Can we overcome bad news today?

The “big” news this morning is BAC may need $34B butMish warned us, in our Phil’s Favorites section,over a week ago that BAC would needat least that much and BAC already fell and recovered off that news. If we are going to get a pullback, it will bemore of a “Ghostbusters” kind of sell off. There’s a scene in Ghostbusters where Manhattan WILL be destroyed and the demon tells the ghostbusters to “choose the form of the destructor” and whatever they think of will come down and tear down the city (they went with the marshmallow man). The markets are like that when they get overbought – SOMETHING is going to bring them down, it’s just a question of what people will choose to fixate on that day.

Note added at 8:30 – Of course that logic goes both ways and when the market wants to break higher, it will fixate on some bit of good news like the ADP report, which is sending us way up ahead of the open.

While we may not be, according toDavid Fry’s chart,as overbought as we were in early January, when the Dow fell from 9,015 on Jan 6th to 6,547 on March 9th (down 27%), we are way more overbought than we were on Feb 9th, when the Dow was still “way up” at 8,270 right before dropping a quick 20% in 30 days. So here we are up at 8,400 and looking just a little toppy so whether it’s BAC or some other stress test or the jobs numbers or the flu or whatever – something will “cause” the market to pull back. It’s not about the pullback really, pullbacks are healthy, it’s going to be about how we handle the pullback, what levels we hold and how we recover.

We UNcovered our long puts in the 9:50 Alert to Members yesterday and had no reason to worry the rest of the day as sunny words from Bernanke (shown here saying “If future inflation were a twinkie, it would be a twinkie the size of a school bus“) and a better than expected ISM report DID NOT lift the markets over our watch levels. We had the mandatory stick save at 2:30 and that lifted the Dow from 8,366 all the way back to 8,410 closing nearly flat for the day but we found no reason to change our…
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