The very last thing you want to be thinking is that Thursdays action was a "major victory" because of the lack of follow through selling from the CSCO report. Once again the market did not live up to many traders expectation by hanging on to its ground. The day actually felt more like a brain cramp thing with CSCO hanging to low 20's more than anything else. Investor Ma' and Pa' used to buy Disney shares for the certificates to give to the kids, today they were buying CSCO to put away maybe under a pillow it seemed. Sure, we'd accept them, but they better be kept under lock and key after or we'd sell them. We just can't hold anything that long for a payday!. The market even tried an intraday rally which in our opinion was nothing but laughable. It was weak and very much a head scratcher. Not a head scratcher 'Wow'...more of a 'Huh?" . What the hell is this about? Wednesday night following CSCO's eps, we were hoping for some dramatic downside movement today so we could trade against it. Unfortunately, the oversold situation from the previous few days seems to have prevented this "panic" from setting in. This is the very moment where you have to be extremely careful if you are considering going long in this market for a trade. The bias is still very much to the downside and any intraday perkiness just cannot be viewed as a sign of reversal, especially if we do not test many of the lows. That's what made today moves laughable and seemingly have no substance. We are using Wednesdays high as a potential resistance point to enter new short positions if this market ever gets there. This is around 12400 from the Dow and 1355 from SPX.
Chemicals/Agri., despite the weakness from BG/TNH, MOS and POT held on to a little gain at the close. They were both up in AH's thanks to a good report from CF. But this is AH and this still may be the next group to get raided as we said sometime ago. EPS won't matter much if the crows are circling now. TNH, BG did nothing really wrong, yet did not perform as you'd expect from good reports. If TNH reported last night, it would have probably been up nicely as well AH's. Look ...if you can't trust the futures as Wednesday morning proved, why would you trust AH's sentiment on some individual stocks or a sector too much. Especially at the market levels we're at now. Even though this group held up well during the past few days, we are hesitant to chase this group into the upper territory. There just seems to be enough resistance for this group that it's looking unlikely they'd challenge new highs any time soon. We are keeping a close eye on this group and if there's any change in behaviour, we'd react promptly and alert everyone.
Right now, the kind of play that makes most sense is to short the markets enthusiasm when it comes. Given Thursdays green close, there's the possibility this market will push for follow through in the morning and we are ready to fade the move. It's just extremely doubtful that people would be happy going long into the weekend when the market just dropped about 600 points in the first 3 days of the week. Instead, we'd be looking for clues in the afternoon to see if there's any sign of weakness and we'd go short some if market leans that way.