2008 Concludes - What To Expect From Stocks In 2009?

Finally we can bid farewell to this crazy market year we call 2008. It seems as if investors felt a little optimistic seeing the year end not completely in shambles as we saw the Dow end up another percent today. To be honest, I'm glad the year is over. It's almost as if people have been waiting until 2009 to see everything change. I am sure we, as a country, will have another pretty strong reality check as we continue to see things not get better around here anytime soon. But for now, I cheer with the investors to hopefully be able to find greener pastures in 2009, as I do prefer to make money on the way up, than on the way down.

I received a lot of emails asking about my experience with Lending Club. I have not joined yet, but will probably next week. I will be sure to keep you all updated to see if I indeed make the 10%+ returns I am hoping for. I'm sure there are many people looking at their accounts for end of year statements, whether it be your IRA or trading account and are seeing pretty massive losses, as all industries received the biggest slam since the 1930's. Below is a chart showing the overall 2008 ending performances for the popular indexes, with China and Dow Financials coming in as the worst for the year.

Gold remained up, which I still remain bullish, as my GDX shares just about touched $34 today. It seems like just yesterday I was buying those shares at $18. I still think gold has a lot of catching up to do as do other commodities.

In light of our new President taking office here shortly, I will be looking into some good alternative energy investments, as I feel those should receive a pretty strong push as Obama's energy package is very favorable to alternative energy. With lowering oil prices, solar has been slammed with people thinking that with oil so low, there is no need for alternative fuels. Well, with the kind of incentives and tax credits Obama is sure to activate during is reign, they look awfully good to me. STP has been on my radar for a while as they are a strong solar competitor. I also have invested in some research and development stocks (CABN and OOIL), which being R&D, their current stock prices are low, but their product and technology is right up Obama's alley. I think both of them can easily produce 100%+ profits in the near future. Sure, they are definitely more risky, but I'll take my chances with this president.

These thoughts are a bit pre-mature, but I try to stay a little ahead of the game. I still think we have some serious bleeding to go before we see any light in this market. Days like today can make people think we're back on track, but by looking at the facts, I cannot even come close to thinking that. Plus, we had some confidence pushed in with The Fed announcing last night that they would begin to buy mortgage securities in January. This is what caused a strong rally for real estate today and a horrible day for SRS and SKF. If people think this announcement means our real estate days of woes are done, think again.

So we close one door, only to open a new one. It will be interesting to see what 2009 brings. It is such a critical year for our economy, especially with the new president. I think some will make a lot of money this year, as many will lose more money (in my opinion). The current VIX levels have made people a bit more comfortable with market conditions, but remember, a market crash usually strikes when people least expect it. Thank you for those that comment and nice emails. I would like to have good discussions on this site, so please feel free to comment and give your insights. Good night all and Happy New Year.

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Consumer Confidence Gets Killed, Yet Market Still Buys

crazy marketI thought this picture would be appropriate, as this is what I think investors are doing who feel like it is time to buy. Wow, today smelled a lot like manipulation again. Maybe the Fed felt like they had seen enough red lately. Whatever the case, the market had no business being up over 2% today. By the way, since we have been discussing Lending Club lately, the P2P lending site that can generate 10%+ returns, I saw that they were featured on CBS news, see here. I plan on lending just a little at first to see how it works. I will keep you all updated. As CNBC headlines said today, stocks are probably not the place to look to make money for 2009, unless your short (in my opinion), so I encourage any other options that can bring me good returns.

Well, Uncle Sam extended their arm again today to the dying American autos, which seems to be the cause of the buying spark today. I don't know how people take this as good news. Late last night, the Bush administration allocated 6 billion dollars to GMAC, GM's equity in auto to help in assisting to better their bottom lines. Now, GM claims to be able to give loans to lower credit customers and issue car loans anywhere from 75-80% LTV, compared to their recent 40%. Ha, we will see about that and just how long that lasts.

Tech had strong gains, as they seemed to have been killed the past week. I still think tech is one of the most vulnerable to this worsening market, as most technologies are a luxury. People will probably not by that extra computer, or the suped up processor chip this year. It's back to basics for me and my IRA for 2009. McDonald's, Wal Mart, and Johnson & Johnson are some of the only companies I dare hold long for the beginning half of 2009.

Of course, people choose to ignore other news, that in my opinion, affect our economy far greater than people's ability to getter better loans on a new Suburban. Consumer confidence fell to a record low in December, having the index fall to 38 from 44.7 from November's numbers. This is largely due to the huge job loss we have seen the past month. As layoffs are sure to continue, I expect the confidence to get even worse. Yes, even with Mr. Obama at the helm. Employers chopped 533,000 jobs in November alone, the most in 34 years. Yet, there are some out there that feel it is time to buy. Go on ahead. I can't even begin to think why that is the case. We have some serious tough times ahead of us.

Not only did that hurt, but the prices of US single-family homes in October fell 18% from last year! So this surely squelches some people's hopes that maybe the housing market was reaching close to bottom. I think not. I have said it before and I will say it again, the housing market led us into this catastrophe and I believe it will lead us out. I don't see any light at the end of the tunnel as long as housing prices remain at record lows.

So we move on. I think today was just a short term fluke, as people cheered Uncle Sam's intervention and hope for more. These days can be crippling to the market in the long term, as I feel some people are duped into buying, even though there are serious negative data released that needs to eventually be factored in. Oh well, you never know. Investors may entirely ignore these continual, harsh economic conditions, but I very much doubt it.

I expect to start seeing some serious drops in the Dow the next couple of weeks, before we start to work through Obama's honeymoon. As we grow nearer, I will probably look to pick up some longs to ride that short bubble and pick up some quick gains, but we'll dive more into that as we get closer. Have a good night everyone, Happy Trading and have a good evening.

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Low Market Volume Continues As Retailer's Future Looks Grim

Well, to most people it looked like just another uneventful, holiday trading day. However, there were some strong moves in some sectors, especially for those that own SRS. A lot of bad retail news circulated the media today, as analysts begin to evaluate holiday retail sales and predict their future performance for 2009. And most everyone agrees, it does not look good. Even though we have been discussing this principle here for months, it seems as if it is now beginning to hit the market again as almost every big commercial REIT got slammed today, having SRS end up over 10% today. This should be just the beginning.

As for me, I plan on steering clear of almost every type of retailer you can think other than discount retailers like Wal Mart or Old Navy. The projected numbers don't look good, and we seem to have a trend of performing worse than expectations lately. At the end of October, ICSC (International Council of Shopping Centers) forecasted 6,100 stores closing in 2008 and 3,200 stores closing in the first half of 2009. This was before big retailers such as Circuit City, Office Max and a few others announced their mass closings. I'm sure this forecast has been revised since then. Mind you, these are national retailers and do not factor the mom and pop retailers that will also be going dark. In fact, I attended the ICSC national conference this past year in Las Vegas and it was pretty dead. All of the retailers said they were done expanding for 2008 and probably most for 2009. Many of the booths were empty and, frankly, aside from losing money at the tables, there wasn't much to talk about.

