"Home Alone"

Isn’t it amazing what the US market can do when left home alone?.  Simply..with China "Eye of the Tiger” on holidays this week not peeking over our shoulder and us not over theirs…and Greece acting as it should ..a “Club Med” vacation spot,  the US market is running the house!

Today, the house was very quiet after partying for days as it should, a sluggish, choppy trade (although still firm breadth) that seems to take most of it’s cues from FX action.   Earnings were led by our alerted WFMI, which helped the staples lead the SP500.  Just on Tuesday, a strong Euro gave a bump to stocks,  today an early sell off occurred as the Euro sank and USD strengthened, but in the end the  market held up well.   The signals sent from FX continue to be mixed,  today even the strong USD didn’t hurt commodity linked stocks or the market end of day.  

It would be advantageous to break 1100 soon, we failed on a few attempts today.  If this failure continues it becomes a  ‘psyche’ thing and nervous longs will start to think this rally is petering out and begin to take more profits.   Also,  if this level to 1005 is not broken through,  it would signal a technical failure and odds would grow to the possibility of a 1040's retest.   *Next week,  the Chinese holidays conclude and Greece has some important dates, including a possible bond offering to have a negative effect on the markets.  The Chinese RRR announcement came out after their markets close and their market needs to react and the reaction will likely be negative.    So, as we said lighten those commodity positions and any China positions, especially before they begin to trade.

Conviction buying is needed and tomorrow the Joblesss claims will be eyed closely as longs need something extra at this point.

AMC, Tech earnings were inline and management comments are still inline positive, but nothing ground breaking.  The trade was into these mid-week reports as noted last week,  there is nothing new to propel tech higher,  it should trade with the broad market tape.

Focus back on Fed

Well,  >1100 SPX lasted all of 7 hours 24 minutes and 35 seconds or something like that!  The day went pretty smoothly until after the market closed!

In a widely expected move for mid to late 2010, the FED decided in increasing its discount rate by 25 basis point to .75% in "shocking timing" fashion this February day,  'a la China' that just raised their RRR right after market close and on the eve of their holiday week.   Fed's announcement has the market  reacting not too well and the futures have pretty much sunk to the lowest point of the day, suggesting that today's gain will pretty much be all wiped on OPEX day.

Now, it depends on how people interpret it, it can either mean that Fed is leaning toward tightening sooner than thought or this is just nothing but a "normalization" process as according to the FED.  China called theirs ’normalization’ as well, but that has not eased liquidation of their stock market.   In either case,  we believe that the reaction will definitely be negative initially.    Given how strong the market has been the last few days, it's inevitable that people would be sensitive to news like this and give back some of the gains.    To us, when the news settles and selling is done,  it will represent some good entry points.   Luckily, timing wise, we’ve been noting lightening up on positions last few days, notably the commodity linked stocks due to the re-opening of the Chinese market on Monday and the possible effect their 2nd RRR increase will have. 

Still, we’d expect this market to be able to absorb this news, but it will need some time and good catalysts to get over.   For now, we are just curious to see how long it takes.

As far as plays go, we really like some of the technology plays if they get pulled back due to the rate fear.   Commodity links are always a sensitve bunch because of USD relationship and realistically with the recent moves back to 50ma, a pullback seems inevitable.   

Again, most people expect the day to start on a downbeat,  but we can't say for sure how long it will last.   Reason for this to be possibly short lived is the ability of the market to absorb negative newsflow lately or at least rebound after ie. Greece..China..and hardly budge after an uninspiring jobless claims number today.   Still, at this point we have to see how much de-risking occurs in many global markets/ currency in days to come and/ or we see markets take this in stride.

Shadowlist

Shadowlist by sector money flow/ rotation to follow. (visit site).  Most Q earnings fall within tech.

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DJIM #8 2010

After digesting the FED discount rate hike on what was actually timid selling, the overblown news was bought up and new high of 1112 on this rally was reached.  The ability of the market lately to absorb negative news flow and go on was prevalent once again. The market was able to take the hike in stride as a probability discussed.  Simply, the FED is on hold and Bernanke’s 2 day testimony this week will reinforce this and the market sooner than later will have to go and realize it’s premature to think a hike in 2010.   What we’ve been more concerned about last week is the reaction in China to their Banks RRR raise after their market re-opens.   But, as we pointed out late Friday, the fact we’ve been able to shrug off the US hike and also rally on the week might temper an initial negative knee jerk reaction.   This seems to be the case tonight as Shang trades flat.   If this mild reaction continues this week, it will be a positive catalyst.

