The big news today was the strength in financials. Across the board, banks and related firms powered higher. Personally, I got out of my RKH, JPM, WFC, BAC puts (and a host of others) as well as my SKF position early this morning. All these positions were profitable, with the exception of WFC, although obviously they were more profitable at yesterday's close. Just for the heck of it, I drew a Fib retracement on MER (who wrote down billions of dollars after yesterday's close) from its lowest point in 1974 (!) to the peak in 2007, and the levels line up remarkably well with the support/resistance of the price points. Let me repeat – – this retracement was based on a price 34 years ago! I think that is simply remarkable. (exact span: 9/16/1974 to 1/18/2007).
Another thing powering the equities was continued weakness in energy. Remember how just a month ago everyone was running around screaming about $200/bbl oil? This market sure has gotten squishy fast. You can imagine all the poor souls who thought they'd be crude oil bulls in the futures markets; I'm sure a lot of newcomers got their heads handed to them. I continue to believe we could be in for another leg down on the OIH to about 165-170.
Looking at the intraday graph over the past 120 days, it's challenging to interpret what today's strength means. For the $INDU, I've drawn a thick dotted line to show a suggested support/resistance zone. The highs set earlier this month are obviously of great import.
The S&P 500 re-approached its important retracement level at 1267.86. The upper limit, as I've said, for any "c" wave higher is about 1,325.
Focusing in specifically on RKH, you can see how powerful the "outlawing" of short-selling has become. The darlings at the SEC engineered a boost of about 50% in a matter of just a few days. As I type this, the restrictions on short-selling have ten hours of life left, and I'd appreciate it if folks in the comments section would give a heads-up as to when the extension of these restrictions is announced, and what the particulars are.
Lastly, the $VIX has, having hitting the 30-ish level, eased its way back down to "the new normal" of the very low 20s. Continued strength in equities would get this back into the teens.
So it was a pretty brutal day for the bears, but it certainly shouldn't come as a surprise to anyone following the markets. All eyes are on Friday's jobs report at this point; let's see if today's strength is going to be the theme for the rest of the week. I wouldn't be surprised to see more strength, and if we get a lot of it, I will view it as simply another good shorting opportunity.