Some have asked me why I focus so much on retailer's performance. Aside from actually tracking their stock performance, retailers are the life and blood to shopping center owners. As they go down, so does the real estate. With the ammount of leverage that has been placed on these conduit loans, just losing 10% of your tenants can put you in the red. So the fate of retailers are very much tied to the fate of SRS and even financial etfs such as SKF and FAZ. As these properties will most likely be given back to the bank, a new round of bailouts will be need to cover the billions of dollars of outstanding loans that are coming due. Our greedy leverage is going to kill the US for the next few years.

So I continue to be bullish on SRS. Also, another good stock to watch that I received a tip from a reader is XRT. It is a retail etf fund which seems to be moving a bit more stable with the market, for those who have become skittish with the Proshares etfs (I have not). Using a put on XRT could be coming up very soon for me.

I still can't find many reasons to buy long here in the short term other than some commodities. GDX, SLVR, DIG(or other oil etfs), and POT are ones on my radar if I have to eventually go long. Financials scare me to death as I feel they have a whole new disease to deal with when commercial loans hit their books. Why do you think they're still not lending?

Anyway, like we expected volume should continue to stay low until after the new year. People may begin to slowly drag themselves back into the office this week, but I am not expecting much. I am excited to get volume back in this market and see where it takes us. Bear tendencies have definitely returned to the market and should continue for a bit longer. Aside from Obama's inauguration, I don't see a lot left to spark buying for a while.

I hope everyone had a good weekend. Thanks for the comments about Lending Club. I also got some emails verifying that returns in the teens had been reached with their initial investment returned. That's the key, getting back what you put in. Nine out of ten people seemed to have something positive to say, so thats pretty good, in my mind. So I think I am planning on allocating some funds there, nothing big at first, to see if I can get myself some 10%+ returns. Everything counts. Have a good night, Happy Trading and we'll see you tomorrow.

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No Santa For Retail, But Hope For E-Commerce

Did this look like your mall this past week? Well, probably not quite, but I definitely noticed a lot thinner crowd circling the stores these last couple of days. Retailers were hoping for a miracle coming into this last week before Christmas as sales continued to be sluggish week after week leading up to the holiday. Well, it seems as if that didn't happen. It's funny, media and analysts won't call it what it is. It must be the weather that prevented people from shopping this year, or everyone is waiting for the week after Christmas, for the sales. Come on, can we just face the fact that we are heading into one of the worst financial crisis of the century, and many folks aren't going out and buying that extra computer or coat that they did last year. The more they try and cover it up, the more they become vulnerable to devastation. Either way, as the magic 8 ball would say regarding retail for 2009, "Outlook Not So Good."

Early reports from MasterCard are showing retail sales down for November and December anywhere from 5.5% to 8%. They contribute a large portion of this to the 40% decline in gasoline prices, saying that in reality, the number is closer to 2%-4%. Do keep in mind that this is still with the fact of huge discounted prices we saw this year, which will cause profit margins to be slashed. So, when calculating actual net income, the number has to be pretty scary.

Whatever it may be, people just weren't shopping that much. Not only were they not shopping as much, but when they were, they were not going to malls. Amazon is claiming to have its best holiday season yet. As people are becoming more discount aware, they are flocking to the online discounts. I am looking for companies like amazon to make a big push the next couple of years. The biggest barrier to E-commerce was the lack of comfort many people (mostly older) had from buying from online vendors. Well, people are now biting the bullet, putting their prejudices aside, and going where the discount is. I had to people in my immediate family who had never even thought of shopping online before, get most of their gifts this year from online retailers. I'll be keeping my eye on more e-commerce companies like Amazon and Overstock for potential buys for my portfolio. We could see a strong push for these companies in 2009 and 2010.

Overall, the day as a whole was pretty boring and lethargic. I assume most people won't be back at their computers trading until at least Monday, if not after New Year's. The Dow finished up another moderate .56% with the trading volume at about 86.6M, extremely low. At any rate, I don't see any big moves being made until the volume comes back.

It is not good to see these early signs of suffering from the retailers as it should only get worse in 2009. I expect this to directly affect SRS, as vacancy, in my opinion, for commercial retail will surely bounce anywhere from 15-30% depending on the market, which should lead to a lot of defaults on these conduit loans that come due this next year and in 2010. This is why I chose SRS as my number 1 pick for 2009, despite the few negative articles which have been written on the inverse etfs. I feel very comfortable with it.

Well, we all have a lot of things to discuss in the near future as we begin to tackle this beast called 2009. I appreciate the input from all of you. There are a lot of smart investors out there that can bring some great concepts to this forum. Please feel free to contribute and share your own successes. Also, several of the readers of this site have joined up with Lending Club, the p2p lending site we discussed last week. I would also like to hear from those that have and any successes or frustrations you have had from them. As I have heard from few, it has been a great source for some serious returns(anywhere from 6-15%), which may seem impossible in this market, which is also why I would like to hear from you that have been involved. Please comment below and let us know of your experience, and if you're interested in joining, see Lending Club for more information.

I hope everyone had a great holiday. There should be some serious discounts at the malls this week, as retailers will be desperate to liquidate some of this year end inventory to pay for their new inventory purchases. So get out and get some goods. Happy Trading.

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Christmas Wishes - My Top 10 2009 Stocks

Top Ten Stocks 2009
Well, we ended early today with a pretty uneventful day as we saw just a bit of Christmas Eve cheer to end the market up about .58%. So instead of talking about the few things that happened today, I thought I would take a peak into the future and give you my top 10 stocks for 2009. Most of these will be dealing with the first part of 2009, as I feel there could be some serious profits made on both the short and long side. If you are without an account, you can open one with free monthly trades at Zecco.com. So without further adieu, I give you my top 10 stocks.

1. SRS - SRS has taken a huge beating the past month as banks gained ground with bailout news and government intervention. Being involved in commercial real estate, I have a good knowledge of what is going on out there. The debt that is due the next two years is substantially larger than the residential we've already had problems with. With more retailers going BK next year, I can't see how SRS won't do well.

2. GDX - Although it may take a bit to get jump started, I have loved gold since it hit its recent lows. Our next problem will be inflation, when we figure out our bank problems, especially if we keep printing money like we are with a 0% discount rate.

3. FXP - Like SRS, FXP has also taken a beating the past month. Next year, as this recession plays deeper into the consumer, it should hurt exporting nations severely. Especially with the huge workforce in China and the building turmoil, I expect to see some serious interior rioting and government instability.

4. DIG - Like GDX, this may take a bit to find it's ground, but oil is acting much like a pendulum. It was pushed up into ridiculous prices earlier in the year when prices we're creeping to $200 a barrel. Now, it has been oversold as it lowers into the $30's. My guess is oil should be trading at around $75 a barrel and should stabilize there in 2009. It may take some time, but DIG should definitely get some love as it moves back up.

5. TBT - This ETF shorts the Lehman Treasury 20+. US Treasuries have been extremely overbought, as investors have lost a lot of confidence in the market. As a result, the returns on treasuries have hit pretty much 0%. I expect a serious retreat from treasuries in 2009 which should bear well for TBT.

6. VZ - This is my cash flow stock. Verizon has a great balance sheet with great market share for their sector. They also have a great dividend. They have proven to remain resilient during this tumultuous market. Although I don't expect huge gains from them, they act as my buffer and I still like VZ in 2009.

