Dave’s Daily

MARKET COMMENT

Dave Fry at ETF Digest, March 10, 2009.  [Theme song below]

With friends like the taxpayers who can lose, eh? Not many investors spent time looking deeper behind the better numbers that Citigroup’s “Mooch in Chief” was citing. But, who cares? A little spark often stampedes bulls in an extremely oversold market—it isn’t hard to fathom. Further Bernanke hints big banks won’t be allowed to fail and there was a good chance the recession will end this year. Also, Barney Rubble states mark-to market rules should be reconsidered (another try at “the willing suspension of disbelief”) and the SEC will consider reinstatement of the uptick rule—this being the biggest smoke screen of them all.

So, it was a massive show of farce force by the powers that be.

Bear market rallies are often the most powerful. Further, the DeMark monthly 9 counts I’ve been citing; monthly RSI readings that are at record lows for many markets; an oversold McClellan Oscillator; and super high VIX readings were just some of the reasons to stay on the sidelines. These conditions and the accompanying jawboning is why we’re not still short.

Below is the monthly chart of SPX (yesterday’s data) with DeMark sequential annotations. You can see the imperfect top from 2007 marked by a red 9 and now the green 9 indicating potential trend exhaustion.

Anyway, hot money moved quickly out of safe havens like gold and bonds and into stocks for what could be just a quick trade. And, make no mistake about it this is only a quick respite for now. We’ll see how far it goes.

Volume was surprisingly average and markets were ramped and camped all day during this short squeeze. If this was a 90/10 reversal day I can’t tell yet.

Our man in Geneva, David Hurwitz, has given us the lowdown on both the NYSE and NASDAQ as follows. It looks like a 90/10 day on the NYSE but not on the NASDAQ. He also adds this comment:

“I just found the comparable Nasdaq data on the WSJ site that I’ll analyze tre vite?.

I analyzed my NYSE volume data since 6-15-2006 or about 693 sessions and find:

90+% up sessions occurred 25 times or 3.6% while 90-% down sessions occurred 46 times or 6.6%.

As you may recall from previous work, the 90+% indicator wasn’t all that useful in predicting subsequent market moves over even a couple weeks of activity let alone where an intermediate or long-term directional change has occurred.”

So bulls got the wave going today and the crowd went with them.

It was a pretty spectacular day and with our friend’s report from Geneva (Thank You Dave!) it looks like a 90/10 day for the big board but just shy of that for the NASDAQ. I didn’t find the level of volume particularly impressive but the points certainly were.

Just remember, this is still a bear market and as we headed into today, everything was as oversold as we’ve ever seen it, particularly on long-term monthly charts.

I’m having some PC problems and internet interruptions so I’ll have to break this off a little early.

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, GLD and DBB.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward.