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..or will the time to year end be all about returns, as in selling?.    This question will likely not be getting any answers on Friday as attendance will still be light and news flow weak.

...30...20....8...

Those numbers are the consecutive spreads of low to high on the SPX for the week.   The market is simply trading, (if that’s what you call it?)..in a holiday mode.   Well,  we’ve made it to class to this week and the only potential trade in the makings, unfortunately has been hampered by the attendance.

Early in the week,  we pointed out the E&P sector,  known here as the Shales  in particular may have been a potential buy -in after the sell- off Monday on already light volume.    Any other time of the year this might have already worked out as a profitable trade by now as ‘ Heating gas’ (UNG)  has been the only thing of interest even as Oil continues it’s slide the past 2 trading days.      On Tuesday, Natgas strangely saw its best day in a long time, surging 8.5% to $5.74MM/.   We were scratching our head as to why the E&P's were not reacting much to this at all for some reason.   The low volumes/attendance was our only guess.     On Wednesday, Natgas had pretty bullish inventory numbers compared to all the other inventory numbers (as stockpiles dropped more than expected).     If demand is destroyed,  why are these numbers getting bigger.     Leading into Friday’s trade this is the only group we are coming for,  hopefully this move in stocks is just lagging because the performance of Natgas caught traders by surprise.   You can see by the UNG chart,   it had a late day surge to weeks high (AH) after the 12pm data came out and E & P’s were still lagging.    Maybe 1 hr before XMAS just ain’t enough.    Besides low attendance, the reaction is in part to Oil continued decline and so this Shale move is in limbo.     If we start getting a higher Oil by Friday,  the Nat gas chart may help awaken a few that come to class.

..or just good?

The worst possible scenario on an expected low volume day is a rash of negative headlines.    Stocks/ Sectors plummet as buyers are nowhere in sight and sellers will relieve themselves of their shares almost at any price.    At end of the day,  we simply got exaggerated moves to the downside because of the low volume.     If it wasn't for the fact we don't want to carry many different positions over the holidays, it might prove to have been an excellent opportunity to open positions in beat up sectors like the Shales (downgrade sec, by RJ).    The negative headlines running the day...very negative data regarding Asian trade metrics, a negative outlook on Alcoa and a bunch of downgrades to the commodity/ industrial sectors.     Throw in an astounding Oil price,  a declining Dry Bulk Index (3rd day in a row) and you have what looks like a fallout occurring from the initial excitement of the US/ China initiatives of spending.   Oh yeah,  commercial real estate headlines also weighted in on the the market, particularly on life insurers because of portfolio concerns.    The short covering here lately (eg,HIG) has abated on new concerns, clearly.   Bank/ brokers space also felt this and besides JPM, most were down 3-7%.    Toss in a Tech mess led by AAPL, more Retail,  Auto bailout concerns and you have to say we were lucky to come out 60 and 16 points down on the DJIA/SPX, respectively.   We were simply down across the board and final tallies in the major indices are looking quite lucky to escape bigger overall declines.

Speaking of the SPX,  we bounced off support at 855 and resistance is now the 50ma at about 900.

If there is an opportunity till the end of the year,  we think it may come from the 'sale' of the commodity/ industrial equities and so we'd watch this space more closely than any other.

Markets close at 1pm Wednesday and our next Journal will lead into Friday's trading day.  Considering how fast we recovered late in the day, we're still going to be around just in case this week ain't a complete wash on the trading front.  Anything is possible.

Happy Holidays to all our friends and your families.

D&J

Seemingly going into this Christmas trading week,  no one is getting overly excited.   Same can also be said for retailers and consumers it seems.   As far as trading goes,  maybe the Santa rally has come and gone sometime last week.    In addition,  as far as policymakers are concerned, as soon as the holiday is over,  it's back to business in dealing with the headache(s).   Friday's bailout of the big 3 does not mean Bankruptcy has been avoided for all.    The market reacted knowing this mess is far from being cleaned up by not getting overly excited.    This was not that 'new catalyst'  the market needs to go forward.

