主题：03/10/2009 Market View -- 宁子

SUMMARY:

- Citi says it may have a decent quarter, Bernanke hits of slight accounting change and the oversold rally gets its trigger.

- Wholesale inventories down again but less than expected and December.

- Credit market experiencing no global warming as dollar LIBOR gaining upside speed.

- Sustainability and for how long is already the next issue of the week.

Market desperate for a trigger finally gets one.

A very oversold market needed the right kind of indication to get the shorts to finally give the nod to some serious short covering. Despite the selling the past week you could see it trying to shift gears and prepare for an upside move with the rebound Friday and the low volume selling Monday. Hints of a change in the mark to market accounting regulations were reason for the shorts to get a bit more restless . . . along with this last (and second in the series) nasty leg lower that had run the same distance as the first leg. Time for a bounce. The question is how much powder would go off when the fuse was lit.

The fuse was two-part. Citi announced it was having its best quarter since 2007, the last time it made a profit. High praise given a better quarter than those of late could mean it was not on death's door. There is a saying whenever you see something such as a hotdog labeled as 'all beef': before you take comfort in that, remember, even a cow's rear end so to speak is all beef.

There was more. Bernanke was speaking before the open and again pledged the kitchen sink and even said that some adjustments in mark to market accounting might be worthwhile. He did not say it should be suspended; he was against suspension. He simply mused about some changes without any detail or direction as to what changes. Didn't matter. Citi was having its best quarter since it went down the toilet and Bernanke said he was for a possible, careful, modest, thoughtful, somewhat remotely likely change in market to market accounting rules.

Futures surged. UTX axed 11K jobs. Big deal. Stocks gapped higher and the indices posted a strong first leg higher in the first hour, then slid laterally for just over an hour and one-half. Then Representative Frank stated the uptick rule could be reinstated in about a month. Fuel for the upside. Of course this is being offered after the financials were run over and left for dead by massive bear runs. A lot of the damage was already done, but maybe the rule could now prevent them from being sold to zero. Kind of ironic that Frank would in reality have nothing to do with the reinstatement of the rule.

Stocks rallied a bit further on the Frank news, but not much. The indices ran right into the 10 day EMA at lunch and stopped. That started a 4 hour lateral move that finally saw a drift higher late in the session that helped the indices push past that near resistance. Stocks held the gains right into the close as the sellers NEVER attempted to step in and block or undermine the move. Sellers have stepped back. They let the market rally and then rest unmolested. Thus the market moved laterally after its surges, giving no ground intraday. The market got a free pass to rally, and there is likely more upside given the shorts were covering in droves, driving the financials higher on massive volume. The shorts won't step in until the Uptick and Mark to Market news dies off, turns out to be a bum steer, or something else such as the continued credit deep freeze comes back to the fore. In any event, the move higher gets interesting at the next short term moving average (the 18 day EMA) as well as the November low on SP500 as old support tries to act as resistance.

TECHNICAL. High to higher intraday with no pullbacks at all. Gains were held and the indices closed at their highs. Sellers were covering , not selling. They were not going to turn right back around and sell what they just sold when the oversold rubber band was still overstretched.

INTERNALS. Strong breadth at 8.6:1 on NYSE and 4.8:1 NASD. Volume was up on both indices, surging well above average. NASDAQ trade matched last weeks downside selling volumes. A solid upside session on par with that selling. NYSE volume exploded to 2.1B shares, the highest since the last day of February. NYSE volume was driven by massive short covering of the heavily shorted financials. You look at stock after stock in those sectors and you see a surge up in the downtrend on huge trade. Buying? In the sense the shorts are covering. Sure there are some long buyers in the crowd, but this massive volume on a rebound session in a gut wrenching downtrend is by far and away short covering volume. There was some good volumes on stocks breaking higher from good patterns (e.g. BWLD, NSM), but they were in the minority.

CHARTS. Pushed on through the 10 day EMA near resistance after stalling there through lunch. After moving laterally for nearly 4 hours the indices managed to push higher late in the session and take out the 10 day EMA. Thus, though the indices took out the 10 day EMA, it was a session long effort to do it. NASDAQ recovered the November low. SOX bounced off its recent lows and is moving up to the key 50 day EMA, its first real resistance level. SP500 and DJ30 were nowhere near recovering that level. SP600 could not even retake its 10 day EMA. NASDAQ 100 managed to hold over its November low on this test and now we see if it can make a double bottom spanning November to March and break the market to the upside. After the drugging the large cap techs received Friday and Monday that seems unlikely, but you have to let the move unfold now that it has started.

LEADERSHIP. Chinese stocks jumped to the upside. Chips rallied nicely from their very solid patterns. Some retailers moved well. All of those stocks in good patterns broke higher as you knew they would when the market trigger arrived. All of those heavily shorted broke higher as well; they just don't have good accumulation patterns. They are in downtrends and the shorts covered up big time, driving them higher in their downtrend. Classic rebound moves. The market still has to come up with more stocks in good patterns. A rally versus a straight 45 degree downward sloping selloff allows stocks to work on their patterns. Even if the rally ultimately fails and the market falls into a base, you get constructive action that creates a new pool of leaders. We can look forward to that on this move. We should also note that the chips led the rally off the October 2002 lows when there were not a lot of great patterns.