LET THE REVOLUTION BEGIN

MARKET COMMENTARY (3-31-09)

Today was the perfect example of a day where you had to stand firm if you were short. There was no reason to cover despite the market killing most of your gains. You must know that, statistically, only 1% of breakaway gaps fill within the first 5 days. We marched to the high of the first opening gap's bar and quickly failed, unable to fill, unless you were the Nasdaq (COMP). Right now, it's a fight for the 50-day MA for the SPX, DJIA, and RUT. The COMP formed a shooting star, a 'warning from above'.


Yesterday's action confirmed the breakaway gap in several sectors, most notably in energy, cons. staples, and industrials. Further, the cons. disc. and materials sectors formed a 2nd consecutive doji, signaling major indecision. Health care formed a black filled candle at it's uppermost resistance and we can see shooting stars in tech and utilities. All are potential reversal patterns. The financial sector is actually the strongest sector, but I'm not concerned at this time.

MARKET COMMENTARY (3-31-09)

The day's actions were acceptable, but I would have liked to seen more neutral flagging. Neutral flagging is a continuation pattern for the down side. Pronounced sell-offs create reactionary rallies. The funny thing was that the day was actually half and half. It looks like we could have an inside day or a continuation of the sell-off. I am short like you wouldn't believe, 25% of it from EOD Friday, and I refuse to cover because there is no reason to do so presently.


The financials, especially the insurers, are in a heap of pain and the breakaway is more pronounced in that sector more than any other sector (surprise!). The insurers, such as HIG, MET, LNC, PRU, and AFL most likely started a new leg down. BAC, WFC, JPM, C, PNC, COF, and STI have all broken down, forming major breakaway gaps.

Looking at the rally from the start, the uptrend of many sectors are still intact. The financials are once again dragging the market down. To get the biggest bang for your buck, it's best to short the financials and not any other sector. However, don't trade them if you can't the volatility. The other sectors must follow the financials quickly for any meaningful decline to take place.

FUTURES 4AM

I used my handy Microsoft Paint to create the red candle that will form at tomorrow's open (on the 10-day chart). The gap will be greater than the huge gap up that started the March 10th multi-week rally. Keep in mind that this will likely create a force spike in which the gap will not recover intraday. It looks like the SPX will open at or very close to the 50-day MA at 791. Obama's speech on the automakers should be at 11AM.

Yes, I went long FAZ at $19.7999 before the close on Friday as documented on my blogs at iBC and greenfaucet. Make note of support levels since some of them will get sliced though immediately at the open. It's time to make some spending money for my Cancun trip.

As of 4AM EST (may change up until the open):