主题：02/24/2009 Market View -- 宁子

SUMMARY:

- Bernanke does it right, provides the trigger for the rebound.

- Consumer lack of confidence hits a record.

- Thank goodness Congress is going to fix housing.

- Will the market now attribute the government with some ability to solve the financial morass or is it just your normal bounce after tough selling?

Market gets its trigger, posts a strong rebound move.

SP500 was right at the November low and most were looking for more downside. Still seems rather inevitable as NASDAQ could easily test its bear market lows, but Tuesday was not the day.

Earnings surprises in retail from retailers Macy's, JWN, and even Home Depot (though the latter lowered its 2009 forecast) helped gin up a bit of excitement. The Case/Shiller housing price index hit a new low yet again, falling 18% in Q4, but that was old news and actually good news. The futures were a higher and managed to hold on into the open. Consumer confidence was not something to get excited about as it too hit a record low at 25. Twenty-five. A recession is indicated in the 50's. This is a 'send lawyers guns and money' level.

Confidence hurt investor confidence and the indices gave up the move but not the green. Then Bernanke started to talk. His text was already out but it was more of the same. When Bernanke spoke, however, the words took on meaning beyond the text. He was calm, confident, and spoke with the staid authority of an expert truly understanding the situation and knowing what needed to be done. He said the Fed will use all available tools to break the cycle of credit fear. He predicted the economy could leave the recession behind in 2009 and start growing in 2010 if the right actions were taken. The right actions involve heavy intervention with monetary policy and bolstering programs such as TALF that actually broke the logjam with the credit markets after TARP was a failure when its focus was changed to financing banks with cash versus buying the bad assets.

The reaction wasn't immediate. There were many questions and answers, and for once the questions were actually germane and constructive. Bernanke fielded them as easily as Brooks Robinson snatched a candy hop grounder. Mr. B showed he has grown into the job. Nothing like getting tossed in the furnace by your predecessor to temper your steel. He even threw one back at Alan Greenspan, saying nationalization and other federal takeover of banks was not the way to do the job.

While the testimony was only something a Fed-head could love, it did the trick. The markets were calmed. The early bounce was no rally. I knew rallies in the past, and the morning bounce was no rally. Once Bernanke fielded the last question and threw to first for the final out the market took off straight up. It finally got its oversold trigger.

It rallied from early afternoon to the close with hardly a stop. Volume swelled, breadth was a strong upside as it was downside Monday, and SP500 jumped off its November low without violating it. Financials surged with MS and GS, two primary financial leaders, putting in excellent moves. Not bad.

TECHNICAL. Intraday the market started higher, fought off some selling, then bolted upside. Good action on a reversal bounce. No equivocating at the close either. A strong surge is what was needed and what was delivered off the November lows.

INTERNALS. NYSE breadth was a strong upside as Monday's downside. Those lower new lows on the test were indeed instructive. Volume jumped sharply on both NYSE and NASDAQ. Very solid action and it tends to suggest the buying was something more than just short covering. Oh sure there was a lot of short covering; after two weeks of downside and lots of short interest and put option open interest, but strong breadth and higher volume show more than just a narrow bounce. Now whether it is sustainable remains to be seen. It was the first attempt upside in a two week tail kicking. The indices have to maintain the momentum, make it up to near resistance, and then do something about that resistance. That is where a follow through comes in. After this first surge and rally you look for a bit of a test and then a renewed surge 4 to 7 or so days into the rally. That shows the buyers are stepping back in and ready to drive prices higher one more. That tends to show the sellers have run out of gas and don't want to come back in. We will see. The market is still a long way from that issue.

LEADERSHIP. There were some very good stocks making some very good moves. GS and MS mentioned above along with Chinese stocks. Lots of stocks moved higher as the breadth indicates, but the problem was that the prior two weeks of selling, particularly the last part of the selling, wrecked a lot of patterns. Thus many were just playing catch up Tuesday versus making the breaks out of pretty nice patterns. Some recent leaders such as metals and chips were up, but they are damaged goods at this point and their rebounds look just like that: rebounds after breaking down. The market had a plethora of leaders up until the past week. Now they will have to redevelop anew to help propel the market higher. Can be done, i.e. leadership patterns completing after a follow through while the initial leaders streak higher, but the market made it harder for itself with the last bout of selling ahead of the Tuesday bounce.