主题：12/17/2009 Market View -- 宁子

SUMMARY:

- Market starts soft, rallies back to positive, but cannot keep it up.

- Fixing the credit markets versus stimulus.

- Credit is improving as dollar falls, bond yields hit record lows.

- After taking some gain, looking for the pullback to provide some buying spots.

Market cannot hold a recovery to positive, but it was not a negative day.

Tuesday there was the usual litany of bad news, but the FOMC was issuing a decision later in the session and the market rose to meet it. After the Fed threw in the kitchen sink to attack the credit, mortgage, and potential deflation issues the market reached for the moon.

Wednesday there was the same litany of issues once more. Earnings were down and up. MS missed and missed big the day after GS produced a loss but in GS fashion, it was less than expected. GS rallied 14% on its results. MS barley budged though in fairness it put in 18% to the upside on Tuesday after the Goldman news. GIS actually beat expectations and raised guidance. Have to eat those corn flakes (are they even made by General Mills?). HOV (homebuilder) was three times worse than expected. What is new?, and after such a rush on Tuesday investors had a bit of a hangover. Job cuts again showed up with WDC cutting 2500, NWL trashing some employees, and BMY dropping another 10% of its workforce. The dollar dove again (1.4389 Euros versus 1.4081 Tuesday); it is falling faster than the breakneck pace it rose. It has lost more than half of its gains off the July low, and it accomplished the feat in 8 sessions. OPEC announced a larger than expected 2.2M bbl/day production cut. Oil surged . . . lower to 40.47, dropping $3.13/bbl. I know Venezuela and Iran want oil prices back at $100 so they can export their terrorism, but OPEC cannot compete with a global slowdown. The oil bubble popped for this cycle, and it will take another boom cycle to inflation a new bubble.

Same stories, but Wednesday investors had a hangover from the Tuesday party. Nonetheless after a weaker open we were watching to see if stocks would move back up. They did, moving to positive over lunch with the small and mid caps leading. A good low to positive recovery. In the afternoon, however, the buyers stalled and some profits were taken, pushing the indices, at least the large caps, back to negative. Can't complain. We were in there taking some profits as well on our plays taken the past few weeks. A good run higher and DJ30 was at the 50 day EMA, not able to move over it on the high. Natural point to take some gains so we did just that. The result was a late fade. The market wasn't ready to make that next move but the action was not bad.

TECHNICAL. Intraday the action was looking good with the negative open and recovery to positive. The late fade was a downer, but it was not death.

INTERNALS. Volume was lower. Not a ton lower on NASDAQ (-3.8%), but on a down day lower trade of any kind is what you want to see when the market is working on the upside. That was good but breadth was the more interesting feature. While the large cap indices closed lower, breadth was positive (1.4:1 on NYSE, positive by a gnat's butt on NASDAQ). Even on NASDAQ 100 breadth was positive at 54 to 46. So what does this mean? It means the action was controlled by a few large caps that fell to profit taking while a lot of stocks were up on the session. Thus down finishes on the big name indices but the rest of the market was not in trouble at all.

CHARTS. Not much change from Tuesday other than backing off 1% on the low end and gaining 1% on the high end. The Dow, the real leader since this rally started, was the downside leader Wednesday. It rallied to take another half-hearted pass at the 50 day EMA, but it never challenged it and then faded in the last hour. NASDAQ stalled at the 50 day SMA again. SOX tapped the 50 day EMA on the high and backed off. The mid-caps did roughly the same. No one was really ready to take it to the next level after such a big run Tuesday, but the action didn't do any damage.

LEADERHIP. Some of the same early leaders were moving higher again Wednesday. Retailers (e.g. AMZN, COH, PNRA, PCLN) moved up again. Infrastructure related stocks (materials, commodities, engineering) were on the move once more (e.g. CX, STLD, SGR) as the Obama infrastructure trade continues. Green stocks were on as well with solar posting gains on the Obama green initiative. Transports of all stripes were on the move and some rails look ready to move higher after some interim downtrends. As one reader asked, shippers are moving as well: the dry bulk index appears to have bottomed and the sector was upgraded Wednesday. Of great interest, the small caps, followed closely by the mid-caps, led the market higher. As stated the past few weeks, if the small caps step to the front of the leadership pack the future of the economy and thus the rally brightens. The smalls and mids are stepping up. They are not showing dominance yet, but they are flexing some.

SUMMARY. All in all it was a day off but it was not even a day off where no one worked. The smaller caps pushed higher and key sectors put in gains. There is anticipation of a big fiscal stimulus package to come in addition to the Treasury and Fed efforts, and those sectors impacted are moving in anticipation. The small and mid-caps are doing the same. Patterns continue to improve and more stocks move into buy positions. A bit of a rest here and then a move through the 50 day EMA by DJ30 and the smaller cap indices is a real positive.