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.

So much for any serious requirements on our $13.4B.

You had to applaud the few republican senators that stood on principal and did not want to bail out the auto industry without some form of restrictions similar to what a bankruptcy court would impose. Problem is, they played their momentary advantage too far, reached for a little too much, and as a result, no deal and no legislation.

That lobbed a softball over to the Executive branch, giving the President and his men the opportunity to do whatever they wanted. Bush did follow a lot of what was in that failed legislative package, requiring proof of solvency and a viable game plan by March 31 or else bankruptcy.

Problem is, the authority is all in the executive without any legislation backing it up. That means when the Presidency changes hands in January the new executive will have complete power to do as he sees fit with the prior plan and what happens in the future. If Congress had struck a palatable deal for all it would take legislation to change plan, not just the stroke of a pen.

Thus we likely threw the $13.4B and another $4B they can grab a bit later right down a hole . . . likely to be followed by more of our money after the automakers fail to make the necessary changes to become competitive. Already the UAW is howling about having to bring its wage structure in line with what foreign automakers with US plants pay their employees. While I agree you don't want the government telling you what you pay your employees, the fact that the automakers came to DC with their hats in their hands (at least the second time around) begging for taxpayer money necessarily requires our government to exercise a bit of control when the feds fork over the dough. That the UAW is howling only tells you that the plan actually has some teeth in it.

In any event, the automakers have some of our cash and will 'endeavor to persevere' over the next three and one-half months and radically change their fortunes. Not too excited I will see my money on this deal. Maybe GM would give me one of those three quarter ton, 4 wheel drive Yukon XL's or a Yukon Denali and we can call it even.

Credit rates continue to improve, need more improvement.

US Treasuries took a pounding this past week as the Fed cut the Fed Funds rate 75BP and pledged the kitchen sink in order to fight deflation and bring the credit markets back to functionality. A bit of a rebound late in the week helped but didn't change things much as the 10 year and 30 year bond yields fell to record lows.

That may help mortgage and other consumer rates, but it is also somewhat forestalling a faster recovery in the overall credit markets. You might ask 'but LIBOR rates are falling nicely'. You would be right. LIBOR fell again Friday with the key 3-month rate dropping to 1.50% from 1.53% Thursday and 1.92% to start the week. Hefty drop.

With LIBOR falling, the TED spread, the difference between 3-month LIBOR and 3-month US Treasury, should be narrowing, making money cheaper and credit more readily available. It is, but the US bond is falling fast as well. In other words, they are moving somewhat together and thus the spread is falling, but not as fast as if the US yield was rising.

As of the start of Friday the TED spread was right at 150BP. That is much, much better than the 434BP in September. It is also still quite high. For example, in 2006 the TED spread averaged 0.36% or 36BP. That puts it just over 4 times more 'normal' levels. Thus there is improvement to be had, but with the US 3-month treasury trading near a quarter of a percentage point, the decline is going to have to come on the LIBOR side. Fortunately it fell 22% this past week and hopefully it will continue to do so.

MARKET SENTIMENT

VIX: 44.93; -2.41

VXN: 43.5; -2.53

VXO: 45.94; -5.37

Put/Call Ratio (CBOE): 0.82; -0.08

NASDAQ

Stats: +11.95 points (+0.77%) to close at 1564.32

Volume: 2.737B (+33.61%). Volume jumped well above average on the modest point gain, but it was due to expiration. A very quiet week leading up to Friday, and thus the volume surge as positions were rolled.

Up Volume: 1.523B (+1.04B)

Down Volume: 1.058B (-505.461M)

A/D and Hi/Lo: Decliners led 1.04 to 1. Opposite of Wednesday, breadth was negative as the index posted a gain. Large caps were on the move Friday on NASDAQ.

Previous Session: Decliners led 1.63 to 1

New Highs: 7 (-6)

New Lows: 108 (+39)

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

A quiet end to the week that started slow, zoomed on Tuesday, then idled laterally the rest of the way. The 50 day SMA (1579) stopped each low volume attempt to move higher. NASDAQ has made a couple of higher lows, a higher high, and something of a higher high this past week. Made it on the close but still has the early December high to get through (1603) and then of course the 50 day EMA (1631).

SOX (+1.38%) enjoyed a strong move but then gave most of it back Thursday after a series of downgrades of some big names. Nonetheless the sector remains in decent shape with the early leaders making orderly pullbacks to support (e.g. BRCM). Still looking for something from the chips even though several pundits have proclaimed them dead.

