主题：03/18/2009 Market View -- 宁子

SUMMARY:

- Market shows resilience ahead of FOMC, then shows a follow through session.

- Bernanke to spend another $1.1T on direct treasuries purchases, expanded TALF, mortgage backed securities: 'no bank will fail and a 4% mortgage in every pot' New Deal.

- Market shows a follow through with that Fed assist.

- Finally figured out how the stimulus plan will work.

- ORCL earnings ramp up some more excitement as shorts will have to cover more.

Fed fears a second Great Depression, launches another 1.1T and the kitchen sink at the credit markets.

CPI (0.4% versus 0.3% expected), current account diving to -$132.8B, UK unemployment rising at its fastest rate since 1971, crude and gasoline inventories jumping (2M, 3.2M respectively). All were out early, all considered important, but all were nothing compared to the Fed and its historic announcement that it would actually, no kidding this time, buy treasuries. In prior times the Fed has mused publicly about buying treasuries but never actually got to the point where it said 'we are doing it' and set a number figure to it. Those days are gone.

Now we have a new "New Deal" with the motto 'no bank will fail and a 4% mortgage in every pot.' Bernanke announce an additional $1.1T in spending and facilities. $750B for mortgage backed securities and that is expected to drive mortgage rates down to 4% for everyone, not just those that are in over their heads for whatever reason. May not like the spending, but you have to like the attitude: we are all in this together and we all deserve a break. Another $100B for Agency debt (on top of the $100B already set aside). And then there is the $300B for the actual purchase of long term treasuries. Big intervention directly impacting bond yields.

Even before Bernanke the market showed great resilience after a slow start. It shook off the selling and started to move up ahead of the announcement with NASDAQ and SOX resuming leadership as they turned nicely positive. Then the Fed announcement hit and everything turned over. Stocks shot higher. Bond yields dove from notching cycle highs (1.03% on the 2 year down to 0.79% at the close; 3.02% on the 10 year to 2.50% on the close). The dollar was slammed (1.3485 euros). Gold shot higher on inflation fears (942.3, +25.5). Everything jerked the opposite direction it was going. Stocks rallied sharply, sending SP500 over 800 and NASDAQ over 1500. Then stocks gave all of the post-Fed move back. A bounce in the last half of the session recaptured half of the post-Fed gain. Very interesting action.

We took some more gain on the news, but with the shorts having to cover thanks to the Bernanke mortgage in every pot new deal there could be some more upside that drives SP500 to the 830ish key level and from there likely a pullback. It was ready to turn back at this level anyway but the Fed has changed the playing field some and the shorts feel the need to cover. Thus we can get some more upside out of this rally to that key resistance and then some kind of pullback.

TECHNICAL. As noted, the market was resilient before the Fed announcement, and that was a good sign of some underlying strength building. Then the surge on the news but also the giveaway of the gains. The point: not as strong as you would expect after such a Fed proclamation.

INTERNALS. The internals and the prices on SP500, NASDAQ, SP600 and SP400 were strong enough for a follow through with the 2% to 3.4% price gains. Sold 4:1 breadth on NYSE and 2.5:1 on NASDAQ. Volume surged on both NYSE and NASDAQ. Definitely follow through caliber . . . just as the indices reach some important resistance. It also occurred on the seventh day, and follow through sessions occurring before the seventh day are typically, and that is typically, stronger. Doesn't mean there is an automatic rally on from here or that resistance will win out. It tells us the market can continue to build for an upside move with more stocks forming bases even with a pullback from this resistance and we have to watch what happens now the Fed has tried to once again change the game.

CHARTS. Even with the push from the Fed it is key that SP500 could not push through 800 and hold it. Made it to 803, gave it back, then could not get back up even with the financials on a tear. Up and down after the Fed, unable to hold a move into resistance. NASDAQ hit 1507 on the high after moving through the 50 day EMA, but it too could not hold the move, giving the post-Fed move back and scratching to get some of it back before the close. This may not be the resistance that stops it (the next is 1600), but how it reacted in the post-Fed euphoria tells us it was not all flowers and candy. The sellers moved in at that point and fended off a rebound.

That said the move upside can continue as the shorts continue to cover their financial shorts, but unless the upside can show something more than Wednesday it can make the higher resistance points (830 on SP500) but those could still stop the move and at least send it back on a test. The Fed has made it more likely that any pullback will be a test versus a rollover to ugly selling as the Fed put something of a bid under financials and the market in general. How it acts at this resistance and if SP500 can even make 630 will tell a lot of the story.

LEADERSHIP. We were looking at some financials that were setting up but then the Fed shot them higher. As noted there could be more upside as short positions are covered, but some decent set ups such as on WFC were shot today. Now if SP500 cannot break 830 and fades then we could get some set ups here. The leaders of late were moving higher with chips moving up along with techs. Metals started to stir after the Fed; good volumes on PCU, RIO, FCX. Commodities may have had their fires lit. Retail is still looking good even for some new breakouts as with some techs and chips. More leadership is setting up as the market continues to move in the rebound, and a pullback will only enhance that action as long as it is just a pullback. Getting better, the leaders are leading even on soft days (techs and chips were out in front early), but there is still work to do overall. The follow through tells us to look for more base building as the market has more of a chance just to pullback on a test versus sell off hard so the outlook is at least better for leadership to develop.