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Bulls, Bears And Zombies

Bulls, Bears and Zombies


There was some nervousness on Tuesday ahead of Helicopter Ben's testimony on quantitative easing (QE) before the zombies today (and tomorrow). The Fed Chairman has become the E.F. Hutton because when Bernanke talks Wall Street and the world listen.

The commercials for E.F.'s advisory services were timeless and classic back in the 70's and 80's and we are sure not too many current investors have ever heard of the company. Smith Barney gobbled up E.F. Hutton later down the road who was then absorbed by Citigroup (C, $52.19, up $0.36). In 2009, Citi sold 51% of Smith Barney to Morgan Stanley and is now known as Morgan Stanley Smith Barney. Last year E.F. Hutton was revived by his grandson and now runs the firm.

We went off the beaten path to explain the story because we are stock market history buffs and it was something we remember as a kid.

We also remember being scared of bears but now we aren't as we have learned to make money off of them. They we out in force during yesterday's second half pullback but for the most part, support held.

The Dow dipped 32 points, or 0.2%, to close at 15,451. The blue-chips traded down to a low of 15,415 and held 15,400 before recovering some of their losses. A drop below 15,350 today could be bearish for a further decline to 15,200 but the bulls will be trying to clear 15,500-15,550 on another Bernanke bounce.

The S&P 500 slipped 6 points, or 0.4%, to settle at 1,676. We wanted to see the index hold 1,675 and it did but not before a test down to 1,671 late in the day. There is further risk down to 1,650 on a close below this level but a trip back above 1,685 should get 1,700 in play.

TheNasdaq fell 9 points, or 0.25%, to finish at 3,598.50. We wanted to see Tech hold 3,600 into the close but the bulls missed by a point and a half. There is help at 3,575 on further weakness and Tuesday's low checked in at 3,589. Another drive past 3,600 would be a good sign the bulls are still headed for higher ground while a drop below 3,575 would suggest 3,550-3,500 could come back into play.

The Russell 2000 declined 4 points, or 0.4%, to end at 1,038. The small-caps were weak for much of the session after seeing a little daylight at the open. The index has led the rally to new highs and will also led the way down on any pullback. We still believe a trip to 1,050 is on the map as long as 1,035 sticks. Yesterday's low was 1,036.

The S&P Volatility 500 Index ($VIX, 14.42, up 0.63) jumped 5% and closed back above 14 after peaking at 14.56. The index easily held 15 but the warning bells will sound on a close back above this level. Volatility could be extreme over the next 2 days so if 15 gets stretched, 17.50 will need to stick. A drop back below 13.50 would be bullish.

We closed 3 more winning trades yesterday and we are once again in a great position to play the market's next major move. While we do hope there is one more push to higher highs, we will be ready to play put options should Bernanke drop the ball.

Futures are showing a slightly higher open as we head to press: Dow (+23); S&P 500 (+5); Nasdaq 100 (+9).