Well that went pretty much as expected!
As BillBigD noted in yesterday's chat, it's "Amazing what 700 points does."
We stopped just short of my 13,250 target with a strong 50-point move into the close but we got everything we wanted this morning with better than 1% gains across the board giving us new green boxes on the big chart in the NYSE, Transports, 2 on the Nasdaq, and the SOX while stopping us just short of our green levels in the S&P (6 points to go) and the Russell (1.5 to go).
Europe had a good showing as well but the CAC and the FTSE had a long way to go so we MUST have follow-through leadership over there if we are going to continue to rally over here. As I said this morning, we also need Japan to show us something special as they are dragging Asia down and mSquare reports from India that the market there is taking a cautious tone and expecting further corrections. The Bombay Sensex was looking strong at 14,248 and we really don't want to lose our levels there. They are in our comfort zone at 14,100 but they must hold 13,500 or it is likely that they will become the downside leader for Asia so we will watch them with great interest!
I said in the morning that this rally was the result of a massive global effort on the part of the central bankers to bail out angry rich folks like Senator Kent Conrad (and his string pullers), who wants to fire Fed officials who let the market drop.
On the whole We're getting close to a 50% retracement on the Dow Jones World Index from our peak around 313 to the drop at 278 and we are going to be retesting our February high (remember 2/27?) tomorrow. Once we clear 290 we can expect a full 50% move to 295 (which is the same center point you would get if you threw out the spikes..). How we act there will really tell the tale of the markets.
Meanwhile, our FXI calls from the 16th look to be in good standing but they should be rolled at this point the $125s are up over 400% and it doesn't make sense to risk it so the best move is to take 75% off the table and roll to whatever cost $4 where we will capture most of any continued upside with just our original bet at risk to the downside (and a 50% stop will lock in 80% of our gains!).
We'll see what tomorrow's markets will bring but there wasn't much driving this rally other than a general sense that the Fed was going to step in and save the markets, this is not what I got out of yesterday at all! If oil stays down and the Nasdaq keeps leading, I will be happy but we MUST break 13,250 or this becomes just another bounce on the way down a long staircase…
Oil closed at $69.26 but the energy sector held strong while gold made a slight gain to $668 and the dollar fell back to 81.25, the 50 dma I warned about in yesterday's wrap-up.
The big news of the evening is BAC stepping in to bail out CFC but, as I said to members in comments: "I am reminded of BSC and GS bailing out earlier sub-prime blow ups but it turned out they were trying to hide the mess they were in… You’ve got to love the AH reaction, up 20% on a 7.5% loan that converts to owning 16% of the company at $18 a share – nice dillutive event down the road! Also, a 20% jump in price on top of the 10% recovery they already had pretty much guarantees Buffett wouldn’t touch them with a 10-foot pole."
