..too much too handle...

Once again, as yesterday, “In typical ‘resilient’ fashion, market came off overnight lows”.    Market was almost done erasing all the AMC tech sell-off when the PBOC ‘surprised’ with a rate hike and ES spiked back downwards.   Still, by early morning most of the momo- high beta’ rebounded and came an eyelash of closing their ‘gap-downs’ (eg.AAPL ~$314 as ‘bargains hunters go out in bid’ and fast trader shorts covered.   Unfortunately, short covering only lasts so long before longs only have to step up. The realization that earnings were not up to snuff and China just did make a rate hike that spiked the USD curtailed any conviction buying.   As far USD, this weekend‘s warning came to fruition, someone always knows something.."..with USD biggest day in weeks on Friday, this trade may rollover some in the next few days until this minor corrective USD/Euro phase ends".    Of course every commodity and the underlying stocks (materials, energy off >2%) took a beating as the DXY jumped 1.6%.

All in all, just to many moving pieces hit the tape and more came during the day, notably, the BAC /NY FED ‘repurchase’ headline caused a late day swoon.  This one was actually floating around overnight, but it gave sellers-shorts a chance to bunch all today’s moving pieces together in the afternoon for a selling spree.  There was no one group to rotate into today too keep the market steady as has been the case discussed last week.

As far as PBOC,  it’s really not bad at all and probably positive for their equity markets as it‘s a sign of official confidence and will not cause China to slow.(definitely good for their big banks).  It will be interesting to see how their markets react tonight and rest of week when their data/ inflation hits their market to get a clear read.  It would not be a surprise to see US markets act favourably, if Shang puts in a green day tonight.  

Yesterday‘ Journal, included MCP ’s nice action and today it had an exploding breakout on it’s biggest up volume day following a China Daily report of cutting exports.  This was actually denied by another gov’t official, but nobody cares to point that out when momo hits.  Any Chinese changes to quotas etc and this will reverse the trade, so this one is speculative at these valuations.   Only brought it up yesterday because it pull backed recently and came back up to breakout levels.   Another volatile one is MOTR  in the software tech/ based on cloud computing that should be watched now that it has pull backed to 9ema levels.  It will definitely move on new carrier contract news from emerging markets in the future.


In conclusion, today likely only a temporary pullback (much needed), if China hike becomes a positive.  Otherwise, it’s looking like August top on the charts.   This weekends G20 meetings are also going to become a headwind this week.    Unfortunately, earnings keep coming a little light and short of expectations tonight to give the market a lift, daily rotation will be tougher.

...holding it's breath

The market continues to hold it’s breath at ~1180, Euro at 1.405,  letting the latest noise on QE and now G20 control emotions.   The up and down gyrations is just proving many can’t sit comfortably. Unfortunately, the earnings story can’t take shake the markets up as there is nothing substantial to move the tape.  Today, all the good reports sold off from highs as Fed  ‘Bull’’ards ‘100 bln comments rattled the USD and markets did their usual tandem move.   All in all, the market is still showing ‘resiliency’ by finding a bid on any shallow pullbacks.

A little excitement today away from the broad markets was in the speculative space, (which is not the gig here).   We’ll, guess it’s not excitement if your stocks drops 25% in one day as in REE  and BORN’s case.  DJIM’s avoidance is based on not buying first and asking questions later, but the other way around.  BORN, supposedly re-discovered how to make moonshine;), almost the oldest profession in the books /  REE, from Canada where we have always had the biggest speculative west coast market relying on promoting ‘swamp land’ companies/ penny stocks with minerals underneath are of no interest to promote here now or ever been.   (At least, MCP  is real,  if you want the hype of the rare metal trade.) Most of the 'Shadowlisted' stocks last a year or more/ or before they are taken over as has been the case time after time, not a month.  An example is tonight, FTNT  an add here at $18 before it was discovered as a play in the space anywhere, showed something many can't and that is accelerated growth.  It's potential takeout price just zoomed to over $30 on this report.

DJIM #43 2010

Market’s G20 headwind kept the market at par late in the week.  This weekends G20 produced a status -quo communiqué, no headline risk/ not hawkish to USD and all focus goes back on FOMC/QE date.    In last weeks case,  it was more of the market holding it’s breath at ~1180 levels despite a slew of earnings exceeding forecasts/ China surprise hike while USD consolidated.   The ‘little surprise’ over the weekend should put the risk back on to start the week,  so we’ll likely have some commodity linked stocks rotation.  

Away from the broad market dullness, (SPX hit 1084 on Oct 13th) most of the trade leads/alerts here last week were on ‘set ups’ instead that worked quickly..MCP  for Tuesday $30L-35H,  MOTR, (9ema) $15L to near $19 AMC on Friday, KH , (9ema), 18L to 19.50H.  So, despite a flattish market for awhile now, we have those ‘daily’ sector rotations and/or earnings (below note)/ set ups making for a good traders environment, while the QE2/election outcome is being waited on.

