Monday Brings in Doubt, Upcoming Earnings Could Be Devastating

It seems as if our market is developing a bit of a pattern, “Freaky Friday” and “The Monday Blues”. It’s as if people actually go out around town and see exactly what is going on in our economy over the weekend and come into Monday with low expectations. Then during the week, the market places a trance over them into thinking that everything is just fine. I mean come on, we just had one of the biggest frauds pulled off in US history on Friday, and the market didn’t even blink twice. Sooner or later, all of this bad news needs to be factored in.

There wasn’t much of a fight today, like we saw all last week. It pretty much stayed in the red all day. It didn’t help that Bush warned auto makers that a bailout was not a sure thing. Only that it is to be considered. Plus, President Bush has bigger things to worry about, like getting hit in the face by Iraqi shoes (watch the video if you haven’t seen it, it’s hilarious). Either way, a passed bailout may cause for a short term rally, but should have no lasting effect on our dying economy. There is a lot to look out for this week that could cause some serious momentum in either direction. We’re getting close to the end of the year, and we’re hearing of more problems day after day.

On the bright side, look at Gold! Like I’ve been saying, I love GDX. Even with the down day it has the wherewithal to be up close to 6%, hitting over the $30 mark. If you scroll back to the post when I was buying it, it was at $19. With the government continually printing new money to bail out every Tom, Dick, and Harry, we should continue to see gold’s value go up and up.

OPEC is meeting this week to discuss a possible supply cut. I think there is a good possibility of the dissolution of OPEC, with growing demand problems. Soon, it will be a blame game of who should be cutting supply more, Saudis? Russians? Iranians?. In turn, the countries may choose to go their separate ways during this financial turmoil. At any rate, they don’t like oil being under $50 a barrel, so I am guessing something will be done with them. Keep your eye on DIG.

Well, we’re slowly but surely hacking our way back up with the inverse etfs. SKF and FXP both performed strong as there were doubts with financials thanks to the Madoff scheme. China continues to struggle as doubts loom over investors. With worries of government instability as well as the possibility of riots, what recently was labeled the savior economy, China, is looking to be a sinking ship.

The Fed begins their meeting tomorrow to discuss the possibility of a rate cut. Like I said in last weeks post, don’t be surprised to see a disappointing number come out of that meeting. The market would like to see a 50 basis point cut to the rate. However, I feel that The Fed will show the US that they cannot expect aggressive rate cuts every meeting, even in our current financial fragility. Sure, it may cause some drama in Wall Street, but hopefully will show investors that every meeting does not mean another 50 basis point hack to the discount rate. The Fed has also given hints to maybe not expect a big cut this time. It’s kind of like taking morphine. Sure, it dulls the pain for a bit, but later we’ll wake up with a bigger headache and worse pain then when we started.

Some key earnings this week are Best Buy and Goldman Sachs tomorrow. I would expect Best Buy to have pretty bad numbers, since I don’t see them that far off from Circuit City. I would also expect Goldman to have less than par numbers after the JPMorgan announcement last week. GS is before market, and Best Buy should be during the day sometime. Watch financials go tomorrow. If the numbers are indeed bad, we could see a 20% run in SKF, providing a solid day for the shorts. This could set the mood for the rest of the week.

Morgan Stanley, reports the following day, and I would expect them to follow suit. I can’t see them being any stronger than GS. If for some reason positive news comes out of the big Investment Bankers, than watch the market run. We have seen the potential for some upswing during December, and positive IB news could give some fuel to the bull. I don’t expect it, however, never rule it out.

The bear is growing hungrier by the day and I believe soon we will have some serious red days in our near future. These inverse etfs are still at really low levels and I would be extremely happy to just be buying into them now. If you don’t have a trading account, you can open one and get free monthly trades at Zecco.com.

SRS (up 5.77%) is still my favorite as we saw the extreme loan problem in real estate during 60 Minutes last night (what I have been saying the past 6 months). Depending on GS news tomorrow, it could be a slaughter. Either way, expect a big push either up or down. Let’s make some money, Happy Trading and we’ll see you tomorrow.

4 comments:

  1. Anonymous Says:

    Indians? I guess you meant Iranians.. Anyhow I enjoy reading your views on short ETFs.

  2. Anonymous Says:

    Anon, you need to buy better glasses. He wrote it right! Are you Indian by the way? lol

  3. Anonymous Says:

    The author had it first time as Indians and then changed to Iranians. Yes BTW I am an Indian.

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