Market Rebounds From Record Lows - But Concerns Remain

obama loan modificationWatching the end of trading today, I almost believed that once again we were going to see a close in the red. I am amazed at the power of the selling that is now going on right before close. Lucky for the bulls, the selling did not prevail this time as the market finally closed in the green today up 2.23% (6,875), however far below the intraday highs. The S&P also did rebound back from its recent below 700 level, which is a good technical sign that indeed a bear market rally could be brewing. However, many obstacles remain for the bulls in pushing this market up, so it is still looking like we are in a very unpredictable market. A big one is the scary unemployment number heading our way Friday.

First, let me point out the very large volume of trading today, 464M (compared to an average of 354M). My level two trading platform was going off the entire day. The increase in volume is definitely something to look out for, especially if markets begin to creep up again this next month. A mixture of the two could be a very critical factor influencing an upcoming crash for the market. So my eyes are watching.

It was liberating for me to see the market finally trade up. Not for any reason specifically dealing with my current holdings, but because it will most likely create some opportunities for me to make some good profits in the near future. I do have some long plays in case of anything severely violent, but nothing very significant. Although the green closing was positive and shows some signs of the possibility of a rebound here in the short term, the critical thing to watch is whether the buying can continue, even amidst negative news. We were very overdue for a technical rally, and are still, in my mind, a bit oversold in the market. So yes, a rally was a good sign for markets today, but it is so so critical to see if that buying continues into tomorrow. I worry if it doesn't it may not make it the rest of the week.

China helped jump start trading today, along with Obama presenting the new plans for loan modification, and the process by which the plan is to unfold. I am very curious to see how successful this plan is, as it seems too specific in some points and far too vague in other points. I would just let nature take its place in the market and have prices correct themselves. If we don't we risk facing more problems in the future. It was also very strange to see that China had a strong up tick in their PMI, but at the same time needed to pass a huge stimulus for the country. Ha, that doesn't smell like number forging. The combination of the two sent China stocks flying and FXP crashing. However, as for me, I am staying out of China!

Other stocks that came crashing today were MGM Mirage, as they have put a hold on their new Civic center on the strip due to a lack of funds available. They are looking for financial partners to help finish the deal. Picked a great time to try and do that. Ford and GM came crashing down during after hours as their plan to "reorganize" debt was announced, which sounded a lot like bankruptcy. Citi took another 7% off today as more concerns keep growing whether or not they're going to make it alive. My guess is no.

Oil finally got the love I've been waiting for today as oil was up nearly 10%. I was a couple days early on buying my options, but it was nice to finally see some reward with oil. This may spark a rally for oil depending on how the rest of the market trades. Gold is creeping down back to the 900 range, which makes it very tempting for me to pick up some more rounds of options. Gold performed very well for me last time, and although I still believe we're a while away from inflation risk, at 900 it's looking very appealing to me. GDX and DGP are back on the radar. UUP and TBT continue to make me glad that I bought them. UUP has a Market Club report of +90, which is also very good for technicals (get your own symbol analyzed for free, all you need is a name and email, Click Here).

If indeed we do see this rally gain some ground, I think we could be in for quite the rebound for the March. Historically, March is usually a strong rally month, as it usually acts as the rebound for the beginning of the year blues. If this rally does indeed get some steam behind it, we could see a 15-20% rally for March. I'm not claiming that we've hit bottom, no way. In fact, I believe such a rally is what will ultimately set up for the market crash, probably sometime around the dreaded earnings season. By then I will want to have once again loaded up on a lot of the shorts to ride, what I believe, will be the worst down spiral we've seen this round. So I am remaining very careful not to get caught on the wrong side of one of these violent rallies for the time being.

So, tomorrow is a very critical today. If we do indeed see bears come back just as hard tomorrow, the green we saw today was in vain. If we see two days consecutive of buying, that's a very strong sign for a short term rebound. Congratulations to Nate Meyer for winning the Lending Club promotional contest. Nate also put money in it, and thus far, says he has nothing but good things to say about the company and his investment. Enjoy the $200 Nate. Have a good evening, Happy Trading and see you tomorrow.