主题：04/20/2009 Market View -- 宁子

SUMMARY:

- Ever-changing bank regulation, renewed worries about world economies provide trigger for post-expiration decline.

- Feds preparing everyone for bank nationalization.

- Global reflation trade takes a hit as investors run to safety.

- After hours earnings try to rally the troops for Tuesday.

Rally was ready to test and it flunks the first section.

Friday after hours was cheered as six regional banks proffered their TARP funds and the government accepted them with no strings. That was a hopeful signal, but even with that we predicted right here that the federal government would likely not allow the larger financial institutions to do the same. It didn't take long to get an answer to those musings as the feds more than hinted that it would not accept return of funds from the larger banks but would require conversion of the preferred shares into common shares, giving the federal government the largest voting block of stock in many of these institutions. The chance of controlling private enterprise through the major banks as well as the revenue windfall presented is, as feared, simply too much for a government controlled by those wishing to expand federal powers so far past constitutional authority as to make the Constitution irrelevant.

That may sound alarmist but recall the soothing words from those in Washington when all of this was going down originally last fall: in times of crisis the federal government historically steps in to lend a hand, and when things are stabilized, it steps out. That was how this was sold to everyone, i.e. a temporary but necessary intervention to right the ship of capitalism and then a withdrawal to let capitalism go forth and prosper. This has been repeated frequently by the current Administration. If this was the case, why would this be brought up BEFORE the bank 'stress test' results are completed? It indicates that the decision is a forgone conclusion and that the results may be jiggered to favor takeover.

Before you think we are talking only of the current administration we state clearly that a lot of this intervention was dreamed up by the Bush administration though those that have sought federal control of private enterprise for years quickly jumped on board the wagon and indeed reworked it to make the plan even more onerous to the private sector, reserving these ownership rights in the name of 'making the taxpayer whole.' Moreover, many of the so-called conservative republicans have formally or informally issued a 'no position' position on the removal of private CEO's by the executive branch or the refusal to allow banks to extricate themselves from TARP. These conservatives are conspicuous by their silence and are thus giving the federal takeover a tacit and almost unanimous thumbs up.

That sobering attack on capitalism dampened the market before it had a chance to get into the starting blocks for the new week. Then on top of that there was the worry that crops up every three weeks that the world recovery attempt just ain't making it. Gold spiked (886.40, +18.50). Oil prices tumbled (45.69, -4.64). Treasury yields tanked (2.84% 10 year, down from 2.95% Friday). The dollar surged (1.2968 versus 1.3026 Friday). All of these moves were safety trades as the one-two punch of bank nationalization and global recovery worries (were these the RESULT of the potential US bank action?) teamed up to send a market ready to test after a move higher into expiration sharply lower.

Earnings from BAC that were quite solid, a merger between ORCL and JAVA (after IBM said the coffee was too costly and too stale), and some upgrades were nowhere near enough to blunt the negatives swamping the market. Indeed even with the good BAC earnings that stock was down 24%. Banks on average were down 15%. Financials took the news very badly and that cut the rest of the market off at the knees on Monday.

The move lower was not just a test that you would expect after a rise into expiration. A 3.3% to 5.7% drop on the indices is not the stuff tests are typically made of. Volume surged on NASDAQ well above any recent levels, making it look like sellers were taking it out on financials and the rally leaders, the techs. But there was a silver lining and some mitigation from the M&A deal as that trumped up the volume. They were hit hard but then again all sectors were taken lower.

TECHNICAL. Intraday action was as weak as you would expect. Well, not exactly. After the decline at the open stocks moved laterally for 4.5 to 5 hours before a last hour rebound attempt. That rebound lasted a half hour and then stocks were crammed back down on the close to session lows.

INTERNALS. As you would expect breadth was terrible (-7.2:1 NYSE, -5:1 NASDAQ). Then you look to a potential saving grace, the volume. On first blush it looked as if there is no solace there. NASDAQ trade exploded to 3.2B shares, the strongest volume in six months. But . . . JAVA, the takeover target of ORCL, traded 780M shares, or about 750M shares more than average. NYSE volume was rather bland in comparison, coming in just above average, higher than most of the sessions this month but less than Friday and three sessions out of the last seven. Thus while the leading index sold off on heavy volume, it was not really the kind of distribution that shows a lot of big money institutions dumping stocks.

