today’s tape

Stocks began Wednesday’s session with strong gains after the Commerce Department announced the US economy expanded slightly more than expected in the first quarter. But the .6% reading indicates growth is sluggish; and it may only get worse. Energy costs are still increasing, and consumer spending continues to shrink. And there is seemingly no end to the downward spiral of the housing market. But equity prices have been rising over that past 2 months, possibly because investors believe the worst is already behind us. Perhaps the past 6 months has only been a rough patch, and the US economy will regain its footing before the end of 2008. Right now, I don’t see it. (We all can’t be delusional permabulls).

But let’s get to what today was really about. The FED cut interest rates by another 25 basis points and hinted its dovish stance may be ending (perhaps the stronger than expected GDP number influenced their language). Everyone was expecting the quarter point cut, yet we sold off anyway because the major indices had already run leading into today’s meeting.

Does this signal a near term top? I don’t know. But here’s what the price action is telling me. The S&P 500 fell back below the 1400 (formerly resistance and support); and even though we have seen the strongest buying interest into the financials in months, the XLF still cannot crack the current $27 resistance (the last time the XLF ended a session above this level was back in late February.

Now, if the FED is signaling they are finished lending cheaper and cheaper money, bank stocks better be finished writing down billions of dollars. If UBS, C, WB and others continue to have problems the market will have great difficulty edging higher.

Outside of financial equities, the US Dollar and commodities will be the only only groups affected by the FED’s decision. The US dollar has finally gained ground against the Euro and Yen, rallying with conviction the past two weeks. Many have called for the Dollar to gain significantly in value in the second half of the year. I”m not yet in that camp.

As the dollar has been rallying, commodities have been falling. Gold and silver are trending down, but crude oil and natural gas are still strong buys. Three of the four gained ground today as the dollar became even cheaper. I don’t like gold stocks here; they will likely only rally until they drop after failing to break their downtrends. Miners and metals not completely exposed to gold (think RIO, PCU and BHP) are safer to own. Oil service stocks (watch to see if the OIH holds the $190 level, October and December resistance) and natural gas names are better buys until the crude oil and natural gas trends are broken.

The large cap technology names should continue to outperform the market. I especially like AAPL, RIMM and GOOG as they will become the favored momentum trades if the agriculture, coal, steel and oil stocks begin to fade.

I think we could see equities begin to fall back over the next few days. And if we continue to see contraction in Friday’s jobs report, it may overshadow today’s GDP number.

today’s tape

Not much movement ahead of tomorrow’s FED rate decision.  I’ll be back tomorrow.

today’s tape

To most, Friday’s market action was an uneventful ending to last week’s trading.  But here at iwearsocksandshoes, we know better.  The internals from Friday indicated investors are no longer choosing between sectors to buy – discrimination has been washed away with the erosion of the bear market.  For the first time in what must have been months the financials and the commodity names (energy, agriculture and metals) outpaced the broad market on Friday.  The banks and brokerage firms continued their long term reversals, and oil stocks recovered after two days of selling as crude oil surged over $2 (because of geopolitical issues).

Since the credit crisis started last summer, the playbook for trading this market has been simple:  own commodity stocks, short the financials.  Outside of the sharp Fed inspired rallies, this trade padded the accounts of investors.  Now that the financials have stabilized, the entire market can trend higher.  And investors can use the cash they have been sitting on to bid up both the financials and commodities.

MSFT had a rough day on Friday, but the NASDAQ mostly shrugged off the 5% drop.  Technology stocks remain in favor, specifically the high growth names that have not been affected by the sluggish economy (AAPL and RIMM).   And as I pointed out last week, many stocks that have lost 50% or more over the last 6-10 months have broken out of their down trends.

This market is now trading in a way that has made shorting very dangerous.  We will still see sharp pull backs from overbought levels when bearish economic/earnings reports are announced (see GE a few Friday’s ago), but we are seeing the market shrug off housing data and consumer confidence figures that are still worsening.

Tomorrow, the FED is expected to cut interest rates by another 25 basis points.  Now, many believe the FED shouldn’t do anything; they judge the writedowns are over and cutting rates will do nothing but stunt the dollar’s attempt to gain ground against foreign currencies, which will likely boost commodity prices to new levels.  But I’m not interested in what the FED does, only what equity prices do, afterwards.

Unlike the lead-ins to previous 2008 rate cuts, the market has rallied into the April’s FED meeting.  In January and March, equities were tanking before Bernanke rescued the market.  But now, the tables have turned.  And as we currently trade well above the S&P 500 30 day moving average, we may see the market drop in a “sell the news” scenario, brining equities back to more normal levels before attempting to trend higher again.  Stay tuned.

today’s tape

The driving force behind the market has shifted from the commodity names back to the financials and technology sector today. It took some time, but declines in the price of oil and other commodities has dropped the energy, agriculture, metal and mining stocks.

There are many items currently at play here. First, the dollar has stopped its free fall. This is lowering the price of gold and dropping anything associated with precious metals. Take a look at the two day chart of FCX. The company beat earnings yesterday; and after gapping higher at the open the the stock has lost $10 in two days.

