主题：03/06/2009 Market View -- 宁子

SUMMARY:

- NASDAQ hits a new bear market low, market rebounds late.

- Job losses bad enough to mean the economy is bottoming?

- Oversold and searching for a reason to rally.

Market tries the stiff upper lip in the face of jobs losses, survives to fight again thanks to short covering.

Futures were up ahead of the jobs report, aided by Wells Fargo cutting its dividend but saying 'business is good.' MRVL in semiconductors reported solid earnings and was up. Even after the report they managed to hold their own, likely given that the non-farm claims were in line with expectations (-651K). After a bit they started to factor in the large downside revisions to December and January, not to mention that LIBOR moved higher yet again (3-month at 1.29%) and Europe reported that corporate borrowing costs surged to a record. Futures started giving ground ahead of the bell. Still positive, but giving ground.

Didn't take long after the open that the indices turned lower, and before the day was out NASDAQ hit a new bear market low, joined by those already holding that honor, i.e. SP500, DJ30 and SP600. Even the mid-cap SP400 got in on the new bear market low action as it made its first foray below the November low.

TECHNICAL. Intraday the action was weak with a higher open giving way to downside and new bear market lows for all the major indices. After NASDAQ broke to a new bear market low and with the weekend looming, shorts covered in the last half hour and that pushed the large NYSE indices back to flat with some sporting modest gains. The NASDAQ side of the market recovered nicely though NASDAQ could not reach positive as the NASDAQ 100 was an anchor about its neck all day and closed with a 0.91% loss. Nice recovery, but it was all due to short covering ahead of the weekend.

INTERNALS. Breadth was about flat, what you would expect with the late rebound. New lows rallied but not that sharply, still well below November individual daily levels. Volume was mixed with NASDAQ trade hitting the highest in two weeks. NYSE trade was lower but as with the entire week, still strong and well above average. Not much to make out of it other than they recovered off the lows on strong volume. That suggests buyers coming back in to push a rally, but it was a Friday after an ugly week of selling, and drawing that conclusion is a bit of a stretch.

CHARTS. NASDAQ hit that new bear market low and rebounded. Indeed all indices (outside of SOX and NASDAQ 100) rebounded after hitting some new bear market lows, showing doji on the candlestick chart. As noted, that has the look of a rebound, but there we go again, right? So many looking for a bottom under every market selloff. It was Friday and short covering pushed them back up.

Other factors do show a massively oversold market that, with the right trigger, could rebound furiously. When stocks or indices rally too far over their 200 day SMA they have to fall. For the NYSE indices that is usually 15%. NASDAQ 20% to 25%. Same to the downside; when they sell off too hard too fast they cannot stay down forever. The cork has to pop back up. Right now DJ30 is 33% below its 200 day SMA. SP500 36%. NASDAQ 32%. Impressively oversold.

In addition, the indices are testing 12 to 13 year lows. As one commentator noted today, historically if the indices test 12 year lows they tend to bottom and/or rebound furiously. While the reason for each selling bout can be cats and dogs in their differences, it is a statistic worth noting.

The question is when a rally begins. The selling is getting long in the tooth on this run lower and looking for shorts with massive amounts of real estate to fall through is not that easy. That still leaves the old 'watched pot' syndrome with everyone looking for a bottom. Nonetheless, a good selloff to start the week would likely scare more out of the market and go a long way to setting a bottom for a rally. Always like to see early week morning selloffs after plenty of selling already. The rebounds can be furious. We didn't get that early morning selloff last week when the market was primed to bounce. We will watch and see if it comes this week.

LEADERSHIP. Still not the best leadership we have seen since the selling started last fall. January and particularly February were very hard on the leaders that were setting up. Chips are coming back with some really nice patterns, but it is hardly sector wide. Some big techs look decent; a lot were roughed up on Friday. Some metals look solid; others are trying to get that way. Retail shows the same picture, i.e. some real promise and some in need of real work. A rebound rally will help them form up better, but that requires some time after the damage done on this last selling. Back in 2002 the chips led the initial surge off the October low. Even after the selloff in February many are setting up once more and we have no problem with them leading a move that allows the rest of the market to wiggle out from under the selling avalanche and catch their breath. Thus we are looking at chips again to lead and to buy as well as they make that move.