Two Day Rally

It was choppy out there, but the bulls managed yet another day of impressive gains. In fact, the largest two-day rally since last November.

Among some relatively good earnings and quick oversold reversals, today's big catalyst was the $150 billion dollar stimulus plan. While doubts continue to whether it will be enough and how effective it will be, the current mood seems to suggest that it is better than doing nothing. Time will tell.

For today, buyers couldn't get enough of technology, construction, agricultural chemicals, basic materials, education & training, semiconductors, consumer finance, and mining. Emerging markets also showed some strength today, but not to the same extent as we've seen here.

For the most part, after-hours trading has also continued today's surge of optimism with a good response to Microsoft (MSFT), Broadcom (BRCM), and E Trade Financial Corp (ETFC), even though Synaptics (SYNA) was taken to the woodshed (see previous post) after lowering their guidance.

So, do we rally into the next "Fed will save us again" meeting next week? Good question and I really wish I knew the answer. If we do, I do know this - it will eliminate every oversold reading I follow. In addition, a lot of people are talking about the necessity for a "retest" of this week's lows. There's little doubt that we'll retest them from my point of view (I'm sticking to my no panic/no extreme oversold readings were hit framework), but I wonder if we'll have to wait the now standard 5 months to do it. As you may recall, in both the corrections in March and August of last year, there were 5 months of separation between the tests. If the bulls can clear 1400 in the S&P, I'll have to at least consider that possibility. Until then, I'm skeptical but trying my level best to find decent trades while I wait for oversold conditions to clear before deploying some shorts.

Have a great evening and I’ll see you tomorrow.