Almost Showtime..

Support noted (Forum) yesterday at SPX1131 held and the market's close came within 1pt of Monday’s rally high of 1049.   That’s a quick 18 handles for those trading the ES.   It seems the bad news from previous trading day was almost forgotten today.    In the first hour of trading, it looked like the ‘Great Escape’ was in jeopardy and we may have a repeat of yesterday's trading action.   But, once again weakness was bought and showed yesterday‘s selling was just profit taking and not aggressive selling and/or not shorts pressing as we discussed in Journal.   All in all,  the rebound in tech and financials was pretty impressive heading into 2 big reports (INTC/JPM ).

A lot of the small cap plays on our screen showed this same action.   In theory, we are hopeful that many of these plays have seen the short term low and they can now digest the recent strength properly and move higher afterwards.  XRTX  off our list had a strong guidance reaction and LLTC , had a very good report with ramifications on many tech related sub-groups which helped sentiment,  but it sold off on the news after a nice run into the report. (hopefully this not a sign of things to come). GMCR HOT  hit new highs

The anticipation of INTC report, due to come out tomorrow (AMC) is weighing on traders.   Right now, there's no reason to believe that INTC would come out with anything disappointing.   It's all about how much they beat and how they meet street's expectation/guidance.    In any case,  we don't think we'd see a repeat of reaction from INTC's last report.    Of course, anything is possible and we’d also be ready to be on the buy side if there's any sell on news reaction in the market.    On Friday, we'll have the  JPM earnings, which we think is also very significant because of the diversity of JPM's business. 

One last thing we have to remind is that many plays on our Shadowlist are volatile.   It's just a nature of our play selection for years.  As we said heading into the year, we expect it to be a high beta 2010 trade.   These are the kind of plays that can potentially carry the best momentum.   As a trader, we simply have to accept their volatile behaviour as part of our strategy.    If you can nail the dip and tops well, then that's great.   If you are taking time building position and trade them in a much longer fashion,  just remember that time and sentiment are definitely on our side

DJIM #34 2010

Heading into a traditionally quiet summer holiday trading week, most are citing the market should get some reprieve from the July carry unwind trade that late last week was on the verge of giving back all of August gains in equities.   Interestingly, these ‘trading ideas’ are contradictory to all those beliefs that the market is controlled by “machines” these days.   So, throw in some Blackberry type gadgets and this market doesn’t necessarily have to take a week off at the ‘beach’…anything can happen as this is not Q2, but Q3 where the macro environment has deteriorated quickly, especially since the ‘initial job claims’ warning here came to fruition in step with NY/Phil manu numbers.   The worst thing about unwinds is the speed they can occur in and HF’s have no mercy in liquidations, even in late month ends, late August past summers.    Last week could have been the start as high beta continue to be sold off more.   Best to stay ‘defensive’ until the USD finds some footing in hope no further strength occurs and takes equities down in lock step.    Also, stay disciplined and watch for and trade what you know.   Like Shadowlisted past earnings like CRM  on Friday, if given the chance for some trades.  It is so much easier to trade  history (as in its been on list for over a year), but keep them on a short string and take profits in this rocky environment.   This is the same story as with NFLX, VMW, FFIV  types for over a year now on our Shadowlist.   They have had the best numbers and they perform to those expectations in share price over and over again.   Unfortunately, the reporting season is over and we’ll have to really dig at the potential plays.    Maybe its secondary plays off M&A activity, like a little known FTNT  noted here, which was strong on Friday..or play GMCR  again as a play on souring coffee prices and SJM earnings…or a HANS, which will one day really breakout from these levels as it sits at 2009 and 2010 highs.   If it’s trading Red Bull, coffee related or some unknown stock like FTNT in this unpredictable market, that’s just fine until things clear.

As the market unwinds from the July end Q reports, attention turns even more to the July ‘macro’ numbers (around the globe more this week), plus the markets attention will be turning to Friday’s address by Bernanke in hope of getting some light shed on what the FED did and why and what the eco‘/ deflation picture is looking like!

