today’s tape

The momentum that had been carrying stocks off their November lows is now waning.  The DOW has tried to break the 9,000 level twice but retreated both times.  Bargain hunters and short covering has been able to lift the market from its depth, but likely will not see a a strong up trend anytime soon.

Similar to the rest of the market, the financials have rallied with conviction of late, the XLF continues to trade below its 50 day moving average, as do many key banking stocks.  GS, JPM and others still cannot find traction once the initial spikes carry their stock prices to quick 25% gains.  I still don’t like this group, despite the FED lowering rates to nex to nothing.

Oil is trading below $100, and as I warned a few days ago on December 15…

…oil was trading higher by $3.50 overnight as OPEC prepares to cut oil production.  But the price of crude slid throughout today’s session and the commodity stocks fell with it.  Look at the one day chart of CHK.  The huge reversal in crude could spark the next leg down back below the $40 level.  And if this happens, service names like RIG and NOV will be crushed.

RIG and NOV have lost 22% and 10% respectively the last 5 trading days.

The financials and oil are are the only item that need to be watched.  They hold the strings for this still terrible market.

today’s tape

The FED’s decision to reduce rates down to and below .25% took the market by surprise and equities pushed higher earning 5% on the day.  But the real aftermath of the FOMC is the performance of the dollar.  Possibly anticipating the FED’s decision, the dollar was getting crushed by the Euro the past couple of weeks.    Dollar weakness is again at play, but with the global economy in ruins exports will not run high like last year.

The other meeting of note was OPEC’s decision to cut production by 2.2 million barrels a day.  Yet oil is still falling and now trades below $40.  As a result, the drillers (NOV and RIG) are still dropping.  But these names have rallied well off their lows despite oil now at its 52 week low.  This again lends credence to the notion equities have bottomed.

In tech land, a downgrade of AAPL and news that CEO Steve Jobs will not attend Mac world have crushed the stock.  Be watchful of AAPL’s performance as it has become a proxy for the entire NASDAQ.

today’s tape

There were two items of particular importance that need to be discussed.  First, AAPL was downgraded today.  AAPL is the last of the high growth technology stocks that were thought to be somewhat immune to the current recession.  Last week we saw RIMM cut guidance and now analysts are seeing weakness for AAPL as well.  The NASDAQ has recovered well recently, so it will be interesting to see whether weakness in AAPL is contagious to the rest of technology.

Second, oil was trading higher by $3.50 overnight as OPEC prepares to cut oil production.  But the price of crude slid throughout today’s session and the commodity stocks fell with it.  Look at the one day chart of CHK.  The huge reversal in crude could spark the next leg down back below the $40 level.  And if this happens, service names like RIG and NOV will be crushed.  The names to own in energy are CVX and XOM.

The bullish run of the dollar has completely reversed recently and dollar weakness is at play again.  This is also sending gold higher.  I raised the issue of a potnetial reversal in the dollar and gold before Thanksgiving.

November 23:

After months of trading below the $75 resistance, the GLD broke out with a gigantic move on Friday.  Gold and gold stocks may be breaking out to higher ground.  Possibly supporting this trend is the Dollar’s recent stalemate versus the Euro.  After months of dropping to new levels, the FXE has held near the $125 for a few weeks.  A reversal in the FXE could send gold prices higher still.

The FXE has moved steadily to the upside, elevating gold and gold miners.

Bank shares have dropped 4 out of the last 5 sessions.  Money has instead been flowing back into the commodity names.  The XME is up 7.5% over the last 5 days.  Typically we have seen the banks begin their next leg down as commodity and other shares increase.  But once the momentum in oil, steel and coal erodes, these sectors begin to fall.  And with today’s reversal in commodity prices, we may see these stocks begin to fade.

today’s tape

The market continues to exhibit remarkable strength despite the rapid decline of the global economy.  Just take a look at Friday’s price action.  With Congress failing to pass a bailout for the automakers, the futures were pointing to a blood bath.  But buyers are now regularly bidding equity shares higher when the begin to dip.  A few weeks ago the market would have been slaughtered.

But we are starting to see terrible news being shrugged off with regularity.  First the jobs report and now the non-passage of a bailout bill.  It is now becoming more difficult to be short this market; but outright bullishness is still unwarranted.  Instead, you should continue to look at the names I have been mentioning the past few weeks as the market has stabilized.  WMT, MCD, the integrated oils, the Chinese market.