It certainly has been a tough trading year.   If you have survived thus far with little to no damage,  we say there's a pretty good chance that you have survived the worst.    However, it's certainly no guarantee that things will get any easier in the New Year.   At least,  for the better,  we are all prepared to deal with anything that may be thrown at us in the future.   Last week,  we had a little taste of a Bear rally that lasted all but a few days.    Although,  we'd hoped for a little longer run, the rally was still nonetheless constructive.   What does that mean?    It means that with the decreased volatility, suggested by VIX, rallies, however short in duration are actually playable.    We found some pretty good opportunities in Financials and a few material stocks that gave us some nice gains leading into final stretch of 2008.   The key with a Bear market rally is that we should never get carried away with one.

At the end of the last weeks trading, we are actually back to the level where we started the week.  Lately,  with the handling off all the bad news by the market,  we are quiet confident that we may see another push the next few days when volume is light as most institutional traders (whales) have packed it in for the year.    We have seen the short term high, which is 918 and change on the SPX and we'll play it accordingly.   Still, just because the idea of playing on the long side remains,  it doesn't mean that we will be doing any sort of loading up for a potential move.

As far as plays go, we are very comfortable with the financials for the time being and maybe a tech or two here and there.   GS,  once again on Friday, despite downgrades finished marginally green which we may be a sign of a healthy market into the end of 2008.    This is a short trading week and we'll try to make it as pleasant as possible.   This means that we'll let the play come to us as oppose to mindlessly chasing potential setups.  Bottom line,  Christmas is near and lets all try to have a stress free holiday.  

It's promising to be a quiet week, although with this market anything is possible and so we're sticking around...

It seems we just finished discussing how there is always news in the direction of resistance/ support (R/S) to break either one.   Well, we did actually about 885 SPX just a few days ago and than the FED decision broke that R and today was payback as we crossed 50MA support while sitting around it thanks to an ill timed SP outlook cut on GE.   Just when GE didn’t throw a shoe out at the market by reaffirming, someone else throws a stinky shoe and shows GE does carry a ‘big stick’ in respect to the market direction.  

Once again with no ‘new catalyst’,  the market couldn’t even reach 918 this time (911 high) and it was time for the Bears to declare a victory as in an end to this rally by close.   In our view,  this GE headline will be forgotten and life will move on very shortly.    A bigger nag on the market might have been Washington’s comments on the Auto bailout…oh yeah, remember that one?.    Well, this bailout stuff may just be the ‘new catalyst’ on freaky Friday where it’s almost been a given to hear good news the past month.    We pointed this out before last Fridays trade and we got a rally early in the morning.   In preparation of such an event tomorrow,  we don’t look at ‘small break'  of support as anything to be very discouraged about just yet, as we have potential positive news flow as a possibility to finish the week above 50MA.    Even though support was crossed,  it is only natural for sellers/ profit taking to come if we breach those levels.    The sellers/ profit takers, of course, as expected all over the ‘recent winners’ , especially in the commodity space as the dollar strengthened and stopped its consecutive days drop.   One survivor and maybe an important gauge on the markets health is GS.    Fortunately, the breach of support wasn’t extreme as we didn’t close that much below it.   Considering, we’ve been in a tight range, we probably have a few supports in different traders eyes, some maybe looking at 885 (held at close) as that was the break point in both directions the past few weeks.   Of course, all of this is dependent and could be worthless talk if we get ‘negative news overnight/ pre-market.

Anyways..that’s lead into trading day, it’s very simple.    There is no need to discuss any sectors or specific stocks in detail as they will only follow the news flow.   A few headlines heading into the day such as the Ag-Chem (IPI, POT) negative or RIMM, ORCL positive reports  will hinge on the big picture, most likely.

* Don't freak when you see a very low Oil tomorrow ( in JAN crude), it will be a very high Oil compartively on Monday.  It has to do with expirations with FEB crude becoming the new front month.

