Good pullback or end of the rally?

So here we go again, is this a good pullback or beginning of the the next leg of the downturn?
In my opinion it is a pullback , a vicious pullback, but a pullback.
We will see another rally but there are no guarantees . We start the earnings season and this is the time when companies who cannot meet earnings estimates start warning, so lets hope those warnings are minimal.
The P/C has turned very high which is good news for the bulls. But remember the P/C was no use in predicting the rally. Even then a high p/c is a good contrarian signal.
Also this is quarter end so things are volatile.

Its not time to buy a lot and be mega bullish but its not the time to be mega bearish and short. A little bit of neutral with some buys and some shorts should help.

APPL, RIMM, AMZN, VMW, USO all look good. But if this pullback gains momentum it could be nasty. I am keeping trade sizes small.
Natural Gas (UNG is the ETF to track it ) is a real confusing , it is at the lows again after having a great week on good volume. Does it bounce here or does it fall apart? Wait and watch I guess.

A great article on the Current market rally by Jeff Cooper of Minyanville.com

So is this a new bull market rally or is this a Bear market rally.
In any case how ling can it last?
Many questions huh? I think Jeff Cooper of minyanville.com , who is a veteran trader ,
explains this pretty well in his newsletter/article, click here to read it.

In short this is a bear market rally but he puts it in simple lang. giving historical examples.

What a turn around

Wow, The markets were up huge , then down huge and then managed to close in the plus side.
What happened was the S&P tested its 50 day mvg avg. at around 793 , goign below it for a while and then turned up , can anyone say volatility?
This shows that the bulls will not give up easily , then Rally has proven it has staying power.
The old Wall Street axiom comes to mind, " The trend is your friend". In this case the bullish trend did not quit on us intra-day.
So once again , I would not short this market until it proves that its exhausted.
The index p/c came in high because of the intra-day plunge.
The equity p/c remains stubbornly low but that has not hurt the rally, Not yet I should say.
But when the earnings saeson starts , that will be a true test.

Rally continues after yesterdays pullback

So we had a pullback yesterday and looks very strong today. This does look like it will continue till at least end of March and as long as 1-2 weeks of April.
But there are no guaranties in bear market rallies.
So be cautious . I see that AAPL is acting very strong. I think this can easily go up to its last high of 115 but again I am trading with very tight stops.
Overall this is a rally with huge momentum but not much of anything else. So I must say that though buying puts seems exciting , it is better to wait for the market to exhaust this momentum and show its trend change.

Also there is great excitement about Cloud Computing as the next big thing. The beneficiaries of this might be AMZN , VMW and GOOG. There is talk that MSFT HPQ might want to get in and do some acquisitions.
If that is so then out of those 3, only VMW is the one which might be open to get acquired.
VMW is owned by EMC . So VMW and EMC stocks would be the ones to benefit most, if VMW is bought out. But this is pure speculation.
I would say keep them on your radar.
Also I have a new rule , sort of, never mess with AMZN. This one has lots of shorts and its a company with lots of good stuff. They did not suffer much in the retail collapse and seem to be benefiting every quarter.

Great Rally again, S&P 500 now above its 50 dma

This is huge folks, The S&P 500 has recaptured its 50 day moving avg ( 50 dma ). The last time it did that was in early Jan. It was above it for a few days and then fell hard.
This time around thing are almost similar , low volume, bullish sentiment etc. But the momentum is surely better.
The p/c equity ratio is very low but the index part of it is not very low now.
The markets are stretched of course but that does not mean they will stop rallying.
This month is the first 5% month since Dec 2003, yes that's 62 months.
Read more about it on Barry's site here.
Does this prove that the markets have bottomed? I do not think so. Read about it , a bit more, here.
Also there is talk that since the markets are up more than 20% from their lows, that suggests its a new bull market.
That thinking is just wrong. Bear market rallies are sharp and short.
I have seen a chart where from 1929 to 1932 the markets rallied an avg of 20% half a dozen times.
Next month is earnings month. The earnings have to be real good for the rally to continue.
If they just meet expectations then we see declines.
But this month might close strong so do not be surprised to see some more upside .
I will make small trades till we see some moves on good volume.

Great rally in UNG ( Natural Gas )

People, time for some drum beats.
Yesterday I wrote "Check out UNG, natural gas, looks like it has not taken part in the rally yet and might join in. Careful though, why has it not rallied yet? I am a trader so I have bought a few calls."
Today it rallied $2 plus from he lows. Why? how did I know . Well I must say I got lucky. I bought for technicals ( oversold and markets and Oil rallying ). Also I did not make my first buy yesterday I have been buying a bit for the last 4-5 days. So it was a bit frustrating to watch is not rally with the others.
But there was a report out today that showed Natural Gas inventories down. Click here to read that.But in any case , the technicals are what made me buy and what makes me think that UNG has still some room to the upside.
Click here for the daily chart of UNG.
UNG is so oversold even with the markets rallying, that alone makes it a buy.
But oversold alone is not enough as it can stay there.
Note today it jumped on Great volume, 4M shares is its avg volume and today it was almost 19m, that's 400% more. Also the MACD was trending up even as the stock was falling , that's a good indicator.
I sold some of my calls and will hold the rest if they keep showing good relative strength.