You can already paint a macro picture from earnings as the notables in each sector have reported,  now it’s gets into being more of an individual game as 2 DJIM stocks showcased on Thur/Fri. ..FTNT, RVBD (+~20%).   This may help rejuvenate the ’cloud-virt’ space, but this week’s up coming names need to keep this out performance up with their reports.  * A good thing to see is there was upside from open gaps of 7-10% from their upbeat earnings for this Q and next, plus, many techs that didn’t ‘guide’ well for next Q,  traded well anyways!, (eg INFA,PMCS,CTXS,SNDK)  is a good sign for the market.   This is a change of pace this group this EPS season.

..underlying stocks again

Oh, those shorts, who tried to press the issue of a Bull ‘blown oppy’  yesterday were rudely (once again) beaten by the ‘resiliency’ of this market as it bounced fast off the opening bell SPX 1178 touch(off ~20 points since Monday’s fresh high).  

They were broken by using the old adage of a stronger USD/weaker Euro = lower equity prices,  ignoring what was pointed out recently here that rotation from TSY’s was going to happen as QE2 expectations gets priced in.  (see DJIM #42...“..but still equities did not sell off on the higher USD, This could be because rotation/liquidity into stocks from Treasuries is the natural course…and market remains steady because individual groups get enough liquidity to sustain it. ).   This was overwhelming theme today as 10yr TSY’s made a big move crossing a trendline at 2.65% from April, while USD got a bid, but  the market ‘surprisingly’ to the Bears did not drop.   This is quite positive to hold up as we did.
  
As noted,  fixate on individual stocks and not the stalling market for oppy’s to trade.  So, while the SPX traded in a very narrow band after 10am, our DJIM listed stocks, including some bolded  yesterday added strong follow through.   Notably, RIMM  powered to a 10% intraday H, our little MOTR, motored another 15% before running out of the 9ema play, right back down the hill.   BID >3% and MCP  to a NCH.   BIDU, NFLX, post -EPS were making fresh NCH‘s.  The clouds-virts were strong with RVBD, FTNT extending post earnings gains as well.  The group was also helped by CML  retaining advisors for a possible sale (v.nice earnings AMC was a no brainer, if you announce such a deal possibly in the making hours before). AMC,   FFIV,EQIX  helped out the group some more.  The premise here that there is room to run after a gap off earnings was shown  again today in MIPS ( it’s another stock that has been mentioned in M&A discussions).   Also, note if the market gets into any defensive rotation soon LIFE, ILMN  are two strong earnings today to go to,  probably even right away tomorrow. 

Clearly, if you want to outperform now, it’s primarily selective earnings stocks we should be driving as broad market’s uncertainty is abound around next week’s catalysts .

volume or no volume...good day..

The initial reaction to China hike resulted in a ~17 pts ES drop overnight, but as discussed here yesterday the market should behave better than Oct.19.  The ES slowly recovered and once one of the lowest volume days on record finished, a flat day was the result of an underlying bid.   Volume, or no volume as was the case today, the action was constructive, if not pretty impressive considering the Shang was under pressure ~2%. The commodities space was the early tale sign for the US markets as unlike crude off ~4% last time, everything (including crude) in the space held up well from the opening bell.

Unfortunately for trading purposes,  the ‘winners’ momo still are not being bought, but instead the laggards hold the market up eg. Financials.  The same trend remains from December 2/3 .. “..it is probably ‘growth’  stocks taking a backseat as they may seem ‘expensive’ compared to the all the other stuff out there.. If there is ‘performance anxiety’ out there into year end, managers may feel there is more upside to the cyclical laggards”.   Also, any action in individual stocks is dictated by ‘media’, eg.Baroon’s with CSCO, NFLX today as traders have little to jump on.  Some holiday trading continues in MCP, (daily on top of Shadowlist gainers seemingly), with REE/newly listed AVL from TSX joining in.  The run in MCP has alot to do with the lock up period ending soon in January, which will result in selling off most likely.  BSFT, marginally put in a NCH.

In all, US markets handled the hike event in stride (may not be the case come January as this inflation noise will pick up steam from here).  Maybe this was the only day this week for the hike to ‘offset’ the expectation of further window dressing.

China lid..

Pretty well a repeat day as US markets shrug off another 1.7% down Shang day and grinds higher.  More and more, the action in the Shang is becoming worrisome and won’t be ignored for too long if it continues.  Right now, it’s keeping a lid on things in US markets.

Other repeat activity include things such as resiliency, dip buying especially in Financials today , no conviction from either side, winners ‘momo’s’ lagging, sluggish eco’ data swept under the rug again and SPX 1260 acting as “R” for a week now.

The heavy action was in the “rare” stuff holiday trade as MCP/REE/AVL ballooned in the morning before ugly reversals giving a glimpse of the ‘selling off’ noted as MCP ($55 to 47) lock up period looms.  We’ll probably not see these highs again for some time.

 Starting to think the way to derail this rally and correct is a ‘good news’ rally and sell off day like in the ‘rare’ stuff today. In this scenario, the market rallies off a good catalyst, but it becomes evident there is no conviction force behind it and the rally peters out.  Something to watch for later.