Comtex SmarTrend(R) Morning Call -- June 11, 2009

An early rally yesterday fizzled over fears rising interest rates would create a strong headwind for a recovering economy. The DJIA dropped almost 200 points before rallying back to close down only 24 points for the day. Overall it was another day of meandering and the SmarTrend(R) indicators are likely to rebound up slightly this morning to continue moving sideways until support and resistance intersect week after next and a major rally ensues.

Rising interest rates at the Fed bond auction yesterday increased worries that the recovery of the economy would be retarded by the cost of capital and the Beige Book report did little to counter these fears. It was not until after lunch that sellers gave some ground to buyers and the market indices began an intraday recovery. That recovery is expected to continue this morning, following the retail sales report for last month, but the market indices will continue to move mainly sideways until late this month. The daily SmarTrend(R) uptrends to downtrends turned in a mildly positive day at 20:6. This performance was in line with a meandering market and the movement of the IBDI and Trend Ratio were mixed. The intermediate-term uptrend is positioned to reassert itself over the next week as the market indices consolidate platforms from which to try to climb up through their ceilings of resistance. The long-term trend showed no change in its slow quest to turn into an uptrend, a phenomenon expected to coincide with the convergence of first the S&P500, and then the DJIA, rising support levels and declining ceilings of resistance. This milestone crossing event has been foreseen since the QQQQ moved up on May 1, then spent a month meandering along just above its support level, which had been its declining ceiling of resistance before May. This was followed by support and resistance convergence on June 1, which coincided with the beginning of a QQQQ climb up that is now ongoing.

The SmarTrend(R) indicators have a good chance of rotating into complementary positions over the next week. It will be important for the near-term trend indicators to be moving upward at the same time the market indices try to break away from their meanderings. At the moment three of the four near-term trend indicators are edging up, with only the NBDX retreating. This should lead to a mild rebound by the market indices today as they will work to maintain an equilibrium around DJIA 8,700 until the break out commences. That break out is still not expected before June 22 for the S&P500 and June 29 for the DJIA.

Any sideways-moving market is vulnerable to trade-term trend swings, and thus the road forward is likely to be full of dips and surges from day to day. Today is no exception with all eyes focused on reports regarding last month's retail sales and jobless claims. Both are discussed below and the reactions are not likely to create big surprises. Moreover, the various mixed signals about the economy are reflective of and consistent with a stock market waiting for a reason to turn up the buying force and commence a shallow long-term uptrend, expected to drive the DJIA up to 10,000 by the end of 2009. To review the complete list of stocks changing trends in the last week, please click on http://www.mysmartrend.com.

"It does not do to leave a live dragon out of your calculations if you live near him," so investors were reminded Wednesday after an auction of benchmark 10-year Treasury notes brought a high yield of 3.99%, the highest since last August, and caused concern that the government's $3+ trillion dragon might scorch the garden of new economic recovery shoots. By mid-afternoon the S&P sank to session lows, down 1.4%, before recovering slightly to close off 0.4%. The DJIA shed 24 points for a 0.3% decline, while the NASDAQ eased 0.4%. Also generating concerns for the recovery, crude oil prices continued their gains, up $1.32 to $71.33.

Yesterday's Treasury auction resulted in the largest yield markup in six years, heightening fears that today's third leg of this week's auction schedule, $11 billion in 30-year bonds, might face their own difficulties, especially considering last month's disappointing sale. Not only interest-rate sensitive shares were affected, although homebuilders and financials were particularly impacted by fears of rising rates. Investors grew concerned that interest rate gains could smother an equity rally as swap rates utilized for mortgage and corporate bond lending calculations are pressured. Yesterday saw mortgage rates spiral higher with the Fannie Mae's (NYSE:FNM) 30-year coupon hitting a high of 5.08%. Hopes that housing may be bottoming at last were imperiled also by reports this morning showing May foreclosures at their third highest on record, although off 6% from April, as one of every 398 households were reportedly subject to foreclosure filings.

