just drifting ..

The writing was on the wall (last hour selling) from the onset of trading.

• Pretty broad strength globally, Shang +>3%, Europe >.7%, anything commodities/mining (no tax hike relief), nicely up and ES was ‘flat’  in the US premarket.  Despite, a 5 pt SPX midday gain the US lag was still in effect coming to 3pm.
• After the opening bell, a big laggard was easily visible in the leading group since early Sept .(SOX>30%)
• Momo/winners of 2010.  Last week noted single stock strength was disappearing in momo/growth names to the years laggards. This profit taking (not severe yet, but something we said to watch), continued today as seen in the NFLX, PCLN, CRM, Casino’s etc.  BBY earnings on deck in morning for tech group.
• Only a handful, incl DJIM’ commodity linked plays (CLF FCX ) up 3-4pts midday were outperforming on the  ‘hike relief’.  The single stocks action wasn’t widespread as you’d like to see considering the inflation trade coming back on and the weak USD.

In all…not putting much into the day just yet, as the ‘seasonal trade’ allows for moments of easy downside whenever buying dries up (lack of liquidity).   A little selling with no bids on the board allows for exaggerated  moves like today’s last hour.   Considering  there was no news and a technical “R” in the 1246/1247 , (a couple H&S are in this zone),  it’s more of a case of buyers losing their cars at the malls lots after some lunch hour shopping and not making it back to their desks or just a case of not even getting out of bed. 

Time out..

The fact the market exhibited the same traits as yesterday shows signs of tiredness and reason to be mostly sidelined.   Once again after briefly touching resistance at 1246/1247, the market for a second consecutive day failed to break through and sold off.   That’s red flag #1 and other is the selling in this year’s momo/winners we’ve been noting, picked up steam as alerted at the open and there was no reversal in sight all day.  This aspect is also spreading from the usual suspects to other earning winners.

There is really no solace in the fact the broad market is holding up, the stocks keeping it up are of no trading interest.   Until, the 1246/47 zone is breached and/or the selling dissipates in the momentum stocks, investors/traders want to preserve gains instead of trying to find a bottom in individual stocks or chasing anything on strength.

Three-peat

SPX off 10pts from day high...

Seems everyone is looking forward to '11 and ignoring the last few weeks of ’10.  This includes traders/investors who have no conviction for further gains and instead take ’10 gains slowly off the table.  Included are the tier 1 firms raising GDP#/SPX projections for ’11, who can move markets on their own machines now, but are not.  Once again early morning trade was a 3’peat this week and gave an oppy’ to ‘time out’ higher near 1246/47SPX zone. This time the market didn’t’ wait till 3pm to selloff and the first .5% decline in December ensued. 

The ‘symbol’ of expectations for ’11 is today’s TSY yield spiking above 3.50% (even with a high USD), which is getting all the ‘awe’ in the market.   You can trade individual stocks here, the general market via ES/SPY or even if things such TSY’s (TBT ) by Journal commentary.   Some like to point to the negative reason for the TSY fall as far as inflation etc,  but,  as it was pointed out here weeks ago….resetting asset allocation is happening ( see equity money flows from this weekend’s Journal)

As far as 3’peat and why DJIM was ‘defensive’ until 2 things change ( broad market ‘R’ and momo leaders selling), today’s action didn’t clear anything up.    The SPX didn’t even make it to “R” 1246/47 and yes, the momo’ names stopped falling for the most part, but there was no sign of buying either or they wouldn’t have closed flat on the day.   So, nothing settled as both issues weigh on any broad market progress.  Yesterday, networking stock, APKT joined the ‘winners’ selling fray, today it was a China internet, BIDU off 8pts from day's high.   As said heading into the trading day, it seems day after day.. more and more earnings winners take a hit on any given day, following in the footsteps of the really big momentum winners, NFLX PCLN FFIV CRM  peaking out.

In all, a few important earnings Thursday as FDX gives signs into holiday spending and a few tech’s are on deck (also Initial claims).  If, very positive reports, the current landscape may change, but even good 'eco data couldn’t do it today, so who knows.  Like today, DJIM’s JOYG  had a nice day post earnings, but everything else in the market was relatively flat, so staying selective and not overloaded is key in this ‘time out’.  It’s nothing more than digestion (pause) at this point, but realize, the whole ride in November from SPX1227 to 1173 was also digestion before the December ride back up.   Simply, there is more concern about conserving the latest rally gains than trying to milk more out this market at this juncture.  That’s all...

..same

 A decent day if you look at the scoreboard, but really nothing has changed as the same trends persist. We’ve highlighted these trends the past few days and with OPEX day at hand, it’s unlikely anything will be settled with “R” holding up and the SPX finishing relatively flat on the week. 

In all, it’s a week of consolidation setting up for what is usually a positive 2H of December.  The market got some v.strong earnings AMC with ORCL/RIMM, but it’s probably not enough to get the market going on Friday.  Wish there was something smart to add, but the market just won’t allow it.  Have a nice weekend…

DJIM #50 2010

Is there any historical ‘unfinished business’ into year-end?.   Let’s hope for underperforming managers to kick off window dressing soon or else this time next year they’ll be window dressing stores with pimply faced kids at the local mall.  Last week was just treacherous to sit through waiting for SPX 1246/1247 to go.

