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Entries in VECO (7)


'Shadow' Outperformance

Perhaps it's just a coincidence that market made the new high recently along with pretty much every single play on our DJIM Shadowlist.    Or perhaps, we have seen this coming all along. ;)    Yesterday, we discussed how the R2K outperformed SPX in December and notably in the ‘holiday seasonality’ trading.   Today, this trend continued and even more as the shadowlist outperformed even the R2K.  A list of top performers in a mixed index trade today is below.   The big outperformers were the ‘Asian sensations’ (more below).



China, Casino, Ferts, coal, Banks- brokers dominated in a mixed index's market.

With regard to SPX making new cycle high today, it's easily understandable.   Remember for a while, we've been saying that the missing ingredient for a major market rally is the financials /bank- brokers.   Guess who’s back and what may be start of rotation in leadership  which would mean the market can go higher in January.  It was Dec 22nd,  we highlighted  in BOLD  the below, we are seeing traces of this underway.

  “…TSY 2-10 steepening curve hits all time high.  Possible allocation shift into equity.
  ....More importantly, a very steep Treasury curve spelling eco' strength and possible favorable banks- brokers earnings

Financial sector as a whole has tagged on some nice gains this week already and is signalling rotation, allocation.    It is definitely bringing underylying comfort to just about every other sectors.    This is about as broad of a rally as you can get as techs (SMH) slows and Financials are able to pick up the slack.  Any pullback to 20ma on XLF (last '09 day low) should be bought.  

We can't really pinpoint a sector that's laggin the rally.     For the longest time,  this market has been consolidating between SPX 1090 and 1115.    We think this week's breakout is the real deal.  For those who have not taken advantage of the ‘seasonality‘ trade in December, may get another chance here.    One reason is that we just broke out some heavy resistance after a long range bound trade with the Transports, SMH and than R2K making new highs, there’s bound to be some momentum money flow chasing and taking us higher. 

Besides the 3 sectors we highlighted going into yesterdays trade (Casino’s, Ferts and Coals ) with the reasons for possible follow through,  we had our Chinese names popping to new highs.      Just as little as a week ago, some plays looked shaky and there some people may even thought about writing them off.  We commented in the forum to a question as they fell off highs…Dec 22nd“best to let things settle, they will bounce and seasonality may allow it soon“.  Did they ever bounce, today !!.   Things have definitely changed in just oveer a week's time.    The culprit was some macro news, but that’s every day.  The move were too big for what comments came out of China.  We think it was a report out from Goldman Sachs that said investors should be positioned for a rally in Asian plays into 1Q.   This report is not picked up by Briefing (surprise!..they have their own interests at times and don’t report some crucial ‘Bloomberg terminal’ news.).

On Friday we have the important job report and we feel as long as the trend is in the right direction, it won't be as big of a deal.   We would watch for any major pre-announcement from corporate America that can potentially impact the market sentiment.    At the meantime, we'd use any technical dip opportunity to add back to the shares we like and ride this thing up. 

Technically, 1137  is a top trendline  ‘R’  from Oct/ November we need to close over probably more than once to think of higher highs.   *In the back of our minds, is an early 2009 market top a few days after a ‘big’ 1st trading day in January.  We had the big pop this year as well, thus,  some hesitation till 1137 completely busted.


Job report, still relevant?

We know a title like the one above will raise some endless debate among the traders.   So, we are not going to defend or embrace the notion of it.   So what's the point of even raising this topic, you ask?   Here's the thing!   It seems over the course of last few days or even longer, there's this particular story developing that the health of this market, at least short term wise,  hinges on the quality of the job report tomorrow.    It's as if tomorrow's job report will provide a definitive catalyst for people to either go short big time or go long big time.    Well,  perhaps this is the way media has played it for a long time.    The truth is, to us, it's just another piece of Eco' data in a series of many many such Eco' data to come in this recovery theme rally. 

Maybe,  we get a really good report tomorrow, or maybe we get an okay one or in an unlikely scenario, we get a bad report.     In any case, any kind of report may cause a "sell on news" reaction as the market maybe looking ahead to earnings season instead.    Of course,  it may cause this market to breakout to the upside even further.    As far as the actual importance of this job report in the broad picture, we think people have put way too much emphasis on it because the potential reaction to this report.  It may simply be irrelevant when earnings hit soon.   In the grand scheme of things,  this is just another report people look at to confirm the validity of this economic recovery.  