The index may show that we pulled back some after yesterday's big rally, but as we said a pullback would be healthy, mostly to digest the previous days surge.   The truth is,  other than a couple of big techs, most of the stocks we care about all ended in green (mostly commodity equity) as the $USD got whipped again.    In fact,  SPX started below 900 and fought its way higher through out most of the day, until literally, the last few minutes.  This is actually just fine with us as we held 900 SPX  cash / 50MA.  Call this support  now,  therefore watch for sellers and profit takers if breached.

The big tell,  once again,  came off the earning reaction from Morgan Stanley.    Based on its number, you'd think the stock should trade down to ten bucks.    But, of course with the example from GS from previous day,    MS had to rally from negative territory and shake off its early weakness and end in positive territory based on our remarks about 'going forward'  before GS earnings.    This is exactly what seems to be happening.     If you have been buying in the financial area the past 2 days,  you cannot fault yourself for cashing out some (as the 50% decline is being filled we noted as a possibility before earnings of the brokers).    Even though the trade/setup calls for higher prices,  it's never wrong to take profit in a bear market.    As far as Insurers  go, there is a SP ratings change coming tomorrow morning and we'd be keep a closer eye on a play like HIG,  which may be affected in either direction.

The trend these days is definitely looking higher, but we need a further push here soon.   We aren't sure what may the ultimate resistance for this particular run and we can only use previous resistance area as a gauge to plan our trades accordingly.   We basically have 9200 to 9400 Dow and 918+ to 950 SPX as the next area of resistance.    Right now, last weeks high of 918+ got walled today and so is the battle line.  The good thing about this particular run-up so far, is that we aren't get those 900+ point rally in a five hour kind of deal.    This rally, not only is fairly broad based,  led by financials,  we feel that it also give us plenty of time to buy on dip and cash out appropriately. 

Still, we may need a 'new catalyst'  to move forward it seems, 918 has to fall soon or Bears will use this failure as a reason to call an end to this rally.

Speaking of plays, as you can tell,  we have been heavily trading the financials during the last couple of days.   Keep in mind, we are trading the financial heavily not because they give the most bang for the buck.   We trade it because it has the best probability for a profitable trade and many agree that they are the main reason for this rally.    Fed's rate cut along with GS/MS earning reaction are enough to give these battered financials a decent run.     Of course, when the index creep higher, many other plays tag along as well.   

We are somewhat surprised by the strength of many 'Steel stocks lately.  But, we really shouldn't be as we discussed this phenomenon occurring from the industry that was left for dead just a few months ago.  Once again, it was because of results/ guidance that is below expectations.  "HUH"?.   CMC is the latest domestic minimill steel company (NUE and STLD last week) to see its shares head higher.  Of course, our big steel winner at DJIM from this year, X is the other play here.

The only sector that stands out as questionable is obviously "oil related" stuff.     Yes, US dollar is being trashed thanks to the thrashing of the USD.  Crude price seems like it just wants to go down no matter what.    We are mostly staying clear of the oil group and even the gas/coal group that may get affected by the drop in oil price.    Basically, there's enough obvious plays out there that you don't need to risk for any uncertain plays.  This reaction following the FED decision and ensuing USD fall is making many a trader scratch their heads.  At approx. $37, many a companies will have too halt production to some degree here in Canada for sure.   Right now, no matter what OPEC does,  demand is just not there.

It's been a pretty good week so far and we are counting on an even better finish to give us traders a nice Christmas bonus.

GS, FED, GE….the market got more than a ugly gaudy sweater for XMAS this year from these 3 behemoths in their own right!.   Most importantly,  the FED did pretty well what we pleaded for in the middle of November…”What is going to ‘zero’ and what may save the market is a zero interest rate policy for as long as it needs to be….The FED has to make a statement to go to zero for as long as it takes”.   

It took the market more than a few minutes to digest what was really said as it acted like a deer in the headlights.  Even though,  we said it was reasonable to go to zero the night before,  it was still a pleasant shock of sorts as the FED finally got somewhat ahead of the curve.     At the end of the day, it seemed like XMAS for many as the market applauded in action and words.    Here's the of the decision and statement...

