主题：1/7/2009 Market View -- 宁子

SUMMARY:

- After the last leg market was ready to pullback and ADP, earnings gave it the reason.

- India has its own Madoff.

- Oil supplies surge and oil falls back from resistance.

- Mall vacancies on the rise.

- Some say bear market rally, some say something more sustainable.

Stocks were a bit stretched and the jobs, earnings data killed the bids.

At the end of Tuesday it looked as if the market was a bit winded and could pull back ahead of an expected terrible jobs number, taking a breather to consolidate and factor the report into prices ahead of time. We felt it could go a bit further on momentum, but when the Wednesday morning news hit it took that option away.

The futures were not bad even after AA made its usual warning and said it would cut 13% of its workforce (13,500 jobs). They were not that bad after mall vacancies were reported at a 10 year high or when India based Satyam reported that 90% of its reported cash flow as bogus. Then it got the gut punch from the ADP jobs report. ADP is usually somewhat scoffed at because it is off from the government number that follows two days later. Supposedly on this iteration it has adjusted its calculations to align more with the government figures. Thus when it announced a 693,000 jobs loss for December (-493K expected and -476K prior), that hit home. Futures turned over quickly. They rebounded just a bit when the next news hit, INTC guiding its quarter lower on some hefty investment losses (any money put with Madoff?). That second punch did in NASDAQ and SOX, the Tuesday leaders, and that pretty much hamstrung any attempt at the upside for the day.

The market stumbled at the open and sold further, tapping the 50 day EMA on the major indices. Then the oil inventory data came out showing big builds in oil (6.68M bbl), gasoline (3.3M bbl), and distillates (1.7M bbl). Oil was up near $50/bbl once more, but after that report it tumbled to close at 42.85, -5.72/bbl. Energy stocks turned over and followed it. With one of the upside leaders from the past few sessions taken down the market was wobbly. With INTC undercutting the techs, the market fared poorly. It did rebound into lunch, but that just build up more potential energy for the afternoon drop. The indices fell all afternoon into the last hour where there was a modest bounce attempt. Couldn't really make up their mind, however, and the result was just a weak-kneed late bump. Even with that afternoon selloff and undercut of the 50 day EMA by the indices, the market remained in decent shape on the close with many leaders holding support.

TECHNICAL. Intraday the action was not good. A lower start turned into a recovery attempt, and while there is nothing wrong with that, the indices never made it close to flat before they rolled over and really got into the selling in the afternoon. Low to lower, closing near the session lows. No buyers were interested.

INTERNALS. Breadth was as weak as it was strong Tuesday. NYSE stocks fell at a 4.6:1 rate while NASDAQ stocks fell 2.5:1. Volume was lower, however, falling back to average on NASDAQ and declining again on NYSE. While the price losses were ugly, the volume shows the sellers did not come out and overrun the market. It was more that the buyers relinquished control in refusing to buy after this last solid rally higher. That allowed a fewer number of sellers to push the market lower.

CHARTS. As noted the indices closed below the 50 day EMA, a key level we want them to hold near on this test. That was not the automatic death knell for the rally, however. It is a general support level and the indices, outside of DJ30, held over the December peaks that mark the move to a higher high on this last upside leg. DJ30 gave up both the 50 day EMA and the December highs, but the other indices remained solid, particularly the small cap SP600. The indices were ripe for a pullback, and though this was a bit more virulent in terms of price losses, the volume remained on the lighter side and leadership held up pretty well.

LEADERSHIP. And speaking of leadership, most everything pulled back with energy taking a good licking as oil fell. Financials were no help, however, as some big names broke lower, making lower lows in the 4 week range. That put the drag on DJ30 as JPM suffered a bad session. While financials have not exhibited leadership and thus they are not leading this rally, ultimately they have to step up and for now they at least need to tag along. Wednesday they were not doing that and the market struggled. But they were not the only reason. Tech and chips were lower as well, and they are leaders in the rally. While down, however, they and other recent leaders held up over support. We took gain in many positions, but we are willing to move right back into them if they hold near support into the jobs report and start to bounce from there. Indeed, many plays and positions held up very well despite the selling, showing no ill effects. Those that sold mostly did so on lower volume. The look was not good for the market overall, but leadership held up nicely with some new buying opportunities setting up.

