...broad strength

In front of the trading day,  despite the late day sell -off on Monday, we noted …“Basically, the rally may not be dead,  but the chart candle today suggests that we could be done with the up until we get newsflow.”  We’ll... it didn't die,  but it was quite surprising and we‘ll see what news FOMC makes tomorrow!.   The FED is likely to announce something new to look proactive to the deepening recession.   One thing is even though they don’t announce purchases of MBS/agency debt at meetings, they might this time.   If the market is anticipating the FED to buy treasuries on the heels of the Qilt U.K buying,  it will probably be disappointed.   Maybe its anticipation of the bad bank/toxic assets news upcoming this week,  but , if the market is putting all it’s eggs in the Geithner basket once again,  we hope he doesn`t cause an omelette out of the market once again.   

At least now, we know where to look for support as the market found a bid around 750SPX and despite low volume continued to be bid up and closed above the pervious peak of 775 at 778.    A range is seemingly built here at Nov lows (751) and 775 where we banged our heads back in Feb before downdraft.    A follow through is looking quite important for tomorrow.    So the question is what newsflow allowed the market to rally back to previous days peak?.     We don’t think the ‘housing’ number was the key,  it’s quite skewed and like the retail numbers will need another month of data to consider it a game changer of sorts.   It's hard to pinpoint a true catalyst today, maybe it’s the anticipation noted above.    So, it’s not specific news flow today, simply, what it is going on today is investor confidence is still increasing as upside risks are taking precedent (not participating) over downside risk of going back to recent lows as we’ve been noting.    This allows for a steady drift higher as shorts are not lining up new positions due to upside risk to news.    A positive today is the market move is getting broad action as money is slowing coming out of the cheap banks and back into better names- sectors.    This is essential for continuation of this rally, a one-sided rally would not have legs.    The market can’t rely on bank- broker ‘updates’ that have been happening since late February when JPM made the first signal.    It will wear thin sonner than later.   Even the credit card data , Whitney’s critical words of banks updates was shaken off by the market.    As we concluded in the last journal.. “we are hoping this market would settle down so traders can get some sensible trades in for the coming days off new newsflow, eg, gov’t and /or Eco’ data where the broader market participates....".   This is seemingly what we got a start of today as participation was broad.     Still, this market continues to be overbought and the odds remain for a tick down to rest.   Will it be here at the recent peak or will it be at 800 or ??.     Considering the volume was quite low to the upside, any negative newsflow or sell on the news of FOMC- Bad banks decision and we’ll see big volume on the downside, most likely.    Also, now the market is absorbing bad news and going forward as witnessed today.    That is a positive, but how long can that last before reality sinks in again!!.   The credit card #, the terrible material sector prognosis AA- NUE , especially, is nothing to sneeze at!.