Bulls are rather a fickle bunch and Bears are rather a cocky bunch, if too much is read into a late day sell off post one big rally early on. Considering the FOMC policy change and subsequent 3 days of market nothing, the Bulls should be happy to be within a blink of 1100/ break of 1088-50ma, instead of looking at 1070 SPX and below. As a trader, you have to understand profit taking will ‘cap’ any big move on extremely light news days, especially today because you have people trapped from last Wednesday's selling that will gladly take some of their money back. Same goes for the "cat & mouse " game, a ’mouse’ always runs back after getting his piece of ’cheddar’ and will wait for a ’finer’ cheese. As far as the Bears, it’s always comical, as the market goes up they always have even better places to short from in their eyes, ie 1100, instead of pressing the issue on the depressed Bulls at 1070 day before.
A little bit of patience paid off today, the signs given before the trading days for a short covering move shortly to 1088 came to fruition. Firstly, earnings, not only did we get ‘no worse than feared’ from the retail likes of HD WMT URBN, we also got somewhat ‘better than expected’, even if expectations were low! . The “SMH" floor boosted the Nasdaq/tech’s (now we wait for their earnings this week).
The macro side of things provided a ‘solid’ industrial production # , post a sour Empire # and with the help of the USD weakness, the transports, industrials, materials all these groups prospered for the day. Simply, the complexion of the market changed “for the day” as things today are not as dire as the FED has led many to believe.
The past few days, we’ve had a slew of small M&A activity as corporations balance sheets swell up with cash, today we woke up to a massive <40bln bid for POT . This move shows the Ag-Chem trade will likely last a long time as this bid gives it more sustainability/ credibility going forward. As far as speculating and throwing monies at POT and waiting for $160/180, we remind how long the CF/AGU merger saga lasted (over a year). BHP are no fools when it comes to deals, so if considering parking monies into this trade..ask yourself if you want tie up hundreds of thousands and tie your hands from doing other trading for an extended time to get your premium?
Now that the ‘short covering’ move petered out in the afternoon, we sit back and see if real buying comes and pushes this market to out ‘benchmark level of 20MA'. The 50ma is crucial to many, but, it means little here as the 20MA takes precedent. We also need to see the tech earnings this week, ADI starts tonight to possibly contrast with CSCO and give credence to idea that the market reaction to FED/CSCO was unwarranted.