***Executive Summary***

• Stock Market Stance Remains Neutral
• Citigroup Talks up Profitability
• Pricey Credit Default Swaps for GE
• QID forms Doji in Support Zone
• Major-index ETFs Stall after Big Surge
• UUP Declines as Risk-Aversion Eases
• GLD Forms Harami at Support
• USO Moves into Gap Zone
• TLT Forms Bullish Engulfing at Support
• ETF Stocks Setups Video by 8:30AM (video link)

***Stock Market Stance*** Neutral on 29-January. No change. It was a pretty impressive rally. There were positive breadth extremes and volume expanded. At the very least, this rally establishes support for the major-index ETFs. In order to turn bullish, we need to see follow through with conviction. The market was down sharply over the last 4-5 weeks and one day is not enough to undo this technical damage. We have seen 1-2 day bounces fail over the last four weeks. Let's see if this one is any different. As noted in the daily chart analysis for the major-index ETFs, I suspect that we will see follow through and a bear market rally will unfold. However, I am not rushing into to long positions. Bottom pickers on Monday afternoon or Tuesday morning are in good shape, but long positions after 6-7% surges risk a pullback or even a failure.

Market moving events for the next few trading days:

• Thursday: Retail Sales, Jobless Claims, Inventories
  -Earnings: Imax, Con Ed, Aeropostale, Pacific Sunwear
• Friday: Consumer Sentiment
  -Earnings: Compass Group, SkillSoft
• Monday: No economic reports.
  -Earnings: Six Flags, Schawk, 3Com, eDiets
• Tuesday: Housing Starts, Producer Price Index (PPI)
  -Earnings: FactSet, Sirius XM, Adobe, Darden Restaurants
• Wednesday: FOMC Announcement, CPI, Crude Inventories
  -Earnings: General Mills, Nike, Oracle, Herman Miller

***Technical Highlights***

***Is Citibank in the Clear?*** Citigroup's earnings pre-announcement helped spur Tuesday's big rally. Banks usually report earnings after three quarters, but Citigroup was so excited that they decided to provide a preview after just two months. Sounds a bit manipulative to me. Anyhow, Citigroup is projecting a profit in excess of $8 billion for the full quarter. This is before taxes and a ONE TIME CHARGE, for which Citigroup declined to elaborate on. Give me a break. How many "one time charges" has Citigroup had in the last two years? I'll give you a hint. It is more than one. What if Citigroup is right this time? What if there are not anymore one-time charges? What if Citigroup has fully discounted all its toxic assets? If this were true, then I would say that Citigroup is a screaming buy. After all, they still have some profitable businesses. That "if" is a huge "if". Frankly, it boils down to belief in management and their statements. Boy, now there's a comforting thought. In addition, there is the bigger question of solvency. The charts really don't help on this one. Buyers at current levels are either going to triple their money or lose 70-100%.

***GE is More Diversified*** General Electric (GE) has been trading like a bank over the last few months. Even though it has a large financial services division, it is clearly much more diversified than the big banks. GE has many businesses that will recover quite well in an economic upturn. While this is pure speculation, GE could conceivably spin off its non-finance businesses. That would be a huge boon to the stock. For now, GE is whole and I have not heard any talks of a spin off. Recently, the CFO for General Electric suggested that investors have over-reacted to the problems, but the market thinks differently. Reuters reported the following on 10-Mar:

The cost of insuring debt of General Electric Co's (GE.N) finance arm with credit default swaps fell on Tuesday, a day after the unit raised $8 billion in a sale of government-guaranteed debt. Five-year credit default swaps on General Electric Capital fell to 9 percent upfront on Tuesday from 12 percent at Monday's close, plus 500 basis points annually, according to Phoenix Partners Group. That means it costs $900,000 in an upfront payment, plus $500,000 in annual premiums, to insure $10 million of GE Capital debt.

The last sentence still says a lot. It takes a 9% payment to insure your GE bonds against default. That seems quite steep to me. Perhaps the Credit Default Swap market is also over-reacting. However, the stock is unlikely to move higher as long as the Credit Default Swaps remain at 9%. On the price chart, GE formed a big hammer with high volume in early March. Follow through on Monday-Tuesday confirmed the hammer and the next resistance is around 11-13. The surge off support looks promising, but I would not chase anything in the current environment. Let it come to your price. The green box shows a support zone. If you believe management and you think that the crisis is overblown, then a pullback to this area would offer a better risk-reward ratio. As with Citigroup, investors will either double their money or lose 50%. Big reward comes with big risk.

***QID Breakout and Pullback*** UltraShort QQQQ ETF (QID) has a potentially bullish pattern in the making. This means that QQQQ has a bearish pattern in the making. QID broke resistance at 64 with a four week surge. Tuesday's sharp decline pushed the ETF back below broken resistance. However, there is still a support zone around 55-60 from the late February consolidation. Also notice that QID formed a doji yesterday. Even though RSI(2) has yet to become oversold (below 10), this indecisive doji could foreshadow a short-term reversal.

