All of the news will be good, anything bad will be buried (or dismissed) as much as possible. Maybe. This could be the start of the next bear market rally, or not. Don’t you just love that decisiveness! Financials certainly got a boost today. The last few weeks have seen them beaten into the ground, and then some. So it’s really no surprise, on top of Wells Fargo reporting alleged good numbers, that there would be some kind of rally.

I’m not as optimistic on WFC as some people are, with the growing delinquencies on their books, but the stock was up over $6 today (31%). Sure enough, one of the CNBC commentators questioned if this was a sign of a turn-around in the financials. You know, “the worst is behind us” kind of thing.

The drop in oil futures prices was another catalyst to push the market higher. I’m not impressed with that pullback, either. But, if it would keep dropping about $5 a day, I could do a happy dance! Feeling a little nostalgic, I went back through our previous posts to see the progression of the credit crisis. I had posted this to the site back in December. It’s not a bad idea to take a look back to see where we’ve come from, because it helps with that short-term memory problem I mentioned earlier.

Hank “give me all your money” Paulson, continues to do his best impression of “I’m from the government and I’m here to help you.” Ben Bernanke continued his useless blubbering before the Senate, and the SEC’s Cox was busy figuring out new rules for the market. The SEC’s garbage of no naked short selling has turned into a total joke. Let’s see, we now have something along the lines of “it’s ok to short stocks, but only certain stocks, and it only applies to some traders, but not market makers.” (SEC is considering short sale exemptions for market makers). I thought I was being indecisive! Make up rules as you go along, to benefit those you like, and next thing you know, you have totally eroded everyone’s confidence in trading in the US market. Way to go Christopher Cox, Ben Bernanke, and Hank Paulson. Can’t wait to see what your next trick will be.

JP Morgan reports tomorrow, before the bell. It’s anybody’s call what they will say or how the market will react to it. So much is being hidden in these earnings reports, and I don’t know how one regains confidence in the market until that changes.

We are into earnings season and this is options expiration week, so truly anything is possible. I hate to sound vague concerning the way forward, but we’re watching and waiting with the rest of you. Daytrade cautiously and take profits out of long positions when you can. That is the best I can tell you. The underlying fundamentals have not changed since last week, if anything it’s just getting worse. Indicators show oversold/extremely oversold conditions in some indices or stocks, while other stocks are not oversold at all. So we could be looking at a relief rally, or a “sideways” rally. It’s difficult to say how much “relief” we could get, but we just watch support/resistance levels. Keep an eye on oil prices and we’ll keep you informed of important earnings reports. The technicals and the fundamentals are at war. It’s too soon to tell which one leaves the battlefield on a stretcher.

Here’s an updated XLF chart:

Posted in Categories: Contributor, External Research, Stocks.

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