A Successful Test of the Lows

The news to start the day Thursday couldn't have been uglier. Unemployment claims were terrible. That followed Intel's (INTC - commentary - Cramer's Take) dismal forecast Wednesday. Wal-Mart (WMT - commentary - Cramer's Take) had a good quarter, but warned about the future.

During the day, the auction for 30-year bonds was held and it was a disappointment to the bond guys because the oversubscription was only 2.07 times. The last two 30-year auction oversubscriptions were 2.4 times in August and 2.69 times in May. Also, the two-year swaps are telling us the London interbank offered rate will be up again Friday morning.

All the ingredients were in place Thursday to crush stocks and take out the October lows and send us home crying. And the market tried selling off well below the October intraday low of 840 on the S&P 500, getting all the way down to 818.

But, of course, this is just the time for a powerful counter-trend rally. Stocks soared in the afternoon with the S&P settling close to 911 for a gain of about 7% on the day.

This is called a successful test. Not that we won't come back down again, but I'm thinking future tests will be headed off a bit higher and we will have a series of higher lows.

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Know What You Own: Farrell mentioned Intel. Related companies are Advanced Micro Devices (AMD - commentary - Cramer's Take), IBM (IBM - commentary - Cramer's Take), Sun Microsystems (JAVA - commentary - Cramer's Take), Texas Instruments (TXN - commentary - Cramer's Take) and Micron Technology (MU - commentary - Cramer's Take).

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Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.

Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.

Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.

Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.