..like a 'Matrix' bullet fight
Thursday, January 28, 2010 at 07:59AM Market nervously balanced just above SPX 1085 most the day waiting for the AIG hearing, FOMC to give it a direction. It didn’t help CDS spreads in the usual Euro spots were signalling trouble. Add the fear of more bashing of the banks by the Obama in the evening and the market tested 1085, 3 times. The last test came following the FOMC and at same time whispers were coming out that Obama will put down his Everlast gloves and not use the banks as a punching bag in his address.
Basically, something finally went right for investors and not just ‘ bull’ traders, but, investors everywhere. Today was sort of like the Matrix movie as in the Bullet- dodging scene with investors on a wire (1080-1085), bending back avoiding an arsenal of fire power.
Investors had to be cautious these last few days before committing any money back into the market. The overhang of headlines had to resolved and slowly this stated to occur by late afternoon. This is why every uptick was nothing (no headlines were resolved), but a little short covering as we’ve talked about last few days. The test of low 1080’s, a 3rd time was critical as volume increased, yes, volume increases always after a FOMC statement, but there was shorts trying to press and crack this level and cause panic. The market was vulnerable as it was on pin and needles, but it didn’t work. The bulls got some momentum, short covering increased and now we have some ‘breathing room’ seemingly. This looks like a pretty good reversal day holding key levels and considering Obama backed off tonight and made job creation and stimulating economy the agenda, it’s more significant. Still, we’d like to breach and close over 1105 before thinking all is closer to normalcy. What we’d really like to see is the ‘China factor’ and it’s headlines begin to be shrugged off for a change. This overhang remains, but as we said we think it’s overblown and will see this ease shortly as in a stop to trading negatively off new daily tightening headlines.
As we’ve discussed, besides the short covering as a start to any bounce, we have ‘profit takers’ as in those that will use any uptick to sell. So, it’s important to understand we need to see volume..volume to signal fresh buyers and conviction for sustainability and a return to dealing with this market on a fundamental basis where eco’ data and earnings matter.