主题：03/18/2009 Market View -- 宁子

MARKET SENTIMENT

VIX: 40.06; -0.74

VXN: 39.8; -0.56

VXO: 41.07; -0.55

Put/Call Ratio (CBOE): 0.65; -0.13

Bulls versus Bears:

This is a reading of the number of bullish investment advisors versus bearish advisors. The reason you look at this is that it gives you an idea of how bullish investors are. If they are too bullish then everyone is in the market and it is heading for a top: if everyone wants to be in the market then all the money is in and there is no more new cash to drive it higher. On the other side of the spectrum if there are a lot of bears then there is a lot of cash on the sideline, and as the market rallies it drags that cash in as the bears give in. That cash provides the market the fuel to move higher. If bears are low it is the same as a lot of bulls: everyone is in and the market doesn't have the cash to drive it higher.

This is a historical milestone in the making. Bulls are impressively low considering we are in general a very optimistic country. The few bulls is a positive indication because it means most everyone that is getting out is out and there is money on the sidelines. In other words the ammunition boxes are full and as the market recovers investors will start opening up the boxes and firing. Little by little they will be forced to put more money into the market and there will be some rushes higher in fear they are missing the train. You relish times when sentiment is so negative because it means some tremendous buys are setting up. This could indeed be the opportunity of a lifetime, and you take advantage of it by buying quality stocks and letting them work for you as long as they will. If we can hold them for years, great.

Bulls: 26.4%. Down from 29.7% and at the lowest level since December 2008. Well down from 43.0%, the current top of the recovery as the market rallied off the November low. A rise from 25.3% in December and quickly starting to fall once the market encountered the January selling. Bullishness bottomed on this leg lower at 21.3% in November 2008. This last leg down showed us the largest single week drop we have ever seen, falling from 33.7% to 25.3%. Hit 40.7% on the high during the rally off the July 2008 lows. 30.9% was the March low. In March the indicator did its job with the dive below 35% and the crossover with the bears. A move into the lower 40's is a decline of significance. A move to 35% is a bullish indicator. This is smashing that. For reference it bottomed in the summer 2006, the last major round of selling ahead of this 2007 top, near 36%, and 35% is considered bullish.

Bears: 47.2%. Bounced back up after slipping last week. this is the peak for the run this year but is still below the December and October peaks. Hit the 34's on the lows, falling from 38.5% and 46.2% in mid-December. Still above the 35% level considered bullish for stocks, but as with bulls, still well below the level considered bearish for stocks. Bearishness hit a 5 year high at 54.4% the last week of October. The move over 50 took bearish sentiment to its highest level since 1995. Extreme negative sentiment on this move. 35% is the level that historically indicates excessive pessimism. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March. Bearishness peaked at 37.4% in September 2007. It topped the June 2006 peak (36%) on that run. That June peak eclipsed the March 2006 high (33%) and well above the 2005 highs that spawned new rallies (30% in May 2005, 29.2% in October 2005). This is a huge turn, unlike any seen in recent history.

NASDAQ

Stats: +29.11 points (+1.99%) to close at 1491.22

Volume: 2.827B (+34.28%)

Up Volume: 2.512B (+582.241M)

Down Volume: 271.118M (+111.835M)

A/D and Hi/Lo: Advancers led 2.49 to 1

Previous Session: Advancers led 2.83 to 1

New Highs: 16 (+11)

New Lows: 38 (-15)

NASDAQ CHART: http://investmenthouse.com/ihmedia/NASDAQ.jpeg

All enough to show a follow through but we note that NASDAQ could not hold a move over 1500 level that represents a lot of highs and lows since October. A significant interim resistance level ahead of the December peaks and the February peak just over 1600. NASDAQ could travel to that next resistance level on this leg if the big techs and chips continue to rally. There are still many in position to move higher. The action after the Fed announcement was a warning flag so at this point we let positions ride higher if they will and then look for a test to really get a lot more active with more upside.

SOX (+3.45%) broke through 225 and rallied to the February highs intraday (231) before backing off modestly. That is the last resistance ahead of the November peak near 250. Chips are definitely leading and can put in more upside here before they turn back, but a lot depends upon just how spent the buyers are after this run. Again, the post-Fed action was not that strong and that keeps us watching the near term reaction.

NASDAQ 100 CHART: http://investmenthouse.com/ihmedia/NASDAQ100.jpeg

SOX CHART: http://investmenthouse.com/ihmedia/SOX.jpeg

SP500/NYSE

Stats: +16.23 points (+2.09%) to close at 794.35

NYSE Volume: 2.077B (+39.23%)

Up Volume: 1.856B (+503.632M)

Down Volume: 213.098M (+79.451M)

A/D and Hi/Lo: Advancers led 4.11 to 1

Previous Session: Advancers led 3.24 to 1

New Highs: 10 (+1)

New Lows: 72 (+7)

SP500 CHART: http://investmenthouse.com/ihmedia/SP500.jpeg

Impressive internals as the financials reversed post-Fed and really surged, bring SP500 from negative to positive. As discussed earlier, it moved into resistance just over 800, hit the 50 day SMA on the high (803) and then faded to close at the 50 day EMA. That keeps it below the January low and under a swath of resistance from 800 to 830ish, and then up at 870 to 875. Moved through the November low and the February failed consolidation and is at next resistance. If shorts cover more, SP500 goes up more given the high number of financials on this index. Big 20% move to this point and the action after the Fed was not that powerful. Not expecting a lot more upside before a test, but frankly with the government making proclamations you simply have to see hw the market treats it.

SP600 (+3.51%) continued its rally, moving up to the 50 day EMA and just below the December low. Strong move but it is following the rest of the market, though it will be interesting to see if SP600 strikes its own path now that the Fed took this action. Will the small caps give it a thumbs up and move to the leadership pack?

DJ30

The Dow rallied as neatly as possible to the November closing low (7522, 7571 on the intraday high Wednesday) and then faded back to close below that level. This is the Dow's first real resistance since tumbling below that level in February so it is an important test point. It is also joined by the 50 day EMA (7630) pushing down on it. Strong upside volume as the financials surged as shorts covered. It might push a bit higher toward 7500 and even 8000 where there is some serious resistance; unwinding short positions takes some time and tends to drive stocks over time. But for the Fed trying to change the game on Wednesday this would be a very good shorting point for the Dow. We will look at that just in case, but we want to see how the market reacts to the Wednesday move before getting in too deep into one side or the other.

Stats: +90.88 points (+1.23%) to close at 7486.58

Volume: 584M shares Wednesday versus 391M shares Tuesday. Big volume as the shorts covered their financial positions.

DJ30 CHART: http://www.investmenthouse.com/ihmedia/DJ30.jpeg