1) will target a RANGE (not an explicit target) for the fed funds rate of 0-0.25% (expectations were for a cut to 0.5%); 2) comments on the economy signal a further weakening; 3) inflation no longer a concern;4) they say that rates will probably. stay at "exceptionally low levels of the federal funds rate for some time"; 5) the Fed reits that they are purchasing MBS and agency debt and will increase these purchases as conditions warrant; 6) Fed reits they are looking at buying longer-term Treasury securities; 7) Fed reits the TALF will kick off early in '09 (which should help consumer financing markets); 8) was a unanimous decision.

Yes, Santa has a helicopter, not a sleigh!.    As far as GS & GE,  let`s just say they were stocking stuffers
Both were received positively,  GS just by surviving and GE by reaffirming.

An integral part of our Journals is to prepare all of us for the next trading session.    By releasing the last Journal the night before,  we set out the importance of the day which revolved around the SPX levels and news items.   You know a move will happen in either direction as these items get their release.   We followed up in Alerts and Forum as the day progressed as to what we were eyeing as crtical levels,  stocks (financials insurers-major indices ETF`s) to go after if a level broken.   ..."Now that GS seems to have survived, looking at 885+ break to add a few ETF relating to major indices and some financials like JPM`…Depends if the financials go and we rally, insurers will piggy back , HIG probably has the shorts all over it again, so move could be nice...we wouldnt play it alone as of now.., 16.50 is a wall to watch ..KIE is the Insurer ETF …..FED has gone all out on this it seems, mkt should like,,,901 50ma SPX next important level. 2:31pm.

Simply, by being prepared to watch certain technical levels and what sec'/ stocks would benefit most or not,  we all should have had a nice day.    SPX financial up 11% inc. a nice move by JPM, 885 level melt up..etc.

By trading day’s end,  we broke through a key technical level the S&P cash of 901 and finished at 913,  a close above the 50 ma for the first time since the beginning of September.  This did and should bring out many a traders-investor who require such levels to wash the market with money.  It`s just a safer trade for many if we stand above the 50ma as some nervousness dissipates here.  Let`s just hold it now, a small pullback in the morning and than a push higher would be the positive action to bring more in.   There was real buying in the move to go with short covering, most importantly it seems forced selling is pretty well gone at end of day.  But, we`re not out of the woods in the short term as in this week as we have some unfinished business.  Quick rundown of major catalysts being watched in this last full trading week of the year: 1) autos resolution in Washington; 2) OPEC meeting 12/17 w/ a cut of at least 2MM BPD expected); 3) MS earnings on Wed; 4) earnings Thurs, ORCL, RIMM; 6) SPX indexes-Nasdaq 100 rebalancing, quad witch to close the week.

Going forward,  the  Broker-Financials-Insurers  are definitely beneficiaries of the the FED decision.  But, we also have because of the larger than expected cut & reiteration of buying agencies/MBC/etc equalling a dollar bearish.   This brings the whole commodity picture into the framework of what we are going to be trading further.   The timing could not have been better as we've been on this dog's tale lately anyway.   In our view,  the action even though mentioned late today as heavy commodity ruled,  we did not see this materialize to the degree we expected.    For one thing, most Ag's-Chem stocks (POT MOS)  were already moving before the decision on the back of a Merrill Lynch upgrade.  CMP , continued it's 2 day move after the announcement.    What surprised many was that Oil and its'/ sector was no flaring up.    We think this totally b/c of the sell the news headline out earlier that Saudi Arabia is calling for a 2mbd before the OPEC meeting.   Crude should move with a significantly weaker dollar sooner than later.

..all in one day for the market?