7. AAPL - Apple has taken a pretty strong beating these past two weeks due to some downgrades. The fact of the matter is, yes I believe tech will struggle more next year, but I believe Apple should lead the pack. With the amount of cash they have sitting in the bank, coupled with their extremely innovative product line, I can't see them remaining below $100 for too long. I know so much hinges on Jobbs health, but I think he can hold on for a few years.

8. YHOO - I think a buyout is imminent. And whether it is Microsoft or someone else, Yahoo's current stock price is way to tempting for a hostile takeover. E-commerce is on many company's radar for the future, and what better engine to lead you into it than Yahoo. I think it should take a quick pop soon as soon as someone can get financing to buy these guys out.

9. VMW - This was one of the most hyped stocks when it was publicly offered, shooting above $100 the first day of offering. Now, it has fizzled its way down to below $20 territory. Sure, they have had problems with management and competitors, but their technology and market share remains the same and as they integrate their technology with mobile phones and other devices, I see some serious upside for them in the future.

10. EEV - The explanation for this buy is much like the one for FXP. Emerging markets are a great buy when every country is buying. However, during a global crisis, everyone tries to keep things in house. I see some good profits from EEV.

So there they are. Mind you that some are long positions that I may not take until 2nd or 3rd quarter 2009, but I believe the upside is there. I still feel some of the above listed will continue to lose value, I just think they have the most upside for 2009 at their current levels. I hope everyone has a Merry Christmas, or any other holiday you are celebrating. Have a great evening, Happy Trading.

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Holiday Woes Continue - Bailout Bids Grow Larger

Well, so far it seems as our S&P test we discussed last week has proven to be correct thus far, as the market experienced another down day of trading during the holiday week. In the morning, it looked as if we maybe would have a day in the green, but sure enough the sellers persisted as the Dow closed down 1.18% today. In fact, I believe we are lucky that it is a holiday week, because if we had higher volume levels, we would maybe be seeing these numbers doubled, as our volume is about half as much as it usually is. Either way, I think it's safe to say that we have definitely flipped momentum since Friday and have some downward momentum for the time being. Now, how long that lasts, who knows with all the government promises that are announced every week.

Despite the down market, some of the shorts, like SRS were down. This may have caused some frustration for some of you. The main reason for today's drop was that SRS, along with others, were funds announced today by Proshares that distributed a dividend. This was the main cause for the down day, coupled with this still lingering bailout issue for commercial developers. I still believe we should see a lot of strong days for SRS here in the near future. You can see a full list of the funds that are distributing dividends here.

FXP had yet another strong day of green as low oil prices and failing banks continue to punish Asia. Many investors are taking their profits from the end of the year rally we just had as well. The selling could continue strongly into 2009, as stability continues to deterriorate.

American Express got a little piece of bailout money today, receiving $3.39 billion from the Fed. I can't complain about that, as I feel that short term lending is something that can help the market a bit. However, I still feel that people should not be bailed out of their existing credit card debt, unless it's me of course. In any case, another company to add to my list of companies I have ownership in.

Other woes to hit today's market was another month of worse than expected home sales. This should be no surprise for anyone, as consumer sentiment is weakening and a lack of lending still exists with the banks. Many people think the housing market will reach bottom during the end of summer/fall of 2009. I think it may be a bit longer than that. They also announced today the suicide of a hedge fund executive who lost millions in Madoff's scheme. That kind of news can't help the already suffering hedge fund market. Either way, there is not much to cheer for this week. Autos were slaughtered today, continuing from yesterdays bad Toyota numbers. At this rate, all three of the companies will be out of business before New Years.

In any case, the rest of the week should be much of the same as we have seen the last two days. We may have a little green day soon, just to reverse the direction for a bit, but I doubt if it will be anything substantial. Remember, tomorrow is a short closing day, so make sure you don't miss the close. As for me, I am holding back at the moment, until the volume comes back after the holidays. I feel I am in a good position for the direction we're heading into 2009. This is a good week to take positions, if you haven't already, as volatility is down due to the holidays. Have a great night tonight, Happy Trading and I'll see you tomorrow.

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No Santa For Stocks - Season's Beatings

I hope everyone had a good weekend and was able to knock off some holiday shopping. I don't know about you, but I couldn't help but notice the extremely low traffic at my malls, given it being just a few days before Christmas. Sure, there were a lot of people there, but nothing like years past. I guess it is just another sign of people not spending. There is a lot more of that to come in 2009.

My last post generated a lot of interest in Lending Club, a social networking lending club. There were a lot of questions, so I got the following brief summary from their company saying more about them and their strengths. They seem to have their act together pretty well. Here's what they said, "Because of the current financial crisis credit worthy borrowers are not able to get the financing they need to be entrepreneurs, expand current businesses and payoff debt. Lending Club connects these high quality borrowers with lenders. Lending Club offers SEC registered notes to these investors with returns stated from 6.69-19.37%.

Lending Club notes are 3-year fixed term, but can be resold on our secondary trading platform. This brings liquidity to social lending. Lending Club is currently the only peer lending site right now accepting new lenders and borrowers." So there you have it, if you're interested in testing those returns, go to Lending Club for more information.

Today, resulted in an interesting low volume day. No doubt, the holiday vacationers led to the low volume in today's trading. However, the sellers were definitely still by their computers, wherever they were. The market started out with a doozy of very disappointing earnings from both Walgreens, the largest US drug chain, and Toyota. If autos needed even more pessimism. Even the best made, most attractive and definitely most dominate auto company is having severe sales problems. I don't see a very bright future for our US autos no matter what kind of loan they get. Not for at least 2 years.

Another element, which made people a little ornery today, was the study that came out showing where banks have used the issued "tarp money." The results found that many of the banks were still paying out very large salaries to their executives as they did not have an outlined executive payout like the autos do. And as you can tell, not a lot of new "tarp" lending has hit the consumer market. So these funds are getting soaked up one way or another.

Something very interesting caught my eye today during today's trading. Notice below, the huge upswing just before close. Something came into the market during last 10 minutes to help give it a big boost (my guess starts with an F and rhymes with Red). With the low volume of trading and the large amount of bad earnings, I can't see a natural upswing like the one we saw today happening on its own. Can you say manipulation?

All the shorts finished strong, especially FXP and EEV. As we have discussed in other posts, foreign turmoil is building up and the more unstable the US becomes the more it reflects on these emerging markets. I am feeling good about being in them. SRS was up strong and came down towards the end with the market moving. One big reason for the fall as well, is that commercial developers are requesting to be a part of the bailout list, asking for more than 200 billion dollars. That's awesome, we're not even to Obama yet, and they are already asking. Of course, no companies were singled out personally, as their stock would most likely tank, but you can probably guess (Simon, Kimco, GGP, Centro), but their stock did receive some love today, as it seems some people believe they may get help. I cannot see them getting bailed out at all and them even asking shows just how much pain there expecting. You open Pandora's box if you give developers taxpayer's dollars. I am loving SRS next year.

Expect the volume to continue low this week with it being Christmas week. I still think selling will remain most the week as sentiment is getting worse everyday. The market has seemed very bearish the past two trading days, and once the volume comes back, it could get ugly. There should be some great profits made here in the near future. I hope everyone has a good evening, Happy Trading and see you tomorrow.

