Monday, December 7, 2009

Weekly Watchlist 12/7

The reaction to bad jobs data 9 months ago rallied stocks but now are we seeing the stock market starting to sell off on good data? If so, this could be the first signs of the market leading the fundamentals. Regardless, Friday the dollar ended strong and stocks sold off before regaining some steam late in the day to still close over 1100. While I think this could be the start of another 5-8% correction the markets, you also gotta remember it is unlikely to see a sustained pullback before year end because of the "Santa Claus" effect in the markets and traders wanting to secure their bonuses that they receive. The "bonus" put in December they call it.

So we need to watch the potential for support to be broken on the SPX under 1085 to see a fast retrace back to 1070 where there is still an unfilled gap. But if we friday's lows near 1095 then I think we have yet another shot at retesting the highs of the brutal trading range we have seen for the last 4 weeks. We need to see the SPX close above 1120 for any kind of continuation higher.

I like the way small caps are setting up to run into year end and REIT's and Semis look strong as well. Some of the dollar sensitive names like oils and materials are vulnerable to further pullbacks at this point and I also would lean towards shorting pops in banks until they confirmed leadership. It looks like there is a nice rotation taking place into more defensive sectors into year end.

The dollar bounce does have the chance at being the start a viscious unwind but it's still a bit early to tell. Losing 1.48 level on the Euro would be a nice confirmation of a further move up in the dollar this week. There is not much econ data on the schedule so perhaps the currencies settle into a range for a few days to absorb the large movements seen friday after the jobs report.


Shorts>> WFT, ACI


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