Bank Stocks Leading The Way For Second Day

Bank stocks are off to another strong start to the day, up nearly +5% in early trading. Treasury Sec Geithner said that the administration may use capital injections as an incentive to get banks to sell their bad assets.

Liquidity injections around the globe continue, with the Bank of England ready to step up its quantitative easing by purchasing government bonds.

Hedge fund investors withdrew $11 billion dollars from hedge funds in February, down from January levels but still a continuation of the industry contraction that began last year amid disappointing returns from many prominent hedgies.

Sources say the SEC won't seek to suspend the mark-to-market accounting rules. Congress will hold hearings about the subject tomorrow, and many say that M2M has exacerbated the recent credit crunch, including the Chamber of Commerce. Rep Barney Frank also seems in favor of at least modifying the rules to give banks more flexibility.

Asian markets followed the U.S. and rallied sharply overnight, led by Japan. The dollar is lower this morning, helping boost gold a bit. Oil prices are slightly lower also. The 10-year yield is higher to 3.03%, and the VIX is another -4% lower to 42.51, trading below its 50-day average.

The VIX has been unable to stay below the 40 level for more than a day or so since last September. So if it can get back down below those levels, it would be a notable change in market sentiment. The 200-day level is right around 40.2, so I would expect a bounce from those levels first.

Trading comment: I haven't added any long etfs to the portfolios yet, nor done anything with the small hedges I had left. I still think the market will work its way higher as it alleviates what had become an historic oversold condition, but it won't be a straight line up. As such, I want to continue to be active trading around our positions, both long and short.