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Time Will Tell


Be careful out there!


"Don't forget your history;
Know your destiny:
In the abundance of water,
The fool is thirsty."

(Bob Marley)

Good morning and welcome back to the confession session. The earnings scorecard is set to heat up today with reports from a number of key names and that, along with the geopolitical noise, is likely to continue to dictate the trade.

Yesterday, the market got a boost from Kimberly Clark (KMB:NYSE) which raised guidance before the open. The market climbed out of the gate and managed to hang onto the gains as traders, who had pulled in the reigns in front of the holiday weekend, repositioned their trade sheets. Across the pond, Europeans were still on holiday (aren't they always) and volume flows were again light reaching only 1.1 bln shares on the Big Board and 1.4 bln on the Nasdaq. There are a lot of cross currents out there right now that are difficult to game. Rather than choosing to get involved in a trade set-up akin to a coin flip, or walk into a potential disaster, many players are simply choosing to keep some powder dry here and remain opportunistic until the murky waters become clearer.

The DJIA finished up +0.70% to close at 10515. That leaves the index staring at resistance at 10528/10558/10578/10590 with support at 10500/10470/10455/10425. The S&P 500 Index climbed to 1145 for a gain of +0.52%. We're still in a trading range between resistance at 1150/1160 and support at 1135/1125. With a good chunk of the S&P reporting this week we could manage to find some clarity. The Nasdaq was higher by +0.61% to reach 2065. We've got overhead resistance at 2075/2093 with support at 2040/2017. The Nasdaq 100 Index (NDX) gained +0.70% to finish the session at 1496 - just below resistance at 1500/1508 (Monday's close) and above important support at 1475/1459 (50 day ma).

The action yesterday was driven by the interest rate picture as Treasury yields worked higher (lower prices). The yield on the 10 year note closed at 4.23% - the highest level we've had since early January. The sell off in bonds and corresponding creep higher in yields, as we highlighted, hit the REITS very hard (-5%) along with utilities (UTY) (-1.75% and cracking the 50-day ma (317.60)) and the homebuilders (HGX is near key support at 383/380). The disaster du jour was sub-prime lender, Novastar (NFI:NYSE) which, after a negative article in the WSJ regarding regulatory practices, promptly lost a quarter of its value (cracking the 200-day ma where we mentioned it was teetering intraday).

The energy sector fueled the gains as gasoline futures climbed to their highest all-time levels and from there it was off to the races. We highlighted Exxon Mobil (XOM:NYSE) trying to breakout on Thursday and that name followed through to lead the charge higher. For their part, the OSX was up almost 2.5% (thru 50-day ma to resistance at 105) while the XOI was up 1.66% (edging to new highs at 610.09). As we also noted, crude is again testing the $38 / brl level and staring at the March 17th highs at $38.18.

The focus continues to remain on the tug of war for leadership between tech and the financials. Tonight we've got Intel (INTC:NASD) (still trades soggy) and Linear Tech (LLTC:NASD) which, along with last night's report from Novellus (NVLS:NASD) (had climbed right to important resistance at $35) and Int'l Business (IBM:NYSE) on Wednesday, will set the tone for tech trade and help shape the tape.

The Philly Bank Index (BKX) has support at 100 and resistance at 101 - we'll see if earnings can serve as the catalyst to break us free from that trading range. Jeffries (JEF:NYSE), Merrill (MER:NYSE), and State Street (STT:NYSE) all report before the bell. Also keep in mind that Bank of New York (BK:NYSE) has a shareholder meeting. Looking ahead, Bank of America (BAC:NYSE) reports on Wednesday and Citigroup (C:NYSE), is stopping by on Thursday. For their part, the brokers (XBD) are hovering between support at 700 and resistance at the 50-day ma (708). We'll see how it plays out...

As always, we'll scan the action and highlight the relevant info as it all unfolds. Good luck.

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No positions in stocks mentioned.

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