There are many theories why SPX had an amazing 1.2% or 14.6 handle jump today. Some say it was because of the reumour that ECB will re-capitalize the broke banks. Others are talking about some sort of secrete communication between the Fed and ECB. Many others are calling for a bottom and end of the correction. But have we not called for the counter trend rally for days now? It was only to be expected and I am rather disappointed with the speed or momentum of the bounce. Earlier I was expecting a bounce up-to 1400. Now I would be happy if we reach 1360. Already McClellan Oscillator is reaching close to 100.
I have written before, this will be a short squeeze rally, killing the bears and laying trap for bulls. But I have not yet decided to jump in. Because I think this bounce will not last long and we will resume selling soon. I do not think the correction is over.
Despite the general bullishness in the market, the horror story was reserved for Facebook, now below $ 29. Is it possible to cancel an IPO and demand a complete refund? Commodities are not showing much enthusiasm matching the equity. Copper is still around $3.47. Crude have not been able to break $ 91 and dear o dear Gold lost intraday and sitting at $ 1555. Euro broke through $ 1.25 and is at the lowest for the year. Spanish yields are reaching the stage where Greece was two years back. And ECB is yet to come up with money. To top it all, Egan Jones downgraded Spain. Why the euphoria then? Because that is all written, so! No treasuries sell scheduled this week, so no need to create panic. Clear the short term oversold conditions and is ready for fresh plunge. It is that simple. In the process if some momentum chasing lemmings join the buy express, all the better.
It is all good if you are a day trader. But God save you in this market if you are an investor and you listen to all the talking heads and decide now is the time to buy or you will miss the bus like last Jan-March. I think and I may well be wrong, that right now, “Cash is King” and I am waiting on the sideline to see how far the bounce goes. We have penned the coming course of action many times over and so far it is following the script with minor variations. So save us from temptation God!
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