The market traded nervously all day as we await the big bank bailout program that is to be announced tomorrow by Treasury Secretary Geithner. The action today wasn't bad, but neither the bulls nor bears were willing to press too hard. We had some strength in regional banks and oil but the energy and commodity strength faded later in the day. Breadth was close to flat overall and volume light.
We are really in a difficult position for traders at this juncture. This announcement could be the type of binary event where we are going to see either a euphoric leap or a disappointing spike down. It is pretty much a coin flip and so well-anticipated that even the "sell the news" reaction is almost too obvious. The only thing I'm sure about is a high level of volatility.
The problem for the bullish perspective is that anything really exceptional about a new bank bailout plan is going to be leaked and priced into the market already to some extent. Something truly surprising in this announcement is probably a poor bet, even more so when the market has already traded up strongly into the news.
The good news is that the bulls are going to be tested by this news pretty quickly and we'll have much better insight into whether they really are ready for some sort of sustained bear market bounce. Bullish sentiment has been improving and one thing this market has been missing lately is confidence. Tomorrow should be interesting.