Today's action, we got some decent pullbacks from many of our leading shadowisted plays, yet the all important SPX index managed to inch up a couple of points due to what now is BKX >10% on the week.     The sector that worried us the most during last month, financial sector, is the same sector that's getting strong underlying sentiment for this market.     Like we have said before, as Financials start to roll to the upside,  this market won't slow down.    While we give some momentum plays some room to consolidate, we have enough of positive from financial sector to keep the index high and afloat.   This is what exactly we want to see for a healthy bull run.    There's enough market rotation to provide different leadership to this market so the market does not feel tired.  This environment also provides technical trades.  This week CMP  moved for a 4 pts and MAN  3 pts from our breakout alerts.   If were getting fast points, we’re not shy about taking the points and finding something else for a fast trade before the report.   

As money moves, we’re looking for potential money flows sub-groups:

Trends were the same today as all week.  Tech weak and financial really broadening out and catching shorts and sidelined money by surprise.  One NASD sub-group feeling no effects of tech weakness is our DJIM LED trio of  VECO AIXG CREE.

The positive retail numbers provide collateral trades in groups such as Casino’s, Lodging/Hotel.  You don’t need to trade retail stocks to make the positive retail numbers work for you.  We’ve put HOT a previous DJIM winning stock on our trading.  Another idea is if financial strength continues to broaden we’ll look for laggers such as Asset managers (BLK BEN).

Tomorrow might be a busy day for many of us,  but we don't really think tomorrow's any more special than other days unless the number is a surprise worse than what is being whispered around the last few days.   If market is looking to sell on news`,  then it shouldn't be surprising to anyone and we'd add to our plays either today or next week as things settle down.   If the market enjoys the job report enough to give it a good chase higher,  then we'd definitely look for some beta plays on our list to get our money's worth. 


New SPX high

What a three day rest has done to this market, eh?   We focused last week on the possibility INTC earning may bring out the "sell on news" crowd and it played out.   Into Friday’s trade,  we noted the 3 day weekend may give this "market direction" and not INTC, JPM earnings .   The question into today’s trade is 'BROWN really GREEN' for traders/ investors and give this market direction as Washington’s messing into the markets, notably into financials, get a wake up call.   It definitely helped today after we re-tested 1130 levels pre-market and in the longer term it should as well.

More importantly to DJIM today was the expectation…“The reactions to reports next week might be completely different than last weeks, ‘sell the ‘good news earning news’ reaction” and the political hype had little to do with the change today.   As said, less than 5% of SP had reported by last weeks close and doesn’t make an earning season.  Today investors came back more optimistic as market shrugged off   so-so call, liked an early cyclical PH  industrial upward guidance,  which gives a good read through to the recovery and sector,  EDU  quickly reversed some early selling and was one of the big winners on the day and AMC, we got a good reaction to CREE.  

Still,  a one day change doesn’t make an earnings season,  but it was good to see.  Given the reports from the likes of AA, INTC, or JPM and today PH, more should start to realize that the economic recovery pace will remain quite steady.    Maybe, we've been spoiled by last couple of quarters' surprise upside announcement by many companies.    Keep in mind though,  previously the estimate were much too low for most companies on average.      For this quarter,  we are assuming analysts' estimate are much more inline with what's happening out there and expectations are greater.    In other words,  if a company can shine through this quarter's report, it may just be a real star we are looking for in 2010.

Regardless how much upside churning we go through this year,  the trend will still be the same.   This is the most important aspect of our trading theme here.    It means that on down days and on pullbacks, we basically have to have strong faith and buy into it.    It's somewhat of an adjustment because this time around last year,  we were trained to stay away from any down day.    Any big down day from early last year would lead to further down days.    This is the reason we assume many people are still cautious about this market.

In AMC,  as noted CREE  came out with an excellent guidance print.   If the selloff in the stock Friday was the concern that their report won't be good, then we'd assume it can at least return to its previous high and perhaps beyond quite soon.  The collateral plays at DJIM, (AIXG, VECO ) should benefit, not just from report, but the fact they’ve gone down with the rest of the tech (SMH) weakness so far this year and we expect a rebound in the sectors.   IBM  came out with number/guidance that met the expectation, but didn‘t raise guidance enough to satisfy hopes.   In addition,  this is actually a reporting week of many financial companies including the likes of MS, BAC, WFC, GS,  but judging by JPM, C  it might be a non-event.   

Bottom line, as earning season gets busier, we have to keep our heads cool and pick the plays that stand out.   For now,  we simply have to lie back and wait for winners to come.

* Wednesday night, loads of very important China Eco data…


Earnings will matter...

