..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.

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

Today might be looked on as a blown oppy’ for the broad market after it closed near the low’s on the heels of the risk trade put back on globally, following weekends go ahead to weaken the USD.  U.S market’s couldn’t carry what was put in other markets globally off the G20.   Add some M&A activity, decent eco’ data here and you see,  it just doesn’t really matter now to the broad market ahead of the early November catalysts.  So, instead,  let's decipher broad market from individual stocks.  The underlying stock tape is where there’s light and life.

As pointed out yesterday, the reactions of individual equities is something that can keep us traders busy while market stalls and today was a good follow through/ confirmation on this front.  This falls into DJIM’s trading methodology, instead of the ETF trade that has been ongoing.   First, we had commodity linked stocks here like eg. FCX/WLT  do the sector rotate game off the FX game.  Secondly, it was  pointed out that earnings are getting a good reaction and today SOHU  was a prime example…traded low $70’s premarket after EPS and made it up to $76’s intraday, exactly what was pointed out post FTNT/ RVBD, stocks still have leg room to move after gap ups.  BIDU/SOHU's  results are also helping the China stocks move, so we have more individual names moving within a group.

Also,  the Virts’clouds extended off the RVBD/FTNT  reports with CRM, FFIV SVVS RDWR  having good days with RDWR earnings helping/ and M&A noise coming back into the group as well.   Also, you`re seeing some individual names  go without catalysts like BID (alerted Sept 27) at $35 hit about $42, MA,   (alerted Sept 16, $210 hit $248 (both >20% since) made fresh highs and fresh names like MOTR  got a Cramer fix supposedly and ran another ~15% to $20.70H , KH  made an early intraday H/ NCH.  PCLN  running off and with good ole`TZOO  earnings.   Geez, even RIMM  made a new high since added back to list (Sept 21).   Simply, there is plenty to trade off the Shadowlist, while 'broad'  market still struggles with SPX ~1180’s. 

In the end, you can’t expect the market to do much as a whole before next weeks FOMC/Elections, so don’t worry about it.   Just fixate on individual stocks as this trade has come back for now.  Nothing broke out today like USD to new lows, Euro, Gold to new highs, so nothing has changed to give this broad market a shot in the arm. 

..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 .

Ad infinitum

Just imagine staying short/ Bear for the last 4-6 weeks counting off the days to the “day of reckoning“, while the market mercilessly inched it’s way up day after day, only to get a "sell on the news”  in Treasury’s, not equities today!.   Okay, maybe one equity (POTASH;)

As opined all week with reasons why ,  if the QE2 ‘consensus’ is correct, the market has reasons not to sell off as consensus thinks and we‘d see higher days soon instead…”if we get status-quo expectation revelations, this may likely turn out to be a non-event (yet choppy) and therefore, not necessarily sell the news event(s).”…The choppy came as well and we tested the previous days gap bottom SPX 1184, but all you had to do was watch the TSY ($TNX-10yr and 30yr sell off ‘ hard’ to know this market was going to hold. (SPX ~14pts move post gap fill).  *Recall, the premise here in October regarding the TSY into equities allocation shift,  if this wasn’t the harbinger for it at work today, it will be a big surprise!!

Probably some confusion initially as they released a NY Fed supplement, the pace (75bln/8mths) seemed a little light, but add the MBS and they will buy 110bln/monthy anyway.   This gap will be the ‘support’ line to look for ‘dip buying’ going forward.   If a subsequent downdraft to those levels occurs, it will be the global gov’ts reaction to QE2 and/or the eco’ data going forward (again more good data today).  So, let’s just move on to why we’re here and that is trading stocks (we’ve got DJIM’s eg. LVS, MOTR, JKS, MA  all reporting well and climbing since alerting most again in Oct.) and slap fines on ourselves if we ever note the ad nauseam “QE2”.    Eventually, ad infinitum (argument made repeatedly until nobody cares to discuss it any more) will win out and we can do it all over again with QE3 next year;)

Simply, Bears need a new ‘plan’ now…go to work, Cubs

Subdued is just fine..

It’s going to take more than some short term USD momentum and European peripheries fragility back on the table to swing this market downwards.  It might’ve been good for ~5-6 SPX points to the downside early, but it was hardly selling pressure before the dip buying began.   Even with continued strength in USD, the commodity linked groups performed well.   Also, the Super-Fins’ discussed late last week as a possible catalyst for higher prices into year end did nothing to dispel this idea.

Market moving catalysts will continue to be sparse this week with US earnings wound down (but, European EPS starting, which may provide more strength for markets),  little eco data, so pullbacks should remain shallow with buyers showing up on the weakness.   

In this subdued trading environment, you’re going to see different groups leading for the day and on any given day different  names off Shadowlisted plays hitting new intraday highs..today eg. SOHU MOTR ILMN HLF WYNN SPRD.