Possibility of a bounce...

Well, the intraday damage was enough to frighten alot of folks but the ensuing rally was nothing short of breathtaking.    Does this mean we've seen the bottom and time to step into water again?    If you are a quickie type of trader that hasn't been frustrated by this market already, you'd probably have done a trade or two during the last half hour or so of trading.   For the majority of us, it is thankful to see that we are now about 300 pts away from the recent low.    Nope, it doesn't mean that we are done going down but it simply means we are done going down today, and perhaps tomorrow.     Right now, there's no firm data or any speculation suggests that bad things have reached an end.    We just have to be patient and wait a while to find out if today's really the "bottom" or not.

At the mean time, lets talk about a potential bounce.    This bounce, as we have said in the journal last night, is primarily caused by the financials.   Why?   Financials are the most important group in this whole equation here and the reason why we've been sold off last little while is due to the fear that the financial system can collapse due to credit crunch and subprime loss and the equity selling.     So, when playing this rebound, we'd actually want to get right into those financials to play their rebound.    Stocks like GS, LEH, MER, C... all have been beaten down to some attractive levels and playing a bounce at their current level has a very good risk/reward ratio.     Of course, a bounce is simply a bounce and we'd never carry a bounce trade into an investment.     Any other stocks?    We'd also be looking at some of the recent movers with good relative strength including VMW FCN ARTC.. etc.    Yes, you get the idea!   The ones with a pretty decent technical picture are the ones with a safer risk/reward for a bounce trade here.      What about others that have been beaten into oblivion the last few days?    Well, right now is a good time to be conservative, as oppose to be adventurous, in our opinion.

The bottom line, tomorrow is the end of the week and option expiry day for this month.    Market will be volatile and any bounce trade is only as good as the next inflow of news release.    In other words, be careful out there and trade small if you have to.