DJIM #11 2009

Since the start of March, we were highlighting on the Journal.. ."the shorts have no reason to cover and take profits as they see a market with no buyers lining up.   Shorts just press until proven otherwise“.    This all changed as the covering started off an internal Citi memo and continued with more of the ‘2 month profitable’  headlines thoroughout the week from the banks-brokers following up on the previous Fridays postive report from WFC.   We headlined a “squeeze lurks” and were positioned well as we started to get a meaningful bounce from the "Mark of the beast 666SPX",  unfortunately being positioned in advance of the rally led to taking lots of the chips off the table as the first 300+ / 4% day occurred.   Of course, in trading there is always the ‘could’ve..should’ve..would’ve’, second guessing yourself game,  but after so many feeble short covering rallies in the past weeks that ran out of steam hours later,  we can’t really blame ourselves or anyone in taking profits as they come in this environment.

So, where are we now after a sigh of relief in the markets last week?.   Well, the sigh of relief is not because the outlook has improved overall,  it’s simply because equities rebounded 10%.   The pronounced weakness of global goods demand continues as all indicators are down in industrial/ international trade meaning the global GDP will show similar traits as the recent Q’s decline.    Also, the consumer is under extreme pressure, the bounce of retail numbers, household spending last week does not mean the labor markets are improving!.    We have to be cautious as we start the banking earnings season this week as this move can reverse at the slightest newsflow excuse to do so.    Last weeks bank-broker newsflow is not enough to change our sentiment on the sector so quickly.   Understand, nobody is all of a sudden turning positive, ‘Bulls’ and 'Bull markets' are not made in 4 days.

A busy week ahead with news flow to be coming from all directions…will FOMC respond in any unusual way to a deepening recession?….will the alerted Credit card Master trust data figures to be released this week bring the financials back to earth? ( remember the Jan. # crushed all financials after, inline #'s probably won't cause the same)….will the seemingly lacklustre G20 finance meetings disappoint as the communiqué really says nothing concrete or respond to U.S wishes or anything else.   Will the market like the toxic asset announcement this week?.  This might be the big catalyst to direction of market this week.

Again,  despite the huge squeeze in the most beaten sec’s,  the laggards were quite noticeable as they comprised the tech and commodity sectors.   Even though, we closed higher Friday with the big 751 SPX holding,  it was done in what seemed like a holiday trading session.   Some profit taking was beginning and fatique seemed to be setting in.   The reason we are drifting higher is because shorts were/ are not lining up new positions just yet.   See Chart Section for SPY chart as to level we are looking for a potential top to this 4 day move(circled).   Downside 740-ish SPX is where we’d want to see support to remain in this positive trend.