Optimism Justified?

We are asking this question tonight as most of us have been just utterly speechless about the market action today.  It wasn't the fact SPX +29 busted through the 740 level with ease and finished at November closing lows,   it was the fact that the rise was led again by the financials (4th straight day).   It may be an understatement to call this a rally because things have happened so fast.   Will good ole’ key SPX 751 be as easy?.   That’s the current question as this remains a very technical market,   so every level of R/S is essential to watch for a turn.   Now at the third day of the rise,  this markets long term trend may be over.   We’ve concluded this past year that a long term trend in this market is no more than three to five days and this may be a good area to stall.

A lower futures premarket turned as positive newsflow hit and continued:

• GE downgrade removed an overhang as it wasn’t as severe as feared.

• retail sales.

• M2M surprised some as congress told FASB to issue new guidance within 3 weeks.

• Swiss franc action suggests relieve of strains on C/E European countries.

• BAC/GM newsflow.

Honestly,  volume isn't that impressive outside of the financial area.  Today’s action is mostly ETF’s / banks-brokers with individual stocks in other areas not having much activity.   Biotech is 2nd best sector riding the M&A activity brewing we noted as a positive for market early in the week.  We were negative on steels and coals before the trading day and they could’ve done worse,  if they didn’t get caught up in the tape of the melt up.   Ag’s had a peer in Europe give a bad impression (earnings).   Still,  most of the red you see today is from this essential groups(s) for healthy action going forward.   By today’s action, you have to think its telling us something about Global activity.    Also, tech was a relative laggard as it didn’t get caught up in the broader tape action as much as you’d expect or like.     Today's action is still the result of the oversold condition during the past few weeks.   Now that BAC- CEO Ken Lewis gave us a similar outlook of its company to Citi and JPM, we don't know if there's any other good news that can potentially lift the sector any higher into their earnings season kicking off in April.    At this juncture,  this rally seems to be one dimensional (banks-brokers, ETF’s) and pretty quiet all things considered.

We have been pretty patient with this market last couple of days.   The enthusiasm has to slow down or stop at some point as this is a technical driven market.    Right now, we are taking things literally one trading hour at a time.    Although a bit unrealistic at this point, the next major resistance after SPX ~750 is 780.   The trade does favor the fading of any further rally.   Tomorrow may be a good time to start poking shorts if the idea of "locking profit" still exists these days.   

There was some negative flows showing,  but they were ignored today as equities outperformed the credit market, which wasn’t tightening today.   Same divergence here as pointed out recently.   We’ll see if the ‘whales’ come and push this higher,  if they think this is purely a banks-broker short lived rally,  they won’t come.