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

Finally, a pretty solid day of selling occurred today after several days of mixed and optimistic trading. Today was a perfect example of how the market can be overruled, even in the midst of manipulation, with the help of higher volume levels. Once again, after hours and pre-market trading was showing a lot of green trading (hmmm...somehow), opening the market at pretty high levels. However, immediately after the opening, the market took a pretty aggressive dart down into red. Bears were not interested in manipulating attempts to pull the market up today, as for the first time in a while, volume was relatively high. A good sign on a selling day.

Bernanke spoke again this morning, in which he discussed his optimistic outlook for banks after completing the stress tests. As we expected, none are to be deemed "insolvent", and only a few will be required to raise additional capital (or so they say). Obviously, investors were not nearly as optimistic about it as most of the financials took a fairly strong dive as the day went on. Much of this was most likely due to the huge response we saw from yesterday's media leaks, where many of the banks were up nearly 20%. We often like to buy on the rumor and sell on the news.

As a result, the shorts finally had a pretty reasonable day. SRS ended up over 10% and FAZ was just behind it. After we saw some strength in gold and oil, both DIG and GDX ended in the red. As a result from today, I saw some nice healthy profits from my FAS Put options I purchased yesterday, which is always good to see (if you're looking to trade options, TradeKing has some of the best rates around). I believe SRS should begin to show some strengthening signs as commercial real estate is slowly creeping into the spotlight for the next disaster on the list to face. It is estimated that commercial real estate loans make up about 15% of all the outstanding debt. Even though, the amount seems small compared to housing mortgages, you need to remember that most commercial loans are 5-10 year terms compared to 25 to 30 year terms for residential. As such, there is a much greater turnover in commercial loans, which should be just as big as a threat for some of these big banks, especially ones like Wells Fargo and Wachovia, who have a lot of outstanding commercial debt.

After today's close, the "actual" bank stress test data was released to the public. Nothing earth shattering was noted that wasn't already discussed. However, after hours have responded strongly to it. Many of the banks are up 10% or over in after hours. It is difficult for me to understand why such results would yield such optimism. Indeed, the actual "needed capital" that was reported was slightly less for some of the banks. The estimates were not far off, but I guess many believe it is enough. So we find out Bank of America probably only needs $35 billion and their stock goes up 18%. Then we find out they really only need $33.5 billion, and they go up another 10%? Just remember, many of these banks will most likely get the additional capital they need from issueing stock. Dillution anyone? I do also believe that due to the much lighter volume that exists in after hours in pre-market trading, there is a lot of manipulation that exists. I have noticed, this past week especially, that conveniently markets are almost always opening rather strongly in the green for no reason. It causes me to wonder...

So, just as I warned on Monday, we are not quite out of the woods of all the fluff from the banks. I do believe we are close, which is why I decided to pull the trigger on some puts yesterday. Tomorrow, could result in a strong green day of trading, especially if a "better than expected" unemployment number is released. As I have said before, whatever the number will be, it is a bad indicator and will eventually need to be factored in. Even if it is in the -500k region, I do not consider those results good news for our economy. Many make the argument that the good news is the perceived slowing down of the recession. However, you cannot make that assumption based on one or two months of slightly stronger economic data. Throughout the Great Depression, there were several changes in direction of economic data. However, the overall regression trend remained in a downward slope for several. This is why it was so devastating, because of the slow, bleeding process that took place. It was the unemployment that plagued society later into the depression, but it was sparked by the crash of the banks in 1929. So don't be fooled by month to month changes in economic data. I have to see consistent, consecutive changes in order to begin to become a believer.

In light of all the joy from these stress test results, there still are causes for concern when you look at the numbers that were released, which you can see in full here. One scary thing is the amount of credit card loans that make up these bank's outstanding debt. In this type of environment, I would consider consumer credit card debt as some of the highest risk of default, especially once personal bankruptcy begins to soar (which usually has a slight lag from unemployment numbers). Considering that 18-22% of many of the bank's loans are made up of credit card debt is very alarming to me. Sure, the high interest returns serve as a motivator for banks to issue the debt, but in these economic conditions, watch out. There are many other alarming numbers which you can see for yourself, but I hope investors go through these numbers and realize what they are buying into.

I will actually be looking to make a move tomorrow, especially if we see green trading. Prudential Insurance has been soaring the past few days, due to some upgrades and better than expected earnings report. Prudential has a very large stake in commercial real estate, which many of their properties are in risk of default. I can't imagine why such praise would be given to them, when in my mind, some of their worst months lie ahead of them. After a 40% rise in their stock in the past two days, I have to believe there is some opportunity for me to short them. I will be looking to pick up some put options tomorrow, hopefully during the peak of the rally, if there is one. Aside from that, conditions seem to be pushing closer to a turn in this rally. I would be very surprised if we didn't see it turn in the next week or so. So I will be waiting. Have a good night and happy trading.

Just 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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