Ahead of the open, (06-01)

As market participants slowly return, they are greeted by ‘rinse and repeat’ action.  Once again, morning losses to SP1266 off fresh Eurozone fears turned into new 2 day highs by mid –day(SP 1282).  As discussed yesterday, Eurozone negative headlines should not sway one’s U.S equity trading decisions at this juncture or that the previously risk- on indicator/Euro currency is sinking.  Also, premise here to start the week of an upward bias due to economic data since global PMI’s t continued with the usually unreliable ADP# that came in at 325K. Overstating the potential NFP#  by ADP or not, it’s in the consensus direction and consistent with recent U.S data, which is most important. If ADP# was say 100k, all the previous related employment data would be questioned today.

In all, the EU hangover into the New Year is not going away.  This week has been quiet on the EU front as speculated despite all the fear mongering, thus adding to the bullish sentiment.  Next week, things really pick up with leader summits, ECB meeting, possible S&P action and investors may position themselves late in the day (selling) for such, especially if the NFP gives the market another boost in the morning.

To be honest, the fact China (Shang) is suffering again despite PMI’s coming over the ‘50’ mark is a bigger concern than Europe. 

Today’s, sour Euro’ soup, primarily consisted of capital raising worries by Euro’ banks in this type of market place, not the actual countries they make their home in for a change.  This is not an indication of broad trouble coming. It is likely a fear stemming from Italy’s UniCredit’s stock issue deal (~40% discount) this week, a shareholder problem (market cap dilution) with individual banks is a way to sum it up.  While the EU Bank indexes sink across the pond this week, the US financials/banks lead the morning equity bounces.  It is the 3rd consecutive day of financials making the Daily Journal (some sort of record), which began as a note of buying in 2011 largest trailers ie. BAC, C.  Now, that this financial rally (best sector in ’12 so far, BKX up > 5%) is being picked up by the talking heads mid-day, it is probably time to sell soon.  As in past Q’s, this sector moves into earnings which could be happening again.  To avoid another head fake by this sector, sell initial rally and buy the dip is likely the best strategy here.

 “….Consumer discretionary/retail late weakness is a little ominous (maybe only due to hesitation before Thursday’ same store #’s’. Jan.3.   . Update: The numbers were very mixed, if not soft overall as some well- known, strong names pulled a shade of SHLD.  Only name reporting today falling under our Shadowlist coverage was ULTA, which was quite positive and moved nicely higher.

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, (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.