A quick round- up into the trading day(s) before all the shoe throwing begins.   The question is how will the market react to the plethora of news events starting in the premkt and lasting long into the week.   As far as today’s trade,  it was mostly a sitting on your hands kind of market before tomorrow.   This was no surprise as quiet days are pretty well the norm ahead of `big` catalysts.   Crude-commodities continued to outperform early on dollar weakness, but crude swung $6 later in the day and was the main reason for the weaker market.   We highlighted shipping  names going into the day on news of a revival/ charter prices up threefold in a week and they held their own most of the day after gapping ~15%.   CMP,  we tossed out again and it caught about 3 points afterwards,  if we get a good market we expect more from this chem play as mother nature is starting to play havoc this winter.   On the technical side,  we put a lot of emphasis last week on bounces from 850-860 on the SPX.   It seemed we got program trading kicking in around 330pm today as the SPX spiked from ~850.    So, support seems to be here.   This was the only glimpse of institutional trading all day, it was mostly a sitting and waiting game all day.

GS,  earnings are on the mound first and all eyes will be set here.  CC at 11am.   The immediate trading action will be something to behold with wild fluctuations that will continue into the first hours of the regular trading day.   The reaction is what we’re all waiting for as it will signal if the market is truly looking forward.   The financials again were one of the weakest groups today and have been on sale since they peaked on December 8th.   GS, like many other brokerage stocks have had ½ of their gains wiped away since the rally started Nov 21.   If the market wants to react favourably, it can cook in any bad earnings outlook into these 50% declines in the past week and move forward! .

GE’ s, full outlook is tomorrow as well and it’s being ignored with GS, FED taking the headlines,  but it can carry a big stick to the markets direction.

FED  decision is in the afternoon and you have to expect the volatility to continue afterwards.   The FED has been aggressive over the financial crisis and a reasonable chance exits we go to zero..ZIRP,  but it is more likely a 50bp ease step 1 to ZIRP taking place later.   The statement will be scrutinized and we’ll likely hear again the FED has sufficient tools at it’s disposal to achieve it’s goals and nothing more.

If this wasn’t enough,  we have lots more market moving possibilities to deal with later in the week.  We’ll save those for later.   Tomorrow’s approach has to centre around the SPX and the levels of importance (Resistance /Support).    Which direction we trade will be focused around these important levels.   Don’t hurt yourself analyzing GS, FED reports, the market will lead you in either direction.   It’s going to be an interesting day.

Which story is more interesting over the weekend?. Is it the, "We don't know how we gonna bail out the auto industry from White house", story or "Bernard Madoff scamming off potentially $50 billion dollar from various high profile investors". You be the judge! While both stories can get some endless discussion from all levels of investment community, it is in our opinion a draw between the two and unfortunately makes for 'life reality' TV for so many. Behind these scenes is a tradable market and we only need to concentrate there.

Wait a minute! Doesn't the auto bailout story seem more urgent and 100 times more significant than anything else at this moment? Oh yes definitely, but based on the way markets been behaving lately, we aren't sure if it actually matters much or at all. The market was back to shrugging off setbacks as we all saw..."a chance for a Friday short covering bounce, maybe to 850-860". The bounce almost reclaimed 885 SPX broken level from previous trading day at one point. As noted in Alerts late last week, sells off are shorter in duration and can trap a few Bears.

Our point is, despite some "worrisome" chain of events surrounding the whole Auto debacle, the stock market is taking the whole thing quite well. Still, there's a high probability that parts of auto industry will fail two or three months from now despite any short term injection. Yet it seems this market has "sort of" priced in the worst case scenario. This is in addition to a number of really bad economic/ earning reports we have witnessed last couple of weeks. Basically, market has rather taking ALL of the bad news really well.

When we speak of the market, we usually mean the SPX and COMP, and DOW to a lesser extent. If you look at some of the individual plays, there actually has been a pretty good rally going on. Look at all of the steels, oil/gas, shippers, agri. and every major infrastructure play. Sure, not every play has gained the same kind of long momentum, but there's enough of a list out there that can make some traders smile.

