No Follow-Thru From Yesterday's Rally

My colleague Doug Kass is fond of saying "this market has no memory from day-to-day". That is certainly the case today. I would have thought there would be some follow-thru from yesterday's late rally, but such is not the case.

Asian markets plunged overnight on concerns about growth in the U.S., their largest export market. Also, there seems to be a big "risk aversion" trade on, as investors embark on a flight-to-safety of U.S. Treasurys, pushing the 10-year yield down to a new low of 4.00%. Silly Fed.

The risk aversion trade is also pronounced in the yen carry trade unwind. Look at the chart of the FXY and you can see what I'm talking about. The spike higher in the yen is exacerbating the selling pressure, imo.

There are lingering concerns in the financial sector as rumors abound that AIG might have more write-downs. Also, oil is spiking higher, and touched $99 this morning. This is finally starting to weigh on consumer psychology, and the retail sector is lagging.

On the plus side, the ARMS Index spiked this morning above 2.25, a very high level. And the put/call ratio opened at a whopping 1.94! Clearly, this is not sustainable. We are heavily oversold, and while the market can always get more oversold, I still think a nice bounce is in the cards.