DJIM #36 2010

Market’s mentality is simple.."What have you done for me lately, MAC'?”.   How else can you describe the turnaround action of 65pts SPX by Fridays highs.  The ‘lately’ is simply fresh ‘ Macro  data’ causing fast sentiment shift following a weekend of tough ‘double dip‘ talk in every major financial newspaper, post Jackson Hole rally.  

Some review of how we got to 1105SPX to pass to the Bear and their probable hogwash this weekend..or just the Bull, who missed the signs.

Let’s not fool ourselves as good as the macro driven rally of 4.7% SP Wed-Fri was, the initial instrumental catalyst was Jackson Hole and Bernanke last Friday.    Even though on Monday the market gave away Friday’s rally gains (due to media weekend focus noted above/TSY reversing) this was the ‘match‘ for better sentiment as Bernanke said , “no double dip‘ and eco’ data followed suit.   What still needed to be done was fix the ‘contentious’ FED worries.   These were cleared up on Tuesday with FOMC minutes as the last hour buying stomped on this rumour.   Now, the table was set for the ‘Macro driven’ rally that ensued for the next 3 days.  We highlighted the ‘solid’ China PMI’s…"Tonights result will help the commodity linked stocks and the very late market push should extend until US ISM  comes into play”.   The market pushed right into “R-1065” at ISM time and than it was off to the races on the much better than expected ISM data.   

Before Wednesday’s trade…
Following the ISM big initial push, the market flat lined all day as pessimism surrounded the rally and a flatline trade for the rest of the day.   At this point it was noted here..    ”What is relevant is noting the flat tape after 10am till close has many doubting this market move.  If data continues to improve into weeks close (retail..NFP#)..watch out Bears!.   The flat tape today makes people skeptical of the move, this is besides the overall daily skepticism that the market can’t hold onto anything as profit takers appear.  These negative sentiments today may just have positive implications this time for the market and thus more upside from here.   Market needs a couple days above SPX1065 for this to be 'Bull's home-court advantage..".    
 
Before Thursday’s trade…
“It only takes a few days of data to change the prevailing sentiment away from double dip speak.  We still have what may be 'determinative' numbers this week to sway the conversation of 'double dip vs. soft patch' .   We got more from retailers this day and thus, 10SPX points.

Coming into Friday‘s trade, we knew we (Bulls) had the agenda above 1065 as we had closed above it on consecutives days and also our 20ma benchmark.    Even an average NFP number would possibly only lead to a pullback before buy dippers would appear as sentiment had clearly shifted.   Fortunately, we got a number closer to vicinity of 100k private jobs (78k pace/3months now), which we thought would be a pleasant surprise for even more upside.   Of course, the TSY spiked well over 2.65% coinciding with NFP release, which we alerted would be next round of buying once cleared.   Simply,  there were too many caught of guard this week on their skeptic/ pessimistic heels and eventually (which was a NFP/TSY) would have no choice but join the party instead of suffering from Performance Anxiety -PA‘s (missing SPX1040 to 1090 to 1105) and become ‘Performance Chasers’.   The “PA’s were chasing all day,  premarket/opening bell off NFP, off 10pt to 1095 and at the close.

That’s the way the week unfolded and we could enjoy a weekend of Bear/Shorts conspiracy hogwash that the NFP was known to special people at 1040 this week!.  The rally event was Bernanke and macro driven starting with China PMI/US ISM...plain and simple!   Anyway, hopefully, we got you on the train before it left the station as we were not performance chasers come this Friday, but instead ‘profiteers’ at someone else’s expense.  Ahh..life of a Buccaneer trader in these machine driven trading days.  Most stocks hit their highs by 9:40am, looking at 'change from open’ instead of ‘change from previous close’ (exception GS got off the pinks sheets to trade) illustrates if you’re chasing at the open, you’d have little gains or no gains/or losses on individual equities by close.  

Not to say this rally can’t keep going/ underscore it or the data,  but a rest approaching 1108 April -August trendline  is as good as any to say your blessings after a monster move off what could have a death spiral at 1040 just days before.   Also,  if you’re returning from summer holidays next week wouldn’t you like this weeks gift to pay for your vacation time by taking some profits? Hmmm?

As this data becomes history till next months fresh numbers,  we’ll need something else (catalyst) to push higher.   Forecasts will not change after only a weeks data, so, we’re not out of the woods as Friday‘s weak Non-Manu' ISM shows.    Believe it not,  it could be Obama/White House becoming the next tailwind for the weeks ahead (Instead of the usual headwinds they’ve been to the market), as there really isn't anything on the horizon.   Yeah, maybe a stretch....but...