Biggest Gain for 2009, 5.8%

Tuesday, March 10, 2009

Fundamental Take:
Stocks posted their largest gain for 2009 with the Dow vaulting 379 points higher. These gains came with a 15% jump in the financial sector as investors warmed to CEO Vikram Pandit's memo stating that Citigroup was in midst of its best quarter since 2007 showing a return to profitability in the first two months of 2009 on revenues of $19 billion. C exploded higher gaining 38% today with BAC gaining 28%, JPM 23%, WFC 18%. Pandit's comments seemed to restore the light at the end of the tunnel for investors. General Electric continued its strong rebound gaining 20% after selling $8 billion in debt yesterday at improved yields over the last couple weeks. Congress continues to debate mark-to-market accounting and the uptick rules. Representative Barney Frank continues to push the Securities and Exchange Commission to reinstate the uptick rule seeing it possibly restored as early as next month. He also believes the Financial Accounting Standards Board and SEC must look to make mark-to-market more flexible.

Technical Take:
Today's action was a classic bear market rally with the markets snapping back after huge declines. While gains are always welcome, it should be remembered that the Dow closed over 9,000 on the first day of 2009. Since the new year began the indexes have seen nothing but continued selling falling 2,500 points in the first two and half months. Stocks gapped up over 100 points and trended higher throughout the day on higher volume. This action should be sustainable in the short-term with buyers finally placing a strong bid into stocks. Financials, having reached drastically oversold levels, reversed aggressively off lows. Investors latched onto the first bit of positive news in months and scooped up beaten down banking shares. The financial sector has led the market back and forth throughout this bear market and where they go, the market goes. When financials eventually do find a bottom and begin the basing process, this market may have a hope for a long-term move to the upside. Today's zealous buying interest should provide a short-term boost to the indexes but it is yet to be seen whether stocks can finally hold a move to the upside and mount anything substantial. This was not the capitulation reversal I was expecting but a new pivot low is now in at 6,440 with strong resistance at 8,000 should the market find solid footing.


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