Sunday, April 12, 2009

Option Expiration Week Starts

Top Line: Dow closed above 8K again on the back of the Wells Fargo earnings forecast. These bursts of power are suspect because of their current news basis. However, if a pullback occurs, this would be another buying opportunity.

The Thursday morning news from Wells Fargo created a buying frenzy on Wall Street and not just in the banking industry. Many sectors benefited from the news. As we have said, when we are in a bullish pattern, surprises are to the upside. That's what we had on Thursday, a surprise to the upside.

The market is trying to decide what to do and when that happens there generally are a few back and forth moves to establish who is in charge, the bulls or the bears. We also though that the deep slump in prices would be followed by a sharp rally catching many off guard and not allowing many to buy.

This 1600 point move in the Dow creates a lot of skeptics. There are those that think the market has gone way to far and now must test the recent lows. There are a few who say that the strong move we've seen may have a little further to go but it's on it's last legs. We know that there will be several opportunities for these folks to be "right" over the next few months but in about six months the move will be much more than people currently think.

As soon as the market gets to the fall highs, then everyone will be saying they predicted it and that it now has a Lot more to go on the upside. When everyone believes it, then we will be ready to sell to them.

As we look forward to the week, we notice that the week contains an option expiration. The April options normally don't have a large influence on stocks but that may not be the case this month. We will keep you posted as the week progresses.

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