Crash Market Stocks - Financial Tips On Making Money In The Stock Market

From trading on Friday, you would have never guessed that we received the worse job loss report in 34 years as the market blew right past that number on Friday and turned to new hope for bailouts and freedom from debts by closing the Dow up 217 points. As I said last week, currently, we are very vulnerable to these short term, violent rallies as speculation has become the steering wheel to market trading. As I also discussed earlier in the week, we knew we were expecting something from Obama to combat the dreaded unemployment number that everyone expected to be devastating. The term "Buy the rumor, Sell the news" seems to be in effect currently as everyone jumped on the bank buy train on Friday(including myself) hoping for some serious news over the weekend. The only news that happened Friday, was a pretty mediocre press conference from Obama talking about his "plan" to stimulate the economy, and the rest were a bunch of leaks that made it to the news talking about what is suppose to be announced Monday (I'm sure the government didn't mean to leak that, right?!). They estimate that over 3 million jobs have been lost since we began the "recession in December of 2007. Over half of these jobs have been lost the past three months. This is a very bad sign, as it clearly shows we have not reached the crest of this job crisis. So I continue to believe this rally will be short lived.

I woke up early on Friday in anticipation to the big day. Seeing the futures trading up, I had a feeling we were going to be experiencing the day we did. I also knew that Ken Lewis, Bank of America's CEO, was planned to be interviewed on CNBC. In most cases, CEO's go on air to sell a company to the public. If it is bad news, they usually send the accountants or lawyers. I knew Lewis would be selling B of A to death and that's exactly what he did. So, I ended up buying into BAC in the morning, even though it was already up 14%. Lewis talked of their successes and that he has not once talked of or been talked to about nationalizing Bank of America. He also said that the plan was to pay back TARP funds by three years. Just during his speech, the stock jumped another 7% and eventually got as high as 33% up. As for the validity of his words, who knows and frankly I don't plan to be in his stock for very long.

My stop loss came into effect with my FAZ and I ended up making a pretty good profit, considering FAS ended up almost 20%. Sometimes, this strategy doesn't work if we reach a volatile day with the Dow bouncing back in forth. However, I felt that Friday was going to go only one direction, and it would go that way with conviction. The market trend FAS technical score is -75, so I don't know how excited I am to stay in it much longer (get your own symbol analyzed for free, all you need is a name and email, Click Here). However, as for now, I am remaining in both my BAC and FAS for the time being.

SRS was showing a lot of strength in early hours of trading as you can see from the chart. However, during mid-day, a big sell off began. I think bailout hopes and more rumors surfacing convinced many investors to get out for the time being. I am remaining in SRS, as I feel it is one of the better shorts for 2009. I do think they are vulnerable to some losses during all this mess, so I may be averaging down as it may continue to go down.


Obama's bailout team has revisited their original stimulus plan over the weekend and have supposedly made some changes (I personally feel they did because they knew they didn't have the vote!). Anyway, it seems as if the bailout amount will be reduced to $750 billion and that there have been a lot of changes to the "bad bank" plan, which wasn't getting a lot of popularity with the media and republicans. They still will supposedly have a toxic asset protection program but are straying from the "bad bank" plan and working on a "ring fence" concept. In a sense, the "bad bank" would buy up to $500 billion in troubled assets and then perform stress test on banks to see if they need more.

Now, where market to market accounting gets changed is when these assets are transferred. As of now, a bank would have to take a loss on their books to transfer these assets, which would kill bank's balance sheets to transfer a lot of these toxic assets. So, rumor is that they may be altering the accounting system where they can "carry market value" in hopes to keep bank's balance sheets healthy. A lot of moving pieces are in this plan and a lot can go wrong. Let's hope they know what they're doing. Secretary Geithner is suppose unveil the plan on Monday. These kind of announcements make me very timid in this market, which is why I am pretty hedged right now and sitting in a lot of cash at the moment. So we'll see how it goes. That mixed with the stimulus vote, which is planned for Tuesday, could cause one crazy trading week next week. In the end, the fundamentals are still very bear, so that is where I remain. I am just waiting for the right time to get in my bear positions fully, and that time may be coming soon.

So, it will be another early morning for me on Monday. I am expecting more volatility this next week in the market as I believe there could be a lot of "exhaust selling" after all of these announcements are done with. "Buy the rumor, sell the news."

