Dow Rallies - Banks Fail - What To Do?

We experienced another complex day of trading as once again the under 8000 scenario proves to be not sustainable for the time being. Just as the market breaks the 8000 threshold, it continues to retreat back up. The Dow rallied for most of the day as well as tech, however, banks were in for a rude awakening as many were down anywhere from 5-15%. Speculation of just how good this upcoming stimulus really is for the economy and if the "bad bank" plan can actually work seemed to bring down confidence in bank's ability to survive this crisis. In fact, I heard a report today from a top commercial real estate economist that the default rate for commercial loans is not expected to PEAK until to the end of 2011. Also, the default rate is suppose to increase almost three times at that point than it is now. If this is the case, I would expect banks to continue to have serious problems.

I ended up watching most of the day and even moves that I did end up making, I didn't buy much, as I am fearing this current stagnant market we have been trading in the past couple days. Volume was up today, but there really was nothing moving the market and not much significant news released today, aside from auto sales...ouch. Indeed, with more negative news, I think we'll see some more definition in trading. Until then, I plan on making small moves and waiting. You can't lose with patience.

So what did I do? For those on the comments today, you saw that just at the end of trading, I picked up some UYG and some BAC call options. By all means, this does not reflect my perspective on the current state of the banks, I just feel we have a potential for a quick bank rebound. It is indeed pretty close to a gamble, and to hedge it I set stop losses so that there is a limit to my downside risk. I was surprised to see how cheap some of the BAC options were. If we are indeed up tomorrow, I plan on selling pretty quickly. The last thing I want is to be stuck long in financials going into unemployment numbers. Both BAC and UYG have very strong negative momentum on their Market Trend analysis, which usually means they are due for some gains (get your own symbol analyzed for free, all you need is a name and email, Click Here).

Autos released devastating numbers all across the board making it another horrible month for buying cars. I don't see how this trend gets better, especially as disposable income is getting eaten up more and more as well as auto loans getting harder and harder to get. Even Toyota was down over 30%. Chrysler over 50%! If this keeps up much longer, we may only end up with three automobile companies.

Tomorrow I am expecting a mixed day of trading. I won't be surprised to see us continually going from green to red. There are relatively strong forces on both the bull and bear sides and A LOT of spectators sitting on the sidelines. When those guys get in, either with the spark of a rally or the force of selling, there should be some violent movements.

I am expecting my next round of payments from Lending Club this week. I have decided to reinvest the interest to increase my return in the end. I don't need it for the time being and would rather remain diversified. So we'll see how that works. I will be on tomorrow morning and am looking to put up a chat to make mid-day conversing easier for you. Happy Trading and see you tomorrow.

17 comments:

  1. Jeff Says:

    not sure if youre into TA / charts FF, but im looking at a resistance @ S&P 850ish -- today looking like a good day to load up on inverse ETFs

  2. Anonymous Says:

    Bought some TYP today.

  3. John Says:

    anon good thinking and I also think tech way overbought.
    now what $@ got in TYP ?

  4. Anonymous Says:

    $53/Share for TYP here.

    If DJUSTC goes to 390, I will double on my TYP position and buy some more.

  5. Jordan Says:

    whats your feelings on BAC? is it a buy opportunity at its 52 week low? or too risky?

  6. John Says:

    anon thanks I need a trade today cause I had no trades on but only holding gld, faz, fxp, srs,

    ovehere in the comments is like GOT TRADE?

    jeff I would like to tell you if TA/charts is right but say call me a spamer. oh well

  7. John Says:

    I sold all my bac, c, drys, today I long nothing but bears etfs and some typ @$54.01 of 100 shares and get the rest @ 52 or 50 just like anon.

  8. John Says:

    Jordan,

    I think its risky cause it fail to rally when XLF FAS UYG were green.
    many you know how feel about banks nothing but blackholes.

  9. Finance Fanatic Says:

    Jeff, I agree with the technicals, definitely looking bearish. I sold my UYG this morning for a 5% profit. I was hoping for more, but hey I can't complain. My stop loss also triggered the sale of my BAC, so overall I just about broke even on my long attempt. Oh well, maybe next time.

    Jordan, I took a gamble with BAC, and I personally feel that it's just exactly that, a gamble. Sure, something could come out and bring a big rally back to banks, in which BAC could be up 20%, but they are also getting close to those scary "bad bank" numbers. Might as well play roulette.

  10. John Says:

    I just more of the TYP 150 shares now iam done with the amount Iam holding of it. it looks like smart money is shorting hard or selling there shares into this fake rally today and looking a crash who knows when.

  11. Finance Fanatic Says:

    It looks like we're seeing some mid day bear... S&P back in the red... even nasdaq is coming down.. Maybe my shorts will end up making some money.

  12. Anonymous Says:

    yeah looks like the sell off is here. but in this crazy market who knows what the next 2 hours, let alone the next 2 days will bring!

  13. Anonymous Says:

    TYP is rocketing right now. Ha ha ha

    I am flushed with green today. My target for TYP is at least $63/share. If the market crashes, my target will be $100/share.

  14. Finance Fanatic Says:

    Please note the new chat on the right sidebar...

  15. Anonymous Says:

    are you holding your shorts, or taking another gamble with UYG?!

  16. Finance Fanatic Says:

    Sorry for the departure from chat today, I had to hit meetings and continue trading from the mobile. Did not make the UYG gamble today. Big bear victory today getting back below 8000, and even though we may be up tomorrow, I thought I'd sit this one out. Chat seems to be working good.

  17. Best iPhone 6 Plus Cases Says:

    The first time such technology has ever been used in a smartphone. Samsung’s bulky Galaxy Beam smartphone is equipped with a built-in pico projector, but Lenovo’s appears to be the smallest and most advanced ever made.