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

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

SP500/NYSE

Stats: +2.6 points (+0.29%) to close at 887.88

NYSE Volume: 2.42B (+75.06%). Big volume here as well, aided by expiration and the S&P rebalance of some of its indices. Big volume and SP500 when nowhere. If it wasn't expiration we would be pretty psyched about the volume spike and no movement. The oil spring coiling. As it is, well, just a big volume expiration in a rather low volume market.

Up Volume: 1.388B (+1.055B)

Down Volume: 1.005B (-33.676M)

A/D and Hi/Lo: Advancers led 1.78 to 1. The small caps were the big boost. Good.

Previous Session: Decliners led 1.39 to 1

New Highs: 27 (-7)

New Lows: 89 (+11)

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

Good surge Tuesday, but it came nowhere near the 50 day EMA (928). SP500 tested the early December high (918.57) but slipped to close at the 10 and 18 day EMA. That also put it below the early October closing low at 899. Dicey area with a lot of former highs and lows that many pundits are very eager to point out. Of course if resistance always held then there would be no recovery rallies . . . ever. Nice quiet lateral action over support. Higher lows, a higher high, and in position to surge higher once more. Like the odds for a breakout to another higher high, but as noted above, two short weeks are not going to give us a very good look at any strong volume.

SP600 (+1.62%) led the market again though the index closed well off its high after tapping near the 50 day EMA (267.34). SP600, SP400, SOX are the indices that have made two higher lows and two higher highs. The children shall lead.

SP600 Chart: http://investmenthouse.com/ihmedia/SP600.JPEG

SP400 CHART: http://investmenthouse.com/ihmedia/SP400.jpeg

DJ30

The Dow is the only index on the week that challenged the 50 day EMA (8953), but it really made no attempt to get through this next resistance as it sold right back down to 8500 support after tapping at it. Similar to SP500 the Dow is bouncing up and down in a relatively narrow range, showing good price/volume action. Would like to see a breakout over the 50 day EMA, but with a couple of holiday shortened, light volume weeks, even if it does make the break it won't mean a whole lot. It will need to show it can hang onto the gains in the new year when everyone shows up once more.

Stats: -25.88 points (-0.3%) to close at 8579.11

VOLUME: 550M shares Friday versus 274M shares Thursday. Big expiration volume. The only other solid trade on the week was the Wednesday rally that pushed volume to average.

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

A shortened week for Christmas and then again the following week for New Years. Not going to give us a very good look at the market's strength given trade will be light. That does not mean, however, we won't see movement and won't get the opportunity to make some money.

The market has a couple of things going for it to take it through the holidays and on into the New Year. First are the technical underpinnings. Ever since the November low the market has changed. First, even as the indices made new lows for the year, the new lows count did not make new highs for the year. First sign the market was getting sold out. Off of that bottom the price/volume action improved as stocks rallied on strong volume and tested lower volume. With that action the indices started by making a higher low, a higher high, a higher low, and in the case of the smaller indices, a second higher high.

That is all well and good, but it does not amount to a hill of beans unless there are stocks in good position to take on the leadership role. It is critical for any rally attempt to have leadership. Several rally attempts during the 2000-2002 bear market failed due to no leadership at all (just relief bounces from another leg of hideous selling) or no new leadership after an initial spurt. That is one reason this rally is so intriguing even though it is making baby steps (and in a way, baby steps are good because it does not fire off all of its ammunition at once). There is a steady increase in leadership, gaining speed, stepping up to support the early scattered leadership. Infrastructure build-out stocks are improving on all of the Keynesian make-work plans of the new administration (materials, engineering, commodities). That is also part of a re-inflation story given the US Fed's 'all in' push to clear the logjam in the credit markets and US investment. Small business stocks are improving nicely as well, continuing their moves after bolting out to early leadership. Retail continues to perform in the daily gloom you hear about how bad retail sales are this season. Chips have weathered innumerable downgrades to continue higher and actually turn SOX into a market leading index. Insurance is setting up nicely as well.

With this leadership improvement we are continuing to look at upside opportunities we can buy into off of the pullbacks leaders are showing after good surges as well as new leaders coming into the ranks and setting up their first breakouts. In this way we can take advantage of the melt upside toward the end of the year even if low volume persists. When we get to year end and the market has put in some more upside we have to evaluate whether we want to take gain off the table ahead of the return of the majority of investors and the jostling that often occurs to start a new year. If we get a nice rise we will be inclined to take quite a lot of gain off the table and then see what the new year brings. First things first. We birddog the stocks that are ready to lead, and if they make their moves we move in and ride them. As noted earlier, even if overall market volume is low on the move, we will likely see some good volume in these smaller individual names.

