDT  MKSI  FIRE PMTC  URI  LULU etc.),  while other names just confirmed they should remain on the list for yet another year, if this Q’s # is any indication, ie: (WYNN  LVS  PII  FFIV  FOSL  UA  CRM  VMI MA OTEX  DDD etc.).

As said recently, ‘all good’ seems to be priced in from recent eco’ data exuberance to what was a mediocre earnings season at best to a Eurozone coming out of the hospital.  Another way to look at it is it will be hard for economic data points to surprise  as the bar has been set high, earning trends are known from this Q and we’re a Q away from next and there is more chance of a surprise Eurozone bomb then more morphine to be given out. (We’ll cover the morphine angle with another round of LTRO end of February and ECB’s Super Mario conference next week at a later time).  

If evidence intraday of a 1330+ close post NFP#(150-160k private), we’d add some exposure into weekekend, (*upside surprise could be faded), otherwise keep the top idea in play by concentrating on single stocks coming out of earnings. 

• N, TRMB, SIMO, THO are some to watch early following earnings.  N,SIMO are familiar here, others like TRMB, THO are to spread a trading list into more cyclical plays this year.

Ahead of the open, (14-02)

Market simply reverted back to its 2012 ‘in the game’ ways.  If the investor doesn’t hold overnight, the investor misses on most of the day’s rally as it’s usually all in the morning gap.  If one doesn’t buy the shallow dips, one misses more opportunities to be ‘in the game’.  Although momentum always stalls after gaps, the market feels like SP 1370’s has a magnet attached to it pulling stocks back up from very shallow dips.

As the market retraced all it’s losses from Friday, you have ask what all the noise was about on Friday.  The austerity package passed this weekend as speculated.  All the Euro group wanted on Friday was for this occur to kick off negotiations.  All in, the noise will likely pick up with ‘negotiations’ as soon as Wednesday (finance ministers meet) and last till late (redemption date) March!.

As far as the underlying sectors, all the right groups led on the upside and single stock action from earnings related names this Q continues to be favorable with many new names hitting fresh highs. Names noted include:

...TDG, HAR, TRMB, THO… (IACI AZPN  FTNT FIRE  LQDT  MKSI  N PMTC  URI  LULU etc.),  while other names just confirmed they should remain on the list for yet another year, if this Q’s # is any indication, ie: (WYNN  LVS  PII  FFIV  FOSL  UA  CRM  MA DDD OTEX etc.)

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.