Wednesday, April 1, 2009

March 2009 Rewind - Real Life Roller Coaster

The old March standby "in like a lion..." just doesn't fully capture it -- does it? Last month brought us both a historic plunge to price levels not seen since 1996, followed by an equally historic recovery boasting monthly returns not recorded in over twenty years -- and yet the S&P 500 remained down nearly -12% on the year!

This March, the S&P 500, Dow Jones Industrials and NASDAQ 100 cash indices rose +8.54%, +7.73% and +10.74%, respectively.

News flow started off on the wrong foot with price already at a vulnerable level. In the first week alone, AIG came back to the till on a $62B loss, followed by worse than expected automobile sales and job losses. However, by mid-month with Madoff jailed, AIG bonuses blocked, added TALF details, and a handful of economic upside surprises, the markets were able to turn it around and powerfully so. Throughout the roller coaster ride of a month, the VIX (implied options volatility) once again remained in a relatively narrow range.

Sector-wise, Financials (XLF +17.2), Materials (XLB +15.4%), and Consumer Discretionaries (XLY +12.7%) led the up-across-the-board majors, while Style-wise the Mid-Cap Values (PWP +10.9%) led the charge. With first quarter earnings soon on deck, analysts will be looking closely for any signs of a near-term trough earnings scenario. Will traders get an April follow-through on the strong March reversal?

Sentiment: Mixed
Volatility: Level (VIX 40-52)
Direction: Upside Reversal

[Click to Enlarge/ Additional ETF Analyses Posted on Market Rewind]

The Style-Box was calculated using the following PowerShares™ ETFs: Small-Growth (PWT), Small-Value (PWY), Mid-Growth (PWJ), Mid-Value (PWP), Large-Growth (PWB), and Large-Value (PWV). The Sector-Ribbon was calculated using the following Select Sector SPDR™ ETFs: Materials (XLB), Industrials (XLI), Energy (XLE), Staples (XLP), Discretionary (XLY), Financials (XLF), Technology (XLK), and Healthcare (XLV). The Standard & Poors 500, Dow Jones Industrial Average and NASDAQ 100 may be traded through ETF proxies, including the SPY or IVV, DIA and QQQQ, respectively.

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