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This Week's Count Rally x 4

This was a very constructive week, the best weekly advance for the Dow and the S&P 500 since November.

Let's review why the market rallied:

1) Oversold conditions

2) Positive comments from big banks

3) More "together" feel from Geithner, others

After the kind of gains we had this week (S&P up nearly 10 percent in four days, Bank Index up 46 percent!) you would think there would be some serious profit taking by today, at least in the financials.

And they did attempt to do that. Just after 10, in a pattern repeated dozens of times in the past couple months, they pressed financial stocks.

The shorts failed.

You can see this in the action in the XLF (the Financial Select SPDR Fund—the financial part of the S&P 500). Typically, they tried to sell this off right after 10 PM, and it succeeded initially. It went straight down on heavy volume...and then...it stopped! And financials began rising again.

It began rising because the selling was exhausted, not because there was tremendous buying enthusiasm, so I don't want to make too much of this.

But it does indicate that, at least for the moment, the sellers do not have the momentum they had until very recently.

Another positive sign: defensive stocks rallied today. Early on in the week, traders were buying high beta stocks like financials. But today, defensive stocks like Pfizer,J&J, P&G, Hershey, Kimberly Clark are market leaders.

Symbol
Price
 
Change
%Change
HSY
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JNJ
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KMB
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PFE
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PG
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The hope for the bulls next week: consolidation. Moving sideways is good. If that happens, this might have legs.

Geithner and Co. are the key. Expectations are low, so continued articulation of what Geithner is doing, particularly on how he is going to get banks to sell toxic assets, is key.

One thing's for sure: the easy money has been made, expect a retest. Bears, of course, are quite confident this is a bear market rally, and we will be testing new lows within weeks. They are the vast majority, and during the last rally in November-December, they were certainly right.

Still, it's not unreasonable to be cautious, but a bit more hopeful. Two steps forward, one step back. We are clearly working off the deeply oversold conditions and slogging our way through a long, painful recession.

For the week: Dow up 9 percent, S&P 500 up 10.6 percent, NASDAQ 10.6 percent.

Read more on CNBC.com including:

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Questions? Comments? tradertalk@cnbc.com

Symbol
Price
 
Change
%Change
HSY
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JNJ
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PFE
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PG
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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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