CHARTS. As the indices and big stocks sold back gains to the tune of 3% to 5% you heard the usual asinine comments on the financial stations about how the indices have just run higher 20+% and were due for a pullback. No one denies that but 4%+ declines in a single session are taking back 20% of that 20% gain. That is not just a pullback and it is not something to dismiss as just a normal giveback. The key is whether the indices continue to sell off or start something of a lateral move to consolidate versus selling off and seriously damaging the patterns. The first indication is the move is a swan dive, but reactions to good or bad news (in this case the latter) are often exaggerated and thus we have to see how the move planes out and if the indices can hold key support levels.

LEADERSHIP. Leaders were down along with everything else and indeed many of the stocks that plowed the upside ground for the rest to follow were targets for the sellers. There were many breaks of the steep up trendlines formed off the March lows. That is not a certain recipe for the death of a move; a stock will often break that sharp, first trend higher and then consolidate, base out some more, or simply test other support and rally again. With short term positions such as options, however, we didn't want to take the chance of a further decline or a lateral languish that bleeds value. Many are still holding longer term support, at least longer term versus the March trendline, and if the selling dries up and turns more into a lateral to slightly lower consolidation in the indices there will be some good buys. With the violence of the overall market move lower on Monday, however, you want to see how things settle out before you jump quickly into tests of near support.

MARKET SENTIMENT

VIX: 39.18; +5.24

VXN: 39.71; +4.42

VXO: 39.71; +4.74

Put/Call Ratio (CBOE): 0.92; +0.2

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: -64.86 points (-3.88%) to close at 1608.21

Volume: 2.811B (+19.06%). Volume was up but as noted, some 750M shares were 'extra' JAVA shares on the ORCL takeover bid. Stripping that out it was down from Friday trade levels.

Up Volume: 1.107B (-480.176M)

Down Volume: 2.133B (+1.322B)

A/D and Hi/Lo: Decliners led 5.02 to 1. Pretty hefty downside breadth as the leaders in the rally were obvious targets for some selling.

Previous Session: Advancers led 1.59 to 1

New Highs: 6 (-18)

New Lows: 17 (+11)

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

After moving over the January high NASDAQ didn't have enough gas in the tank to push higher or to hold the gains. It gapped lower and sold to close at session lows, holding just over the 1600 support levels and the February and December peaks. A hard thumping on volume that was up overall but only up due to the JAVA takeover deal. NASDAQ is still in the narrow range between the February high and the January high, and that leaves it in good position to do some lateral consolidation and build a new shelf of support to make another run at the January peak and then the November high, the high after the harsh selloff started last September. A harsh start to the selling but not a collapse below key support.

NASDAQ 100 showed similar action as it failed just below the November peak and fell back toward the January and February highs. As with NASDAQ the large cap techs remain above support and can hold here and continue to consolidate for another run. We will see.

SOX (-5.74%) was not surprisingly the market leader; it tends to be more volatile. Gapped lower from the 200 day SMA and after just clearing the November peak, making a new high following the bear market selloff. It broke its March up trendline on the move and looks ready to test the break over the January peak, just 5 points away. The clear leader on the move higher, it is the clear selling target outside of the financials.

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

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

SP500/NYSE

Stats: -37.21 points (-4.28%) to close at 832.39

NYSE Volume: 1.761B (-9.82%). Volume was above average, but overall lower from the Friday expiration trade. No special volume here as trade was lower than three other April sessions excluding expiration Friday.

Up Volume: 61.707M (-1.09B)

Down Volume: 1.695B (+905.105M)

A/D and Hi/Lo: Decliners led 7.22 to 1. Small and mid-caps were down over 5% each and of course breadth was pathetic as a result.

Previous Session: Advancers led 1.91 to 1

New Highs: 5 (-7)

New Lows: 45 (-18)

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

Financials were gutted, some more than others (the broker dealers held up relatively well), but when the big names are hit as they were the large cap index is going lower. Unlike NASDAQ and company the SP500 broke below near support at 850 that marks the October low. It was not a total breakdown as it managed to hold over the 90 day SMA (826) and is back in that general range of slop from 800 to 850 that actually extends on up to 875. Lots of slop. Looks as if a test of 800 is a given and the question is whether it is a straight flop to that level or as discussed above it planes out some and forms the kind of consolidation an index can rally from.

