Super Size Me...

An interesting thing happened to the market on the way to it’s date with FOMC in the afternoon.  It seems to only occur once year, if at all.   You know what is it?.  Well, it’s called a ‘Super-Cap ’  breakout and it took place in INTC, GE  and made the FOMC almost irrelevant as long as the FED kept somewhat tight lipped. (actually were more dovish than expected).   Add the sovereign headwinds abating with Greece/ Spain in the morning news and we have a fresh SPX closing high.

So,  is the market going to be "Super Sized"  now and keep rolling to fresh highs day after day now that INTC GE broke out at their important technical levels?.    If anything this individual stock action was the “Performance Anxiety” , we alluded to the other day needed for the market to breakout and/or to at least potentially continue into month end window dressing provoking more "PA".    Of course,  we would like this to spread to other big stocks and confirm the move with volume.    But, as of tonight’s SCHW-AMTD monthly figures, you see even the retail trader is sitting on their hands with volumes down over 15-18% in Feb from Jan of this year.   Add the fact,  Asset Allocation jumped big heading into the New Year into equities from managers to over 70% and you understand there is no money left to chase (volume) this market with.    We just have to accept low volume trading is the norm going forward as it’s been from 2009......leading to a grinding higher market.

Grind me higher...

Lately, it feels like this market is outperforming everyone.   Why do we say that?   It's those stocks that weigh so much on the index and have hardly done anything in the past are starting to slowly grinding higher, just as are lagging stocks in lagging sectors, you’d never look at it.   Nothing wrong with this catch up picture though!   We knew that eventually the optimism will spread from the high beta stocks to others.    It was just a matter of time and adds to the performance anxiety theme.  What's surprising though that it's happening around the middle of the month , a lot sooner than we expected for Q end window dressing.  

*On the hand today, high beta names from AMZN to GOOG to BIDU rested, some commodity linked stocks (steels/metals) had big reversals,  momo China stocks were hit all day (is policy tightening around the bend?), all this hints at resistance being hit today around 1165.

Well,  we still haven't got out of March yet and market is locking SPX 1200 in its sight and that may happen a lot sooner than everyone realizes.    Of course, any number on SPX is nothing but a number until people start to make a case out of it.    We know a lot of analysts have set SPX 1200 as a target for this year and we wonder what'd happen once we've reach it.    Trading in today's environment is a little bit tricky even though media has painted a very rosy picture of the market lately.

If we didn’t know any better, we could've just bought every stock out there and add more everyday.   The stocks that are hitting new 52 week high is simply unreal.    So, there's abundance of plays out there seemingly worthy to chase as there is not much resistance after 1165 and 1177.     Question here, shall we chase blindly now and hope for the market gets to 1200 soon or shall we wait for some better prices?    As it stands,  this super sized market is fat and could use a diet pill and that's what's keeping us from chasing it higher.    Lets just give it a couple more days as the odds of reaching 1200 any time soon is not very high, but realize it's being eyed now as a target.

..blinkers on

Nothing occurred today to say anything differently from yesterday’s Journal.  Except, we could add today that the market has it’s ‘blinkers’  on as if China and Greece are no longer on the map!.  Yep, the same China tightening fears/ Sovereign debt issues that abated last month were in full force again this morning..... Incredibly the markets pretended for this day it doesn’t matter.  The same story discussed yesterday,  mega cap types..MMM BA GE HON outperformed.  Not very exciting trades in our books!.

Usually,  we’re always thrilled when the market shrugs off bad news and the tape trades well, but this is becoming almost comical.   A component of this is probably the quad witching/ SP rebalancing on Friday that has a tendency to make the tape trade flat into and on the day of such actions.  We don’t expect Friday’s trade to be any different. 

DJIM #12 2010

Whether it’s Greece, China or even Health Care passing worries…What's needed for this market, is a healthy dosage of skepticism.  Any excuse will do!.  Yup, before we can cheer for this market to move higher, we first need this market to come down or consolidate a bit.  This sounds familiar, doesn't it?  Every couple of months or so, market seems to be in a very complacent mode and people forget why this market is going up at first place.

Well, the action that was displayed during the last couple of days the past week showed signs of tiredness.  We discussed internal signals of resistance at 1165 and by Friday the markets ‘blinkers’  came off as Greece worries surprisingly to us not mattering in Thursday's action to the market, geared up on Friday as the catalyst for USD ralling,  pushing SPX to a intraday low of 1155.