Bernanke’s testimony, China and a very likely multi billion bond offering in Greece will be the catalysts this week.

Sidelined..

You couldn’t help but sense many "active" market participants are sidedlined and waiting today for a few of the catalysts noted yesterday.   Volume, which usually isn't a big deal to DJIM, is particularly low today.   Other than a few outperformers in each of the sectors we follow, most plays on our list exhibited some indecisive action today.    After couple of weeks of rally time, we guess it's time for this market to take a deep breath and let some folks to catch up.

Frankly,  we'd prefer the next mini move to be down as opposed to up.    Another quick move to challenge this year's high is not only somewhat unrealistic, but also irresponsible at this point.    SPX 1115 is just fine with us as ‘R’ at this stage as it's the first flush day low on January 21st.  Cautiousness is definitely in the air because some of the moves from some of our plays are just too big to ignore.    One bright side of the market today is the outperforming financial sector as some mortgage/commercial news flow helped, but overall breadth was not up too par of last week and many sec’s are battling around 50ma (transports, semi’s).   It's actually a bit odd to see an underperforming sector pick up the slack today.   In fact, if it wasn't for the financials, market would've probably done much worse and we'd be even more cautious.

Right now, we know exactly which plays are strong,  but the price at this point makes anyone think twice before adding.    If we do get a mini pullback, we'd like to add back some shares at 9 ema.   This pretty much goes for all of the technology and commodity plays on our list.   Hopefully, we can spend most of this week consolidating and give  plays a rest and give us a chance to enter those plays at a better price.

...could have been worse...

The DOW may have only eked out a triple point loss by .97 with the broad market off just over 1%, but it really looked worse under the sheets.  Major catalyst was the disappointing US confidence number, the lowest since April 2009 as the unemployment picture is getting tiresome, but there was more to the awful market sentiment…..

Tech- BRCD CTV earnings were a huge disappointment, add some Samsung overseas comments about worries over a chip bubble, moving away from their bullish outlook.  $SOX, we noted its battle at 50ma, today it lost as it closed 3% down.  These Samsung comments were blown off by exec’s at some major US companies, but it didn’t help by close.

Financials were hit as a banking report headlines hit that bank failures are draining the FDIC fund.  This was about same time as Consumer number.

Weak Euro zone numbers from Germany hurt, stalling recovery talk is starting in the area.  Also our notes last week about China are beginning to get whispers.  The Shang hasn’t tried to play catch up at all to the US markets rally and this is probably showing signs they are not buying..restocking.   Some are looking at the action of copper as a sign (down 3% midday),  we’ll just wait for noise about this issue to gain momentum one way or another in days to come as its integral to the health of commodity linked stocks and China stocks etc..

Eyes on Bernanke testimony now,  there was some confusion in the market today on a SFP program and he’ll need to clear this up as it probably hurt the market as well.  Anyways, lots of confusion all of a sudden and a bearish reversal day technically.   Also, Greece is still in the picture and the offering may be delayed and US investors are not interested in their debt and this may lead to questions of it’s success or not if /when the new debt comes.   Stay light or out as we proposed late last week into this weeks trading.  A few too many headwinds, including technically to look at buying individual stocks at 9ema due to a chance of a test of 1085 (about 20ma).

could have been better....if

The SPX jumped 10 pts or so, but it didn't really feel that way.   As we expected,” Simply, the FED is on hold and Bernanke’s 2 day testimony this week will reinforce this and the market sooner than later will have to go and realize it’s premature to think a hike in 2010“.    But, surprisingly, it seems the market was actually doubting this and was relieved enough to make up a nice portion of yesterday's losses.  Well, at least for one day it did!   This upside could have been better and believable,  if there was any signs of ‘conviction buying’.  There was none.
 
Looking at all of the sectors, other than some outperforming action from the financials and big techs, it was pretty much boring everywhere else as market followed FX mostly.  Still, we can spot jitters as tech showed on yesterdays Samsung news bit and today’s reaction to WDC comments at a conference around 2pm. (see WDC/STX charts).  Commodity plays are mixed and most of the smaller plays on our list didn't seem to participate.

It looks as though we will still have some more consolidation to go through before there's even a talk of challenging the year high or breaking out of most recent 6 day range 1092-1112.   We aren't chasing anything on today's rally and it'll stay that way until we feel more comfortable with what this market wants to do.   Again, techs and commods will still be our primary focus at this point. 

