Market Holds Support and Bounces Huge

Pre-market news is mostly bad: GM and F got credit rating cuts, WMT is cutting store expansion plans, and WHR is cutting jobs. However, short-term money market and loan rates continue to come down, the price of gas is in a record free-fall, and European and Asian markets are up. That has pre-market futures up strongly, and back in line with where the market was prior to the last 10 minutes of the day yesterday. Any time traders diverge from the news it's a good thing, although I'm not ready to read a huge amount into the divergence because of all the uncertainty still out there.

Probably what is happening is traders are looking at valuations and asking themselves if fundamentals are strong enough to support the current "cheap" price of many stocks. The big X-factor now in traders minds will be the elections and how the newly elected White House and Congress will affect corportate taxes, capital gains taxes, government ownership of private business, and individual income taxes, all of which will affect the valuations of stocks. A "cheap" stock now could become an expensive stock later if corporate taxes go up 10% - 15%. Traders are always concerned with elections, but there has been so much financial news to process the past month, and so much uncertainty in the polls, that they are probably only now starting to really pay attention and decide how much money they want to put to work before voting starts in earnest.

On a humorous note I got a chuckle out of a headline this morning that bemoaned the lack of predictability of the Fed Funds Futures now. I have been yapping about the divergence from Benny Van Halen Bernanke and the FFF since January. And I've been really yapping about the irrelivence of the Fed Target Rate and the real lending rate for 6 weeks. It always cracks me up when the media catches on to something about 10 months after it's actually relevent.....

As for the markets today, it's the same old story, take the intra-day signals and get out. You can see what would have happened to a put by holding it overnight.....The FOMC announcement tomorrow will only add to the uncertainty (which, again, is ironic since they're supposed to embue the market with stability and predictability). I will still be looking at the clean intra-day signals. Yesterday the cleanest intra-day signal was a nice call trade on the 5m and 15m charts that I "paper" traded for a prophet. We'll see what today brings.....

After the open: The market is fading hard off the gap at the open, which means that election uncertainty and global financial uncertainty are trumping "cheap" valuations at this point. The fade looks pretty ugly, so we'll see if we get some serious chart destruction or if the market holds and comes back. I will only "paper" trade the clearest of intra-day signals if we get them.

7:30 pm MT: Market Wrap: The Bulls fought of the fade and bounced with one of the biggest one-day moves in history. Of course, historical moves seem to be the norm these days. The Dow and SPX are holding the intermediate term support level that has been forming since the middle of October. The Naz is also holding support, but Tech and Small to Mid Caps have not been performing well as Large Caps and Mega Caps. There wasn't any single catalyst, rather it looks like "cheap valuations" won out over "financial meltdown" and "election uncertainty."

Today is a confirmed bounce, and although we have to deal with the Fed announcement in the middle of the day tomorrow, I will be looking closely at my Bullish Movers list since many stocks are acting like they are in a bottoming process. Now, as always, anything can happen, but for now, it looks like the market may be good for another couple of days in the current bounce. There are always news risks hovering around like vultures these days, but I will watch the list of Bullish Movers along with the DIA and SPY for potential quick call swings.

By the way, the Dollar Basket Index is looking primed for a consolidation, which could give Energy and Commodity stocks a little short term tailwind, so keep an eye on that as well.

Here are some nice Bullish Movers today:

Energy: OXY, ESV, DO

Retail: TGT, AMZN, WMT, ROST

Financials: COF, BBT, WFC

Cyclicals&Transports: BA, UTX, CHRW, DHR, MMM

Railroads: BNI, UNP

Steel: NUE, CLF

Defense: RTN, GR

Biotechs/Healthcare: AMGN, GILD, BAX, CELG, CEPH, GENZ

Tech: AAPL

Note: REIT's and Utilities moved nicely today but the spreads on most of those stocks are too wide to trade. Also, CCL is starting to hold support.

Remember, we are still in an anything goes market, but the Bullish Movers were hard to ignore today. I especially like the movement in Retail. I won't be surprised to see consolidation ahead of the Fed, although if we get a big move in the morning, I think I will lock and walk on the bulk of any call trades - because we could then see some profit-taking on the Fed announcement. However, I won't be surprised if we rally into the close tomorrow later on, after the announcement, especially if the Fed doesn't throw out any negative surprises. The Fed Funds Futures are predicting a 50bp cut tomorrow, although the rate cut will be mostly a psychological boost and won't do a whole lot to change the LIBOR rate. As always, we shall see.....