Last time we had such a market gain, it was back on April 1st!. Is the joke on us again?. Maybe not for the next week, month or so, maybe even a 500-1000pt run as last April to the May's highs is in the cards , but the chances are still greater we're going to test these recent lows all over again. This week, we said everybody is waiting for the big capitulation fear day and it would not come unless the commodities-energies get a beating simultaneously. That same day we had a market down big time at the open and soon after we saw a beating of crude in a volatile trade that took all of 10-15 minutes and than a significant market recovery. Of course this takes Exploration & Production Shales, Coals which are all energy related down. Wednesday, we had more of the same as Oil took it on the chin again. Include favorable earnings from WFC and INTC and the market had all the ingredients to run. Times are different and a big capitulation day may never come as expected, maybe there was enough fear Tuesday morning with the Indices down sharply followed by a historic fast slide in oil that may be enough to trigger a nice move. Not a nice move as in coast is clear for months to come, but just enough to get us through the summer!.
As we said before the Wednesday trade, you have to keep a closer eye on energy prices and sentiment. We all saw the new found volatility Oil can give just the day before and the damage it could do on commodities in a very short time frame. Right now, following a 2nd day of oil dropping, the sentiment is definitely a lower Oil and you need to know the ramifications of such in specific groups. If you got greedy and did not take the 5-10% gaps up on coals such as WLT, PCX thanks to the ANR deal, you probably blew it all once the oil/ energy inventories came out. Two mistakes there were possible as a trader, one is you got greedy in the first place by not selling the gaps and the second is you weren't paying attention to oil, especially on the day of inventory numbers. Simply, the sentiment changed and we're not going after the Shales, Coals, Steels the rest of the week unless Oil shows the same volatility to the upside. Only Ag's are a possibility now until we see where oil stands in the next few days as we expect some news flow. We are simply at the mercy of Oil even more now and we have to respect where the money flow, institution money is going this week. We've seen in the past year how powerful a bank- financial rally can be for those individual names, we have to keep this in the back of minds as to something we'd start to play heavy, but it doesn't mean we're gonna start this week. Right now, we are going to concentrate on the earnings coming out. Basically, we're looking for fresh meat to trade and freezing the other stuff we've played for now, unless a news flow catalyst appears. Time to hit the books and get back to old DJIM basics for the time being....earnings.