7/16/08
SEC announced a restriction of shorting 19 financial stocks late afternoon yesterday and crude oil future continued sell off 2nd day in a row are both big factor to play today biggest banking sector rally in 16 years and DOW ended up 278 points. Technically, major indexes are now forming bullish reversal morning candlestick pattern ( 7/14/08, 7/15/08 and today 7/16/08 a 3 day pattern) to end this horrible downtrend selling since 5/22/08. Although financials are finally bottomed, the market will have another pull back soon to retest. I do not believe this is another V shape reversal back up because few technicals are not in reversal signals zone to confirm this turnaround. Also, this just happened before the option expiration Friday. Also, major indexes are facing the resistance downtrend line to break in order to climb higher. So, it is huge rally and S&P did have heavy volume yesterday to hammer this bottom. But I am not so convinced yet we are ready to turnaround from here. I suspect the market need kinda double bottom or make a divergence signals on indicators to make this down shift gone. Moreover, need to test the sentiment if more bad news cannot hurt the Bulls. Tomorrow morning, JPM will post earning and MER will announced too after market close. C will be showing their number before market open on friday. Even SEC restricts shorting financial stocks, it does not mean there appear any big buyers rushing in and make this turnaround. Insolvency cannot be taken care by these rule and I am sure there would be another selling wave of financials in the very near future. Folks, trade short term with financials is fine but do not own them in long run. I do not think their fundamental has changed.
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