Today's action seems to have re-ignited the fear in the bulls. Not only what happened in the market, but also some of the news coming out and some of the doubt analysts are having in the government generated profits by the banks. The bulls are no longer screaming for Dow 10,000. They are no longer screaming for financials to double. Well, OK, Bob Pisani is still saying the banks can triple to get back to where they were, but does he count?
The fear is lingering. You saw it in the action at the end of the day. In previous down days, the market would rebound at the end of the day as shorts would take profits and longs will buy on the dip. Not today.
I am not saying the rally is over. But today may have been a day which told us that the rally is running out of steam. We need confirmation though. Here is what I am looking for...
- The SPX closing below 900. That would be big. If it closed below 895, that is a clear signal the bulls have temporarily lost control.
- The VIX crossing the 20 day MA. This means a VIX at or above 36. That would be a heck of a move.
- Banks raising capital through secondary offerings close at or below their secondary offering price. That would tell us the market has lost confidence in the bank valuations and reality has set in.
Without at least 2 of these happening, we are just looking at a short term correction. If the market closes below 895, we are definitely headed to 875. But if none of the other 2 items happen, it will bounce right back.
I have held, at a fault, AXP and BAC short positions perhaps too long. And the trader in me said I should have covered today. But the action at the end of the day said it is too early to cover. Financials should continue their slide at least through tomorrow. The question is, will the market follow and thus feed more selling in the financials as fear returns?