By: Elliot Turner
Shortly before the Bernanke confirmation vote, I wrote that we could possibly see a relief rally should the “yays” win and Bernanke get reconfirmed. The Senate called for a 3:20 vote on cloture–the procedure to end debate and proceed with the real vote–and somewhere around 3:45 the result came in. At first instant, the market shot up; however, before I could sell out of any of my long positions, we quickly reversed and pulled in hard. After accepting my small loss, I moved on and decided to wait it out until Amazon (AMZN) earnings.
All morning I had made money long Amgen (AMGN) while the market tanked. When the market finally bounced, I added to my position, anticipating that the market’s short-term strength would add an extra boost to Amgen’s breakout. Sure enough, as the market bounced, Amgen faded back to the breakout level and I had given away a good chunk of my gain in the process. This afternoon, the SPYs held the test of the important $108 level and provided some decent long opportunities, although the rally was rather muted and failed at around $109 on the SPYs–our most recent support area.
We can clearly see past support levels capping rally attempts. Caterpillar (CAT) opened the day right at $54, it’s multi-month base, and aggressively sold off in early trading . JP Morgan (JPM) made several attempts to retake the $40 level and failed each time. As long as this dynamic continues, then I will continue to search for shorting opportunies against prior bases. I do not like shorting as th stock moves up towards the past base. Rather, I wait to see if the prior levels works as resistance, and once I receive confirmation, I then initiate a position with a stop above the level.
Today the financials exhibited relative strength, while commodity stocks continued to get annihilated, yet for some reason, when the market bounced, the financials could not rally. We had our first higher low in the XLF since the aggressive selloff began and the sector exhibited relative strength throughout the day. Look to see if that higher low can hold. If so, we just might get that “relief rally” we have all been waiting for.