Also dampening hopes for a solid economic recovery over the near-term, crude prices continued to rise after a weekly US inventory report revealed crude stockpiles had fallen 4.38 million barrels after recording a 2.87 million increase the previous week. The national average price for a gallon of gasoline rose to its highest since late October, hitting $2.63 per gallon, and increasing concerns that consumer spending will be affected. This morning the International Energy Agency added its bullish comments, trimming oil demand contraction estimates for the year.

Although the long-term rates have risen to their highs of the year, they remain relatively modest by historic standards, with the 10-year well below historic highs of 15% recorded in the early 1980s. And while sufficient to overshadow earlier gains in Asian markets, release of the Fed's Beige Book later in the afternoon curtailed the market's fall. According to the monthly report of 12 Fed bank districts, economic conditions remained weak, or showed signs of further deterioration from mid-April through May; however, five noted signs of moderation and several asserted expectations had improved.

The market's recent crab-like crawl signifies not only the fears of rising inflationary trends, the overhang of government financing needs and higher basic material costs, but also the sense of better times ahead. With both the DJIA and S&P near their 200-day moving averages, and following a S&P rally of 37% from 12+-year lows hit in early March, traders may be excused for awaiting clearer signs of a recovery. Despite the dilutive impact of the record number of share offerings last month, the secondaries do reflect increasing health in the marketplace. Today's retail sales numbers are likely to show their first gain in three months, even though assisted by the gains in gasoline prices and higher demand for cars and trucks. Weekly jobless claims are estimated to have fallen 6K to 615K last week. Business inventories are likely to have matched March's drop of 1%.

In the corporate corner, Fiat closed its Chrysler deal.

National Semiconductor (NYSE:NSM) is expected to report a fiscal fourth quarter loss of 42 cents.

Palm (NASDAQ:PALM) CEO Colligan is being replaced as CEO after 16 years with the firm.

CR Bard (NYSE:BCR) increased its quarterly dividend 6% to 17 cents.

Del Monte (NYSE:DLM) is estimated to report fiscal fourth quarter results of 26 cents.

Vulcan Materials (NYSE:VMC) slashed its dividend to 25 cents from 49 cents also announcing an 11.5 million-share offering.

Bank of America (NYSE:BAC) received an upgrade from analysts at KBW.

By Chip Brian, Editor-in-Chief, Comtex news Network

www.Comtex.com -- editor@mysmartrend.com

The following equities mentioned above include:

                                    Comtex SmarTrend Alert
                        ----------------------------------------------
Ticker    Last Close    Trend Direction    Trend Price      Trend Date
----------------------------------------------------------------------
FNM        0.68          Downtrend           0.65           10/24/2008
NSM        14.71         Uptrend             11.75          2/6/2009
PALM       11.99         Uptrend             8.49           3/24/2009
BCR        73.34         Downtrend           71.48          4/23/2009
DLM        7.65          Uptrend             6.26           12/3/2008
VMC        43.97         Uptrend             48.47          6/2/2009
BAC        11.98         Uptrend             5.42           3/12/2009

INX -- S&P 500: 939
Lo: 928 Hi: 950
Change: -3.28

http://www.mysmartrend.com/images/INX20090611.jpg

INDU -- DOW JONES: 8,739
Lo: 8,640 Hi: 8,835
Change: -24.04

http://www.mysmartrend.com/images/INDU20090611.jpg

QQQQ -- NASDAQ: 1,853
Lo: 1,828 Hi: 1,872
Change: -7.05

http://www.mysmartrend.com/images/QQQQ20090611.jpg

This report is divided into three sections. The first deals with our 5 proprietary market indicators, the second section examines important economic and business happenings which are expected to affect U.S. Stock market movements and the third section describes specific company announcement and earnings releases. Experience demonstrates that when these 5 indicators reach extremes they can shortly be expected to change direction and move in the opposite direction. When such happens in all or most of the 5 indicators, on or about the same time, followed by a move from below an extreme (oversold) to above that extreme (or vice versa for overbought), a change in market direction is very probable. The near term market moves are measured to identify the best possible returns for traders/investors. Daily price/volume examinations provide the best data upon which to base such forecasts. In this report though, intraday indicators are examined to improve the point of entry timing for the expected move.

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