nice kick off

Beating the "bull drum" since March… we don’t expect anything as dramatic as ‘09 (shockwaves of 08-09 are gone!) in both directions.   Still, we expect a continuation of the rally into ‘10 as we‘ve been drumming in December to stay long.   We are seemingly on positive footing which is advantageous to our ‘growth’ oriented stock/ sector picking as fiscal initiatives (unwinding of policy stimulus) globally will be baby steps.   So, overweight equities is the strategy,  we hope this becomes universal (retail investors) as returns on capital will be in the equity markets and fund flows will occur.  High beta, small-mid caps, high beta regions, cyclical. 

This was the theme in December, R2K went from 590 to a breakout to 640/>2% today on the R2K...Into Dec 3rd trade..."Even though the rally seems to keep losing momo’ in this range up to 1120 ,  we’re not listening!.  Yesterday, we said it will be a selective stock/ sub groups pickers market going into year end and we’ll stick to that!  R2K  big outperformance up >1% of the market maybe a clue of things to come". 

We left off before holidays with DJIM #51 and some selective names..."Only 2 ½ trading days ahead this week,  some window dressing Q end may begin with some recent beat up mega  stocks AAPL AMZN  getting a bid .  We think it’s a stock pickers market now and will be in 2010 as lower volatility and the search away from zero returns brings money into risk assets (equities).... Also trading some (GMCR OVTI ) off recent low possible turns)".   One glance at charts off these stocks for the R2K period above and you can easily see the great outperformance to the SPX while it flirted with a breakout, yet finished the year below 1120. 

Today, we had the only underperforming group in December of high betas taking center stage with the Casino's led by WYNN, LVS +10%.  We`ve discussed previously how fast these move due to squeezes and today was no exception after consolidating most of December.  An upgrade and good Macau December numbers attributed to the pop.

Coals,  WLT, ANR  another high beta group also participated due to China weather again as supplies are disrupted. 

Chems' Ferts,  back near top of trading list after bullish GS call.  More firms will likely follow.  POT, MOS, CMP

This the bullish road we’re taking in early '10, a swerve would only be from tightening too soon, an error of policy here or abroad will cause us to change our stance likely.   Heading into this earnings season, 3 strong Q’s have already been seen in the recovery and a 4th should be ahead.   But, before earnings kick off, we have Global PMI December readings to chew on and U.S unemployment # to signal more broad recovery strength.   Today's PMI globally/ ISM in US were solid, if not robust!.

Expectation Game...

When a stock is expected to come out with good earnings, it better not disappoint.   Most earning seasons,  we have often seen that a stock trades up just prior to the earning announcement, but only to get a lousy reaction due to the "miss" of high expectation or what they call the "whisper #”.  For some stocks, such as GOOG, AAPL, AMZN.. they fall into the category of "need to beat the expectation" as they are the “Crème de la Crème’ of the stock market.

Maybe it has something to do with their fairly rich multiples and the fact these stocks always had wild moves post earnings in the past.    However, doesn't that game get a bit tiresome after these many years?   Come on, why can't people treat GOOG  just like any other tech stocks?.    Honestly, we don't really want to put much emphasis on GOOG's earning or reaction tonight because it can get into an endless debate.   Instead, we wanted to point out UPS, which guided much higher for the year as a barometer for health.   If anything, this gives us the impression that the increased business from UPS means Economic activity is more or less flourishing across the board.

Today's the second day market closed over SPX 1200,  little follow through, but same story in buying/ selling trends as on most days talked about here.  X  down >3% added more credence to what we’ve been alluding to regarding the commodity linked names & broad market.   

Since, many of our plays are getting close to the report time and according to our own trading rules, we'd let go most if not all of the position prior to the earning date.  This is hard to do in a recovery period as you’d expect most to do as well as previous Q, if not better.      When the play reports number/guidance that surpasses the most optimistic expectation, we can always get back in.  

So far we are only getting a small taste of what's to come for this earning period, but these are the best names reporting first and they ie.(INTC UPS JPM) set the stage or let’s call it a “high bar", so far to meet for names reporting later.   GOOG/ISRG  are proof tonight.   Already, we have broken through some major levels from this market.    We can't wait till next week as the bulk of EPS begins, even though we have some important names tomorrow for the broad market.

Shadowlist update

Shadowlist by sector money flow/ rotation to follow. (visit site).

...data..data

The premise to start the week  ….”market’s ‘resiliency’ keeps on showing it’s hand as it hold ups on economic drivers withstanding depressing events”…” only hope is eco’ figures this week turn some heads away from European perpherials..”.    Slowly this is playing as the big media debate for the last 2 trading days has turned to‘Eco data vs. Contagion’  as the market bounces back to back after terrible openings.  The plan here is taking effect as focus is turning to eco data and away from European peripherals for the time being.   Today’s data points (Chi PMI, CConfidence) moved the market in the right direction and tomorrow should be no different with key data to hit (China PMI, US ISM).   The European peripheral situation will remain center stage, but if eco’ data continues to be strong (as expected), the headlines out of Europe will get muted somewhat.   A combination of European fears easing and v.good data, including euro figures and we may finally break out of this 30 point November range.   In reality, market needs to do it soon and gain some momentum as ‘important eco' data’ wind down after NFP on Friday into year end.

As far as the trading tape,  today was more of the same (see yesterday’s bolded comment).   As long as this trend keeps up, which we watch via Shadowlist, the market will hold up and you shouldn’t fall into ‘panicked’ selling because the market slides 160 and 110 points as has been the case last 2 days.   There was some negative noise (liquidation) about techs/momo/internets trading patterns (FFIV, CRM, PCLN, AMZN  types), but viewing it as a (month end/holiday end sell on news) phenomenon more than anything at this point as the selling wasn’t really aggressive.   Still, despite a negative day, we had some good individual stocks action off our list with APKT, KH, TFM  putting in NCH’s with >6% gains.