Miracle Closing Boost Gives Bulls Victory - GDP Expectations

new home salesToday's closing was better than the evening fireworks show displayed at the Disney theme parks. I had to double blink a few times just to make sure I was seeing the correct numbers stream across my screen. Definitely, something caused for an absolute V difference in trading, as we saw the Dow go from being down 100 points to closing up 90 in under 30 minutes. The biggest change was made, literally, the last 5 minutes of trading. As I have said before in prior posts, we should expect these violent swings more often and with more volatility. Today reminded much like the V turn around we experienced back in November. It was definitely something to see.

Now my first suspicion of the closing was PPT. The sudden jolts of buying at certain dow markers was very similar to trends that PPT would create. My other theory is that some inside information may have leaked out about the GDP number tomorrow. It kind of felt like there was a party and the whole neighborhood was invited, except for me. Either way, someone is trying to ignite the market in preparations for something, and as for me, it makes me a very cautious investor. Oh yea, and over half of today's volume came from the last two hours of trading...chew on that.

crash market stocks podcastIt is days like today that more solidify my beliefs in the coming of a strong downward spiral, as clearly there remains significant speculation in the markets. Even after another day of "perceived" strong numbers, the second half of trading (besides the last 20 minutes) was mostly selling. In my opinion, the rally is beginning to run out of steam. We're about 250 points off of my 8000 expectation that I wrote about a couple weeks ago and we could be there by tomorrow. If we break through the 8000 mark, the rally should push onward toward 8300, so keep an eye on that.

As we anticipated, new home sales were better than expected as were the purchase of durable goods. Once again we find ourselves comparing apples to oranges. The better comparison for such numbers is a year over year number instead of a month to month number. As it was reported that durable goods did rise 3.4% from January, from a year to year basis they are still down 28% from last year's March numbers. The same goes for the new housing sales in which we saw had a significant increase from last month's numbers. However, from a year over year standpoint, we are down over 41%! Also, they failed to highlight that the median price declined, once again, over 15%.

Obviously, there is a twisting of the definition of numbers going on to try and propel buying in the markets. There was also some problems with Government bonds and the failure for asking prices to get filled. I go into more detail of this problem in today's podcast (subscribe here), but I feel The Fed has some big motivation to keep the markets looking healthy at this point.

There is an article on CNBC today that almost directly defines the headlines we should expect to see more of in the near future, entitled, "Has Geithner Rescued America?". In the article the writer talks of all that Geithner has done and that we have him to thank for unfreezing the credit markets and turning around this economy. Talk about don't speak too soon. I am amazed that CNBC posts articles such as these on their front page. Sure, give me access to a currency printer and I will get anyone out of their current financial problems...for now. Such nonsense shows the naivety of some of these writers, all of which I take with a very, very small grain of salt.

dow rally
At one point during the day, SRS and FAZ were both up over 10% which was looking quite well for me. Being only 45 minutes from close, I thought to wait until closer to the closing in order to take some profits (considering my SRS was up over 20% from when I bought it, and my FAZ option up 30%). However, little did I know the storm that was to arrive right before close and flip the market upside down. I ended up not making any trades, which could keep my little stake in short longer than I had originally wanted to hold it. I still remain up in SRS, but if this rally shoots into tomorrow, we could see it back in the mid 40's.

I anticipate the GDP number to follow suit and be "spun" as a good number. Tomorrow is a tough one to call, because honestly I could see us rallying 200 points or even sinking 200 points. Investors are becoming more and more sensitive to market conditions and the littlest breath of new developments can stir things up. We should have a good sense of where things are going in pre-market trading, but I would expect GDP to set the tone for tomorrows trading.

I believe we're getting close to the peak of this rally. I don't mind getting in late on the short side rather than getting in too early. I don't think we are done with seeing these violent green jolts, so I am still being cautious on the allocation of my funds.

So tomorrow acts as a very critical day for trading and I believe we will be able to better tell if this rally is coming to a halt or if it has some more steam left in it. April is getting closer and closer which not only could be new trends for the Dow, but also the dreaded tax season. In this type of economy, there are a lot of ways to save $$$ on tax dollars, so consult with someone. Washington Tax Service is very good, so if you Need Help with Tax Debt? Learn your options for reducing or settling tax debt. Have a Tax Attorney on your side. Get Started Today.

We'll see you all bright and early, Happy Trading.


  1. Anonymous Says:

    Based on the April 17 calls/puts for SRS, traders seem to expect a call price of $97.86 and a put price of $70.85. So I would expect a price target for SRS trading between that range for Apr 17. Is my assumption right?

    Also, we haven't heard much about the commercial loans for the banks. Can we assume now that those are not really that much of a problem after all, at least not in the near future?

    Thanks for the great blog. Keep it up.

  2. Finance Fanatic Says:

    The commercial loans are still very much a problem for banks and I believe all of the recent bailout plans is to help them prepare for the disaster to come. We are just scratching the surface on the commercial defaults, we're still trying to figure out the residential problems.

  3. dreadwinaard Says:

    Totally in agreement regarding yesterday's 3pm rally (my guess is that there was a leak). I've learned hard lessons from last December.

  4. Anonymous Says:

    hey FF,
    was wondering why I was banned from the chat room all of a sudden. Was typing and all of a sudden got the message saying I was banned from chat. I didn't use profanities or anything. Any reason?

  5. Finance Fanatic Says:

    The only two people that are banned from the chat are a Timoth Sykes, who was on spamming the chatboard and a user name, "Youdouche", which was banned for obvious reasons. If neither of those are you, you should not be banned. The bans are temporary at this point and should be lifted in April


    Now thas some post.