主题：04/14/2009 Market View -- 宁子

SUMMARY:

- Stocks have a hard time getting over retail sales and the President's agenda, and cannot push the advance farther.

- Retail sales cannot make it three in a row, but no one was even looking for two in a row.

- PPI shows no threat of inflation until inflation rises.

- On the stagnation path once again.

- INTC earnings are solid but the reaction is negative. Earnings honeymoon may have been short and just kind of sweet.

Retail sales slow the indices just as they try to solidify the second leg higher.

Futures were modestly lower but when the March retail sales came out they were solidly lower. The PPI was neutral, showing no inflation pressures. Earnings were good with JNJ beating handily and confirming 2009 guidance and GS blowing out results but offering billions in a new stock issue. Surprisingly the economic data trumped the earnings results.

Stocks started weak but made a run that started on the heels of the initial 10 minutes of trade. It was good enough to get the indices scratching at positive just about an hour and one-half into the session. Then they tested, sporting modest losses into lunch. Everything was fine until the President delivered a strong affirmation of his 5 point 'agenda for change' that is itself a change from what many voting for him thought the change would be. Sound confusing? It isn't to the market. His expansive big government in every aspect of your life and promises to control, from the federal government, executive pay, sent stocks from just a modest pullback to test a good recovery to a sharp selloff as the afternoon session got underway.

Stocks sold to session lows in the span of 12 minutes, undercutting the Monday lows and pushing the indices to 2% to 3% losses. Things leveled out as Bernanke made is second speech of the day, and stocks did recover the losses suffered as the Obama speech concluded. They never got back near to session highs, however, but they did cut the losses back to the -1% range and less. Indeed SOX, the relative strength leader all session, turned positive for the second time in the session.

The negatives for the day, however, were too much to bear. In the last hour the indices ran into the early morning selloff lows and faltered. They tried to resume the move but in the last half hour gave up and slid down again. They avoided the session lows, but the losses ramped back up to the -2% to -3% range. The culprit for the selling: the financials. They looked pretty solid early, rebounding nicely from the weaker start. They suffered badly after the Obama speech and when they could not recover with the market in the afternoon, the rest of the market gave in. Not a great session, though with it just being day one of the selling there was not a collapse.

TECHNICAL. Intraday the action tried to redeem itself after the weak open but it folded the tent over lunch and never recovered.

INTERNALS. Breadth was modestly negative at -2:1 on both NYSE and NASDAQ. Breadth was not the issues. The problem was with volume. It was the strongest (average) on NASDAQ since early April. It was above average on NYSE, thus a bit more telling. Either way it was higher volume on selling and that is distribution, i.e. dumping of stocks more than accumulating them of late. Now the market can suffer a day of distribution in a continuing move higher, so we are not overly concerned about the rising trade (it was still just average on NASDAQ). Nonetheless, volume was weaker on the way up and the distribution happened at the top near resistance. Sellers clearly entered and were stronger than the recent buying. They were more active and could be even more so Wednesday given the response to INTC's earnings.

CHARTS. The indices lost a bit more ground than you want to see in one session. You want to see a more orderly pullback, and things were looking pretty good until the midday fireworks. The overall view of the charts is still positive as they are holding easily above next support. The drawback is this is just the first day of a pullback and 2% to 3% declines quickly mount up and leave a market little maneuvering room. The good thing is there is still room for a decline and test, e.g. NASDAQ to 1600 (another 2% loss) and SP500 to 825ish. The rising selling volume creates the question as whether they will hold that support. For now in good shape but you don't want to see the distribution continue.

LEADERSHIP. The chips were back in the game, something we were looking for, and they were helping prop things up. That was ahead of INTC's earnings, but once again chips were in the game. Financials were down early but rebounded nicely, ready to add needed support for the chips. After the morning session and the speech, however, the financials gave up. The chips could not do it alone, and then the techs struggled and the small caps tanked. The small caps are trying to establish some upside momentum but they keep getting dragged back. With the weaker economic data that is somewhat understandable, but if the overall economic picture is improving, the small caps will need to take a share of the lead before too long. As for the chips, despite no help they held up well ahead of INTC, but now we will see if they can do the same now that the news is out.