Top Line: Tuesday saw a major retracement of Monday's drop. This rally is most likely based on two things, quarter end and just the fact that the market was down so much on Monday, bargain hunters or bottom fishers were out in droves.
Well, the other reasons include "hope" that the financial crisis will be taken care of by someone someday soon. Last week we had the rally for the Emergency Rate Cut from the Fed that was supposed to happen today actually. That didn't materialize, not to say that it won't. We fully expect the Fed's campaign of lowering interest rates to continue in the not too distant future.
The buyers continue to come into the market place meaning there are still many who don't want to "miss" the bottom. As long as this mentality holds, we don't think the bottom is in. We know that the volatility index crossed 50 yesterday but a higher volatility number is coming, in our opinion. And, a higher volatility number would be caused by Lower stock prices.
This article from Fortune (CNN Money) is pretty good and will be writing our post for the evening. Pay particular attention to the deleveraging which is what we consider to be the primary "problem" the $700 billions is supposed to fix.
One other article from CNN Money that shows the news in the past few weeks. We like these kinds of articles so we are putting it in the post tonight mostly so we have it for ourselves. You can take a look at it, too, if you like. We haven't read it but it looks like it might be a good way to see how all these dominos fell...
We apologize for a "short" post tonight. Sometimes life gets in the way of a good post but we would refer you to yesterday's post if you haven't read it...the basic idea remains the same.
We received an email asking why the market didn't shut down on Monday with such a huge loss during the day. Well, the answer is that the market didn't go down enough to trigger the circuit breakers that are in place. The triggers are set every quarter and the first trigger is set at a move of 10% in the Dow. There are two other triggers, one at 20% and then one at 30% which actually shuts the market down for the day. Here is a link for "circuit breakers".
GDX 33.79 (may get another chance at this)
FSI: 63.97 (a bounce from the annual low)
VXO: 44.51 (probably will go higher than the 55 set on Monday)
SDS: 70.30 -6.20
QID: 56.72 -6.78
Dow Industrials: 10,850.66 +485.21