today’s tape

The market continues to rally, and many bulls are getting nervous.  So far, the current run up looks eerily similar to the other bear market rallies from the past 2 years.  We become violently oversold; the financials begin to stabilize and then rally.  The rest of the market catches fire (technology, commodities) and everyone proclaims the bottom is on.

Well, I’m not there yet.  But there are some bullish conditions starting to form again.  First, is the price action in crude oil.  Though the debate for a bottom in equities remains undecided, the verdict in is for crude.  It’s not going lower.  And this bodes well for all stocks in the commodity space (outside of the steel names).  Agriculture and energy companies are now worth owning.  Perhaps a basket of MOS, PBR and NOV.  Bullish oil energy prices are a sign that the economy is eroding less quickly than we thought.

We are also seeing a drop in gold prices.  After nearly touching the $1,000 mark, gold is starting to fall, and there has been no support of yet.  Most interesting is that gold has been dropping since the high was established on February 22.  Stocks were unable to find there bottom until two weeks later.  If the gold trades continue to unwind, this will drag down top performers like AEM and GG – two stocks that have now dropped 4% in ten days as the S&P 500 has gained 11%.

Unfortunately for the bulls, volume has not been anything out of the ordinary.  Many suggest new money is waiting for a pull back to begin buying.  The problem is that every “pullback” has immediately crushed new buyers of stocks.  When this market finally runs out of momentum (it could happen any day) the reaction to the DOW losing 2% will be very interesting to witness.  Will new buyers come in and bid the market higher, or where the bears taken control once again?  Have a trading plan for both scenarios.

today’s tape

I apologize for the prolonged absence.  So much has happened since my last post, so let’s get to it.

As I suspected, the broad market was pushed to down beyond the November lows as the banks continued to weigh on the major averages.  But something started to happen at the end of last week and this pat Monday.  The DOW, S&P 500 and the NASDAQ were still dropping, but the financials were no longer falling.  In fact, many were increasing, even as the DOW dropped over 1% on Monday.

For instance, look at GE.  This stock was following C into the low single digits.  But on the 5th and 6th of March GE was flat while the DOW lost about 400 points.  WFC, BAC and other banks were also flat.  The names that have been killing the market for months were stabilizing as the rest of the market continued to fall.  Two days later the market gained 5% .

This is the way the market has acted about 5 or 6 times since the current bear market started in late 2007.  The banks initiate everything.  They fall first and drag the rest of the market lower.  Once the financials can stabilize as the commoditiey and technology names fall, we usually see a large rally that can extend for week.  The DOW advanced 20% from the November lows (7,500 to 9,000).

Can we get a similar type move?  Yes.  Does it mean that the bear market is over.  No.  We should see a lot of short covering in the coming weeks.  Be patient when looking for shorting opportunities.  Let the market prop of the insurance companies and casino stocks before they inevitably drop again.

today’s tape

The DOW has broken below the 7,500 level and the S&P 500 is dangerously close to breaking the 750 November support level.  If 750 is going to be broken, it will be the commodity names that make it happen.   Names like MOS and RIG – stocks that have performed well during the latest downturn – will be the stocks that push us below the November support.

The government has decided to up its stake in C, and that has pointed the futures in positive territory.  Take any lift in the banks as an opportunity to sell.  This group will continue to drop.

And keep an eye on technology – particularly the large cap names in the NDX.  The NDX is still about 200 points above it November lows and has been trading in a steady, neutral trading range for months.  It’s rare for a major to trade so independently for so long (compare it to the DOW, S&P 500 and Russell 2000).  I expect the NDX to break down soon, or for the rest of the market to start performing much better soon.

today’s tape

The market ended Friday with its lowest closing price since the November lows.  The banks and retail stocks are preventing the major indices from being pulled higher by the now outperforming technology and resurgent commodity sectors.  Most interesting is the rise in oil service companies.  The price of oil has remained near its lows from the past few weeks, but names like NOV are beginning to form bullish patterns.

Perhaps the oil stocks are foreshadowing a rise in oil prices in the near future.  So much supply has been taken offline that if demand ever comes back (a huge if) that there may be a supply shortage.  This could cause a sizable spike in crude prices.  Other commodity names are beginning to trade higher as well.  FCX, RIO and the agriculture names are also performing well.

But the DOW and S&P 500 will not trade higher until WFC, JPM and some of the other presumed “good banks” stop acting like next C and BAC.  I still maintain the next leg down will be lower as the market breaks through the November lows.  Watch for the technology names and commodity stocks to follow the rest of the market lower.  Their strength is the only thing preventing another swift move to the downside.

today’s tape

The market remains strangled by the same problems I raised in this space during the summer of 2007.  The financial institutions that supply credit to the economy are crashing.  We’ve heard numerous calls for a “bottom” that were ephemeral at best.  Interest rates are at zero, the Treasury and FED have added hundreds of billions in liquidity, we are about to see a second stimulus bill pass to the size of $850 billion.  Nothing has worked.  And to be honest, I’m not sure what will work.