SUMMARY. I could spend a lot of time talking about the day and about how the indices sold hard in price, unable to hold the 50 day EMA and unable to swallow bad news as they have done for the past month. Some were worrying about that Wednesday, noting the market waffled after the trio of bad reports issued Tuesday and the selloff on the ADP and INTC news. That is true, but there really isn't any need. As noted Tuesday the market was extended and likely needed a pullback ahead of the jobs data. That pullback is what it started on Wednesday, and as noted we closed out several positions to protect gains in the event of a deeper selloff. We are not really expecting a deep selloff on this move and thus we are looking to get back into these stocks and others that hold support over the next session on into the jobs report. The idea is that the market will factor in the bad news ahead of time and be in position to move back up. If the market is seriously looking downstream to better days ahead that is what it should do.

MARKET SENTIMENT

VIX: 43.39; +4.83

VXN: 43.52; +3.81

VXO: 43.75; +5.23

Put/Call Ratio (CBOE): 1.14; +0.34. Back above 1.0 for the first time in several weeks.

NASDAQ

Stats: -53.32 points (-3.23%) to close at 1599.06

Volume: 2.054B (-5.86%). Volume fell back to average. Better to see lower volume on the selling as that continues the decent price/volume action the renewed market rally has shown.

Up Volume: 473.299M (-1.275B)

Down Volume: 1.572B (+1.154B)

A/D and Hi/Lo: Decliners led 2.83 to 1. Definitely a broad move lower.

Previous Session: Advancers led 2.51 to 1

New Highs: 9 (-5)

New Lows: 14 (+9)

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

NASDAQ gapped lower then moved below the 50 day EMA (1610). It tapped the 10 day EMA on the low (1588) and rebounded modestly. That bounce kept NASDAQ above the December highs on the close (1598). This is the general range that we want to see NASDAQ hold on this pullback and then move back over the 50 day. It can undercut some more without serious damage but this is the general range to hold.

SOX (-4.87%) gapped lower and sold as well. It tapped the 50 day EMA on the low and rebounded, closing above the December closing highs. Chips were leaders on the last leg and it needs to hold and reassert itself in this range.

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

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

SP500/NYSE

Stats: -28.05 points (-3%) to close at 906.55

NYSE Volume: 1.233B (-7.59%). Volume fell further below average as SP500 sold. As with NASDAQ, that shows more a lack of buyers than an increase in sellers.

Up Volume: 145.155M (-855.122M)

Down Volume: 1.083B (+764.707M)

A/D and Hi/Lo: Decliners led 4.6 to 1. Broad move lower as bids were pulled across the market.

Previous Session: Advancers led 3.62 to 1

New Highs: 29 (0)

New Lows: 58 (-7)

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

SP500 posted a rare gap lower and sold through the 50 day EMA (917), landing on the 10 day EMA at the close. That puts SP500 just below the December 2008 closing high (913) but this is the general range it can hold and still make the move back up. A rather large loss for one session thanks to the weakness in financials, but thus far no damage.

SP600 (-3.52%) sold as well, but it closed near its 50 day EMA, closing right on the 10 day EMA. That keeps it easily above the December peaks and still in good position to hold, make the test, and then continue higher. Small caps have turned into leaders of late and you want to see SP600 hold in this range and then resume the move.

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

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

DJ30

The blue chips suffered the worst technical day, falling through the 50 day EMA (8869) as with the rest of the indices, but it also gave up the December highs on the close. Volume rose as the financial stocks struggled. The Dow led off the lows but it is not in leadership mode right now, leaving that up to the growth indices. Indeed that is the way it should be.

Stats: -245.4 points (-2.72%) to close at 8769.7

VOLUME: 266M shares Wednesday versus 215M shares Tuesday.

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

Jobless claims and consumer credit are the scheduled economic reports for Thursday. They are warm-ups to the Friday jobs report, a report everyone knows will be bad. The good thing is that the weak ADP report gets the market used to the idea of the bad news to come and helps consolidate the move and gets the indices in position to move higher once the news is out.

It is no done deal. Any rally can get turned over if bad, unexpected news piles up. Nonetheless, this is rally does not have the characteristics of a bear market rally. Those tend to be sharp and almost vicious in their advance. Then they end equally abruptly. One session they are surging higher, the next they roll over and dive lower.

This rally is market by its steady, sustained build higher, making higher highs and higher lows, taking out resistance points one at a time. It is not a rush back up by a bunch of stocks that were screaming lower, but a build of patterns, breaks higher, tests, and then new breaks higher. There are real leaders in very good patterns. Moreover, the market endured wave after wave of bad news. It had about all the bad news imaginable thrown at it and the market swallowed it all and advanced. Tuesday it wavered when a series of bad reports hit and Wednesday it sold on the ADP jobs survey, but it was also extended on the last leg higher that lasted more than a week. It was time to take some rest and the news was a good reason to pull up a chair.

