主题：04/21/2009 Market View -- 宁子

SUMMARY:

- Market starts soft, but Geithner does not threaten any CEO's so stocks recover.

- When $700B is actually $3T.

- Feds preparing us for common share conversion versus simply getting the money back, but if some banks fail, who wants common shares?

- Just about the right timing: $103B flows out of stock funds as the indices rally 20+%.

- Some new leadership is trying to step up to support the rally, but it has a lot of water to carry as chips, industrials, financials struggle some.

Soft start but stocks find some backbone to recover some Monday losses.

The market was in a pattern of weak Mondays in March. Indeed, all but one Monday that month was negative. The interesting features: the market was starting the last run and each downside session was pretty typically followed by some solid upside gains. After the tail kicking 3% to 5% losses on the indices Monday, Tuesday the market was up, posting some 1.5% to 3.7% gains. Not a complete recovery, but quite a respectable response, at least in terms of price recovery.

Earnings were flying on the busiest earnings session of the season. The results were mixed but not bad. CAT posted its first quarterly loss in 17 years as it cut its 2009 outlook. MRK missed earnings and cut its guidance. DD reported a 59% profit decline. On the other hand, UTX affirmed its guidance and noted stabilization in the business decline, whatever that means. COH beat, saying it saw patterns return to pre-Christmas levels and it is paying its first dividend ever. Ho, ho, ho. Again, mixed but not bad. Indeed overall those beating expectations is right in line with historical levels (60%). Financial results are not as horrid as anticipated, down 25% versus the 37% expected.

There was more M&A activity after Monday when ORCL picked up IBM's sloppy seconds. BRCM is trying to acquire ELX though it is having to sue the latter over its poison pill provisions. Nonetheless, deals are trying to get back on track. Moreover, BRCM, an early leader in this rally from March, announced its earnings as well. It missed, but the miss was due to compensation restructuring charges. Indeed, BRCM said bookings improved during the quarter.

Stocks started weak in some follow through to the Monday selling, but not that weak. We noted in the morning alert we were not going to jump into the downside positions as the pre-market downside was more like just a soft opening versus a real downside follow through. From the open stocks started to recover, and after a first hour test of the initial bounce, they were on the recovery track all day, turning positive and then rallying to new session highs at the close. After Geithner started his delivery to the House Oversight Panel and noted that the 'vast majority' of banks had more than adequate capital, stocks started to rally back. NASDAQ was in the lead, and not the large cap techs. SP600 was the percentage leader once more as it tries to muscle to the front of the leadership pack. SOX and SP500, well they were up, but they are struggling even with SP500 posting a 2% gain.

TECHNICAL. The intraday action was positive with the downside open, recovery, test, then rally on into the close. Beats the opposite shown Monday, and overall the intraday action has been bullish but with a potential transition in progress this is less meaningful.

INTERNALS. Nothing compared to the Monday downside drubbing that doubled up the advancers Tuesday, but very solid at 3.3:1 on NYSE and 2.9:1 on NASDAQ. Volume was solid. Yes it was down on both NASDAQ and NYSE, but NASDAQ trade Monday was skewed by 780M shares in JAVA. Tuesday the 2.4B NASDAQ shares was as good as any last week during expiration. NYSE trade fell to average on the upside, but that still put it well over most April sessions on the move higher. Good but still hardly decisive.

CHARTS. NASDAQ held the February/December peaks and bounced on very solid volume. It is still below the January peak that it topped last week but gave up on Monday. That keeps NASDAQ in the game to take it out again, but it has made a slightly lower low. That may be splitting hairs, but it is something it did not do on the entire move higher and it is occurring below resistance after a strong move. SP500 posted a strong percentage move, but that only got SP500 back up to 850 resistance and it failed at 875 that it hit last week. Now SP500 is at the October closing low and this is key resistance. It may surprise us and surge on through 875, but likely SP500 has to move laterally here for a bit. SOX struggled to close flat, trading negative most of the session. It made a new high after the bear market last week but stalled out and gave that up Monday. The chips are tired and a test of the February peak and 50 day EMA, another 10 points lower, is necessary. SP600 jumped back up off the 18 day EMA, trying to put in a higher low, moving up to the late January high. The small caps are coming to life and as we have said before, they are economic canaries, and if they surge into leadership that is one of the best indicators we have to pull together the slightly improving economic data.

LEADERSHIP. As noted, chips are tired and are resting. SP500 and its financials have run a long way, earnings are mostly out, and the large cap index looks tired. Techs are holding well but they too are struggling to get out of their narrow range. The small caps are trying to make their move into leadership. Steel started back up after a one-day setback. Industrials showed more strength than we expected, rising on strong volume. Perhaps UTX earnings had something to do with that. The small caps will help if they step up, but there is a lot of the early leadership that looks tired and without help from other areas the small caps can support the gains to this point while the other sectors rest, but not likely alone push the market higher.

SUMMARY. The rebound on solid trade at least on NASDAQ was a good response to the Monday tail kicking. The indices held at support and bounced. The move did not reverse the Monday session but it showed there is still life in the upside as it did not simply roll over in submission after Monday.