The Fed’s bailout of Citigroup and Obama’s announcement of his economic team was good enough news to ignite an up trending day. The government is building a substantial portfolio in the banks and becoming it’s on hedge fund of sorts. The major indices rallied up, with the SP having its best two day gain since 1987. . Rallies in bear markets can be quick and powerful.The next issue will be the next dip, will buyers be willing to come in and create some supports in this market and overcome the selling that may persist overhead.
I am writing on the flight from Florida where I just finished a week long work session with a client. The weather was not great but a little better than freezing temperatures we had back home. So I will not complain too bad. It was a productive week within more volatile trading sessions of the griping Bear Market. One of the main items we isolated was structure and focus. It is better to be good at one or two things as to be just average when average in this market is not to be down by 50% per the indexes. Without a plan we are not sure what we should do based on the markets actions. My favorite quote is… “It is hard enough to figure out what the markets will do; if you do not know what you will do, the game is lost.”
The DOW popped 500 points amid reports that President-elect Barack Obama will name Timothy Geithner, the current head of the New York Fed, as his Treasury secretary. The rally halted a sharp two-day plunge. Citigroup shares plunged another 20% today as the board discusses selling off portions of the company. The market finds itself back in oversold territory after breaching the 2002 lows. Next week will be a shortened holiday week as we approach the Thanksgiving holidays.
The DOW popped 500 points amid reports that President-elect Barack Obama will name Timothy Geithner, the current head of the New York Fed, as his Treasury secretary. The rally halted a sharp two-day plunge. Citigroup shares plunged another 20% today as the board discusses selling off portions of the company. The market finds itself back in oversold territory after breaching the 2002 lows. Next week will be a shortened holiday week as we approach the Thanksgiving holidays.
Last Thursdays classic reversal, well was too classic. Lack of follow thru is a very negative sign. The retesting of the floor eventual failed and the 2002 lows was breached today. This has been a vicious bear market. Divergences are failing quickly, supports are broken and the markets cannot rally for more than one day. There is no good news there out there. The only good news is at the pace we are going we should hit zero pretty soon, then we may can get a rally. We are now on track to have the worst year ever in the market history. This is all unprecedented action and doubtful anyone has experienced anything like this. Protecting capital here and you are up huge and outperforming the indexes.
This market cannot find any reason to have a follow thru day. One day wonders is all it can accomplish. C closed down 23% to new lows of $6.45. BAC fell another 14%. GE was down over 10%. Stocks with exposure to commercial real estate fell on fears of potential defaults on loans for buildings, retail stores and hotels. Trends can and seem to always last longer than we may think they will ever last. The market doesn’t care what we might think is reasonable and will almost always surprise us by continuing to trend up or down even when it seems to us that the move has already gone too far.A market that cannot follow thru after a washout reversal day indicates no one is willing to step up and bid this market up and buy stocks.
Wow, this testing of the lows is playing on peoples patience and nerves, this market needs to rally that is technically what is suppose to occur. As you may if something is suppose to occur and does not that is power sign in of itself. If we show no follow thru here we will likely go test the 2002 lows. The next few days is key.The last hour created another knew jerk reaction to a down trending day, closing the positive and retriggering the daily MACD_H bullish divergences. This continues to be mainly a day traders market and one must be sure they have a style that fits such conditions. Until this volatility simmers down, this market is a play ground for day traders.
Jeff sent us an email in response to my comment on RIMM and entry preferences. Jeff makes a good point… here is the email.___________________________________________________________________________
I have had a few technical difficulties with my charting and I will post some charts either later tonight or tomorrow night after I arrive in Florida.The news remains grim and negative. Very little news is positive and when we do encounter positive news, it is negated by ten more negative news stories. This is what we have during recessionary and bear market times. Do not expect the news to get better until after the market turns. The markets always tend to bottom before we hear good news. Unemployment typically peaks at market bottoms. As we continue to read more about layoffs, this number will rise. It will begin to indicate we are getting nearer to some sustainable bottom. However bottoms do not occur within a day or a week, this typical takes months. This does not mean we will not have very nice tradable bounces, but be mindful, these lows are tested often. The reason for this is to make sure the floor is solid and not about to give way.I remember as a kid building tree houses and as we got the floor framed, we would hold to branches above us and jump up and down trying to ensure the floor frame would not collapse from under us. We would test this out multiple times. I cannot tell you how often we watched wood fall from the tree underneath as the floor was poorly built. (we were only 11 years old)
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