- Rally After Down Day Or Continued Weakness?
- Sour Mood Invades The Street; Here's Why
- Retail Results Just Plain Soft
- How Market Played Out Today
- Commodities "Taking It" On The Chin
- The Good News This Morning
- Why Tuesday Was a Let-Down
- Great Commodity Unwind Picks Up Steam
- Dollar/Euro Highest Since Feb.; Commods Drop
- Bob Pisani's ETF Special Monday
- Foreclosures: Why California, Florida Matter To Rest Of Country
- Video: Sell Your Gold?
- S&P and Nasdaq on track for 5-day losing streak
- See What People Are Saying About... Merrill Downgrade
- A Tale of Two Homebuilders
- Google: Happy Tenth Anniversary--Now What?
- Strategists: Embrace The Fear and Buy!
- Patriots Quarterback Tom Brady On Pay And "Secrecy"
- NFL Commissioner Roger Goodell On League And NFL Network
- Republican Convention: Whose Week Was It?
- Surge in Joblessness May Deepen US Housing Slump
- Are We Headed for a Recession? Take Our Poll
- Treasurys Turn Lower After Stocks Pare Losses
- Rising Dollar to Curb Exports: Feldstein
- Nokia Shares Fall on Third-Quarter Warning
- Unemployment Hits 6.1%, Fueling Recession Fears
- Europe Slowdown Worse than US: Goldman
- How China's Bet on US Paper Went Wrong
More Videos
The two factors moving the market today were 1) the drop in oil, now down almost 10 percent in two days, and 2) the rally in financials.
ROTATION: IS "BUY COMMODITIES, SELL FINANCIALS" FINALLY OVER?
Traders tried unwinding this trade in May, and they got burned badly. But there are a number of indicators that this time around the unwind has traction.
1) The rally in financials. For the first time since March, traders are trying to make a stand in financials. The impetus was Wells Fargo [WFC
Loading...
()
], not only beating but raising its dividend.
There may also be more at work here. Much of the rally in financials, of course, is due to short covering. There are reports that bank stocks are harder to borrow, either through higher borrowing costs and/or share availability; this is also helping the short squeeze.
It's a good start, but it's not enough to sustain a real rally. What we need now is a little follow-through on the earnings front…I doubt Merrill Lynch [MER
Loading...
()
]will have a lot good to say tomorrow, unless they announce an asset sale…we need Bank of New York [BK
Loading...
()
], Huntington Banc [HBAN
Loading...
()
], JP Morgan [JPM
Loading...
()
] and PNC Bank [PNC
Loading...
()
] not to be disasters…they are all tomorrow.
2) Have energy and material stocks topped out? This is anathema to energy bulls, but since hitting its historic high on May 21, the S&P Energy Sector is down 16 percent.
Energy stocks this month:
Weatherford [WFT
Loading...
()
] down 21 percent.
Noble [NBL
Loading...
()
]down 15 percent.
Apache [APA
Loading...
()
] down 17.3 percent.
Exxon [XOM
Loading...
()
] down 8.8 percent.
Material stocks are also looking toppy; since hitting its historic high on May 19th, the S&P Materials Sector is also down 16.6 percent.
3) Rotation into other names more obvious. Particularly in healthcare, where Johnson and Johnson [JNJ
Loading...
()
] is at a new high, and other names like Schering-Plough [SGP
Loading...
()
] are up 12 percent this month.
Dredging up famous old names. How desperate are traders to call a bottom? Remember Joseph Granville, famous for his bear calls from the 1970s into the 1990s? Traders are passing around a letter from Granville, written last night, where he claims that this is a bottom, largely on the basis of the huge number of new lows the market saw yesterday.
Excerpts from the letter: "The bottoming process has matured. I can now forecast that a Dow bear market rally is about to get underway. What is behind it is the predicted collapse in the price of crude oil. I would now cover all short sales with the exception of the oils."
related content |
Questions? Comments?
Del.icio.us
Digg It