Well the market had no problem breaking all key levels and looks poised for a 300+ point rally today as breadth is very strong and the technicals show no real sign of letting up. It's clear that the past two days of sideways action in the market and the lack of reaction to oil prices surging yesterday that the market was just looking for an excuse to rally big. They got it today with the Lehman news. 11,700 is the next area of resistance however I'm not sure how significant that is anymore.
It's quite possible wave 2 is still underway and we have another week(s) of rallying before wave 3 of (3) gets underway. The only question is how much more pain is to come before that happens. I'll be following the Nasdaqs for now for guidance. The Nasdaqs traced out nice 5 wave declines from their highs and are underperforming the blue chips. The Nasdaqs also haven't broken any of their key levels. I'll watch them for guidance.
I'm still convinced that even though wave 2 might still be underway that the market will be very hard pressed to sustain any significant rally over a long period of time. The daily charts and breadth have deteriorated significantly during the past rally, and unless some huge discovery hits the markets and reverses that, I don't see a sustained rally. Buying out one private equity firm in Lehman does not solve the problems of job losses, consumer tightening, subprime, the housing crisis, etc. But it does appear in the short term the market wants to use this news to rally for a little longer.
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