Thus we are not inclined to say this pullback Wednesday is the start of the end of the rally. We anticipate the indices holding the test in this general area and then moving higher at some point after the jobs report. Maybe the market has not factored in all the bad news and won't hold up, crumbling back into the bear market selling, but the jobs report is lagging the rest of the economy. If the terrible more leading data did not keep it from advancing the lagging jobs data should not.

There are many solid plays that have pulled back modestly or to support in the selling, and we are going to be patient, let them make the test, and when they start to bounce, move in. We are even talking about those we just got out of today. We never want a gain to turn into a loss so we closed some positions that ended up holding support. That is okay. We can treat them as new plays and do it all over again.

Support and Resistance

NASDAQ: Closed at 1599.06

Resistance:

1603 is the December peak

The 50 day EMA at 1611

1620 from the early 2001 low

1644 from August 2003

1752 from 2004

The 90 day SMA at 1754

1782 from August 2004

1786 is the November 2008 high. Key level.

1948 is the early October 2008 gap down level

Support:

The 10 day EMA is 1588

The 18 day EMA at 1569

1565 is the second low in October 2008

1551 is the 50 day SMA that stalled NASDAQ last week

1542 is the early October 2008 low

1536 is the late November 2008 peak

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

S&P 500: Closed at 906.65

Resistance:

The 50 day EMA at 917

919 is the early December peak

965 is the 2003 consolidation low

The 90 day SMA at 988

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 905

899 is the early October closing low

896 is the late November 2008 peak

The 18 day EMA at 896

889 is an interim 2002 peak

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

Dow: Closed at 8769.70

Resistance:

The 10 day EMA at 8781

8829 is the late November 2008 peak

The 50 day EMA at 8869

8934 is the December closing high

8985 is the closing low in the mid-2003 consolidation

9200 is the July peak in the 2003 consolidation

9323 From June 2003 peak

The 90 day SMA at 9384

9575 from September 2003, May 2001

9654 is the November 2008 peak

Support:

The 18 day EMA at 8721

The 50 day SMA at 8665

8626 from December 2002

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.

January 5 - Monday

November Construction Spending (10:00): -0.6% actual versus -1.4% expected, -1.2% prior

January 6 - Tuesday

November Factory Orders (10:00): -4.6% actual versus -2.6% expected, -6.0% prior (revised from -5.1%)

ISM Services, December (10:00): 40.6 actual versus 37.0 expected, 37.3 prior

January 8 - Thursday

1/03 Initial Jobless Claims (8:30): 550K expected, 492K prior

Consumer Credit, November (2:00): $0.5B expected, -$3.5B prior

January 9 - Friday

December Average Workweek (8:30): 33.5 expected, 33.5 prior

Hourly Earnings, December (8:30): 0.2% expected, 0.4% prior

Nonfarm Payrolls, December (8:30): -475K expected, -533K prior

Unemployment Rate, December (8:30): 7.0% expected, 6.7%

Wholesale Inventories, November (10:00): -0.9% expected, -1.1% prior

Upside:

Play Date: 01/07/2009

FSLR (First Solar--$148.50; -5.21; optionable): Photovoltaic solar devices

http://biz.yahoo.com/p/f/fslr.html

EARNINGS: Late January

STATUS: Test breakout. We took the rest of a nice gain off the table Wednesday, and FSLR came back some more and tested the 10 day EMA (144.34) on the low and then rebounded to recover some ground. Low volume on the selling. Looking for FSLR to bounce off of the test and continue the breakout from its 8 week cup with handle of sorts. Can move in a hurry and it is setting up to do so with this low volume test.

Volume: 3.649M Avg Volume: 5.148M

BUY POINT: $151.66 Volume=6.5M Target=$174.95 Stop=$144.11

POSITION: HJQ CJ - Mar. $150c (57 delta) &/or Stock

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

Play Date: 01/07/2009

WFR (Memc Electronic--$17.10; -0.59; optionable): Semiconductor integrated circuits

http://biz.yahoo.com/p/w/wfr.html

EARNINGS: 1-22-09

STATUS: Test breakout. WFR broke higher Tuesday on strong volume, rallying out of a 9 week consolidation at what looks to be the bottom of a long 13 month selloff. WFR moved through the 50 day EMA (17.27) on that break higher and then tested back Wednesday on low volume, closing just below the 50 day. Looking for WFR to continue this move and give us a buy off this pause. It may come back a bit more Thursday, and if so we will let it and move our buy accordingly if necessary. Would like to see it get through the 50 day, however.

