The Search For "Tiny Tim" - Dow Lowers

geithnerAll eyes were looking for Secretary Tim Geithner on Friday, as the market was looking to close again after another strong day of selling, mostly due to concerns of nationalizing banks. But he was nowhere to be found. Finally, in the moment of despair, Obama sent out his "press secretary" (wow, the powers of this guy!), to inform the country that continuing private ownership of banks was the best option for the country. This caused for a violent rebound to almost green territory, especially with financials, until sellers again prevailed and continuing doubts kept the market down, closing the DOW at a new recent closing low of 7365.

You can see in the graph of today's trading where Obama stepped in to calm nerves, but its effect was not long lasting, maybe due to the fact that is given from the press conference and not President Obama himself or Secretary Geithner. Also, some contradicting items were discussed in the press conference as the press secretary warned that some irresponsible people would indeed be benefiting from the recent mortgage subsidization, after Obama boldly declared that no irresponsible parties would receive any sort of benefit from the bill. Analysts have been having a hay day with the bill ever since it was announced.

dji_2_20

What use to be the enemy of bears, has now become a friend. "Speculation" is currently a big driving factor for the mass selling taking place in our markets. Prior to this past week, it was speculation of good things to come that use to reverse downward trading days and send markets flying. This negative speculation has over ridden many of the technical charts and kept the markets selling in fears of bank nationalization. I was amazed to see the movements of FAZ/FAS on Friday (I was on chat with many of you)! FAS went from $3.92 to $5.20 in about 5 minutes. During these times of speculation, we can see some serious violent jolts in the market as nerves increase or are eased. At any rate, it makes the market in a very dangerous and volatile state.

Although the selling is continuing, I am not convinced this is the big "critical mass" selling that we are to receive before we see a capitulation in the markets. The models just aren't there yet for deflationary signals. We are very overdue for a technical rally, and with speculation in the air, it makes me very reserved to make moves. As we saw from SRS on Friday, shorts can become very vulnerable in a speculative state. This a big reason for my liquidating of much of my position on Wednesday.

The only move I made Friday was the buying of FAZ put options for $65. The volatility of options are becoming greater and greater as we saw the VIX rise above 50 on Friday. Just on Friday, the range of my put option was $7-$14 (I got in at $10). So, I am choosing to short FAZ, instead of buying FAS, hopefully decay is on my side this time. This play is mostly a hedge for me, as I feel this technical rally may eventually take hold early next week. Plus, just during intraday trading on Friday, I made quite a big profit. Below is the Market Club report on FAS (get your own symbol analyzed for free, all you need is a name and email, Click Here). We also may see Tiny Tim finally make an appearance to try and squelch the concerns of nationalization better than the press secretary. At any rate, I'm not comfortable with the current models to go any more short than I am already and feel that we are very, very close to critical mass, but may still be a month or two still away. We did indeed reach new closing lows with the Dow, but not with the S&P, which is a more critical reading. So most of my Zecco.com account sits in cash at the moment, but with positions still in my "usual suspects."

fas chartfas analysisI expect to see more stronger and more volatile movements going into next week. It will be interesting to see if speculation continues to drive trading or if we indeed get back on track with technicals. Watch out for the leveraged ETFs, as with the increasing VIX numbers, they become more and more volatile. It's great when you're on the right side of the momentum, but not the other way around. Have a good weekend and Happy Trading.

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9 comments:

  1. George Says:

    FF, hindsight is 20/20. Please don't use it to prop yourself up when you are writing your posts. I'm glad you are now "smart" for selling some of your SRS at $80 midweek rather than regretting it the next day. Anyway, I got in FAS at 3.93. I put in a buy order early Friday which I never thought would get executed. So, I was quite suprised when I was watching CNBC and they made the statement. Wow, what a pop. I'm going to ride this for a while. I'm in SRS. I'm hoping there will be some shift over to SRS when people get tired with financials. Here's to another exciting week of trading.

  2. Finance Fanatic Says:

    George,
    It was not my intention to "prop myself up" in reporting about my dealings with SRS. If you continually read this site, you would have known that I had sold off a lot of my SRS on Wednesday, because that's how I felt at that time. So hindsight did not play a part on my decision to sell on Wednesday. Sure, I still own shares of SRS, as I have always liked the fund.

    Fortunately, on this website, I have the liberty to report on the decisions I make in my portfolio and why. That is why I started this site in the first place. I am sorry if you got the impression of me "boasting". I make wrong trades as well, and report on them, just as I do my good decisions. That is what this site is about, so I would appreciate comments minus the sarcasm next time.

  3. wymen Says:

    ff, have u even thinking about making pick and infor the member, i mean if we can be a member of the site.....?

  4. Finance Fanatic Says:

    Sorry Wymen, but can you rephrase the question, I don't really understand. Thanks

  5. Neethi Says: This comment has been removed by the author.
  6. Anonymous Says:

    FF, what do you think about SKF right now? Are you completely out of it? Also, you mentioned that you were on the chat on Friday. What chat are you referring to? I would have loved to get on FAZ on friday, but missed the chat. Thx! Love your updates.

  7. Anonymous Says:

    FF, what do you think the recent news on US gov taking stake in C; what effect should it have on Bac and fas, faz.Thanks

  8. George Says:

    FF, George is sorry. George loves the site. George visits the site every day. George read Thursday how you wished you didn't sell your SRS on Wednesday. Then George reads your latest post and misunderstood. What can I say? George is an idiot and appologizes. I'm sorry. Keep up the good work. Good luck this week. I wish you and everyone else a green week.

  9. QUALITY STOCKS UNDER 5 DOLLARS Says:

    Sounds ok