Change You Can Believe In...

Yes, that's the slogan for the now US President Mr Obama and we can all see by now that he's a man of his words. The moment he took office, we saw a huge change in political resolve and action and we saw it once again today as Mr Obama pushed through yet another huge stimulus bill this evening. Obviously the Republicans still don't know what's going on and are persisting in their old ways by voting against the bill unanimously. It seems like the new President is going to have a hard time with these people going forward. Hope he wins their heart as well. Stocks surged today off the line as the US government could actually create banks to buy all the toxic waste from the good banks in something known as a Bad Bank. Indeed, this Bad Bank idea is something that no economists or financiers have ever heard of and is yet another change effected by the Obama administration. Obama is demonstrating resolve to end the crisis once and for all against all political and theoretical resistance... in fact, he is taking actions so harsh that we are convinced that consequences ain't that important to him at this moment. The language from the Fed today was less than encouraging and actually stalled today's rally. Well, now that Uncle Ben can do little more to help, it is time for fiscal policies to take over.

Tomorrow, investors will focus on the Durable goods order and jobless claims (see economic calendar) for more signs of stabilization. If these numbers beat expectation like the numbers on Monday, investors could be convinced into the stabilization scenario and spurs more buying. Beating expectations on the Jobless Claims number could be a tall call as consensus is calling for a lower number of 575k vs 589k of last month. We have continuously seen reports of companies scaling down these 2 months, putting the odds in favor of yet another higher number. So, what if the number is higher? The situation is really quite complex now, typical of market and economic bottoms, where there are a ton of promising measures along with mixed economic numbers. It really boils down to what news investors choose to focus on and act upon.

The Dow rallied 200 points today and established a short term neutral trend within an intermediate neutral trend. The same situation the Dow has been in the whole of last month but on a lower plane. The short term neutral channel is bounded by 8500 - 8000. Short term bullish momentum is still rising and still have way to go before getting into the short term overbought region, which could provide some energy to break above the 8500 level this week.