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MV Weather Report: Sun Shines on Financials


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

Today's tape was shaped by news that Standard & Poor's may downgrade the UK's government-credit ratings due to concerns generated by the extra obligations it's taken on during the financial crisis.

The ripple effect was felt throughout the US bond and stock market; investors fear that the US may also be downgraded.

Today on the Buzz and Banter, Professor Brendan Rife gave his thoughts on the current state of the bond market:

"Since 11 a.m., bonds have been getting smoked like a Cuban cigar.

"The quick and dirty reason is that the NY Fed only purchased $7.4B of the $45.7B in paper that dealers offered. The market was anticipating a much heavier purchase after yesterday's FOMC April meeting minutes contained some jawboning about possibly stepping up to the plate and buying more assets.

"Geithner's comments this morning about it being his job to sustain a strong dollar along with yesterday's FOMC minutes were pure jawboning and nothing more. The bond market is reverting back to the old phrase of actions speaking louder than words.

"It knows the Fed and Treasury are coming to the conclusion that there is not much more they can do at the moment."

Today was an across-the-board sell-off. The only strength was in the financials: JPMorgan (JPM), Wells Fargo (WFC), Citigroup (C), and Goldman Sachs (GS). The S&P 500 traded as low as 879 the day before, recovering to 888; it still closed down 1.68%. I would also note that the index closed below the 20 DMA.

Also on the Buzz and Banter, Professor Smita Sadana gave her thoughts on the S&P 500:

  • "If the S&P retreats from a lower high, that's something to watch out for.

  • "If the S&P retreats before touching the top of the channel, that would be presumably be another sign of weakness.

  • "If the 200-dma is not tagged, in the technical-analysis land, nothing falls apart, but I construe it as a negative. (An athlete has to be really exhausted to not reach the finish line in two attempts)

  • "Check out the On Balance Volume it is lower at this retest, signally a negative divergence.

  • "Seems to me that SP-500 is being held hostage to the longer term trend-line, that we looked at a few days ago.

"The only good news? It is at 20-dma support and that support can hold. But this is also colored by a bit of bad news; now is the second time. First time, the possibility of it holding is very strong; Second time around, we can never be so sure (especially in light of the above factors).

"We need to watch last week's lows (878:intraday low & 882:closing low) hold, and if those are breached 50-dma (currently 848) could be the next stop."

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Be sure to check out Professor Sadana's excellent findings in Bull Market Timer, based on extensive research of past bear markets. There's not much on the radar tomorrow. The bond market closes early.

All right, Minyans - it's Thirsty Thursday. Have a great night!

No positions in stocks mentioned.

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