Comtex SmarTrend(R) Morning Call -- January 6, 2009

Jan 06, 2009 (SmarTrend via COMTEX) -- WFC | Quote | Chart | News | PowerRating -- The uptrend paused yesterday as the market indices began to correct an overbought situation, responding to rising oil prices and declining auto sales. The DJIA fell 80 points for the day, retreating below its pivotal 9,000 level by about 50 points. This morning the DJIA will try to climb back above this ceiling, and turn it into a support level again.

The third day in a row of the daily SmarTrend(R) uptrends exceeding downtrends by polarized proportion occurred yesterday, registering 159:6. It would be unusual for this ratio not to begin to retreat today, as has been forecasted here for the past two weeks. The effect to date has been to drive the IBDI and Trend Ratio upward, and now the IBDI is markedly overbought. This means that the intermediate-term uptrend is likely to take a rest for the next two weeks, thereby providing less of a boost to the other trends. In the meantime, the long-term trend indicators continue to flash signals that a bottom was reached last November. As noted here previously, it would be solid confirmation of this phenomenon were the DJIA to rise up to a new high on this rotation, above 9,600.

With both the intermediate-term trend indicators banging into overbought ceilings, and the near-term trend indicators appearing to be forming tops from which to rotate downward, it may be too tall an order for the DJIA to find a new high above 9,600 this week. The NBDX, overbought for two days, has formed a top, and the other three near-term trend indicators are rapidly closing in on their overbought territories, which may signal the current multi-day rally by the DJIA will run out of steam before rising to and above 9,600, and thereby portend a longer recovery period for the long-term trend than a new high would have signified. However, it continues to remain likely that there is enough uptrend momentum in the stock market that the recent higher low, at DJIA 8,600, will provide a solid support level from which the DJIA will launch its next upward assault near the end of January after the expected upcoming downward rotation is over.

There are three important economic reports due out today, discussed in detail below, which could prove catalytic in a trade-term trend shift. Yesterday the trade-term trend moved from overbought to oversold, and was headed back up again at the close. Absent some news report more dire than expected, the market indices should rally this morning, trying to climb above 9,000. Expectations in the stock market are being shaped now by the realization that three decades of credit gluttony in the private sector is being replaced with $8 trillion of government spending directed at reversing the recession; a torrent of inflationary pressures are thus being unleashed. This will show up in stocks by capital rolling from sector to sector, as impacts are measured. To get an idea of what stocks are benefiting and which are not, please click on http://www.mysmartrend.com.

Analyst downgrades and profit-taking sent shares lower Monday as volume remained light despite post-holiday status. It would seem that investors may be viewing the equity markets with an itch to invest. They took in stride yesterday's news that US auto sales had declined by one-third in December with nary a shrug. They welcomed news that after months of dismal housing market reports a post on November construction spending showed a less-than-expected decline. And, of course, they applauded Mr. Jobs' communication of a treatable hormone imbalance. Yesterday's retreat from its two-month high appeared, on balance, a modest round of profit-taking: advancing securities on the NYSE actually outran decliners by a two-to-one ratio. The Vix index, a key measure of market volatility and investor distress, held under forty at 39.08. Safe-haven oases continued their moves lower as longer-dated Treasuries marked sharp declines. The 10-year fell 1 1/32 to a yield of 2.474%, and the 30-year plunged 5 6/32 to a yield of 3.026%. Gold lost its safety luster, as prices fell $21 to $858 per ounce.

Automakers' ugly sales figures came as no surprise: the group's US sales had plummeted to 49-year lows. In December, General Motors' (NYSE:GM) sales of light vehicles in the U.S. fell 31% YoY, for a 23% decline in 2008: its shares, however, increased 1.6%. Ford (NYSE:F) shares jumped 4.9% despite its sales drop of 32% in December, bringing its full year decline to 21%. Toyota Motors (NYSE:TM) shares fell 1.1% on its news of a 37% sales drop in December. This morning the firm announced plans to halt production at its Japanese plants for 11 days in February and March. What did surprise some economists were the better-than-expected November construction spending numbers, which declined by 0.6%, much better than the expected 1.4% decline; moreover, October's 1.2% drop was revised to a more modest 0.4% drop. For those awaiting signs of stabilizing housing markets as an omen for improvement in the overall economy, the numbers were most welcome, even though residential construction remained weak, falling 4.2% during the month.

Pessimism arose surrounding more negative news and lowered expectations for the financial sector, piggy-backing Synovus Financial's (NYSE:SNV) widened fourth quarter loan-loss projection. According to Deutsch Bank's (NYSE:DB) analyst, commercial bank losses could double by the end of 2010, advising as well that "worsening economic trends should put additional pressure on JP Morgan's (NYSE:JPM) loan portfolios." JP Morgan's (NYSEJPM) fourth quarter earnings estimate was lowered by 53 cents to 18 cents and the price target to $34 from $37. Among additional banks' lowered fourth quarter estimates were: Wells Fargo (NYSE:WFC), US Bancorp (NYSE:USB), and Bank of America (NYSE:BAC). Citigroup's (NYSE:C) 2009 losses could total $1. According to a report from Fox-Pitt Kelton, banks remain faced with numerous negatives in 2009, with credit issues "still in the early innings." Credit Suisse (NYSE:CS) also advised clients to avoid the banking sector.

