主题：1/7/2009 Market View -- 宁子

SUMMARY:

- After the last leg market was ready to pullback and ADP, earnings gave it the reason.

- India has its own Madoff.

- Oil supplies surge and oil falls back from resistance.

- Mall vacancies on the rise.

- Some say bear market rally, some say something more sustainable.

Stocks were a bit stretched and the jobs, earnings data killed the bids.

At the end of Tuesday it looked as if the market was a bit winded and could pull back ahead of an expected terrible jobs number, taking a breather to consolidate and factor the report into prices ahead of time. We felt it could go a bit further on momentum, but when the Wednesday morning news hit it took that option away.

The futures were not bad even after AA made its usual warning and said it would cut 13% of its workforce (13,500 jobs). They were not that bad after mall vacancies were reported at a 10 year high or when India based Satyam reported that 90% of its reported cash flow as bogus. Then it got the gut punch from the ADP jobs report. ADP is usually somewhat scoffed at because it is off from the government number that follows two days later. Supposedly on this iteration it has adjusted its calculations to align more with the government figures. Thus when it announced a 693,000 jobs loss for December (-493K expected and -476K prior), that hit home. Futures turned over quickly. They rebounded just a bit when the next news hit, INTC guiding its quarter lower on some hefty investment losses (any money put with Madoff?). That second punch did in NASDAQ and SOX, the Tuesday leaders, and that pretty much hamstrung any attempt at the upside for the day.

The market stumbled at the open and sold further, tapping the 50 day EMA on the major indices. Then the oil inventory data came out showing big builds in oil (6.68M bbl), gasoline (3.3M bbl), and distillates (1.7M bbl). Oil was up near $50/bbl once more, but after that report it tumbled to close at 42.85, -5.72/bbl. Energy stocks turned over and followed it. With one of the upside leaders from the past few sessions taken down the market was wobbly. With INTC undercutting the techs, the market fared poorly. It did rebound into lunch, but that just build up more potential energy for the afternoon drop. The indices fell all afternoon into the last hour where there was a modest bounce attempt. Couldn't really make up their mind, however, and the result was just a weak-kneed late bump. Even with that afternoon selloff and undercut of the 50 day EMA by the indices, the market remained in decent shape on the close with many leaders holding support.

TECHNICAL. Intraday the action was not good. A lower start turned into a recovery attempt, and while there is nothing wrong with that, the indices never made it close to flat before they rolled over and really got into the selling in the afternoon. Low to lower, closing near the session lows. No buyers were interested.

INTERNALS. Breadth was as weak as it was strong Tuesday. NYSE stocks fell at a 4.6:1 rate while NASDAQ stocks fell 2.5:1. Volume was lower, however, falling back to average on NASDAQ and declining again on NYSE. While the price losses were ugly, the volume shows the sellers did not come out and overrun the market. It was more that the buyers relinquished control in refusing to buy after this last solid rally higher. That allowed a fewer number of sellers to push the market lower.

CHARTS. As noted the indices closed below the 50 day EMA, a key level we want them to hold near on this test. That was not the automatic death knell for the rally, however. It is a general support level and the indices, outside of DJ30, held over the December peaks that mark the move to a higher high on this last upside leg. DJ30 gave up both the 50 day EMA and the December highs, but the other indices remained solid, particularly the small cap SP600. The indices were ripe for a pullback, and though this was a bit more virulent in terms of price losses, the volume remained on the lighter side and leadership held up pretty well.

LEADERSHIP. And speaking of leadership, most everything pulled back with energy taking a good licking as oil fell. Financials were no help, however, as some big names broke lower, making lower lows in the 4 week range. That put the drag on DJ30 as JPM suffered a bad session. While financials have not exhibited leadership and thus they are not leading this rally, ultimately they have to step up and for now they at least need to tag along. Wednesday they were not doing that and the market struggled. But they were not the only reason. Tech and chips were lower as well, and they are leaders in the rally. While down, however, they and other recent leaders held up over support. We took gain in many positions, but we are willing to move right back into them if they hold near support into the jobs report and start to bounce from there. Indeed, many plays and positions held up very well despite the selling, showing no ill effects. Those that sold mostly did so on lower volume. The look was not good for the market overall, but leadership held up nicely with some new buying opportunities setting up.

SUMMARY. I could spend a lot of time talking about the day and about how the indices sold hard in price, unable to hold the 50 day EMA and unable to swallow bad news as they have done for the past month. Some were worrying about that Wednesday, noting the market waffled after the trio of bad reports issued Tuesday and the selloff on the ADP and INTC news. That is true, but there really isn't any need. As noted Tuesday the market was extended and likely needed a pullback ahead of the jobs data. That pullback is what it started on Wednesday, and as noted we closed out several positions to protect gains in the event of a deeper selloff. We are not really expecting a deep selloff on this move and thus we are looking to get back into these stocks and others that hold support over the next session on into the jobs report. The idea is that the market will factor in the bad news ahead of time and be in position to move back up. If the market is seriously looking downstream to better days ahead that is what it should do.