A Rebound?

After many days of intense selling, we finally got a bounce today. We noted at 250pm the bulls have come in to battle, this became evident as the action seemed to change after we skidded to the August lows on the DJIA/ NASD.  The DJIA/NASD moved up their entire 146/34 positive points for the day from this time and finished strongly giving us what we wanted to see.  This is the sort of action that marks the first process of making a bottom.   Don't get confused, we are only talking about a tradable short term bottom here at this stage.    The possibility of a turbulent market remains very high at this juncture.   Fortunate for us traders, we really don't have to plan months ahead for events that may or may not materialize.  As we noted heading into the weeks action, "We have to look to the very short term possibilities this week.    This includes a very technical bounce scenario that even has the Bears thinking a recovery of sorts is inevitable now.  How long it lasts if it happens is any ones guess.".   With the way this market has been trending, it's probably more advantageous just to deal with the days ahead as oppose to start thinking months or even weeks ahead.

Lets talk about the days ahead!    With today's rebound, there's no doubt many traders are jumping on the gun and calling it a reversal thinking a bottom was formed.    However, in our experience, the more severe the preceding selling, the less likely a bottom would be formed in just one day.  The shorts will be lining up to refresh their positions if this move continues.  If you have been bottom fishing this market the past few days, it's likely that you are still hurting prior to today's move.    In case you are still heavily long, we think it's best to reduce some exposure during the next day or two of trading if given the chance, especially those positions that aren't quite following the overall market direction.

Can we take advantage of this rebound still?   Of course we could, we wouldn't want to be left out with so many stocks trading a dozen points off their day low.  Many hammers on beaten down charts were formed and these stocks should continue.  Definitely short covering was a key ingredient in many of the stocks forming a hammer.  The key here is to stick with those stocks that are performing with the market move.     We are talking about the world of AAPL RIMM MA GOOG BIDU here as always.    You can throw in FSLR as maybe the first and/or only solar play we would trade on a good day.    Most of these trades are going to be treated like day trades with a tight stop.    We just can't afford to think that this rebound is going to turn into a multi day rally.   If that ever happens, we'd adjust our strategy to suit the markets condition.

AA officially kicked off the earning season today and we have many market impacting stocks to report the next while.    Because this market has been beaten so bad lately, a couple of good reports from some key companies can cast away the shadow of recession and prove that the global market is still sound and healthy.  Behemoth, Dupont (DD) of the Dow gave some hope early on off their report.   A combination of good earnings reports and a friendly Fed can really take us out of this recent slide and it won't be long before we know what to expect. (btw...Bernanke takes the podium today, but it may be wishful thinking anything will be revealed of substance).   Ironically.. today's reversal came as a few gurus started calling the close yesterday the beginning and confirmation of a Bear market, it was also the 'unofficial' kick off to earnings day, a season that could leave that call hanging.  We'll see soon enough...

Bottom line here, the rebound today is far from injecting confidence back into investors' mind regarding the big picture, but it is an expected and welcomed relief.   We'd trade small using tight stops and reduce any unwanted merchandise you have left during the pop.     We'd be disciplined about our play selection and let the market show you the setup.

A few things from today...it was kinda scary to see our words regarding the MOS report coming to fruition early on.  A nice report had it to $96 in premkt and then a gradual turn down before riding to $80 by noon as they proceeded with the CC.   TNH, MON all joined in for a quick $10 buck bath.  Yeah there were hints of panic, but considering DD's report fell on the same day it might have saved their bacon as they reversed before the rally in the market even took place.  Hopefully, our note had some eyeing this sector with opp's to go short and/or long intraday.