Shadowlist update

Shadowlist by sector money flow/ rotation to follow. (visit site). 

Last S/L (7 weeks ago):

Shadowlist update

Shadowlist by sector money flow/ rotation to follow. (visit site).

...looking ahead

Following an eventful 4 days for the Bulls, today’s flat session is perfectly fine with us.   Actually, even better than fine if you consider the 200ma provided support.   Even though, we didn't see a lot of new buying/ conviction to push this market even higher (let’s be realistic short term..digestion needed),  it is almost as good because we saw ‘dip buyers’  come in.    An oppy’ to buy the market on dips has been methodology of longs for a long time to get into this market.  We just haven’t seen those explosive breakouts of years past, instead those wanting to be in the market..buy the dips.   This is what we will center around going forward and will use it ourselves to position into Q end.  

Speaking of Q end, entering the week, we discussed “…sidelined money should come in for June Q end”.  This Q provides more than one reason for this to occur.    First, look at where the SPX is today on June 16th…almost half way through the year…1115.!   Yes, that’s a hefty return of 0% on the widely followed benchmark for every manager with a book in 2010.   Secondly, consider this…Hedge funds – “Hedge funds hit in monstrous May….Global hedge funds in May suffered the heaviest losses for 18 months after some of biggest and most successful managers were wrong-footed by world markets”.      Simply,  if we’re these guys we’re in a mess after May and need to put up some numbers, not only for June to make-up losses and avoid consecutive months of underperformance, but they also have to put up Q numbers!.    To us at DJIM, this is almost a perfect storm for money flow to come in the next 2 weeks.    This is why we will be watching the dips carefully for oppy’ for accumulation.

As far a individual stocks, sectors, we are seeing many of our listed stocks hitting NCH’s the past few days…EDU AZO VCI SXCI RBCN  and these aren’t even offensive high beta stocks.   At this point,  we are concentrating on the tech’s and have many from our lists of techs/and earnings related that on any given day can pop..from VMW  to NFLX AKAM, NTAP (SNDK added)  etc.   Many like DLB VRSN  are also setting up near highs.    Hopefully in the days heading into Q end, the number of sectors in play extends to beat up commodity linked stocks and more high beta names/sec‘s.   Until this is evident, we’ll concentrate on Nazzy/ tech linked stocks.

Nice last 30 min close..

We definitely had some help from strengthening Euro today, plus the market was able to shrug off  disappointing U.S. Econ. data to end the day slightly higher.    The fact that there was a successful closely followed bond offering by Spain and the subsequent move of Euro, really set the tone for this market.    Right now, anything that gives a positive indication that things aren't as bad as people feared in Euro land, people gives our market a shot of calmness.  Also, importantly the premise of buyers coming on dips was present again.

The so called disappointing Eco. data isn't a big issue to us.  Despite the recent mixed signals, (+ consumer confidence still showing resilency) trend still indicates expansion and recovery for the U.S. Economy.    In addition, we came off a very strong April where most of the Econ. reports we remember beat estimates and it's just difficult to repeat the process month after month.    Unless people are anticipating a 10% GDP growth and 5% employment by the end of year, it's just unrealistic to expect a huge increase in key Econ. data month after month.    So, let's just give this Economy some more time and see where it's going.     The earning season is soon upon us and we'd like to give the CEO/CFO's more credibility on their outlook as oppose to some of the raw Econ. data.    Can companies grow profit and revenue while unemployment rate stayed at a relatively high level?   Of course,  it can happen and this is the scenario we are actually banking on.    Of course, picking the right sector that are taking advantage of the recovery is the key to our trading strategy.

As far as plays go, technology plays are outperforming.  Again listed plays like VMW CRM NTAP  were inching to NCH's.   Also, CLH  off list as a play on the oil clean up hit a NCH.  Basically, we have a choice of either chasing/playing the strong techs that are at or near the recent high, or playing the beat up plays that are no where near high and have tons of resistance on the way up.    Well, it's pretty clear choice, isn't it?   Also, we feel commodity, material and industrial stocks are more sensitive to "disappointing" Econ. data as oppose to tech stocks.

Bottom line, market as a whole just wants to churn higher.    The only thing we aren't sure at this point is the pace of the churn.   In either case, we feel with the end of q coming up, some of the fund managers would love to have some of the high beta plays (the ones hitting new highs) in their portfolio.

SPX ~60 in 5

It’s been nearly two weeks since noted..”Earnings, if they keep at this pace 'will trump' any Eco data-FOMC statements..”..   

Immediately, following this statement we ran into a few days of roadblocks where earnings were missing the revenue top line and most proclaimed Macro victorious over Micro (corporate) as the SPX dropped to 1055.    Now 5 trading days later, yes only 5, the SP hovers near 1115, some 60 handles  higher on the heels of Micro winning out.    Of course, this stands till August …“….because eco`data will be sparse until August hits and we see how July was.  Starting next week, we will live by the guidance from the CEO/CFO`s."    In other words we have some time to climb higher if we get through a boatload of technical ‘R” numbers around today’s close, but once August hits it will be eyes on US eco data’ starting with ISM’s to verify what the corporations and global markets are saying. 

The good part is we have good things on the Bulls back coming into August data...Micro (earning) fundamentals,  Western Europe accelerating into 2H and China ‘bottoming’, plus FINREG/ Stress tests over with.   We didn’t have any of this when the market was toying with a potential summer under 1K SPX in June.

Today, market had FDX  add some validility to the global picture,  but we’ve had this already here at DJIM 2 weeks ago as part of an improving global snapshot.. “EXPD , bot some, 30% upside is a great pre-announcement, should help FDX -transports”.    

A few other earning highlights noted VMW , CRUS, also making NCH (New highs).  Past DJIM Q's/2010 plays, AZO, RBCN, OVTI, NTAP, ROVI, CRM  continue to grind away at new highs.   We also have APKT, DLB  on 5-6 trading day moves that we suggested as potential run ups into their earnings this Thursday flirting at NCH‘s..“Look at tech reporting soon on sell off..APKT DLB etc.on this 20 day hit. Apr 16.     Also AMC,  VECO  report shows DJIM LED stocks (CREE AIXG RBCN ) still have momentum in ‘10.

In conclusion, if the breadth of the market stays on par and/or performance chasers come, a try at the 50% retrace would be in the cards.  This is also where we have June peak to contend with.  Still, don’t think these levels should cloud our thinking with new earning plays emerging and getting some recent ones back on pullbacks remaining the premise.   Starting tomorrow, looking for a close over June high close of 1118 for ~1130 sooner than later,  otherwise a dip is probably in order.