Jerry Samet
10-10-2011, 11:30 PM
We had a strong rally on a price basis today. France and Germany announced over the weekend that they were going to put together a plan to recapitalize European banks. Most of the major averages reclaimed their 50dma's. It is amazing how many times the markets can rally on just words. If they really come up with a workable plan that other Euro zone governments will endorse there could be a rally with some legs, but until then I don't see much sustained action and today's rally should be viewed with caution. Almost all the biggest one day moves occur during bear markets. Volume was very low today as would be expected on a holiday, but the major averages are developing a wedging look. Leading stocks slightly outperformed the overall market with the leaders index rising 3.86%. Volume was also very low and the index is developing the same wedging look as the major averages. I don't know how far this rally will go, but the long side should be played lightly. Jerry