Saturday, March 14, 2009

Markets Go 4-for-4

What a difference a week makes.

On Monday, stocks fell to their lowest levels in roughly 12 years as the news flow continued to beat down on investors with a cacophony of flim-flams, trillion dollar deficits, banking black holes and enough assorted global meltdown fear to scare even the hardiest bulls out of the market.

Seemingly overnight, between Monday and Tuesday, a switch in sentiment - begun by something as benign as a banker's leaked memo, in fact, Citigroup's Vikram Pandit's note that his bank had performed well over the prior two months - sparked a rally that extended four days.

Stocks finished the week on the rise again, with everything suddenly seeming not so dire, so terrible, so untenable. Maybe it was that bank memo, or maybe the appearance of robins on the lawn. The winter in the Northeast has been long and unrelentingly cold, and it was time for a break. It could have just been that investors and traders were worm out from selling, or that there were a load of bargains at the bottom of the market.

Whatever it was, it turned into the best week for stocks in many months. The Dow gained an impressive 597 points for the week and 677 from the close on Monday, and while it was welcome relief, almost nobody believes we have seen a final bottom in the markets, but it was a nice change and only the second weekly gain out of 10 for the year.

Dow 7,223.98, +53.92 (0.75%)
Nasdaq 1,431.50, +5.40 (0.38%)
S&P 500 756.55, +5.81 (0.77%)
NYSE Composite 4,721.00, +36.01 (0.77%)

There was little in the way of economic news on Friday, except that consumer confidence improved by a small amount, from 56.3 in February to 56.6 in March. Other than that, investors were more or less left to their own devices and they continued to be in a buying mood for most of the session.

Gainers held sway over decliners, 4011-2509. The difference between new lows and new highs narrowed significantly. There were only 16 new highs, there were only 107 new lows, as compared to over 1000 on a regular, daily basis, just last week. we are rapidly approaching a date when these numbers will roll over, an event which has only occurred - more new highs than lows - only 5 or 6 times over the past 16 months, and not at all since this past summer.

Volume was not as strong as previous session, but still solid.

NYSE Volume 1,611,209,000
Nasdaq Volume 2,073,777,000

Commodities participated in a rather dull session, with oil finishing lower by 78 cents, to $46.25; gold up $6.10, to $930.10; and silver ahead by 22 cents to $13.22.

The rally may continue for some time, so long as news flows don't become frightening again and the negative feedback loop cycles again, though sentiment changes can occur at the drop of a hat, as evidenced by this week's upheaval. The most odd feature of this week's rally is that to a man or woman, not a single person said that Monday was the absolute bottom. Not one commentator was so bold as to call the bottom, and oddly enough, that's usually precisely when they happen, when nobody believes the worst is over.

Monday could very well have been the bottom, but I'm neither brave enough nor smart enough to call it. Time will tell, though I would not be at all surprised if it holds for longer than anyone suspects.

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