It seems the news out of Europe regarding the potential nationalizing of some banks spooked the markets well ahead of the Presidential Inauguration. Financials were destroyed with several stocks losing over 15%. The Direxion Financial Bear 3X shares (NYSE:FAZ) ETF was up a staggering 40%. It all culminated in the worst Inauguration decline in history for the Dow. So where do we go from here?
It seems a foregone conclusion that the markets will test the November lows, and it's probably the most likely near term pattern. I highly doubt the markets would break that level severely without some sort of consolidation or rally attempt prior to the test. While it's true that oversold markets can remain oversold, they don't typically break major support in that state. The plunge lower often traps the last sellers and quickly reverses. However, if the markets attempt to rally for a few days, work off their oversold tensions, and then rollover, it could get ugly.
Some of the financial stocks caught some bears off guard today with a gap higher and early strength. They key to any rally at this point is the financials. Morgan Stanley (NYSE:MS) for instance, erased yesterdays losses and actually traded higher than yesterdays high. As of 11:00am it was back under the previous days highs, but well above the lows. I'll be watching them as well as GS as my market tells today.
Good Trading,
Joey
Subscribe to:
Post Comments (Atom)
0 comments
Post a Comment