Big Rally Ahead
The market dropped severely yesterday and then, in the final minutes, all indices jacked higher and closed +2% - it reminded me a lot of March 9 of 2009.
I don't want to get overly excited to be a bull here, but for the time being, I think yesterday could be a key swing low.
First, and foremost, the bulls need another positive session today. The bulls defended 1100 yesterday, which I suspected they would do; and they regained 1115 support. The bulls need to test, preferably take back, 1131 support today.
The U.S. indices will have help from the market across the pond this morning. Stocks in Europe have recovered after European Union leaders spoke about a massive bank recapitalization aimed to build investor confidence in the banking system.
Since the big fear out there is that banks in Europe will fail, and contagion risk is high, the message (similar to Ben Bernanke years back) was welcome and erased a lot of the bearish momentum from the market.
In addition to the coordinated effort to stabilize the European bank system, the European Central Bank will announce rates tomorrow. Many market analysts expect interest rates to stay at 1.5%, but I think the ECB might surprise us and lower their rate.
If the ECB lowered interest rates commodity and bank stocks would roll, full steam ahead, back towards last month's high.
As you know, I loaded up on longs yesterday. The Mosaic Company (NYSE:MOS) and Sterlite Industries India Limited (NYSE:SLT) will benefit from gains from commodities, which should be led by a charge higher in oil - Cameron International (NYSE:CAM), Joy Global (NASDAQ:JOYG), and Oil Service HOLDRs ETF (NYSE:OIH) are also nice trades.
Technology stocks should also outperform, and our trades in Synaptics (NASDAQ:SYNA), Atmel (NASDAQ:ATML) and Polycom (NASDAQ:PLCM) provide us with enough exposure to that sector. Other options in tech are Micron Technology (NASDAQ:MU), F5 Networks (NASDAQ:FFIV) and Allot Communications (NASDAQ:ALLT).
Clearly, I am looking for a bottom. And I think we'll get one, but let's keep those stops tight just in case.