***Major-index ETFs***

***Medium-term Trend*** After a big surge on Tuesday, the major-index ETFs turned indecisive as doji formed on Wednesday. These candlesticks have small bodies that signal little change from open to close. In addition, they have relatively equal upper and lower shadows to denote the high-low range. A little indecision after a sharp advance is perfectly normal. It is used to consolidate gains. This is the tricky part. The bigger trend is clearly down. Is this just a dead-cat bounce or did Tuesday's big surge signal the start of an extended bear market rally? Even though breadth and volume were impressive, I must side with the dead-cat bounce at this stage. Follow through holds the key. A one day surge can be triggered by short-covering and bargain hunting. A follow through surge would show new buying that is needed to show sustainability.

***Short-term Trend*** QQQQ, SPY and IWM surged to key resistance and stalled on Wednesday. Tuesday's gap held and most of the surge is holding. I identified support levels from broken resistance. Each ETF broke above the 9-Mar high with Tuesday's surge. These broken resistance levels turn into support. A bullish pullback should hold above these broken resistance levels. The green boxes mark support zones. Watch for firmness and/or a reversal should the major-index ETFs pullback to these areas. As far as a short-term trend reversal, follow through to Tuesday's advance AND a resistance breakout would reverse the short-term downtrends. With the ETFs in a downtrend and near resistance, the odds favor further weakness.

***Inter-Market Charts***

***Dollar*** The chart below shows comparative central bank rates around the world. Rates around the world are falling. The Fed and the Bank of Japan have the lowest rates. There is no more room for cuts. In fact, near zero percent interest rates make both currencies ideal for a carry trade! Europe and Australia have the highest rates, which means these have further room to fall. Further interest rate cuts could weigh on their currencies.

With stocks bouncing further, money moved out of the Dollar again on Wednesday. The greenback has been the safe-haven currency of choice lately. Rising stock markets reflect an increased appetite for risk and this benefits the Euro. But will this appetite for risk last? Even though the Dollar took a hit the last two days, the trend for US Dollar Index Bullish ETF (UUP) remains up. There is a support zone around 25.9-26.2 and the ETF is trading just above this zone. Further strength in stocks could push the Dollar down further, but let's see a support break before calling a trend reversal. The Euro Trust ETF (FXE) is challenging resistance at 129, but has yet to actually break this key level. The advance over the last seven days looks like a rising flag. A break below 126 would signal a continuation lower.

***Gold*** The Gold SPDR (GLD) firmed with a harami pattern over the last two days. Wednesday's smaller white candlestick is within Tuesday's black candlestick. These patterns show indecision that can sometimes foreshadow a short-term reversal. With GLD at an important support juncture, a bounce would keep the medium-term uptrend alive. On the 30-minute chart, GLD bounced off the bottom of its support zone on Wednesday. The short-term trend remains down as the ETF trades below the February trendline and early March high. At the very least, a break above 91 is needed to anticipate a trend reversal.

***Oil*** Oil took a spill yesterday as the Energy Department reported an increase in inventories. As noted last week, inventories are close to 16 year highs and many storage facilities are near peak capacity. Next up, oil will be focusing on the 15-Mar OPEC meeting, where expectations are for another production cut. This could stoke the bulls. On the daily chart, USO backed off resistance around 28-30 with a gap down on Wednesday. This decline reinforces resistance in the 28-30 area. On the 30-minute chart, USO declined to the gap zone on Wednesday. There may be support around 25.5-26.5 from the gap and the February trendline. A successful bounce here would forge another higher low. Let's see if USO can firm in this area first.

***Bonds*** It seems like we get a new signal every three days in the iShares 20+Yr T-Bond ETF (TLT). The ETF continues to consolidate with support around 101 and resistance around 107. After a gap up last Thursday and gap down on Tuesday, the ETF formed a bullish engulfing on Wednesday. This further affirms support and TLT could be poised for another resistance challenge. Failure to follow through and a break below 101 would signal a continuation of the January decline. The 30-minute chart amplifies the consolidation. TLT bounced off support yet again with a strong move Wednesday afternoon. A mini-breakout is in the works with the trendline breakout.

Good day and good trading -Arthur Hill

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Disclaimer: Arthur Hill is not a registered investment advisor. The analysis presented is not a solicitation to buy, avoid, sell or sell short any security. Anyone using this analysis does so at his or her own risk. Arthur Hill and TD Trader assume no liability for the use of this analysis. There is no guarantee that the facts are accurate or that the analysis presented will be correct. Past performance does not guarantee future performance. Arthur Hill may have positions in the securities analyzed and these may have been taken before or after the analysis was present.
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About: The Daily Swing is posted every trading day around 6AM ET and focuses on short-term strategies for QQQQ, SPY and IWM. In addition, at two stock setups are featured every day with a detailed trading strategy. As warranted, coverage extends to broad market topics, key sectors and industry groups and inter-market securities (gold, bonds, the Dollar and oil).
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Sources: Data from Bloomberg.com, CBOT.com, Kitco.com and ino.com; Charting from Metastock (equis.com). Closing data from Reuters.com, eSignal.com, MS QuoteCenter and Yahoo! Finance.