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Tuesday, October 28, 2008


Starting about 2 pm, the big money boys decided to put on a short squeeze as the SPX went damn near straight up. Despite more bad news, we were positive most of the day, but not hugely. Energy was up pretty big most of the day, but it was the financials the made the move. XLE and XLF both finished the day 14% up (moves like that are getting to be routine now). The short trend line from the October 10 low, broken last week, is now support again, and we have a positive MACD histogram for the first time since August.

The Nasdaq gapped up decently, and stayed positive most of the day, but closed "only" 9% up (compared to the SPX and Dow, both over 10%). Volume was big, so I suspect not all of itr was short covering.

The Russell 2000 wasw the laggard, negative most of the day, and only gaining 6% today. Most of the small caps I was watching today were negative until quite late in the day.

The transports (I refuse to call them "trannies", if you live in California you know why) are supposed to have benefitted from low oil. Other than the airlines, it doesn't seem to be the case.

I have mentioned the steel industry several times lately as one that has the potential for a huge bounce. This is the Dow Jones U.S. Steel index, and besides making a huge move today, you can see the divergence in MACD and RSI. Stocks in this industry are nowhere near their 52 week highs, and most are coming off 52 week lows.

Since I mentioned living in California, I thought of a good analogy for what is happening in the market. I have been through a few earthquakes here. The funny thing about earthquakes is they are usually over by the time you realize you are having one, but it is the aftershocks which are unsettling to your nerves. I think what we are seeing is the aftershocks form the early October earthquake.

It seems the banks are using the bailout money for everything except what it was intended for. The White House is threatening to hold their breath until they turn blue to get the banks to start lending. There isn't much else they can do.

1 comment:

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Eddie b

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