today’s tape

New trading patterns continue to emerge as the broader market remains range bound with a tight floor and ceiling.  The DOW has been unable to break below the 8,000 level or above the 8,300 mark during the past 9 sessions, but shifts in the market appear to be happening.

First, there is a bit of a reversal happening in the oil sectors.  The integrated names were easily outperforming the drillers until a few weeks ago.  Now, it is XOM, COP and CVX that are beginning to trend down while RIG, NOV and SLB that trade above their 30 day moving averages.

Conservative stocks have begun to underperform the market One month charts of WMT, CL, MCD and CLX are not pretty.  These companies were thought to be able to weather the onslaught of selling the was attacking attacking the broader market.

Gold and gold stocks have started their latest run higher.  Inflation is surely not at hand, but they may be filling the void as the new safety play.  Treasuries have started to stumble (look at the fall of the TLT), and gold may be acting as a replacement.

The government announced new steps to shore up the banking sector last night which is certain to cause another wave of short covering.  We’ve been through this numerous times.  Whether it was record cuts in interest rates or the creation of the TARP – a month later you didn’t want to be holding onto bank stocks.  If you have any exposure to the financial sector use this latest lift to sell.

Until the DOW closes above 8,300 and then breaks pass through its 30 day moving average with the S&P 500, there is nothing to get bullish about outside of a few pockets of relative strength in the agriculture sector.

today’s tape

The market has fallen back to it’s old trick: investors are buying early morning sell offs and selling any strength that lifts prices higher.  I remain firm in my belief that the bulls and bears are playing tug of war, trying to influence the market in their respective direction.  The DOW is trying to hold the 8,000 mark because another push to the November low at 7,500 will likely prove disastrous.

But we are seeing some new strength emerge in certain sectors.  The agriculture stocks are attempting to trend higher again.  MOS and POT are trying to build higher highs on top of higher lows.  The drillers have stopped their free fall.  RIG and NOV are now trading along with the larger integrated oil companies.  I am as of yet convinced if the energy sector as a whole can begin a sustained rally.

Companies continue to post disappointing earnings results (look at CAT) and shed still more workers (again, CAT).  Unemployment will surely take another giant step higher when the latest data is announced at the end of next week.  Timely passage of President’s Obama’s stimulus will also be critical.

But of course the market will ultimately trade based on the performance of the banks.  And that remains a scarey thought.

today’s tape

The market is once again at the mercy of the financials and the health of the global banking structure.  Tuesday’s trading crushed all banks to the tune of 16% – and that was the average.  C, BAC, and the regional banks are in serious trouble.  And without some assurance that the common stocks are not headed towards zero the overall market has no chance of stifling the latest drop.

Technology was a mixed bag today with AAPL providing rare spark.  But the NASDAQ was hampered by MSFT and it’s 11% decline.  Most importantly, MSFT is now trading at a new 52 week low, below the $17.50 support from November.  I can’t recall how many times I’ve heard commentators saying MSFT’s balance sheet will help them weather the current market and economic storm.  That doesn’t mean the stock will trade higher.

A new trading theme has pooped up on my radar; we are seeing a swift reversal in bonds after the recent, steady flight to treasuries.  The TLT is beginning to crash back to earth, and the inverse, TBT, looks to be starting a new uptrend.

Oil and gas stocks have been trading in a tighter range than normal of late.  I find this pattern very interesting because I am seeing mixed signals.  RIG is trying to establish a bottom as XOM is stalling to resume its uptrend.  Energy names will break out again soon, and they will likely follow the price of oil.  I see no sign of oil trading higher, so I remain bearish on the energy sector.  And watch out for CHK.  Several thousand puts were purchased today at the February $10 and $12.50 strikes.

The last three days of trading indicate that the bulls and bears are trying to gain control of the market.  The bulls don’t want to break 8,000 on the DOW as that will likely bring a retest of the November lows.  And the bears know that if we reach 7,500 on the DOW, it will likely break.

today’s tape

The US banking sector remains persistent in trying to destroy the global economy and and equity markets.  This week alone JPM had its rating lowered by Moody’s and BAC requested another $20 billion from the government.  BAC, appears to be following the path of C.  It now appears BAC did little in the way of due diligence before acquiring MER.

The XLF is not from from it’s November low, but the overall market is still trading much higher.  With the VIX still trading in the $40’s, we have yet to see volatility return to the level we witnessed just 3 months ago.  If the weakness in the financials continue to spread to the rest of the market we could see another washout to the downside.

Oil remains in the mid $30’s yet the integrated names are holding up well.  A couple months ago I recommended a short RIG long XOM pair trade that worked well.  Watch the $75 support on XOM.  If this level is broken, watch for all energy names to fall.

But for now, there is a group of energy stocks that are starting to take off.  The refiners, having been beaten down for so long are coming back into favor.  TSO, SUN, VLO and HOC are outperforming every other sector at the moment.  The has also been heavy call buying the past few weeks in these names.

It will be interesting how the market reacts to Obama’s first week in office, but I suspect the health financials will remain in focus, as will deteriorating earnings.  Other than oversold bounces, I don’t see this market moving higher.  I think the best you can hope for is trading range that limits the downside selling pressure.

today’s tape

Computer issues have prevented posts of late, but I am back on track and ready to provide daily updates.

After weeks of uninterrupted gains, equities are under pressure again as earnings comback into focus.  AA released last night, kicking off the the first quarter of 2009.  Earnings will remain in focus, but the performance of the financials appears to be weighing on the market again.  The XLF has dropped 13% over the last 9 sessions with many individual banking names losing much more.  BAC is nearly back to its 52 week low.

The other problem for the market is commodity deflation.  Crude oil, and precious metals have been unable to reverse their volatile down trends.  I expect names like RIG, NOV, FCX and others to trade back to their 52 week lows.

Technology was also roughed up on Monday.  Downgrades across the sector dropped CSCO and INTC (who already warned about their upcoming release).

I’m not as bearish as I was just a couple of months ago.  But you still cannot be 100% bullish despite the media’s claim of a new bull market.  The market may have bottomed on November 20.  But that does not mean it will trade higher.

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.