'Snow job' report?

SPX1123 has been the theme the past few days here and guess what?.   The market hit this mark by 10am and backed off and than struggled to stay green midday showcasing more of the tiredness signs.   But, a last hour push up and guess what, we closed at 1123!.   Just a wait and see market,  no conviction buying,  an underlying bid on any weakness and shorts afraid of upside risk.   Market is shrugging off all negative data today as a ‘stormy weather’ excuse and is thinking the same for tomorrow’s NFP #.    A bad number may work as an excuse (say it's worse (-100-140K) and market sells off, we'd be buyers most likely as an underlying bid on weakness should prevail.  But guess what?.  A surprise strong number and we likely gap!.   Now, that might be a ‘snow job’  report.   A combo today of a higher USD+ lower 2yrTSY may be the signal of such a surprise.    Do we want this possibility?.  Well, our concern is of a gap up that would be followed up by a sell on the news reaction possibility at these technical levels near 2010 highs.   So, we’ll be watching for this, if a surprise number hits tomorrow,  the chasing investor may get a snow job  in the face if the market rolls over signalling the fatigue we’ve been talking past few days.  Whatever up or down swings happen intraday off whatever type of NFP report, the last 30 minutes/close will be the thing to watch.

Broadly, the banks-brokers were strong as a good nights sleep seems to have abated the ‘DC’ fear from a day before.  What side of the bed these guys wake up on tomorrow is another question!.  The bond offering in Greece was simply over subscribed and so a relief,  but, a bigger aid/ issue bond offering package is still an underlying question.    Despite,  what seems like a broad market whipsaw for a few days, earning plays are working well.  Today Shadowlisted SXCI  was the star, plus we are seeing some momo’ flow, which provides intraday opp’s or possibly longer term framed trades..ie TIVO, AAWW and CNAM  today.   Hopefully, the NFP# reaction does not derail this trend.

..the right "stuff"

It’s only one day,  but the market got some of the ‘wait and see’  stuff that is needed for it to feel better about Europe and itself.   We alerted pre-market to the Portugal successful bond issue/ tax hikes, we also later heard about Spain’s austerity plans and Greece received a 5.5bln instalment to blow out the Ouzo.   All this leads to tightening of CDS spreads in these countries showcasing the bailout is becoming acceptable to the markets.   The biggest drops prior to last weeks plunge were the Euro banks and as we see clearly, they are acting just fine to this point.   These are signals the market was/ is looking for to rally today.  Simply, ‘it’s not the Euro ’ that is dictating the confidence and thus the market.   It’s CDS spreads, issuance of debt successfully, European banks action that is the wait and see stuff.   It's the collaborating evidence to ease systemic risk.   Those relying on the Euro for trading are behind the curve.  

Yesterday, ‘No specific reason for sell off, which is good news”.   Once again the market showed what we’ve pointed out numerous days…if there is a bunch of small catalysts that really seem insignificant, it usually means we see dip buyers arriving soon.

On the home front,  it was back to business!.  We had M&A activity and ‘back to earnings” related positive flow from IBM INTC analysts meetings.  

Technically-  yes, it is very technically minded market now!.   Before the plunge, May 5th close, we said…“Today’s breakdown to 1156 taking out the last support at 1170 and not closing above  it pretty well confirms we are in a May correction.    Mayday Mayday is the distress signal from Europe that has put the market in this unstable position.   Add, the China curbs creating a possible slowdown in many eyes and we're likely due for a rocky month.   Any push higher/bounce now and we are looking at "S"upport at 1180/1185 now being "R"esistance.".   We are sticking to this, so the market may have a little closet space, but we're not seeing 'conviction buying' enter to think we can push higher now.   Considering this was noted before the plunge, it is seemingly ‘double’ the resistance as we’ve come a long way back up in a very short period of time!.

Our trading methodology here has been keep trades 24/48 hours and be very selective and it’s best we keep to this as we come into market "R".   We’ve alerted 3 stocks in May,  all "safe harbors" and earnings related.  VCI  twice. first at $30 to $34 before plunge and a few days ago for a breakout in 33’s to a high of $36 today.  GEOY  $28-31 in two days and SXCI  to a hot $70 yesterday after oppy’s to pick up all the way down to $58 since alerted last week.   That’s a lot of points between them during market turmoil, a few thousand shares in those names is better than 500-1000 shares of even an AAPL momo' type in taking up trading dollars and it comes without the stress.

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).

...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.