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

Just as a crack addict must eventually come to terms with reality and "sober up", so it is with the stock market on this "Cyber Monday", directly following the Thanksgiving weekend. I am sure what many thanks people had this weekend are all but gone when they saw the close of the market today. Well, maybe not everybody. In only one day, the market is more than half way back to our recent set bottom after enjoying a whole week of gains last week. This is what I have always been preaching, when economic news isn't on your side, it's a tough battle to win.

So it seems as if not all the bad news had been factored into the market, which is what some were starting to believe. Now, most everyone is in agreement that we still have a ways to go until we reach that bottom. Of course nobody knows, but lets hope next time people are slower to jumping on this bottom band wagon again.

So why today? Well, first off we had the profit takers. In a bear market, a week long rally is more than you can ask for and if you didn't take any profits on your longs, than shame on you. Second, they're officially proclaiming that we are now in a recession, which shouldn't be that earth shattering for most of us. They say that this recession started in Dec, 2007. Still, hearing it out of the horse's mouth always hurts a bit more. China continues to have problems as their PMI (Purchasing Manager's Index) reached a record low, falling from 44.6 in October to 33.8 in November. These kind of reports are beginning to make analysts very skeptical of China's ability to maintain their 10% growth that they are constantly reinforcing. As time goes by, China is continuing to show more and more of its true colors.

As a result of today's antics, we saw huge gains from every short in the book. Financials took the lead with SKF being up almost 30% (FAZ up over 40%). SRS also finished strong as did FXP and EEV. This combined in giving me a very healthy day of gains across the board. Of course my unsold long options took a hammering, but those losses were easily outnumbered by my very large gains on the short side. It's days like today that I am very glad I sold some options last week!

Today's performance doesn't look like a 1 day fluke. This heartburn could continue throughout the week. Expect world markets to get slaughtered this evening and there is nothing but more bad news tomorrow. We could return back to that 7500 region very quickly.

More big news to consider is Governor Schwarzenegger declared California in a state of "fiscal emergency" and called a special budgeting meeting with lawmakers to discuss the next few months. Believe it or not, California risks bankruptcy and even hints of the thought will cause a very negative reaction to the market. If these troubles are taken further, watch out.

Auto sales are released tomorrow, just in time for the big GM meeting. These figures should be record breaking as no one seems to be buying cars. Also, keep your eye out for Friday, as they announce non farm payrolls. This announcement may be enough to put our recent "Rally Fridays" to an end.

In any case, as we have seen from today, clearly investors aren't ready to run yet. There is too many unknowns that remain to make people comfortable investing in today's market. We should see some strong gains from the inverse ETFs this week. The GM bailout may shake things up for a day or two, but that should be over and done with shortly. The market may still rally back in forth for a bit, with us being in this "bull season", but as I have been saying all along, I believe we still have a ways to go down before we go up again. Have a good evening everybody, Happy Trading and we'll see you tomorrow.

As anticipated, this week (at least the beginning of it) does not look to be a good week to anticipate market movement. Today, we saw the Dow Jones trade at low 179.25 M volume, the average being 335.66 M. Clearly, we see that Wall Street has taken the back seat to the upcoming election which takes place tomorrow. It was a pretty slow day all around for the market and not much movement was found in most sectors. Circuit City announced today that they will be closing 155 stores and cutting around 7,300 jobs, as we expected. This is just a tease until the big closure comes after the holidays.

On the bright side, China had a relatively strong opening of the week, bringing FXP down to $85 during points of the day. I was able to bulk up my position more at this discounted price. If I can continue to pick up shares at this discount, I am all about, because a storm is coming, and it's just a matter of time. It will be interesting to see how Asian markets respond this evening to the relatively weak opening of Wall Street today. I believe many countries predicted a nice rally this week.

Like I said last week, I am not planning on being too active this week. With the volume so low, it makes it a real volatile market vulnerable to several conditions. A couple positions that have been catching my eye are GOLD (GDX) and AIG. Everyone keeps saying we are in a "deflationary" market, hence the continual rate cut. Many predict us to eventually have The Fed rate at 0. At this point, inflation is inevitable. It doesn't matter how quick The Fed responds, we will experience inflation. At that point, gold becomes a commodity of high demand. I think GDX is a Strong Buy under $20. You can't go wrong.

Also, AIG is picked up strength the past few days. With the FDIC controlling it currently, I think its a pretty solid buy in the short term. Mind you, there will continue to be negative news with credit markets for the next year, so I look at it for the very short term.