Don’t shoot the messenger, but our Journal tone pretty well summed up our expectations of the market the entire week.  Drift…Time out…and ‘same’.   Whatever reason, maybe reading too many trading manuals, but there is always noise around OPEX day and the volatility it will bring.  In this book, OPEX days are biggest waste of time and so it was easy to predict,, …”….it’s unlikely anything will be settled with “R” holding up and the SPX finishing relatively flat on the week….The market got some v.strong earnings AMC with ORCL/RIMM, but it’s probably not enough to get the market going on Friday”

All in, a good 5 day consolidation…by end of week, some momo’s started to look better, as well, our consumer/ retailers after post Turkey basing.   Of course, it’s going to get especially quite on the eco’/earnings side.  The only worry is sovereign/Euro noise to resurface after a couple of quiet weeks.

..." I'm out of the office..."

An incremental move over the 1246/1248 SPX zone, but, hardly a rejuvenated move as signs of fatigue still preside from last week.  

Nonetheless,  the December year end momentum continues on the back of preserving gains, no broad conviction, no buyers or sellers as “I’m out of the office…” auro-email replies gather steam across trading desks.   It didn’t look too good early as the day’s first attempt at zone failed with notable weakness in this year’s winners coming again…eg. BIDU PCLN,  it was good to see another zone afternoon attempt and many of the outperformers come nicely off the low’s.   Still, as discussed days ago,  money flow is going into laggards.    The best midday action >5% off our Shadowlist were from a couple of late season call-ups in TFM, QLIK,  recently it was HOLI/LIFE  that broke out nicely before profit takers came in quickly.  This exemplifies the type of tape we’re dealing with.  If you’re not “I’m out of the office ..” type, you are dealing with a market with no rhyme as on any given day a different stock will make a move. You might as well throw darts at the Shadowlist to try to stuff the stockings (account balances) some more.

..Holiday hours

..."DJIM is out of the office..." 

DJIM #51 2010

Hope everyone celebrating XMAS had a good one, but if you think it’s time to get off the ‘eggnog’ and trade away, you might have switch to something stronger to get through the week as 3 feet of snow hit the market coast land.

We entered last week hoping for some ‘unfinished business’ via window dressing starting and we did get some to push through 1246/1247SPX.   Unfortunately, any further incremental gains via window dressing (commodities especially) for next week were probably ‘offset’ by a lending hike coming down the chimney from China on XMAS day.   In this holiday environment it is hard to gauge the effect of this small bit of a hike as most have closed their books for 2010, plus a first .25 could be priced in as a 'prudent' China was expressed recently.   Also, the expectation was for lending hikes to be front loaded in 2011 was discussed here,  so it shouldn’t have a Oct 19 effect (see recent note here on big market drop and quick recovery  after last hike)..."Recall, China’s last lending cut was a “SURPRISE”  in October and the market swan dived about 270 DOW/20 SPX pts, crude was off 4%, but 2 days later, all the losses were recouped.  The next one should not be a ‘surprise, but the expectation soon and so market should behave better.."   Also, since last RRR hike things have dramatically turned in the expectations of growth/GDP in the US, so effect should be minimal to close off 2010.   Come January, it may be different as many things intertwine (see recent note). 

Right now, the market is complacent on light attendance, any slight negative macro/micro (earnings) all pretty well being swept under the rug.  The point is not to carry this market ‘complacency’ and be trapped with the sanguine looking forward crowd once we’re in January.

volume or no volume...good day..

The initial reaction to China hike resulted in a ~17 pts ES drop overnight, but as discussed here yesterday the market should behave better than Oct.19.  The ES slowly recovered and once one of the lowest volume days on record finished, a flat day was the result of an underlying bid.   Volume, or no volume as was the case today, the action was constructive, if not pretty impressive considering the Shang was under pressure ~2%. The commodities space was the early tale sign for the US markets as unlike crude off ~4% last time, everything (including crude) in the space held up well from the opening bell.

Unfortunately for trading purposes,  the ‘winners’ momo still are not being bought, but instead the laggards hold the market up eg. Financials.  The same trend remains from December 2/3 .. “..it is probably ‘growth’  stocks taking a backseat as they may seem ‘expensive’ compared to the all the other stuff out there.. If there is ‘performance anxiety’ out there into year end, managers may feel there is more upside to the cyclical laggards”.   Also, any action in individual stocks is dictated by ‘media’, eg.Baroon’s with CSCO, NFLX today as traders have little to jump on.  Some holiday trading continues in MCP, (daily on top of Shadowlist gainers seemingly), with REE/newly listed AVL from TSX joining in.  The run in MCP has alot to do with the lock up period ending soon in January, which will result in selling off most likely.  BSFT, marginally put in a NCH.

In all, US markets handled the hike event in stride (may not be the case come January as this inflation noise will pick up steam from here).  Maybe this was the only day this week for the hike to ‘offset’ the expectation of further window dressing.

China lid..

Pretty well a repeat day as US markets shrug off another 1.7% down Shang day and grinds higher.  More and more, the action in the Shang is becoming worrisome and won’t be ignored for too long if it continues.  Right now, it’s keeping a lid on things in US markets.

Other repeat activity include things such as resiliency, dip buying especially in Financials today , no conviction from either side, winners ‘momo’s’ lagging, sluggish eco’ data swept under the rug again and SPX 1260 acting as “R” for a week now.

The heavy action was in the “rare” stuff holiday trade as MCP/REE/AVL ballooned in the morning before ugly reversals giving a glimpse of the ‘selling off’ noted as MCP ($55 to 47) lock up period looms.  We’ll probably not see these highs again for some time.

 Starting to think the way to derail this rally and correct is a ‘good news’ rally and sell off day like in the ‘rare’ stuff today. In this scenario, the market rallies off a good catalyst, but it becomes evident there is no conviction force behind it and the rally peters out.  Something to watch for later.