Tomorrow is OE ( options exp ) so I expect a rally tomorrow followed by a pullback next week. After the pullback we will see how strong the markets are. Will there be buying on the dips or widespread selling.

The rally needs a short break?

This rally has been very strong, though on low volume. But other than the nasdaq fall couple days ago, it has been a great rally. Veteran traders say the rally can last from 3 weeks to 6 weeks.
But it will have pullbacks in between. A sharp day or 2 of pullback . Do not get excited and short away and also do not just get on the band wagon and buy.
Look at good stocks to buy and keep the shorts on you checklist. Get a good entry point.
Check out UNG, natural gas, looks like it has not taken part in the rally yet and might join in. Careful though, why has it not rallied yet? I am a trader so I have bought a few calls.
Also there is lot of talk that Oil is going to break through 50 this time and go on a little bit above that.
When the markets are rallying and people are puring money into something , then join in imo, do not short right away just because sentiment is giddy. That takes time.
The low p/c has not bothered this market rally at all. So I am going to ignore it right now until its gets very extreme.

Also this is options expiration (OE) week and the tendency, just the tendency , is to continue the week with the already existing trend , which is higher now. So expect a rally into Friday with minor pullbacks.
Also the tendency is for the week after the OE for the markets to pullback.
these tendencies change when too many people get on board, that's just the way the markets are.

Another thing , IBM buying SUN micro should put a lot of confidence in the markets are that says deals are getting done. Menaing credit is available, thats huge news and bullish.

Good luck.

Sentiment has been very bullish during this rally

Since the markets made a temporary (temporary? how do I know, well it has to be tested once beofre it is a permanent one ) bottom and bounced back the put/call ratio has been very low. In fact the index p/c ratiod has been below 1.00 for 6 days in a row.
This really calls for at least a day or two of selling. The equity p/c also has been quite low.
I will try and check when this happened last time , 6 days below one in a row , and what happened next.
This week is options expiration week, so expect more drama, up or down.
I am not going to reject the rally or the bear market, just looking for opportunities to make money.

Does this rally go on?

This has been a great rally , catching most off their guard. But can it go further? It sure can , that's the opinion of quite a few respectable traders.
But keep in mind this is a bear market rally. Once its over we start our usual grinding down, sell offs.
For now the P/C etc has been too low and that suggests a pullback, a short one at least , after which we can rally again.
I will say this , and I know its confusing ( hey no one said this is easy ):
1. Do not under-estimate the strength of the rally.
2. Do not under-estimate the bear market.
So what is one supposed to do? This is what I am doing, make small trades, take qick profits.
Remember how bad the markets were? We can rally maybe till 800 or maybe some more.
But we are still in a huge bear market.
The trend is your friend, the long term trend is down , but this short term is now up. So do not commit too much , remember this can change any minute.
Now I am thinking if I should buy some RIMM on todays weakness, some calls, very small trade.

The Put/Call has been very low.

The Put/Call has been very low last 2 days, also the call/put has been high.
I am taking this into account and not jumping on stocks now, expecting a meaningful pullback.
The indicator is a good indicator ( the p/c ) but who knows when it will really take effect, its not great on timing, might be immediate or take a few days. The only way this changes is if the p/c gets very high now.

Markets , where to next?

So the market seems to be digesting the huge rally from yesterday. It has not given up the gains . After a huge rally when the markets do not rally more or do not fall again , then that's a very good thing.
It shows the rally has staying power. Also the high-beat ( high volatility ) stocks are doing good.
In all it looks like it wants to rally more. The low Put/call ratio is a concern but lets not dismiss the rally altogether.
Anything can happen by 4:00 pm, market close, but if it does not sell-off then count this as a good day for the bulls.
Most traders/analysts are not yet ready to call this a bottom , but there are a few who are.
Doug Kass from thestreet.com is calling this a "generational" bottom, click here . Those are big word and he , it seems, was bearish 2 years ago. We shall see.
In any case the rally can hold a few weeks. After that we can think if its a something more than a bear-market rally.

So which stocks to buy? I am sticking with those having good charts.
I have WFMI, QCOM , USO and RIMM calls.
I am looking at MS , AAPL, AMZN etc. I have a few AMZN puts which are under water now , if this rally is going further then I will get rid of them.

Nice rally but be cautious anyway

Markets bouncing off lows very well, but like all bear market rallies , this one has it problems too.
The p/c is very low and also S&P500 will have huge resistance at 720.
I am hearing of some "hearing" for Mark to market , fasb 157, rules to take place on this Thursday.
So be careful no need to chase this rally if you do not have long positions already.

