主题：10/06/2008 Market View -- 宁子

TUESDAY

Another sharp drop Tuesday without the intervening Monday afternoon bounce would really have made things interesting and would likely have cleared out the most of the market as the hedge funds, despite their desire to take advantage of a market selloff, have to liquidate and raise funds. Thus they get out to raise funds and then buy back in. It would be nice to have some short selling allowed as that would help the rebound some, but with the financials the only group not shorted that is not a complete bar to a short covering rally. The short sellers moved onto other areas such as large cap tech.

After hours the financials were again under pressure as BAC cut its dividend by 50% and announced a stock offering to raise $10B. Asian markets are down sharply as Japan injects $1T into its economy and Australia adds A$1.815B (US$1.3B). The metals and commodities are down again as comments from foreign money managers center on how quickly the world economy threw in the towel.

US futures are basically flat thus far, not indicating the kind of after hours follow through to the Monday afternoon reversal. Of course they are not pointing to another dive either. It may be that the Monday afternoon recovery was a safety valve that let off the downside fear and pressure and let the bears off the hook, i.e. will allow them to hunt another day on this selloff.

Maybe, but with these sentiment, internal, and technical indications we are looking at a bounce higher at least near term, one that we can play with some of these indices and stocks that were hit hard but can rebound to test just as quickly. After the bounce we see what is in the tank for more upside or if they crap out. Remember, there will likely be another pullback to test this deeper low before a longer term bottom sets itself so any upside move outside of a high quality pattern will likely test as well.

Thus we look for some upside bounces after closing the downside on Monday with the idea of riding the move as a bounce and then seeing what the status is after the indices approach resistance.