Market hangs in there..

Some thoughts did occur to us that we'll give the recent high a try soon as the market continued it’s steady grind today, but when the clock struck 2pm,  reality sank in as it topped out for the time being at 1123SPX.   The culprit for the late downdraft was likely MSFT's day, which coupled with a recent extended SMH/ SOX led the slide.   Having a neutral stance on SPX levels,  we feel,  it's probably better for this market to take a breather before giving a serious attempt at new highs.   In other words,  a mini pullback at this level will be considered healthy.    At this point,  many plays on our list are looking extended and it's not very wise to chase at the current price level.   Instead, we are looking for new stocks coming up to potential breakouts out there to trade.

Of course,  we have to respect and obey the force of this market in case it gets happy feet over a Greece resolution, NFP # report and climbs higher.   Or/  An important ingredient this week not factored in before has been the ‘ positives’  in M&A activity (today TRA) and the many buybacks, including one that helped an alert play today in PLT.   Just like investors on the sidelines with not many places to put cash except into riskier assets like equities to get a decent return,  companies with mountains of cash are showing the same temptation this week.   If this continues at this pace, it could be an important catalyst coming to fruition to move this market higher.

We basically have a few days for this market to pause / consolidate before the NFP# .   We also have China`s National People`s Congress starting March 5th to be a possible market mover ahead.   Add the anticipated Greek resolution for this weekend and it’s best the markets don't get ahead of itself and than have any of these market mover possibilities cause the phenomenon of sell on the news.


.

Rollover theme?

We can literally begin tonight’s Journal in the same manner as yesterdays as early thoughts returned of trying for 2010 highs soon.... a steady grind high continued,  yet once again the clock struck 2pm and we sold off to close nearly flat on the day.    It’s one step forward, one step back for the last 2 days.  This time the culprit was ‘ DC ’.  

Market just got used ‘DC’ risk being off the table, this is not something we want to see rear it’s ugly head again and gain steam as today with ‘Volker’ noise.    At least the selling is not happening in the last 30 minutes of the day, which would be a bad sign.   This likely‘ take a breather’ action preludes a few potential catalysts and we shouldn’t look at it as the market encountering heavy resistance just yet,  but just a normal course of wait and see for a catalyst at many technical level (including SPX1123 ).  There is a lot of technical ’fib’ stuff between here and 1130 and than back up to 2010 highs.   If positives emerge in the next few days,  but the market continues this trend of losing steam and rolling over,  it would signal a tired and overbought market and more caution would be necessary.  

A few more signs still today, we’re moving in the right direction....

M&A, which we discussed as a potential catalyst last night got another boost (NOVL) and Eco’data was on the right track.  This is all good but near term,  we patiently wait to see how the debt offering is received (demand) in Greece (and resolution) + if China puts in more curbs ahead or after their congress starts + NFP#.  

In the meantime, EPS plays continue to act well.  PLT  continued on today and we liked what MFB  put up in their report today.  Another play to shadowlist is FARO , which has consolidated it’s recent report in good fashion on the charts.

'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.

DJIM #10, 2010

Nine weeks into 2010, we are pretty much at where we were at the beginning of the year.    This isn't negative, though.   Considering what this market had to endure in the past two months, we'd say this is about as impressive as it gets for being at this level at this time of the year.    The higher we go, the scarier the pullbacks to market participants, and stronger the ensuing rebound it follows.    No matter what skepticism shows in the market, and not matter what the catalysts that caused the market to slide recently, we always manage to come back during the past nine months, right?    Folks, this is simply a classic definition of a bull run and riskier assets are the way to go..     A bull run, as we know, may come in different shapes and lengths.    At this point, we are still treating this bull run as a long and grindy one that can potentially last years with lots of bumps and obstacles in the way.    This is the best kind of bull run a long trader can ask for.

On the heels of an excellent week of M&A/ buybacks, which grinded the market higher, we hit a trifecta of good news by Friday’s open…..“we patiently wait to see how the debt offering is received (demand) in Greece (and resolution) + if China puts in more curbs ahead or after their congress starts + NFP#.”   The Greek offering went great and has traded well after, the China Congress kicked off with a very assuring, calming opening statement and obviously, the NFP# was a ‘gapper’ kind of number in itself.   Probably, best of all,  the market didn’t rollover/ get a snow job intraday day and/or in the last 30 minutes as 3 positives catalysts were too much too handle for the shorts, who even got squeezed some more on a final kick leg higher late in the day.

Still,  broadly, we shouldn't cheer the fact it's a better than expected # because the Economy is still not in a strongest shape to create jobs.   Unemployment rate of 9.7% is still on the high side and it's going to take a long while before we even get to a steady positive trend as far as the job creation is concerned.    However, the message this Economy is sending to everyone is that things are improving and not worsening come Spring.    People will see the light at the end of the tunnel and this is the very optimistic reason why people are buying up this market slowly.     As things improve,  we'd have more and more companies benefiting from the improvement from our Economy and execute well to show higher profit.    This is basically the bottom line thesis of a bull market.

