主题：12/22/2009 Market View -- 宁子

SUMMARY:

- Stocks stumble around, needing a last hour rally just to make things decent.

- LIBOR continues to improve as the cure continues its slow advance.

- Another business we cannot live without asks for a TARP.

- After testing bottom of the range indices now have to rise.

Stocks find some traction late, recover some losses from the day-long slide lower.

There was definitely no melt higher as we anticipated. The futures were flat to modestly lower to start the week, a perfect set up for a move higher. Didn't happen. Stocks started modestly lower and sold progressively lower throughout the session. Sluggish all morning, and though the losses were not that bad at all, breadth was really weak as was the action. A fog was over the market, smothering it. A midday flat ling looked promising, but it turned into another leg lower. The main sellers were the growth indices, though by early afternoon their outsized demise eventually pulled the large cap NYSE indices lower with them. After NASDAQ lost 60 points into the last hour a rebound started, shaving half the losses on the close.

A miss from Walgreen's shows how slow the economy is. Toyota announced it will sport a loss for 2008, only the second time it has ever posted a yearly loss. Sysco in the food wholesale sector reported flat sales. We have to eat for sure, but it seems we are going onto a literal belt tightening mode nonetheless. South Beach Diet mortgage and credit crisis style. China lowered interest rates. With 5 cuts in 3 months this is just about as non-event as you can get for a central bank. Pretty telling when rate cuts are the normal policy direction.

LIBOR improved again, not on the overnight level as was the case for a few weeks, but on the 'long end,' all three months of it. The 1-month fell to 0.46% from 0.51% to end last week. The key 3-month fell as well, down to 1.47% from 1.50%. That decline put the TED spread, the difference between LIBOR 3-month and the US 3-month Treasury less than 150BP, the lowest it has been since the LEH implosion. TED spiked up over 400 BP after LEH. Still a long way to go to get down near the 36BP average in 2006, but these are serious inroads and a key link in the credit chain. The damage has been done, however, so once the credit chain is un-kinked the economy needs the right kind of stimulus.

Unfortunately, none is on the horizon, but that is subject to change. Obama may lean too much on Keynesian pump priming, but he has shown flexibility in the face of new facts. Also, his primary economic advisor at least says he is in touch with and favors small businesses. The problem is the definition of small business. Obama's guys tend to focus on Mom and Pop shops. They are small business no doubt but small business goes on up to 500 employee shops. Those larger small businesses (reminds you of jumbo shrimp, huh?) produce the bulk of new US jobs. If they are not included in the stimulus then once the 'make work' jobs are over there are no new jobs to take there place we are dead in the water once more.

TECHNICAL. As noted, no melt higher, just a melt lower. Stocks were soft on the open and could not gel. It took the last half hour to generate any upside as some short positions were covered after four days of pullback that took the indices near the bottom of the three week range. Stocks bounced and the indices took back half or more of their losses in the last hour. Impressive bounce and the upside welcomed it as it put the indices and many stocks in palatable positions by the close. It was a return, however, to the more volatile times seen prior to the past three weeks. Even so, DJ30 traveled a mere 230 points; chicken feed compared to its October and November swings.

INTERNALS. Generally bad breadth though not chronically so (-2.2:1 NYSE, -2:1 NASDAQ). The late rebound helped pull it back from the -3:1 levels. Volume declined considerably from high expiration Friday levels. It was more than just a normal decline, however. Trade hit holiday light levels. Makes sense as it is a holiday week. The ultra-light trade shows us that while the sellers were in charge, they were just not that strong. On the flip side, it also shows the buyers were at best asleep at the wheel. You want to ignore the action given the light trade, but we were looking at a market that had grown some backbone, that had established a bit of an upside bias as its primary character. That was nowhere to be seen Monday, and it got our attention. Now it is up to how the indices and the leadership holds.

CHARTS. A reach toward the bottom of the three week lateral ranges on the indices, and then a rebound to put them smack dab in the middle. That is good for the upside as it keeps them in the game to rebound once more. The growth indices (NASDAQ, SP600, SP400, SOX) led the market lower, but in the end their rebounds were stronger and that left their patterns looking the best. 'Best,' however, is relative. The recovery keeps them in the game as noted. They still have something to prove, i.e. get over the next resistance and make a higher high in this leg of the move. Last week they tested back and put themselves in position to do that. Monday they hung on to keep them viable. Not exactly a strength move, especially when you just wanted to see a melt higher with some general upside bias. Now we see if that small spine the market grew over the past month can hold.

LEADERSHIP. Sluggish for the indices, sluggish for all the recent leaders. Metals struggled though gold closed higher. Chips struggled but they managed to come back and keep their respectable patterns respectable. Retail faded but it is just setting up nicely for another move. Agriculture was not really a leader, but it was trying to move up. That died on Monday. Some large cap tech turned jell-o-like. Others held up fine, just pulling back some, e.g. QCOM, RIMM, NOK. As with the indices, we now see how many guts they have.