..a little too happy

Market sometimes takes 24hrs to disseminate news it seems.   What was disappointing yesterday….” a little surprisingly is the fact ‘Cirque de Soleil” a.k.a (IMF,EU) was on it’s way to Dublin… didn’t get the market thinking something will be resolved shortly” is the bomb today as market thinks Ireland will be bailed out one way or another due to this road trip.  As far as China rate hikes, fear subsided because China said they will initiate inflation measures through something called ‘administrative controls’. What the hell is that?.   To the market this is less severe outcome, but the funny thing is, this hit the wires during Wednesday trade and market didn’t react.  Also, it does not necessarily remove the chance they will do hikes anyway in the near future.   It’s pretty naïve for the market to be betting for the best case scenarios on both issues by driving the market to about 1195 SPX by the first 30 minutes of trading as things can unravel quite quickly.  Even though, positives were outlined for the market in yesterday’s flat day (Irish trip, tech/momo’s performance, QE2 risk trade back on), the tapes exuberance sets up a possible pullback off resistance quite easily.

Luckily, we had something ‘real’ to keep the market true in the surprise upbeat Phily fed #! vs. NY Empire from previous/ Initial claims and NTAP refuted CSCO’s faulty trends in it’s CC to get all our Shadowlisted momentum/ storage/clouds/virts stocks rolling.  

Add CRM’s  strong earnings AMC and it looks like tech survived Oct end releases making CSCO look like a black sheep, at least until next Q4 report release time.

All in all, the gap fill in the 1180’s is a positive going into what is usually a positive biased Thanksgiving trading week.

DJIM #46 2010

Heading into a shortened trading week, the 3 main issues grounding the market seem to have dissolved to a point by recent actions.   Firstly, Ireland has been ‘forced' into a bailout, but details will take days, if not weeks to come out.  Secondly, China’s RRR hike on top of other inflation fighting techniques announced last week seems to show they will do anything but use monetary policy ‘hikes’.   Third, tech Oct end earnings have mostly refuted CSCO’s concerns ( till Q4 reports). (HPQ BRCD ahead). http://online.barrons.com/article/SB50001424052970204076004575616732157163518.html?mod=BOL_twm_col

In all, on top of last weeks positive Eco data (inc. retail reports), the market should be relieved some and enjoy what is usually a ‘positive’ trading bias in the holiday week.   Still, in no way is this the last you will hear of the consequences of these 3 issues, it’s likely just a temporary relief, at least for the holiday period. Eg. Irish bank haircuts as a bailout result…we may get more contagion issues show up (Portugal)…a bad tech guide ..more China curbs??

As far as how the week finished, the market pullback to the high 1180’s on Friday and the first sign of intraday dip buying coming back showed up.  This ‘shallow pullback’ is a better sign than what was primarily a short covering rally the day before as it shows buyers are willing to step back up.   A good 'traders' sign is individual equities/sectors(retail) are not so correlated to the broad market tape now. Eg. We saw 3 earnings noted here last week all trading higher as buyers pick up quality…CRM  being the highlight.  Simply, if you stay selective, the broad tape action should not matter.

..market padded down...use scanner!

As trading desks empty slowly into Thanksgiving,  the market is at the mercy of low volume volatility.  Today’s 20pts ES drop from overnight H and then a return ticket in the afternoon is probably indicative of what is at hand for the rest of the week.  Clearly, the issues of Ireland/ China/ CSCO consequences are not going away and more (FBI probes) is being thrown at the market.  *Even though, HPQ refuted CSCO’s claims, what is not being noted AMC is the how brutal BRCD’s  EPS guide (they have one the biggest gov’t/ federal  stakes).

Luckily…. yesterday it was noted ‘dip buyers” are back and today’s reversal exemplified this as does the easiness to change directions due to low volume.  If you watched the market get padded down by all the noise, a soothing aspect is to use the ‘Shadowlist Scanner’  to see if it was warranted.  Clearly, the only pressure on the % loser side was the Financials and if you flipped the list over, you’ d see all our momo/clouds in NFLX, FFIV, RVBD, CRM  etc making NCH’s.  Simply, what this points out is a lot of the tape is ES/ETF related, while individual equities outperform as noted yesterday regarding ‘correlations’ and broad market tape not mattering that much.   As long as this visibility remains in the underlying tape, Thanksgiving will come even with ‘war games’ now on the table to test the market.