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Despite Auto Loan - Investors Are Still Unsure About The Future

Well, our rally streak has ended, at least for the DOW, as we saw it close down just under 26 points today. The Nasdaq remained strong today with the help of some better than expected earnings the past few days from tech companies like RIMM. In fact, if any of you are looking for some quick ways to way money, I found an interesting site where you can borrow from other people or make money(up to 19% return) by lending to other people(all secured). It's pretty interesting and worth checking out, It's called Lending Club. Hey, even in a recession, there's ways to make money.

The S&P barely closed up, ending today at 887. As we discussed yesterday, 920 was the magic number for all the graph and trend analysts. Many of the formulas and trends they use to determine this number is much too left brain for me, but they can definitely help in showing direction of trends. Closing today below 920 is suppose to show that the Christmas rally is done with and we should start heading the other direction. As I have said before, take this information how you may, as they can be wrong, but I do give them credit, so we'll see how next week makes out.

Seeing that we opened up a little fickle, despite the auto loan approval made me more believing that indeed we may have reached the end of this holiday rally. I mean here we had our usual Friday rally day, great news with the 17 billion auto loan to be approved for Chrysler and GM, even good earnings news for tech, and lowering oil prices and we still ended down today. So I definitely think, at least for now, momentum has shifted.

So with me believing we have the bears returning, I decided to make some moves today. I put a decent amount of cash into SRS at $61.00. Being that retailers, despite being downgraded by banks, had a push today, I felt like it's just too low for me to pass up. In fact, I actually transferred some of my FXP investment into SRS, it being my favorite of all the etfs right now. I do still see a lot of upside for FXP, it's just with SRS at $61, I can't pass it up. So, we'll see how that goes. It may go down a bit more in the short term, due to our recent huge rate cut, but with the woes heading for commercial real estate next year, I can't help but to love this fund.

I still think Apple is a bit undervalued, considering that RIMM performed well on earnings recently, and the Iphone has been outperforming Blackberry in mobile phone sales. Sure, Apple's computer sales may be down, but their product mix is so solid, I can't see them hurt too much during these times, especially with their cash balance. We'll see though, I still own some April expiring options.

So, I am now mostly out of my longs, with a few remaining GDX and Apple options. I personally feel that during next week, we should start to trail off. Maybe not too much with Christmas in the mix, but I definitely feel we're close to retesting the lows we've reached already. Hopefully, I can regain some traction on my short position as my latest buys seem very low. I hope everyone has a good weekend and is gearing up for a holiday. Go shopping this weekend, retailers are having RIDICULOUS sales (especially Macy's) to try and stimulate money spending. I am sure it's been a pretty slow December thus far. Happy Trading and we'll see you next week.

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Fed Tests Wall Street for Auto "Orderly Bankruptcy" - Market Responds

Well, yet another day of selling persisted today as there was much noise going on behind the scenes that Wall Street was not too fond of. Also, tomorrow plans to be a very, very crucial day for the market as we may see a pivotal position taken by closing time.

I think it has been 8 weeeks straight now that we have ended on a Friday with pretty strong rallies. This has been a strong trend with the market and has been a defining trend to continuing the rally. Tomorrow acts as a pivotal day of where the market may head in the future. Mechanics of the market say if the S&P stays below 920 by close tomorrow, watch out. Graph technicals show that if the S&P pushes us above 920, we could rally another 800 points. They also show that if we remain below that level, we could see a pretty strong spiral downward to end the year. These are technical trends, so take them how you may, but tmany times they can be great guides to momentum of the market. So keep your eye on that magic number.

Putting technicals aside, even if we break the trend of ending the week with a rally, could be pretty devastating for the market in its current fragile state. So, as I said in the beginning, tomorrow acts as a very important day. I personally don't see them making the threshold. With global woes continuing and now, the talks of an "orderly bankruptcy" for the autos, I find it tough for the market to end with a bang. Who knows though, I have been quite surprised before the past few weeks.

Commodities did bad today due to the increase in the dollar. Bank reserves were raised in Europe, which was an interesting move, since that usually significantly reduces lending. In return, the dollar had a big gain today, driving down gold, oil, and other commodity prices. I still love Gold for the long run, and at these levels cannot say no to oil too. I plan on picking up some DIG shares and putting them in my IRA. You can open up an IRA and get free monthly trades at Zecco.com.

The Fed tested the market today by throwing the idea out there to have an orderly or a pre packaged bankruptcy for the autos, which is essentially going bankrupt while having your hand held by the government. If this does indeed go through, wow, this could be bad. Even being a pre packaged bankruptcy would result in severe job loss and even more woes for the US economy. I do believe it is the best thing for the autos, I just also believe Wall Street will severally suffer from it. I see little chance for Chrysler even surviving, which I do not grieve that much. They always struggled with making cars and really do not have much of a future. It will be interesting to see if they really go through with it.

SRS soared today, as I expected, and I was able to pick some up at $57, which made me loving it when it closed at $65.75. Even though I have never been too worried about this fund, it is always rewarding when it has a 15% up day.

I still think Apple is under bought right now, even with the downgrade this week. The fact is they have huge cash positions. This is king in this market. Because of their cash, they will have strong negotiations and ability to sustain, even during a tougher time. I play "longer" options (usually expiring 4 months) out with apple, to give it time to come back up before I sell.

Well, set your alarms and wake up early tomorrow, because it's an important day. If it looks to be a down day, I may make one last buying round in SRS and even FXP. If it dares to be a big long day, maybe I will pick up some more GDX, DIG, or even UYG. It will have to be a really good day for the market though. Have a good evening, Happy Trading and we will see you tomorrow.

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Stock Market Carnival - Financial Sites To Consider

In doing this site, I have come across some great sites on a variety of different subjects. So, I decided it would be good for me to host a Stock Market Carnival on the site. For those of you that don't know, a carnival on the web is just a collection of different stock related articles that I have reviewed and my personal thoughts on them. I will give the link of the specific article and my personal thoughts on them. Feel free to check them out as there are some great resources out there. I will be giving my daily write up, as usual, after the close. On a side note, take advantage of some great currency trading in this market. If you do decide it's for you, I would highly recommend Forexmentor.com.

So lets kick this thing into gear. There were some great sites submitted. Feel free to check out the ones you are interested in:

Investing School presents 52 Must Read Quotes from Legendary Investor - Warren Buffett posted at Investing School. Indeed Warren Buffett is a legend and has been calling this crisis for over a year now. Good reference site for some of his greatest quotes.

The Investor presents Seven surprising things you may not know about Warren Buffett posted at Monevator. Another Warren Buffett reference. If you are interested in reading in on his past, this a good article for you. Not many fundamentals regarding today's trading, however.

Aussie presents Watching What Fund Managers Are Buying And Selling posted at Australian Stock Market Blog. This is a pretty interesting article on tracking hedge funds. It is dealing with the Australian market, but is applicable to our market and is beneficial for those trading in emerging market funds like EEV.

