..more of an egg hunt

..than a stock hunt..

If traders weren’t falling asleep yesterday, they did so today!.  A feeble attempt to close in on this rallies highs in the morning off some good eco data and than back to bed was seemingly the routine for the day. 

We were discussing in early to mid March the slow grind up as `performance anxiety` and it seems the whales were interested in doing it ahead a few weeks in anticipation of not doing much of it come this holiday week.   Some window dressing is around and allowed the market to hold and not test 1153ìsh after last week`s poor closes, but,  most of it now is just some select buying and mostly rotation from a leading sector to a lagging sector in Q1 setting up the books for Q2/earnings season.  You see some of this today in money flow from the Financials into Tech.

As liquidity dries up more and more this week, we’re not anticipating any aggressive moves in either direction without a surprise catalyst.  Such a surprise is doubtful as the global market tend to keep such things hidden till a holiday week-season ends.  Individual stocks getting any uptick are usually met with some profit taking in this environment as it`s looked on as an opp`to book a few more dollars and nothing else, thus we see mostly -1-+1% action on stocks by close.

We may have a few EPS's familiar to trade to DJIM tomorrow in (BMO) HEAT, CAGC and (AMC) XRTX and notably RIMM reports,  but we're not holding our breath and prefer to wait it out and not lay an egg of a trade on till we see the market mood post -Bunny weekend.

it's that EPS time again...

Well, it's official, we are at a new EPS season again with Q1 end.    Maybe, this is what this market needs in order to roll up to higher level from here.   Without proper guidance for the remainder of the year, people aren't convinced enough to chase this market any higher in March.    At least, this is what it seems like out there at this point.     There's definitely buyers on any pullback we've faced in the past days/ weeks/months.     In addition, we have enough of a rotation into the equity market to get to where we are at SPX 1170 and stay resilient.    Question is, are we ready to push even higher in Q2?

Even though many of the stocks we track aren't really trading at a ridiculous level (valuation wise), we are still not convinced if they'd trade into over-valued phase like in past bull markets.    Maybe this time, people are just bit more cautious, at least in this early phase of the bull run.    Todays late day selling is really irrelevant as was the morning selling and it would've been irrelevant if buying caused break of 1180 this week in such light attendance volume.   It just doesn't feel like it's been productive sitting in front of the trading monitor this week as liquidity gets worse by the day.    We feel it and you all probably feel it too.     It's okay, it'll definitely get busier after the long weekend. 

RIMM sort of kicked off this earning season with a somewhat a disappointing revenue Q, but guidance was positive (+10% higher than EPS expectations) and that is what may really matter this Q in reports.  The stock may have ticked down, but futures were climbing at the same time after the closing bell.   An interesting divergence, possibly indicating an overreaction on the stock and/or that more important things are on the horizon. ( Also, shows support in 1160/1162 levels).  Most folks are more concerned about the event on Friday than anything else and earnings ahead.    In most likelihood, people will be chilling out tomorrow and giving it a rest till next week.

Have a great weekend…

DJIM #14 2010

All the early week hoopla about a high +200’s k NFP print diminished after the ADP# and a couple of tier 1’s (GS) lowered estimates.   We’ll take Friday’s solid # as is and not make a big deal about it either way.  Unfortunately, after a dull week, this number will not get traders juices flowing (Bulls or Bears) and Wall Street may just be watching Baseball’s opening day games and/ or wagering on Monday nights, Butler vs. Duke game to start week,  rather than trade alone as most of the global markets take Monday off.  

If last week’s global PMI#, ISM, even NFP# in U.S are any indication, we are entering a new phase of the recovery and that is the expansion we noted last week.  Thursday’s released global #’s were steaming and so we sit comfortably bullish heading into the earnings kick off next week(4/12th).

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...

typical...

Just your typical market day after a melt up breakout as most stocks consolidated gains, some played a little catch up, some just buoyed around.    The predominate themes remain as investors buy the weakness (1182),  yet don’t chase prices higher preferring just to hold on to the holdings they have with little reason to sell in this environment.   A ‘dovish’ inline FOMC minutes report solidified to hold tight for those still fearing an early tightening.  

As we come up to next weeks earnings, we doubt much broad based follow through to the upside, investors may have some fear of a repeat of a post-INTC report like sell -off this Q.   If any fear is out there, we wonder why not sell before and we’re not seeing this play out.   Still, it might be a ‘sit on hands’ type market till next week.   Maybe some of today’s out-performance from Financials is compelling and carries over for a few days and/or retail SSS numbers will allow this market to tick up, but we`re not holding our breath.

