The Wrap 9/12/11


Held bottom of wedge so far
Held bottom of wedge so far

Today was interesting. We gapped down hard on fears of Greek default and French bank downgrade risk. At around 2:40 pm the market started to bounce on a Financial Times report that China may step in and buy Italian debt. This gave the market a bid, and we were off to the races. Always remember this is a headline market and gains can be turned to losses on one piece of news in a heartbeat.

Here’s the rub and the reality. The Prime Minister of Italy mentioned a month a go that he was in talks with China to encourage investment in Italy. This was a semi rehash of older news, but the market is so herky jerky that any perceived piece of good news will be construed as a cure and the short sellers ran to cover.

We’ve seen this movie before (remember last week?). I am agnostic here as always and we may have some follow through tomorrow to the upside, but we need to be careful. I covered shorts in CF and DLB today as a result of the short covering rally, as I wanted to see how the market reacted to this China news. It ended up being a smart move in hindsight, as both stocks rallied higher. Sometimes you get lucky.

Please note that this is a treacherous market and is really unlike anything I have seen in a few years, so take it slow, trade smaller until we can catch a trend that we can hang our hats on.

Watch the financials as I think that will be a good tell for future direction this week. XLF


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