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, (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.

Into the trading week, (Apr. 23- )

The week long whipsaw being called a Bull/ Bear battle is a little extreme considering neither side has conviction to put money where their mouths are.  In this view, it’s more of a standoff than a battle as investors keep watch from a distance.  One result of the recent action is chartists, mostly Bear ones have come out in numbers with their Bear wedges, Bear flags now to give the week/ month long action some color.  If some market direction occurs soon, they will say it was in the charts.  But, the real culprit will always turn out to be a catalytic event and we’re coming into a few weeks of possible triggers for such.

To sum up last week’s action, it’s surprising the SP was actually able to muster a gain as the tape had reason to be ‘heavy’.  The lingering Euro’ debt crisis , ‘light’ eco’ data (notably, Initial claims #) , toss in noise “crumbles’ about AAPL nearly testing its 50Ma for the first time in 4 months and festering noise of a repeat of 2011 action as we come into the cyclical ‘sell in May’ buzz.  The negativity was offset by the ‘calming' earnings.  As discussed recently, market will know trends quickly off earnings and that’s the case now with important names in each important sector out of the way.  Best gauges are out of the way and Q1 is positive considering the weak global growth hand dealt.

On deck this week,

Initial claims, this may turn out to be the vital market puzzle piece this week (post 2 light weeks of numbers). Earnings will not overshadow eco’ data as they did last week.  Now, eco’ data has to compliment the earnings.  If  I’C’ #  number keeps on trending up to 400k it will invoke fear of a weakening labor market.  NFP# is a few weeks away and this Initial claims is last for April’s NFP#. 

FOMC,  market will look for changes in the growth rhetoric due to the recent eco’ data, specifically last NFP and Initial claims. Also, economic, rate tightening forecasts are on tap.  Policy will most likely be reaffirmed.

Earnings, it becomes a single stock story as major trends known. Still, one sector really interested in is the ‘retail’ luxury/ growth space to see if momentum is continuing. (COH reports, early March it was quite positive).  Of course, AAPL is on Tues. Last week, closely followed here, URI  PII VMW  FFIV  UA  were viewed positively. Add MLNX  to list off report last week.

China, China who?.  Now that we’ve escaped ‘hard landing’ again , Shang’ the best market in April.  Flash PMI’s early this week. Recall discrepancy between these HSBC #’s vs, gov’t.

Europe, Besides EU flash PMI’s, it’s a quiet schedule of events with politics taking over with May 6 elections in France/Greece. 

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.