If a lull does play out,  we have no problem with it, we’ll just follow our Shadowlist (last on Feb 21 Journal post) which broke down our widely followed by sectors and go where the money flow is that day if you‘re already not a holder.     Yesterday,  it was our LED stocks in our Tech sector and today Commodity linked/ China play PUDA added since on DJIM pages (Brean Murray initiation with a lofty tgt) was the play, which helped bump LLEN (alerted) as well.   If you go to our search link,  you can search “Murray” and see what we think of their ways.   Whatever their ways are with China stocks,  it’s always a good idea to buy the news for the short term.    

There is a lot of noise about 10yr TSY, oil going higher, etc. and the possible implications.   As far as we’re concerned this will be topped by whatever happens in earnings and so we’re not going to take our eye off the ball ….we have no problems waiting for new plays to emerge and add to what we already trade from our list.

..reminder not to be complacent

To be ‘honest‘, Bulls,  we are actually curious to see if this market is capable of a pullback at this point.   Of course,  we don’t want a big pullback from this market, just a decent one.  It's always good to think such, today’s action may remind of such a possibility as we don’t all of us here and the market to get too complacent.    Today,  the market couldn’t find the usual suspects (buyers on shallow dips) at previous day’s 1182, but on a 3rd attempt today volume crept in and we broke to 1177.   Still, usual suspects came in last 30min and got some of the Bull turf back, but today’s action should wake some up, including the Bears, who may see and take this action as a shift from the norm. 

Overall, most shadow listed plays hardly gave back any ground during today’s selling.  Kind of impressive because most our widely followed plays/ sectors can be classified as momentum/ pretty high beta stocks of late.  If there's going to be any follow through to the downside next couple of days, watch the list for early clues as fast money runs both ways.. in and out. 

It has actually been a while since we've had some major downside volatility in this market.    Of course, there's always a saying "be careful of what you wish for"!    For us,  rather than having some hefty pullback, we prefer some meaningful sideway action.    Isn't it strange that we always prefer sideway action than the big up or down moves?   In the case of a bull market, it's a general indication that people, including DJIM, are usually "underinvested"!    Think about this, we have been shouting more sideway action more often than anything else.    Every time we beg for such, market basically just ignore you and marches higher.    This can definitely get tiring because as you end up chasing higher.    What we hoped to be a grinding year for 2010 has so far turned into a one way fast ride since mid-February.    We respect that.    We just have to deal with the phenomenon as it progresses.     There's no set strategy to deal whatever comes up from this market the next few months.    Even with some of the most reasonable prediction, we say anything is still possible… just look…Carlsberg staff strike for second day over ban on drinking at work; the co on April 1 made a decision to introduce new rules for employees on beer drinking at work…;)

The strong groups today are the tech stocks and a couple of story stocks.    SMH is actually up at the end of the day.    Things are rather quiet for the rest of week and it will surely gear up next week.    As far as pullbacks, 1174 would be a negative break of Feb channel.   A slight shift tone today, back in the picture ..Greek CDS’s widening to new highs and a few other noises,  therefore not a time to become complacent.   If it’s hard to find plays to upside now, it’s a sign to best keep nimble, reduce exposure and/or wait things out on the sidelines.

Bull's Channel

The market refuses to give up the recent breakout over 1180 without a fight on the close this week.  Is it really a fight the Bears want???, it seems they run away and cover their freshly laid shorts on any reversal as today showed.    Today,  seemingly was just a tease by the Bulls to let the market dip to 1175 to show support.   Yesterday ..As far as pullbacks, 1174 would be a negative break of Feb channel.) . The chart below on site is the ‘ Bull’s Channel’, we’re referring to.   Remember,  our watermark for the Bull run to eye since 2009 has been the 20MA and we’re quite aways from it to even become worried.  At this point the 20MA constitutes a 2% from 1191 high and that is all we’re looking for as a decent pullback.   Maybe just over 3% at worst if and when it comes.    As pointed out yesterday watch for clues from our Shadow list as to the severity of the pullbacks for clues of liquidation.    One thing you can clearly see this morning is the list hardly showed any selling, unfortunately, you also didn’t see them participate in the reversal as there was really no losses to reverse from and most closed pretty flat on the day.

Bull's Channel

Discussed earlier this week was the out performance of Financials continuing into the week, as well as the retail SSS numbers.   Today, this was the backbone of the market as it negated all the negative noise…Jobless claims,Greece etc.    We didn’t expect this to move us higher, but it has kept the Bulls from surrendering.  The April SSS expectations were above estimates and the hope of selling off on anticipated strong March #’s didn’t materialize because of it. ...“Maybe some of today’s out-performance from Financials is compelling and carries over for a few days and/or retail SSS numbers will allow this market to tick up, but we`re not holding our breath.”