Support and Resistance

NASDAQ: Closed at 1564.32

Resistance:

1565 is the second low in October 2008

1579 is the 50 day SMA that stalled NASDAQ last week

1603 is the December peak

1620 from the early 2001 low

The 50 day EMA at 1631

1644 from August 2003

1752 from 2004

1782 from August 2004

1786 is the November 2008 high

1886 is the 90 day SMA

Support:

The 10 day EMA is 1545

1542 is the early October 2008 low

1536 is the late November 2008 peak

The 18 day EMA at 1536

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

1499.21 is the 2008 closing low

1493 is the October 2008 low. Key low.

1428 is the November 2008 low

1398 is the early December 2008 low

1387 is the 2001 low

1295 is the November 2008 low

1253 is the March 2003 low on the test of the rally off the 2002 bear market low

1108 is the 2002 low

S&P 500: Closed at 887.88

Resistance:

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

The 50 day EMA at 928

965 is the 2003 consolidation low

995 from June 2003 consolidation peak

1008 is the November 2008 peak

1065 is the Q4 2003 level that SP500 started the run to 2007 after the first run in the recovery.

Support:

The 10 day EMA at 886

The 18 day EMA at 883

866 is the second October 2008 low

853 is the July 2002 low

848 is the October 2008 closing low

839 is the early October 2008 low

815 is the early December 2008 low

818 is the November 2008 low

800 is the March 2003 post bottom low

768 is the 2002 bear market low

741 is the November 2008 low

650 on the top and 625 on the bottom of a 7 month range in 1996

475 from 1994 where the market moved laterally for the entire year.

Dow: Closed at 8579.11

Resistance:

8626 from December 2002

The 18 day EMA at 8638

The 10 day EMA at 8658

The 50 day SMA at 8702 stopped the Dow on the prior bounce

8829 is the late November 2008 peak

8934 is the December closing high

The 50 day EMA at 8953

8985 is the closing low in the mid-2003 consolidation

9200 is the July peak in the 2003 consolidation

9323 From June 2003 peak

9575 from September 2003, May 2001

9654 is the November 2008 peak

Support:

8521 is an interim high in March 2003 after the March 2003 low

8451 is the early October closing low. Key level to watch.

8141 is the early December low

8197 was the second October 2008 low

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

7965 is the November 2008 intraday low.

7882 is the early October 2008 low. Key level to watch.

7702 is the July 2002 low

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

7449 is the November 2008 low

7282 is the October 2002 low

Economic Calendar

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

December 23 - Tuesday

Q3 Chain Deflator-Final (8:30): -4.2% expected, 4.2% prior

GDP-Final, Q3 (8:30): -0.5% expected, -0.5% prior

Existing Home Sales, November (10:00): 4.93 expected, 4.98 prior

Mich Sentiment-Rev. , December (10:00): 58.6 expected, NA prior

New Home Sales, November (10:00): 420K expected, 433K prior

December 24 - Wednesday

Initial Jobless claims (8:30): 575K

November Durable Orders (8:30): -3.1% expected, -6.2% prior

Person Income, November (8:30): 0.0% expected, 0.3% prior

Personal Spending, November (8:30): -0.8% expected, -1.0% prior

Crude oil inventories (10:30): 525K prior

Upside:

Play Date: 12/20/2008

ANN (Ann Taylor--$6.07; +0.19; optionable): Women's clothing stores

http://biz.yahoo.com/p/a/ann.html

EARNINGS: Third week of February

STATUS: Trend reversal. ANN is back on the report as it has continued its lateral move to consolidated the early December, and high volume, move off of the 'low.' The 'low' was made after a particularly ugly September to late November 86% price decline. ANN based for 8 months ahead of that tumble. What does that mean? Not much other than it was trying to set up to move higher before the credit debacle hit. In any event it reversed the trend on strong volume, and for the past 8 sessions it has moved laterally, consolidating the reversal. Friday volume spiked. Rebalance, expiration, whatever. Money flow is indeed turning higher even as the price works laterally. Looking for a break higher on solid volume. May not want to marry this one, but it sure can give us a good run higher toward the 50 day EMA (9.09) as our initial target.

Volume: 4.062M Avg Volume: 2.214M

BUY POINT: $6.21 Volume=3M Target=$8.91 Stop=$5.57

POSITION: ANN CA - Mar. $5c (75 delta) &/or Stock

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

Play Date: 12/19/2008

BIDU (Baidu.com--$131.07; +0.38; optionable): Chinese internet search

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

EARNINGS: Third week of January

STATUS: Double bottom w/handle. It has been awhile since we played BIDU during its massive 2007 run from 100 to 400 and the unreal money it made for us. Indeed, it has been over a year now, but after an extremely hard August to November selloff (350 down to 105), BIDU has double bottomed the past 5 weeks, gapping higher Tuesday to clear the 18 day EMA (128.26) and then working laterally the rest of the week to form the handle. Very low volume on the lateral move after great volume on the break higher. Just going to wait for BIDU to finish this lateral move and show us the break higher. That is when we move in and look for BIDU to move to the 50 day EMA (164) as our original target. Then we see what it has from there.

