The good news is that we broke the three day jinx and did not end at our lows for the day. More good news: retailers for the most part did not drop, despite poor January sales.
The bad news: a stronger midday rally was quashed. Worse, selling intensity picked up notably at the top, which occurred right after 2 PM ET.
In other words, traders sold right into the rally, heavily.
This illustrates the central problem: buying conviction (demand) is not that strong. Absent some catalyst (like dramatic rate cuts) that sends sellers temporarily to the sideline, supply of stock (i.e. sellers) is readily available.
This means that the stocks that rallied most off the January bottom--retailers, financials--are in a bit of a no-man's land right now.
What will get things moving for these sectors? This may be a stock by stock, in the trenches event.
1) JC Penney , which kept inventories under control, raised guidance,
2) Deutsche Bank , which hedged much of its subprime exposure and reported almost no writedowns. This is not sign of a bottom for the sectors, but it is a sign that some companies are working through the problems.
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