It does look like this market is a little "toppy" short term.  As we have been saying in the past few days, a pullback from here is more healthy than if the market continues grinds up from here.  Plays on our list are becoming extremely difficult to enter these days.  It doesn't mean that we don't like our plays anymore, and it's just that we'd prefer to trade them at a lower level. So, before the next earning season starts, lets shake out some fast money and build a stronger base somewhere.  Let's give some of our best plays some breathing room before they get priced into even the best expectation for next quarter.  If this economy is on a slow pace to recover, then we ought to treat this market in a similar way. There's no doubt that some companies are delivering some great results in this type of environment, but we also don't want to forget what happened during the last cycle.  Things can get too exciting too fast and we definitely need to curb our enthusiasm.  So, lets bring out some skepticism so this market can behave in a healthier way.

As far as technical goes, we don't expect much of a support at SPX 1150 as it was never tested recently after we broke through it.  We do expect some meaningful support in the mid 1120s as it's also the 50 MA there.  Anything in between is fair game to us and it'll take more than a few days to settle if the pullback does occur before window dressing possibilities.  In the meantime, at DJIM, we are treading the water carefully and keeping our trades on a short leash and/or away from high beta stocks/ sectors.  Until this market decides how to digest the latest move, we are keeping minimal exposure to this market.

That's it?

Was that it?.   Was the gap down to only 1153 SPX,  the pullback/ consolidation before end of Q dressing, we’ve been discussing as a possibility into Q end.   If that’s all there was, than it was quite impressive.  “Performance Anxiety” was at it’s best and shorts were at their best running to cover at the first hint of today’s reversal after laying down some fresh positions over past few days, including some very early today.   Waiting for a decent pullback seems to be a lost cause into Q end and earnings season unless an unexpected ‘catalyst’ hit’s the wires or familiar liquidation.   “Worries” over China, Greece, and HCare today are just that…’worries’ that come and go on a daily basis and the market has started to deal with it, seemingly by finally believing in a recovery.   The action in what we call consumer discretionary stocks was definitely present today as Casino’s  did one of those regular Q squeezes on an upgrade/ some newsflow and Auto  related stocks rode the ALV report. (HAR  a shadow stock at B/O levels and MGA  is where we look.  

We all can crazy guessing where this market goes next, the nuances of the SPX,  let’s not worry and continue to just concentrate on individual stocks selection and sectors.   Even, not following the HC bill and the sectors involved,  we still dug up a shadowlisted stock to play into the story, EMS  last week on an alert on the story at $54-55 hit $61 today. 

Two things can happen, the market can roam freely and grind higher till Q end on performance anxiety and /or even until early April when the next eco’ data of significance the NFP (next Friday) &  AA-INTC earnings in reminiscent fashion of last Q or we get one of those big dreaded ‘liquidation’ moves from the hedgies we’ve seen more than once at Q end after a run-up.    Again,  let’s not worry either way by just not outweighing positions in numbers or size and take it (profits) where we can along the way and hope a move up/or down is not exaggerated for the sake of a future healthy market.   As long as new highs are being confirmed on a seemingly daily basis from different indexes,  the momentum grinder is in the Bulls hand.

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.

..the better way

In sports, a hot team always seems to be luckier than the struggling team it’s up against.  Sometimes, a hot team with key injuries still beats up on the team in the doldrums.  Well, today’s action is similar, the Stock Market  “Bulls”  disseminated with key injuries (tons of negative news flow) managed to actually ‘win’  this one vs. the struggling “Bears“.   Also, an excellent sports franchise can bring up some rookies to fill a void in the line up, today the “Bulls" got inspiring debuts from 3 rookies in the form of IPO’s.  A positive for the future of the Bull team.

It might not look like the better team won today in the final box score, but this had to be a moral victory for today despite the (TSY bewildering weak action= Fed tightening (hawkish?) expectations,  Club Med sovereign debt moving to Portugal. 

Yes,  these new ‘noises’ may escalade, but, until it/if happens it’s just another ‘worry’ that can just as easily pass day to day, so no dwelling on the ramifications of such possibilities…just trade away and be part of the better team, the better way to go.

Euro trash talk...

