No April Fool's Joke...

The joke is definitely on the Bears today.   We couldn't help but be amazed at the timing of this rally.    Sure, even as late as Monday, we are pondering whether our short term bottom of Dow 12200 and SPX 1315 would hold.    Today's action just proved that last few days consolidation was worth buying for.     If you haven't loaded up during the last few days and felt that you haven't taken big advantage of today's action, it is ok!    We are still treating this rally, which started two Tuesdays ago, as a bear market rally.    One thing you have to understand that nobody loads up before a bear market rally.      However, if you have just be doing a little bit of adding of the strong ones in the last few days, today would've paid off nicely.

In our opinion, today's big movement did not only provide us with some nice selling prices, but more importantly, it confirms that we may still be in a powerful rally that can stretch a few more weeks.     Buy on dip strategy is looking even more efficient now than ever.    Today's action was sparked by the earning reports of UBS and Duetche Bank, as well as the convertible offering from LEH.    Also, you can throw in the not so terrible ISM number as a catalyst.    In addition, the combination of an advance of the U.S. dollar and drop of gold also helped the cause.    Today's awesome index movement also comes on the eve of another earning period and at the start of a new fresh quarter.     Can things be so rosy all of a sudden?     We think given the amount of idle sideline capital out there, there's potential to be some more upside here.     Remember how we kept on reminding everyone to keep an eye on the financials(XLF) lately?    In a way, this market has just been absolutely fanatical and obsessed by the health of the financial sector.     Even though we totally agree on the importance of a healthy financial market,  we are still truly amazed by this markets dependency of ONE sector and how much it plays on the markets.    If you look at the last few days where the market was sliding, it was all because of financial companies that were getting the negative headline and media coverage.    Markets action is once again led by financials today.      So, we are simply once again pointing the fact that "no financials, no rally"!

At this moment, we aren't asking the financials to return to even the pre-BSC level.    All we ask for is for the financial companies to stabilize at the current level so market can shift its focus away onto some other aspect of the economy.    One sector that has benefit the recent rally in a huge way is technology sector.    We are only looking at popular plays like RIMM AAPL BIDU and ISRG since they are representing a very common sentiment.     You gotta play these some into their earnings!    This is basically what this market is telling everyone to do.    We aren't exactly sure how the earnings will come out this time but simply because we are seeing traders willing to push them ahead of the earnings, we get excited as it seems it won't be a boring earning quarter this time.

Commodities plays are a mixed story unfortunately today.   We noted in a premkt alert the pressure we may see early and it definitely happened as the Ag's-Chem, steels etc were hit.    We know that we have been putting a lot of emphasis last few months on many commodities plays, but we feel it maybe time to start lightening up a bit on the exposure.     Other than steels, most of the commodities plays feel like they have been left in cold given today's index performance.     Although you can point to a number of factor explaining the lackluster performance of oils,  agri/chem and gold plays, we think many speculators may give these sectors a rest now that we are moving away from the market bottom.   The fact that we are also into an earnings period also gives traders other selections to play.    Right now, you can actually chase strength in AAPL BIDU or ISRG as oppose to POT or a EOG.    You just have that many more momentum plays to choose from these days.    Lastly, watch the Dollar performance we alluded to.    If the Dollar moves away from the recent low, you'd see people getting less interested in the resource plays.     All of the reasons we have here give us the feeling that it may not be the best bang for the buck strategy to chase resource based plays coming up.    This doesn't mean that these resource plays will be left for dead.    We'd still be inclined to pick some up on dips but on dips only as the last two days provided.   Amazing recoveries today in X and POT are examples of what you can do on a dip.  Some like AKS, CSX just climbed all day to NCH's after recent dips.   In our opinion, if this coming quarters earning reports disappoint and it proves that we are in a deeper recession than we previously thought, those resource plays will definitely be back in vogue in no time.

Tomorrow we have MON and BBY reporting in pre- market and RIMM reporting in after hour.   All three have big implication on overall market and many plays on our watchlist.    We'll watch the action closely and react accordingly.   A few good reports at this early earning stage is what will push as forward and through the resistance levels we are at or nearing.