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主题：04/21/2009 Market View -- 宁子
家园 04/21/2009 Market View 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.
家园 THE ECONOMY Opposing views: $700B versus $3T.
All during Treasury secretary Geithner's testimony the number $750B was tossed around as the amount of money available under the TARP. Geithner advised Congress that there was roughly $110B left to fund the banks and that should be sufficient to get the job done.
Great. But, surprise, not all agree with the Secretary. Indeed, the 'TARP top cop' as some call the gentleman in charge of oversight for the TARP says that when you include the direct spending, loans, and loan guarantees the amount is closer to $3T.
$750B or $3T. As one former senator put it, the Secretary left more questions than answers. Questions about just how much money is really being spent, questions about how banks get out from hock, questions about how anyone will tell what banks are fit, and questions about how we will know the program is a success.
Thus as is often the case when the government is involved, there are no answers, just a lot of money getting tossed around in the belief that money solves all issues. Education issues? Money. Healthcare? Money. Energy? Money, but not for a combination of methods to cut dependence on foreign sources and bridge to the next fuel source(s). Thus it is not very surprising there were more questions than answers at the oversight hearing that was to produce answers to everyone's questions. Any questions?
Rumor to become fact, but what happens if some banks actually fail?
As reported over the weekend and on Monday, the Administration, in collusion with key members of Congress, is not going to let the big banks, or at least all of them, out from under the TARP. Ostensibly it is to 'make the public whole' but if the companies return all of the money is not the public made whole?
What is really planned is control of key financial institutions in the US by virtue of converting preferred shares to common shares, giving the federal government the largest block of shares in many of these institutions. As most business in the US has to go to these banks in order to conduct business, the majority ownership allows the feds to reach all aspects of business without ever having to pass any laws or worry about constitutional limitations. How this is not being shouted down all across the nation is mindboggling.
Now some are saying this is just rumor with no actual statement of intent to do so. But as we have seen, this is how information is disseminated and the masses primed for the actual news. This Administration leaks out the information in rumor form and then it confirms it in one form or another. Thus expect the program to be announced when the stress tests are complete.
Ah yes, the stress tests. Shrouded in secrecy and indecision as to whether to release the details or not. If they release them there could be runs on banks, right? So, don't expect many details. It, as was the original 'take it or get audited and live in hell' offer to banks for the TARP funds from Paulson, is going to be kept secret and we will simply be told that the banks just were in worse shape than feared and had to be commandeered. Geithner was already talking of the issues at today's hearing, how banks were still having serious issues. It is all leading up to the announcement as the stress test results are pretty much predetermined.
What happens, however, if the banks, despite the federal intervention and ownership, still fail? It can happen because citizens will not stand for more money going into the banks, US common share ownership or not. If it does, where in line do common shares stand? In the back. At that point will taxpayers think it better to let the banks repay the money and get on with lending and making money so the economy can grow again or play out some control scheme some in Congress have always wanted to implement?
家园 THE MARKET 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
家园 WEDNESDAY Wednesday already. My how time flies when you don't know what the federal government is going to do from day to day with the banks, the economy, or anything. All things considered and all things thrown at it, the market has done quite well.
The question on every financial show that comes up 50 to 65 times a day is whether the rally is over or not. Right now the market has not tipped its hand but it is showing that it is tired and needs a rest of some sort. The leading SOX is struggling, failing to make a new high after making a new high. It is coming back to test and the other indices are showing some top heavy action as well. SOX was first and now the other indices are struggling. SP600 is trying to emerge as a leader. Good to see but a bummer on the timing. Can the children lead? Yes, but they likely cannot hold up the rest of the market. As noted above, perhaps they can keep things on a lateral plane. Again, the market hasn't tipped its hand and the small caps have not shown yet they are truly ready to try and lead.
So we have picked at a few new upside positions, are looking at some downside positions to see if they develop, and have taken positions off the table as the market rose. We still have several positions left, partials on a lot after taking some gains. If they cannot hold support or struggle more on upside days we will close them out and see what develops. The market is top heavy but the sellers have not taken over. Monday they flexed their muscles a bit but volume was relatively light. They are not done, however, so we will continue to look for some potential downside as we also continue to look for good stocks that are pulling back nicely to keep tabs on for the move higher AND those that are ready to move higher despite the overall tiredness in the leaders that brought the market up off the March lows.
Support and Resistance
NASDAQ: Closed at 1643.85
Resistance:
1644 from August 2003
The January closing peak at 1653 (intraday)
1661 is the April 2009 prior peak
1666 is the intraday January 2009 peak
1780 is the November 2008 peak
The 200 day SMA at 1778
1947 is the October gap down point
Support:
The 18 day EMA at 1599
1623 is the early April peak
1620 from the early 2001 low
1603 is the December peak
1598 is the February 2009 peak, the last peak NASDAQ made
1587 is the March 2009 high is getting put to bed again
1569 is the late January 2009 peak
1542 is the early October 2008 low
The 50 day EMA at 1541
1536 is the late November 2008 peak
1521 is the late 2002 peak following the bounce off the bear market low
1505 is the late October 2008 closing low.
1493 is the October 2008 low & late December 2008 consolidation low
S&P 500: Closed at 850.08
Resistance:
853 is the July 2002 low
857 is the December consolidation low; cracking but not broken
866 is the second October 2008 low
878 is the late January 2009 peak
889 is an interim 2002 peak
896 is the late November 2008 peak
899 is the early October closing low
919 is the early December peak
944 is the January 2009 high
Support:
848 is the October 2008 closing low
846 is the April peak
842 is the early April peak
839 is the early October 2008 low
833 is the March 2009 peak
The 90 day SMA at 826
818 is the early November 2008 low
The 50 day EMA at 817
815 is the early December 2008 low
805 is the low on the January 2009 selloff. KEY Level
800 is the March 2003 post bottom low
768 is the 2002 bear market low
752 is the November 2008 closing low but it is not broken and done away with
741 is the November 2008 intraday low
Dow: Closed at 7969.56
Resistance:
7965 is the mid-November 2008 interim intraday low.
The early April peak at 8076
The April peak at 8113
8141 is the early December low
8175 is the October 2008 closing low. Key level to watch.
8197 was the second October 2008 low
8375 is the late January 2009 interim peak
8419 is the late December closing low in that consolidation
8451 is the early October closing low
8521 is an interim high in March 2003 after the March 2003 low
8626 from December 2002
8829 is the late November 2008 peak
8934 is the December closing high
8985 is the closing low in the mid-2003 consolidation
9088 is the January 2009 peak
Support:
7932 is the March 2009 peak
7909 is the early January low
7882 is the early October 2008 intraday low. Key level to watch.
7867 is the early February low
The 50 day EMA at 7778
7702 is the July 2002 low
7694 is the February intraday low
7552 is the November closing low. KEY Level.
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
April 20 - Monday
March Leading Economic Indicators (10:00): -0.3% actual versus -0.2% expected, -0.2% prior (revised from -0.4%)
April 22 - Wednesday
04/17 Crude Oil Inventories (10:35): +5.670M prior
April 23 - Thursday
04/18 Initial Jobless Claims (8:30): 630K expected, 610K prior
Existing Home Sales, March (10:00): 4.65M expected, 4.72M
April 24 - Friday
March Durable Orders (8:30): -1.5% expected, 5.1% prior
Durable Orders, Ex-Auto, March (8:30): -1.2% expected, 3.9% prior
New Home Sales, March (10:00): 340K expected, 337K prior