Dead Cat Bounce Today

Stock futures are up substantially on a typical dead cat bounce relief rally after the implosion yesterday. Traders are pointing to the bailout as a catalyst. Several politicians have been yammering that the bailout will still go through, which has kept trading in Asia fairly orderly and given U.S. stock futures a boost.

The dead cat bounce should not be a surprise after a 777 point drop on the Dow yesterday, which was actually the best performing index by percentage. As for the bailout.....I know it's unrealistic to hope, but I hope that politicians go in and strip the bill completely down to a simple $700b targeted to buying mortgages that will all be re-sold on the open market during the next 5-10 years. I hope that all the special interest, self interest, and socialist measures get nuked out of the bailout. I fear that it won't happen because these are politicians after all, but I suppose there is always a fools hope.

I speculate that the stock market will probably have a pretty good bounce by points and percentage for much of the morning (with a few violent intra-day swings in the process), but that the overall recovery will probably stay below the 1/3 - 1/2 point of yesterday's sell-off. We shall see.....

12:30 pm MT: The Dollar is up sharply, Oil is up strongly, and the Stock Market is up strongly. Normally a rising Dollar would drop Oil, and normally a strong jump in Oil would drop the Market.....so goes the market these days. The dead cat bounce is playing out pretty closely to what I expected this morning. We may see an end of day drop, but even that will probably be met with some buying into the close. I expect the dead cat to stay in the air today, and I expect the trading oscillations to settle down over the next couple of days until we get the next mega news bogey.

The Dow is fighting with the 50% retracement of yesterday’s drop right now (10,750), which is the bounce I was anticipating this morning. The SPX and Naz are also fighting with their 50% retracements of yesterday’s dump. This is probably the gassing out spot for now, which means we could see a drop over the next hour or so before a bounce into the close.

4:00 pm MT: Market Wrap: Well, it wouldn’t be 2008 without a 777 point drop in the Dow followed by a 485 point jump a day later.....This is beyond even the wildest roller coaster rides imaginable, but I’ll take the comeback today with open arms, especially in our current market environment. I’m not even going to try and do any technical analysis of the price action today. Normally I would have pretty good idea of whether I wanted to buy calls or puts, but every day is a new day in our wild, wacky 2008 stock market.

I did go up and down my watchlist and look at my universe of 300+ stocks today, and I found a few interesting stocks to watch.

Bullish: I like how some Financials are doing right now, especially WFC, but also USB, BBT, COF, and MET. I also like WY, KMB, and GIS. Finally, Gold is still hanging in there with ABX leading the way but AEM and GG also looking interesting.

Bearish: I think the Chemical Agricultural group is finally bouncing, so I’m watching for Bear Flags on CF, AGU, and PX, and perhaps MOS. Certain Manufacturing/Machinery stocks look interesting if they have Bear Flags including CMI, ETN, and DE. Tech is wild, but RIMM could be interesting if it has a Bear Flag.

I’m still taking this day to day (sigh.....), what can I say? Just keep plugging away, and don’t feel obligated to do a lot of trading right now.....