DJIM #41 2010

Another week, another solid % gain tacked onto the SPX!. The QE train kept rolling with the last hurdle taken out Friday morning with the NFP# report.   If there was any teeter-totters in the FED or in the marketplace, this report surely solidified an unleashing of liquidity to come in their minds.   Add strong earnings from the first Dow component (AA) with the prospect of loose money and the SPX breached the July channel top.  
 

Last weekends Journal with market seemingly fatigued around ~1150,  we talked of rotation into financials (BKX +3% on week)  and commodities  away from tech  …"US Macro data this week should re-inforce a weaker USD/ higher Euro ahead....A rotation should provide enough stimuli for the market to break the Oct '07 trendline eventually....despite the precious metals taking off,  the concern here has been that many commodity linked stocks/ groups were not participating in this ramp off the Euro and decline of USD.    But, late last week, we had some developments that it`s probably time to become 'bullish' and shortly look to get long some commodity-linked stocks" 

Finally,  the widely followed DJIM base metals  got going outperforming the precious metal stocks ….WLT CLF FCX X  all up ~5% on the week.   On Friday,  Ag’ commdities  got into the picture ramping big after USDA reduced it’s supply estimates.  As noted a few months ago, the Ag trade/ picture will last a long time once in motion, therefore there would be a trade after the Russian fires.   Since those days the space has really done nothing,  even with POT offer on the table.    As far as linked plays,  Machinery stocks benefit ACGO CNH DE, but the fast trade will come to the fert' stocks (DJIM’s past included (CF MOS TNH IPI ).  The outperformance of base vs. precious is likely indicating some rotation as well.

Drag…

The tech rotation from last week continued and took on a new phase as this years momo-M&A tech alarmed of a blow off top.   The big caps are providing ‘safety’ now.  If there is overhang on the market, it is this right now as it‘s ‘spooked‘  quite a few.    The markets need to see this cloud picture clear up and earnings / M&A activity will decide this most likely.

It should start to get interesting as attention turns to earnings this week, partially away from the QE. At least for a week or two, we'll see if the Micro can be the driver to higher prices.

..waiting room

As the Euro deals with more exhaustion (-.4%), the FX sensitive market didn’t have one of it's usual rally tailwinds.    Add the anticipation for FOMC minutes at direction of Fed’s thinking on QE, earnings  INTC,LLTC tomorrow,  bond market closed and it’s no surprise the market parked it for the day.  At least there was some action in the DJIM composite, casinos (WYNN LVS ) in the consumer section and JKS (solars strong) putting in some very nice gains.   FX sensitive base materials were a little light after a big week, Ag’ machinery name  CNH +4% led the corn trade, ferts ok, CF >3%.  The “clouds”  again were a ‘drag’ on the market as they came on sale once again.  

Not much of a read on the market,  just have to wait on tomorrow’s events.  Otherwise, staying selective, somewhat defensive in prep/ available cash for new earnings as market is prone to selling if any diversion in QE expectations hits the wires.

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