主题：03/16/2009 Market View -- 宁子

SUMMARY:

- Financials lead another rally, until they run out of gas and market slides.

- New York Manufacturing cannot follow the lead from other regions, contracts at record pace.

- Factory output falls for fourth straight month.

- LIBOR 3-month continues its tick lower

- NASDAQ making its test, will need to step up to lead the next bounce.

Financials rush out early but no one else follows and market finishes lower.

The financial stocks were up again, gapping higher as Barclays was the next to say that 2009 was off to a good start. With borrowing rates at zero and loan rates at 2%, they should be making good money. OPEC held production levels steady and oil fell initially, though it did not last (47.18, +0.93). Financials were up and they pulled the rest of the market with them despite a reluctant NASDAQ as techs held back with modest gains, with leaders ready to make a second day of pullback to test the move higher that they led last week.

Nonetheless, despite a record weak New York PMI, record weak production and capacity, and weak Treasury 'TIC' data (foreign buying of US Treasuries), stocks rallied and NASDAQ stocks followed them higher. Even as the NYSE indices hit 2+% gains and the notion of a follow through session seemed to be somewhat reasonable, however, technology started slipping after lunch. It already sold back midmorning but fought back into the game. After lunch, however, stocks stumbled and it was a race to the bottom. NASDAQ started in the downside lead so it made the move to negative rather quickly. By the close the techs were sporting near 2% losses with the NYSE indices giving up their 2% gains and closing flat. A mirror flip from the morning to the afternoon, but in the end all indices were lower.

TECHNICAL. Intraday there was that gap higher by financials and then the rollover to close negative. Obviously not the bullish action seen of late. Question is, after the run by financials is this just a pullback or something more sinister given the pattern shown on the indices? Have to look at the other technical features.

INTERNALS. Very tame as NYSE breadth was modestly positive but it was backpedaling into the close, giving up 4:1 positive breadth. NASDAQ breadth hit 2:1 intraday but it gave it up along with the breadth. Nothing really bad there, however. NASDAQ volume was up but still below average as techs stalled and faded to test their break higher. The low volume makes this look like a leadership test of a break higher, and that is a positive. NYSE volume surged to the highest level since last Tuesday when the oversold rally started. While NASDAQ trade remained tame, the NYSE volume could be an issue for the upside. Financials were pushed higher early on, and higher volume was fine with that move. Problem is the financials reversed and closed lower, and even though just modestly so the volume can signal a reversal and is something watch for.

CHARTS. As noted, NASDAQ sold back on average to below average volume and is still holding near support as well as above the December lows. Modest distribution but with the below average volume that is nothing major. Similar action on SOX as it sold back and held above its 50 day EMA. It is in good position here to form a handle to its kind of double bottom formed from early February to the present. SP500 rallied further but it did not come near the 50 day EMA or the January consolidation lows. Instead it hit the peaks in the late February lateral move and rolled back. Volume was up. The action shows a evening star on the candlestick pattern, and that is a signal of some form of pullback. With the financials gapping higher and then turning over on stronger volume, a pullback is coming. The key is how severe it will be, i.e. just a test as NASDAQ's action would indicate, or something more nefarious. SP500 didn't get as high as it needed to in order to start a good test. It has left itself little room to the downside as it closed at the November closing low. It has some support at the November intraday low and the short term moving averages, but the point is it doesn't have much of a cushion to test and make a higher low. DJ30 shows a similar pattern. It failed to make the November low before showing the same potential reversal indication as SP500. SP600, the small caps, failed at the November closing low, failing to even get past the last wrung of support on the selloff. It may not do much more before rolling downside more (keep the IWM play in mind).

LEADERSHIP. Commodities of all kinds were stronger (copper, sugar, corn, beans, etc.) on the idea of re-inflating China and the emerging markets. They were up, but they still gave up a pretty good chunk of their gains. Techs and semiconductors are in pullbacks after leading higher from good patterns last week, and as noted, they are pretty nice looking pullbacks thus far. Another day or partial day of a test gives them a 1-2-3 pullback of sorts and puts them in position to make the next move higher. The market will really need them to step up and make that leadership move.

SUMMARY. NASDAQ and SOX, leaders in the move higher, were down early, but this was an anticipated pullback. Thus far they look to be doing it right and could give us new buys after a bit more testing. NYSE financials have you somewhat concerned with that higher volume reversal after a gap higher, but if the techs and chips hold and resume leadership as they did before that will help prop up the financials as they take a needed breather themselves.