主题：03/30/2009 Market View -- 宁子

SUMMARY:

- Pile of bad news starts the week on the downside.

- World economic news hardly inspiring.

- Administration rejects auto restructuring plans, prefers bankruptcy for automakers. So why is the President removing CEO's versus a bankruptcy judge?

- Financials on the edge of another selloff, techs holding a pullback test. Once more we see which group tilts the market's balance.

No bounce for stocks as world economic woes move front and center once more.

Ah the smell of fear on a Monday. After failing to rally further Friday and full test next resistance the indices didn't have much of a chance out of the gates to start a new week. A veritable smorgasbord of bad economic news, much of it focusing on financials, assured a downside session even before the bell rang.

European banks were the center of the news storm as the governments in the UK, Spain and Germany had to intervene to take over teetering financial institutions. Geithner, after receiving some lessons in authoritative extemporaneous speaking that helped build some confidence in the market with his long-awaited bank plan, stepped in it once again. After some hope snuck into the picture after many banks gave the finger to more US TARP funds, the Treasury Secretary relapsed into his old ways, offering that that US banks would require 'large amounts of aid' going forward. That pretty much skewered the financials.

On top of that the Administration rejected the automakers' restructuring plans, removed the GM CEO, told Chrysler the feds were going to have a shotgun wedding between it and Fiat, and if things didn't get better it was off to bankruptcy court. Gee, several billions later and now we are going to the place that all other businesses go to when they have these kind of financial issues. Japan threw in its fifth consecutive month of declining production. MS added the icing with its report saying 'sell US stocks.' Hard to get happy after all of that. The foreign markets were lower, US stocks were lower. US Treasuries were stronger and the dollar was stronger; everyone was moving away from world equities and toward US bonds and dollars.

Stocks moved in the opposite way, gapping lower and toward support levels broken through to the upside last week. They ran through the that support on the opening dive lower. After that dump they landed at some interim support and worked laterally in a relatively narrow ranged the rest of the session. What a consolation prize. Overall trade was light but the financials sold on stronger volume, and that pushed up NYSE volume. Still light overall. Tech showed relative strength; kind of a funny statement on a day of 2+% losses, but techs did show comparative strength. The question once more is whether financials again pressure the overall market and lead it lower.

TECHNICAL. Intraday the action was crappy with an overlay of general malaise. After the initial dive stocks moved laterally for 5 hours, rallied late, but even with that push off the lows they could not breakout from the range at the bottom of the trading range. The bounce eased the sting, but it didn't change the session's character one bit.

INTERNALS. Breadth was negative. Really negative at -6.4:1 on NYSE. NASDAQ was by comparison decent at -3:1. Relative breadth strength. All that shows is that the techs were not getting the same whip the financials got. Volume was mixed with the financials selling on stronger volume, starting to distribute once more. NASDAQ volume was lower with volume falling even further below average. Financials are getting dumped some, techs are being held. Once more we will see if the financials spell the doom for the rest of the market as in February.

CHARTS. Gapped lower, sold through near support on both SP500 and NASDAQ, and could not recover much ground. NASDAQ managed to recover with a mildly respectable late bounce, but that only took it up to the top of its long intraday trading range; it broke it late, but gave it up at the bell. SP500 never made the pretense, falling through support and hanging on to the top of the late February consolidation that is now coincident with the 18 day EMA. Decent hold, but the gap down broke the short uptrend formed off the early March low. SP500 is left in a precarious position where it could easily test down to the November low at 752 (closing). That test would not really be a bad thing, setting up a higher low. The November low makes since; sometimes the market does as well. SOX broke back into its trading range, but not deeply. It is worth watching here to see if it can quickly jump right back out.

LEADERSHIP. Despite the downside leadership was showing up. Retail actually positive with stocks such as AMZN and HOTT posting gains in a weak market. Others were up but scattered with no concentration of strength. Now just because they were up does not mean leadership is out. Most pulled back, most down pretty sharply but holding support decently. The losses were more than you want to see in a session as it leaves little room to play with as the market continues to test the run higher. With the financial stocks under pressure it is up to the recent leaders, e.g. tech, chips, retail to hold the line, particularly as commodities and some energy are under pressure as well.

Monday was not a good day for economic news, but it did not alter the nascent improvement showing up in the US data across a broad spectrum. The Monday news did not change what the data has shown. What it does show is worry by the market, investors, and even our overseas allies and partners as to the course we are taking.

Europe wonders what the heck we are doing.

We have reported that many of our European allies are asking our politicians, business leaders, and others just what the heck we are doing over here. They rely on our entrepreneurial, free-wheeling free enterprise system to produce the outsized gains it has always produced and thus finance the rest of the world's cheaper drugs and healthcare research, innovative technologies, and high standard of living to consume their goods. They don't want us to be like them, i.e. with stagnant GDP growth due to economies burdened by massive entitlements and social programs. They need us to fund their economies. As Daniel Hannan of the British Parliament says so passionately, stop with the national healthcare moves that are such a disaster in Europe. Stop with the move toward their socialism policies. It won't make them like us more. Europe likes us for what we are, i.e. our deep-seated mistrust of large centralized government. Indeed that is what we founded our country upon and yet we seem intent on a makeover into just the thing our Founding Fathers rebelled against and tried to avoid in drafting the separation of powers among the three branches of government.