Bank of America withdraws offers made to H1-B Visa holders

So BAC is withdrawing job offers made to Students who would requite a H1-B work visa to work in the US. They say its a Govt requirement if they got the stimulus package.
Read more at clusterstock.com or click here.
Well I think H1-B visa holders were quite restricted in getting jobs with big companies due to those restrictions anyways.
But since BAC is doing this now , it is bound to be in the news.

Whats with the Markets?

Whats wrong ? why we can't rally? well maybe because the outlook is that bad and the markets are discounting that now.
The real bottom can be very far off and imo one should not wait around hoping for that, in between we can rally strong , when that rally will start ? Now very soon imo.
There will be some small rallies here and there , oversold rallies, short covering rallies etc. etc.
The markets are below the Nov 08 lows and will keep searching for a temporary low.
This is bad for investors as they usually buy and hold and it does not seem to be working now .
For traders too this is not that great a market, you have to act fast.
You see the rally we got this morning and how tough it is for the rally to stick? Those who think its great for shorts, its not exactly like that.
As most stocks are oversold and remain oversold its tough to short them , who knows when a sharp rally might occur and wipe out positions.
So one has to look for trends and commit very little money to each trade, all just my opinion.

The umemployment numbes, did you know about the U-6 etc?

OK , We got Feb 09 job data or NFP ( non farm payrolls ) and they declined a lot.
651000 jobs lost and the unemployment rate went up to 8.1%.
But thats not the whole picture.
Acc. to the BLS ( Bureau of Labor statistics ) , the unemployed numbers are broken up into 6 categories.
U-1 through U-6.
What is reported is U-3. Click here to see all.
They define U-3 as U-3 Total unemployed, as a percent of the civilian labor force (official unemployment rate)

The U-6 is as follows:
U-6 Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the labor force plus all marginally attached workers..

Many argue that the U-6 is a true measure of unemployment as it captures all those who want full time work but have to work part time etc.
The U-3 catches only those who file for unemployment and not those who are workign only half as they want to or those who are no longer eligible etc.
So the U-6 for Feb 09 is 14.8% ( seasonally adjusted )
Something to keep in mind.

Extreme caution required

The markets have essentially broken down and yet there is no Panic. Meaning everyone is looking to buy when the markets bottom.
Markets usually bottom when no one wants to buy. But now we have people wanting to buy at support levels instead of panicking.
The VIX is low compared to last fall and also the put/call ratio is rather high.
We remain oversold but like a veteran trader warns, markets break/collapse from oversold conditions not overbought.
There is some chatter on some financial sites about a 1987 like crash happening.
There was this talk on Nov of last year too.
I will say we crashed enough, but me saying does not bother the markets, they will do what they do.

Remember I am a trader and that's what I do, so when I buy its for short term. In such a market I will never buy for the long term anyways. I am not shorting or buying puts now as we can have some sharp rallies anytime.
But we should be afraid of a crash and not of missing any rally.
Most rallies have been a 1 day wonder.

Good Luck

Support breaking down, be very careful

A one day rally , thats all? Looks liek it, 693 had been broken on snf S&P 500 and though we remain oversold it looks like we might go very low.
This is the moment when tryign to make sense does not matter, the markets can rally or breakdown huge.
I am going to make some sells and stand asie and watch. There is lot of talk of the 593 level on the S&P 500.
Be careful and cautious.
Good luck.

This rally should stick

I have been looking for a short term bottom since end of last week. This week we went down , but the stocks like AAPL , USO , QCOM , WFMI ( I own some calls on all of these ) did not breakdown and maintained their strong support though did not run away.
Now in this rally , which I expect to last at least a few days, I will sell all of them unless they show great strength ( good volume and good pice action).
I hope we get sharp rallies as this is a bear market and the path of leastresistance is down.
Some veterans are saying this should be the low of 2009 , meaning 693 on the S&P500 should be the low and the markets will be higher than that for the rest of the year.
I am not so sure. Other smart people say S&P500 to 600 will be a good point to buy some good stocks.
I am a trader and will keep the big picture in mind and trade with the short term in front of me.
Good Luck.

Very scary, this decline.

Wow , we are so oversold but not getting any bounce. By the time we get one most will not even bother to look ? Some veteran traders say the markets crash from extremely oversold conditions and not overbought as many think.
As if we gave not broken enough yet. SP500 touch almost 700 today ( 704.27 was the low and the markets are not closed as I write this ).
With no one calling for any rallies or bounce maybe this is the right time to bounce . But who knows , at times like this its better to sit back , too low to short , too scary to buy.
Other than small trades I would not do anything much.
The bounce which can come anytime will be strong and if we breakdown completely then that too will be something.
They say its never as scary as it looks and never as great as it looks.
Hope we do not breakdown and get some bounce towards 750.