1. Baltic dry index actually rose today
2. MOSC on $SPX is at all time lows, -350 reading is extreme and a immediate bounce is imminent
3. $USD is overbought - RSI is above 80 (correction in $USD will lead to bounce in commodities)
4. $USD and $GOLD rallied together - out goes the argument that they are inversely correlated..at least for today..
5. $NAMO, $NYMO are oversold - primed for a bounce, leading to a bounce in Market
6. $NYHL, $NYHGH are at extremes - primed for bounce
Potential problems to above points -
a. CPCE has not reached extreme yet
b. $NASI and $NYSI are still hanging towards the highs (much more room to come down)
c. $BPNYA, $BPSPX are still at or near highs - more come to come down
Overall, earnings are great, fundamentals, although manipulated, are still strong. Right now the market is sympathizing with the world events, especially in Europe and needed a reason to correct. Most importantly, the contrarian view can be that yesterday's spike down has washed away all the weak hands and now the market is free to go higher, much like how it washed away all the shorts in September'08 with a huge spike up, only to come crashing down afterwards in the first week of October'08. In short, the market does exact opposite thing first to cause a shift in sentiment and then acts exactly opposite when the masses are convinced otherwise.
No doubt longer term we should test the March'09 lows but its too early to go there I think. I am counting on a last spike up, maybe test 1300 on $SPX and then form a wide topping pattern before the real bear resumes in Sept-Oct'2010. After all, all those dollars that the fed is dumping in market has to find its way in stock markets on the bid side. Lets see, we are surely in for a treat.
Keep eye on - DB AIB NBG BCS ING BPOP - If the european financials break Feb lows (exception NBG, ING), look out!
Trade: Sell $VIX options - Sell calls or bear call spread!
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