Just how far are we going to go in abrogating the Constitution?

So, that left a lot of people Monday wondering why in the name of the Constitution was the President acting to remove the CEO of a private company, regardless of whether that company received public funds to bail it out. Where is it that the President tells a company it must merge with another company or else?

The administration says it favors bankruptcy. Then why didn't the Administration simply say 'sorry, your plans are not doing it for us, so no soup for you!' and let them file for bankruptcy? In bankruptcy court the judge would then, as per the law, make decisions as to the operation of the bankrupt entities. If the CEO needs replacing, that is the purview of the bankruptcy judge. It is not, and it is a massive, massive overstep of executive authority for the President to remove the officers of private companies. The precedent is catastrophically fatal to our system of government as it completely jettisons the Constitution and its grants of authority.

There was not a lot of outcry. Seems as if everyone is stunned by the extent of the power grab or they are just asleep at the wheel, willing to give up rights as they are too lazy to be ever vigilant as is required by our form of free government.

The market did speak up, however, and as it has consistently done when these extra reaches for power are announced. Everyone else needs to step up and speak out and look at things form a constitutional perspective or we will find ourselves with very few of the freedoms left that we have enjoyed for well over 200 years and that our forefathers have fought and died for along the way.

MARKET SENTIMENT

VIX: 45.54; +4.5

VXN: 44.87; +3.42

VXO: 45.21; +1.82

Put/Call Ratio (CBOE): 1.14; +0.22. Big jump in the ratio as institutions bought massive amounts of downside protection and a lot of individuals bought some puts as well. Over 1.0 on the close is important, but it takes more than just one close to make a difference.

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: 28.9%. A fraction more bulls (28.4% last week) but not really commensurate with the market gains. Not a lot of belief in it just yet. 29.7% three weeks back, down from that 'optimism' 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: 43.3% versus 44.3% the prior week. Slowing the decline from 47.2% as here as well there were not many believers in the run higher. Still showing plenty of worry. 47.2% is the peak for the run this year but is still below the December and October peaks. 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: -43.4 points (-2.81%) to close at 1501.8

Volume: 1.963B (-4.67%)

Up Volume: 294.603M (-165.918M)

Down Volume: 1.726B (+92.901M)

A/D and Hi/Lo: Decliners led 3.16 to 1

Previous Session: Decliners led 2.97 to 1

New Highs: 5 (-13)

New Lows: 31 (+18)

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

Gapped lower and sold through 1500ish support. Held above the 50 day EMA (1477) on the low and rebounded to close over 1500. Not bad action, showing that relative strength even though it is down in the range again. This is the general area it needs to find support over the next few sessions. The low volume was a positive as it shows no heavy selling. The price action was not great but it is holding where it needs to for now.

SOX (-4.42%) gapped lower as well, falling back into its trading range, but it did find support at the 10 day EMA on the close. Chips are the market leader and a hold in this 225 range would be a bonus.

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

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

SP500/NYSE

Stats: -28.41 points (-3.48%) to close at 787.53

NYSE Volume: 1.512B (+4.73%)

Up Volume: 73.656M (-118.426M)

Down Volume: 1.435B (+188.681M)

A/D and Hi/Lo: Decliners led 6.39 to 1

Previous Session: Decliners led 3.07 to 1

New Highs: 8 (-4)

New Lows: 66 (-21)

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

Volume was up on NYSE and you could say that means some distribution, but volume was still well, well below average. Thus there really was not distribution outside of the financials and then just some of them. Good to see volume backing off. Better to see it drop off and SP500 hold at this level. Likely? Down to the November low at 752.

SP600 (-3.05%) sold off as well, gapping and then tapping the 18 day EMA on the low before a rebound, albeit modest. Holding above the February consolidation as well, but it is a follower here and needs the other indices to run up for the small caps to run up.

DJ30

Sold off to the November low, undercut it, and rebounded to close right at that level. Volume was up but below average. Key level to hold.

Stats: -254.16 points (-3.27%) to close at 7522.02

Volume: 383M shares Monday versus 323M shares Friday.

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

Two days down on overall lower volume. Another downside day without a major breach of news lows on this selling and on lower volume is constructive and can lead to a rebound if financials stop with the selling and the techs and chips take to the lead.

SP500 broke its recent uptrend from the March low and that is not a good sign for the upside. It did occur on that light trade, and that helps, but how many times has selling started on a light volume session only to intensify? More than a couple during this selling from last summer.

That means you have to take care of further downside from here if the financials cannot find a reason to catch a bid once more. There was no chance of that Monday and with the size of the gains from the low a bit more testing by the financials is typically in order. As noted above, an SP500 test of the November low is logical and would not mean the end of the rebound move. NASDAQ is trying to hold its support, and if SP500 sells to that low the question is how far does NASDAQ sell and how much of its move does it bitterly cling to along with its religion and guns. Large cap techs, despite their gap lower and break of their own up trendline off the March low, easily held support at 1200 and bounced. There is promise in those techs yet again, but yet again they have to fend off the albatross-like weight of the financials as the latter continue to thrash around in this economy.

