Month End.."Top kill" it!

Even though it's only been FIVE trading days where we traded below SPX1100, already, people are talking about SPX 1095 followed by 1104/200ma, as if it's the biggest technical resistance of the year!.     It's true,  we made no less than three attempts at 1095 in last few days and every time we just get rolled over hard to the down side.     The downside,  it seems, can be so devastating once the momentum reverses.    We have witnessed a drop of 50+ SPX points in matter of hours when "machines" take over control of our trading activity.    However, today it feels like it's business as usual with the "month end" fund buying globally.

How can we even tell if it's fund buying and not short covering?   Well, we can't be for certain, but we are going with the month end fund buying anyway as it was a global climb that started at 3am and just continued as steady can be.!  Too many overnight points with no amazing catalyst had many scratching their heads.   Basically, trying to pinpoint any hourly move with a legitimate reason is futile as the market is running on emotion.   If media says this is the reason we are getting a selloff or rally, who are we to argue?    In any case, the volatility in this market last few days may have driven people's emotion into untested territory.    So, we'll just take today's 35 pt rally in SPX as is.    What can you do on a day like this?   Simply put, you'll have to participate even if most of the points (26 by 7am) are done with while we’re in bed.   We are not talking about chasing stuff throughout the day, we meant you have to stick your toe in the market when everything was getting sold left and right last few days as discussed.    If you were simply watching and cheering the fact you weren't hurt by the volatility by not be involved in the market, then we don't imagine you'd be too happy after seeing today's action.    Just to put it in perspective, we merely cleared SPX 1100 and we are still significantly down from the recent high.     What we are really hoping for is that we've seen the low for the time being so we know where to pick a point of reference to trade our favourite plays.  A few recent ones like SPRD, SXCI  were making new 52wk highs.

We have another trading before the long weekend kicks off and a new month starts.    In a way, we'd like to see this month over as soon as possible in a quiet whimper.    It's been a very tiring and emotionally draining month for all of us and a long weekend is definitely what everyone deserves.   In addition,  we are hoping that the month of May gets most of the volatility out of the way and we begin June with some quieter action.   After all, who really wants to keep an eye on market when the biggest event of the world (world cup soccer) is right around the corner?

Happy & Safe Holiday!

Shadowlist update

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

Shadowlist update

Closely followed equities for sector money flow/ rotation. (Visit site).

DJIM Shadowlist outperformance

Entering the trading day,  yesterdays ‘biggest takeaway’  reversed and allowed the market to have a decent day, although the highlight around here was the outperformance of DJIM’s closely followed stocks.   Our alert in the premarket noted the nice reversal of the FTSE with ECB stepping up the buying of their problem children debt (Portugal, Greece etc. )/ bond buying program.   Once this ‘comforting’  act was done,  you knew the Euro was not going to slide further today and the US markets would be able to stabilize as yesterday‘s missing buyers would appear.    Also, the Irish sobered up and compromised with a good/bad split of one their banks, which is better than a complete wind down.  It’s good to see action being taken on all these Euro fronts immediately, instead of allowing problems to drag and watch the markets get spooked.   

Speaking of problem children, we have one in the US markets that underperformed badly (Semi’s)  and will keep this ‘rest period’ below 1108 extended if such bad behaviour continues to be exhibited.  SLAB   is #2 warning now after INTC.  Considering how early this comes, you can expect more from this sector.

On the home front (DJIM’s), we had an array of stocks outperforming off the latest Shadowlist update this weekend…

NZ , up >14%, flying already, it got some rumor mill action (IBM).  Stock is now up a good 25% since alert buy.   Note,  ARST  rumors from last week were refuted today and so this one may be too in days ahead.    Still, NZ is an EPS stock foremost in DJIM books this Q.   GMCR , announced a raise in product pricing and exploded to an intraday new high above $40.     NFLX  mentioned here plenty of times just the past week or so, kept on ticking to an intraday high of nearly $148...PCLN  >5% off upgrade,  APKT , NTAP , LVS , HLF  were also outperforming the tape with NCH‘s intraday.   In the commodity section off DJIM’s shadowlist, machinery’s outperformed, BUCY/JOYG  >5% were the winners going into Obama’s afternoon promises.    This was a day you can just ignore the broad markets stocks and sectors up and downs and just trade away the DJIM composite.  

Note: add retail PVH  to Shadowlist in consumer sector.

..CSCO on deck

If you blinked, you missed it!.  That’s the 7% blink in of an eye in the SP over the first 7 trading in September that has left those on the sidelines scratching their heads and/or suffering from some performance anxiety.    What’s come to fruition is simple …Journal sept1st/AMC….“September will be no different in dependence on data…It only takes a few day’s of data to change the prevailing sentiment away from ‘double dip’ speak.  We still have what may be 'determinative' numbers this week to sway the conversation of 'double dip vs. soft patch'’ . .  Buffet said today, no double dip at all and slmost all his corporations are coming back!