And that is why you cannot own any financial stock (save for GS or MS without pairing with aggressive shorts elsewhere).  On February 1 I recommended owing GS and MS while shorting ZION and STI.  Ten trading days later, GS is up 7.% while MS is flat; ZION and STI are down 27% and 37%, respectively.  The regional banks are heading to the mid single digits, like C and then BAC before them.

The agriculture names also escaped much of yesterday’s selling.  POT was down just 1.3%; MOS lost 3.2%.  These long positions should now be paired with other commodity shorts such as AKS – down 13% on huge volume yesterday.

Being long anywhere else in this market is just too risky.  The DOW broke below the 8,000 mark and is likely headed to the 7,500 low from November.  And if when this level breaks, everything will be taken down.

today’s tape

The market once again shrugged off a terrible jobs number to end Friday’s trading substantially higher.  Though the DOW and S&P 500 remain below their 30 day moving averages many sectors are starting to perform again.  The rest of the basic resource sectors have joined the agriculture names with stellar gains recently.

Take a look at X for example.  Analysts cut their estimates on on the steel maker last Monday, but the stock has rebounded over 10% since then.  Coal stocks are climbing again, and as oil prices stabilize above $40 names like NOV and RIG are slowly moving higher.  These stocks are moving as if the worst of the recession is already at hand (or past us).  We’ll have to monitor their movement to see if any sustained uptrend can be maintained.

And for the market to move higher form its current levels the commodity names cannot falter.  Outside of 3 or 4 financial stocks every banks looks poised to be nationalised.  Only GS and MS are safe to own right now – though they should be paired with a short somewhere else.

Technology as a group is being pulled higher by RIMM, GOOG and now AAPL.  But outside of these names technology stocks have too much risk to the downside.

Monday trading should be rather calm ahead of the bank bailout plan and stimulus bill.  But don’t take that as a given.  The VIX barely dropped Friday even as stocks exploded higher.  Volatility is still in this market.

today’s tape

One of the driving forces behind the current market action (other than the depreciating banks) has been the relative strength of technology.  Yesterday I mentioned the relative strength in the NDX versus the DOW and S&P 500.  After today’s gain, the NDX is one index trading above its 30 day moving average.  Disappointing earnings from CSCO looked to have set the NASDAQ up for a rough session, but technology remains resilient.  AAPL is joining RIMM and GOOG in their ascent – even YHOO is moving higher.

Tomorrow’s jos report will be terrible – everyone knows it.  But just how bad will it be?  And will the market react postively or negatively regardless of the number?  That, no one knows.  Stay long strength and short weakness.

today’s tape

The market is doing the best it can to stay above 8,000 on the DOW and 800 on the S&P 500.  The regional banks took it on the chin Monday, but the continued weakness in the financial sector was unable to sink stocks yesterday.  We are simply not going to see leadership from this group soon, so the market will have to take its cues from another sector.

Could the energy sector start to lead again?  The price of crude oil has halted its prolonged decline and has been trading near the $40 level for weeks.  A floor may finally be in place (though that doesn’t mean crude will start moving higher, either).  This may be why names like RIG, NOV and SLB are now steadily moving sideways.

Technology is trying to pull the market higher.  Over the past 10 days, the NDX has doubled the pace of the DOW and S&P 500.  RIMM and GOOG are the best performing names at the moment – and AAPL may soon join them.

Friday’s jobs number will be in focus as will earnings announcements.  Weakness should continue to permeate throughout economy.

todayt’s tape

The market ended the first month of 2009 with substantial losses.  And while I do not subscribe to the January effect (ie., as January goes, so does the rest of the year), most sectors do look ready to resume their extended down trend.

We all know about the black hole that is the banking sector, but Friday’s drop was caused by the deepening recession.  The GDP number was better than expected, but corporate earnings have been terrible and thousands of jobs are being shredded everyday.  The market also appears to dislike the current stimulus package that is in the works.  I bring your attention to to the steel makers as evidence.  NUE, X, and STLD are three stocks to examine.  Each surged after reporting earnings recently.  Yet each stock immediately faltered and are beginning to trend lower again.

I’ve also been mentioning the new weakness in the so called recession proof stocks.  JNJ, WMT, MCD, KMB, and PG.  These companies are not immune to large drops.

We are seeing some real strength in two if the technology leaders from 2007 and parts of 2008.  RIMM and GOOG are performing well despite a poor market.  The agriculture stocks are also performing relatively well.  And the remaining investment banks are trading much higher than the rest of the banking sector.  GS and MS can be owned as long as you they are paired with ample shorts from the likes of STI, ZION and other banks.

This market appears destined to retrace all the way back down to the November lows.  Once it does, I expect this support to break.

today’s tape

A day after the latest faint hope was thrown to the banking sector the market collapsed again. And it was the banks that led the decline.  The major indices appear to be falling back from their 30 day moving averages, and the next move to break equities out of their current trading range is coming shortly.  If XOM’s earnings report causes a full on sale in the energy sector and if the GDP number comes in weaker than expected another large drop in the market is likely.

And if 8,000 on the DOW and 800 on the S&P are broken, the November lows are the market’s last chance to avoid the next 20% drop.