Well, we got the Turnaround Tuesday we thought we'd get! Ka-chingo!
Nice overnight gap down, then bounce, then drift, then BAMM! Some BS news from the BS Fed and wha-la - instant rally!
That's what you call a massively oversold rally! So, where to now? Well, hopefully we get a few more days of a rally. I missed one trade, I think someone pointed it out to me but I just plain missed it. AAPL into the news Friday of the new I Phone. That thing almost always rallies. My bias, which was right, kept me from calling AAPL long, but obviously that's been a nice trade into the news Friday. Usually that stock will sell the news, so it'll be interesting to see if AAPL sells off after Friday or Monday.
SO, ok, now back to the bounce notion and how long it'll possibly last. I think we have a shot to get a move to 700ish on the ER and potentially 1400 on the S & P. I don't think we can go much more than that. What you notice here is classic Window Dressing anti-trend. Oil tanking, commodities tanking, those stocks tanking and the beaten down sectors rocking. Usually this type of rally will last a few days to a week overall, with pullbacks buyable for that time period.
I do not see the financials getting very far here. I would love for some of these to get a 10% bounce. Get me to $40 on MER and I'll show you a really nice short entry. LM which has been STELLAR for us at $42 area would be very very nice to get a new short on. In this type of market we look to trade bounces to the long side and then look to short at resistence points. That gives us a very nice risk/reward situation, one that is easy to trade and manage as long as you are willing to set your stops.
I was asking on the blog yesterday about bounces and investing. Please note that I can't give individual advice to anyone, I'm not licensed or registered. I will say that me personally, I would NOT be investing in this market. I continue to believe that this market is VASTLY overvauled and these bounces are simply better short entries.
If you want to invest, after days like today just buy the SKF long (I would give it a little more room, perhaps it'll fall to $130 area which would be an ideal entry to the long side).
The ridiculous thing about the markets is, and why we can have a HUGE edge if we are patient is that they usually follow very clear patterns. Look at FNM and FRE today. If you've followed the markets lately you will know that the Fed has said similar things and sparked massive squeezes in MBI, ABK, WM, C and others over and over again. Yet, these stocks all have CRACKED HARD once everyone realizes that just because the Fed says some nonsense about how important FNM and FRE are, the Fed doesn't give a rat's butt about SHAREHOLDERS or the price of the stock. Just look at charts of MBI and ABK and compare them to the charts of FNM and FRE and you'll see a very real correlation. THese stocks are so so broken that they are doomed. Does that mean that FNM and FRE are going to go bankrupt? No, the Fed will bail them out more than likely, if they can, but do you think the Fed cares if FNM trades at $25 or $2.50? They don't, nor should they. FNM and FRE were set up to provide liquidity and stability to the markets they serve. TO use them as investment vehicles is not only foolish, but irrational. They should trade at roughly 5 to 10 X"s earnings AT MOST. When do you think FNM is going to earn enough to justify trading at the $18ish it closed today at? Not for a LONG while, if ever again.
Please remember ABK and MBI, part of being sucessful in the markets, or any business is to learn from history. These stocks kept getting propped up FALSELY and then they would just roll over again. The only ones making money on them? SHorts and TRADERS.
I do not believe rallies like today, other than they are a dead cat short covering. The media LOVES to say "the bottom". THe only thing that has a bottom here is my behind, which with my two a day workouts is getting a bit smaller. I know, TMI< but hey what can I do, you think it's easy to write every day and tell it like it is? I gotta put a little BUT(T) into it. Why? Cause everything AFTER BUT(T) is BS!
Or, so I'm told!
Let's see what shakes, but I suspect this bounce is fairly short lived. What I would look at here now is LAGGARDS. I have some on my list to call for members that I Think can get REALLY nice bounces short term. The usual trend on bounces like this is that they stall out and trade sideways before retreating and while trading sideways the stocks that lagged the initial move tend to get nice big fat moves. Watch stocks like MELI and some of the small cap solar stocks for that type of action.
'Nuff said! See ya in the am!