DJIM #2 2009
Monday, January 12, 2009 at 07:57AM The market continues its zig and zag ways with 5 trading days left to zig it’s way back up before Inauguration. For all those previously thinking of an Inaug’ rally of sorts may have received the best possibility of one because of the mkts 4+% slide last week. We couldn’t have a Santa rally immediately turn into a Inaug’ rally, so maybe last weeks zag presented this opportunity. As expected here mid-week, SPX slid through 900 on what was a very dull trading day with a close right at the more crucial 888 / 50ma. After what seemed like weeks of discussion regarding the jobs report, it was basically shrugged off by traders come Friday. Barring any bad weekend news, it will be critical to watch if we can regain strength from this support level early on. Clearly, the focus has changed as ‘bad news’ has been sold off, a shift from what we saw last Q. Right now the broad market feeling is this is purely a Bear Market rally we have experienced as any strength now has created a selling opportunity for many it seems. Some of the moves have been too great in many a beaten stock and sector and those holding are realizing it’s best these 20-30% individual stocks gains are taken off the table before it's too late.
The focus turns to earnings reports this week, we also have potential M&A activity with MS-C providing a backdrop to the Inaug’ talk. During the most recent kick up the banks were missing auspiciously from the rally and as we always say , anything worthwhile needs them to work as well. The M&A noise may provide some juice, at least that’s what we will be monitoring for as well. Unfortunately, there is bad noise from UBS/Deutsche side to mute this to start the week.
Until we see more, we remain neutral heading into this trading week. The questions are arising as to the sustainability of this rally and many an answer will probably present itself this week with earnings the key factor. If there is no more shrugging off bad news here, we’ll have a failed rally on our hands and will turn quite bearish. So, watch for guidance and the market reaction to the results. It’s a simple start to a busy news flow week and we‘ll know if what we saw last week was just a pause or another failed rally.