Volume: 2.072M Avg Volume: 4.177M

BUY POINT: $133.12 Volume=5.8M Target=$163.75 Stop=$124.98

POSITION: BDQ CG - Mar. $135c (49 delta) &/or Stock

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

Play Date: 12/20/2008

BMC (BMC Software--$26.36; +1.35; optionable): Application software

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

EARNINGS: Late January

STATUS: Cup w/handle. BMC held up better than many of its brethren this year, setting up a nice base in Q1 and breaking out to a nice gain. That, however, lead to a peak and a selloff from June through late October. Up nicely, then was taken down ultimately. Over the past 7 weeks, however, BMC has formed a really nice base after hitting a low in late October. Big volume Friday, and we will have to see if that was just a product of expiration and rebalancing on the S&P. BMC is in that group of business service stocks that will lead out of a bottom, and BMC has set up a base at the bottom of the selloff to do just that.

Volume: 3.934M Avg Volume: 2.622M

BUY POINT: $26.55 Volume=3M Target=$30.89 Stop=$24.77

POSITION: BMC BE - Feb. $25c (70 delta) &/or Stock

http://www.investmenthouse.com/cd/bmc.html

Play Date: 12/20/2008

EPIQ (Epiq Systems--$16.21; +0.11; optionable): Technology solutions for the legal profession

http://biz.yahoo.com/p/e/epiq.html

EARNINGS: Late January 2009

STATUS: Test 18 day EMA. EPIQ made us some good money over the last few weeks. Then it started to test on some rising volume so we took all the gain off the table to see how it held and if it would give us a new buy. It is holding at near support at the 18 day EMA (16.16), and it has shown some increasing volume as it tests and holds this level. That can indicate that buyers are stepping up. We will simply let EPIQ show us if it is ready to continue its move by giving a bounce upside on strong volume. EPIQ is one of the small business service stocks that came off the October low with a vengeance and was an early leader. This test could give it the rest it needs to send it upside once more.

Volume: 505.577K Avg Volume: 360.605K

BUY POINT: $16.77 Volume=545K Target=$19.88 Stop=$15.84

POSITION: FQU DC - Apr. $15c (67 delta) &/or Stock

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

Play Date: 12/20/2008

VSEA (Varian Semiconductor--$19.88; +0.28; optionable): Semiconductor equipment

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

EARNINGS: Late January

STATUS: Reverse head and shoulders. VSEA is an interesting stock for us. It made us some huge coin in 2007 when it had a pair of massive runs. That was the peak of its life cycle at the time, however, and it has spent the last 18 months in a nasty selloff. VSEA is also interesting because it was a stock that made us a sack full of money in October to December 2002 as it was one of the chip stocks that led the market off the October low in the initial run off the bear market bottom. Thus VSEA has some early cycle properties as do chip stocks in general (thus we find it interesting that they are suddenly outperforming other sectors even though they are still universally hated and despised by the analysts). Thus when we saw VSEA set up this current 10 week pattern, making a couple of higher lows and higher highs along the way, showing strong upside volume as well, our interest was piqued. VSEA broke over the 50 day EMA (19.75) Wednesday on strong, above average volume and then tested Thursday and Friday, showing a doji Friday. Like what we see so far, but needs to show us the volume once more as VSEA continues the move and perhaps is once again an indicator of the amrekt bottom.

Volume: 1.178M Avg Volume: 1.182M

BUY POINT: $20.74 Volume=1.4M Target=$24.91 Stop=$18.94

POSITION: UES BD - Feb. $20c (55 delta) &/or Stock

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

New buy point on current position:

Play Date: 12/20/2008

BHP (BHP Billiton--$41.38; +0.33; optionable): Industrial metals

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

STATUS: Test 50 day EMA. Looking to pick up some more of BHP on this test of the 50 day EMA (40.58). BHP broke higher for us early last week but then tumbled Thursday when much of the commodities and materials stocks sold post-Obama stimulus announcement Wednesday. Nice hold at the 50 day, showing a doji Friday. Money flow remains super. Looking for that volume to kick back up as BHP starts back up. That is when we put some more money to work on this stock that is in great position.

Volume: 4.311M Avg Volume: 6.903M

BUY POINT: $41.78 Volume=8.5M Target=$49.91 Stop=$39.44

POSITION: BHP BH - Feb. $40c (52 delta) &/or Stock

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

Any ideas about oil price. It have been crazy recently. want to buy at bottom but wondering if there is one : )