Ahead of the open, (29-02)

Only today was the DJIA able to close over the ‘irrelevant’ (in this view) mark of the supposed ‘psychological’ 13k+ after numerous crosses back and forth.  Luckily, it hasn’t been noted here for the past 8 sessions that saw intraday highs above this mark each and every day.  Here, it’s not even ‘psychological’ level, just an excuse for market to chat about something that hasn’t occurred in years.  Here, more importantly SP did have a magnet at SP1370 noted as early as Feb 10 and soon after when SP dipped to ~30 handles lower than today’s close.  “Still, although the tape is seemingly going sideways, it’s really gliding and can move into SP1370 this month after hitting our 1350’s target on a breakout from 1327”.(feb.10). In the past two weeks, DJIA has gone literally nowhere (maybe 100-150pts), while SP has climbed 30-35 handles and even more since the ‘technical’ breakout consequences/importance at SP1327. Interestingly, despite this late February outperformance fact, it’s been the ‘winner’ sectors of ’12 that have corrected the most without hampering the SPX advance at all. This was pointed out in part the other day….”The fact SP hangs on while all the beta rally sectors succumb to some lessening of exposure is a positive so far.” Feb 23.

Still, let’s not fool ourselves; the recent grind has affected individual stocks as the hesitation in the overall market has taken its toll on single stocks as well.  Despite the pause - climb – pause -climb climb since low 1300’s to 1370’s, there has been no panic lately to chase winners, momentum stocks.  Today, we had PCLN, GOOG, AAPL all go at once.  Is this the necessary sign for more gains as traders begin to chase the leaders, momo’s, earnings or was the overall lag in RUT, transports the true tell today.  All in, it’s probably best to wait for the events ahead this week to dictate market direction.

On the eve of the second ‘LTRO’ tender day and the #1 (LTRO #1) reason behind the rally, the question regurgitated here is what happens when the ECB liquidity ‘music stops’ in the weeks ahead.  If the number is inline tomorrow, it may just be anti-climatic (best result) for the time being.  What will the investor do and think later?, if there is only ‘accommodative’ short term durations injections given out going forward.  How much and how long will the confidence flush instilled last before we do it “crisis’ it all over again in the Eurogroup?.

Ahead of the open, (23-03)

Is this time going to be any different?.  Do the markets do a 3-peat in Q1?   

As the market (SP) closes lower for a third straight day, (~26 SP handles from ’12 intraday highs to today’s low), we ask if it will turn out like the 2 other shallow pullbacks this year?.  The last pullback and reversal is still pretty vivid here,  “…what happened was only a repeat (shallow pullback) of January’s 3 day/~35 SP handle drop, including a 200+DJIA decline day followed by a complete reversal to within 4pts of February highs."

The premise in early March,..” ..'Ahead of the open’ with the market at weeks low of SP1340 with NFP just 2 trading days away, asked, “Question now, is it better to wait on NFP#’s now or buy the dip now below broken support???.   And concluded with, ...“Still, if you believe in the recovery, it's hard not to get in on a ~35SP move off highs in front of the NFP# sooner than later”.  If an investor missed the ~65 SP point ride that followed in March, how long can you stay away this time?.   Some of the old culprits in the last pullback have returned with China, leading ‘a commodity swoon’ once again today.  Did they ever go away?  Basically, the same concerns discussed all month here are ringing through the marketplace today with the ‘risk off’ trade paying the price…sometimes it’s the Precious metals etc, today it was crude, base metals, but all in, it’s still a commodity demand worry linked sell-off. 

But, one thing that remains constant is the idea, “On 01/03 noted the possibility  ...”A commodity led correction, but not necessarily one that will take equities down very much!”.   Despite the selling in materials, steels, coals etc. today, the IBM type mega tech caps, internets, consumer stocks performed very well indicating equities are hard to take down as money flows through equity groups.  Although RUT gapped down and underperformed, listed names here covering a broad range all finished green with many others only marginally in the red. (ie. ULTA FOSL LVS  LULU  PCLN  N FFIV  V  PMTC BIDU  SXCI  LQDT)

All in, the market got something to talk about, but in the end the same trends remain until/unless more concrete data hits.  Example,(same trend), Initial claims was another robust # bringing in another fresh cycle low. (4wk avg.). 

The market ‘headlines’ and it’s gurus did their best to alarm the ‘Bull’ with the remix of the old hit..Hard ' China' landing and Eurozone recession fears.  It seems a .5 to .7% drop on the major indices is really a big deal today.  It’s almost comical.  Starting the "Ahead of the open' with “Do the markets do a 3-peat”  is even comical as the market is not even through stage 1 of a true 3-peat play(of ~35 handles).  It’s only been hit~26 SP pts. (H to L), so far!.   Incidentally, a trip of 10 more pts would take it to February highs and mark another ~35 ‘shallow’ pullback.  A few other supports are in the 1370’s.  It would’ve been ideal spot for dip buyers to pounce for month/Q end window dressing, but no such luck today!.

Ahead of the open, (17-04)

A weird tape, yet support on the SP 1370 not broken yet.  A sideways session for the broader market at the end, but an underlying market consisting of growth and best performers succumbed to tandem profit taking.  Considering this is as bad as it got with Spanish yields widening over 6% is a relief of sorts.

The heavy hitters like AAPL, PCLN, MA, GOOG  the most visible casualties, but the underperformance in growth ‘retail’ stocks like FOSL, RL, PVH VFC , not living up to the overall retail sector performance following better than expected retail # was a head scratcher.  Still, despite better retail # in China last week and now here this sector can’t get going.

A lot is being made of AAPL’s slide threatening to take the market with it, but at this point with its action coinciding with other growth stocks is likely more of a rotation of sorts for the time being.  Not a safety relocation/ rotation into TSY or GOLD, but one where the cash is being spread out in equities.  Example, see the PC’s/Semi’s in the black today as ‘tech’ gets slammed.

The ‘weird’ action is likely not a very long term phenomenon.

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.