We have Initial Claim number on deck for tomorrow and it's part of our reasoning to wait and see before chasing a day like this.    In the interest of everyone,  we think it's better for this market to keep digesting its recent gain for the rest of the week.

...need a tie-breaker!

.. like a hockey shoot-out to break this range...

Today, we were thinking when was the last time the market had any good news?.   Just like today with a disappointing jobless claims #/ durable goods, we seem to have only headwinds..eco’ data, political..etc for weeks now.  The last ‘tailwind’ was a holiday (China New Years) of all things to let this market recoup some of the downside as US markets literally played home alone.   

So, really, considering all the negativity we’ve faced,  it’s not all that bad that we’re around SPX1100 as the week comes to a close.   We talked about a bearish reversal and a chance at 20ma earlier in the week and after one up day, today the market smacked the 20ma today and reversed not violating the 1085.   Recall, the 20ma area is of importance as this was the mark all the way up in 2009 rally.   As the fact that there is no conviction buying to push out and close out of this now 7 day range, today's consolation prize is selling was not aggressive and so no conviction is on the other side to breakdown.  Both sides lack confidence.  Longs are jittery and shorts are pretty quick to cover as seen today.  

Unfortunately, we are getting lower highs all week, but today’s rebound may inspire overseas markets and we can change the lower high closes theme tomorrow with some follow through.   A ‘tailwind’ tomorrow might be the snowstorm as trading desks will be quiet allowing for some monkey retail business and end of month window dressing.   Yep, we’re getting desperate for a ‘catalyst’ being meteorologists.  This market is simply an ETF trade right now, which is great for flippers, but for traders like us looking for a trend, momentum in either a group or individual stock,  it’s almost non-existent at this moment.

DJIM #9 2010

First of all, we hope everyone enjoyed that epic hockey game on Sunday.   It's definitely one of those games that will be remembered for ages.    Now that the Winter Olympics are over, does it mean many traders will be focusing more on the trading screen as oppose to the TV screen?   We hope so!

In fact, there's really not much we shouldn't like about this market.   Time after time again, this market is able to withstand some viscous pullbacks that could've led to the beginning of a "bear" trend.    As we climb higher over time, the pace of the climb will definitely be slower and a skeptical view will grow ever louder.   Such is the case we are facing right now.    We have lots of uncertainty ahead of us that can give this market many surprise turns.   Uncertainties from our Economy, the Economies abroad, and as well as the current administrations' new initiatives are all some of the things we just cannot predict well at this point.   One thing we can do though, is to carefully analyze the recent trend to see where we might be headed.    The most recent earning quarter is nearing it's end and we have to be prepared for the lack of corporate news in the next little while.    What many market participants will do is to use the most recent trend to determine if it's worthwhile to be involved in this market or not.    We are definitely in the camp that market is in the early stage of a recovery and we have to absolutely be part of it.

Market ended the week at SPX1104 and in our honest opinion, we like to see this market hover around this area for a bit longer.    The recent slide is still fresh on the back of people's mind and any weakness in the market can definitely invite quick selling.    However, this market is about as resilient as one can ask for and we have full faith that it can pull out of whatever trouble it gets into.    The plays on our most recently updated shadowlist represent some of the names that are widely followed by this market.   It's not a coincidence though.   We picked those plays because we feel they have the best representation of an Economy that's in recovery.   

...upside risk coming back slowly

After breaking the string of lower highs closes on Friday,  the market woke up to be powered out of the gate by a string of M&A activity worth about 50bln  + more Greece aid package noise to close at flush levels of 1115 SPX, we discussed last week.   This is just above the 7 day recent range and if a good ‘breadth ‘ day is indication, as many times it is for a few days more,  the risk is upside and those conviction buyers may have reason to step off the sidelines as the shorts will keep their distance.  What’s good about the ‘ breadth’ is even the big momo laggards got in the action..AAPL, AMZN.    This appetite for techs helped propel the SOX over the 50ma after trying unsuccessfully last week. 

Of course,  the financials are always the disconnect from the market tape it seems.  Last week they outperformed the tape,  today they stunk the joint out.  Well, we’ve learned the past 6 months or so that GS and the boys are not greatest barometer of the tape, so it’s no big deal.    If we follow our shadowlist names and set it up as we did in our last update, you know where the money flow is going and therefore what is the trade.   We can see by the example below of where some of the flow was today and it was into our Q earnings plays.  Some names noted in February off earnings enjoyed a NCH day…ie. WFMI  MICC DLB NFLX PMTC