So...We did rally on bad news.

The fear last night was palpable...but with the rise of a new day...all those fears drifted away as if it were a bad dream. The big picture above shows that we opened up outside the wedge and the lower trend line of the bull channel. But alas the bulls managed to save the day and kept the trading hugging the lower trendline. But the drop, the previous night in the futures showed that there is still fear out there.



A closer look at todays action shows that we effectively formed a bear flag today. Also noted that on the larger scale we are inside a rising wedge which is a bearish formation.

So how much longer can we rally? Madoff has cheated billions and will cause the collapse of other hedge funds. GMAC is close to bankruptcy. GM and Chrysler are about to go under without immediate government intervention. Unemployment is at a record level. Credit markets are tightening again. Ecuador has defaulted.

We must need good news for this market to drop. So I expect us to tank when the government announces the Auto Bale out (well just enough to get them to next year) and a rate cut. Any additional good news and we could even make a new low!