UPDATE 2 @15:50 (13:50 GMT): it looks like some people are very well informed what US Treasury and SEC are doing. A story that "mark-to-market" rules for valuing banks' assets might be abandoned was the basis for equity rally? See this story at FT Alphaville.
UPDATE @ 14:30 (12:30 GMT): Daily Options Report has a story about bullish "gorilla" play in financial sector, and this is supported by "bullish speech" of Todd Harrison of Minyanville.com on Yahoo's Tech Ticker ...
Well, let's put the disturbing fact that equity market reversed to the upside yesterday exactly as the Fed announced the purchase of (officially the agency) bonds ...
However, let's look at rather extreme bullishness in the equity options markets. This, in contrary, would suggest the high risk of bearish action in the equity market. Option markets may be assumed as "smart", as they are putting just a fraction of share price to benefit from the upside, but the downside is limited to the option price (a fraction of full share price). The question is whether the real cash market will follow. ISEE index reached the highest reading this year, and is close to bullish extremes observed in the past 2 years, see the chart below. Same applies to CBOE Options Total Put/Call Ratio (just in reverse order whereby bullishness is seen at the bottom of chart). Usually it takes up to 3 trading days, for the market to change the direction. In "frugal plain" - the option market is extremely bullish, and if not followed by real cash market, may be hit hard...
Well, will the real cash market follow the "smart" option market?
Click on images to enlarge...
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