I’m still not buying the latest rally in the financials, and I remain firm in my belief that the market cannot begin to trend higher unless the banks lead the way.  They got us into this mess and the will likely have to get us out of it.

today’s tape

Though the market ended slightly higher on the week, I believe the bulls can claim the last five trading sessions as a sizable win.  With equity prices tumbling lower on Monday – the Dow lost about 680 points – it appeared the major indices would soon be testing the October lows.  But on Tuesday and Wednesday, the market was able to rally into the close after trading much of each session in the red.  On Thursday stocks sold off anticipating Friday’s job report.  Payroll losses were much worse than expected, but buyers came in to bid shares higher on Friday.

What makes this week’s action even more impressive was the steady stream of terrible news released by companies and the government.  RIMM and DD lowered guidance; the big three auto makers came back to DC begging for even more billions from Congress; MMM, T, CS, JPM and countless other companies cut thousands of jobs trying to cut costs.  Speaking of jobs, the worst unemployment report in 34 years was announced as the US shed 533,000 thousand jobs in November.

Though I have been a bear for the longest time (correctly, I might add), I have not been ignorant to the  few bright spots in the market.

November 29:

That doesn’t mean you cannot selectively own outperforming stocks.   The integrated oils are still the best energy stocks to own.  MCD and WMT are starting to break higher.  CL and PG are turning the corner.

I have also mentioned the recent strength in the Chinese market.

We have avoided another raid on the financials, but the possibility of BAC or WFC sliding down another 25 to 50% remains.  These stocks will be key to any sustained year end rally that may occur.  But if you are going to be long somewhere, find the outperformers: MCD, WMT, XOM; I also like the price action of the airlines.

But the economy is not going to improve any time soon, so the market will remain susceptible to giant losses – especially when we become over bought (like just after Thanksgiving).  The market may be improving slightly , but let’s not get carried away.

today’s tape

Not much time today; but just enough to remind you of the two themes that continue to grow.

1.  XOM continues to rally even with crude dropping.  The long XOM short RIG trade I proposed on the 23rd of November has been very strong.

2.  China’s market is in better shape than the US.  I still like the FXI, CHL and ACH.  And another pair trade might be to own CHL and short RIMM (who, with today’s estimate cut, appears to be in major trouble).

But we still need to watch those volatile banking stocks.  They have the ability to destroy all other equities in their path.

today’s tape

This morning’s rally faded fast, but the run up into the close was even more dramatic.  This was a must for the bulls.  If the major indices were to finish down after yesterday’s action and gaping higher this morning, investor confidence – already shaky – would have withered still.

We are still very bearish overall, but I cannot escape the performance of the integrated oils that continue to rise even as crude oil drops.  Oil lost another 3.5%, yet XOM and CVX exploded higher into the the close.  I’m also noticing a turnaround in the Chinese market.  Have a look at the FXI in addition to such individual names like CHL and ACH.  These are stocks that appear right to own against your short positions.

today’s tape

Despite the 20% gain in the S&P 500 from last week the last sentence from my weekend post urged caution.

Don’t buy into this market just yet.

The problems affecting this market have not been resolved.  And this is reflective in the performances of the financials.  JPM, BAC, WFC – the banks in the best shape of all – were crushed today, with selling rapidly increasing into the close.  GS was down 17% as a Credit Suisse analyst lowered her estimates on the investment bank.  Estimates may still be too high for the financials, and if the numbers are lowered across the board shares will trade much lower.

Commodities dropped multiple percentage points, most notably Gold.  Gold had ramped higher the last couple of weeks, trying to break out as traders may have been using the commodity as a safe-haven for capital.  But with other precious metals and energy prices dropping, the worry of deflation is becoming ever more real.

On the data front, the recession in the US economy is now official (though most salient minds have known this fact for months).  Unlike most observers, I don’t expect us to exit this recession anytime soon.

With such a swift move to the downside today investors may be fearing the next shoe to drop.  Just look at the accelerated selling in the one day chart of STI (or any bank, for that matter).  A test of the low from two weeks ago now looks ever more likely.  And once again it will probably all come down to the health of the financials – an increasingly dicey prospect.