We have to pay some specific attention to various sectors when we approach the current market.  Why are BDI rate (Dry bulk rates) going up?   Note*..this weekend, Baltic Dry index is getting more press for its "record" rise amid speculation Chinese steelmakers have been importing more iron ore to take advantage of a collapse in shipping costs. (DRYS EXM TBSI GNK ).   Why are all of the steel companies going up despite lowered guidance/production from just about every U.S stock?.   We talked about the Chinese export figures/ Obama plans playing a role here and so FLR doesn't go down that much after a Goldman downgrade.   Why are people so excited about the recent Haynesville drill results?   We can attempt to answer all of these questions with an educated answer, but instead we feel it's probably better just to point out the obvious. These sectors are in a RALLY mode as commodity stocks are showing a "Pulse"

As we have been saying in the past week, we feel that the trading dynamic has changed some what. It has changed from some very panicky and volatile environment to a much more stabilized and oversold environment. These psychological changes work well now that the hedge fund liquidation seems to have subsided for time being.

So, we have a rally and we may continue to get pushed up right through the end of year. Our trading plan has been simple and that is to trade what's currently working with the market. We are trading long on Gas/ Oil (weather is helping also), some steels and even a couple of shippers here and there.

Early in the week, we have GS/MS reporting and we feel a lot of downside news may also have been priced in the stock prices already. It's reaction will be critical to a year end rally. Of course, we have to see it to believe it starting Tuesday morning when GS reports.

As we said heading into December 4th trading,.."In an almost perfect Santa Claus rally world, we'll get these data figures 'shrugged off'!. Do you believe in Santa Claus?"

So far for this year, we do believe!. We're seeing all setbacks shrugged off.

SPX 885 was sliced and diced and by the look at the Futures ES (SPX)...870 was minced and 850 was shredded. That's a lot of support taken out in hours, no matter how bad the Auto Bill rejection seems overnight.     We've focused on SPX as an important reading of late,..."Technically, 885.85 (886) was held again on the SPX and 925/ 930 is the upside resistance. The direction of your trade should be glued to these levels"....and said at 2pm the market may start looking ahead soon with the Senate problems and Financial earnings on the way.       Considering we're off about 700 off DJIA since the alert, the market not only looked ahead soon after,  but may have just got ahead of itself.    Simply, a chance for a Friday short covering bounce exists, maybe to 850-860 as Friday's have brought on rallies almost every week lately.   Still,  we would probably trade nothing,  maybe some indices ETF's and just sit quietly into the weekend.   It's been a good week with the Energy sector here, maybe some of you shorted (or just got out of stocks) at 885 and wake up to a nice surprise.    No need to be reckless now,   just wait for the next headline, hopefully something positive.

Away from this Auto debacle,   the market was on fumes unable to go higher, buyers were not chasing any longer and short covering part of rally seemed to end.    The psychology turned sour with Financials, which peaked Monday, took over headlines as their own executives opened their mouths.    One was BLK's Fink saying Q4 earnings for financials will be 'horrific and shockingly bad".    Later, it was JPM's CEO, saying it had a terrible November and December also looked bleak.    Is this something new?.    At this point as far as the Financials are concerned, nothing is new or surprising.    It's not a coincidence that negative headlines always happen at support or good news at resistance.    There's usually catalysts to bring the indices to R/S levels and bust them,  unfortunately today it came at support with CEO's blab, failed rescue plan, an ex- Nasdaq Chairman Madoff,  head of a multi billion hedge fund involvement in a giant Ponzi scheme.    The latter is probably quite damaging as investor confidence may be rattled once again.  Who can you trust on Wall Street,  if not a 70 year old who can pass for a Mall Santa this season.    Guess, his suit will have pinstripes instead.    So...we have all this negative news out there that may not be "shrugged off" as all the recent negative headlines have been....let's wait it out

Compared to some of the crazy moves that took place merely a couple of weeks ago,  this week's action has been been nice and tame.   Yes, we still have the back and forth gyration, but it's nothing like the wild wild stuff we were used to.   It's contained so far this week in a range.   Change of pace and change of scenery?    Perhaps, lets just enjoy it while it lasts.

