The markets crashed back to support on Wednesday in a sell the news rally that was less about Scott Brown and more about bank warnings and China's halt to bank lending.
I am glad I waited to add new positions on Tuesday. The dead stop at resistance on all three major indexes was too suspicious and suggested a lack of real confidence that the rally would continue. Basically the market was setup to fail on bad news and we got a pile of it this morning. The question now is where do we go from here?
This is obviously not a market that we want to write puts on. If today's dip was just a knee jerk reaction to the news then it should come back over the next couple days. However, the continued failure at resistance is a bad omen.
You know from my writing I have been expecting a bigger decline after the Fed meeting and Microsoft earnings next week. After today's bad economic news from the banks I am not sure the market will wait that long. After several banks have said the worst may not be over, institutional investors have got to be thinking about moving to safer investments.
For the rest of this week I am not adding any new positions. We need to avoid the volatility if at all possible. The Deutsche Bank position took a hit today after the major U.S. banks posted lousy earnings. We are still in the position with the stop at $67.
Wellpoint is struggling but still holding the highs. Because we entered that play on a gap open I am going to tighten the stop just in case the healthcare hope fades on democrat assurances they are going to pass it anyway. Actually in the current bill it would be positive for providers because there would be more people insured so WellPoint should do well either way but WLP will be subject to sector sentiment changes. Better out early in a weak market.