Michael Cintolo presents Compelling Action From This Potential Leader posted at The Iconoclast Investor. This is a short article on a stock Thoratec. It is brief, but I didn't know much about the stock to begin with. I plan on looking more into the stock.

Sandy Naidu presents Bernard Madoff's Ponzi Scheme posted at FutureNestEgg. This is a great little article breaking down the Madoff Ponzi scheme. If you are still wondering what went on there, great little summary here.

Tristan presents Insider Dealing vs Insider Investing posted at Find Financial Freedom. This is a great little article comparing Insider Dealing with Insider Investing. Worth checking out, a good little read.

Financial Planning
MBB presents Steps To Become A Millionaire posted at Money Blue Book Finance. This is a great article giving some good, overall personal finance tips. It's a bit lengthy, but you can definitely extract some good points from it.

Joe Manausa presents What Is A RSS Subscription | Tallahassee Real Estate Blog posted at Tallahassee Real Estate Blog. A quick reference of how to subscribe to blogs. It may be basic to some of you, but some people are still struggling how to figure that out. A good quick read.

Silicon Valley Blogger presents How To Become A Millionaire In 10 Steps Flat posted at The Digerati Life. A site discussing some steps to become a millionaire. I don't know if it will work, but maybe you'll find something to get you there. A quick read.

RL presents Are You Managing Your Debt Correctly? | Rich Credit Debt Loan posted at Rich Leverage. A great article on managing debt. This is definitely critical in today's market, worth reading.

Credit Shout presents Financial Planning for Retirement posted at CreditShout. A great post on retirement planning. This is something I always try reinforce its importance. Check it out.

Stock Market
Ryan Suenaga presents Market Timing: Twice as Hard as Previously Thought posted at Uncommon Cents. This won't knock your feet off, but it's a real quick read on playing tops and bottoms. We know how important that has been in this market.

Richard Taylor presents 2 Good Things About the Stock Market Crash of 2008 posted at Fun With Living Blog. Some interesting points about how to deal with the current low levels of stocks in today's market.

Surfer Sam presents NEW !! Best Stock Picks of the Decade !! posted at Surfer Sam and Friends. Some good stocks to keep in mind during the upswing of the market. Who knows when that is coming.

Well, there it is. I would like to thank those that submitted and encourage everyone to keep writing worthwhile information. We cannot compile enough information in today's market. Please vote for your favorite in leaving a comment below. I would like to get some feedback from you. I hope everyone is doing well during today's trading. It is moving just as we talked about in yesterday's post. We will see you again at the wrap up.

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Aggressive Rate Cut Spawns Questions - What Does The Fed Do Now?

Well, it seems as if we aren't as excited for 0% interest rates as we thought at close yesterday. It seems as though people have been digesting the thought of the huge rate cut with some serious questions. Why on earth did the Fed do such an aggressive cut? What can they do now to help stimulate the market? Even though there are still many vehicles they can do use to attempt to stimulate the market and cause for more speculative rally days, their strongest weapon is now out of bullets.

The fact that the Fed made the decision to slash the rate to the degree that they did yesterday, tells me that they think some serious problems are ahead. I mean, if the Central Bank feels they need to bottom the discount rate, like I said yesterday, this is their big finale that can hopefully carry us through the very frightening 2009. Really, the only big factor left, is the ability to continue to print money and flood markets with more capital. But Japan and Germany has shown us what can come from doing that. That is why I have loaded up on GDX and GLD. Which if you are looking for a trading account, you can get free monthly trades at Zecco.com

Well, Chrysler announced today that their assembly plants have been put on hold. Sure, this could be a bluff to try and hurry a bailout decision. In any, case it doesn't look good, especially to foreign nations. Ford also is choosing to shut down most of their North American plants an extra week in January. I just wish we could move on with the bailout, because we are going to experience another reactive day, like yesterday, as soon as something is announced with that. Can we please move on?

None of the short etfs were dramatically better. EEV and FXP were some of the better performing ones as foreign markets continue to show frightening signs. SRS was significantly lower today due to some strong gains in the REIT sector (GGP and Kimco). I mean, remember, it was just yesterday that we just received a historical slash to the rate. For this reason, I held myself from pulling the trigger on more SRS today, although I may hate myself tomorrow. Of course real estate is going to receive a push with the rate at 0%. If it is down more tomorrow, I am just going to have to buy some more. I don't feel like this cut is going to stimulate the market. Those that can get new competitive loans, will most likely take equity out of their house just to put money in their savings account or pay off their credit card debt. It's not going to be money inserted back into the economy. I just feel that when we cool off from this fuzzy high we're on, we have some serious problems to face.

Another problem with yesterday's rate cut is that, like I said, we cannot lean on that anymore. The ability to cut the rate has single handedly been the biggest source for market recovery than anything else. Well, we have maxed that out. No longer can we factor in expectation into the markets when the Fed meets. These are just a few things I feel people came to realize after yesterday's closing.

Sure, we are still very vulnerable for some more rallying. This is a massive rate cut, and with the help of other nations doing the same (probably Japan) and the auto bailout, we may still rally some more. But are bailouts our drying up. I do plan on picking up some more of the longs I discussed yesterday to give me some more hedge, but I still am staying very strong with my short. January is approaching very quickly, and there are a lot of problems which have been pushed to "next year" that will come back to haunt us.

I don't see us going much past 9200. If so, maybe after the holidays, I expect some serious consecutive days of selling. There has been a lot of money made on the long side the past month, and I would like to believe many of these people would be cashing in their chips. Tomorrow will be an interesting day, as a pretty aggressive sell off spurred right before close today. This trend could push through tomorrow and create some more selling on the trading floor. Either way, I am expecting both red and green throughout the day, with a pretty aggressive punch in either direction the last 10 minutes. I have some making up to do on my shorts, but I still feel that we've got a ways to go before we start to get better in our economy. Have a good night and we'll see you tomorrow.

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Dow Soars In Response To Historical Rate Cut

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.

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Emergency Update*** Fed Cuts Rate to 0 to .25%

Well, it's official. We are in 0% lending territory. This is a first for the US, and quite frankly scares me to death. This coupled with the moderate GS earnings today, expect the market to end on fire! We may end up over 4%. However, the way I look at it, is that we have no where else to go. We are all out of morphine. We should be in for a rude awakening shortly. I will discuss on this issue more on the daily wrap up.

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Monday Brings in Doubt, Upcoming Earnings Could Be Devastating

It seems as if our market is developing a bit of a pattern, “Freaky Friday” and “The Monday Blues”. It’s as if people actually go out around town and see exactly what is going on in our economy over the weekend and come into Monday with low expectations. Then during the week, the market places a trance over them into thinking that everything is just fine. I mean come on, we just had one of the biggest frauds pulled off in US history on Friday, and the market didn’t even blink twice. Sooner or later, all of this bad news needs to be factored in.

There wasn’t much of a fight today, like we saw all last week. It pretty much stayed in the red all day. It didn’t help that Bush warned auto makers that a bailout was not a sure thing. Only that it is to be considered. Plus, President Bush has bigger things to worry about, like getting hit in the face by Iraqi shoes (watch the video if you haven’t seen it, it’s hilarious). Either way, a passed bailout may cause for a short term rally, but should have no lasting effect on our dying economy. There is a lot to look out for this week that could cause some serious momentum in either direction. We’re getting close to the end of the year, and we’re hearing of more problems day after day.

