Great Earnings Injects Optimism...

FUNDAMENTAL ANALYSIS
The Dow staged a surprising 133.4 points rally amidst expectation that it should revisit the Jan lows before doing so. I was one of those analyst with such an expectation. Apparently, the expectation of a rally after visiting the Jan lows has investors rushing in now along with the great earnings so far in order to be ahead of the move. Such a rush have the effect of preventing the visitation of the Jan lows from happening in the first place! :) The earnings season so far has been great and most of these great earnings are from exports due to the weak dollar. Nonetheless, nothing drives stock prices more than earnings and earnings expectations. However, I would not be surprised if the market takes all these back a little tomorrow when the retail sales numbers bring some investors back to reality (see economic calendar) and the reality is.. slowing growth and consumerism. A lot of analysts are attributing the rally today to Berkshire's proposed take over of the muni bond insurance from the troubled insurers like MBIA. However, just think about this... this is a scheme doomed to fail because the muni bond insurance business is an extremely significant, non-subprme related business these insurers have and probably their ticket to long term survival! Would they give it up so easily? I don't think so. Already there have been 1 official reject out of the 3 insurers approached by Buffett. Mr Buffett, it's not always a buffet out there where you can just eat to your heart's content you know?

TECHNICAL ANALYSIS
The Dow made a significant but weak break out of the 4 days limbo. The internals to this rally is somewhat weak with advancers marginally leading decliners. Volume is also way below average and the intraday retreat from its 30 days moving average proves that the 30MA continues to be a strong resistance level, capable of turning the Dow down like we saw back on 4 Feb. I maintain my view that the Dow might still visit the Jan lows before deciding where to go. Absent such a move, any rally could still be a short lived one.


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