A similar pattern is forming in the agriculture names. POT announced unbelievable earnings today, but the stock lost 5% on three times the normal trading volume. I expect CF to do the same thing tomorrow. Oil stocks are falling as crude oil retreats from record levels. And because the price of oil often corrects (violently) in a matter of days, we could see further declines over the next few trading sessions.

The financials are turning around, even as another European bank reported billions in losses. CS was still able to climb 5%, as so many banks have after reporting their latest earnings numbers. So far, only WB has sold off after reporting earnings. C, MS and GS have finally successfully tested their 30 day moving averages and have begun to trend higher. Something else to consider: ABK’s quarter from yesterday (and it’s 35% drop in the stock price) would have crushed the financials back in January. But the very next day, every bank and financial stock was up over 3%. It’s becoming harder to argue against the thesis that the BSC bail out signaled a bottom in the financials and the broad market in general.

Many technology stocks that have trended down for months have now reversed. Observe the charts of NIHD, SNDK, VMW, TTEC and CHL. We have seen so many reversals that it’s impossible not to be long the NASDAQ. Many retail names have also displayed strength, even in the face of a slowing economy and weakened consumer. KSS, COH and the RTH are moving forward.

Simply stated, the market wants to go higher. It doesn’t matter that the housing crisis is still worsening (still!), or that food prices are skyrocketing, or that we haven’t added a new job to the economy in months. Also, the market leadership may be shifting from the commodity groups to retail and the financials. We should have a clearer indication what will be driving this market in the future after the FED meeting next week. But right now, the financials may be setting up for a huge run int to the second half of the year.

today’s tape

no update today.  i’ll be back tomorrow.

today’s tape

Disappointing guidance from TXN dropped the recently rallying chip stocks, and the rest of the market followed the lead of the NASDAQ, losing nearly 1.5% on the day.  Despite the recent shift in market posture, we cannot lose sight that the economy is weakening, hence my still cautious posts.  And when the major indices rally 5% in a short amount of time (such as over the previous 6 trading days), investors will use any sign of weakness to “take profits,” as everyone is keen to say.  This is why, though we have exited the bear market phase, I don’t see the major indices advancing far from their current levels.  Another trading range – albeit with a higher floor and ceiling from the previous range – is probable.

And let’s not fool ourselves; the market has only been able to advance because of the oil, coal, steel, agriculture and a few technology stocks – hardly a case for strong market breadth.  Unbridled enthusiasm should not rain down on this market.  The financials are still trading like dogs.  The retail sector was battered again after COH released earnings (the stock did well to recover much of its early losses) this morning.  (Check the RTH’s most recent fall from the $95 resistance level).  The airlines were pummeled today upon UAUA’s release of its biggest quarterly loss in years.  The dollar continues to sink; energy prices are soaring.  There are too many headwinds that will prevent equity prices from rallying to far.

What may eventually tear this market back down is a collapse in the commodity stocks.  So many names have had parabolic runs, and some type of correction is bound to occur.  Whether or not this decline occurs with the same veracity as the recent rally is unknown.  But we could see a sharp decrease in the OIH and XME that disrupt the market.  If I could, I’d post the 1 month comparison of the XLF, XLE and XLB against the S&P 500.  The S&P 500 is up 2.5% over the last month, with the XLE and XLB up 17.5% and 11%, respectively.  The XLF is down 2.5%.  I’ve shown this chart many times before, warning against the weakness in the financials spreading to the rest of the market.

Now…I think the giant moves lower in the banks and brokerage firms may be over (it says, may).  These groups are still trending down and you should not own them, but we may be beyond the 10% daily drops in LEH, C and others.  Investors finally appear to be comfortable with the current state of the financials.  And even assuming the worst possible event (like, say, a prominent investment bank going bankrupt) the FED has shown it will do whatever it can to prevent financial armageddon.  Moving forward, additional declines in the financial arena should become more orderly (this assumes the FED doesn’t do something completely out of the blue next week).  And though the next market fall will be joined by the XLF, the cause of the decline might be sparked by a sharp sell off in the commodity names.

The other cause of a potential market drop is a negative reaction to AAPL’s Wednesday afternoon earnings.  So far, we’ve seen initial positive reactions RIMM, INTC and GOOG.  If AAPL impresses, the large cap technology names should continue to advance.

The major indices stumbled today, led lower by the financials as BAC announced a 77% drop in earnings and NCC posted a loss for its first quarter.  Though the health of the market is much improved from earlier in the year, the financials continue to suffer.  The XLF was down over 2%, and adding to the misery of BAC and NCC, an analyst at Oppenheimer stated she believes C will have to cut its dividend again – to zero.  No rally in these stocks should be believed, regardless of the latest talking head professing, “The bottom is in!” Seriously, why mess with this group?