On the bright side, look at Gold! Like I’ve been saying, I love GDX. Even with the down day it has the wherewithal to be up close to 6%, hitting over the $30 mark. If you scroll back to the post when I was buying it, it was at $19. With the government continually printing new money to bail out every Tom, Dick, and Harry, we should continue to see gold’s value go up and up.

OPEC is meeting this week to discuss a possible supply cut. I think there is a good possibility of the dissolution of OPEC, with growing demand problems. Soon, it will be a blame game of who should be cutting supply more, Saudis? Russians? Iranians?. In turn, the countries may choose to go their separate ways during this financial turmoil. At any rate, they don’t like oil being under $50 a barrel, so I am guessing something will be done with them. Keep your eye on DIG.

Well, we’re slowly but surely hacking our way back up with the inverse etfs. SKF and FXP both performed strong as there were doubts with financials thanks to the Madoff scheme. China continues to struggle as doubts loom over investors. With worries of government instability as well as the possibility of riots, what recently was labeled the savior economy, China, is looking to be a sinking ship.

The Fed begins their meeting tomorrow to discuss the possibility of a rate cut. Like I said in last weeks post, don’t be surprised to see a disappointing number come out of that meeting. The market would like to see a 50 basis point cut to the rate. However, I feel that The Fed will show the US that they cannot expect aggressive rate cuts every meeting, even in our current financial fragility. Sure, it may cause some drama in Wall Street, but hopefully will show investors that every meeting does not mean another 50 basis point hack to the discount rate. The Fed has also given hints to maybe not expect a big cut this time. It’s kind of like taking morphine. Sure, it dulls the pain for a bit, but later we’ll wake up with a bigger headache and worse pain then when we started.

Some key earnings this week are Best Buy and Goldman Sachs tomorrow. I would expect Best Buy to have pretty bad numbers, since I don’t see them that far off from Circuit City. I would also expect Goldman to have less than par numbers after the JPMorgan announcement last week. GS is before market, and Best Buy should be during the day sometime. Watch financials go tomorrow. If the numbers are indeed bad, we could see a 20% run in SKF, providing a solid day for the shorts. This could set the mood for the rest of the week.

Morgan Stanley, reports the following day, and I would expect them to follow suit. I can’t see them being any stronger than GS. If for some reason positive news comes out of the big Investment Bankers, than watch the market run. We have seen the potential for some upswing during December, and positive IB news could give some fuel to the bull. I don’t expect it, however, never rule it out.

The bear is growing hungrier by the day and I believe soon we will have some serious red days in our near future. These inverse etfs are still at really low levels and I would be extremely happy to just be buying into them now. If you don’t have a trading account, you can open one and get free monthly trades at Zecco.com.

SRS (up 5.77%) is still my favorite as we saw the extreme loan problem in real estate during 60 Minutes last night (what I have been saying the past 6 months). Depending on GS news tomorrow, it could be a slaughter. Either way, expect a big push either up or down. Let’s make some money, Happy Trading and we’ll see you tomorrow.

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What is FXP? The Make-up of This Inverse ETF

With the past few weeks bringing trouble to most of the inverse ETFs, many have wondered what these ETFs are tracking. Today, I am going to break down FXP, which has taken a severe beating the past month, due to praise China has received with help from government stimulus money as well as rate cuts.

FXP is the 2x leveraged ETF that inversely tracks the FXI China 25 Index/Xinhua. FXI is the NYSE traded index that is identical to FTSE which is traded on the Honk Kong Stock Exchange (HTSE). Weights are capped at 10%, so that there is not an over-concentration of one particular security. The index consists of two main security types:

H Shares - By definition H shares are securities of companies incorporated in Mainland China and nominated by the Chinese government for listing and trading on the Hong Kong Stock Exchange. They are quoted and traded in HKD. The only Chinese investors permitted to trade H shares are those who are approved by the Government, however there are no such restrictions on international investors.

Red Chips are securities of companies incorporated outside the People's Republic of China that trade on the Hong Kong Stock Exchange and are quoted in HKD. The constituents are substantially owned, directly or indirectly, by Chinese state-owned enterprises. The only Chinese investors permitted to trade H shares are those who are approved by the Government, however, there are no such restrictions on international investors.

All the securities that make up the FXI Index can be identified as either a Red Chip or H Share securities. The following are all of the securities that make up the index, along with their weight percentage and security type:

1. China Mobile (Red Chip) 10%
2. Industrial and Commercial Bank of China (H) 9%
3. Petrochina (H) 8%
4. China Life Insurance (H) 7%
5. CNOOC (Red Chip) 6%
6. Bank of China (H) 4%
7. Bank of Communications (H) 4%
8. BOC Hong Kong (Holdings)(Red Chip) 4%
9. China Communications Construction (H) 4%
10. China Construction Bank (H) 4%
11. China Merchants Bank (H) 4%
12. China Petroleum & Chemical (H) 4%
13. China Shenhua Energy (H) 4%
14. China Telecom (H) 4%
15. China Unicom (Red Chip) 4%
16. Ping An of China (H) 4%
17. China Coal Energy (H) 3.69%
18. China COSCO Holding (H) 2.51%
19. China Merchant Holdings (Red Chip) 2.28%
20. China Netcom (Red Chip) 1.95%
21. Aluminium Corp of China (H) 1.61%
22. China Citic Bank (H) 1.12%
23. Huaneng Power International (H) 1.02%
24. Datang International Power Generation (H) .96%
25. Air China (H) .85%

Usually you can tell what the general direction of FXP is heading by following China Mobile (CHL), it having the most weight at 10%. This should now give you some direction of why FXP moves the way it does. Even on days when the DJI is down, it does not necessarily mean that FXP will be up. FXP follows the above securities, and lately they have been performing at their own speed due to the recent government intervention in China. In my opinion, this should not last long. Here's a good article underlying reasons, that I heavily agree with, that should bring some problems for China in the near future at seekingalpha.com.

Hopefully, this clarifies things for those that have been confused about FXP. There are many things written about these inverse ETF funds, both positive and negative. My feelings on the issue is that in this volatile market, they act as a great way to make quick profits without having to buy on margin. Sure, there is an expense in these funds, but for me, they have not stood in the way of some big profits.

I will be hosting a Stock Market Carnival on this site this Thursday, December 18, 2008. A blog carnival consists of other stock related sites with a brief explanation of what their site is about. I will try and keep it to worth while sites that will help you in your research. If you want to submit your own site, click here (you will need to register). I hope everyone has had a good weekend. Asia is up right now, which could correlate to yet another bad day for FXP tomorrow. We'll see what the market brings to the US tomorrow. Happy Trading.

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Friday Rallies Persist - Madoff's Ponzi Scheme Could Cause Problems

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What a day. I felt like I was riding a never ending roller coaster. Investors had no idea how to "day-trade" in today's market as digestion of all the new economic and auto bailout news was a bit difficult. Then to top off the day, we have the Madoff hedge fund scam that should cause some noise next week.

