Coma-Inducing Bernanke Testimony Drives Bears Into Hibernation ~ The Risk Averse Alert

Tuesday, February 24, 2009

Coma-Inducing Bernanke Testimony Drives Bears Into Hibernation

Let's try not reading too much into today's sudden turn higher. Probably the most promising development to come of it was the lift major indexes made above respective price channels containing declines over the past two weeks (albeit ever so slight was each channel's upside penetration). Nevertheless, it simply is too early to assume this is the start of something big. At worst, today was a positive first-sign the decline of the past two weeks is near its end (if it is not, in fact, already over).

Prudence rather advises one expect a retest of yesterday's intra-day lows coinciding with technical divergences confirming bottom is in. Given how sharp was the reversal in various technical indicators coincident with today's advance — raising suspicion of a buy-side imbalance ripe for the testing by those interests largely responsible for driving prices lower these past two weeks — the smartest stance at this moment is one anticipating further confirmation a big turn higher could, indeed, be imminent.

Already, we are seeing technical divergences, now versus October - November 2008, substantiating a view that sees indexes building a base over the past several months. So, add short-term technical divergences still to come (?), raising the likelihood bottom to the market's present decline is in, and the stage will be set for what could be the mother of all short squeezes.

Fast Money
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