Stocks Consolidate Gains

Thursday, March 19, 2009

Fundamental Take:
The market paired recent gains falling 85 points as investors took profits in banking and insurer shares. The financial sector lost 7.9% today after rising over 50% in the last 7 trading days. Citigroup announced its plans this morning for the conversion of the US government's preferred shares into common shares. C will issue 4.38 billion at $3.25 per share for the US government with a total of 16 billion shares required for the full preferred stock conversion. C will be massively diluting current shareholders asking for authorization to issue up to 60 billion more shares on top of the mere 5.48 billion currently outstanding. C also plans a reverse stock split somewhere between 1-for-2 to 1-for-30. C lost 15.6% as investors await the proxy vote by shareholders on the plan. Commodities have found a substantial bid after the Fed's announcement as investors look for inflation hedges and the falling dollar value pushes up prices. Gold futures closed up $70 today after rallying yesterday in electronic trading while crude oil futures added $2.45 closing back over $50. Energy stocks outperformed the market closing 2.4% higher on the day.

Technical Take:
Today was a very tight consolidation day as the market took a rest after gaining over 1,000 points in 8 trading sessions. Stocks do not run higher in a straight line and today's action was healthy considering the overall picture. A stabalization of the financial sector and a bid to energy shares could propel this market higher in the longer-term. Technically, the picture is still bullish and technicians will watch this pull-in to gauge the strength of the buying interest. This bounce has been great for traders as real buying interest has entered the market again after months of despondency.


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