As expected, pre-market trading was very negative, in response to the rejection of the auto bailout last night with The Senate as well as the Madoff scheme. The Dow dipped as low as 220 points today, but quickly gained strength as President Bush announced the possibility of utilizing a portion of the "Tarp Money" to assist in preserving the autos. As I discussed yesterday, I did not see a very likely chance that they would completely abandon the auto makers.

We then received the retail report, which once again brought down the market. Retail sales came in down 1.8%, which actually was lower than market expectations, but it also has been the longest stretch of negative sales (beginning in July) since the Commerce Department began tracking the number in 1992. Many people believe the reason for this semi-optimistic number, is that more people did ALL of their holiday shopping during the Black Friday weekend, instead of spreading it out over December, as it has been in prior years. I don't know about you, but lately, the traffic in the shopping malls near me have been pretty modest.

Another positive that bumped the market a bit, was University of Michigan's consumer sentiment report came back more positive than the previous month, rising to 59.1 from 55.3. Much of this was contributed to the incredible drop in gas prices, as most people are getting anywhere from $50-200 extra a month now. However, studies show that people are not spending this money (either being saved, or paying bills). So in turn, that doesn't do much for our monetary supply chain. At any rate, they don't call the end of the year "The Bull Season" for nothing. People are a bit more positive during this season.

In the end, we did see the "end of the week rally" prevail as I believe that makes it 8 weeks in a row we have seen a rally on a Friday. I am still hearing from analysts on the news that, because of the ability to stay positive in the midst of persisting negative news, that means we're at the bottom. Hilarious. We are ankle deep in this current economic crisis, that has a very long winter ahead of it. And what happened today with the Ponzi scheme is a preview of what we can expect in coming months.

Today, Bernard Madoff, the well respected Wall Street guru who managed a billion dollar fund, and who was the Chairman of the Nasdaq Stock Market in the 90's, was arrested due to frauding investors of what could be more than $50 billion in what authorities are calling a "ponzi scheme." Madoff was able to fool investors into thinking their fund was producing great returns, when in fact their money was being sent to what Madoff called, "money heaven." This gives more weight to the phrase, "if it seems to good to be true, it probably is." Even though, the market seemed to plow right through this, this is a big divot in our recovery. This directly affects investor sentiment. After this story being in the headlines all weekend, many investors will question their hedge fund's integrity. If it wasn't difficult enough for hedge funds to gain confidence from investors to keep their money with them, now they have one more big obstacle they need to clear. Having been looked right over today in the "Friday Rally", I believe we will see this scheme factored in next week, as people will realize how big of a deal this really is.

We've got a lot of action in next week's trading. Not only do we have the Fed's meeting to discuss another rate cut, we also have Morgan Stanley's and Goldman Sach's earning announcement which should cause some momentum (either bad or good) for financials. I plan on selling my UYG options before than, as I do not expect good numbers, due to the disappointing announcement from JPMorgan yesterday. SKF and Faz could receive strong bumps, if those earnings are indeed disappointing. Also, there is still a consideration that the tarp money could not get allocated to the automobiles. Although, I still feel it is unlikely, it is possible. There is a lot of opposition to the bailout and it is still a crucial element to moving this market.

Going into the holiday season, volume should continue to get lower and lower, which makes it more vulnerable to volatility. It should be another crazy up and down week as we end the year. I still think we should continue to get gains from the shorts as more and more of this bad news gets factored into the consumer.

I am still loving SRS, FXP, EEV, GDX, and DIG for the next year, as I think they should receive some good gains. Note the recent volatility of SRS lately. Just in the past two days we have seen it be up 30% one day and down 20% another. Even though, I love this fund as a long buy, it could be a great play for you day traders. If you can buy into SRS in the $70's price and sell at around $100, you may be able to turn some quick profits in a very short amount of time. Keep that in mind. Have a great weekend and Happy Trading.

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Emergency Update*** Auto Bailout Is Denied In Senate

Thursday night, the auto bailout was officially rejected by the Senate as there will most likely be no bailout passed before the new year. Wow, what a surprise. Expect a serious negative response tomorrow in the market. World markets are already hurting hard from it. Well, I can't say that I don't agree with rejecting the bailout, I just thought they would pass the bridge loan. Tomorrow should be an interesting day. Have a good night.

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JPMorgan Warns of Tough Times Ahead - Wall Street Reacts

Well, it seems as if winter may be ending early as there was some movement from the hibernating bears today. Finally, we saw some strong movements from most of the inverse etfs today. As I said yesterday, the “Holiday High” may not sustain into the new year. Negative outlook persisted as Jamie Dimon, the CEO of JPMorgan, went on record to say that they had a “horrible” November and are having a “horrible” December. I can’t imagine the kind of numbers they are performing if the CEO has to prepare the market the way they did today. Like I have been saying all along, financials are definitely not out of the woods yet. The $700 billion was chump change just to help cover their bad debt. It has not stimulated any new lending, and in my opinion, much more “tarp money” will be needed if they expect the banks to start lending anytime soon. Wait until the consumer starts pulling out their money next year, because of the massive job loss. The banks are getting desperate. You can actually find pretty decent rates if you’re willing to work with the banks. This is a pretty cool site where you can have different FDIC insured banks bid for your business. It usually results in better rates. Visit MoneyAisle.com for more info.

KB Toys and EZ Lube were new members of the Bankrupt club this week, which is slowly becoming standing room only. Office Depot said they plan to close 112 under performing stores in North America, as well as six distribution centers. They are also going to cut spending by $200 million. These are the beginning signs of business failure. If only businesses new that you should cut spending in the high times and begin to contract their operations and use the recession times as building, they would be far better off. Many American businesses will now suffer from their past five years of greed. This should add another log to the Unemployment fire as we are looking to have one heck of a Q1 2009.

The auto bailout is still pending as it is finding some adversity in the Senate. Sure, they may have to go back in tweak some things, but I still don’t see how they won’t pass this bridge loan. Media likes to keep people on edge, but I believe it is a lot farther coming along than media plays it out to be. The auto bailout is the one lurking variable I still feel has the power to keep the bull running for a bit longer. I just wish it would be done and over with, so that we all could move on with more normal market movement.

One thing to look out for is next week when The Fed meets to discuss the rate cut. Sure, we most likely will see yet another cut to our already very low discount rate. However, don’t be surprised to see The Fed disappoint the market. The market expects a 50 basis point cut. In doing so, The Fed would be flirting awfully close with inflation and also needs room for emergency rate cuts, as I believe they know we have harsher times ahead. If we indeed see a lower than expected rate cut, that could cause for some negative trading and set a bad mood for next week. At any case, I believe the bears are ramping up soon to take control back of this market.

SRS showed today why I deem it the “Rock Star” out of all of the ETFs. We saw it just about touch $100 today (close to 30%), which I would say is pretty strong. In my opinion, SRS is just getting started. Wait until the commercial loans come do. 200+ stock in my book. SKF and FAZ also had high gains due to the negative outlook given by Mr. Dimon. FXP gained pretty well as Asian markets are continuing to show doubt to investors of their ability to grow in these tough times. Hey, maybe people are beginning to do their research.

