Short covering and no follow through

Prior to last weeks plunge,  we concentrated on the ECB and their ‘dropping the ball’..  first sign was “..but it is the details of the bailout announced, notably  (ECB’s Greek bond collateral waiver rule change) that prompted an exodus out of the Euro…the markets are handcuffed as there is no “official comments” leadership  in the Eurozone to the soverign concerns.  One hand and/or country is saying something, the other is saying the opposite while the Euro bleeds"..   And finally the kicker was Trichet and his nonchalant  attitude Thursday morning .. .."Well, it was Trichet calmness  on the sovereign concerns that was the “match” that led to the fire we witnessed in awe".   The damage was done last week, but the shorts sensing the ECB tentativeness, inability to fix anything had them lined up for a lotto ticket this weekend in expectation of the same ECB and who could blame them after watching these guys kick the ball around last week. 

Well, instead, the ECB did an ‘about face’  and beat any expectation with a 3 unprecendentant pronged bailout.   The significance of discussing the footprints leading is to grasp today’s trading action..the huge gap and than the flatline all day.    Firstly, the gap and early action to highs is pure ‘short covering’.. the flatline is the lack of buying of any conviction which would come from whales, MF’s.   Of course,  we also had some longs playing the other side of the trade Friday and they sold into the gap and who could blame them!   We also had those that just wanted to get something back from the ass- kicking last week selling into the gap, as a scenario noted yesterday.   All this equals a no follow through flatline trade.   The hedgies are the ones that covered,  they are the only ones who would play the big lotto tickets!.    We want to be with the whales, MF’s buying and they weren’t in the game today.   So the point is we/ you have no reason to chase either.    Maybe commodity linked stocks will continue to work, but who knows.    Until, we get a few closes above the March 09 trendline ,  we’re hardly out of the woods. 

Simply, what the ECB did was pick up the dropped ball and like a soccer goalie kick it back downfield 100 yards and wait.   In the mid/ long term this solution may work, but as a long trader, we still have to see be on the defensive and just be selective in our trading decisions/ stocks until this soverign debt is hopefully put under the rug with attention turning elsewhere.