Market Bounces Yesterday, Today Weakens

Yesterday, the market rallied for the first time in three sessions, but late in the day a significant portion of the gains were taken back as the market rolled over in the last hour of trading. The Dow closed at 8,331 and the S&P 500 closed at 893. We still continue to look for the market to retest the last prior significant support area between 875 and 877 on the S&P and if that level is violated on a closing basis, we are expecting the 850 level at the 50 day moving average to get tested. This market remains resilient today though, especially the financials, as we are down about 40 pts on the Dow and 7 pts on the S&P at mid-session today. Goldman Sacs (GS), leads the financials today so far.

We await another trend turn in the market to take any long positions, but we have un-wound the overbought conditions that appeared on the 60 minute charts over the 9 week rally we just had. Just because we un-wound the over boughts does not mean we take long positions again. We need to wait and see how the S&P reacts at the 875 test level if it can get down there to decide to take on more longs. Too us, shorting makes no sense here as we have pulled back already significantly and we are not experiencing over bought conditions at the moment. Stay tuned for Monday, is how we are playing things at the moment.

S&P 500 and overall market action today

Yesterday an analyst friend of mine and I had a conversation after market about how many secondary offerings have been announced from firms across almost every industrial sector in the market. He had counted over $30,000,000,000.00 billion in offereings announced in the last 7 days. That's a lot of stock hitting the market right now! What's funny is $30 billion sounds small now considering the numbers the Treasury and FED throw around these days for bailouts and "stimulus" etc. Citi could buy up in the open market all the secondary offered stock and then the Fed could just hand them another $30 billion in freshly printed dollars under the table Foreinstance? :) Now that's a joke but is it truely that far off of how this market has been suported over the prior 9 weeks? We have begun a much needed pullback in the markets now this week from the mid 900's on S&P and today so far the S&P 500 is up about 7 pts to 892. I'm expecting the retest of 875 to 877 of S&P 500 here over the next few days and then we have to evaluate the markets action at that significant support area. If we break 875 on a closing basis we could go back for a retest of the 50 day moving average line, which is currently at around 851. I'd argue that we should see that level over the coming week or two with the amount of secondary offering supply hitting stocks right as we speak but this market has defied logical strength now since the March 12th bottom. It's been entirely logical that we did get a huge oversold bounce in the markets after 1.5 years of a dramatic downturn, but now you would expect a lasting calm and turn down for a few weeks at least. Stay tuned.

Brian Cook

Chinese market down 1%, US Futures red

Greetings,

Today's economic calendar shows Federal Reserve chairman Tim Geitner is sceduled to speak at 10am Eastern. It's our opinion that this market needs a few more days of selling down to unwind the over-bought conditions on the daily charts. After 9 weeks in a row of heading straight up on the S&P and Dow Jones, another few days down would be healthy for this market.

Brian Cook