Thursday, March 26, 2009

More Late-Day Theatrics

As was the case yesterday, we saw a frenzy of buying kick in just as the final hour got under way. In the end, the indices were able to close at the best levels of the day and add an average of 2.8% on breadth that was 7:2 to the positive, furthering the oversold rally that began over two weeks ago. Industrials, consumer discretionary and materials were the big winners on the day, while energy was the only cyclical sector to show any real relative weakness. In the process, there were some interesting themes at play.

First was that the S&P 500 was able to move above the 825 level, which represents a breaking of the downtrend that’s been in place since October. That’s a major coup for the bulls who were able to push us higher despite the fact that the market remains oversold. Secondly, traders were actively seeking out pockets of momentum. Semiconductors and solars saw big gains, spurred by a good deal of chasing, and it’s been a long time since we’ve seen that kind of action. The financials have been the main beneficiary of this oversold rally, and it’s encouraging to see buying interest spread to other areas, especially those with high betas.

Of course, none of this makes it any easier for prudent investors looking for proper entry points. There’s no question that this market is extended to the upside and in desperate need of some consolidation, but like we’ve been saying, end-of-quarter pressures will likely have money managers looking for ways to add long-side exposure so they can show their clients they’ve been in on this move.

We’ll see how it goes. There have been some signs that the character of this market may be changing, and the hope is that it will continue as we closed out the quarter and head into earnings season.

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