The long awaited stress test

The long awaited stress test = the long awaited pullback???

could be. but I wouldn't expect it to happen easy... we have both the S&P and XLF on the verge of breaking out of the highest possible channel. Which would be a mega blow off breakout. (charts below)

But be cautious of a throw over and drop back under to pull everyone in to the mega breakout and then reverse. in fact... be VERY cautious of that. Sidelines might be your best friend at the moment. (even if you are positioned long.... if you try to milk a bull too long, something bad happens)

So not much talk this time... 2 charts...

first chart is the S&P.. we are at the tippy top of the channel..



second chart is the XLF.. we have 2 spots to stop it.. but there isn't much room left..



GL trading.

Back to our regularly scheduled rally..

Looks like the GM and BAC news last night did not have the effect on the market that I was expecting.

It will... eventually. But looks like it is being ignored for now.

912-914 could be a stopping point.

but.. i'm gonna be quiet and not say much until we get a reaction to finally releasing the stress tests results tomorrow.

Will it be buy the rumors sell the news? or mega rally extension?

i'll tell you one thing.. it won't be a nothingburger.

Late night ALERT.. ALERT ALERT

GM just had a 100 to 1 reverse split... essentially common holders are destroyed and GM will likely open at penny stock levels tomorrow.

On top of that, Bank of America is rumored to need 34 billion in new capital. For those who haven't been paying attention... 34 billion is half of their Market Capitalization. Which means if they have to raise the money by equity offerings, you are talking about 50% dilution.. and probably will be far higher by the time it finishes trading tomorrow.

This changes everything. News trumps all. And this is some freaking news.

GM is screwing over the bondholders and common. GM was getting government money. Anyone who is a bondholder in a government "assisted" company... (tons of banks).. is going to be freaking out tomorrow. Because the sudden realization that they CAN be wiped out... is going to sink in awfully fast.

I won't write off potential of lock limit down tomorrow. I won't say something like that often, but all the ingredients are there. Extended bear rally... horrible news.. this has potential of a no bid situation. There WILL be big money having a heart attack tomorrow.

It's tempting to go heavy short the open tomorrow and ride it down. But I think I may just watch the fireworks happen and see where it ends up and come up with a new plan.

Tomorrow is one of those days where what happens in the stock market will be the new main article on CNN 5 or 6 times during the day.

You won't hear about swine flu tomorrow.

GL

05/05/09 Rally on.. Nothings wrong, nothing to see here

Yeah so if you hadn't noticed, we broke the 875 level from my last post and shot up 32 points.

There's really nothing stopping us from going straight to the 200DMA which is 960. Although, I don't think that will be the top of this rally and it would be too easy for the bulls if we just went straight on up to it.

There's not a lot of technical analysis to do here.. if you try to apply a Elliot Wave count, there's a number of ways you could call it. We have some signals that say correction near and yet others that say rally on.

How the market reacts to the stress test results will be key here I think. The instant reaction will probably be wrong as is usual. However, how the day ENDS after the results are announced is what will be important.

I'm on the sidelines personally. Trading at the moment is too much like gambling. It's a roll of the dice where this market will be sitting by next Monday morning.

The continous rally up to the stress tests results is curious though. You would have thought the opposite would happen as no one would want to be long through the annoucement... this could be setting up a sell the news event and kick off the long awaited pullback.

But like I said, it's a roll of the dice at this point. My advice is to wait, see what the reaction is, and then position yourself in that direction.

That's what i'm doing. :)

GL trading.