I wanted to end with a clip from CBS news featuring the Lending Club we've been talking about. They have been getting a lot of publicity lately, which continues to reinforce my decision to invest in them. So far so good! Remember, the now $200 promotion ends this month for Lending Club, so check it out if you haven't already, click here.

Bravo Fed...Bravo. I have to tip my hat off to the Fed for their slide of hand on cutting interest rates today. They were able to manage expectations to create an explosion of excitement today. Throughout all last week, all of the signs and the announcements the Fed was releasing to media had to do with their probability of not doing a large cut. By doing so they were able to control expectations to a minimum and surprise the world by their cut to pretty much 0%. It actually is a range of 0-.25%, as they feel it would be easier to manage having a range. Much like the finale of a firework show, it seems as if the Fed has saved the best for last. This is their big finale to hopefully pull us through the next year. Although they claim to have other factors to help stimulate the economy, there is nothing comparable to their "trump card" of cutting rate. By their move today, they have become very vulnerable to future expectations.

Things started out when both Best Buy and Goldman Sachs announced "better than expected" numbers, both, however, being losses for the quarter with some strict guidelines for the next quarter. Media is doing a great job of managing the day traders by using such terms as "market expectations." By doing so, it is helping to ignore the fact that these companies are still suffering losses and are hurting more and more in an unstable economy. In fact, I am not even listening to some of the analysts out there, as I feel they are trying to manipulate investors. I have been very satisfied with Morningstar. They have a GREAT annual subscription or you can sign up for a membership to use their free website tools. See more at Morningstar Investment Research: Free Online Trial. 4,000 In-Depth Reports, Ratings. Data on 20,000+ Stocks and Funds. Either way, the market has purely become one that reacts off of speculation and should be factored in when making investment decisions right now. Fundamentals are completely gone at this point and our future has become even more so darkened.

Of course a day like today will cause for extreme buying volume. However, despite the huge gains, volume was still not high. Just a bit above average. Many people are still holding back. The bears fled at sight. The belief is that buy having almost 0% interest rates, this should stimulate mortgage, credit card, and small business loans. However, in my opinion, this is not possible. The monumental debt which is due in 2009 is far greater than available funds that the bank has. The CMBS, conduit loans have destroyed our lending system for a very long time. Unfortunately, a majority of the American people don't know this. Either way, expect to see this market continue to rise in the short term as we still have an auto bailout to pull off as well as more upcoming stimulus plans.

To hedge my shorts, the only sector I feel comfortable going long is commodities. Buys like POT, GDX, DIG, SLVR, GLD are the few stocks that I feel aren't as vulnerable to having the bottom fall from underneath them. Financials scare me tremendously, especially after the extremely over zealous buying which has gone on this month in the financial sector. With the Fed looking like they will continue to print money as long as it takes to get banks lending again, I believe commodities are due to fly. The US dollar will be worth nothing. 1990's Japan, here we come.

Expect this rally to probably push into tomorrow. People are so love struck by the Fed, I don't even think disastrous Morgan Stanley numbers could even phase them. World markets should cheer the rate cut tremendously in their markets this evening. This market should pull back one day after this momentum slows, as it usually does after an announcement driven rally. Either way, I plan on buying more SRS and either FAZ or SKF tomorrow as they are sure to be down to all time lows. These may seem like a sinking ship to some of you, but I personally feel that once this emotional rally is finished, there is a lot of problems to sift through. If I can keep lowering my basis on some of these shorts, it will be that much better for me during, what I believe to be, the 2009 disaster. Most of these "day traders" have quit (or been laid off) from their jobs, so they don't even know whats going on in Capital America. There are many, many tough times ahead.

With my long UYG, DIG, and GDX options expiring Friday, I have been trying to decide whether to sell them or execute them. Most likely I will sell a lot of them during tomorrow, if the market remains up. I may flush those profits right into POT and SRS.

Well, its a rough day for the shorters today. Patience. Houdini just performed his final trick and seems to have nothing left up his sleeve. We are, as the poker players say, "all in." I hope for the best with our economy and hope that somehow we can lessen the pain that is to come in 2009, I just don't see that possible from happening. Have a good night, see you tomorrow.