Expectations Were Too High For Geithner
I think the selling yesterday was way overdone. Expectations had simply gotten too high relative to what Geithner had to deliver. I agree that he really didn't give us any new details on the bank rescue plan, and that was a letdown. But without any new negative news, I don't think the bank index deserved to be punished for -14%.
I had been commenting on how the put/call ratios were getting low, signaling that complacency was on the rise amongst investors. Conversely, the VIX was still high in the 40s, signaling that options players expected continued volatility. That was a prescription for a pullback yesterday, which could last for more than one day, but hopefully isn't a signal of a new leg down.
The market opened higher this morning, which always worries me in terms of its sustainability. Lo and behold, as soon as more Congressional testimony started, the market began to selloff. The market sure does hate when these Congressmen are on TV. Maybe we should just short every upcoming appearance for a trade? Probably would have worked well over the last 6 months.
In corporate news, Research In Motion (RIMM) reaffirmed guidance at the low end of estimates, which is being greeted with heavy selling in the stock. Arcelor Mittal (MT) and Credit Suisse (CS) missed earnings estimates, but the stocks are higher. Genzyme (GENZ) reported earnings that topped expectations.
Asian markets were mostly lower overnight. The dollar is mixed. Gold is higher, and oil is flat. Oil has been up the past 2 mornings, but reversed lower both days. The 10-year yield is lower at 2.77%. And the VIX is flat near 46.2.
Trading comment: I expected a pullback yesterday for the reasons I have been discussing, but I didn't not expect the extreme selling pressure we witnessed. Today I will be taking partial profits on some of the etf hedges I put on recently. I will not be taking full profits, as I want to see if the market can find some support and stabilize. Right now, I am watching the SPX 815-818 level to see if it holds.
less long QID, SRS, SDS