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MV Hunting Report: Traders Sniff Out the Smart Money


Rain or shine, we review the day's biggest stock stories.


Today's top story was that superstar investor John Paulson announced positions in Bank of America (BAC), Goldman Sachs (GS), Regions Financial (RF), Gold Fields (GFI) and Anglo Gold (AU). The news sent those stocks flying as investors played "follow the smart money."

For the day, markets traded sloppy as the summer doldrums continued on Wall Street. The S&P 500 closed higher by 0.70% to 1,012, keeping in the week's range between 1,013 and 992. More importantly, since yesterday's FOMC announcement the market has basically done nothing, staying between the 1,013-992 range.

On today's Buzz and Banter Professor James Kostohryz gave his thoughts on the current position of the market.

"Even if we are in the last stage of this bull market, this last stage could be worth another 10%-20%. One must be careful.

"Look at the two year chart of the S&P 500 if you need more convincing. Above 1,010, the path to 1,200 is clear.

"Thus, I am currently neutral. However, I will become constructive with closes above the 1,010 area. I will only get progressively more bearish with closes below 1,000, 990 and 980 areas.

"On a final note, the disappointing news on retail sales today should have caused a major sell off today. It was ignored. Today's news on the surge in foreclosures should have caused a downside bias in the market. Instead, the market is buying the banking sector which is the most heavily exposed to these foreclosures. The lesson? Respect momentum. Respect the cash out there. And respect the situation I have continually alluded to in which managers may feel virtually "forced" to jump into the market if it continues to rise."

Even though last night's report created quite a stir, the markets action continues to be bullish here. As evinced by James Kostohryz's thoughts, the market has room to 1200, and this also fits the head and shoulders pattern that was discussed Tuesday night. As Buzz Editor Terry Woo said in his column today, "if you're not long you're wrong."

That being said, there's still bears in this market. Today on the Buzz & Banter Smita Sadana presented the downside case for the S&P 500.

"In the spirit of providing evidence from the charts, here's a longer term view on the SP-500, Nasdaq and the Russell 2000 (Click links for charts).

"And now, using my Economics background to present `on the other hand' scenario (Every time, I say this I am reminded of comments by a frustrated President Truman," GIVE me a one-handed economist. All my economists say, "on the one hand...on the other") ... let's analyze chart on SP-500 and see the makings of two potentially bearish set-ups.

Click to enlarge

Click to enlarge

"The one conclusion that I can clearly draw from these charts is that among all the lines, the June high is the line in the sand. The confluence of factors such as the 50-dma, make this support even stronger.

"So, what do you see?"

That's all for tonight, this week and the next week as I'm off to California for some much needed beach and family time.

Have a great one!

Position in BAC

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