Last week, and for the first time in a long while, we had some momentum/ speculation in the micro/ mid cap land.   Notably, the speculative Chinese coal plays such as CNAM  PUDA and SCOK  were getting the sort of action we've been missing for a couple of years.   Is this a sign that perhaps the appetite for momentum micro- mid , small float caps is back?   We aren't exactly sure yet,  but it's definitely something to monitor.  Of course, care is needed if you feel you're out of shape to trade these highly volatile plays.    As long as market players believe that those plays exist and are willing to hunt them down and herd them,  DJIM won't be sitting on the sidelines either.    We were very active at trading CNAM, PUDA and alikes last couple of days and it's just a great feeling and change of pace from the bigger cap stocks.    We still like these plays and feel that they may have playing time left.    How high they can go is anyone's guess.  As long as they are in play,  that's all we care. 

As far as the rest of the market,  there's a good probability that we'll retest highs.    Financials, a missing part of the previous rally have been very strong lately.    The regional banks have been on fire lately and BKX  index toys with highs.   All of these, the financials coupled with the strong action from commodity and material sector, and as well as the technology group, are enough to drive this market substantially higher.    Having said that,  we still feel we have to wait for some better price to enter some of our widely traded plays.    Remember, it doesn't matter how optimistic things look, we are only at the very beginning of a long grindy bull market.   There's no need to push yourself into thinking that you are missing out on great plays and pile all in mindlessly.    At DJIM, we simply lock our favourite plays on our shadowlist radar and buy the dip opportunity when it comes to us.

Bottom line, spring is around the corner and the atmosphere in the market is more energetic than ever it seems even if volumes don't show it.   Trading opportunities are becoming more diverse and this is where we have to give our best effort to take the full advantage of it.

'On Strike'

Simply..today was a ‘strike day ' as both buyers and sellers took the day off following a busy week on many fronts.  Unfortunately,  it may be a yawner for the rest of week as catalysts are few and far between with no eco’ data/ EPS / political events on the U.S plate.   It’s a good thing as the market needs to digest the latest leg higher and for the Bears to try and muster up more scepticism on this 1 year anniversary from we called the “Mark of the Beast’ (SPX666) after the March 9th close.   The wrath of the “Bull’ is still upon the marked and tormented ‘ Bear’ to this day a year later.
 
Today was also an opportunity for an education day,  we either do some homework on potential plays looking forward or go back to see where we were a year ago and how we were thinking and handling the situation at hand. (Journal pages #25, 26).   It never hurts to refresh your trading methodology...

Not to get too complacent..

Early on today,  the market felt like nothing can go wrong and we can slow grind to SPX 1500 in about 9 months.    Well, as sarcastic as it sounds,  I'm sure some of us have felt that way even just for a second or two, lately.    Truth is, we'll have lots of bumps and obstacles along the way to whatever the eventual top this market will reach.

Although the market ended in green, many plays actually ended in red as fatigue set in and money flowed out of stocks. As always the bigger changes in price movement are more evident in high beta names (Casinos/China's).   Still, recent alerts here of earnings plays keep grinding higher PLT, ROVI, MFB.    Such is the nature of this market, one minute we can be all relaxing under the sun and next thing you know a storm comes which ruins the day.   No real late catalyst today, so maybe just a drizzle as the market finished off the highs and has yet to join NASD/ R2K in making new highs.  If there is any concern,  it is this failure to join the party on part of the SPX and maybe why some money came off the table.  Still, so far it’s only one day late, BKX  hanging at multi month highs is probably a big signal as to what's next.

In all honesty, as long as we bring our "umbrella", we should be prepared for any storm that comes our way.    What does it mean then?   It means that we can expect for this market to pullback as soon as people start to get complacent.   In a way, this is healthy behaviour.   Some of us would love to get back into some plays at a much attractive price.    We believe we'll get our chance, sooner than later.    This is the kind of market that does not go up in a straight fashion.   It may have a mini stretch of a bull run, but it will always stop at some point.  The ground this market gained will be tested and we have important level at SPX 1150 to retest.

Over the next couple of days, we have some important Econ. data coming from China.   Those data points can very well be the tipping point we need to move this market higher or not.   In the meantime, we aren't expecting much news from our home front this week as noted earlier this week.     Bottom line, we are begging for some more sideway action before we can give 1150 a real attempt.

...Mixed signals

Mixed signals... divergences, cross currents…are all over the market tape and the question is,  what is the very short term meaning??

Today,  part of this is likely the anticipation of  'hot' China numbers overnight that will get tightening..cutting stimulus noise all over again (export # today signalled some steam ahead) vs.  the BKX  breaking out today from multi month highs.  Who wins?. 

In March 2009, it was the breakout of BKX  that led the broader market to rally from March to August.   Are we in for a repeat?.   You’d think with a BKX breakout and big center banks driving to the upside, we’d see more than a 2 point up day in the Dow or another day without the DOW/SPX (biggest gainers all financials) making fresh highs (which are heavier weighted with financials) than the NASD/ R2K.  Oh yeah, airlines, rails lead the Transports to fresh highs, yet Dow pretty well flat.   All these tape divergences may be the biggest sign the market is overbought and if the China #’s  are too hot,  it may be the perfect excuse to sell off early.

