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segunda-feira, março 30, 2009

TW - S&P Traders: Is the Party Over?

The correction that began on Friday of last week in stocks has continued
this morning. What started out as profit taking last week has gained more
selling momentum as the markets were hit with some negative news over the
weekend. The Auto Industry got hit on news that the Obama Administration
reportedly asked for the resignation of GM's CEO Rick Wagoner. The
government also rejected both GM's and Chrysler's plans for restructuring,
and basically opened the doors for a possible government led
'reorganization' of the companies (bankruptcy).

Furthermore, Treasury Secretary Tim Geithner was quoted as saying that "Some
banks are going to need some large amounts of assistance" and this hit the
financial sector hard. Losses in European bourses are being led by the
financial sector which is down nearly -6%, while XLF is currently lower by
-4.7% in pre-market trading.

So is the party over? Has the bear market rally run its course, or is there
more left in store? That is the $64,000 question...

As we mentioned last week, we were keeping a positive bias on the market but
thought the rally was mature and prone to correcting lower. Prices have
already broken below first support at 800 which is the 8-day MA, an
indication the short term trend to the upside may be over. More significant
support is found in the area between 785/775 which corresponds to the 50 and
40-day MAs. If this area manages to hold then the recovery rally can
continue, whereas a close below this support area will place the focus on
the downside once again.

Our bias is neutral given the break below 800. Look to trade both sides of
the market within a 785 to 800 range. Aggressive traders should favor the
selling of strength expecting this correction to carry lower. More
conservative types should be patient and look for better buying
opportunities at lower levels.

Support:    785 - 775 - 764 - 752
Resistance: 797 - 805 - 815 - 821

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