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

..tired signs again?

First post-INTC, judging by the ES tone tonight, the market looks at flawless execution (INTC) as a non-event or it’s just a lazy bum looking forward to the 3 day weekend.  It was pretty obvious by >2% pre earnings day INTC  move,  it would be impossible to move the behemoth following results,  no matter how flawless they might be.   We should just be happy it didn’t disappoint and not worry that the ES futures didn’t ramp up.   So far this is a repeat of LLTC  earning, a big player in space, suggesting many Semi’s, particularly INTC may peak shortly in their own metrics(gross margins) and therefore stock price.  It doesn’t mean Nasdaq and /or market has to stop grinding higher as there is always ‘rotation’ even amongst the technology groups..eg software/ hardware from Semi’s.

As far as market activity today,  the early week losses have been made up and the theme remains the same of buying on any weakness, still no conviction to chase the market too much higher.  Lately, any bad news has literally been shrugged off, either right away or if any selling ensues it is bought eventually.  We haven’t had back to back downside days since early December.   The market needs a ‘ BIG’ catalyst in the short term and we have no idea what this possibly could be on the positive side to go higher.  The odds are always better for a surprise ‘BIG’ negative, so we must simply ‘trade’ the upcoming individual earning surprises or sectors that get momentum.   Such, was the alert idea on Sept 8th to buy lodging/hotel stocks HOT/ MAR.   This was the standout group today as both have broken out in the past 2 days and now are up ~7% since.  The “Shadowlist” is not only comprised of stocks we trade, it is also comprised of stocks to see where the money flow/momo is day to day giving you daily options as to where to put our money in or take out.  

Next on deck, JPM ,  even though the market inched up to a new intraday high of 1150, it is still showing tiresome attributes tonight possibly and the JPM report is unlikely to be a ‘BIG’ catalyst to the upside.  The weekend may provide more than direction than INTC/JPM.

..it ain't rocket science

On a business trip?… grab a  room at MAR/HOT..get yourself a SBUX and order a flick at NFLX.   Okay, if you’re a DJIM..u ain’t getting SBUX , its not on the shadow list and it isn’t BF.A or STZ …. but the other 2 are moving in front of our eyes.   One is the hotel sec/consumer discretionary.. (MAR HOT), we’ve covered as part of recovery trade and the other (NFLX) is in the Earnings winner column since last q.  The importance of a good ‘tradeable’ list prevailed once again…

As traders,  we try to compile a list of approx. 50 stocks of the best of class to monitor daily.. adding and subtracting stocks as we go along.    EPS growth, sectors, sub groups that will show you the money flow that day(s)/ weeks.    The point is,  we are traders and we are here to trade and not spend market hours and non- market hours looking for the next big trade.   Just have the right list and the potential is endless…rotate and rotate the names/sectors.   We all want to have ’lives', we want time with family, friends and have hobbies outside of trading and not be consumed 24/7 by what is an already lonesome gig.   To be honest,  if there was a new edition of trading for dummies handbook, we’d nominate our methodology!. 

Anyway…that’s the market today simplified..NFLX MAR ..etc.  News pops next to a Shadowlist stock..read it and than watch if the money flow comes.   Trade.

Oh yeah..so… who was that masked man who has scared the market since Wednesday noon.   Well, today he put on a different face for once and had no new market damaging revelations.   Even JPM's Dimon agrees with 80% of the reform.     Simply,  this was short covering bounce as impressive as it was, it was short covering on 'relief'.    This is cool!.. it just keeps on showing shorts can’t keep their shorts on for too long as they scamper out the door on any sign of strength.    Oh yeah,  seems the bullet points of the speech were public before Obie’ moved his lips on the tube.   Once he shut them … the bounce really ensued.    The dip buying money was probably waiting a  few points above the 20ma for the move to kick into gear with the speech text in hand.   Yes,  the same 20ma  we’ve noted for the last 12 months as the single best market barometer and alerted again a couple days ago for a oppy’ buy was in play again today.   We would love SPX1175,  but it’s a bugger to get as the fight for 1200 is really the tape battle line it seems.

..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.