Market Commentary - Thursday

With good economic news, markets have rallied today, DOW closed at 12853.09, SPX 1420.33, Qs 47.99, and Nasdaq 2446.80 which are the intraday resistances after the two day rally.

Markets reversed from the pivotal supports and the reversal volumes were quite good.

Even after the two day rally, intraday is not quite overbought because we had volatile swings today.

Markets have unfilled gaps, and will be volatile with earning news.

Live chart links for major markets

We need to see good consolidation without breaking the supports which noted yesterday.

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I noted that we saw the worst first week of New Year performance since 1937 and now we have, "Bears Exceed Bulls by Most in 17 Years, Investor Poll Says" The bearish sentiment is extremely high which is often contrarian indicator. Seeing the extreme bearish sentiment is understandable as we are seeing subprime melt down.

So far, Bernanke has shown good management of the financial market as we see relatively stable market than we could have faced. With his brilliance, markets have survived even though we have a lot of slicing and dicing going on with individual stocks as I noted since Oct 2007, especially, with noting weak breadth.

Bernanke didn't lower interest rate because of high inflation speculation with Gold as we can see that USD is trading lower causing higher oil price. Oil price priced in geopolitical risk premium as well. I noted that markets are trading like schizophrenic because the market sentiment can change so quickly with price volatility.

For this reason, I noted that it would be better to be cautious in 2008. As Bernanke noted today, we could see the Fed making necessary moves to help market condition.

Market Summary

A Countrywide rescue cheers Wall St.

The Dow jumps 118 on news that Bank of America may take over troubled Countrywide Financial. Fed boss Bernanke vows 'substantive' action to help the economy. Delta Air Lines seeks a merger partner. Wal-Mart was a rare winner on holiday sales.
Stocks jumped today on the possibility that Bank of America (BAC, news, msgs) will acquire Countrywide Financial (CFC, news, msgs), the nation's largest mortgage lender and one of the most troubled players in the subprime-mortgage crisis.

The second big rally in as many days also continued on Federal Reserve Chairman Ben Bernanke's promise that the central bank stands ready to move aggressively to help stave off a recession.