The stock market was being its usual volatile self this afternoon when the news that Standard & Poors reaffirmed AAA ratings for bond insurers MBI and ABK. Surprisingly, we had a repeat of Friday’s action when traders bought the rumor. Today they bought the news and the market spent the last couple of hours heading north. While its nice to see the market going up for a change, there are all sorts of technical reasons why it could be running out of steam. We still have not made a break for the upside. If we do, then I might change my tune, but until then I’m still cautious. There is probably more bad news on the way before we see a turnaround. Like for example after the market closed we learned that MBI has eliminated its dividend. Guess which way that stock moved after hours?

- JD

The bad news on the US economy just keeps on out weighing the good news. The market headed south for the weekend, closing in on the January lows just a couple days after failing to break through resistance. Monday could be a pivotal day as we see if the stock markets can find support for the S&P 500 at 1325 and the DJIA at 12,200. Today’s big move could easily lead to some type of bounce, but with the current trend that could be just another opportunity for you to sell or put on some bearish option strategies.

- JD

In the end, the stock market went absolutely nowhere today, and it did that fairly slowly to boot. The Japanese Candlestick formation for this is called the Doji. This could be a turning point or a pause in the up trend. The important point here is that it happened at a point of strong resistance. What does all of this mean? The market can not decide if it wants to go up or down. Well if the market can not decide on a day when Uncle Ben Bernanke speaks on Capital Hill I am certainly not going to try to take a guess. Should have taken a long lunch instead.

- JD

In the 4 years that I have been trading the bond market, I have never seen the markets so divergent as they are now. The treasuries had a huge day today. The curve sloped steeper. The Dow was only down 112 or a little less than 1%. It felt like the market should have been down much more. The economy and inflation dominated the headlines. The GDP came in a little worse than expected. Gold hit a new contract high at 969 an ounce. Oil hit a new high. The dollar got clobbered. All of this is very bad news. Its kind of obvious that the fed is giving up on fighting inflation to fight slowing growth. Its also kind of obvious the Bernacke in not Greenspan. When the market begins to lose faith in the chairman, the market will really accelerate on the downside.

- BA

Was that an evening star I saw hovering over the stock market tonight? Well, it looks close enough. The bears appear to have won the battle today with the line drawn at yesterday’s close.

The stock market gapped down at the open, while the bond market gapped up. There’s still a strong flight to quality in the financial markets. The economic news, and the comments from Uncle Ben, all indicate that the economy is slowing down and inflation is rising. Not a good scenario for the stock market.

No change from our cautious attitude. Still time to consider some bearish options strategies. Certainly not time to get brave.

- JD

Good news from IBM outweighed bearish economic news as the DJIA flew through short term resistance at 12,600 like it was made of paper. The same can be said about the S&P 500 and the 1375 level. The next stop for the DJIA is 12,800 and the S&P 500 is 1400. What will make these levels more difficult to break through is the fact that the 50 day MA is going to multiply the resistance these markets find this time around.

While the bulls have had the upper hand over the last two weeks, we will soon find out if this was a bounce or signals a reversal. We are still cautious.

- JD

The markets rocketed higher into the close as news came out that some banks were finalizing a bailout for ABK. The market spent most of the day south of -100 before closing up nearly 100. This could be potentially very good news and makes a lot of sense. If these bond insurers lose their AAA ratings, the loses could be severe. The banks are potentially saving themselves billions. Volatility is really the name of the game right now in all markets. Commodities are booming. Equities are having wild swings and bonds are all over the place. Until the credit markets settle down, investors have to play defense.

- BA

Some good news from technology companies did not help the markets break through the resistance that continues hold back the stock market. A drop in the index of leading U.S. economic indicators for January was just one of the news items that contributed to the market’s steady fade.The most interesting thing about today’s market was not the fact that it finished about where it began yesterday, but the fact that the VIX finished considerably lower than it opened yesterday. There is not a lot of conviction in this market. The panic selling has died down, but the market continues to fall because there are just no buyers out there.

- JD

The Technology stocks are trying to lead the market bounce, but they are not really making a lot of progress. The market is still in a down trend, though it is starting to look like its trying to form a bottom while waiting for the other shoe to drop. With the stock market sitting at resistance and the VIX sitting on the support of its 50 day MA Thursday should give us an indication on whether or not the market is going to break out of this trading range, or continue with the status quo. If we continue to consolidate it may be a good time to sell some premium with some credit, calendar, or diagonal spreads.

- JD

A strong 4th quarter earnings report from Walmart (WMT) helped the DJIA to gap open up over 100 points this morning. As often happens in a bear market though, things started to move south in a hurry. After lunch the Dow tried to bounce back, but when it could not break above the opening range the sell off quickly closed the gap and even a little more.A major reason for the end of day fireworks was the fact that Crude Oil closed over $100 per barrel for the first time ever. That certainly could bring back some of those inflation fears to the FED.

The bad news in the financial sector is is still overwhelming the good news, so there is no reason to think the market will not at least test the January lows.

- JD