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MV Weather Report: Stormy Weather for Banks


Rain or shine, we review the day's biggest stock stories.

The markets haven't done much so far. Yesterday's sell-off and reversal came on the heels of the swine flu news; today's followed capital concerns for Bank of America (BAC) and Citigroup (C).

The S&P 500 has been bound by its trading range for the past few days; "wait and see" is the prevailing mood, and the market's move may be over.

Here's a Buzz from James Kostohryz:

"As I look at this distribution in the last couple of days I see some signs that give pause. In particular, I am seeing a distribution from high beta to low beta; from economically sensitive and into consumer staples, utilities and the like. This is a departure from the pattern that we have been seeing for weeks in which there has been a clear rotation from low beta to high beta.

"Thus, I am wondering whether this switch (admittedly only incipient) in sectoral emphasis and constituency that I am seeing represents a distribution and an early warning signal that the uptrend is losing its way. Bull markets are not built on leadership from utilities and consumer staples produced by buying by dedicated managers that are only buying because they have to."

There are 3 upcoming events that have stalled the tape: The first is tomorrow's FOMC meeting tomorrow; the second is the end of the month (Thursday); finally, there's the stress-test results, due out next week.

We'll focus most of our attention on the FOMC meeting, which is on deck for tomorrow afternoon.

Today on the Buzz and Banter, Professor Lance Lewis gave a preview of the fed meeting.

"Therefore, I suspect we'll either see the Fed announce at Wednesday's FOMC meeting that it is either increasing the amount of long-term Treasuries that it is monetizing, or as an FT article suggested yesterday, the Fed could also guarantee to keep rates at zero for a defined period of time."

Under Lewis's scenario, a rally in gold stocks could occur. Some names to consider if this does happen would be the Gold Miners ETF (GDX), Agnico Eagle Mines (AEM), and Goldcorp (GG). It's possible that equities may rally as well.

Could this be the push the market needs to power through 875 on its way to the 890/900 level? Anything is possible - especially with the end of the month coming. Big mutual fund managers might window-dress, marking there positions up.

If this scenario does play out, I think it could be Hoofy's last gasp before Boo puts on the sleeper hold.

What's that cute saying, again?

Oh yeah - "Sell in May, then go away."

All right, Minyans - have a great night!
No positions in stocks mentioned.

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