Another Day, Another News Bogey

The U.S. Treasury announced that it will "finance" as much as $1 trillion in "toxic bank assets." A "Public-Private Investment Program" will use around $100 billion from the TARP to create "purchasing power" of $500 billion, and the program "may double over time." Another day, another trillion dollar news bogey.....I don't know if I can use any more quotation marks than that.....

I'll let you draw your own conclusions because I shot past reality into the surreal nebula a long time ago.....

Now, let us all come back to a type of reality for the trading day. Remember, it doesn't matter what you think about the news, it matters what fund managers think about the news, at least enough of them who are buying this stuff with real money. Pre-market futures are up sharply. The market is set to gap up and probably head for a test of the Wednesday/Thursday highs from last week.

Here's one Fund Manager's take on the news: Mark Mobius, who helps oversee $20b of emerging-market assets as executive chairman of Templeton Asset Management Ltd stated "A new bull market has begun, you have to be careful not to miss the opportunity."

So there you have it, Mark is calling the bottom, we can all look forward to a new 27-year secular bull market.....

Now, in my reality, I don't believe today is the start of a new 27-year bull market. But that doesn't matter, I just care about what I think the fund managers think, and if enough of them believe a new bull market has begun today, then they will be net buyers for the next several weeks, which is what I've been speculating anyway. I'm still targeting the April Earnings Season for the next major catalyst in the market after the News Bogey Gauntlet launched an important seed change amongst fund managers. The NBG has had a few well-placed follow-up bogeys, like today, which continues to push the mentality of "innocent until proven guilty" with the fundies.

Here is a chart of the SPX:
(click on image to enlarge)

The SPY is set to gap up about 1.50, which means the SPX will open about 10-15 points higher right out of the gate (probably right around the 780 area). Today looks like it may form a Breakaway type of candlestick pattern. The market is likely to take a shot at 800 again some time in the next several days. Traders will probably try to probe the highs for a breakout and see if the they can push a rally as far as the 820 - 830 area some time in the next week or so.

Expect some volatility, hype, freneticism, and even exhuberance today. There will probably be an initial thrust out of the gate, then some wiggle depending on how the Existing Home Sales number reports (30m after the open). I will choose to stay nimble with any call trades today, and then if the market closes strong, I will look for some solid carry-through to the upside for a couple more days.

9:25 am MT: Intra-day Update: The SPX hit 800 as speculated, now it looks like the market may consolidate a bit intra-day. Financials, Energy, and Commodity stocks are leading the way, which isn't a surprise at all. Of course Energy stocks leading the market is unsustainable, but that's irrelevant right now. What matters is that the fundies are googly-eyed for stocks, at least for the near term.

The market internals are confirming that the big volume push is coming in a more selective group of sectors and industries. Nevertheless, as long as traders are excited, then even a push in a narrow group of sectors will be enough to keep the market chugging along. At this point, being scaled out of about 2/3 of any call positions from this morning is a good idea. If we get an orderly pullback, then there will probably be another opportunity for a second leg up intra-day.

10:00 am MT: Intra-day Update: The market is making another push off a quick consolidation. This leg will probably run for another 15-20 minutes before the next consolidation hits. When the current push peaks out in the next little while, I would look to sell the last 1/3 of any calls from the morning, and then use the next intra-day consolidation (if it holds up fairly well) to re-enter a new set of calls for a push into the afternoon.

12:50 pm MT: Intra-day Update: There's the afternoon push after the consolidation.

3:00 pm MT: Quick Market Wrap: The DIA and SPY both finished with pure Bullish Kicking Patterns today. Volume wasn't as big as the news, but then again, this isn't about reality anyway. I expect today's Kicking pattern on the market to carry through to the upside for another couple of days. Traders are buying Financials like their very lives depend on it, which is being exacerbated by the Shorts, who are on fire and running screaming into the night.

The SPX has resistance in the 825 area, and then again in the 875 area. The Kicking pattern carry-through should overshoot 825, but might not make it to 875, so I'll go with 850 as a good average area to shoot for in the next couple of days. It's possible, if the Shorts are in mortal anguish, and the Top Gun Fundies are "feelin' the need for speed" then the market could shoot as far as 875, but I'll keep an eye on the 850 area first.