Cooler Heads Prevail; Wall St. Bucks Up

A day after one of Wall Street's more impressive downflights, the suits got back on their trains this morning as usual and began buying some stocks.

It wasn't exactly an overwhelming affirmation of the miracle of capitalism, but Wall Street, being the fickle beast that it is, turned the tide and restored some confidence after a severe battering on enormous volume - the largest ever for the NYSE.

Like I said yesterday, nobody should have been in a big hurry to dump their 401k or empty the college fund because yesterday's event was highly staged and will barely be seen as a blip in the long run of events. The fact remains, however, that all of the gains of January and February were wiped out in one day, so we're starting all over again for the year, like some version of an economic do-over.

There were probably more than a few millions made on the short side in options and most of that was likely in the hands of the big brokerages and other uber-traders. Today's mini-rebound notwithstanding, the overall mood is a bit dour and anyone who's anyone knows that stocks were overbought and in need of some kind of reversal. One should also be aware that in this shock-and-awe environment, yesterday's Bear barrage was only the first salvo and more down days are on the horizon.

A 3-4% wallop on one day is certainly a good start for a protracted correction, which is well underway and should see a fair share of up and down days over the next couple of months. Naturally, the down days will be larger and more dynamic that the speculative uppers, and the bottom will eventually be found well below current levels.

For the record, the Dow gained 52.39 points, the NASDAQ plowed ahead 8.29 and the S&P picked up 7.78. Those numbers are dwarfed by yesterday's hammering, but it shows there are still Bulls ready for slaughter.

Make no mistake, the correction has now been well-greased and there are still overvalued stocks aplenty. A couple of my favorites, Yahoo and eBay, are trading at current p/e ratios of nearly 60 and 40, respectively. (I've a mind to buy about a zillion Yahoo April 30 puts but I don't want to disturb the market. I just want to report on it.)

One doesn't have to look far to find stocks to sell. Tuesday's sell-off was rather uniform and orderly - as orderly as a mini-crash can be - and while there were a number of severe casualties, there were no fatalities.

Today's muted reaction was more of a calming session, even though suckers could be found on every issue. Volume was once again abnormally high. There is more downside risk, much more. Keep an eye peeled on oil, silver and gold. Crude has broken above $60 for now, closing today at $61.75, the last day of trading for April futures. Expect a pull-back tomorrow on crude, while gold remains rangebound. Silver is on the verge of a breakout and bears watching if not an outright screaming buy. Considering the carnage from Tuesday, the precious metals certainly displayed some generous giveback today.