More Bullish Behavior, But Will Financials Keep Everyone Afloat?

Price is showing nice resiliency ahead of significant news risk. Just one more example of the market's recent bullish behavior. Cumulative Tick and the A - D lines are moderately positively sloped and the VIX remains below 40. Nonetheless, the broad indices wouldn't look nearly as nice without the Financials more than pulling their weight. We'll see how far into the day this pre-earnings optimism can hold.

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Comments

[Gary Gallo:]

Today FAS closed +1.04 at $9.75, up nicely from our $3.71 purchase price. If in fact we are in a recovery my target of $25.92 should be hit. Remember every time the financials have a good day, go up 5%, FAS goes up 15%. So for the accounts 95% cash 5% FAS, our target on FAS of 25.92 would return 700% translating into a 35% overall return for our account. With of course less then 5% market risk overall.
Guy Gamello

Apr 13 07:30 PM

[The Geoffster:]

Is optimism driving this market? I thought it was just a bear market rally. I don't think there's a whole lot of investing going on. I've been doing my fair share of trading though- sold GE today after nearly doubling my money, but my commercial real estate shorts are underwater.The big banks and other financials are a sham. Now that El Presidente realizes markets do count, he's become a shill. Just tune in to his bullish talk tomorrow. Investors aren't getting their money back anytime soon but there's still money to be made shorting the U.S. economy.

Apr 13 07:51 PM

[Steven Vincent:]

Check out my piece: VIX Breakdown Forecasts Bear Panic

seekingalpha.com/insta...

There is panic buying after hours in Citigroup, now up to $4.20 +39%. Also BAC.

Here is an addendum to my piece:
Question from this posting on MarketOracle.com:

VIX showing buying panic?

Just wanted to ask about your interpretation of the VIX. When I saw the VIX break down below 40, I took it as a sign that we'll see less panic in general, on the long side and the short side. Options implied volatility works both ways. Why did you see it as a set up for panic buying?

Reply:

It's interesting that there are many divergent interpretations of this indicator that has become widely monitored.

First, clearly historical volatility has not diminished in this bull phase...we all know that this is "the fastest rally since 1933."

The VIX tends to move inversely to the market. Technically the index had reached a point that demanded resolution implying a sharp break in either direction. A break down from the 200 DMA and the triangle formation would imply a continuation of the bull trend in stocks...and a sharp one. A move away from the 200 DMA is a fundamental change of trend. It means something very important is happening. Bears had been expecting an upside resolution to the VIX, coinciding with a top in the "bear market rally". They have tried to short the market again at this level on the blanket assumption that the bear must return. The breakdown in the VIX in an indication (and a strong one) that they are probably wrong. It is possible that on Tuesday or Wednesday there may be a sharp pullback in the markets and the signal that the VIX has given may prove to be a bull trap (or bear trap from the perspective of the VIX chart). However that would need to happen in the next few days or the shorts will start to cover and sideline money will pile on driving the market to the 200 DMA on the SPX.

Apr 13 08:01 PM

[Francisco M...:]

Cetin, you are correct. Tech stocks usually lead bull cycles coming out of a bear market. In this specific case, this is just a plain bear rally with A LOT of window dressing performed by our government. Why can't banks show the results of the stress tests? Come on, banks are so eager to give us the "good news" why wouldn't they give us the stress test results. The reason McDonald's is doing so well is because America cannot afford to go to higher end restaurants anymore. That is exactly the same phenomenon we are seeing with the great numbers credit card companies are expected to deliver. No income = more credit card spending.

A retest of recent lows is inevitable. Singapore's GDP numbers came in twice as bad as estimated. Of course, it could be worse. We could have had three times as bad the number.


On Apr 13 05:42 PM Cetin Hakimoglu wrote:

> Believe it or not, there are other sectors that play an influential
> role in the economy besides financials. Large cap tech such as Google,
> Apple, and Rimm and multinationals (Wallmart and mc Donalds)are thriving.

Apr 13 11:10 PM

[Rob Viglione:]

Financials are the biggest political beneficiaries of our new economic system. With taxpayers absorbing the brunt of remaining balance sheet losses, we should expect to see banks and financials, in general, outperforming the market.

Apr 14 12:08 AM