主题：11/06/2009 Market View -- 宁子

SUMMARY:

- Even lipstick won't help as economic worries pound market lower for the second day.

- Same store non-sales rattle investors.

- Jobs report speculation reaching mania level, provides for three scenarios, 2 of which work for the upside

Market elects to continue selling post-decision.

Day two of the Obama pre-term saw the market get clobbered for the second session with 3%.5 to 5% losses. Indeed, it is the worst 2-day move since October 1987 as the indices lost over 9% Wednesday and Thursday.

LIBOR was better again with the 3-month falling again, down to 2.39% from 2.51% Wednesday. Not massive chunks as earlier in the week, but a solid, steady decline. The ECB cut rates 50BP to 3.25%. The Bank of England cast off the more typical English stoicism and cut 175BP to 3%, the lowest level in England since 1955.

On the other side of the ledger, earnings were weak, particularly when looking at guidance. CSCO talks of weak foreign demand and News Corp talks of just weakness. Same store sales showed the weakest comps ever in the history of the results and retailers are dreaming of a red Christmas, and we are not talking about Santa's coat.

Stocks tried to rebound pre-market and were looking pretty good in doing so, but after an attempt to bounce off the lows early the deed was done and stocks sold off all session. The afternoon session started with a bounce on word that House Speaker Pelosi wanted permanent tax cuts passed in 2009. The market was pelted with rocks and garbage and the indices sold off to new lows, however, when she met with automakers who entered the room with one hand out and the other holding a sign saying 'another industry too important to fail.' That raised the specter of another massive bailout of bad business models such as GM that is more of a healthcare management company that makes cars to fund its health plans than a car company that makes cars for profit. Many wonder if it simply isn't better to let it fall on its own weight and allow more efficient companies emerge from the rubble. Many wonder why these poorly managed companies with poor vision and poor management are getting all of our tax dollars while the small businesses are not only unable to feed at the public trough but are going to be burdened with higher taxes to pay for these giants that nature says should become extinct. After all of this the final bell sounded like the end of a prize fight that the market lost. Wow. How many metaphors and similes can we stuff into one paragraph?

Again, Wednesday and Thursday combined for the worst 2-day move since October 1987. The dollar exploded higher on the European rate cuts. Oil barrels spilled down to 60.77, -4.53 with gasoline prices showing up below $2/gallon. The economy is in the tank but gasoline prices are lower. That helps but consumers have to have jobs no matter what the price is.

TECHNICAL. Intraday action was as bad as you would suspect. A four hour selloff set up a second leg for the day, that bounce into the afternoon session, but that was crushed in the last hour. Again, no surprise.

INTERNALS. Very weak as you would expect with breadth near -5:1 on NYSE and -3.5:1 on NASDAQ. Volume did not reach average but it was certainly much stronger as sellers moved in to fill the void the buyers left on Wednesday. That shows distribution, i.e. dumping of stocks in general. Not all stocks were sold on volume (smaller financials, some energy), but overall the sellers came back into the market, and without any buyers, they easily took control. Overall, volume even with sellers assuming control is still light overall. That is good for an attempt to test and hold the prior lows.

CHARTS. The rally off the prior lows is still in tact given the indices have to nearly make new lows for the year to undercut the start of that last rally higher, but it is clearly in jeopardy. As we know another test was going to come at some point and it may be now. We feel it is too soon to make this test and form a solid base for the true bottom, but that remains to be seen. It looks as if the test is on and as we always say, it is the market that is the final arbiter of where it bottoms. SP500 managed to hold support at 900 where it made its early October closing low after that dive to the low for the year. DJ30 is still over 8500 that should act as some support as the initial closing low for the month is at 8451, and the first test of that level held 8500. They can hold at these levels, but at this point the market is in full sell mode again and another test of the prior lows is in play just as it has been since the market made that initial low. Thus we see how it plays out, and as discussed in the 'Friday' section, we react according to what it shows us.

LEADERSHIP. Leaders were down overall, but they were a mixed bag even with sectors with some stocks holding up quite well despite some sharp selling. Financials were down for a second ay but the smaller cap issues such as the regional banks are still holding up, showing relative strength. Energy was similar with some turning lower on stronger volume while other issues held support on lighter selling volume. Airlines tested but are in no trouble thanks to lower oil; seems that is overriding worries of fewer passengers. This move is taking out some leaders but it is also still part of base forming as they rallied some and now will test back some as well. If they are going to be leaders they will hold their patterns, selling back yes, but using the selling to either form handle consolidations or start putting the finishing half on their patterns. Looking at some metals, some tech, some energy you see this happening. We will let them finish their basing and see if they do indeed form bases in numbers. That would indicate that the prior bottom will try to hold.

SUMMARY. It looks as if the test of the prior low is on albeit a bit premature from a historical perspective. The sentiment indicators and market internals all hit levels consistent with a significant bottom. They rallied off those levels and tested in two weeks. A short bounce and they are testing again. Sentiment indications peak, the market rallies, and then it bottoms after that. Again this is rather short in historical terms, but we will watch and see how the indices hold at the prior lows and what kind of bases stocks build. The economic times appear as bad as can be. Out of the depth of gloom and hopelessness bottoms are formed. This looks to be a historic economic crisis on par with the 1930's and 1970's. this has been a relatively short bear market (1 year) in that perspective, but again, we let the market show us if it is going to bottom.