主题：02/26/2009 Market View -- 宁子

SUMMARY:

- New budget and its tax allocations roadblock an early market advance.

- Jobless claims hit a 1982 high and continuing claims post a record of their own.

- Durable goods orders tumble, revisions sharply lower.

- Market trying to hang on with some good but much thinner leadership ranks.

The government talked and the market listed.

There were bad initial jobless claims (667K) and terrible durable goods orders (-5.2%), yet futures were still up. The data knocked them back some, but as the open neared futures were back up to pre-data levels. The market opened positive, and when January new home sales came out at -10.2%, once again investors shook off the data and continued higher.

Once again, however, the government spoke and the market fell. When the brand new budget was released, all the cheerleading and fancy names and slogans did not hide the facts. The market rolled over, sold into negative territory, and closed a the session lows. NASDAQ gave up close to 55 points high to low. DJ30 218. SP500 27 points. As one commentator put it, the is an angry budget looking for retribution as it raises corporate taxes, eliminates or radically reduces deductions for the 'rich', and will place even more of the tax burden on the small businesses that fuel the US economic engine. Despite claims that tax increases would only impact the top 1%, then the top 2%, and then the top 5%, the proposals severely limit deductions for those making $209K versus the $250K the President said even today. No wonder investors gave up. Another day with the sword of Damocles hanging over the market, and on Thursday it dropped and cut off the hand that feeds the federal government.

TECHNICAL. Intraday the action was poor. The old start higher then rollover and close negative and at the lows. The only thing they did not do was crash back through the November lows.

INTERNALS. Breadth was fine at -1.1:1 NYSE and -1.6:1 on NASDAQ. New lows were very well contained, coming in much lower than the last time SP500 and NASDAQ hit these levels. Volume did not jump on the rollover, but it was still strong and above average on NASDAQ. NYSE was above average as well, but it was significantly off the Wednesday levels. Not a terrible internal session and that gives the market some backbone as the indices test key levels yet again.

CHARTS. The indices sold right back down to levels hit Monday as once again the government talked and the markets listed. A tap at near resistance at the 10 day EMA on SP500 and then back down to the November closing low. NASDAQ is right up against the December lows again. SP600 is at the November closing lows. DJ30 is moving laterally in a 4 day range after breaking the November low. SOX could be instructive here. For the second day it rallied up to the 50 day EMA and the 90 day SMA, and it backed off considerably on the close. Thursday it closed negative, showing a shooting star on the candlestick chart just below resistance. Not the most bullish signal. That keeps it above the January low but it has the look of a lower high setting in, and the short term indicators have turned bearish once more on the chips.

LEADERSHIP. Leaders are getting thinner. Yes GS and several other stocks from several sectors continue to set up and look solid, but their ranks are thinning. A rally cannot survive without leadership to drive it. thus the indices need to make lateral moves and allow more potential leaders to set up and try and give the market the lift it needs.

SUMMARY. The indices continue to hold key support levels for sure, and you don't' want to get too negative as things settle a bit here at the old lows. What we are watching is SP500 of course. If it continues lower we are looking to add to the SPY downside play as well as look at some other downside plays. Many patterns have turned from indicating near term pops to near term drops. One thing, however, is that despite the terrible budget implications and the market rollover Thursday, the indices did not break the prior lows. Again, you have to have some respect for the range that continues to hold. It is getting sloppy, so we are ready to play the downside, but we need to see the break lower.

Jobless claims hit some big numbers.

The weekly claims at 667K was not a record but it challenged the October 1982 high, and that was a really bad recession. It was also near the end of that recession, indeed quite near. If that were only the case this time. What we have are some figures that are quite negative, and thus far not many signs of a bottom in the market, much more the economy.

