..can’t teach an old “bull’ ..new tricks..eh!

Talk about the habits in yesterday’s Journal coming to fruition as the SP snapped back 15pts!. Not only did we take 20MA back, but closed above 1205, which is a signal the Bull will likely test Mondays’ highs. If we can close above here tomorrow, it will make this highly probable.

If Tuesday’s sell off seemed relentless to some and yesterday's action cautious,  today's action states the  plain and obvious (underlying ‘ bullish’ sentiment is still there).     With the kind of news flow and mood swing lately, this market is definitely worthy of making a soap opera out of it.   Where’s Greece or Portugal today?   Come on, those headlines from two days ago should have at least a couple of days of staying power, no?    Well, you tell that to those who are chasing the high beta BIDU AAPL as the broad market focus also came back into earnings power as we’ve been noting here as something that needs to come back to go higher.

Of course,  this market is not just about the high flying beta techs.   The way this market (SPX wise) carried itself in a 2.2% rebound,  the action had to be broad.    The strength from financials helped quite a bit as they are the most sensitive to soverign overhangs    The earning reports from various industries keeps suggesting the improvement in the Economy covers a wide spectrum of sectors.    Now, we don't need to point out a particular paper stock or a specialty chemical stock to make this argument because believe us,  the move today is pretty wide spread.    

The only weak spot(s) today seemed to come from some commodity area such as coal and steel, but we’ve been writing about the warning signs from X early in the month.  In fact, we view the weakness as opportunity soon to start in some positions in DJIM faves’ like CLF and WLT  X at much cheaper prices than we could have imagined a few weeks ago.   Maybe, even for a quick bounce trade for tommorow starting with CLF.   Still, it’s not a hurry because we are seeing commodities like copper, aluminum hovering at important technicals levels and have earning reports to trade instead.   Clearly, considering CLF had excellent earnings and sold off big (it follows in the footsteps of X’s excellent report), the problem is China curbs we noted recently that are reflecting upon the group and money is coming home ( this means into domestic stocks..paper, builders and the materials for them). 

The other spot was a weak LED group , despite a good tech print.  VECO  has been selling off since earnings and this strengthened with AIXG’s report that had something about not so strong of an order book.  Just like commods’, money is rotating out the best momentum stocks/ groups of late.  To be completely honest, we welcome our past year's best trades selling off as it had become hard to justify chasing on valuations recently.   This will only present an excellent oppy later to get back into the winner's on a cheaper share!.

Slowly but surely, we feel some of the companies are finally getting the kind of reward it deserves for delivering few awesome reports in a row.  Examples ..VCI, IRBT, HOT  and APKT, DLB (AMC) today in mid cap names.    Finally, after a long period of denial, we think the general public is accepting the fact that things can only get better from this point on.   The only thing that somewhat worries us is that bad news doesn’t come often these days.  That's because when a negative headline does come,  it blows up in a 1.5%-2% down day.    On the other hand it’s better to get these corrections over with quickly.   Still, overall for this market's sake,  we just hope the positive sentiment won't let stocks get ahead of themselves keeping in mind as we've said earlier in the month, if a correction comes it won't be like last Q right after INTC earnings, but instead a little later ...meaning May for this Q. 

...and the number is...????

Most of  DJIM discussion this week centred around home front/Economic data.  It‘s slowly making it‘s way back to the markets talking heads.   This is good because we are finally taking a break from Eurozone and switching some focus.   Well, we don't know how long this is going to last because once the NFP report comes out tomorrow, folks may just concentrate back onto the Euro worries now that the market has rallied from SPX1040 to 1105/200ma.   Many have not grasped that we've actually rallied since the 25th/1040.   Those in the rally play may want to sell over 1100,  but those sidelined may begin to feel some anxiety of this move going further.   Stay tuned...

However,  it's important to give some thoughts on the recent Econ. data.    People have been pointing out the fact that although the Economy is recovering, growth has slowed recently.   The fact China is down >20% is evidence of the ’growth’ investor has been slipping away this year.   Also, fear of Euro May problems derailing activity in US has been on the mind.  This weeks macro #`s show it hasn’t derailed things in May.   The eco` downshift may not be as great as feared due to Eurozone.  Unfortunately, a fresh twist in our waters now... the ramifications of the BP spill will begin to put June #'s into question sooner than later by the market.!    We feel all these fears are very natural because sooner or later this is what had to happen for the markets not get out of hand.    Basically we need to level off the growth curve for a bit before we can tick higher.    The biggest obstacle to the recovery remains the unemployment rate.   It seems no matter how many jobs we create, it just won't be enough to replace those millions of jobs that were lost during last couple of years.    It'll be a long way before the unemployment rate comes down to a reasonable level.    By then, the Economy will be at full steam and we bet many of the plays-sec`s we like will be trading at a much higher valuation.    This is always the case in an upward Economic cycle.