Honestly,  it doesn't really matter what the negative headlines suggest,  profit taking is all we need to know.  Instead, media and analysts alike would love to pinpoint a couple of specific reasons for any day's decline.   Well, it's their job.  Today, rumor that China is tightening its lending is sending "shockwave;)" throughout the world before the release of all their Eco data tonight that is expected to show overheating of sorts.   Ummm,  unless we just heard it for the first time during last few months, we swear this is just recycled news.   Yes, they will withdraw excess liquidity, let’s get used to it. (headlines).   Also, there's always people who like to remind us that we've already had such a terrific run from last March and it's time for a meaningful pullback (again, eh).   Well,  we also like to remind people that this market has ran up so much since 1960s and it's time for a pullback now;).  The point is, you have to have a pretty good idea about this market in order to dissect what news is helpful and what news isn’t these days.

We have literally entered the second week of an earning season and we'd like to think corporate earnings should dominate the news media.   In our opinion, it should and it will!   No matter what causes any little pullback, or in some people's opinion, healthy consolidation, we have to focus on what's more important.   Do corporate earning suggest an Economic recovery?,  if so, at what pace are we recovering.  Here's the thing, we don't expect SPX to hit 1200 anytime soon and breaking over 1150-1160 would probably take some time without a “BIG’ catalyst.  In 2009,  we’d see SPX going 5-10% in either direction in a matter of weeks, sometimes days, but it’s just not likely going to happen in 2010. Why?  Things have stabilized and people will invest/trade in a much more rational way than past few years.  So, compared to last year,  this year will give us this "grind" feel.   This is just fine with us because it allows us to ultimately focus on our game, the earnings game!

CREE,  from last night, came out with an outstanding report/guidance as noted and was rewarded with some nice add on gains along with VECO,AIXG .  This morning, many financial institutions have come out with reports that have exceeded expectation and are probably the main reasons we had a little comeback in the afternoon.   In AMC today, names such as SBUX and STX, PLXS (add to list) all came out with quality reports, basically as many as 5-6 NASD/Tech (incl. FFIV  on our list) did as well.  So, trend is still pretty clear where this Economy is going.   As long as people's favourite companies come out with good earnings, you can assign a reasonable P/E behind them which in turn will give a strong support to the overall market.

Bottom line,  we may be in for some range trading (again, we bounced off ~1030 and closed on Nov trendline) until the assessment is clear that the market deserves a higher valuation.  Majority of the companies have yet to report and their earnings are an absolute key to the health of this market.  Forget about rate hikes or inflation because right now,  it's just the excuse bears use to get out of their position.



DJIM #7  2010

A whipsaw week finshed as it opened.  The market continued it’s up and down routine right to the end as China ‘RRR’ so-called surprise headline hit Friday premarket sending the SPX to low 1060’s once again.   As pointed out premarket, we didn’t see it as a surprise feeling any negative reaction would be exaggerated.  The fear mongers were out early, but rationality set in as the day progressed and CNBC began to have guests on that believed the same thing we did and the market started to rally back on the heels of tech.    We’ve been saying we need a meaningful close above 1071 and now we have back to back ones that should change the tone to a more technial positive one for the short term.   Also, finally, we had some dip buying come back to the market.  Some buying was probably generated by better than expected eco’ data (Jobless claims, Retail).  Last week was pretty quiet on US eco’ data,  despite the shortened week ahead, it will be busier and important as we get fresh looks at February data.

All eyes were on commodity linked stocks last week,  but tech ($SOX) quietly came in the back door and duplicated it’s Thursday move on Friday as some money started to rotate into them from commods’.   As pointed out,  we think this is anticipation of some earnings reports in the upcoming week from some big names.   Market might be anticipating more estimate revisions because of the reports coming up, giving potential for a bounce in the sector.

On the topic of earnings and tech many names from February released reports (mostly January Q end) are trading well.  Names this Q include, VECO  NETL DLB  and cheaper names like SFLY APKT MKSI  and stocks in other groups like HAR CMI EMS  have also had good reactions.  

M&A activity in Ag’ space this weekend may provide a bid to these linked stocks.

Market is still on a fog on as it tries to look at something it can’t see clearly..Greece, China.  These are market stresses, but, if the market concentrates some more on what’s happening here, hopefully with the help of some eco‘ data this week,  it has a chance to stay away from recent lows.   Importantly,  there are some open spots in the fog to trade day to day, eg. commodity linked stocks or possibly some more tech ahead.   Either way, recent earning plays are providing a pretty good place to trade.


Torch firmly in bull's hand...

If an Olympic torch run can be used to describe this market, then the torch has been carried by bulls for awfully a long time.    Heading into last weekend, we were a little concerned that the latest rally pace was finally a bit "excessive" and we had to respect the idea of consolidation/pullback.   We have to be careful these days using any sort of adjective to describe this market because every bull run is new and fresh to all of us.    However,  we still have to use the trading experience in the last few months in order to execute our strategy efficiently.    One thing that's getting obvious though, this market won't go down without a fight.    And fortunately, this fight does NOT involve any Bears and their shorts at this time. Since shorting this market doesn't make any sense at all, and it hasn't made any sense for a while, we firmly believe that this market is currently in total control of the bulls.  