The large cap technology stocks continue to outperform, and the NDX barely missed finishing Monday’s session in the green.  APPL will report earnings Wednesday after the bell.  This will likely determine the near term fate of the NASDAQ.  So far, most tech socks have risen despite the earnings.  Consider SNDK.  After trending down for months, a reduction that cut its share price by 66%, the company missed its EPS target by 5 cents.  The CEO also stated its margins will be pressured in the next quarter.  Yet the stock has rallied about 8% since the earnings release.  Technology companies are not being punished unless they report an egregious quarterly report.  Also, take a look at how stocks like EMC have finally have finally jumped higher.

Crude oil prices finished at another record high nearly reaching the $118 level.  Energy stocks keep climbing, and there appears to be no end to their giant runs.  New highs are made virtually every day in names like RIG, APC and DVN.

The DOW briefly touched the 12750 level (which has now become support) early in today’s session before bouncing higher.  We then came back down to this level and held firm once again.  The DOW must hold this support (and the S&P 500 the 1375-1380 level) to give traders confidence in the prospects of a sustained up trend.  If the major indices give up this ground, we’ll probably be forced into another trading range.  And if that’s the case, we are already trading at the ceiling.

today’s tape

Earnings from technology giants INTC and GOOG eased investor fears that the current economic climate would seriously deter business performance.  This helped lift the NASDAQ to its best weekly performance in months.  The S&P 500 was supported by strong oil and commodity names, but, more importantly, the overall behavior of the market appears to have signaled it can start to look beyond the credit crisis.

Earnings from MER, C and other banks were terrible – and much worse than expected.  However, that doesn’t mean these stocks can’t go up.  Though I don’t subscribe to the theory that the bad news is priced into the stock, I’m not ignorant to the fact that stock prices can go up on “bad news” or down on “good news.”  Perhaps the positive reaction to additional billions in losses to C, MER and others could have been foreseen after witnessing UBS and DB spike upon announcing the size of their write downs at the beginning of the month.

The market may be in a much better state (more on that later), but I still don’t want to own any financial names.  The XLF sold off over 1.5% from its high into the close.  C gave back almost 4% from its high and has not yet proven it can climb above the $25 level (February support and early April resistance).  JPM and MER also fell back as they approached resistance.  With more many sectors and stocks now trending higher, why would you be involved with these names?

Oil now trades above $115 a barrel and natural gas has broken out above the $10 level.  This should continue to aid the performance of energy equities.  The XLE and OIH are up over 17.5% over the past month.

Onto the major indices…they have finally broken out above the resistance levels I have been monitoring for months.  The DOW is now above 12750; the S&P 500 finished well above the 1380 resistance.  Dare I say the market is now trending higher?  Yes.  And if earnings from BAC, AAPL and others continue to come in line with lowered expectations, we could see further advances next week.  But I remain cautious ahead of the next FED meeting.  The financials are still relatively weak and the commodity names have run so much that a large scale pull back will eventually lower these names by 10 to 15%.

Now, we didn’t see the common practice of thrashing financial stocks ahead of the April FED meeting.  But the playbook remains the same.  Own commodity and large cap technology names.  Stay away from the financials and retail.  Until the banks and brokerage houses are the stocks leading the market, you can’t become too bullish on the market, overall.

today’s tape

no update today.  you can thank the Pope for wreaking havoc on downtown DC traffic.

I will say, though I have remained bearish on the market overall, the long commodity stocks (agriculture, coal, steel, gold, oil, natural gas…) short financials and retail trade still worked wonders during today’s 2% gain.   Why buy MER, C, RL or JCP when you can own MOS, ANR, RIG, X or AEM?

today’s tape

The major indices spent much of the day straddling the unchanged level as investors were unwilling to make major commitments ahead of INTC’s report (this afternoon) and the major banks that will be releasing the rest of the week.  Seeing the most interest were commodity prices as oil spiked another $2 above the $113 level.  The price of crude oil, as well as natural gas and gold, remain quality investment alternatives to equities.  And these prices should stay firm, supported by an ever weakening dollar.

The airline sector was the biggest mover of the day.  Stocks gapped higher at the open after the DAL and NWA merger was finalized.  But the intra-day declines reached 10% in names like CAl, UAUA and AMR.  Volume was well above the 30 day average in most stocks.

The surge in oil also affected the oil stocks, pushing the OIH up to the $195 all time high.  But the ETF retreated from this resistance level and may have trouble breaking higher over the next few days, especially since investors will be focused on technology stocks and the banks for the remainder of the week.

The solar names have become the best technology stocks to own.  FSLR has reached a new all time high and many other names are fast approaching their own.  The solar sector suffered the same fate as the rest of technology as the NASDAQ dropped about 15% in January.  But since I mentioned the solar stocks again back on March 27, the sector has been on fire while the NADSAQ has added a modest gain.

There was little movement elsewhere in the market.  But the market will probably be jolted the rest of the week as earnings come forward.  The price action over the next three days may determine the fate of the current bear market.

A final note:  I’ve been having trouble capturing images of chart.  I hope to resolve this issue as soon as possible.