More Mergers and More Problems

centex buyoutWell, much like I expected, we saw almost no reaction from trading after the Uptick Rule was discussed by the SEC today where they have agreed to bring back some form of the rule. Some executives, like Warren Buffett, are fans of the rule and welcome its return. They can try to blame bears and their shorting for recent drops in their company's stock, but the truth is, it's fundamentals causing the decline. In any case, obviously investors were not too shaken up from it as the market failed to make any big moves.

Like I said yesterday, a three day consecutive selling streak has been rare lately and if had seen another down day today, I most likely would have began climbing down the fence. I was impressed with the market responding to the market's 100 point gain in early trading, bringing it into the red at one point. However, the negative trading did not last long as we saw the Dow close up 47 points. Like I said on Monday, it is hard to get anything out of trading this week, as the volume remains very low due to everyone being on vacation. You can't underestimate vacation weeks though, as this same week last year was one of more volatile ones of the year.

crash market stocks podcastsThe big news being talked about today was the purchase of Centex by Pulte homes. Pulte purchased $1.3 billion worth of stock and tacked on an extra $1.8 billion of debt. This is one of the first of many, especially in the real estate field, of companies consolidating to minimize costs. We saw this a lot in the early 90's. Some of the strongest real estate companies at the time were forced to closing their doors due to the recession. The ones that did survive, did so by a string, and usually had merged with another company to cut costs. If that was so prevalent in the 90's, you can imagine what we can expect this go around.

SRS was holding up for most of the day when it finally got dragged down into the red. The same went for FAZ, though we did see it hold up rather well even though the market ended in the green. My Apple options are continuing to rise, which is good news for me, being that they expire in a couple weeks. If you are near the strike price coming close to the expiration of the contract, the options become very, very volatile. This option is averaging 40-60% moves a day. It can be very stressful.

I'm waiting for one more crushing day for gold, where I will then hop into either some GDX call options, ending in January, or GLD call options. I have expressed my hopes for gold in the past, especially once we see inflation kick in down the road.

We are reaching a very critical point in this rally. When markets get in this stagnate position, which they tend to do before a strong move, the longer it takes, the more probability there is of a correction. I would expect that if this rally gets a second wind, we are going to see it ignited by next week. Any longer than that, investors risk bears taking control of it again. I am hoping for a good defining week next week as we gear up for some serious earnings announcements. These first few to announce will be very critical in setting the standard for the rest of the season.

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