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Thursday, March 29, 2012

Market Thought... hmmm, CAT

One day certainly does not make a trend, but the subtlety of today's action I found interesting. Interesting enough to highlight it.  In my Market Thought post 'churning', I highlighted a few scenarios that may lead to a flat, down or up market.

The market turned around 12:30-12:40.

One can argue when the exact time could have been, but thats irrelevant. What I found to be pretty specific was that CAT, arguably, led the change upward (while the banks and technology were relatively flat/down).

(Another interesting subtlety were big oils like XOM, COP, SU etc, diverged from the price of oil. Hopefully that means their discount will start to be removed.)

The subtlety is suggesting the laggards (industrials, energy and materials) maybe seeing renewed interest. If there is a churning into these names as banks and techs remain flat, we will see a bid for this market.

I call this a subtlety because the current charts of the laggards are really really crappy. The one fundamental catalyst that will shake the big boys into accepting the above scenario is if/when China begins to ease. Or if the Chinese PMI shows better than expected numbers Sunday night.

(Either way, an initial play is being made here. I was hoping to pick up some CAT near 98 for the China easing/good PMI play, but after today, I do not know if it gets there. It may not break today's low. If I do play it, I will probably hedge the position with a few FCX puts. FCX saw a move today too, but it was much later, and not as fierce. Both will lose if China's PMI is weak and China does not ease. FCX should lose more as per the sentiment.)

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