Really, there's not much else that can be extrapolated with regard to today's last hour jittery close.   We did begin the day with some enthusiasm and a channel high around 1189 in sight, but first the 1177 break needed to hold.  At these levels,  the market would use any excuse (it was a lousy, silly one) to correct as the odds were stacked ‘technically’ against the Bulls.   So, in our view this was more technical than what came out of Trichet’s silly lips.  We’ll see if the Bears can muster any follow through Friday after a disappointing finish today.  Still, short term top talk will start anyways no matter the trade outcome tomorrow.

Considering EPS season is coming fast,  we possibly got a glimpse of things to come.  BBY  gave investors something to cheer about as the improvement in outlook cheered many technology stocks up as did QCOM preannouncement.  

At this point, as much as we like the prospects of this market, we are eager to see some better prices.   Is today's action signalling some short term weakness ahead?   Is performance chasing done into Q end?   We aren't so sure yet and we’d be happy to pick up some shares and help out if we dip more.   Out of all the groups on our screen, commodity group reversed the steepest toward the end.  Simply, the high beta momo’ names always come up for sale first.   It'll  be interesting to see the kind of follow through they get after today's late day sell action.    Technology group, on the other hand, seemed to be holding up much better in comparison.   This is the group we'd be paying more attention on in the short term as BBY's earning can be a good tell on how rest of the tech earnings will fare in the next few weeks.

Bottom line, today's action is nothing but a technical event.   We simply have to respect this market and give it some breathing room before the real catalytic event (NFP report) hits next week.

DJIM #13 2010

We entered Friday’s trade wondering if the Bears could muster some follow through by pressing positions on a jittery market…simply, once again, they failed to take advantage.

Now, the attention turns to what we’ve been alluding to since mid month and that is more performance chasing in the days ahead of Q end.   The reason is simple, MF managers are below the benchmark SP this Q.  The numbers of the big players below indicate they are likely not finished as they trail a 4.7% SP return by a wide margin.

Templeton 2.67%, Blackrock 2.91% have the largest assets under management and familiar names like GS 3.5%, JPM 2.94 are some examples of a group that is averaging a 3.55% Q return.

The market might feel stretched and a little jittery, but it should overcome ahead of what will be a NFP report that may print a number as high as +300,000k on Good Friday.  After the Q end is done with,  it will be interesting to see how the market positions itself ahead of a report that comes out when the market is closed.  

A bullish snoozer..

To be honest here, the action out there today could make you fall asleep as the SPX traded in a very tight range after a good opening bell.    After all, aren't we "supposed" to have some follow through from 2 late weakness days?   Instead, we got some firm actions from Asia as many of their indices closed near at two months high to lead the way.   Along with the strong a rally from crude, more M&A activity, there's basically no reason for this market to start the week with any downbeat sentiment.  Don’t be surprised if it gets quieter this week as Passover kicks off tonight.

Too bad, for the bears it‘s a holiday week!   Once again, Bears just can't put anything together!    We are once again close to the area where we made an attempt at 1080+ last week.   It will be interesting to see if we have another go at it this week on light attendance.   Bear in mind, we have a NFP report coming out on a day when the market is not even open and we'd imagine much of the move would be made ahead of the event.    Truthfully,  unless we get some kind of surprise from NFP, it's not going to matter that much to the current market psychology.   The psychology is that we are going to be entering into a new earning season and people are expecting to see some further evidence that economy is improving.    Geez, doesn't make everyone sick already hearing us about this Economic recovery?   Well, unfortunately, we are probably going to be saying this for the next couple of years, if not longer as we anticipate this recovery would take a long time to complete.  The next catch word will likely soon be ‘Expansion’.

As far as plays go, commodity plays, especially those trade around oil, had a very good day today.   Financial stocks and as well as other beta stocks have held up strong as well.  There's really not a single weak link anyone can point to this market today.    Usually, when an important sector lags the overall market, we may start to suspect a stall in the market momentum.   Right now, we aren't seeing such a case so this market may continue to chug higher slowly from here.

Bottom line, good plays on our list just aren't coming down to give many opportunities at buying a dip.   Sometimes, we really don't have a choice, but to chip back in little bit at time to keep up with this market.   Until we find some fresh plays that offer attractive risk/reward, this is how most of us will be trading.   Perhaps, the up coming earning season can be a good place to start digging on individual stocks, otherwise broadly for the market, we have to keep in mind excellent earnings may be 'priced in'.