...and the number is...????

Most of  DJIM discussion this week centred around home front/Economic data.  It‘s slowly making it‘s way back to the markets talking heads.   This is good because we are finally taking a break from Eurozone and switching some focus.   Well, we don't know how long this is going to last because once the NFP report comes out tomorrow, folks may just concentrate back onto the Euro worries now that the market has rallied from SPX1040 to 1105/200ma.   Many have not grasped that we've actually rallied since the 25th/1040.   Those in the rally play may want to sell over 1100,  but those sidelined may begin to feel some anxiety of this move going further.   Stay tuned...

However,  it's important to give some thoughts on the recent Econ. data.    People have been pointing out the fact that although the Economy is recovering, growth has slowed recently.   The fact China is down >20% is evidence of the ’growth’ investor has been slipping away this year.   Also, fear of Euro May problems derailing activity in US has been on the mind.  This weeks macro #`s show it hasn’t derailed things in May.   The eco` downshift may not be as great as feared due to Eurozone.  Unfortunately, a fresh twist in our waters now... the ramifications of the BP spill will begin to put June #'s into question sooner than later by the market.!    We feel all these fears are very natural because sooner or later this is what had to happen for the markets not get out of hand.    Basically we need to level off the growth curve for a bit before we can tick higher.    The biggest obstacle to the recovery remains the unemployment rate.   It seems no matter how many jobs we create, it just won't be enough to replace those millions of jobs that were lost during last couple of years.    It'll be a long way before the unemployment rate comes down to a reasonable level.    By then, the Economy will be at full steam and we bet many of the plays-sec`s we like will be trading at a much higher valuation.    This is always the case in an upward Economic cycle.

As far as market goes,  SPX stopped dead at 200 MA today.  Volume was relatively light and people are most likely waiting for the NFP report tomorrow to give them a reason to make their next move.  Today’s somewhat green to flat action gives the market some room to manoeuvre, if we broke out over 200ma today,  we’d probably have a better chance for a sell on the news(NFP#), no matter what the # would be.  As we all know,  selling on any NFP# is always a possibility and will be on this census skewed report as well.  Watch private sector jobs, whisper highs a tad over 200k.

Excluding the commodity linked stocks (Again, China housing clamp cooling property mkt big time), many plays behaved really well, especially in softie tech.  We had M&A activity (SNWL) once again in the group and DJIM listed softies, CRM VMW  and another VRSN  added hitting NCH`s. (will update Shadowlist this weekend).  Others like DGIT, DLB  also put in nice days.  

In all honesty, if we can close out the week in a relative quiet fashion, it'd be a nice confidence boost for the sidelined investors to slowly buy into the market again.    Right now, the most important issue for this market is to ease the volatility and stop the late day sell offs.   It stopped today and yesterday,  let this continue today and we`ll be happy heading into the weekend.

...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.