What does it mean?  The only way for this market to stall/pull back without a very negative catalyst is for the Bulls to stop chasing and buying.   We saw more of this today, after meandering all day, the market surged to a SPX breakout late as investors/traders don’t want to be left behind.   We alerted 1pm to such a possibility and the SPX fell just shy of a couple of points of hitting our next resistance target of 1177, the SOX made a NCH and joined every other pulse of the market in doing so. 

Now what?  It's pretty obvious that the latest move is being carried by some heavyweights.    Even though that the new high list is popping up with plays left and right, none of them are as significant as the ones that make up the key index.    Many of our plays, and especially those are sensitive to the Economy, are being helped along by this strong bullish environment.    The toughest thing for the bulls, regardless new or old, is that they can't shy away from this action.    Waiting for better price to enter is what we like to do, but we also don't want to miss out on any strong action from different groups on our shadowlist.     Today, we have some strong performance from Techs, led by semi's >2%, LED semi group (VECO ), and Commodity linked metal stocks (coals, steels CLF X WLT ) after getting sold off last few sessions came back roaring.   Also, Auto parts & Equipment stocks noted yesterday continued to get momo (HAR ) last alerted March 10th a as a breakout potential exploded out of the gate, continuing its previous days break with a very quick 5% lift.  

So now, the guess is on!  Where are we really going to settle before the NFP report?   Before the next round of earning starts, where does this market want to be?   Does it matter in the grande scheme of things for the rest of 2010??.  Probably not,  but,  we'll know the answer soon enough for the short term prospects.


What worked... still works...

Is this the "everything is going fine" melt up we’re witnessing on the back of solid NFP# / global PMI‘s from last week and today‘s ISM non-manuf‘ & Pending home sales?   Is this the same stock market we've been playing day in and day out since early last year?   The more we ask ourselves, the more uncertain of an answer we'd come up with.    Cast aside any personal opinions and too much analyzing, this is what it is…the market is still very resilient,  investors are favouring risky assets, especially on any shallow pullbacks and that is all that matters.    We are at SPX 1187, up over 500 points from the low we hit early last year.    If memory serves correct, the pace of this bull market will slow down dramatically,  just like in the other bull markets of the past.    Of course, knowing that the pace will slow down and knowing when it will slow down are two different things.

Our speculation is that sometime during the coming earning season, the pace will slow down.  Possibly a May sizable correction coinciding with the “Sell and go away in May” almanac trading mentality returning as things have gotten back to normal.    Right now, market has risen to a point that a lot of positive things are expected for this quarter and beyond.    You can also say that some of the price movement from some of the plays on our list may reflect all of the potential good things in them.     Does this mean the end of the bull run is near?    Hardly!    First, we have merely gone from being really undervalued to somewhat fully valued.    This is also a big if because we can't generalize everything in this market as being fully valued.   Some companies, given the current environment and their prospect, may still be "cheap" if they can capture the growth opportunities.    Here's the thing, not all of the companies out there are in the same phase of this Economic recovery.   Some companies have indeed been recovering, like many commodity plays, from the slump in demand over the last couple of years.    Other companies, such as those in technology sector, are having the kind of growth they've never seen in their history.   In other words,  recovery or not, some companies are seeing their business at the best level despite the fact we are still sitting at a "cough" 9.7% unemployment rate.

Here's the thing though, it looks like we are playing both the recovery and growth theme at the same time.    In our opinion, it can probably only get better from here.    Today's action is simply broad based and led by familiar DJIM shadowlisted plays hitting new highs, outperformed with R2K the other major indicies.    The semi LED group ( RBCN CREE VECO AIXG ) being the strongest, as well as gaming stocks ( WYNN  LVS ) and our favorite X CLF WLT  commodity linked plays all taking on some nice gains throughout the day.    We are talking about mostly EPS winners that have made it to our list in the past,  econ. sensitive material stocks and as well as consumer discretionary gaming stocks going up all at once.    It truly is a bullish feeling out there.    

However, although we broke out of the recent high of SPX 1180 and closed at a new fresh rally high, the volume is somewhat disappointing, but the majority of world markets were still on holidays.    We can only conclude that many longs are just holding that much tighter to their holdings, in spite of recent gains.      Again, sometime this earning season, we may able to see if people are willing to lock in some profit before the lazy summer hits.

Bottom line, we definitely started the week with a bang.   The question is, can we keep this going...