DJIM #11 2010

By the conclusion of Friday’s trade, you can say both sides failed with eco data for each cause.   Despite, a hot Retail number (yet, not a huge surprise following SSS data earlier),  the Bulls had no conviction buyers step up and the reversal off the morning high was nothing the Bears (w/ a weaker consumer sentiment # ) wanted to press lower with new positions.  End result a draw of sorts with a close at SPX1150,  but a very small reversal day anyway.

We enter the week with the same premise discussed last week and that is a breakout is just 'too dreamy' before with the FOMC ahead.   In reality, this is a better safe than sorry play.   We think even a slight shift in tone from the FED is possible, surprising the market in favor of the Bears.   There is also now the China monetary policy circus gaining steam and the fear mongers are out with hike possibilities, even for this weekend.   Another “RRR” hike will come soon,  but the idea of a real hike is slim.   We think the plan there is to wait for March data, which comes in mid April before doing anything.   If they surprise with forceful action before, the market will get hurt.

Also,  market internals changed a bit Friday as the recent leader ( R2K) was the weakest of all the indexes and may have signalled a change in trend.