Today's dominant news is again on the auto bailout deal.   What else is new, eh?    Frankly, not many people really believe this deal will really help the big three if this recession persists for a while.   However, if the deal doesn't get passed,  the big three would face immediate liquidation process which will definitely put the fear into the economy and this market.    So this temporary dosage of life saving deal is a pretty big deal if anyone still wants a calm Christmas.    Basically, the bottom line is that if the auto industry collapses before year end,  we would have lots and lots of nerve wrecking folks out there which is not good for this country.    Beyond this saga,  there is a tradable market to peruse.

From the trading side,  we have basically carried the same theme for the past few days.   About a week ago, we noted the change in dynamic in this market where bad news gets absorbed and it was no different today.   Stocks warning of coming quarter is "no longer" a surprise,  but an expected exercise.  So for all the corporations out there,  now is the time to warn and get it out of the way.   In fact, some stocks actually seem to enjoy a boost in stock price after they lower the guidance and come clean with the market.    We think there are two reasons for this behaviour.    One, the estimates that companies provide are much better than the estimates people fear.    We should not even bother looking at the estimate from on Financial pages as most of those are just "pipe dream numbers" from a year ago.   With the way most, if not all of the stocks got sold off during the past few months, you get bottom fisher/ value players to stepping in for some buying.    Two, we simply have the deceased activity from hedge fund selling.    Remember, much of the recent panic from this market was created by hedge fund liquidation.    We have to believe at some point that the process will eventually stop or slows down dramatically.   We are seeing some of this now take place.

Aside from the better psychology of recent market activity,  we have been getting the most bang for the buck from the commodity sector.    Oh geez, not again, you say!    The truth is, we have to play what's working from the market and it has a pulse now.    If you have seen the recent production cutting annoucement from the likes of NUE, MOS.. and yet those companies still manage to go up after the news, you know that we are either at the bottom or have seen the bottom.    The fact the drilling results are getting a lot of market participants excited on our past Shale plays also make us believe some plays are just so eye catchingly attractive at this stage.    One thing you have to remind yourself though, just because some of these plays have gone up quite a few points, it does not mean they will come all the way down to the recent bottom for you to buy some.   It just doesn't work that way.   If those plays have seen the bottom, it simply means you would NOT have a chance to buy HK at $9 or CHK at $11 or NEU at $26 etc.    Trade rationally, and not with a stubborn mind.    Yes, we would feel more comfortable playing the entire infrastructure theme related stocks at a cheaper price levels,  but it just doesn't mean we'd wait for a 20 to 30% pullback now.

Into the trading day, we said a perfect storm may be brewing for the energy sector.    The SPX, bigger names got involved helping the Shales along. Of the top 10 stocks contributing the most to the SPX on the upside today, 70% are energy (XOM, CVX, OXY, COP, DVN, APA, CHK all among top 10 contributors to SPX. One of the best ways to monitor this component is through the OSX,  (PHLX Euro Style Oil SVC. INDEX).

Energy/materials/commodities equities very strong today.  The last few days a lot of talk around the Obama infrastructure, combined w/some hope that China’s gov’t spending plans, has helped drive a lot of the commodity names.  The Baltic Dry Index (dry bulk shipping stocks) has climbed for the last 3 days.   As for Steel  names,  the decline in Chinese net exports is a positive for U.S steel producers. (NUE)

Market at this moment, is still very fragile and we are definitely not out of the woods yet.   We are hoping this market would go sideways for a long while to repair the technicals before we can get a meaningful rally.    We are not sure what can potentially drive this market higher and it's not that important at this point.    There seem to be more trading opportunities that are manageable with our trading strategy these days and we are taking advantage of that.     Remember, we can deal with a recession, but we cannot deal with a collapse of the system.     With worst of the crisis behind us seemingly,  it may not be that bad of a market to trade along with.

So what we do at DJIM is look for plays that are trading at recent high, not year high as in previous years, and adding them to our list.   Over the next little while, you'll likely see our shadowlist get many of the old names back on it .  

Technically,  885.85 (886) was held again on the SPX and 925/ 930 is the upside resistance.  The direction of your trade should be glued to these levels.