Finally, a deal has been reached in the EU crisis. The bulls were excited for the news and relentlessly ran the markets up to unforeseen levels. Most bulls even admitted they were shocked on how far they were able to push the markets. Even though this deal does nothing to resolve the situation, simply tosses more money at the problem, and only “kicks the can” down the road a bit longer, the bulls came out in full-force.
Pundits are saying we may not talk much more about this crisis until between March and May of 2012. That would be great for the markets in the meantime. Chatter about Italy and Spain’s problems are slowly growing louder though, which may create another headline handcuff that market players hope to avoid. In the meantime, a stock pickers market started developing on Friday. Technicians and momentum traders who were able to identify breakout patterns saw a very bullish day of trading. We can only hope this is a trend that will continue for a while as a stock picking market is when much money can be made with reduced risk, the complete opposite of what we’ve been seeing lately.
Since the market has moved based on headlines from the EU crisis, most of us have been underinvested for the recent move up due to the high levels of risk. The market is still in need of a healthy pullback to reset some charts, but the bears have been burned so badly that the bulls were able to keep churning higher. I peeled off most of my long trades on Friday, hoping for more clarity this Monday on how quickly and aggressively I can deploy capital to make more capital. A fresh perspective for a fresh week is what I felt was needed.
Treasuries have continued to sell off since the market bottomed weeks ago. As treasuries sell off, this creates extra capital that may be invested in the equity markets, which seems like a reason why we keep pressing higher. As long as treasuries continue to sell-off, I anticipate the bulls can keep working higher. As I’m trading during the day, I am now using ProShares UltraShort 20+ Year Treasury (TBT) as my shadow chart to tell me if the bulls are firmly in control at the moment or if we might be seeing an intraday pullback. Even if treasuries pullback though, many bulls have felt left-out from this recent surge that they are anxious to deploy capital. This could be an additional level of support to keep us afloat as modest dips are likely to be bought fairly fast.
Monday morning we have Chicago PMI. I expect that will drive the early part of Monday. The rest of the week is setting up to be mostly driven by earnings. We have a FOMC rate decision on Wednesday that may draw some attention simply for commentary on the economy. On Friday, the employment data hits the market.
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Oct 31 | 09:45 | Chicago PMI | Oct | 60.0 | 58.9 | 60.4 | ||
| Nov 01 | 10:00 | ISM Index | Oct | 53.0 | 52.1 | 51.6 | ||
| Nov 01 | 10:00 | Construction Spending | Sep | 0.8% | 0.3% | 1.4% | ||
| Nov 01 | 15:00 | Auto Sales | Nov | NA | NA | 4.07M | ||
| Nov 01 | 15:00 | Truck Sales | Nov | NA | NA | 5.97M | ||
| Nov 02 | 07:00 | MBA Mortgage Index | 10/29 | NA | NA | 4.9% | ||
| Nov 02 | 07:30 | Challenger Job Cuts | Oct | NA | NA | -211.5% | ||
| Nov 02 | 08:15 | ADP Employment Change | Oct | 130K | 100K | 91K | ||
| Nov 02 | 10:30 | Crude Inventories | 10/29 | NA | NA | 4.735M | ||
| Nov 02 | 12:30 | FOMC Rate Decision | Nov | 0.25% | 0.25% | 0.25% | ||
| Nov 03 | 08:30 | Initial Claims | 10/29 | 400K | 402K | 402K | ||
| Nov 03 | 08:30 | Continuing Claims | 10/22 | 3700K | 3675K | 3645K | ||
| Nov 03 | 08:30 | Productivity-Prel | Q3 | 2.8% | 2.8% | -0.7% | ||
| Nov 03 | 08:30 | Unit Labor Costs -Prel | Q3 | -1.0% | -1.1% | 3.3% | ||
| Nov 03 | 10:00 | Factory Orders | Sep | -0.5% | -0.2% | -0.2% | ||
| Nov 03 | 10:00 | ISM Services | Oct | 53.0 | 53.7 | 53.0 | ||
| Nov 04 | 08:30 | Nonfarm Payrolls | Oct | 100K | 88K | 103K | ||
| Nov 04 | 08:30 | Nonfarm Private Payrolls | Oct | 130K | 114K | 137K | ||
| Nov 04 | 08:30 | Unemployment Rate | Oct | 9.2% | 9.1% | 9.1% | ||
| Nov 04 | 08:30 | Hourly Earnings | Oct | 0.2% | 0.2% | 0.2% | ||
| Nov 04 | 08:30 | Average Workweek | Oct | 34.3 | 34.3 | 34.3 |
Without some unforeseen negative headlines hitting the wires, I expect the bulls to stay in control for the time being, including healthy pullbacks. Some of the stocks on my trading radar this week are:
CAMAC Energy (CAK)
Canadian Solar (CSIQ)
China Sunergy (CSUN)
Emulex Corp (ELX)
Healthstream (HSTM)
India Globalization Capital (IGC)
Ikanos Communications (IKAN)
Cheniere Energy (LNG)
Mercer International (MERC)
Mines Management (MGN)
SinoCoking and Coke Chemical Industries (SCOK)
China Shen Zhou Mining (SHZ)
Stillwater Mining (SWC)
Vitran Corp (VTNC)
Yingli Green Energy (YGE)
Zalicus (ZLCS)
ViroPharma (VPHM)
Teradyne (TER)
Vasco Data Security International (VDSI)
Meridian Bioscience (VIVO)
Targacept (TRGT)
You can follow my trades alongside the 36,000 plus market players who follow me on SeekingAlpha (Shameless promotion). As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long VDSI, TRGT, VIVO but positions may change at any time
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Tags: CAMAC Energy (CAK), Canadian Solar (CSIQ), Cheniere Energy (LNG), China Shen Zhou Mining (SHZ), China Sunergy (CSUN), Economic Calendar, Emulex (ELX), General Market Commentary, Healthstream (HSTM), Ikanos Communications (IKAN), India Globalization Capital (IGC), Mercer International (MERC), Meridian Bioscience (VIVO), Michael Kudrna, Mines Management (MGN), ProShares UltraShort 20+ Year Treasury (TBT), SinoCoking and Coke Chemical Industries (SCOK), Stillwater Mining (SWC), Stock Radar, Targacept (TRGT), Teradyne (TER), Vasco Data Security International (VDSI), ViroPharma (VPHM), Vitran Corp (VTNC), Weekly Homework, Yingli Green Energy (YGE), Zalicus (ZLCS)
