New Bank Plan Scares Investors Down 382 Points

mortgage rescueIt is days like today, which solidify my feeling of why I am so nervous to be long in these current market conditions. We saw in just one day, the last three days of green get annihilated, closing the Dow once again under 8000 at 7888. This is why having dangerous days like Friday, in which investors looked right past some pretty devastating unemployment numbers and kept buying on hopes of "The Saving Bailout Plan", sets us up for an even more devastating day of losses as eventually that news will get factored in. The market opened up in the red, but really began dashing down during Geithner's speech, where he attempted to unfold the Treasury's plan with confidence, but failed miserably. A bunch of numbers were thrown out there, as well as phrases like "private equity help" and "should help to unfreeze markets", however the linking equation to execute the promises was missing.

As soon as the speech was over, analysts had their way with Geithner and his new "plan." Many discussions about the Fed's inability to perform on their promises as well as their "lack of preparedness" in the plan gave the media a lot to talk about the rest of the day. This indeed seemed to cause a lot of doubt with investors as the selling continued up until the close.

So what do I think? I think it's a joke. I can't blame Geithner as I feel our current dilemma is a task too big for any individual or entity. We are currently reaping what we sowed for the past 5 years. Falsely labeled AAA-BBB assets were bought and sold with no actual currency exchange, but with new loan documents. This debt has built up to a ridiculous amount that will take much longer than a year or two, in my mind, to begin to see a turnaround. So I can't blame Geithner, although I blame him for falsely preaching hope to investors, causing buying at times when markets should be selling. In the end, this market needs to crash in order to pick itself up again. I believe we are close to these times.


They discussed helping private equity to help buy these toxic assets. What private equity? You mean the $13 trillion in wealth destruction? Sure there is still money out there in certain institutions, but who has the kind of money they need to buy these "toxic assets". I guess this is why many institutions are interested in the plan, but none have signed up. I loved the line, the private sector will "determine the prices for current troubled and previously illiquid assets." Sure that will be easy, just talk it out. These are just a few of problems with this plan.

So I'm very glad to have sold out of BAC yesterday. There was a lot of green in my Zecco.com account today, as after my FAS shares sold, there were nothing but profits all around. Indeed, in this market, we can expect these selling days to be much more violent than the buying ones. Before close, I took a lot of my SKF profits off the table as I don't think we're quite out of the "rally woods" yet and wanted to pocket some in case of a rebound rally. I don't necessarily feel that we will be green tomorrow, but I made enough gains from my shorts today, I can play it a bit more conservative for tomorrow. In fact, with retail sales coming this week, and the poor earnings from NVIDIA and Applied Materials after today's close, we may see another day of selling for tomorrow. I am keeping all of my SRS as I still continue to love that ETF and will average down if hurt tomorrow.

After the huge day of selling, we could see a day in the green, but I don't expect big green numbers, unless we get some additional news. Days like today take a good bite out of sentiment. Sure, there may be some profit taking, but I don't feel that there is much wind behind Bulls sails. If we do indeed end below 8000 for tomorrow and possibly end under 820 for the S&P, I would expect a continuing downward trend. We'll see what tomorrow brings though, 8000 has been very, very tough to stay under and Hogan's bottom seems to have a spring on it.

My DGP did quite well today, as gold continues to do well in these uncertain times. I'm continuing to like plays like these, and even oil right now as I think there will soon be some more separation between Dow movements and commodities. Plus, DGP has a market trend score of +55, not too bad (get your own symbol analyzed for free, all you need is a name and email, Click Here).

dgp chartdgp analysis
So tomorrow will be interesting. I plan on getting into a position in the morning as I believe we will see some definition of the day's trading pretty early on. So yet another day of early rising for me and we could see the markets hit some critical technical numbers tomorrow. I'll be on chat later and tomorrow, so I will see you then. Happy Trading.

11 comments:

  1. Papa Bear Says:

    The only thing that will keep this market is the weakening of the dollar index. If the dollar index skyrockets past 86, there will be nothing stopping this beast from hitting 90-92. In that scenario, we can def expect a retest of the Nov low in the SP500 at 745. That would be about 7,000 for the DOW given the discrepancy bet. the DOW and the SP500

  2. Anonymous Says:

    I think a rally for tomorrow is coming. Last time this happened was Jan 20, if you remembered how it looked, it was just a steady and straight line incline upwards then next day it shot down a straight line decline. 40% rally on FAZ and then a 40% decline.

    What happened on that day? Bad earnings, but next day? No good news but bad news, and just a massive rally happened on financials with shorts taking profit and running. It was also with DOW below 8000, and damn History likes to repeat itself.

    Anon2

  3. Finance Fanatic Says:

    Anon2,
    Indeed I wouldn't be surprised to see it green. There are a lot of wheels spinning right now

  4. Papa Bear Says:

    Anon,

    That is what the manipulators want you to feel. They want to give you this feeling of comfort by repeating a certain pattern 2-3 times in order for you to develop a biased trading thesis. Once the majority of people expect the move, they pull the rug on the suckers by going the other way. Personally, I expect this market to start the day with at least +100 to +150 pts. If the market trades mostly in sideway for the early part of the session, I would get the hell out of my longs immediately.

    Given that scenario, the manipulators will pull the rug on you.

  5. Anonymous Says:

    Papa Bear

    I agree to some extend since you can CLEARLY tell today the huge drops were caused by manipulators. Look at it from 11am and 11:30am, those are timed sell offs, then lead to panic selling. But I also know that you can only manipulate the market so much till you'll get caught with your pants down if you short too unconsiously. Remember the pull back? 900 points rally at nov 21 scared the crap out of every shorter.

    Besides there has been tons of support around the 8000 level, I really can't definitively see where today is going to be since the US is in such a mess.

    Anon2

  6. Dave Says:

    It would be really helpful for me if someone could explain who these mysterious manipulators are, and how they have enough money, influence and organization to cause the entire market to move in one direction or another.

    I can't come up with anything but a visual of the guy behind the curtain in the Wizard of OZ. I am extremely skeptical of manipulation theories, but perhaps I am naive. Anybody care to help me out?

  7. Newbie Says:

    Sorry, I just don't see any reason to rally tomorrow. As much as I hate to see the markets tank like this tomorrow will be more of the same, RED. Finally, we will retest the lows. Everyone says we need to do that.

  8. flipdippy Says:

    Newbie, I agree. The S&P future charts are screaming freefall tomorrow. We see another bloodbath as the markets plummet.

  9. McBalls Says:

    dun u fret boys n gals. s&p futures globex is in the green now

  10. QUALITY STOCKS UNDER 5 DOLLARS Says:

    The big banks are to blame for everything.

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