Ahead of the open, (26-01)

Although, U.S eco’ has solidified since the beginning of the year, the FED doesn’t seem to believe it too much. That was the message this afternoon as FOMC/Bernanke ‘surprised’ the market with dovish tone instead of an expected tiliting ‘hawkish’ one. 

Besides pushing out the period of Fed fund rates to be held at near zero to late ’14 instead of mid ’13, Bernanke later hinted it would not take much of disappointment in growth to kick some more QE into gear if these ‘unsatisfactory conditions’ persist. The latter gave momentum to equities/commods’/Gold as the usual effects of QE took hold with USD/TSY downside.

Unfortunately, due to a prolonged ‘ZIRP” all is not so cut and dry as the trade of ’12 reverted back to ’11 in the underlying tape.  If sidelined ‘longs only were waiting for a pullback, today’s events complicated things somewhat as a ‘ safety’ rotation in equities took place with many Financials sub-sectors selling off and ‘safe’ sectors such as Utilites getting a bid.  

Looking ahead, SP 1315 becomes support and a close below will signal a much needed correction is already underway. Until, the odds of some performance anxiety into month end increased.

• URI  PMTC, a few small caps coming in with solid earnings.

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, (19-04)

A little give back, a little digestion post big day.  Really not much going on, except maybe a better sentiment towards Europe as Spain negative headlines (bad loans data) was shrugged off ahead of the main Auction on Thursday.  A better picture of what investor sentiment towards Spain will emerge from the auction.  Still, it likely won’t be a catalyst to solve this 1370-1400 SP range as conviction on both sides is lacking.

All in, on a boring down market day, it was nice to have 3 of the best performers in the market (all up 10%)off the Shadowlist.  PII, URI,  earnings winners again and  SXCI up on an acquisition. Upgrades were flowing all day for the 3 stocks.

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.