Back In The Saddle

I was out of the office late last week, and didn't get a chance to do any blogging. The S&P 500 rallied right up to its 50-day average, and then pulled back. Pretty textbook.

Today, the market is getting a huge relief rally on the news that Treasury unveiled its "toxic asset" program to help banks improve their balance sheets. The program aims to create a series of public-private investment funds to buy $500 billion (could go to $1 trillion) in legacy loans and securities.

The private sector will put up a little of the money, and the govt. will foster the leverage to expand the investments. Moreover, the govt. will take on much of the risk, which should improve the participation from the private sector. Bond guru Bill Gross said he is very intrigued by the prospect of double-digit returns offered by the program.

The news is propelling the bank sector +10% higher so far. Let's hope this intricate program lives up to these expectations.

Asian markets rallied sharply overnight in anticipation of today's news. The 10-year yield is steady at 2.62%. The dollar is lower, and oil is moving higher, while gold is flat. The VIX is -5% lower to 43.3, but still above that 200-day support I have been writing about.

Trading comment: The market is still somewhat overbought, but could be a good buy this week. The SPX is consolidating just below that overhead 50-day, which is constructive. A strong close above this resistance sometime this week would be a bullish sign. I have not added any further long exposure yet, but will likely be looking to do so.