I would like to say the selling will continue into tomorrow, but there are a couple of elements that could stir that up. First, we still have the auto bailout lingering out there. If a deal is cracked tomorrow, expect a pretty strong cheer rally. For you gamblers, picking up some GM or F stock may not be a bad idea. Just get out fast again. The second element is that it is Friday. Recently we have seen big runs on Fridays, despite whatever bad news the economy can throw at the market. For some reason, investors have found Friday a good day to buy, although I do believe the bulls are not as ramped as prior weeks. I still like YHOO as a pick up, as I believe it is only a matter of time until a deal is struck. At any case, I am glad to be short right now, and expect pretty strong gains from them the next few weeks. Happy Trading and see you tomorrow.

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Market Rallies In Auto Bailout Anticipation - Are We Done With Green?

auto bailoutAnother day down which resulted in similar trading trends that we have been seeing these past couple weeks. With the anticipation of the bailout, traders (I dare not call them investors anymore, because the investments that are yielding profits right now are about as solid as junk bonds in my opinion) pushed the market into the green for most of the day. We did see the market dip down into the red, as people began doubtful, there being talks that the bailout could face some problems with the Republicans. However, you and I both know this deal will be done and in my opinion this bailout was factored in two weeks ago when they announced they would be meeting about it. But I am sure the market will have something to cheer about when it gets announced, but it may not last more than a day, there being no more bailouts in the current pipeline.

Emerging markets and China have been receiving UNBELIEVABLE amount of praise from investors. This weekend I will write a detailed post of why I feel FXP is getting killed so much, so look out for it. China is forking out money left and right into their airlines, banks and major business just to keep them afloat. Somehow, this is perceived in the market that this is a positive sign. I mean come one, how blind are these people. China announced yesterday that their Producer Price Inflation fell 2 percent from January to November. This is far more than predicted and is very scary for China. They have a major risk of inflation as energy costs begin to rise and global economic problems persist. Yet traders brushed that news off just as they did the horrific employment number we received on Friday.

This is a dangerous time in the market, because there is very low volume and it seems as if the main bulk of traders are not fundamental traders. It is clear to me that hedge funds and institutions are waiting. Until, we get some fundamental movement based on actual numbers, the market is one big roulette table. This is why I am choosing to stick with my few fundamental picks and just wait. EEV and FXP have been utterly destroyed the past month. I don’t dare call “bottom” during this end of the year market run, but if I had to guess, I would say we have to be close with those two. If you haven’t bought in those yet, you are loving these incredibly low prices! Bring on 2009 and the new batch of problems.

The next item up for shorting are Treasury bills. With the recent, enormous popularity in our treasury bills with the billions of dollars being flushed into them, this makes treasuries prime for shorting in my book. As the US economy continues to show signs of severe weakness, our foreign neighbors will grow fearful of keeping their money with us. TBT is the Proshares Ultra short that shorts the Lehman 20+ year treasury. With the amount of government spending, coupled with foreign countries pulling their money out of our treasuries, this should weather very well for TBT. It may take a month to get jump started, but I believe we are low enough now. I plan on picking some up later in the week.

GDX and DIG are proving their resilience and I don’t see them slowing down much in the coming months. Sure they may get hit a day or two, but I think we will see an upward trend from here on out. The Saudi’s are closely watching oil and will not let the prices get lower. All commodities are receiving a lot of love due to the global weakening currencies. I am getting the urge more and more to look into trading currencies as I have been using Forexmentor.com for research. You might want to look into it if it’s your cup of tea. I see GDX and DIG continuing to move strong. SRS hurt today with strong gains in the REIT sector. There are no fundamental reasons for these gains other than them getting caught up with the bailout bust. These should be going down just as fast as they shot up in my opinion. Like I’ve said before, SRS is a rock star in my book.

We may see a bailout pass tomorrow. Either way, the market should move with that decision. If we see it pass, expect a nice little cheer rally. This could be the peak for the longs. I may sell out of the rest of my longs, except for GDX and DIG. If there is still complications with the bailout, we could see some selling tomorrow. Either way, I believe after this bailout is passed, people are going to once again realize the reality behind their two weeks of hallucinating. I hope everyone has a good evening, Happy Trading and see you tomorrow.

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Profit Taking Begins - Investors Find Safe Haven in 0% Treasuries

Well, as expected we saw our day of profit taking. Like I said yesterday, a 600 point rally in a bear market is more than you can ask for if you’re going long. Continual negative forecasts and outlooks brought Wall Street back down to reality for today, as people started digesting all this economic data we have been receiving. Personally, I don’t know who is doing the buying right now, because it is sure not the institutions. In fact, I believe the institutions are selling. The Treasury sold $32 billion in 0% yielding 4-week bills. $32 Billion! That shows just how many people feel that our market is in for a bad run. These people are happy having a 0% yielding return, which sounds great if you think a big downfall is on the horizon. Our foreign investor friends and institutions are looking like they are not wanting to roll the dice with the NYSE. Is it really all that surprising? ICSC (International Council of Shopping Centers) announced their negative outlook on retail for the next year. Fed Ex and Texas Instruments also joined the party of cutting their forecasts for the next quarter.

Even though we had this sell off day, we could see the market still continue to be bullish for the next week or two, especially if there is an agreement on the auto bailout this week. However, I feel that the bull is running out of steam. This Friday we have retail sales which , in my opinion, should be pretty lousy. We also have the PPI (Producer Price Index) on Friday, which expectations are pretty low as well. In any case, during this holiday season, there is not much to be cheerful about in regards to the stock market. However, the market has continued to push up and I have absolutely no idea who is buying right now. I think the government may just be printing money and putting it into the market, ha. At any rate, I still think we could see a crash any day. As soon as momentum starts pushing down again, it’s going to be hard to turn that train around.

SRS, my favorite ETF, was best of the shorts today, ending the day up over 12%. SKF also did well, as financial’s green streak came to an end. FXP and EEV were alright, however, I would like to see a stronger performance from them in the near future. DIG and GDX both held up strong despite the sell off. As I said yesterday, energy and commodities are the only buys I like long right now.

Right now, many people are using the “end of the year” term as a scapegoat. Broadcom cut their forecasts today saying that “many of their customers are postponing their purchases until 2009.” Yeah, like things are going to get better next year . It is the same with China and Europe, as they are hiding behind “year end uncertainties” to explain their market instability. The fact is they will use any excuse to hide behind to try and instill investor confidence. If foreign investors pulled out of those emerging markets, they would be killed. As soon as 2009 hits, I believe that is when reality will hit most. Coupled with the exhaust from holiday spending, year end earnings reports, continued unemployment, and slowly increasing energy costs. Right now, we are very lucky that oil has hit such lows. Just don’t expect it to be at $42 a barrel for much longer. As colder, winter months settle in, the demand for oil should increase.

We could see another day of sell off tomorrow, depending on the auto situation. If so, I will probably sell out of some of my long options and finally cash in on my profits. I have good positions in short right now, so no need to bulk up on more of those. If we go green again, I will, however, be picking up some more SRS in the low 80’s or high 70’s. I do expect a red day tomorrow, as I would expect foreign markets to react negatively to our down day today. But, who knows in this market, with these crazy buyers. I hope everyone has a good evening and thanks again for the donations, much appreciated. Happy Trading and we’ll see you tomorrow.

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