主题：12/19/2009 Market View -- 宁子

SUMMARY:

- Stocks once more give up most of an early gain, finish the week status quo.

- Congress' failure to pass auto bailout legislation leaves the bailout size and requirements at the whim of the Executive.

- LIBOR continues its fall, trying to match pace with the US treasuries.

- Market has some leadership and technical positives to take it higher to New Years.

Stocks bounce as TARP thrown over automakers, but the big gains fritter away.

The announcement of the auto deal came two days later than expected, but expected nonetheless. The Executive branch is throwing $13.4B in TARP funds at GM and Chrysler to keep them solvent a few more weeks. The market was relieved to get the word and futures moved higher. Earnings had something of a positive flavor with RIMM and ORCL bumping their outlooks more than expected. On the other hand PALM dropped the ball, ASML (chips) reduced its outlook, and CTAS (uniforms) missed. S&P downgraded eleven financial institutions including BAC, C, DB and GS. The financials are crushed for over a year, they finally start to bounce back some and S&P finally downgrades them. Good call guys.

Despite the negatives there was a solid rally off the open heading into midmorning. Oil was lower again as the January contract was routed (33.87, -2.35), the dollar bounced back for the second day, and gold continued its pullback after the Wednesday reversal (840.40, -20.20). Gold is interesting. It imploded in October, rebounded and gave us a decent gain with a GLD play we had, and finally made it up to the 200 day SMA this week. That is also a down trendline from the July and October peaks. It turned down right spot on at that trendline.

All of this pushed stocks higher through midmorning with the Dow putting in about 150 points. As on Thursday, however, midmorning turned the dial and the market could not hold onto the nice gains. A lunchtime to afternoon bounce stalled and the indices closed near the session lows. Even with that selloff the indices, sans DJ30, closed positive.

For the week stocks finished higher, aided once more by an early week surge. Just as with the prior week there was a strong start and then the action tapered off into Friday. That left the indices with some gains on the week but a quiet finish and not much farther along, definitely unable to take on the next key resistance level with the fade. No real issues with that; plenty of rest to make the move, and in good position to do it.

TECHNICAL. A second session of an early move and then a fade. Don't want this action to be habit forming. Overall, however, the action was not bad given most indices closed positive and held together decent positions.

INTERNALS. Breadth was positive on NYSE thanks to the continued solid performance the small caps are putting in (+1.62%). NASDAQ breadth fell negative even though the points were positive. Mostly a large cap tech move as ORCL did well and the NASDAQ 100 closed up over 1% versus NASDAQ's 0.77% gain overall. Volume exploded on both NYSE and NASDAQ. That was a function of expiration Friday and some rebalancing on the S & P indices. Nice to see volume up as most of the indices posted gains, but we don't want to read more into it than is there. Overall the week was a low volume one with a spike on Tuesday when the indices rallied. No blowout, just a good gain on good volume and then a lower volume coast the rest of the week.

CHARTS. After a nice Tuesday surge the indices slid laterally into Friday, holding above near support. That is good, but they still have to deal with some key resistance overhead. It is most prominent on DJ30 as the index butted heads with that level, or at least came close, Tuesday and Wednesday. All of the indices are in a tightening lateral move above near support and below the next key resistance level. The move is punctuated by some solid upside volume on upside sessions. That shows there is continuing accumulation, albeit somewhat under the covers. There is still serious overhead resistance that has many pundits glum. Every upside day such as Tuesday the are ebullient. Then they get a couple of slow sessions such as those that ended the week and they turn into glum chums. The action, however, tells us that the new backbone is still in place and that is positive for a Christmas rally (or holiday rally, Winter solstice celebration, etc.; good grief) during the two back to back holiday shortened weeks ahead as the market moves with the current trend.

LEADERSHIP. Small caps were definitely the preferred flavor Friday. Of the positions we bought, all were smaller caps. Really like seeing them step up to the fore given they are growth oriented and need an expanding economy to grow earnings. They move out ahead of the economy, and thus we need to see them continue moving higher as the new year gets underway. That will show the buyers are betting on a firming economy. There are many stocks that have made solid moves higher, stocks from various sectors such as materials, commodities, business services, chips, tech. These stocks are making excellent, orderly pullbacks to near support, and that is setting them up for the move higher once more. There likely won't be many buyers and sellers over the next couple of weeks with the holidays, so an overall strong volume market move is not likely in the cards. Nonetheless, just as we have seen in this generally light volume, these stocks are still corralling the volume as they make their moves higher.