A Bernstein report, cutting ratings on telecommunications giants AT&T (NYSE:T) and Verizon Communications (NYSE:VZ) sent those shares lower. DJIA component Verizon (NYSE:VZ) shares fell 6.2% on its ratings cut to "underperform" from "market perform." DJIA component AT&T (NYSE:T) shares closed 3.4% lower as its shares were cut to "neutral." The analyst noted AT&T's (NYSE:T) price/earnings multiple stands at historically high levels relative to the general market, and, while more recession-resistant than most companies, is still subject to economic trends and also likely to suffer slowing in its wireless and enterprise divisions.

Today's economic posts are considerable, with most slated for 10:00 AM ET release. The decline in factory orders in November may have slowed to a 2.6% drop from October's 5.1% pace. The December ISM purchasing managers' index is expected to have edged slightly lower for a 37.0 post versus 37.3 in November. Pending home sales are expected to have fallen for the fourth straight month, declining an estimated 1% to 88.0 in November from 88.9 in October, still above the record low set in March, 2008. This afternoon the FOMC minutes from its "0" interest-rate-setting meeting are slated for release.

This morning's global markets reveal Asian shares sharply higher. China's Shanghai Composite closed up 3%, with only the Hang Seng marking a drop, off 0.4%, among major indices. Premarket futures in the US point to 75-point gains in the DJIA. Crude prices have continued their slow climb from its recent low of about $34, now above $48 amid escalating Israeli/Hamas violence, militant activity in Nigeria, and US plans to restock strategic oil supplies.

In the corporate corner, Apple (NASDAQ:AAPL) commander, Steve Jobs, addressed not MacWorld, but numerous blog rumors concerning his health and ability to run the firm. He admitted a treatable hormone imbalance, which affected his ability to retain proteins and caused his recent weight loss... Walgreen (NYSE:WAG) reported December same-store-sales had jumped 4.9% in December... LDK Solar (NYSE:LDK) lowered its fourth quarter revenue guidance to $425-$435 million... Goldman Sachs (NYSE:GS) upgraded Best Buy (NYSE:BBY) to "buy."... Barclays (NYSE:BCS) widened its 2008 loss estimate on Saks (NYSE:SKS) from 45 cents to 50 cents... Bob McCann, Merrill's well-regarded head of brokerage operations, announced plans to leave Bank of America (NYSE:BAC)... Chubb (NYSE:CB) shares were cut to underperform by Bernstein...

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 ---------------------------------------------------------------------- AAPL 94.58 Downtrend 87.36 12/22/2008 T 28.43 Uptrend 28.65 12/4/2008 BAC 13.98 Uptrend 15.90 11/28/2008 BCS 9.78 Uptrend 10.52 11/28/2008 BBY 30.00 Uptrend 24.22 12/8/2008 C 7.08 Uptrend 7.95 11/28/2008 CB 50.07 Uptrend 50.77 11/28/2008 CS 29.49 Uptrend 27.37 11/25/2008 DB 38.92 Uptrend 31.72 11/26/2008 F 2.58 Uptrend 2.53 11/28/2008 GM 3.71 Uptrend 4.66 11/26/2008 GS 88.78 Uptrend 76.03 12/8/2008 JPM 29.25 Downtrend 28.98 12/15/2008 LDK 14.84 Downtrend 17.22 11/11/2008 SNV 7.17 Downtrend 6.75 11/21/2008 SKS 4.40 Downtrend 3.87 12/22/2008 TM 65.62 Uptrend 64.87 12/11/2008 USB 24.01 Downtrend 24.97 12/12/2008 VZ 32.48 Uptrend 32.57 11/28/2008 WFC 28.06 Uptrend 30.31 12/18/2008 WAG 26.84 Uptrend 26.23 12/8/2008

INX -- S&P 500: 927 Lo: 920 Hi: 937 Change: -4.35

http://www.mysmartrend.com/images/INX20090106.jpg

INDU -- DOW JONES: 8,953 Lo: 8,892 Hi: 9,034 Change: -81.80

http://www.mysmartrend.com/images/INDU20090106.jpg

QQQQ -- NASDAQ: 1,628 Lo: 1,605 Hi: 1,640 Change: -4.18

http://www.mysmartrend.com/images/QQQQ20090106.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.

Comtex News Network, Inc. is not a registered investment advisor and does not provide investment advice. Investors bear complete responsibility for their own investment research and decisions and should seek the advice of a qualified investment professional prior to making investment decisions. SmarTrend is a registered trademark of Comtex News Network, Inc. Copyright, Comtex News Network, Inc. 2008

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