At 667K the claims topped the 635K expected and the 631K the prior week. The 4-week average rose to 639K, up 19,000. Continuing claims hit a record at 5.112M It was not long ago at all that claims topped 3M. Massive job loss even if you factor in the size of the population and work force now versus that in 1982. Yes it is not on the same absolute scale, but the jump in continuing claims shows there is no job creation on going. Said thing is, we are talking to many small business owners and there is no plans to hire because nothing in the stimulus bill provides any incentive to do so. There are some local small businesses down here that have let go some of the help they typically keep around to give the younger kids a job or hire out some older workers part time. Those jobs are gone and they are telling us there is nothing they see in the stimulus package to bring them back.

Inside the durable goods orders.

Where they as bad as they appeared? Yes. Durables fell 5.2%, more than doubling expectations. December was revised to -4.6% from -2.6%. Ex-transportation was weak again (-2.5%) but December was revised lower as well to -5.5% from -3.6%. Business investment fell 5.4%. Machinery -20%. Computers -16%.

What does it mean? Businesses, as with individual consumers, are not buying anything. And you know what is sad? Unlike Kennedy's economic plan, unlike Reagan's economic recovery plan, and even unlike Bush 2's stimulus plan (the second one, not the first), the $800B just passed provides no real incentive to start spending on any equipment. Where are the tax credits for small businesses that buy equipment, machinery, and other capital goods to run their businesses better? Nowhere.

We have surveyed dozens of small businesses and other than the very few specifically anointed by the federal government, none of them see anything in the bill that will cause them to invest or spend for their business. Many said they wanted to buy new equipment to replace the old, but with the poor economy and now the threat of higher taxes less than 2 years away, close to 100% said they were not going to buy anything unless the equipment broke and could not be repaired. We have seen stimulus packages. History shows which stimulus types work. This is no stimulus.

MARKET SENTIMENT

VIX: 44.66; -0.01

VXN: 43.87; -0.08

VXO: 46.56; +0.94

Put/Call Ratio (CBOE): 0.68; -0.17. Pretty significant drop here even as the indices test the old lows. Now the ratio jumped over 1.0 for four straight sessions last week. That is enough to get the market moving, and the lower ratio here can mean there is more confidence. Given the slide lower that is pretty thin to hang your hat on. Best to say the put/call ratio is inconclusive and is not showing rising fear on this quick test back to the recent lows.

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: 28.6%. Another significant dive, down from 31.1% the prior week and the 35.2% it recovered to on the market rebound. Well down from 43.0%, the current top of the recovery as the market rallied off the November low. A rise from 25.3% in December and quickly starting to fall once the market encountered the January selling. Bullishness bottomed on this leg lower at 21.3% in November 2008. 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: 45.1%. Up sharply again, rising from 41.1% last week and 36.3% the week before. Hit the 34's on the lows, falling from 38.5% and 46.2% in mid-December. Still above the 35% level considered bullish for stocks, but as with bulls, still well below the level considered bearish for stocks. Bearishness hit a 5 year high at 54.4% the last week of October. 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. As with the bulls the jump in bears did its job after hitting 44.7% in the third week of March. 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). This is a huge turn, unlike any seen in recent history.

NASDAQ

Stats: -33.96 points (+2.38%) to close at 1391.47

Volume: 2.35B (-1.89%). Lower but just barely as volume remained well above average.

Up Volume: 589.828M (-255.234M)

Down Volume: 1.729B (+192.703M)

A/D and Hi/Lo: Decliners led 1.58 to 1

Previous Session: Decliners led 2.34 to 1

New Highs: 0 (-1)

New Lows: 224 (+90). Still holding low as NASDAQ hits near the recent lows.

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

Touched the 10 day EMA on the high and rolled over to close just below the December closing low though above the Monday close (1387). Volume remains at the same level of the past three sessions as it tries to hang on. As noted Wednesday, that higher volume at support can indicate buyers holding the index up, but they will have to prove it. The short consolidation continues as NASDAQ holds the bottom of the 13 week trading range. Obviously this is a critical test particularly coupled with SP500 back at the November low.

