All of the good news about the bad news has been priced in.
The markets have been rallying strongly on terrible news as participants assume the worst is now behind us. Each new negative revelation has sparked fresh buying.
This week, we had $19 Billion in write downs, a major investment bank raising a fresh round of dilutive capital, Bernanke finally admitting the possibility of a recession, amidst questions raised by Washington, and the onset of societal acrimony about government involvement with Wall Street.
Today's unemployment report was supposed to be the Main Event, which would confirm the recent rally or squash it. The general consensus seemed to be that stocks would rally if numbers were good, and stocks would rally even more if numbers were bad.
We ended up with a muted session and a mixed market after negative numbers.
The lack of continued rampant buying today signals that this market is running out of steam.
We are short term overbought and everyone seems to be getting nervous about missing the next bull run, instead of worrying about protecting their capital.
Establish some fresh shorts, scale out of some overextended long positions, but above all tread cautiously.
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