Digestion = tired buyers

No,  we are not going to spent our time here discussing the big play today on digestion day, the drill results of an oil play (MMR).   Instead, we just want to point out the relevance of  'one' stock to this market on our premise at this point heading into this EPS Q.   Yesterday, we noted the market needs to do some backfilling sometime this week and we’d look for individual plays heading forward.   Today’s market signalled digestion, which at times means “buyers are tired”.    The Q4 leaders (NASD) squeeze lost steam after one day (Friday) and Financials, which took over leadership last week couldn’t extend it into today’s trade.   Simply, the sell tech, buy Financials trade is not co-operating so far this week.  Only, sub-group in Financials that has done well last few days is the Asset Managers noted in Journal before Friday’s trade,  BLK  from $236 to <242 and BEN  $106 to 111 for about 5 points each.

One day doesn’t make a trend, but it is probably signalling some tiredness in the overall market and a wait and see on big name earnings.   The importance of this MMR  play, even if it’s not earnings related, is it shows a herd mentality is possibly back and present.    The stock shot up 52% and to $14 from our base alert from $12.80’s for a quick <15% in late trade.   If this thing is as big as they say it is,  there's potentially more upside to come as targets should be increased on the stock.    This is just pure excitement play and is the relevancy with our market.   We also picked up some SEED  as the increased involvement(13% stake) of Fidelity will give the short sellers a huge reason to worry.    SEED is also releasing year end report on Thursday.   Right now, these are ’trades’ with no timeframe in mind as these are under $15 stocks, which means you can load up shares and unload lots as well leading to volatility swings    Yes, our market is seemingly exciting for a change.   We’ll continue to look for new ‘individual plays’  until the market backfills or gets conviction buying to go forward to step back in size on sectors/ stocks.     .  

Market has done really well in the past months, but the now it may be getting exciting, in our opinion.    Why?   Well, we feel this is the first time where we have something good to look forward to.    We spent most of last year searching for an answer.   We got the answer and it was "worst was indeed behind us and it can only get better"!   So here we are, on the eve of an earning season for the new year.    Shouldn't we be looking forward to that and rest of the year?   Of course, we are excited about it.

AA  officially kicked off the earning today with a beat in revenue, but a miss on EPS, this is downbeat   short term.  CVX , update doesn't help either.  Longer term,  this is not worrying news because we are much more concerned about revenue than earning at this point as far as commodity stocks are concerned.   Also,  did you see what fuelled China this morning?.   Robust export and import numbers!!.    You have to remember that increased revenue means business is picking up in the commodity sector, which bodes well for many other related companies in the sector.    Whether how each player can make full use of its revenue and turn it into good profit is another topic, however, as long as we know the revenue is increasing, it's definitely a healthy sign.   For now, we are just hoping that other companies can execute better and turn some of those revenue into some good profit.   Still, this 1st report comes after a big recent commodity rally and some profit taking is an excuse for the very short term.

Market as a whole displayed some resiliency after last week's job report.    One thing is clear though, with the unemployment rate and job creation that are not improving in any timely fashion,  Fed will keep its words and leave the interest rate low for as long as possible.    This was one of the concerns heading into this year that people were afraid that the rate hike might be coming by 1H/2010.    Well, it's not the case, as suggested by the job report.    For us, we actually like a slower recovery pace.    We don't mind some companies taking advantage of a slow Economic recovery because that's the only way they are going to shine.    Can you imagine when our economy is in full growth mode?   It'll be much more difficult to pick out a true winner because most companies will demonstrate some sort of growth during the golden days.     For now, any company that comes out with spectacular earning results and showing a strong growth trend will earn a special place on our trading list.    This is what we hope to see within this earning season and next.