Just the right kind of balance...

We have talked many times on this site about the potential Economic recovery that can last a long time.   It is the sort of recovery that can drive many people insane.    Why?   Most of us have never experienced an "agonizing" recovery like the one we are going through.    You can go as far back as the 30’s when the stock market actually mattered, and you won't find a similar example of an Economic cycle that we are going through now.    For most of us, we didn't begin to trade till the 90s, for some of us maybe the 80s or even the 70s.    Psychology in trading may still be the same, but the circumstance that dictates the psychology is way different.    We no longer can rely on one set of data to make a clear case of this market.   Due to the volatility of this market in recent months, you can say that this is both a bull and a bear market.    However, we have to look at things in a longer time frame to determine what will really come out of this.   Once again, we have to say that this is going to be a long and grinding bull market that will outlast even the most patient traders.  An example at the conclusion of this Journal shows how selective stock picks could have made you good money even in a long term investment portfolio throughout 2010’s turmoil

So, we got a taste of INTC  report last night that the Corporate America can make profit, and lots of it, without increasing their headcount.    What is that you ask?   That's called lean and mean efficiency!   Unemployment may be high, but it doesn't mean that every company out there needs to operate under a recession like scenario.    Of course, what INTC may be able to pull off does not mean others will do the same and most likely many others won't be able to.   What we do want to point out though is that given time and patience, many more companies and industries will be able to catch up to some degree.    It's just so hideous to write this market off and point its head into a double dip scenario.

JPM is also on deck to release its report tomorrow and we don't have to mention how important it is to the investment professional, especially since we are overbought short term and at important technical levels.   So far, it's a great start in earning season and lets hope things get even better from here.

As far as trade today, once again dip buyers prevailed and today it was twice, once at gap down open and after FOMC (see alert note) at 1088.  DJIM had numerous plays, mostly earnings/ tech related hit NCH's today.  They included APKT  (off ADTN eps/ ADCT M&A communication equipment stocks) , ROVI, VMW, FFIV.   Considering the market has gone nowhere in a wild up and down 2010, it’s pretty impressive these additions to our Shadowlist,  mostly 2 Q’s ago are still making new highs today.   We added freighter, EXPD  to shadow trading list today, CTV  yesterday.

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.

...slowly but surely

..the market crawls methodically for 1131 retest

We can wrap the today’s market by repeating yesterday’s first paragraph as the context remains the same.   Overall,  simply buyers on fence and shorts not eager to press on with new positions.Market sticks to tight range showing more signs of resiliency as buyers show up to buy dip blips off anything that can be construed as possible bad news. (*China Stress tests (housing)- Commods bought up after headline pressured them.   Still, this may get more attention as the belief recently was the China gov't would be "relaxing" things.    Also, the discrepancy in the steel uptick end of July vs. X's and other steel co's guidance not resolved.   Leaning on the X  side as to what might be occuring going forward.

Overshadowing a broad tight range market was the outperformance of DJIM’s Q stocks as traders buy the earnings.  Recently mentioned, EXPD  led the charge ( last week noted as long as transports stay intact the market would be fine) with VMW, ILMN CLW  hitting new highs since releases.