Friday February 1st, After Market Close

Another wild day in the markets. After reversing my trades on BIDU and GOOG in the morning, I actually went long a large position in BIDU at 265 and sold 2 lots between 272 and 273 for a sizeable gain. I also have established an entry long position in EJ at $18.28. Overall this has been a great week for trading.

Near term - we need to understand that the market has had a strong rally this week. On the positive side, we've seen somewhat of a broad rotation out of technology (+3.7% on the Nasdaq 100) and into the financials (+4.8% on the S&P), as evidenced by the outperformance of the beaten down financial sector. Even with the gains in the NDX, looking at the leaders, you would wonder where the gains are coming from, as GOOG, AAPL, RIMM, AMZN remain fairly beaten down here. On the more bearish note, the gains in the S&P should be expected, given that interest rates fell 125 bp in less than 2 weeks. In fact, you might argue that they have not rallied as much as they should have. In addition, many names are now either brushing up against or have just rallied past their 50 day moving average, by spiking through the 5,10, and 20 DMA. From intraday low to high, the Dow has rallied over 1100 points. It looks as though the market could be due for a breather. I think many of the shorts have probably given up at this point and this may be the perfect short entry if this market is to continue downward.

Volume wise, we actually had some decent volume in the last 2 days in the financials.
Overall I would be careful here if I was long this market and have a short term trading perspective. In bear markets, if you look back in chart history, there are very sharp rallies but ultimately they fail. The environment remains treacherous and I would not be surprised to have some nasty headlines come out before the market opens on Monday. Be careful out there and have a great weekend. I'll probably be back with some thoughts if time permits.