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!.

..Whatever

As we come to the end of a very successful September (6 tradings left) with many technical targets achieved and/or brushed with 1130, 1140, 1150 SPX + notable Macro data /FOMC out of the way, the market has only a few things to do!.  Most of it consists of taking a breather, rest period, back filling, consolidating, digestion, sideways action …..'Whatever', you want to call it,  it’s happening since SPX1049 as the market works off some of September’s ‘overbought’ gains (SP~8%, Nazzy ~11%, Dow ~7% and investor ‘bullish’ sentiment.  

Most of the workout today occurred in the techs (ADBE, PMCS-these warnings are nothing new, we’ve said to expect more in this group into EPS season) and Financials off >1%.    This reaction in tech is really not due to these warnings being a surprise, but the fact it’s the best % September group and these news bits become an ‘excuse’ to take profits.  Considering the big ‘overweight’ in these 2 sectors on the SP,  today’s broad market performance was not bad as selling pressure is seemingly contained.   

DJIM can hardly complain as Tuesday’s alerts to RIMM  in low 46’s, hit $49 today and NFLX  exploded ~10pts from alert..(” NFLX looks to copycat the movers from yesterday with NCH not far away.”)… Not bad to catch a few of the best movers since the market hasn’t done anything to the upside since.   RIMM should still be in play till next weeks developers conference (tablet intro?) and with AAPL at potential resistance levels, a pair trade may be conceived here.

Performance anxiety over these September numbers should be enough to keep this market steady as managers come to ‘window dressing’ time.   Still,  it’s not a bad idea to take off some exposure and be more selective as upside risk fades here late September with potential upside catalysts not on the agenda.  Post FOMC and today, commodity linked stocks little reaction to weaker USD was enough reason to reduce exposure (alert at 1040SPX/10am) as the usual trade had not began not materialize.  You could see the expectatation and spikes in WLT X CLF  charts at the open and the tops put in early and subsequent 3pt drops in X /WLT  by close.   If you're 0 for 3 leading off the day..1.tech, 2.financial, 3.commod's as today, there is no (DH)Designated Hitter to clean up.

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.