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.

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.

Ahead of the open, (27-04)

Market doubled its day gains post noon hour as upward bias once again caught people flat footed and chasing into the afternoon/close.  Yesterday, noted the upside risks and also potential to reclaim SP1400, starting with a better than expected Initial claims.  Well, seems market didn’t mind initial claims disappointing, maybe because spike in Pending home #'s took some of the heat off recent related data.  Still, the spin is likely that a disappointing I.C # put some QE back on table following Bernanke’s remarks on FOMC day.  All QE asset classes rising together signal this. 

  

All in, SP got over 1392 range top on most radars, a second day over 20ma, RUT pushing over 20ma.  Most stocks escaped ‘inside day’ on charts noted yesterday.  A little digestion of 3% uptick since Monday’s low is in order, but mentality should revert to buying the dips, which eventually would allow for SP 1400 to be reclaimed.

  

GTLS, EQIX  were earnings winners off the Shadowlist, gaining 10% and 13% respectively.  LVS, more of a momo’ stock caught the selloff draft despite good EPS as many names recently noted.

   

Retail earnings heats up in May, but a few small/mid- caps coming in early were pretty positive today.  Most retail links off Shadowlist put in >2% gains (KORS, VRA, LULU, FOSL , RL). Those names keep list balanced and at max. ~45 equities, other retail closely followed like COH VFC  PVH TIF  are never far away to mix in the group

Ahead of the open, (03-05)

Considering how much was made of the previous sessions mid -day slide, it was no surprise to see ES continuing its slide and almost entirely wipe out ISM gains.  Some follow through was inevitable as Europe was coming off holidays with region soft eco’ #’s(inline) to help the late U.S  day sour sentiment drag.   The ADP# falling short of expectations didn’t help, but it was hardly a surprise considering how labor data has come in.  Also, consensus for NFP# has declined to ~160K this week, although even a lower # might be the ‘real’ market expectation following ADP.  The U.S PMI was a nice surprise ‘relief’ indicating the economy is not falling off a cliff, still an improvement sequentially in Initial claims/ NFP is what the market ‘longs’ really want.

  

As noted the previous 2 days, each sell-off and ‘market is falling apart at seams’ chatter had no merit here.  Today’s dip to a low of SP1393 and close of 1402 continues to reinforce the premise . .” A little digestion of 3% uptick since Monday’s low is in order, but mentality should revert to buying the dips, which eventually would allow for SP 1400 to be reclaimed”.  We do have the consecutive closes over SP1400, but it's not a done deal to say it's reclaimed to see new highs, just yet.  Still, holding SP1293 is a positive.

 

Our Shadowlisted retail names continue to roll as Consumer links outperform broader market, fresh highs hit by LULU, PVH, VFC….. UA RL KORS FOSL not far away.

  

A ‘ Eurozone’ wildcard this week for upside risk exists if ECB meeting reveals an openness to rate cuts, Spain deal if done right.

Ahead of the open, (29-06)

Any doubt if the previous day’s morning rally was artificial was answered by the Dow ~170+, SP’s 18 handle drop at its trough.  Any question if it’s a fast traders market was answered by the Dow ~150/ SP+ 15 recovery surge in the last hours off a ‘cancelled Merkel conference’ headline leading to the possibility of a EU deal at hand.   The fact it’s a ‘renters’ ES/ETF market was also evident as single stocks hardly participated in the rally with most coming little off their lows with many ‘growth’ names still off 2-5%..KORS ,FFIV, VMW  just some names at the high end. (MA,  PCLN off 10pts and even AAPL -5pts).  Hardly what you’d call an inspiring tape for the longer than an hour or day.

 

 

...but wait...

  

A deal has really been struck tonight and the euphoria has pushed ES over 1340.  The question on many minds tomorrow will be how long before this shine wears off and we have another anti-climactic moment as we did following Spain’s bailout and Greece’s elections??. Those fading the upside tomorrow on that notion may be in for a surprise.  We discussed only needing a credible deal and at this juncture it seems to be, which should allow the market to end decent on the week, month and Q.   It will be interesting to see how long the short covering lasts and if 'longs' emerge afterwards.  '24-48hr renters' need to go, investors need to show signs of life.. In all, the fact we finally got a surprise out of a EU summit is a positive and it would be a disappointment (and surprise here) if market doesn't end the Q on a good note.

  

The immediate summit need of reducing Spain’s borrowing costs/ sov’ balance sheet woes due to banks debts was ratified with Germany caving in on bond buying.  Italy also gets a lighter set of conditions to reduce its borrowing costs.  Question here is ‘show me the money’ as there is over ~2 trillion of debt in Spain’s /Italy’s sheets and about a ~1/4 of that is in the ESM/EFSF funds.  Overall, this the big surprise with a gift for Ireland who take home a ‘surprise’ cake as well.  Breaking up the sov’/ bank link seems to be broken.  Also, a proposal of direct control covering all banks by a European ‘banking supervision system’ seems to be on track to recap the banks if need be. Still the details need to be seen and analyzed.  This is the first step to the ‘banking union’ expectation discussed here in the past leading up to the summit.

 

All in, a humbling 24hrs for Germany and a celebration for Italy and Spain.  Germany backed into a corner politically by Italy/Spain not signing off on the (small)120bln growth pact until borrowing costs issues addressed and for its football team on the pitch with Italy and Spain up for the Euro cup now this weekend.  As for the markets, it’s time to look at ahead to the ECB on July 5^th and earnings season around the corner.  Yep, that’s how the market works..on to the next!.  Expectation now will rise for ECB rate cuts and some LTRO as ECB should be pleased with the summit results to go ahead with easing measures.  Also, earnings expectations are depressed, thus any surprises (better than feared) and/or signs it’s not that bad should also be a market positive to go with possible ECB actions.