SOX (-3.60%) again tapped the 50 day MA's on the high and then turned negative. In the process of making a lower high and the short term indicators have turned down. There is still support at the January lows but this lower high is a negative for the chips in that they cannot right the selling from the two weeks prior to the last.

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

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

SP500/NYSE

Stats: -12.07 points (+1.58%) to close at 752.83

NYSE Volume: 1.488B (-17.37%)

Up Volume: 641.303M (-29.758M)

Down Volume: 835.846M (-274.588M)

A/D and Hi/Lo: Decliners led 1.18 to 1

Previous Session: Decliners led 1.64 to 1

New Highs: 2 (0)

New Lows: 160 (+58). Low new lows yet again.

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

Similar to NASDAQ, tapping the 10 day EMA on the high and then rolling over for a loss. SP500 held the November closing low on the close and that keeps it above the Monday low that tested the November intraday low at 741. In a nip and tuck battle to hold the lows right now and a quick revisit is never really great action. So far, however, SP500 is still holding the trading range though it is dangling over the edge.

SP600 (-2.05%) shows the same action, back to the Monday low that is also the closing low in the bear market for the small caps. Same storey as SP500 as we watch to see if SP600 can stem the selling and try to put in a bottom that starts the possibility of a double bottom base.

DJ30

The Dow continues to struggle, not even making it to the 10 day EMA on the high before rolling over and fading. Still above the Monday and Tuesday lows but hardly a picture of strength as DJ30 stalls at the lowest resistance in its downtrend.

Stats: -88.81 points (+1.22%) to close at 7182.08

Volume: 321M shares Thursday versus 450M shares Wednesday.

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

Dell announced earnings after hours and they were bad, but bad was expected and the stock was not mauled. Indeed there was little movement across the market after hours up or down.

That leaves the market opening Friday with the indices at the support levels they hit at the Monday close. Friday is not the best day to rally, at least as far as new buys and in this kind of market that is weakened and trying to hang on. Better to see what Monday and Tuesday bring. The market is going to bottom here or not and there is no need to be out in front this time given that the leadership patterns are weaker and fewer.

The market is still handling back economic data well. The rise off the November low started as the market was able to swallow bad economic news and rise on the prospect of a stimulus package and a bank bailout bill. The stimulus was not stimulus and there still is no bank bailout bill. There is a promise to raise taxes, and as Investor's Business Daily reported earlier the hikes would hit the 'rich' as soon as October 1. That is no 2011 date as all of the Obama team said earlier in the day. Moreover, it is on capital gains, the exact source of money the economy needs to help get it revived. Many democrats talk about hiking marginal tax rates back to the Clinton era rates when we had so much prosperity. Well the hikes did not bring the prosperity; ultimately they ruined it by draining funds from the economy. What Clinton did do, however, was lower capital gains taxes and that kept capital flowing into the economy. Obama is going to hike marginal rates on those that run the small businesses and he is going to raise cap gains as well. Now in his defense the 15% current rate would rise to normal income rates starting 2011; it is possible that by raising them to 20% Obama would then keep them at 20%. Something of a victory there.

So the market can handle the economic data because it knows it will be bad. The problem is the wildcard, the new Administration and its plans. Some are calling it a war on investors and business. Whatever you want to call it there is a definite populist emotional pitch being made and in times of strife the population tends to go along with it. The market, however, does not. Thus it is still in the position of getting slashed with each announcement about a new program or plan. The fear of tax hikes could even have a stimulus effect as well as those with capital rush to invest and take gains ahead of the rate change. A possibility though the short timeframe and the pathetic economy make that less likely.

In any event we have a market that has seen it all on the economic data and would be ready to move but for the big unknowns still with the Obama administration. Many view its actions not as a unifying force but as an attack on certain parts of society and driving a wedge there. Either way the results are the same. If the burden grows too great on those that produce the growth then they will produce less and that means less economic output and not the job creation hoped for.

