If the markets rally last week was due to the hope of a "clear and detailed financial rescue plan", then the element of supporting such a rally is on life support. As traders, we have to be absolutely clear on this part. Things are going to get very murky from Washington in the coming days and weeks. Right now, nobody knows what sort of program or options Geithner and the boys are exploring. Unfortunately, judging by yesterday debacle, neither do they!. All we know, work is being done on a solution that may or may not materialize any time soon. There might be the surprises we want, but you can't trade on that hope. At this juncture, traders will remain focused on newsflow from D.C as earnings season comes to an end. As time moves on, we feel traders will come back to the economic side of things, as well as corporate earning outlooks.
Market inched up a bit on the firming of financial stocks. At this point we're very wary of any rally that is led by the financials. After all, aren't these institutions the reason we are below 8000 DJIA in first place? Technically, SPX 820 (big level) has been the support and the trend is either going to stall around here or drift lower to even more notable support near 800. This means that unless there's a surprise and positive announcement with regard to the financial rescue plan, we aren't going to hope for a rally any time soon. Given the uncertainty of this financial plan, we feel there's currently no point trading some of our favourite financial names like GS MS JPM NTRS. They all had a pretty good move prior to Tuesday and we feel it might be prudent to let them work off the gain and establish good support somewhere.
In other areas, we feel commodities still present us with some compelling trading opportunities going forward. Sure, when market tumbles few hundred points, nothing survives. We are looking to establish positions in some of the stronger sectors. Ags, natural gas, coal and some oil names are attractive given the price level. The key right now, is to let the price come to us and establish our position incrementally.
In tech land, RIMM said although subscriber count will exceed expectations significantly, revenue will be near the mid point of guidance, margin and earnings at the lower end of the guidance and the stock got hammered. We used the intraday opportunity to flipped a few shares and that's about all there is today to trade in our circle. This one may be company specific as quite a few firms came out and said RIMM did the same in last year Q, but you have to remain cautious due to the economy trend and so it may affect some of the other growth oriented names too.
Bottom line, we have a long weekend coming up and it's going to be interesting to see how traders wrap up the week. Things don't look too optimistic at this moment and extra caution is needed when pulling a long trade.