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MV Weather Report: Markets Survive Early Storm


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


The market kicked off the week with a down day but this shouldn't come as a surprise to investors after a 4-week run that saw the S&P 500 move up by more than 15%. The popular averages were down for most of the day before a late day rally attempt helped the market close near the breakeven level.

For the day, the S&P 500 closed lower by -0.33% to 1,007, the DJIA closed lower by -0.34% to 9,337 and finally Nasdaq finished the session lower by -0.40% to 1992.

Today's selloff wasn't led by any particular company, I would note that Goldman Sachs (GS) was weak for the third day in a row and Research in Motion (RIMM) traded lower by -4.94% on the heels of a UBS downgrade. Just like the losers, the winners were spread out as well as energy stocks traded strong. See Transocean (RIG) and Core Labs (CLB) for example. AIG (AIG) continued its squeeze higher as did Citigroup (C).

As this one month 15% rally has at least stalled for now, what should your game plan be?
Today on the Buzz and Banter Professor James Kostohryz laid out his.

"In terms of fundamentals, this market is in a tug of war. On the one hand there is a great deal of positive momentum from good short term news flow. On the other hand, the quantity and quality of further upside surprises are likely to wane given the culmination of earnings season and the burden of heightened expectations on the economic front that will be harder and harder to meet. Additionally, I foresee increasing worries on the part of market participants about the strength and viability of the economic recovery in the medium term.

"Thus, in the midst of these crosscurrents, I do not see that fundamentals are providing a decisive signal either way, at this juncture. Valuations are in a neutral range: they are neither undervalued, nor overvalued. In terms of fundamental news flow, momentum in short term economic indicators abounds, which is bullish. However, we must not forget that markets are discounting mechanisms as well. Markets have already discounted a good bit of good news in the pipeline, and at any moment the market could begin to discount concerns further down in the pipeline."

Professor Kostohryz went on to stay that the fundamentals are "ambiguous" but he thinks opportunities may lie ahead by using the technicals. He said he's "neutral" at the current position, above S&P 1,010 he is "constructive" and below 1,000 he is bearish and would look for the 980 level to break.

While Kostohryz laid out the technical levels to keep an eye on, Professor Branden Rife gave his thoughts on the potential market catalysts that lay ahead.

"We also have 3 bond auctions going off this week starting tomorrow with a 3 year (yawn), and more importantly Wednesday's 10 year and Thursday's 30 year. Will the Fed assume the role of Monte Hall again and make a deal with primary dealers to buy a large chunk of the bonds in the auction only to sell them back to the fed 6 days later if demand looks to be coming in below expectations?

"Wednesday's FOMC meeting will be interesting from the perspective of whether or not they decide to make any comments regarding changes in strategy in its quantitative easing policy. Last meeting they made no meaningful comments."

That's it for tonight, have a great week!

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