So . . . the easiest path for the financials and thus SP500 right now is further selling toward the November low. For techs it is to sell further as well but NASDAQ has some support it can play with a bit. SOX is back in its range, and though it is the strongest that doesn't mean it gets smacked around a bit more as well. As long as our positions hold their near support points we can leave them alone, and it was good to see them bounce late in the session. Not enough to remove them from harm's way, but it showed there was life still in those market leaders. If we get a bounce Tuesday we see how strong and gauge if we want to use it to take some off the table. If the market doesn't bounce then we want the upside to hold in their near support ranges and set up for the next move higher. Another modest day of pullbacks (and that means nothing like Monday) on light volume and they have done the requisite testing and are in position. Then we see if they hold and can bounce.

Right now, however, with the trend breaks, we are looking for some more testing to prove just how solid the leadership is before the market shows any renewed bounce, particularly with earnings season close at hand. It is a good thing to get some of the froth out of the move ahead of earnings because a run into earnings without any fade is begging for selling on the news. Of course earnings are expected to stink such as they have not stunk in years and years. The general idea is that earnings will be so bad that you have to think they might be good. In other words you know when a company reports a horrific quarter but announces restructuring, new management, etc. and the stock bounces. It is bad, it is putrid, but there are only so many degrees of bad. That will certainly happen for some stocks, but for the majority, bad is usually bad, and thus any rise off this test is good for some selling when it starts to stall out.

Support and Resistance

NASDAQ: Closed at 1501.80

Resistance:

1505 is the late October 2008 closing low.

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

1536 is the late November 2008 peak

1542 is the early October 2008 low

1569 is the late January 2009 peak

1587 is the March 2009 high

1598 is the February 2009 peak, the last peak NASDAQ made

1603 is the December peak

1620 from the early 2001 low

1644 from August 2003

The January closing low at 1653

1666 is the intraday January 2009 peak

1780 is the November 2008 peak

Support:

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

The 50 day EMA at 1477

The 18 day EMA at 1478

The 50 day SMA at 1463

1440 is the January 2009 closing low

1434 is the January intraday low

1428 is the mid-November 2008 low

1398 is the early December 2008 low

1387 is the 2001 low

1316 is the November 2008 closing low

1295 is the November 2008 low

1271 from is the March 2003 low, 1253 intraday

1262 from July 2002

1192 is the July 2002 intraday low

1114 is the October 2002 low, the bear market low

S&P 500: Closed at 787.53

Resistance:

The 50 day EMA at 797

800 is the March 2003 post bottom low

805 is the low on the January 2009 selloff. KEY Level

815 is the early December 2008 low

818 is the early November 2008 low

The 90 day SMA at 828

833 is the March 2009 peak

839 is the early October 2008 low

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

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:

The 18 day EMA at 783

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

722 is a December 1996 low

681 is the June 1996 intraday peak, 673-71 closing

665 from August 1996

656-654 from January, April 1996

607-05 from November 1995

Dow: Closed at 7522.02

Resistance:

7552 is the November closing low. KEY Level.

The 50 day EMA at 7634

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

7932 is the March 2009 peak

7965 is the mid-November 2008 interim intraday low.

The 90 day SMA at 8013

8141 is the early December low

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

8197 was the second October 2008 low

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:

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

The 18 day EMA at 7466

7449 is the November 2008 intraday low

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

7197 is the intraday low from October 2002 bear market

7115 is the February 2009 closing low

7008 from February 1997 closing peak

6528 is the November 1996 peak

6489 from December 1996 closing peak

6356 is the April 1997 intraday low

Economic Calendar

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

March 31 - Tuesday

March Consumer Confidence (9:00): 28.0 expected, 25.0 prior

S&P/Case-Schiller Home Price Index, January (9:00): - 18.6% expected, 18.55% prior

Chicago PMI, March (9:45): 34.4 expected, 34.2 prior

April 01 - Wednesday

March ADP Employment Change (8:15): -648K expected, -697K prior

ISM Index, March (10:00): 36.0 expected, 35.8 prior

Construction Spending, February (10:00): -1.6% expected, -3.3% prior

Pending Home Sales, February (10:00): -2.0% expected, -7.7% prior

Crude Oil Inventories, 3/27 (10:00): +3.3M prior

Auto Sales, March (14:00): 2.9M prior

Truck Sales, March (14:00): 3.5M prior

April 02 - Thursday

3/28 Initial Jobless Claims (8:30): 653K expected, NA prior

Factor Orders, February (10:00): -0.3% expected, -1.9% prior

April 03 - Friday

Nonfarm Payrolls, March (8:30): -656K expected, -651K prior

Unemployment Rate, March (8:30): 8.5% expected, 8.1% prior

March Average Workweek (8:30): 33.3 expected, 33.3 prior

Hourly Earnings, March (8:30): 0.2% expected, 0.2% prior

ISM Services, March (10:00): 42.0 expected, 41.6 prior