The small cap SP600 (-5.50%), just off of making a higher high over the late January and early February peaks, turned over and fell right through those levels. It did manage to close right on the October closing low and that puts it right in the middle of the range from 230 to 250. As with SP500 that leaves SP600 in position to hold and consolidate and try to set up a shelf to rally from once more.

DJ30

Thanks to the flogging of the financials the Dow was knocked back from its run to the October low, falling back below the January and early February lows. It is still more or less in the range, but it is also in the laggard range. The Dow has lagged on the way up and it is lagging on the selling, losing just 3.56% on the session. DJ30 can't get ahead either way.

Stats: -289.6 points (-3.56%) to close at 7841.73

Volume: 453M shares Monday versus 537M shares Friday on expiration. Still above average.

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

The run to safety Monday, i.e. the moves into US Treasuries, the US dollar, and into gold, once again arose as the worries about a global economic recovery materialized. Why Monday? Why Monday when last week China's growth rate showed the lowest since the Boxer Rebellion? Why Monday when the prior three weeks the economic news out of the EU was on the lines of Europe in the immediate aftermath of WWII?

Okay I am embellishing a bit but the point is that the data about the troubles in the rest of the world has been very apparent but the market rallied anyway. It was only when the largest US banks were truly threatened with nationalization that the woes of the rest of the world became enough to supposedly cause the spin lower. The reason: if the US goes to centrally planned economies as in Europe we won't be the engine that drives the rest of the world, or more accurately, funds Europe's ability to take an entire month or two off from business each year and virtually shut down the countries as far as business. That doesn't even cover funding their low cost drugs with our research and higher prices here so they can mandate low prices in their countries. Said it before but we keep hearing it from our friends in Europe: 'what the hell is going on over there?'

The after hours earnings from IBM and TXN were better than expected and helped raise some optimism about Tuesday, somewhat blunting the Monday selloff. They both topped expectations, beating earnings and revenues, and both had more favorable out looks with TXN raising its midpoint expectations sharply and IBM noting its improved comfort level with its 2009 guidance. These stocks were up after hours and overall there was a positive response, but it of course was not taking back the lion's share of the Monday losses.

The earnings could be enough to blunt further selling and deflect it into more of that consolidation or sideways move discussed above that would allow the indices to hold the line and again set up for a move higher.

We have to see how this plays out. The selling was sharp. SP500 hit some serious resistance after a good run higher and at a minimum it needs to consolidate a bit. Volumes mercifully didn't surge, but they were not light trade sessions. When you have 4% to 5% declines in a session that requires some attention and typically does not work itself out in just a day or two. The indices were up 20+% and on light trade the last half of the move. They made some key moves but the light volume undermined the gains. Now the market has to sort out whether it is serious about an economic recovery from here.

This could mean at a minimum some sideways chop that makes little headway, but that also is good consolidation action for the market. In the initial drop, however, we can look at some downside plays on stocks that have rallied nicely, are breaking the near trendline, and have some room to fall. We issued a bonus alert on AA to the downside at the close Monday after we spotted its break and the good option pricing and potential decline. It is still a buy on Tuesday if it does not gap lower. Indeed if the IBM and TXN indices bounce some stocks higher early that could give us good downside entry points on these quicker plays of the trendline breaks.

We closed some positions that broke their trendlines to preserve gain and we let others that were holding support hold over to see if they get a pop off the support. If they do but cannot gather strength, i.e. volume is low and they bounce toward resistance but stall, we can use the bounce and close them out. If things reverse to the upside, cool. We let them. We just don't anticipate that happening after the move to this point and the lower trade on the latter part of the move. We protect current positions that struggle to hold support and at the same time look for good pullbacks for the future upside bounces while we also play some downside that presents itself for some easy and rather quick gains.

Support and Resistance

NASDAQ: Closed at 1608.21

Resistance:

1620 from the early 2001 low

1623 is the early April peak

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 1785

1947 is the October gap down point

Support:

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 1537

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 832.39

Resistance:

839 is the early October 2008 low

842 is the early April peak

846 is the April peak

848 is the October 2008 closing low

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:

833 is the March 2009 peak

The 90 day SMA at 826

818 is the early November 2008 low

The 50 day EMA at 816

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 7841.73

Resistance:

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 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:

The 50 day EMA at 7771

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

Upside:

Play Date: 04/20/2009

BKE (Buckle, Inc.--$33.32; -1.04; no options): Apparel stores

http://biz.yahoo.com/p/b/bke.html

After Hours: $33.32

EARNINGS: 05/21/2009

STATUS: Breakout test. BKE is one of the retail and market leaders off the lows, breaking out from a 3 month base in mid-March and rallying up to 37 last week. It is now testing, coming back to the 18 day EMA (32.87) and holding that level the past few sessions. Low volume as it tests shows no heavy selling. Sure it could break down here and if it does break down it is a short; the put option spreads are too wide to go that route. Looks strong, however, and the test is solid. Thus we are going to wait and let it test and look for an upside play off of the near support.