Volume: 6.741M Avg Volume: 7.075M

BUY POINT: $17.32 Volume=8.5M Target=$20.98 Stop=$16.22

POSITION: CJC DC - Apr. $15c (71 delta) &/or Stock

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

New buy points on existing positions:

Play Date: 01/07/2009

BHP (BHP Billiton--$44.40; -3.60; optionable): Industrial metals, minerals

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

STATUS: Breakout test. BHP broke higher to start the new year, clearing a 12 week base, a double bottom of sorts formed after a nasty May to November selloff that stripped two-thirds of its value. After a gap higher Tuesday on strong volume it gapped lower Wednesday, selling back to test the 90 day SMA and the 10 day EMA on the low (43.98). Looking for BHP to test a bit more and then rebound, and when it does we are looking to pick up some more shares.

Volume: 4.712M Avg Volume: 6.609M

BUY POINT: $45.65 Volume=8.5M Target=$54.55 Stop=$43.22

POSITION: BHP EI - May $45c (57 delta) &/or Stock

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

Play Date: 01/07/2009

CMI (Cummins--$27.94; -3.67; optionable): Heavy machinery, engines

http://biz.yahoo.com/p/c/cmi.html

EARNINGS: 2-3-09

STATUS: Test breakout. CMI moved nicely higher off of an 8 week base to start January as did many of the recent leaders. Volume really picked up as it surged higher, reversing an August to November selloff. Wednesday it faded back, falling just below the 50 day EMA (28.27) and closing at the 10 day EMA. Volume was still above average but lower. Going to let CMI finish the test, but expecting it to hold in this general area and renew the move. When it does we move in.

Volume: 5.05M Avg Volume: 4.518M

BUY POINT: $28.38 Volume=6M Target=$33.95 Stop=$26.58

POSITION: CMI CY - Mar. $27.50c (64 delta) &/or Stock

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

Play Date: 01/07/2009

GOOG (Google--$322.01; -12.05; optionable): Internet search

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

EARNINGS: 1-15-09 (not confirmed)

STATUS: Test 50 day EMA. GOOG may be just an internet ad company, but you have to like the potential for a trade here. It reversed its near term trend from August to November with its lateral December move and then break higher to start 2009. It tested back on low, below average volume Wednesday, holding at the 50 day EMA on the close. From here it can give us a bounce up to the 90 day SMA at 350. Earnings are next week but it can cover this ground quickly and give us a nice 45%ish gain on the option play.

Volume: 4.494M Avg Volume: 7.28M

BUY POINT: $325.45 Volume=8.5M Target=$349.85 Stop=$315.88

POSITION: GGD CD - Mar. $320c (57 delta)

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

Play Date: 01/07/2009

JEC (Jacobs Engineering--$49.63; -4.39; optionable): Engineering services

http://biz.yahoo.com/p/j/jec.html

EARNINGS: First week of February

STATUS: Breakout test. JEC formed a double bottom with handle base October to early December. It broke higher in December, then tested back to end that month but holding the 50 day EMA (45) on the test and surging back up to end 2008 and start 2009. It tested back Wednesday on lower, below average volume, closing above the 10 day EMA (48.86). Looking for it to complete the test Thursday and perhaps early Friday, and then turn back up and continue the run. That gives us the buy point we are looking for.

Volume: 2.829M Avg Volume: 3.108M

BUY POINT: $50.68 Volume=4M Target=$59.95 Stop=$48.66

POSITION: JEC DJ - Apr. $50c (53 delta) &/or Stock

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

Play Date: 01/07/2009

STLD (Steel Dynamics--$12.78; -0.21; optionable): Steel and iron

http://biz.yahoo.com/p/s/stld.html

EARNINGS: 1-14-09 (not confirmed)

STATUS: Test breakout. STLD formed a classic double bottom with handle base from October through December, rounding out the bottom of a June to November selloff by the commodities. Broke higher mid-December, but could not hold the break. It ended the month testing in a very flat lateral move over the 18 day EMA (11.31). It started the new year with the break higher on strong volume. It cleared the 90 day SMA (12.55) and held that level on Wednesday even as it sold back, dipping below it intraday and then recovering to hold the line. Going to let STLD complete the test. It may go back to the 10 day EMA (11.90) before it is ready. We are just going to be ready and after it makes the test move in with new positions.

Volume: 7.578M Avg Volume: 9.201M

BUY POINT: $13.33 Volume=10M Target=$17.45 Stop=$12.45

POSITION: RQL ER - May $12.50c (63 delta) &/or Stock

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

Personally believe that the pull back will last until this Friday. Next Monday the index probably bounce back. I will keep my SKF until Friday and see what happen then.

Thanks