主题：04/21/2009 Market View -- 宁子

MARKET SENTIMENT

In Q1 $103B flowed out of US stock funds. That was just in time to miss the March rally, and that is about the usual timing for money flowing into and out of mutual funds. Now they did catch the Q4 rally and missed the downside from mid-February to early March; not bad. Still, once they were gone the market rallied nicely.

VIX: 37.14; -2.04

VXN: 38.44; -1.27

VXO: 37.39; -2.32

Put/Call Ratio (CBOE): 0.84; -0.08

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: 43.2%. The market rally has revved up the bulls, jumping up from 36.0% the prior week. The sharp jump in the bulls continues. Back over the 35% range considered bullish, but as noted this is not a bearish indication yet. Has to get up to the 60% to 65% level to be bearish. Dramatic rise from 21.3% in November 2008, the bottom on this leg. 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: 34.1%. Continuing their decline, falling from 37.1% the prior week. Well off the high on this run at 47.2%. Hit the 34's on the lows, falling from 38.5% and 46.2% in mid-December. Just slipped below the 35% level considered bullish for stocks. Bearishness hit a 5 year high at 54.4% the last week of October 2008. 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. 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). That was a huge turn, unlike any seen in recent history.

NASDAQ

Stats: +35.64 points (+2.22%) to close at 1643.85

Volume: 2.394B (-14.83%). Lower trade but if JAVA from Monday is stripped out, a solid advance and indeed a solid session compared to any.

Up Volume: 1.923B (+816.046M)

Down Volume: 490.304M (-1.643B)

A/D and Hi/Lo: Advancers led 2.9 to 1

Previous Session: Decliners led 5.02 to 1

New Highs: 9 (+3)

New Lows: 15 (-2)

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

Held the February peak and bounced, holding in the narrow range from 1600 to 1666. As noted earlier, NASDAQ made a slightly lower low on this test, but it held support nonetheless. It has broke its March up trendline with that Monday tank lower and could not recapture it Tuesday, but a stock or index cannot maintain that kind of move indefinitely but needs to consolidate for a new run. It has tested modestly, but it has not likely done enough. A good lateral consolidation in this range would set up the next move. At this point NASDAQ is a bit winded and has not tipped its hand to a deeper test, but with chips struggling and many techs still at the top of their recent runs, it could easily slip back toward the 50 day EMA (1542).

SOX (+0.20%) continues to struggle after its run to a new high following its bear market low. It gave up the November peak and is now testing the January and February peaks. The chips led the move higher and they are tired. The last peak matched the prior one, the first time on this move. It is going to test back some more toward those support levels near the 50 day EMA at 229.

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

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

SP500/NYSE

Stats: +17.69 points (+2.13%) to close at 850.08

NYSE Volume: 1.672B (-5.09%)

Up Volume: 1.451B (+1.389B)

Down Volume: 209.702M (-1.485B)

A/D and Hi/Lo: Advancers led 3.34 to 1

Previous Session: Decliners led 7.22 to 1

New Highs: 9 (+4)

New Lows: 45 (0)

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

SP500 made a higher high on the last leg so it is not suffering the same degree of weariness as SOX, but it is having a hard time getting through next resistance at 875 and holding the October closing low at 850. It can slide into a lateral move here and consolidate for another run or it can slide back in a deeper test. Thus far it has not shown any downside virulence, but a test down to 800 would be easy.

SP600 (+3.72%) is trying to gain a leadership foothold and it rebounded sharply off the Monday selling to match the February peak. It cleared the November/January trendline. It is still making higher highs and higher lows and while it can stall here some as the larger cap indices have to consolidate, SP600 is in great position to make a strong move toward the January peak, playing some catchup with NASDAQ. An important economic indicator, a breakout over the January peak would be huge. First things first, however.

DJ30

Stalling out the past two weeks at 8000. DJ30 made a lower low this week and though it is still in its range it is showing the same tiredness as SOX and SP600. It is holding its 50 day EMA (7778) but a test back to 7500 as it works on a consolidation is a pretty easy test.

Stats: +127.83 points (+1.63%) to close at 7969.56

Volume: 424M shares Tuesday versus 453M shares Monday. Neither day this week showed tremendous volume though Monday was above average as it sold.

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