Despite the market seemingly not going anywhere before earnings kick-off,  opportunities to trade most days is still there off our sector shadow list.    After LED’s  big out performance early in the week, the Casinos  from our consumer discretionary sec’ caught a big headwind from strong Las Vegas strip revenue numbers.   On the soft side, the commodity linked stocks, notably coals/ steel are dealing with China’s internal talk to stop iron ore imports for the time being in retaliation to recent price hikes.

Shadowlist update

Shadowlist by sector money flow/ rotation to follow. (visit site). 

Last S/L (7 weeks ago):

DJIM #15, 2010

Show me the earnings!   We wrapped up yet another relatively quiet week with fresh new rally high's for DOW, COMP and SPX.    Some people claim that this rally has not gotten the kind of respect it deserves.   Well,  we'll know soon enough how much respect is being baked into the current rally when the earning season starts in the coming week.

In general,  people tend to be optimistic as far as the stock market is concerned.    What we witnessed over the last few weeks is the slow acceptance that things are improving.    The stability of the Economic trends and the positive outlooks provided by corporations from time to time give investors a very strong reason to hold on to their current assets.   In reality,  we probably have pursued more people to invest back into this market after an absence of a couple of years.    Even though the risk is always there that the Economic recovery doesn't go as smooth as expected at some point down the road, but at this point, most people have accepted it as a non factor.    On the other hand, there's really nothing else that's earning anyone any return besides the equity market.    Real estate still has problems and the different forms of treasury just do not provide the kind of attractive return we've been seeing from the stock market.    What makes things more interesting is that even the "household" stocks have been performing as well.    It's definitely a confidence issue and we can imagine people discuss their investment portfolio with their friends/family and they probably all have one conclusion in common, things(stocks) are getting better.    You have to understand, traders only represent a small fraction of the pie out there.   Most of the investors and funds invest for long term and sentiment is very important to them.     For most people, when they realize that the crisis is truly behind us and stocks have been moving up, it's enough for them to step back into the market.     Technical levels are really only important to those who trade this market on a short term basis.

Okay, earning season is upon us and we have just updated our shadowlist.    We definitely had some excellent EPS plays and expect many to deliver some good, if not spectacular results once again this quarter.   After all, some plays do need some good results to justify their current valuations.   On the other hand,  just like in the past, we'd be keeping our eyes on any fresh or old names to resurface on great results/outlook.   Bottom line, we'll have a few busy weeks coming up and it's important to keep our minds focused and fresh cash on hand.

Anticlimatic at SPX 1200?

Are share prices and expectations too frothy entering this Q reporting season?.  Will excellent earnings/ guidance be anticlimatic.    That is the simple question on investors minds and the answer will be known shortly as we have…INTC, JPM, GOOG, GE coming to the plate to open the season.    As said last week, some are expecting the same sell on the news that supposedly crippled the market into a correction in January.   Unfortunately for those laying down shorts in anticipation of such are likely ignoring the facts are quite different this time.  We had D.C /bank regulations and risk crisis in Greece/China that have since pretty well dissolved and/ or were priced into the market on the correction that ensued.    Now it’s simply ‘Earnings’ and if they can meet the high challenges in expectations, the broad market can hold up into May.  No matter what the outcome of earnings,  a correction of the magnitude in January is unlikely now and will likely be a buying opp’ if 2-3% at worst occurs.

On the positive angle of how this may play out , we just saw March SSS retail #’s  that had a great chance of selling off after reported. but the April # expectations were above consensus  and no sell off ensued.   This may happen the same with stocks now if they guide well.   Also, a look into the crystal ball today for possible tech reactions is a stock you won’t find on the US markets that pre-announced and guided very nicely today.   The stock is Infinieon Tech , which is 2nd largest chip co' in Europe and it sold off about 3% or more during day.   The question here is if this had to do with a BAC downgrade that followed or just selling off good news.   It may be good to see if this stock rebounds tomorrow overseas to understand this better.    AA ’s reaction to inline # expectations is not providing any clues after reporting tonight, we’re more concerned about the action in commods’ off highs,  notably select steels that is still continuing today.   We're watching if this metals selling spreads and grows to other commodity linked stocks/sub groups.
 
Anyways, so that is the speculation and considering we aren’t making bets in the indices either way, it probably doesn’t matter as we'll just wait to see what the market brings to us in the form of new earnings plays in the weeks to come.   If there was ever a Q where we get upside surprises, it should be this one as the recovery grows.   Still, as long as the market is flooded with new upgrades/ higher PT's almost on a daily basis that seemingly hit DJIM's coal, LED's and casino's play,  we should have things to trade until new EPS's hit.