March Break?

Wouldn't it be great if the market closes for a week, so we can all leave for a break?   Nah, we are having too much fun still with this market to go on a vacation.    Things are definitely looking better today with another outstanding performance from BKX  (+5% week) as it extends it‘s Wednesday breakout.   It won ‘today’ against the China #’s that were mixed at best, yet the data did raise the probability of another(expected) RRR hike sooner than maybe anticipated.   Why do we keep stressing BKX and financials in general you ask?    Even though,  we chose not to play the sector this time around as there's plenty to do,  we have to be aware what's carrying the market up these days.    No doubt, in this rather quiet newsflow week, the financials are not quiet and doing their best to push the SPX to retest 1150 as of close today.    This is just pretty amazing,  sellers are still on 'strike'  and any little buying moves the tape upwards because of it.  

If we could just add “performance anxiety“ at these levels, we’d see conviction buying and a volume breakout.   How 'dreamy'  is that?.   Maybe just a tad with FOMC  ahead next week.

The question right now for most of us is that "do we want this market to go any higher now?"   Doesn't this sound ironic that the long traders are asking a "silly" question like this?    Here's a good reason though!    Many of our followed high momentum stocks have been doing really well the past few weeks and they haven't had enough time to digest the recent gain properly.   With the financials pushing higher, the rest of the market tape is on it‘s coattails.    This, in the end, will make some plays very stretched out and the risk rises substantially when entering a trade on some very extended plays.

Well, we can only wish for the best scenario, but we still have to respect this market regardless how we feel.  In AMC news, POT  raised its guidance for next quarter and this is actually might be pretty significant news.    We can't remember the last time POT did this.    All we can say is that the turn in commodity area is getting clearer by the day for the long term.    Tomorrow, the Fert group is probably in play again after a pretty weak week, in addition, the usual steel/coal groups and OIH will get another look.    See, it's all about perception into the future.   As far as earning sensitivity is concerned, the commodities are the most beneficial group when economy is improving.

Bottom line,  this week may be so quiet that no one is talking about anything anywhere.   Next week, we'll have a very important FOMC,  whose tone may finally change some and so we may not get a significant move until.  Up or Down!.  In any case, this week is setting us up for some major volatility next week.    We simply have to be ready for it.

DJIM #11 2010

By the conclusion of Friday’s trade, you can say both sides failed with eco data for each cause.   Despite, a hot Retail number (yet, not a huge surprise following SSS data earlier),  the Bulls had no conviction buyers step up and the reversal off the morning high was nothing the Bears (w/ a weaker consumer sentiment # ) wanted to press lower with new positions.  End result a draw of sorts with a close at SPX1150,  but a very small reversal day anyway.

We enter the week with the same premise discussed last week and that is a breakout is just 'too dreamy' before with the FOMC ahead.   In reality, this is a better safe than sorry play.   We think even a slight shift in tone from the FED is possible, surprising the market in favor of the Bears.   There is also now the China monetary policy circus gaining steam and the fear mongers are out with hike possibilities, even for this weekend.   Another “RRR” hike will come soon,  but the idea of a real hike is slim.   We think the plan there is to wait for March data, which comes in mid April before doing anything.   If they surprise with forceful action before, the market will get hurt.

Also,  market internals changed a bit Friday as the recent leader ( R2K) was the weakest of all the indexes and may have signalled a change in trend.

FOMC on deck..

Well, it definitely looks like nobody is willing to do anything until the FOMC.    There's really no pre Fed movement whatsoever and market momentum (lack of) pretty much carried over from late last week.    This isn't necessarily a bad thing though.    For all we know, market's simply waiting for a big catalyst to get us moving.

Fed can and probably will provide such a catalyst this time around,  up or down.  Notably, just because we are at important resistance from Dec/ Jan.   Note, this is a single day meeting.   As the economy improves, people are paying extra attention to every word the Fed says.   Of course, every one is trying to sense when the Fed will start change it’s tone as that may signal a potential hike in the interest rate on the horizon.   In most likelihood,  it doesn’t look like anything will change, but market will be on the look out for any shift in tone,  which subsequently may rattle the market initially if there is even a subtle one.  The point is, why should Fed change its main tone all of a sudden?    We aren't exactly in a white hot booming economy at this moment.   Unemployment is so high that anything they do will jeopardize the market's confidence and  have a very devastating effect on the economy and further pushing back the recovery.   Basically, now is not the time to expect the Fed to even consider the possibility of a rate hike.

So, do we still get a lift from the market if Fed gives us what we want?   Well, we just have to wait till tomorrow to find out.    Right now, there's no sense of urgency to chase stocks,  but that can change quickly.   We have to be prepared for a quick chase in case the market decides to give us a run for the money.