Slow and ugly

Those anticipating a ‘reprieve’  from August's selling in a holiday week were quite happy at the gap open to 1081.  Unfortunately, that joyous mood didn’t last longer than 20minutes and the next 5+hrs were a drift down and sombre reminder empty trading desks can still do damage.   The only question was how low?    SPX 1067 (-4 on day)  is the answer and a low close for the month is achieved.    The SPX is off at least 25+pts now off DJIM’s benchmark 20ma, that’s a long ways off thinking about being too long (oversized in lots and /or positions) as 1057 is the next zone area support.    As noted heading into the week, stay slim and trim despite the idea of a beach week trading environment.   Today was just ugly,  if you just look at the fact that this market couldn’t hold a cheap gap and went on to finish at days low and month low, you get a simple ugly day.  The selling is again reminiscent of the action since the August 11th big down day,  first clue of profit taking was Friday the 13th, this day had very late day selling and here we are again today in the morning and end of day with the same selling.   Simply, the market can’t hold it’s liquor you can say (small volume or not).   Traders want some of their previous summer gains back, something discussed here last week and will take off positions on any up move.    As slow as today was and on par for slowest day of year,  it didn’t stop a last 30min volume push (SPY notably).   If the market participants think the market can outduel the macro side by “may bid”  type M&A  rumors like today,  it’s mistaken.    This goes back to what was noted last week that all the M&A hoopla will take a step back off Initial claims etc,  if bad!.  

Only a dozen or less stocks ended green off our DJIM list as the tape was ‘safety’ biased.  The names noted yesterday, safe in our terms in an unpredictable market were some of the only green names on today’s board…FTNT, HANS, GMCR.   

Anyways,  market should find some footing/bounce some before Friday's Bernanke address, if 1050's are re-visited.

Live with it!.

Oh, the disgust amongst Bears and shorts tonight after the late 30min ramp in the markets.  Why would they expect anything less on a day when the FED fills 4bln into the coffers of sellers of treasuries that can now go buy something else?.    Also,  it’s clearly been a better to buy market with stocks having an underlying bid on dips, especially when technicals come into play.   Anyways,  we always enjoy the disgruntled tone and this sort of action,  even if it was just a ES/ ETF trade  for the most part with DJIM shadow listed stocks basically flat on the day.   A few days ago,  DJIM closely followed stocks and their NCH’s were posted, clearly these stocks ran before this market inch by inch move to fresh highs mid week.   

As expressed last night ignore the QE2 noise / why all safe assets are running in tandem as yesterdays trade would end shortly and all explanations would be worthless.   All you we need to know is..‘equities are better to buy’ as has been the theme in the 10 trading days of September.   The ‘all we go up’ trade noted fizzled 24 hours later.  

A possible myth in the market is if SPX1130 resolved to the upside, it will get traders/investors active again.   Yes,  “PA”,..some performance anxiety will hit, but it already has as noted if a break of April-Aug down trendline occurred.    We’re not getting the 30% loss in volume from last year back overnight on a catalyst free breakout.    So, even if this summer’s nightmare range is resolved shortly,  it’s breaking out to the upside is really no biggie as it’s not going to be a wild rush in.   Hate pointing old stuff out, but remember breakouts are not of years gone by in the major indicies.   Instead, breakouts have been of the grind you Bears /shorts to death over days and days/weeks.   

Recall, a market top call this year because of the turn in X  first in April.    The last few days have included warnings from Steels..NUE, STLD AKS  for Q3.  We don’t think this is another top.    Just throwing this in as fear mongering is abound after these warnings.    This weekend’s edition overview of week ahead has gone to plan with China data/Basel/BBY-CSCO  playing their part and brings us to Thursday’s watch on FDX .  Considering the market action this week, watch if a good report gets sold off after a move higher as it could signal a broader market move for the day.

Simply,  if 1130 is gonna fall or fail,  it’s going to do it without much fanfare on this side.  The trade has already taken place with DJIM list as a lead.    If our list is foreshadowing a temporary top with steels, it will only be a buyable pullback.   It may be best to wait for the outcome of 1130 as most of the heavy movers are already pausing and pick them back up around 9ema ( like note here for Sept 8th trade when FTNT  kissed 9ema at 20.30 and moved 15% in 5 days).  This pertains to recent movers like GMCR, RVBD  types and of course, excludes commodity linked stocks.