Well, at least we cleared the mystery of yesterday's rally. It was mere short covering and that's the way we approached it in yesterday's Journal. As soon as it was clear no follow through was going to take place, the end of day selling rained down as the possibility noted. Today's action will make anyone think twice about chasing any "financial led" green day in the future. Other than the downgrade of CSCO/INTC by UBS earlier, there's really no earth shattering news that could be responsible for the market action today. To see all of the gains from yesterday evaporate and then some has to be devastating to anyone who's either been bottom fishing last little while, or concluded we have seen the bottom.
On the commodity side, we actually had some nice upgrades in the Coal and Agri sectors, as well as the news from the Steel sector. We highlighted one stock yesterday, CLF, as the best early and fast trade for those in this steel group. The exuberance was definitely there as these steel plays were the big early winners. Yes, if you're trading intraday swings, this could've been a nice day if you selected the right plays. On Thursday, have an early look at CLR as it's 2nd well news from the Bakken acreage is out. It should respond positively. Toward the end though, most commodity plays just could not handle the brunt of selling from the rest of the market and caved in much of their gains. However, we do have to conclude that we are rather encouraged by the action from the commodity sector. Good news is being bought again and the reaction has been favourable and that's every encouraging. As long as the overall market stabilizes somewhat, we think people are going to appreciate even more the good news from the commodity sector. We think it's possible that we see more of the "price increase" news from various commodity industry to keep this game going. Assuming this market doesn't drop dead, we feel there'd be some nice opportunities down the road in the near term.
For most of the plays on our shadowlist, they appear to be in the consolidation mode to digest the recent correction. We are hoping the consolidation time can last a little longer so they have a chance of breaking out of the previous high. We know it's a bit too early to even talk about resumption of momentum from our favourite plays but we still have to point out that they are all capable of "CLF like" action on any given day. For now, we are being highly entertained by the market action and we'd for any change in sentiment toward our favourite plays. This market only rewards those who make good trades. To us, a good trade means a high probable setup and that's the only thing we are looking for these days.