Once You Go Ack, You Never Go Back: Valeant Edition

Working our way through the early afternoon portion of today's session, equities remain mixed as upside momentum is not showing much sense of urgency. We still have quite a few long setups on the radar. But certainly they could stand to benefit from bulls showing a better concerted effort than the lethargic trading we have again today.

A few notables below the surface include Valeant, a highly controversial name which recently saw hedge fund titan Bill Ackman selling all his shares and doing a mea culpa regarding his trade. After Ackman sold in March, VRX sank further and made the seemingly unthinking trip all the way back down to its prior lows from 1999/2000 and then 2008/2009, a turn of events which seems wholly unrealistic when VRX was trading at $263.81 back in September of 2015. 

If nothing else, the VRX episode illustrates that the markets can continually surprise and that we should know to think long and hard before ruling any scenario out of impossible, let alone improbable. 

Going forward, the issue with today's 25% gap higher after earnings is whether Valeant has bottomed. From a contrarian perspective, seeing Ackman liquidate his position and do the mea culpa dance is a bullish dream. 

But we still need more evidence, which places VRX in the same basket as our recent blog posts about FEYE FIT TWTR-types of potential turnarounds. Even if they have bottomed, we should expect a turbulent flight higher, which means smaller position sizing and patience for longs is the name of the game. That said, it is a good initial sign to see a 20%-plus rally off such a major long-term price level (the $8-$9 area), as seen on the monthly chart, below.

More on the market in my usual Midday Video for Members.