As for now, I am mostly playing FXP. If SRS and SKF can get below $100, I feel very confident about getting back in those as well. This Friday, November 7, Employment Report comes out and you can count on this number being disappointing. I would not be surprised to see the Unemployment rate over 7% and the new jobs down huge from the previous quarter. This is bound to take a negative punch on the market. However, we still could be feeling the short squeeze up until Nov 14th, so be aware we may not see too much movement until Mid November. But be advised, this credit crisis is not going anywhere for a while. Get out and vote tomorrow and keep tabs on FXP. I'm guessing we should get a little bounce from it tomorrow. Happy Trading and we'll see you tomorrow.

Quickly, go all in. We have reached the bottom. Not so fast. In our current market, emotions are playing as a higher factor than fundamentals. But like a heroin high, it's only going to last a bit and then cruel reality will once again set in.. Yesterday, I discussed the probability of a green day, especially in Asian stocks dealing with the possibility of a rate cut in Japan. That possibility is still lingering.

Today, we officially found out we had a contracting economy(one more quarter of those and we've officially got ourselves a recession) with the GDP report, but the "bad news" was better than expected.
With that, surprisingly, came a pretty well stimulated day. Good enough that I unloaded the rest of my Apple $110 strike price contracts for double what I bought into them for. And with those proceeds I'm back in heavy to FXP at $90. Ahhh, I feel so much better now. It's like coming in from a rain storm. Getting back on the short side is so much more comfortable in this market than playing the long. Let's take a look at where we're at:

And we were so close. From now on, you may just want to save yourself the time and only turn on your computer to check the status of the stock market between 12:50 and 1:00pm (PST), because lately the last ten minutes we have seen this market move anywhere from 3-5%. We enjoyed a majority of the day in the green and saw, for a brief time, increases in gold, oil, Rim, and Apple. However, that was quickly wiped out the last five minutes of the market. Don't worry, all is not lost.

On the bright side, we saw FXP hit $184, wow. So for all who heeded the call at my $92 buy in, has now doubled their investment on that stock in 1 week. No need to thank me, I'm riding the wave with you. Although it looks as if this stock will never be halted, I found it time to unload a majority of my position. I mean how greedy can we get. We may see it creep close to $200, depending on the market the next few days, but I don't want to roll the dice.

One dilemma this puts me in, is now I am not in a short position to cover my longs. Sure, I still have a minor stake FXP, but nothing that will hedge my longs. The good news is, all of my long purchases were option contracts, so there is a maximum to my downside risk.

So why go long in this market? Do I think that we have reached the bottom? NO! But I believe there is enough news in the next two weeks to encourage a healthy 1000+ rally and it could happen on any day. What are these reasons?

• Fed is meeting to discuss and is expected to make another cut to the rate. Historically, this has been a great way to stimulate the market. Depending, on how big the cut is, the market could really take off. It could take off tomorrow just in anticipation for it. If they cut it 50+ basis points, watch out.
• Elections. Historically, the market always slows prior to an election, but than usually gets a healthy bump afterwords. As it looks as though Mr. Obama will be elected, that can easily stimulate a run.
• Hedge fund redemptions expire Mid November. It is in their best interest to have the market as high as possible for these redemptions, so look for maybe a manipulated run in that regard.

Yesterday I discussed a move I made to buy into FXP, an Ultrashort ETF fund, that shorts the China Stock Market. For more about this ETF click here. Yesterday the buy in was close to $90. Currently it is trading at $101.39, up 12.92%. I plan on holding this for a bit until we see it hit $120-130. This is one of several ETF shorts I have been playing, which, as you can see, have been performing very well and act as a great hedge for your long securities that you may still be holding onto to not take the loss. Today, the market is reacting to a variety of poor earnings reports, which, in my opinion, there will be a lot of this month. With that, Apple (AAPL) is down close to 5%.

Don't lose faith in Apple quite yet. I still like apple as a buy, especially as a call option. I think they should weather well on their earnings report today after the close and we should see a good 6-15% jump in their stock tomorrow. Of course there is always the chance they do not perform up to market's expectation, I just don't find that very probable with their fundamentals. Pending on earnings reports tomorrow, we could see a pretty healthy rally, especially in the NASDAQ.

Another play worth noting is oil. In playing oil, I play the stocks DIG and DUG. DIG is an Ultra Long choice and DUG is shorting the Oil sector. Oil has taken a beating this past month, reaching their 52 week low. It is down another 5.71%, reaching $70 dollars today. A lot of this is due to lack of demand from Countries like China and India, as well as the weakening dollar. However, OPEC, the body which oversees Oil production, has a critical meeting tomorrow where they will decide if they will cut production of oil, and if so, by how much. I am expecting a pretty decent cut in production, which should cause some upward momentum in oil. DIG is currently trading at about $30 per share. Consider bulking up on some DIG share for a nice healthy bump tomorrow.

