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

Finally, we reached the end of a crazy week of trading. There were many times during the day on Friday where I worried about another 200 point reversal like we saw the day before. However, bears were able to maintain control of the market for pretty much the whole day and end the Dow lower 144 points, which is a good sign that indeed this rally may be slowing. But before I go and position myself in a strong short position, there are a few speed bumps for bears that are definitely worth discussing. I discuss them in more detail on today's podcast (subscribe here), but lets cover some of them right now:

Technicals
Although the bear market rally was expected, the strength of the rally has been much stronger than anticipated. The angle of the upswing is much more vertical than that of the rally we experienced back in November. We have retraced our previous sell off about 50%, which is usually normal in an environment like this. This could mean that the rally has opportunities to creep up into the mid 8000 Dow levels. 8000-9000 are the key technical numbers I keep hearing about this rally. If we indeed are heading to mid 8000 levels, I definitely don't want to be caught short. Now, I do think we won't be as violent as we've been and may bobble around up around 8000, but the risk is still there.

Mark to Market Meeting
On April 2, there will be a meeting to discuss the altering of mark to market accounting, which would cause for a big help for bank's balance sheets. This obviously won't be the savior for banks, but it should definitely spark some buying for at least a few of days. This is all depending whether they actually go forward with some alteration in the accounting method (which I believe they will). So keep your eyes on that date, because that could most definitely shake some things up.

Bank's Earnings
This is a side bonus for bulls if the mark to market accounting does get altered. By changing it, most likely bank's will begin, at least on paper, to start to show some profits. GS is the first of the bunch to report on April 13th, which I feel regardless of the accounting change will show positive numbers. Multiple positive earnings reports could continue to pull this rally into the mid 8000's.

Uptick Rule
This is the least of my worries out of the bunch. Sure, reinstating it may cause some positive trading for a short term, but I feel the effect it has on the market is minimal. In 2005 they ran a test to gauge the uptick's influence on market manipulation, and concluded that that the rule did not prevent manipulation. Bears will always short, with or without the uptick.

So there definitely exists enough variables to keep me from fully positioning myself short. Indeed, if conditions get worse enough we could sell right through these speed bumps, but I do feel there will still remain some buying. So, I don't feel we're at the position yet for me to be comfortable getting into a much stronger short position. I do have some, but not near as much as I will have when I feel it's time. There are a lot of signs that we are close, but not quite there. Next week will be an important week in defining the remaining strength of the rally, especially how we react to the mark to market meeting on April 2nd, which I believe should cause the biggest shake in the markets out of all the news.

So gear up for another exciting week. I think the VIX may take a ride this week as I believe our daily spreads are going to start increasing dramatically very soon. Have a great weekend and Happy Trading.

It is after days like today that I am very glad that I am in the position I am currently in with my portfolio (mostly cash), as I would have most likely had an ulcer with all the volatility we saw today. We had about 8 color changes with the DOW (from green to red) and both sides seemed to be gaining momentum at different points throughout the trading day. The market opened with financials soaring, having BAC over 10% again, as well as FAS up close to 15%. I was oh so close at that point to selling the rest of my FAZ put options as they were up another 35%. I, however, held off thanks to greed and missed the high point to sell. The opening rally slowly started inching its way down until it finally dipped into the red around mid-day. At one point we saw the market almost down 60 points, when it quickly shot back up into the green. After what looked like it was going to be a fairly strong close, a big sell off came right before close, leaving the DOW just slightly up just about 4 points for the day. What a ride. You have to pay $70 bucks for that at Disneyland.

First, the goods for the bulls. This is now two consecutive days of a green closing, which we have not seen for weeks now. Although it did not close near its earlier highs, just having two consecutive green days, especially following the massive rally we had yesterday is a good sign for bulls and that this bounce may continue a bit.

Also, financials stay relatively strong throughout the whole day. BAC did trade in the red for some of the day, but financials got a big push towards the end of trading as there may be a temporary return of confidence for the banks. I wouldn't expect that to last long and I'll explain why later on.

Techincals still lie with the bull. From a technical standpoint, the market is pushing for a rally. Sure this could easily be over ruled by enough bad news, but it is always a nice extra bonus when you have technicals working for you rather than against you.

Now the good news for the bears (the shortened version). If this rally even does continue, which it may not, it most likely will not last long. Although, many people may have regained some confidence in the banking systems, that may be short lived due to the increasing problems that is heading for banks. Recent news shows some slowing of losses for the banks, which is helping in the rally. Well, of course! The government has spent hundreds of billions of dollars to help absorb those losses. After all the help Freddie has been given, they announced that they are wanting another $30 billion from the Treasury to help balance out their quarterly $24 billion loss.

Not only that, but we have only endured the 1st round of problems for banks. Be assured that the next round is soon following and could have an even worse effect than the sub-prime crisis did. With the derivatives, credit default swaps, and prime loans that will be plaguing us this next round, be sure the the days of asking for help funds are not over. Also, I don't plan on trading JP Morgan's stock anytime soon, even though they have held up pretty well, as they hold a far greater amount of derivatives than the smaller banks such as Citi and Bank of America. So, although financials seem to be gaining some ground, I don't plan that to last very long. Which is why I will be out of my financial longs very shortly.

Another positive for bears was that they showed some aggression at close today. There was definitely some selling motivation going into close, as I feel there were a lot of people who did not want to hold their longs over night. I don't know if it's because of the meeting for Mark to Market (which I don't see them doing much), but in any case the market closed with downward momentum.

I did end up selling most of my FAZ put options during the last run up before close. Although it wasn't at its peak of the day, I made off well enough and am glad to not be in as heavy going into tomorrow. I am holding onto BAC for kicks in giggles, but besides that, I am still waiting. I know some of you fell I am being "too safe", but if indeed we continue to head in the direction I believe we're heading, I believe I will be set up for a very big opportunity to make some solid profits on the short side. It is just like a chess game and I am setting up my pieces. Instead of trying to guess right now, and risk getting killed, I am making smaller moves and waiting for the right time. So you all will be the first to know when that is for me. Check out FAS Market Club report score of -75, which is a pretty big jump from it's previous -100 (get your own symbol analyzed for free, all you need is a name and email, Click Here).

The big question tomorrow is how we respond. I think tomorrow may be another "defining day" where, we may start out flat and bouncing around back and forth, but one direction will take control by close and we should have a pretty significant close either up or down. The big question, is which way? The opening should show us a lot, and if we do indeed open up again, I will probably sell a lot of the longs I have left and be freed from that burdern.

Also, remember, we're creeping up on tax season, and I'm sure all of you look forward to filing these profits as much as I am (dang you Uncle Sam). Anyway, if you have procrastinated like I have, you can file free at H&R Block and find a variety of services there. However, you might as well as pay a bit extra for their premium services, it saves a lot of time! So, File for FREE at hrblock.com and learn more about it.

I have been thinking about shooting out a podcast a few times a week, because there are many different elements about that market that I never get to discussing on this site, due to the length of the posts, and I would much rather speak it. If this is something that you think would be worthwhile, shoot me a quick email at crashmarketstocks@gmail.com and let me know if you'd be interested. If there are enough, I'll get it set up. Have a good evening, Happy Trading, and we'll see you tomorrow.