SEC Mulls Uptick Rule, While Congress Focuses on AIG

The market is pulling back in early trading, which is not surprising given yesterday's outsized rally. I heard that the S&P 500 had its biggest two-week rally since 1938. Impressive, but many wonder if this will be the bear market rally that actually sticks.

I suspect that we will have one more retest of the market lows at some point this year, but I am hopeful that given the plethora of govt. programs and monetary stimulus taking hold that the March bottom will be the ultimate low.

Yesterday's public-private investment plan was a big step, as the market's reaction confirmed, as is the TALF plan aimed at reviving the securitization market (credit cards, auto loans, student loans, small business, etc). Today there is news that the SEC is considering modifying the "uptick rule", which is meant to help slow the decline in stocks under pressure from short sellers. I think at the margin this could be helpful.

In other news, Goldman (GS) is looking to pay back its TARP funds as soon as possible. I guess they didn't like the implications of being told how to pay out bonuses to employees. CNBC is reporting that GE won't be forced to raise additional equity, and Dow Jones is saying that Deutsche Bank (DB) does not need fresh capital either. All of these signs, in addition to the huge rallies in the stocks, lend themselves to the notion that banks are stabilizing.

Asian markets were higher across the board overnight; the dollar is higher today, weighing on oil and gold prices; the 10-year yield is a bit higher to 2.71%; and the VIX is roughly flat around 43.15. I am surprised that the VIX isn't lower after yesterday's huge gains. The fact that it is still above 40 makes me think we could see some additional sharp selloffs in the near future.

Trading comment: Boy, it sure doesn't feel good to have any hedges on a day like yesterday. Thankfully, they are small, and outweighed by our long positions. With the S&P back above its 50-day, I will look to add my first buys near any test of this support, which would equate to something near the SPX 800 level. I suspect we could see another wave of buying into quarter end.

I will likely start with our index etf positions, but am also interested in adding back to the oil services (IEZ) group (including Schlumberger (SLB)), as well as Gilead (GILD) and the biotechs (XBI). Gold (GLD) has not been acting well, and is one area I might look to trim.