Quite fitting we had a Halt Rally to +150 on the DJIA considering we've speculated on Half Ass Rallies more than once the past few weeks off the ABK/MBI turmoil. The last 48 hours played out as we noted intraday with the shorts covering into the last hour on Tuesday to avoid being caught in the news of a ABK rescue and then the quick tick up as soon as ABK was halted followed by the sell off of about 200 points as reality set in. A 1-2-3 shuffle that is no different than what we see in the markets on individual stocks as they move into an earnings report and then sell off. Trading is a game of human nature and it is prudent to have some street smarts and try to think how the herd will react in order to be on the frontline and not be followers. The difference comes in the form of dollars and that is why we are here, to make money and not lose it. Not to be beat a dead horse without a white knight to bail it out, we are left thinking ahead and wonder what promise lies ahead for the market to move forward now that half ass rallies will stop on the monolines soap opera. Now the Bulls are left wondering what bailout will come for them without these rallies to save the downticks into the pit!. The tide has probably turned and if there is news on the monolines it will probably be negative, so we have to be prepared.
Underlying all the ABK hype was what matters and that was the action in commodities and the stocks involved. The melt up action rejuvenated overnight after a substantial down day as new highs were made all over the place. Based on this action and on the decent last 10 minute close, we'd be looking to see which commod' will make the best trade of the day very early. We wouldn't be afraid to jump in early today unless we get some bad headline in the pre market. The market may will feel a sigh of relief today and just go after what is working in the commodities, in case it does we'd play the below.
If its coals, we'd look early to FDG as it did not wilt under a downgrade, AKS, JRCC follow.
If its O & G's, we have BZP, EOG, CLHB and FLS potential 9ema'er rebounder.
If its Agri-chemicals, we'd add early to CMP as it made it back to NCH levels and then deal with usual suspects..POT, MOS
If its metals, we have to look at MTL and CLF
If its none of these, we'd stay away heading into Fridays jobs report and read the Ambac prospectus to kill time...okay maybe not.