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Markets Hold Gains From Tuesday--Sell In Rally Theory Over?

Don't let the light-volume, low volatility day lull you into thinking nothing happened today.

The disappointing jobs report (including downward revisions in January and February) failed to significantly drop the markets. More importantly, the markets have held the gains from the 400-point move on Tuesday, weakening the "sell the rally" mentality that has been the primary market trend since October 2007.

The market bottom so far has been March 17, the first trading day of the Bear Stearns buyout. This will give added weight to those who are arguing that the Fed has indeed effectively created a floor for the market through its assistance in the Bear Stearns buyout and its action to provide liquidity to the market.

Another important point: financials have led the gains this week, though there were also substantial gains in tech, energy and materials, as well as builders (up 8 percent with many at 7 month highs), retailers, and REITS.

Be careful of complacency here, since earnings for a lot of big financial names are coming the week of April 14th. Expect writedowns and cautious commentary, but how big will the writedowns be? JP Morgan this morning said writedowns for the first quarter will be lower than for the fourth quarter.

Financials this week:

Symbol
Price
 
Change
%Change
SC0Y
---
NYX
---

Fannie Mae up 17 percent
Lehman up 17 percent
Citi up 16 percent
Merrill up 16 percent
NYSE up 11 percent

Sectors this week:

Financials up 6.7 percent
Retailers up 5.9 percent
Tech up 4.0 percent
Energy up 4.9 percent
Materials up 6.2 percent

For the week--Dow up 3.2 percent, Nasdaq up 4.9 percent.


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