On September 18, 2008, it was leaked to the media that The Fed was in motion to put together a plan to come to the rescue of the some odd hundreds of billions of dollars out there in debt to be foreclosed on. The news resulted in the stock market making about an 800 point swing into the green, which it greatly needed after the beginning of what was going to be the worst week in Wall Street history. Today, the market remained optimistic by ending today well into the green. Is the beginning of the end of the crisis? My guess is, NO!

What is the greatest lesson we learn in our economics classes of why the banks failed during the Great Depression? It was because of the lack of confidence from consumers. The Fed has done a great job of slowing the pain by stepping in during critical times, as we saw with the Fannie and Freddie takeover, bailing out AIG, and now looking to rescue the rest. We began this week by what looked to be the beginning of the worst week we've seen in the stock market. If it were not for this news, we could have seen devastating losses, which were on the week of option expiration. We could have seen up to 3 more banks do what Lehman did last week.

This surely would have destroyed all confidence of consumers fueling this recession into even a worse state. The announcement saved us, for now. Looking at the numbers today, I do not see how The Fed will be able to embark on such a task it has laid out to do. Plus, I'm not so sure congress will be optimistic to move the risk of these failed loans from the banks to the taxpayers, who are you and I. Either way, this does not mean our economic woes are finished.

Strategist say that even if the Fed pull this off, they don't see the housing market reaching the bottom until late next year and 10-30% lower in prices. However, The Fed is determined to have something to send to congress by as early as next week in hopes to "juke" America away from all the financial hurricanes we have been faced with.

Take this news with what it seems to be. A temporary relief from a battle in the financial sector. Consider taking out a line of credit on your house to use as an emergency fund for then next 2 years. Access to equity will most likely get more difficult in the near future. Next week will tell a lot of how the market accepts this announcement long term.

By definition, recession means "a contraction phase of the business cycle." Although, in early stages, most economists dodged that word by saying we were a "slowing economy," I am pretty sure that all agree that the recession is here. The plan is to hopefully put it off until the economy is back on the upswing and we can look back and call the time a recession. No one likes to admit that we are currently in one. However, I believe if you can recognize it, prepare for it, you can come out of it more successful than you are today.

Signs of the Times
We first began to feel the heat on the economy when the sub prime market fell out in early 2007. This began a ripple effect which halted the purchasing of new homes, then lead to a surplus of houses on the market, then leading to a decline housing prices throughout the country. This resulted in new housing projects to be put on hold or cancelled.

Losing equity in your house is usually the biggest influence on a person's disposable income. Hey, you've always got your house, right? When you've lost 30-50% value in your house in 2 years, you tend to tighten the belt a bit. National retailers banked on new growth areas and a booming economy to sell their inventory which they pay for after they sell.

As a result, we have retailers like Linen's & Things, Starbucks, Circuit City, Mervyn's and many more, who then make the decision to either file for Chapter 7, or close several stores to prevent bankruptcy. In 2007, commercial real estate owners should have realized it was only a matter of time until the same problems that plagued the residential market would eventually come to the commercial side. What is that problem? No Lenders.


CMBS Market
From 2000 to 2005, CMBS financing became very popular by offering new financing terms that had never been seen. CMBS can be explained by taking a group of different loans and packaging them into a bond rating (ie AAA, BBB) depending on their strength of credit. These rated bonds would then be traded on wall street and sold to investors depending on their credit rating. This in turn allowing lenders to provide very competitive interest rates and terms.

However, the underwriting standards became sloppy and banks were being loose with their lending. This in turn led to the eventual collapse of the CMBS market all together. In short, the banks were lending out AAA money to CCC properties which artificially pushed property prices into the roof. Buying buildings for $400 per foot in secondary and tertiary markets was unheard of. It became a reality.

It was only a matter of time until this bubble popped. Now with the turmoil of the banks (Lehman Brothers, Freddie and Fannie, AIG), this has stepped up the crisis one more notch. Not too mention the oil crisis, weak dollar, inflation, commodity scarcity due to global economy, and the upcoming election. All of these elements combine to provide the vehicle into maybe one of the worst economical positions the US has seen since the Great Depression.

Goal Of This Site
Knowing the signs, you can prepare for the worst, but hope for the best. Living within your means is the key. In this site, I will provide the tools, warnings, strategies, and vehicles that have helped me to weather these storms. Living in a land that promotes "free economy," we must live with a Cyclical Economy. There is no way around it. The goal is to know when the cycles are coming and change our lives accordingly.