Stock Reversal Week: Financials Down, Commodities Up

Well, you knew it would happen--"sell the rally," except this time it's come a few days after the rally. The dollar is getting hit again as the ECB has make it clear they are unlikely to lower interest rates.

So what was working last week (financials, builders), is reversing this week, and last week's debacle (commodity stocks) is moving up this week.

Of course, sell on the rally always starts with the weakest links--financials, many of which are down 3-6 percent today. Citi down 5 percent as Meredith Whitney at Oppenheimer took her numbers down.

As for home builders,

New Home Sales was a bit better than expected

(590,000 vs. 570,000), but not much. Still the lowest reading since March 1995. The inventory of unsold homes remained unchanged with Jan at 9.8 months supply, a bit disappointing.

And retailers--which also had a great week last week--are also selling, with Nordstrom , JC Penney , and Kohls down 3-5 percent.

Energy stocks have been sneaking up all week and accelerated this morning as the weekly oil inventories showed less of a buildup of crude than expected.

Not surprisingly, with oil approaching $105 airlines are getting killed again.

Any good news, Bob? Well, we are approaching the end of the quarter. There is considerable chatter that funds have raised a significant amount of cash for fear of redemptions. There is some evidence that redemptions to date may not have been as strong as some feared. If that is the case, it means there is a significant amount of cash on the sidelines that could come in after the quarter ends, providing traders believe there is value in the market.

Questions? Comments?