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Monday, July 13, 2009

After Market Report

Today's market direction might change the way I view the general direction of the market. All three market indeces were up in excess of two percent. The Dow was up 2.27%, the NASDAQ was up 2.12%, and the S&P 500 was up 2.49%. All of today's movement followed an announcement by bank analyst Meredith Whitney (incidentally married to wrestler and entrepeneur John "Bradshaw" Layfield) that she was now bullish on banks. It makes sense that banks would get better because of this but a broad market move is curious. It's even more curious when Whitney also predicted 13% unemployment. It's even more curious given that commercial lender CIT group is on the verge of collapse.

Bonds of CIT Group Inc (CIT.N) fell more than 8 points on Monday after the U.S. commercial lender said on Sunday it remained in discussions with regulators on measures to improve liquidity.

The picture gets even more cloudy when you consider that while stocks that fabulously well they did it on very weak volume. In fact, according to CNBC, this continues a pattern of strength on low volume and weakness on high volume.

I have long believed that depending on what piece of news the market latches onto, that is a good sign of whether it is oversold or overbought. There was several pieces of news today. Some of it was good bad and some bad. Yet, the market latched onto the good news. It's dubious for a market to move so broadly just because one analyst raised the expectation on one sector. Yet, that's what happened. It's especially curious when the very same analyst also predicted a gloomy future for the economy as a whole.

My analysis:

I'm not ready to turn short term bullish yet, but this is a trend to watch. Given how low the volume was, it's very likely this is a one day move. If, however, we see strength over the next couple days that maybe a sign the market was oversold and it's time to buy.

1 comment:

Jason Gillman said...

..Conspiracy alert..

My question is "where is the buying coming from?"

I understand there might be folks looking to see the light at the end of the tunnel, but my personal thoughts seem to return to suspicions of propped up markets at key moments in current history in an attempt to solidify confidence.

..end conspiracy commentary..

I'm glad for my 401K that gained $52 today.