Morning Sickness for Markets

delta crashJust as Friday has been finding it a norm to end green, selling has become comfortable on returning Mondays as bears barely won a hard fought battle that left the Dow 50 points in the red. Once again, we saw several different color changes as the Dow continues to have problems making up its mind (with the help of some manipulation), however bears were able to finish off with stronger selling and keep markets in the red. The lack of volume is showing that bears are not ready to come back from vacation as of yet. I assume many are waiting for the big spark, whether it be another large corporate bankruptcy, more destructive economic data, or worsening unemployment data (take your pick). The fact of the matter is, many are there waiting, and when the coast is clear, I would imagine some pretty strong volume to return, especially if these bulls eventually start taking their profits as well.

Trading trends have been very abnormal as of late, which continues to cause me to believe in some continuing manipulation in the markets. It seems, just as strength is building on the bear side throughout the day, it is only squelched by an large influx of buying volume. With this being a continual trend I’m seeing, I’m starting to think it’s no coincidence. The double trading of FAZ/FAS has remained to be a good option still at this point as once again both found themselves in the green at one point during trading. It is just being able to time when to sell each one.

SRS finally had a bit of a rebound in the market with a 10%+ gain today, as companies like Simon Property Group were slapped with some downgrades. Also, on Friday, Kimco announced their selling of mixed securities over a short period of time. They will be selling a mixture of common and preferred stock that they say they hope to use for acquisition of new centers that may arise. Well, of course they need to offer stock. They can’t get any bank financing. What about the trillions of dollars that was given to banks from the Fed? Shouldn't that help. Like I’ve said before, it is easy to say that the banks have recovered, however, when looking at real life application, not much has changed in the credit markets, especially on the commercial side.

A global scare of the new “Swine Flu Virus” caused for some concern in the morning of trading. This new virus has been founded in different parts throughout the world, but mainly rooting from Mexico. As a result, we saw airlines get killed today in worries that many people will be re-arranging their summer traveling schedules to keep safe from the virus. I myself have a trip planned for Mexico in June that is now in jeopardy depending on the fate of this virus. If this problem continues to become more severe, I would expect it to get even worse for airline and hotel stocks. This could be a great time to consider a short on MAR, DAL and UAL. Even though this could blow over into something that is nothing of much concern, it is just one more thing to tack onto the list of worries for people around the world.

Another thing to consider with the recent flu outbreak, is what effect this could have on emerging markets. Today we saw a pretty big jump in FXP and EEV, the short on China and emerging markets. I believe that emerging markets have been overbought for the past six months, especially China, and feel that concerns of health could bring even more problems to their already fragile economies. If indeed we begin to see this next leg down in the market, I think I will be able to find a lot of opportunity in FXP and EEV.

Today’s selling really doesn’t tell much of a story. With the low volume, it’s hard to make the argument that a downward push is beginning. Sure, bears fought a good fight today, but it will be their ability to maintain selling in this trading environment that will show strengthening signs of a sell off shortly ahead. We’ve started the past few weeks with red trading on Monday, only to end with green at the end of the week.

So it will be interesting to see if we can maintain the selling or if more news comes out to spark more aggressive selling or buying. Don't forget, the stress tests still are hanging there ready to cause some noise in trading. Until there is consistency, I will remain with my holdings as to not get caught by more surprises from Uncle Sam. My Zecco.com account has cash waiting to be put into the markets, which is crucial for me, as I smell opportunity in the very near future. Remember to join the CrashMarketStocks Forum to engage in more detailed stock analysis and questions with others in the CMS community. Happy Trading.

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5 comments:

  1. Anonymous Says:

    FF,
    You looking on starting a bigger position on SRS yet ? A lot of put activity on SPG and VNO in the 30's. Your thought's on this would be appreciated.
    Thanks for the posts.

  2. Finance Fanatic Says:

    I have not taken a bigger position in SRS at this point. There still exists too much uncertainty and government risk at this point... however, the time is coming very soon in my opinion.

  3. 5U Says:

    Be careful 2morrow.

    Treasury yields are back higher than they were pre buy back.

    Uncle Ben could be up to some tricks.

    SRS is very frustrating. I am almost convinced the PPT is trying to herk and jerk it up and down so it can't get any momentum and people get killed holding it.

    Hope and Change.

    Btw did you see the PPT is hiring?

    Now Hiring Credit Analysts: The PPT (Self Administered 401k Included)

    http://zerohedge.blogspot.com/2009/04/now-hiring-ppt.html

  4. Finance Fanatic Says:

    Agreed 5u, definitely some manipulation happening in the markets... Ha, love the PPT article.

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