The eagerly awaited results of the stress tests for banks has been slowly leaking out and apparently needing roughly 34 billion dollars is a boon for the stock price of Bank of America. The bank was one of the 19 being tested which will apparently require additional capital and this news sent its stock price initially lower and then higher by 15%. This action moved the entire financial sector higher and propelled the broader market to new 2009 highs in many names and averages. The question which continues to abound is "Does this rally still have legs?" The answer seems to be a resounding yes.

The mystery to many traders is what is fueling this rally? Many traders believe the catalyst is the legions of investors who suffered significant losses in 2008 and hit the sidelines to wait out the turmoil. Now we have seen a significant leap of over 25% from the March lows and many are afraid they are missing the opportunity to recoup some of those losses. What makes that evident is folks generally like to get in on any dips and every time we have seen one in the last couple months they have been short lived. The buyers have not exhausted their buying power and until they do we are unlikely to see any significant pullback. Quite frankly, it would make it a much healthier rally if it was not linear. A mild pullback may help in lengthening the duration and intensity of the rally and guard against the sudden washout of a portion of it. All told, it makes me continue to look for opportunities for short-term trading profits and remain very cautious with respect to long-term opportunities. I still expect a pullback and realize that the longer we go on rallying the more dramatic it will be, but I am not fighting the cash flows.

thinkorswim, Inc. and its registered employee, Steve Quirk, do not solicit or recommend any form of trading in the individual stocks (or their derivatives) mentioned above. Please do careful, independent research before investing any money as well as weigh the possible consequences on your particular financial situation before doing so. The risk of loss may be substantial.