Volume: 597.97K Avg Volume: 977.002K

BUY POINT: $34.64 Volume=1.2M Target=$39.95 Stop=$32.57

POSITION: - Stock (option spread too wide)

http://www.investmenthouse.com/ci/bke.html

Play Date: 04/20/2009

YUM (Yum! Brands--$31.33; -0.74; optionable): KFC, Pizza Hut, Taco Bell, Long John Silver's, etc.

http://biz.yahoo.com/p/y/yum.html

After Hours: $31.33

EARNINGS: 04/22/2009

STATUS: Test 200 day SMA (30.78). YUM broke through the 200 day last week, clearing a 3 month reverse head and shoulders pattern. Strong volume on the move and Monday it started testing and on lower, below average volume. Expecting a test on back to the 200 day and then a bounce. Now earnings are on Wednesday and that could be perfect timing for a bounce up. We can wait to see how earnings treat the stock or we can move in with some positions ahead of time. YUM sold back for 3 sessions on its January earnings but it recovered. Aggressive to move in ahead of the results, but this pullback after the breakout makes it worth a few positions to us.

Volume: 5.04M Avg Volume: 5.176M

BUY POINT: $30.91 Volume=6.5M Target=$34.94 Stop=$29.77

POSITION: YUM GF - July $30c (65 delta) &/or Stock

http://www.investmenthouse.com/ci/yum.html

Downside:

Play Date: 04/20/2009

BA (Boeing--$36.48; -1.84; optionable): Airplanes

http://biz.yahoo.com/p/b/ba.html

After Hours: $36.48

EARNINGS: 04/22/2009

STATUS: Trendline break. Rallied nicely off the March low, putting in almost as solid a run higher as the nasty February selloff. It bumped resistance at 39 three times and then gapped lower Monday below the trendline. Looks primed for some more downside and a move to the target lands a 45%ish gain. With earnings on Wednesday we don't think there is much chance of a rescue for BA with those results so we are more than happy to move in ahead of them.

Volume: 7.017M Avg Volume: 8.558M

BUY POINT: $36.32 Volume=9M Target=$33.22 Stop=$37.21

POSITION: BA RJ - June $36p (-43 delta)

http://www.investmenthouse.com/ci/ba.html

Play Date: 04/20/2009

GS (Goldman Sachs--$115.01; -5.59; optionable)

http://biz.yahoo.com/p/g/gs.html

After Hours: $114.60

EARNINGS: 04/13/2009

STATUS: Downside. Some won't short GS, but it has formed a short head and shoulders pattern over the past three weeks and gapped lower Monday. It held the 18 day EMA on the close, and while still in the uptrend it is very, very choppy and needs a consolidation. Before it moves into that mode we anticipate a break lower toward the 50 day EMA (103.50). A move to the target lands a 37%ish gain.

Volume: 21.609M Avg Volume: 28.194M

BUY POINT: $114.44 Volume=30M Target=$104.55 Stop=$120.31

POSITION: GS RC - June $115p (-42 delta)

http://www.investmenthouse.com/ci/gs.html

Play Date: 04/20/2009

VLO (Valero Energy--$20.08; -1.64; optionable): Refineries

http://biz.yahoo.com/p/v/vlo.html

After Hours: $20.10

EARNINGS: 04/27/2009

STATUS: Break trendline. Another stock that rallied well off the March low and then broke down through its short trendline. Volume spiked to above average as it did; the sellers were in control. It is still over the 50 day EMA (19.97) and on a move below that level we are ready to move in for the continued downside. A move to the target lands a 42%ish gain.

Volume: 12.631M Avg Volume: 12.475M

BUY POINT: $19.91 Volume=12M Target=$17.86 Stop=$20.68

POSITION: VLB RT - June $20p (-41 delta)

http://www.investmenthouse.com/ci/vlo.html