主题：04/06/2009 Market View -- 宁子

SUMMARY:

- Downside open hands the sellers another opportunity, but they can't press their hand and market recovers most of its losses.

- Another downside Monday, but that has not been a bad thing.

- Slow economic day, but as expected, Treasury is threatening bank CEO's with removal if Treasury so desires.

- Some good tests are setting up some buys. Almost too nice a test. Is there something out there to upset the action?

Market pulls back, but resilience is again the operative word.

Futures fell into the bell and stocks fell at the open. Asia was positive and so was Europe, but as the European session wound down those indices reversed as the US futures were sloppy. Stocks and the indices gapped lower and sold off quickly, making new session lows into lunch.

What news prompted such lackluster performance? Over the weekend Geithner issued more threats to use his unconstitutional 'authority' to remove bank CEO's and management if the Executive Branch decided they were lacking for whatever reason. Expected, but still very unsettling every time our supposedly constitutional government is blatantly overrun by our own leaders. Sun, showing shades of Yahoo, refused the IBM offer, saying it was not enough money and wanting guarantees. Would you give them guarantees? How about 'I guarantee to pay $x for your company." Sounds very 'Yahooish' and that worked so well for that company. A famous bank analyst (Mayo) opined that loan losses would top Great Depression levels as he cut ratings to sell. His premise: bank loans are on average written down only 2% and thus have a long way to fall. Whatever; we all know results will be bad. As for the 'usual,' oil was down (51.16, -1.35), gold gapped lower yet again (870.60, -26.7), the dollar was a bit stronger (1.3422), and bond yields were mixed (0.94% 2 year, 2.93% 10 year).

As the east coast sat down to its lunch, however, the market hit a new low and turned, beginning an all-afternoon move higher. It was a bumpy ride. Stocks would advance and then give back 80% of the move before starting a new advance. It continued to make higher lows, however, and though it ran about 10 miles to gain 1, by the close the indices were at post-open highs, having cut the losses to less than 1% on the large cap indices. Indeed NASDAQ 100 lost just 0.23% thanks to gains by AAPL and RIMM, still celebrating the latter's earnings announced last Thursday after the close.

Not bad action given the rally into the session that took the indices up to next resistance and left them at a perfect point to test back. They did test back, and that was all it is. With the set up for the downside and the downgrading of financials and further attacks on private companies the market had what it needed to sell off if it wanted to. Sellers were very noncommittal, and thus when they could not close the deal on the downside the buyers slipped back in and picked up shares. Given it was Monday and Mondays of late have been ugly, not bad action at all.

One word, and it is not plastics: resilience. Earnings are coming, they are going to be similar to what you find in the toilet, yet the market continues to hold onto its gains even when it sells. Perhaps it is the case where earnings are so bad that investors figure all of the bad news is in. Then if there are any positives that surprise, e.g. RIMM, the rewards are grand. Historically, the more stocks run into earnings the more likely they won't see more of the same on the actual news. Perhaps the early earnings are solid and then the market takes a well-needed dip after additional gains.

TECHNICAL. Intraday the action was quite positive. The old negative, weak open then the recovery and rebound characteristic of more bullish markets. It was not a rocket shot back up; as noted, it was quite volatile as stocks rebounded off the lows. The indices did not make it to positive, a sure sign of strength, and volume was light. Thus the intraday action was on the bullish side but it was not a power move. Thus we were a bit hesitant to move into new or additional positions even with the rebound.

INTERNALS. Downside as you would expect with decliners leading -2:1. Volume lightened up on both NYSE and NASDAQ, and by quite a bit with 23% and 20% declines respectively. Thus there was no distribution on the downside day, but there was also no rush by a huge number of buyers as the market recovered. Lighter volume the past week during most of the move other than the Thursday surge. Volume is an issue as the indices bumped that next resistance. That rises questions as to the durability of that last leg higher, particularly with earnings at the threshold.

CHARTS. After bumping up at the next resistance level on Thursday and Friday, the indices took a pause. They were never in jeopardy of any major selloff, at least the kind we have grown accustomed to this past year. NASDAQ did undercut the 1600 level intraday but it also recovered and held above the February and December peaks. No issue with that. Similar action in the small caps (with the SP500 that is) as they could not move through that next resistance but bounced up off the lows and cut the losses. SOX lost 2% but it also bounced sharply off its low and easily held above the 2009 peaks though it gave up the early November 2008 peak. It barely cleared it the first time, so we are not going to quibble much with this test. Overall the indices paused after hitting resistance, selling off 2% or more, but then recovering to cut the losses below 1% on the large cap indices. That is about all you could really expect.

LEADERSHIP. Steel was up Friday and pretty much all of last week but it had to pause Monday. Would love to see steel step it up again. Same with the industrial machinery stocks. All are improved but in need of a bit of test to show the prior move was not just a flare gun shot, i.e. running up fast then burning out and falling to earth. Techs, chips, financials, retail, restaurants pretty much all of the recent leaders took a day off, and deservedly so. We expect a bit more of a pullback Tuesday, maybe Wednesday, and then we see how they bounce. Of course some are already in position to bounce (e.g. BRCM, BIDU), but another quick test would not hurt them at all. All in all leadership made some nice tests, just what you want to see.