Today was no different as our lead-off hitter for the week (China data) got things rolling with a single up the middle and Basel iii was well received for not being (oppressive)as expected here.  That’s 2 critical groups (materials/ financials to get any rally up and running with the euro .  Also, the missing link (semi’s) came from nowhere and continued their late push from Friday for the market to bust through the 200ma (1116 last week here for next step if 1108 was closed above).   So, we had all the necessary Bull leaders in tow today, including small cap space (R2K) as evident in DJIM’s composite stocks making NCH’s across the board…RVBD+8%, FFIV 5%, NTAP, GMCR, HLF, HMIN, JOYG, EXPD, CMI, SXCI, LVS, APKT , ROVI, NFLX with FTNT/NZ flirting with NCH’s off ARST /news.   That’s a high percentage of stocks breaking out/ flirting with breakout moves at NCH levels, if you consider some stocks are just for watching money flow/rotation as part of the trading day.

What now?.  Playing around ~1120+ is probably getting shorts all riled up, especially those (this includes Bulls), who may think the market is going to continue it’s range bound  trade(1040-1120/1130) to eternity!.  We’ve laid at the catalysts for the week, now with our lead-off hitters doing their job, it’s up to the meat of the order with CSCO’s analyst meet up today (8:30-9.45am) and BBY earnings to continue the move to August high/June highs/ semi's continuation or the shorts will have some juice.

DJIM #38 2010

Friday’s gap up possibility (ES was 1132 ) not surprisingly deteriorated as v.good earnings tech earnings are not a mover and shaker at this stage for the market.  ORCL/ RIMM earnings were not one of the moving pieces we included as a worthy bit for the week and it turned out that way.  Market’s inability to breach 1130SPX was not because of renewed sovereign issues as CDS ‘ widened to new heights in peripheral Euro countries (same song and dance), but, mostly because the Euro was already in it’s textbook descent off fresh highs overnight.   Overall, the problem was there were too many little things interwined (Euro, CPI, financial weakness) and notably a big thing ahead next week that postponed a stand off today at 1130 levels.   It was more like shooting blanks from both sides.    The market’s focus has turned strictly on the September FOMC meet up  as the week progressed and what the FED may partially do has intensified ( give a taste of QE2 ) and/or hints of it’s readiness to do such or much of it for later.  

So, there is no disappointment or signs of failure at 1130.  The market was able to consolidate above the Monday gap all week, which is bullish, even if the majority of high flyers off DJIM’s list are pausing.  They are more likely being accumulated on slight dips for broader market highs to come.  As discussed earlier in the week about high beta action and steels as a ‘toppy’ possibility sign is gaining noise as the week concluded.   We still don’t think this is the case as long as an ‘accident’ catalyst doesn’t hit.   Another mark getting lots of attention is meteoric rise is ‘sentiment’ gauges over the past few weeks.  A couple of these readings (AAII for optimism on markets) correlate to previous market peaks (Jan/Aug).  Just like overbought technical RSI readings can stay overbought for longer than expected without market cratering, these readings should prove to do the same now for the short term.  What’s not getting a lot of attention is a ‘huge’ reversal in equity ETF inflows from outlflows the past few weeks.


In this view, the April-Aug DT and DJIM’s 20ma ‘bullish’ benchmark was Bull captured.   Also, holding the 200ma for the week is significant.  The longer we stay above 200ma, the sooner it will finally curl up, which would be very bullish.  The constructive action all week is lending to the thought we could end up with a big breakout day still, if the man vs. machine theme is hit by a favourable catalyst sending the market into an Algo covering /buying fit.    Question is where and how much of it is set in the 1130’s -1140'ish or ES levels to run the market into mid-Octobers earning season.

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.

Steady..

As speculated, buyers did not return the day after a big downside day.  To many this type of action is disappointing, but not here as it’s the expectation in the past year.   Also, we have to look at the underlying tape and see if there were any signs of stability appearing.  The little short covering in the morning was important due to the fact of where it was coming from (tech, momo’s, also yesterday’s silver lining) and within this group,  it was important to see CSCO in the green for most of the day after consecutive days of losses.   Ironically, our signal on NTAP yesterday reared it’s ugly head EOD and it seemed déjà vu’ once again as the stock got hammered 10%/halted and the shock waves hit the market.   The fact the market reversed back to the flatline is probably one more signal this recent “trashing has taken a lot of the downside out” and we can deal with the other market issues at hand.   We might be able to put this fear to the side until Q4 pre-announcements/ season starts in January. (away from NTAP, ARUN, which was a long standing DJIM in ’09 and SPRD  had nice EPS after hours).

Of course, one of the things at hand is the Irish turmoil and a little surprisingly is the fact ‘Cirque de Soleil” a.k.a (IMF,EU) was on it’s way to Dublin for a pub crawl didn’t get the market thinking something will be resolved shortly.  Still, this road trip is a positive and another non-tech underlying tape positive was the fact the pre QE2 trend was back (short USD/ TSY buying), which of course will help the commodity/China hike picture, if it lasts for more than just today.  It may carry over because the CPI number today suggests there will be no stopping Ben’s 600bln package and all can just shut up that want to stop it and allow the market one less worry that has appeared the past week or so.

One thing lost in the GM mayhem tomorrow to watch is the Phily Fed #, it would not be a surprise to see this number disappoint following the NY empire number (which suggested a significant drop in manufacturing activity to come) that was brushed underneath the rug last week.