Friday we will see what comes as far as any bounce. Not too hopeful there but Dell did not get crushed and there could be a morning bounce. Whether that holds would be iffy at best. With the start of the recent weeks being bad we will look at some downside positions in the event things start rocky once more. There are many stocks that are weak, but getting those plays ready takes longer and thus the later delivery of tonight's report.

Support and Resistance

NASDAQ: Closed at 1391.47

Resistance:

1398 is the early December 2008 low

1428 is the mid-November 2008 low

1434 is the January low (1440.86 closing)

The 10 day EMA at 1448

1460 is the February low

1493 is the October 2008 low & late December 2008 consolidation low.

1521 is the late 2002 peak following the bounce off the bear market low

The 50 day EMA at 1522

The 50 day SMA at 1523

1536 is the late November 2008 peak

The 90 day SMA at 1541

1542 is the early October 2008 low

1565 is the second low in October 2008

1569 is the late January 2009 peak

1603 is the December peak

1620 from the early 2001 low

1644 from August 2003

1666 is the January 2009 peak

1752 from 2004

1782 from August 2004

1786 is the November 2008 high. Key level.

Support:

1387 is the 2001 low

1316 is the November 2008 closing low

1295 is the November 2008 low

S&P 500: Closed at 752.83

Resistance:

768 is the 2002 bear market low

The 10 day EMA at 780

The 18 day EMA at 799

800 is the March 2003 post bottom low

804 is the low on the January 2009 selloff

812 is the February low

815 is the early December 2008 low

818 is the early November 2008 low

839 is the early October 2008 low

The 50 day EMA at 842

848 is the October 2008 closing low

853 is the July 2002 low

857 is the December consolidation low

866 is the second October 2008 low

The 90 day SMA at 869

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:

752 is the November 2008 closing low

741 is the November 2008 intraday low

722 is a December 1996 low

673 is a June 1996 peak

Dow: Closed at 7182.08

Resistance:

7197 is the intraday low from October 2002 bear market

7282 is the October 2002 closing low in the prior bear market.

The 10 day EMA at 7447

7449 is the November 2008 low

7524 is the March 2002 low to test the move off the October 2002 low

7694 is the February intraday low

7702 is the July 2002 low

7867 is the early February low

7882 is the early October 2008 intraday low. Key level to watch.

7909 is the early January low

7965 is the mid-November 2008 interim intraday low.

The 50 day EMA at 8101

8141 is the early December low

8175 is the October 2008 closing low. Key level to watch.

8197 was the second October 2008 low

The 90 day SMA at 8414

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

9200 is the July peak in the 2003 consolidation

9323 From June 2003 peak

9575 from September 2003, May 2001

9654 is the November 2008 peak

Support:

7008 from February 1997 closing peak

6489 from December 1996 closing peak

Economic Calendar

These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.

February 24 - Tuesday

Case/Schiller Home Price Index, December (9:00): -18.5% actual versus -18.25% expected, -18.20% prior

Consumer confidence, February (10:00): 25.0 actual versus 35.0 expected, 37.7 prior

Bernanke Monetary Policy Report (10:00)

February 25 - Wednesday

Existing home sales, January (10:00): 4.49M actual versus 4.79M expected, 4.74M prior

Crude inventories (10:35): +717K actual versus -138K prior

February 26 - Thursday

Durable Goods Orders January (8:30): -5.2% actual versus -2.5% expected, -4.6% prior (revised from -2.6%)

Durables ex-Transportation, January (8:30): -2.5% actual versus -2.2% expected, -5.5% prior (revised from -3.6%)

Initial jobless claims (8:30): 667K actual versus 625K expected, 631K prior (revised from 627K)

New home sales, January (10:00): -10.2% versus -9.5% prior.

February 27 - Friday

Preliminary GDP Q4 (8:30): -5.4% expected, -3.8% prior

GDP Chain deflator, Q4 (8:30): -0.1% expected, -0.1% prior

Chicago PMI, February (9:45): 34.0 expected, 33.3 prior

Michigan sentiment, revised February (10:00): 56.5 expected, 56.2 prior