| Gar's Market Blog
Outlook for Friday
( 19 February 2010 )
After-hours
Bear Catalyst!
For
the last several days, there
has been a seemingly relentless
bullishness that has pushed
the market up almost in a straight
line. And, while our StockVision
"bear/bull" meter
has indicated this precise action
(being solidly green since the
weekend), I have personally
found this rally a tad suspect.
The reason is that this upside
has been accompanied by completely
anemic volume.
For
a rally to really mean something,
there needs to be signifcant
volume behind it (at least better
than average volume). If you
think about it, if traders and
investors are optimistic enough
to drive an index upwards, shouldn't
they be buying heavily? In the
most recent upside, volume has
been running better than 50%
below normal, which is about
what we see on a 1/2 day for
Christmas Eve when everyone
is gone.
Low-volume
"rallies" simply need
the smallest negative catalyst
to get toppled, which is exactly
what we had during after-hours.
Knife
from the Fed
Today,
in after-hours, the Federal
Reserve announced that the bank
discount rate (the amount a
bank pays the Fed for borrowed
money) will be raised by 25
basis points. This spooked the
markets to such a degree that
the market futures plummeted
immediately, and they remain
ultra red to this minute. This
is exactly what can happen to
a rally that is fueled on anemic
volume---which is a lesson to
be remembered for the future.
Don't go long-term long without
volume!
Outlook
for Friday
Assuming
that the futures hold, look
for plummeting downside at the
open, with possibly a gallant
attempt to bounce off the opening
lows, but only to draw more
sellers before the end of the
day. I suspect we will close
at or near the session low by
the time we reach the closing
bell.
Whether
or not this spawns a new, multiday
downtrend remains to be seen.
In any event, your best shot
for gains tomorrow will be to
play deep bouncers, and panic
lows, and ride them up along
with "bargain buyers,"
but don't stay in very long.
Remember that any semblence
of strength will draw sellers.
Tomorrow will have "get
in-and-out" written all
over it.
Sector
Watch
The US
dollar is the one to beat, as
it is likely to spike sky high.
This will fuel the downside
to equities even more, but more
importantly, a spiking dollar
could tank precious metals and
other commodities.
Hence,
look for commodities to be among
the worst sectors, followed
by financials as second worst.
Most sectors will probably be
in the red, yet with non-financial
and non-commodity stocks having
the best shot at upside. Healthcare
and pharmaceuticals could be
sectors to watch.
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