As far as market goes,  SPX stopped dead at 200 MA today.  Volume was relatively light and people are most likely waiting for the NFP report tomorrow to give them a reason to make their next move.  Today’s somewhat green to flat action gives the market some room to manoeuvre, if we broke out over 200ma today,  we’d probably have a better chance for a sell on the news(NFP#), no matter what the # would be.  As we all know,  selling on any NFP# is always a possibility and will be on this census skewed report as well.  Watch private sector jobs, whisper highs a tad over 200k.

Excluding the commodity linked stocks (Again, China housing clamp cooling property mkt big time), many plays behaved really well, especially in softie tech.  We had M&A activity (SNWL) once again in the group and DJIM listed softies, CRM VMW  and another VRSN  added hitting NCH`s. (will update Shadowlist this weekend).  Others like DGIT, DLB  also put in nice days.  

In all honesty, if we can close out the week in a relative quiet fashion, it'd be a nice confidence boost for the sidelined investors to slowly buy into the market again.    Right now, the most important issue for this market is to ease the volatility and stop the late day sell offs.   It stopped today and yesterday,  let this continue today and we`ll be happy heading into the weekend.

SPX ~60 in 5

It’s been nearly two weeks since noted..”Earnings, if they keep at this pace 'will trump' any Eco data-FOMC statements..”..   

Immediately, following this statement we ran into a few days of roadblocks where earnings were missing the revenue top line and most proclaimed Macro victorious over Micro (corporate) as the SPX dropped to 1055.    Now 5 trading days later, yes only 5, the SP hovers near 1115, some 60 handles  higher on the heels of Micro winning out.    Of course, this stands till August …“….because eco`data will be sparse until August hits and we see how July was.  Starting next week, we will live by the guidance from the CEO/CFO`s."    In other words we have some time to climb higher if we get through a boatload of technical ‘R” numbers around today’s close, but once August hits it will be eyes on US eco data’ starting with ISM’s to verify what the corporations and global markets are saying. 

The good part is we have good things on the Bulls back coming into August data...Micro (earning) fundamentals,  Western Europe accelerating into 2H and China ‘bottoming’, plus FINREG/ Stress tests over with.   We didn’t have any of this when the market was toying with a potential summer under 1K SPX in June.

Today, market had FDX  add some validility to the global picture,  but we’ve had this already here at DJIM 2 weeks ago as part of an improving global snapshot.. “EXPD , bot some, 30% upside is a great pre-announcement, should help FDX -transports”.    

A few other earning highlights noted VMW , CRUS, also making NCH (New highs).  Past DJIM Q's/2010 plays, AZO, RBCN, OVTI, NTAP, ROVI, CRM  continue to grind away at new highs.   We also have APKT, DLB  on 5-6 trading day moves that we suggested as potential run ups into their earnings this Thursday flirting at NCH‘s..“Look at tech reporting soon on sell off..APKT DLB etc.on this 20 day hit. Apr 16.     Also AMC,  VECO  report shows DJIM LED stocks (CREE AIXG RBCN ) still have momentum in ‘10.

In conclusion, if the breadth of the market stays on par and/or performance chasers come, a try at the 50% retrace would be in the cards.  This is also where we have June peak to contend with.  Still, don’t think these levels should cloud our thinking with new earning plays emerging and getting some recent ones back on pullbacks remaining the premise.   Starting tomorrow, looking for a close over June high close of 1118 for ~1130 sooner than later,  otherwise a dip is probably in order.

..stalling too long

The expectation of a dip since early Tuesday morning is getting a bit tiresome due to the action today.  It’s getting a bit too long in the tooth and there is no solace in today’s mid-day rally or the fact the market managed to close above what should be a short term ‘floor’ at ~1098.   The ‘floor’ seems a little squeaky and you can start seeing downstairs (1080’s) through some cracks.    A close above today’s close is a necessity now for Friday (need to see some conviction dip buying show up), otherwise any disappointment over China’s weeeknd PMI’s and/or US ISM on Monday will cause a roll down the stairs to test the 1080's levels quickly.   Market's resiliency will probably be tested tomorrow, if buyer's don't show up before the macro data next week. 

Being underinvested after Tuesday’s 1118 alert avoids any real worrying of the above happening, yet trading goes on slowly and it includes being ‘selective’ in picking out some current earnings and sticking with them and/or buying them on dips.   These stocks have ‘underlying’ earnings that should avoid any ‘hits’ a high beta stock or sector such as commodities may experience in a further pullback.  

A couple more of these earnings in the last 24hrs, include DJIM stocks past and present. BMO, we had VCI, CLW.   AMC, we have DLB  with excellent #’s and ROVI  again not disappointing.   These companies keep producing Q after Q.    Tonight’s EPS#’s in high beta closely followed names like APKT, WYNN, CSTR, even FSLR  are very ‘noisy’ and hard to gauge immediately off the headline revenue and/or EPS beat.   The reactions are more of the profit taking unfolding we alluded to after VECO that is still presiding over the momentum ‘popular’ stocks.