After Many Ups and Downs, Dow Squeaks a Green Close

fannie mae crashIt is after days like today that I am very glad that I am in the position I am currently in with my portfolio (mostly cash), as I would have most likely had an ulcer with all the volatility we saw today. We had about 8 color changes with the DOW (from green to red) and both sides seemed to be gaining momentum at different points throughout the trading day. The market opened with financials soaring, having BAC over 10% again, as well as FAS up close to 15%. I was oh so close at that point to selling the rest of my FAZ put options as they were up another 35%. I, however, held off thanks to greed and missed the high point to sell. The opening rally slowly started inching its way down until it finally dipped into the red around mid-day. At one point we saw the market almost down 60 points, when it quickly shot back up into the green. After what looked like it was going to be a fairly strong close, a big sell off came right before close, leaving the DOW just slightly up just about 4 points for the day. What a ride. You have to pay $70 bucks for that at Disneyland.

First, the goods for the bulls. This is now two consecutive days of a green closing, which we have not seen for weeks now. Although it did not close near its earlier highs, just having two consecutive green days, especially following the massive rally we had yesterday is a good sign for bulls and that this bounce may continue a bit.

Also, financials stay relatively strong throughout the whole day. BAC did trade in the red for some of the day, but financials got a big push towards the end of trading as there may be a temporary return of confidence for the banks. I wouldn't expect that to last long and I'll explain why later on.

ibd
Techincals still lie with the bull. From a technical standpoint, the market is pushing for a rally. Sure this could easily be over ruled by enough bad news, but it is always a nice extra bonus when you have technicals working for you rather than against you.

Now the good news for the bears (the shortened version). If this rally even does continue, which it may not, it most likely will not last long. Although, many people may have regained some confidence in the banking systems, that may be short lived due to the increasing problems that is heading for banks. Recent news shows some slowing of losses for the banks, which is helping in the rally. Well, of course! The government has spent hundreds of billions of dollars to help absorb those losses. After all the help Freddie has been given, they announced that they are wanting another $30 billion from the Treasury to help balance out their quarterly $24 billion loss.

Not only that, but we have only endured the 1st round of problems for banks. Be assured that the next round is soon following and could have an even worse effect than the sub-prime crisis did. With the derivatives, credit default swaps, and prime loans that will be plaguing us this next round, be sure the the days of asking for help funds are not over. Also, I don't plan on trading JP Morgan's stock anytime soon, even though they have held up pretty well, as they hold a far greater amount of derivatives than the smaller banks such as Citi and Bank of America. So, although financials seem to be gaining some ground, I don't plan that to last very long. Which is why I will be out of my financial longs very shortly.

Another positive for bears was that they showed some aggression at close today. There was definitely some selling motivation going into close, as I feel there were a lot of people who did not want to hold their longs over night. I don't know if it's because of the meeting for Mark to Market (which I don't see them doing much), but in any case the market closed with downward momentum.

I did end up selling most of my FAZ put options during the last run up before close. Although it wasn't at its peak of the day, I made off well enough and am glad to not be in as heavy going into tomorrow. I am holding onto BAC for kicks in giggles, but besides that, I am still waiting. I know some of you fell I am being "too safe", but if indeed we continue to head in the direction I believe we're heading, I believe I will be set up for a very big opportunity to make some solid profits on the short side. It is just like a chess game and I am setting up my pieces. Instead of trying to guess right now, and risk getting killed, I am making smaller moves and waiting for the right time. So you all will be the first to know when that is for me. Check out FAS Market Club report score of -75, which is a pretty big jump from it's previous -100 (get your own symbol analyzed for free, all you need is a name and email, Click Here).

The big question tomorrow is how we respond. I think tomorrow may be another "defining day" where, we may start out flat and bouncing around back and forth, but one direction will take control by close and we should have a pretty significant close either up or down. The big question, is which way? The opening should show us a lot, and if we do indeed open up again, I will probably sell a lot of the longs I have left and be freed from that burdern.

Also, remember, we're creeping up on tax season, and I'm sure all of you look forward to filing these profits as much as I am (dang you Uncle Sam). Anyway, if you have procrastinated like I have, you can file free at H&R Block and find a variety of services there. However, you might as well as pay a bit extra for their premium services, it saves a lot of time! So, File for FREE at hrblock.com and learn more about it.

I have been thinking about shooting out a podcast a few times a week, because there are many different elements about that market that I never get to discussing on this site, due to the length of the posts, and I would much rather speak it. If this is something that you think would be worthwhile, shoot me a quick email at crashmarketstocks@gmail.com and let me know if you'd be interested. If there are enough, I'll get it set up. Have a good evening, Happy Trading, and we'll see you tomorrow.

9 comments:

  1. Anonymous Says:

    Chris,

    Yes, by all means, set up a pod cast. Your post today was so in tune with my synopsis, I have to jump out of lurker status and tell you so...

    nothing like finding similar sentiment...

    Always Lurking,
    David

  2. Mohan Says:

    For the record, I admire that you are in cash and freely admit that you are playing it safe because you don't know which way the market will go. It gives you a lot of credibility and commands respect, at least from me.

  3. Dinadur Says:

    I would love for you to do a podcst! Btw I just signed up for Zecco though your link... hopefully you get some sorta commision once I put money in.

  4. Finance Fanatic Says:

    Ha, zecco is the way to go, great online platform.

    Ya Mohan, it drives me crazy, but I believe I will be happier in the end.

    Keep lurking Dave :)

  5. Finance Fanatic Says:

    I'll be post later tonight around 9:30 pm pac time. I apologize, but I have a prior engagement, so if you want to wait up it will be there.

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