Who..How...Why
Wednesday, February 2, 2011 at 07:54AM Who..How..Why…WTF?, is the general head scratching mode of the market after ~45ES reversal the past 2 days. It’s true not many envisioned such a quick snapback on either side, but that’s where the power lies and that is when you make a bet (short) against this market you are easily drawn into short covering as soon as the legendary ‘dip buyer’s appear!. You are simply forced to cover. The fact covered that the initial sell off was ES SPY/ETF just adds fuel to the reversal as its where many play because of the liquidity allowing for easy in’s and out’s.
As said since late Friday, Egypt was the perfect excuse in a market ready for a correction at peak earnings season, but investors didn’t ‘panic’ and held long positions (DJIM#5). You add the air pockets discussed Friday to 1260( w/20ma bust) that got hit so gracefully in an overnight ‘air pocket’ you can say and kaboom all ingredients are there for what many are head scratching about tonight. In all, it’s great to see, earnings are still bought indicating more downside was not in the cards, but we’ve come to “ SPX 1307’ish’ as the ‘R” not 1300 as noted last week. Today, we’ve been at this level since 1pm. (Like to see RUT hit NCH’s as well for market to follow through). It’s possible to overshoot into the low 1310’s, but around these levels from 1307 to low 1310’s is where we’d watch for selling into this 2 day strength with China hike?, ECB, NFP #, being possible catalysts. Again, watch ES/SPY vs. Shadowlist to gauge any importance.