Monday, January 25, 2010

A counter-trend rally led by Financials?

The massive selloff seen last week broke a number of key support levels and it now appears that the bears are now in control of the stock market. In the short run, the market is now short-term oversold and poised for a rally.

The spark for a rally may come from a re-assessment of the Obama proposals to limit banking activity. Simon Johnson's post Is the "Volcker rule" more than a marketing slogan? suggests that the Obama proposals may be more sizzle than steak. Go and read it in full.

Now that the bears appear to have gained the upper hand and have an (over)valuation tailwind at their backs, my inner trader tells me to wait for the oversold bounce before taking significant short positions in this market.

No comments: