Financials Breath New Air in Rally

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Today, bulls answered the two day consecutive sell off with rather strong gains for the Dow, mostly lead by financials. At one point the Dow was up over 200 points, but ended with a rather strong pull back the last 45 minutes only closing up 87 points. There was no significant news in my mind that caused for the aggressive buying, which leads me to believe that, once again, investors are buying on speculation, not actual data.

The market was pulled up by the strong day in financials. Fundamentally, this is surprising, considering all of the bad media that the autos have been getting and the real possibility of bankruptcy for GM and Chrysler. However, as I discussed in Saturday's post, there are a lot of "influencing announcements" which are right around the corner that investors are obviously feeling that are going to have a positive impact on trading. However, this is a very risky game to play. If you want to play the "speculation" bumps, make sure to ride them before the announcement, because lately, the actual data released has usually been more of a downer than what investors had originally anticipated and can lead to a reverse in trading.

My guess for today's praises is the anticipation of the FASB meeting being held Thursday to discuss changes in the mark to market accounting, which I previously discussed here. It is hard to see FASB completely doing away with mark to market, as it would most likely cause more harm than good. However, many believe that there will be enough alteration that will give banks a lot more breathing room on their balance sheet. The only problem is that much of that was factored in today's trading and that anything less than a significant alteration in the practice would most likely lead to a very negative response from the market. This is why we saw SRS and FAZ get hammered today, as much of their success relies on the compounding debt plaguing the financial institutions. However, whatever the result, bank's problems are far from over, in my mind, and these speculation rallies set up good opportunities for short term shorting for quick profits.

BBY (Best Buy) is one that I have been eyeballing along with GS for opportunities to short here in the near future (I discuss it more in today's podcast). I think both are susceptible to significant downside risk as markets continue to become non-reliant and the economy worsens. When indeed deflation hits hard, I would expect BBY and other electronic depots to get hit pretty hard, especially since much of their inventory is purchased with debt. So I'll keep my eye on these two.

Currently, markets are down in after hours, and both FAZ and SRS are up rather strongly, especially for after hours trading. It is very common to see an even bigger sell off following days of strong "speculative trading", which I believe was what we saw today. However, with one more day left until the FASB meeting, enough noise about it on the news stations could still give some financials a bit more love, but I do feel they got most of their "pre-bounce" today.

So, Thursday will be the critical day to watch as all eyes will be on the FASB meeting. I still see oil and gold having some more downside risk before seeing buy opportunities of the two, however, agriculture has been looking very strong lately. Remember, E*Trade is running a great promotion right now where you Get 100 Commission Free Trades in an E*TRADE IRA. No-fee, no minimums. Definitely check it out as it is becoming a good time to setup up the IRA's, as more and more future tax risk is coming. Happy Trading, we'll see you tomorrow.

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In A Bear Market, The Bear Prevails

gm crashWell, already we are seeing a change in speech and sentiment from news anchors and analysts, who are now considering that indeed we may not have seen the worst for the stock market and that we are still vulnerable to some more downside. This is why it is so dangerous to go long during a bear market rally and why I try to avoid it as much as possible. This is because most influencing forces are pushing stock prices down, when, usually, only technicals and speculation cause for stocks to rise. No matter what the government announces and how much money they spend, there is still going to be bad news reports after bad news reports that cause for a lack of confidence in the equity markets.

Today it was the autos, GM and Chrysler specifically, causing much of the problems with the market. The market was doomed at opening, when the Dow opened down over 200 points. At one point during the day, the market was down almost 350 points until the market started pulling back the last hour of trading. Today was definitely not the way bulls wanted to start the week, especially already seeing a slow in their recent aggressive rally.

The bad news came when GM's CEO was asked to step down and President Obama rejected the auto's turnaround plans and said that he wanted the US autos to be able to compete internationally and that the auto industry was not currently heading in the right direction. He also gave Chrysler a 30 day ultimatum to get their debts in order, which would take a miracle if they could pull that off. Obama tried to reassure everyone that the government has no intention or desire to run the companies internally, however I don't know if anyone bought that.

The new GM CEO later said in an interview that due to the recent demands of the government, GM is considering bankruptcy, which was not discussed as an option previously. They would still prefer a restructure outside of court, however due to the most recent demands from the government, a controlled bankruptcy may be the road they choose to go.

This is just one of the many problems the market is vulnerable to. In this type of economic environment, everyday is a new day of risk of something very significant being released to negatively influence the market. The more devastating fact of the auto bankruptcy threat is when you consider the massive amount of bailout dollars that was spent the first round to try and keep them a float. This result is not very encouraging, especially when you consider how much money we just spent on commercial banks and AIG. This is why too much government intervention can, ultimately, be worse for the market than if they had let nature takes its course.

The shorts soared today. My SRS and FAZ call options in my account both saw big gains throughout the entire day. Due to a family emergency I was unable to make any moves toward the end of trading, which I may regret, if we see a rebound tomorrow. I personally don't feel this is necessarily the beginning of the long road down, as there is still some potential positive news coming soon, but continual problems with the autos could very easily send the market down another 3-400 points. This is a very critical time to watch how the market reacts and what the charts look like. I will make sure to keep you all posted if I personally feel something is coming. I have enough gains in my SRS at this point (buying it at under $50) that I can afford to sell tomorrow if I do begin to give back some profits.

At any rate, this is a good sign for bears. Not only does it prove the significant downside risk we are still vulnerable to, but that indeed even with great help from the government, many programs and companies will still fail, all while increasing our national debt more. So, tomorrow acts as an important day for bulls to see if they can stop this path downward. One or two more days of strong selling could cause for a change of winds for the market. So keep on your guard. Happy Trading.

PS - I apologize for the current problems for new people wanting to subscribe to the podcast. There is a logistical problem at Paypal at the moment that I have been assured should be fixed ASAP. For those already subscribed, you should not have any problems hearing the new podcasts. I'll keep you updated.

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Upcoming Bear Speed Bumps

uptick ruleFinally, 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:

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.

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Are We Reaching The End of the Rally? - Things To Watch

obama dollarWell, we might as well start printing new dollars with Obama's face on them, because by the time we spend our way out of this mess, our current dollar will be worthless. Once again we saw another wacky day of trading. Volume remained light today, which makes me even more suspicious of market manipulation. Today, again, we saw these unnatural spikes throughout different times of the day, suggesting several "lump sums" of buying. Whether it's institutions or Uncle Sam, there is definitely a bullish force turning the market around every time the markets begin to drop and as I said in yesterday's podcast (subscribe here), The Fed has motivation to do so. With the light market volume, institutional trading will cause the market to react much more sensitively, compared to trading days we saw last week.

It's amazing to think on days like today, when a 6.3% drop in GDP for the 4th quarter is announced, investors find it a time to buy. We are falling back into the trend we saw back in November and December, where no matter what news is reported, we keep buying. Well, we saw how quickly and violently that caught up with us, and I believe it will be even worse this time around. Once again, we saw this horrible reported number spun as a good sign of the "strengthening" markets. Don't ask me how they come up with that conclusion, but obviously they are using different indicators than I am.

crash market stocks podcastThere continues to be noise from the government as Geithner described how he plans to apply more transparency for hedge funds dealing with credit default swaps and debt trading. Many are cheering his ability to answer the questions, but application of such plans is a different story. President Obama also had more media time today, hosting the first "web" town hall meeting where he talked about more spending he has planned for programs outside of fixing our economy. Wow.

Fort most of the day, the shorts were actually holding up fairly strong. SRS was in the green for most of the day and even FAZ got into positive numbers for a while. However, once again, we found a "mystical" force push all markets up the last hour with no news behind it. Let them move the markets on these low volume days, because when the volume comes strong, it won't be as easy. We are seeing a lot of resistance for SRS at 5o and 18 for FAZ. Tomorrow, should be a good sneak preview of whether this rally still has some legs or if it's running out of gas.

I am feeling a definite slow down in this rally. We may bounce back and forth a bit more around these levels, but as of now I don't see the rally going that much higher. This of course is pending there are no more big government announcements. From below, you can see the moving chart of the S&P. Technicals are showing a definite slow down heading towards that 850 mark. We'll see how close we get to that number or if we begin to retreat from it. If we do indeed push right through it, that's a big move for bulls.

sp trend chart
Another factor leading me feel that we're slowing up, is the slow down in financials. Financials have been leading the way in these crashes and rallies. We've seen C and BAC double since their recent lows, which has helped sent the market flying for most of March. However today, even though FAS was up, GS, MS, BAC, C, and WFC were all down, despite the strong day for the Dow. Moody's cut their rating for BAC yesterday, which probably contributed to the sluggish trading, but overall financials are losing their flare. I would expect if this were to continue, eventually we're going to see the Dow follow.

Also, we are beginning to see inflating prices for commodities and energy. Oil continues to rise, despite us heading into the low demand season for oil. Sure, I believe oil should climb back up, but I do think we're a bit overbought at the time. Gold also continues to rise. I love gold, but I feel we will see it dip well below the 900 level before inflation hits. These inflated prices lead me to believe that the market is a bit inflated in general and that we should see some selling soon. This contributes to the deflation, that I feel, will soon take our economy by the horns.

STP saw huge gains today (up over 40%), based on the new announcement that China will be subsidizing solar costs. I had mentioned STP in a few posts a while back as one to watch in the solar field, so keep your eye on that. These gains caused for some big gains for my IRA, which was nice. Speaking of IRA, E*TRADE is offering a great promotion where you can Get 100 Commission Free Trades in an E*TRADE IRA. No-fee, no minimums. Pretty awesome, check it out.

Below is a comparison chart showing the Dow movements from the 1929 crash compared to our most recent bear markets, including our current one. As you can see, and as I have stated before, our current market is tracing very close to the trends of the 1930's market. Although other recent bear markets were bad, there is not nearly the selling volume that we have seen in our current crisis. So, hopefully this can be a reminder for those feeling that we've hit bottom, that it could (and I very much believe) get a lot worse.
crash comparison
Tomorrow should be a very defining day for the rally. If we someone how end over that 850 number, we could see yet another week of gains for the market. However, if bears return to this market and regain control, there is big potential for a strong sell off. We are due for a sell off and I would expect our next one to be pretty significant. I am remaining cautious, with my light short position waiting for a bit more definition. We are getting close. So be alert, Happy Trading, and we'll see you tomorrow.

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Miracle Closing Boost Gives Bulls Victory - GDP Expectations

new home salesToday's closing was better than the evening fireworks show displayed at the Disney theme parks. I had to double blink a few times just to make sure I was seeing the correct numbers stream across my screen. Definitely, something caused for an absolute V difference in trading, as we saw the Dow go from being down 100 points to closing up 90 in under 30 minutes. The biggest change was made, literally, the last 5 minutes of trading. As I have said before in prior posts, we should expect these violent swings more often and with more volatility. Today reminded much like the V turn around we experienced back in November. It was definitely something to see.

Now my first suspicion of the closing was PPT. The sudden jolts of buying at certain dow markers was very similar to trends that PPT would create. My other theory is that some inside information may have leaked out about the GDP number tomorrow. It kind of felt like there was a party and the whole neighborhood was invited, except for me. Either way, someone is trying to ignite the market in preparations for something, and as for me, it makes me a very cautious investor. Oh yea, and over half of today's volume came from the last two hours of trading...chew on that.

crash market stocks podcastIt is days like today that more solidify my beliefs in the coming of a strong downward spiral, as clearly there remains significant speculation in the markets. Even after another day of "perceived" strong numbers, the second half of trading (besides the last 20 minutes) was mostly selling. In my opinion, the rally is beginning to run out of steam. We're about 250 points off of my 8000 expectation that I wrote about a couple weeks ago and we could be there by tomorrow. If we break through the 8000 mark, the rally should push onward toward 8300, so keep an eye on that.

As we anticipated, new home sales were better than expected as were the purchase of durable goods. Once again we find ourselves comparing apples to oranges. The better comparison for such numbers is a year over year number instead of a month to month number. As it was reported that durable goods did rise 3.4% from January, from a year to year basis they are still down 28% from last year's March numbers. The same goes for the new housing sales in which we saw had a significant increase from last month's numbers. However, from a year over year standpoint, we are down over 41%! Also, they failed to highlight that the median price declined, once again, over 15%.

Obviously, there is a twisting of the definition of numbers going on to try and propel buying in the markets. There was also some problems with Government bonds and the failure for asking prices to get filled. I go into more detail of this problem in today's podcast (subscribe here), but I feel The Fed has some big motivation to keep the markets looking healthy at this point.

There is an article on CNBC today that almost directly defines the headlines we should expect to see more of in the near future, entitled, "Has Geithner Rescued America?". In the article the writer talks of all that Geithner has done and that we have him to thank for unfreezing the credit markets and turning around this economy. Talk about don't speak too soon. I am amazed that CNBC posts articles such as these on their front page. Sure, give me access to a currency printer and I will get anyone out of their current financial problems...for now. Such nonsense shows the naivety of some of these writers, all of which I take with a very, very small grain of salt.

dow rally
At one point during the day, SRS and FAZ were both up over 10% which was looking quite well for me. Being only 45 minutes from close, I thought to wait until closer to the closing in order to take some profits (considering my SRS was up over 20% from when I bought it, and my FAZ option up 30%). However, little did I know the storm that was to arrive right before close and flip the market upside down. I ended up not making any trades, which could keep my little stake in short longer than I had originally wanted to hold it. I still remain up in SRS, but if this rally shoots into tomorrow, we could see it back in the mid 40's.

I anticipate the GDP number to follow suit and be "spun" as a good number. Tomorrow is a tough one to call, because honestly I could see us rallying 200 points or even sinking 200 points. Investors are becoming more and more sensitive to market conditions and the littlest breath of new developments can stir things up. We should have a good sense of where things are going in pre-market trading, but I would expect GDP to set the tone for tomorrows trading.

I believe we're getting close to the peak of this rally. I don't mind getting in late on the short side rather than getting in too early. I don't think we are done with seeing these violent green jolts, so I am still being cautious on the allocation of my funds.

So tomorrow acts as a very critical day for trading and I believe we will be able to better tell if this rally is coming to a halt or if it has some more steam left in it. April is getting closer and closer which not only could be new trends for the Dow, but also the dreaded tax season. In this type of economy, there are a lot of ways to save $$$ on tax dollars, so consult with someone. Washington Tax Service is very good, so if you Need Help with Tax Debt? Learn your options for reducing or settling tax debt. Have a Tax Attorney on your side. Get Started Today.

We'll see you all bright and early, Happy Trading.

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Rally Hits Wall - More Mumbles From Gov't is Sure to Interfere

obama speechThe market took a breather today after its huge hike up yesterday, as the Dow closed down 115 points after being up several different times throughout the day. I expected a rather mixed day of trading at some point either today or tomorrow, as there were many still buying to try to catch the soaring rally mixed with those selling to pocket those big profits from yesterday, which bulls hadn't seen for a while. Today, we saw even lower volume than yesterday, which really has me wondering who's trading in this market right now? It doesn't seem to be institutions or hedge funds. I believe it's a world full of day least at the moment.

Sometimes, in the midst of these violent, bear market rallies, it is easy to forget that indeed we still dwell in a bear market. It was surprising for many to see the Dow end almost 1.5% today, when just two weeks ago we were down over 1.5% almost on a daily basis. It is during these times I continue to remind myself of the actual, fundamental problems that exist in the economy and rely on those measures to make investment decisions instead of what is going on with CNBC and government press conferences.

Of course there needs to be an awareness and recognition for government intervention, as history has shown us, they can cause quite an uproar, for better or for worse. So, I make a lot of my decisions, currently, based on a collage of indicators and trends. So far it's been working pretty well. Since I'm on the topic, lets discuss the important data coming forward this week.

Tomorrow, we are getting new home sales reports, which are important, but I believe will take a back seat to all the other media noise going on right now(unless of course we see a really significant number). Then Thursday, we have the GDP report. This one could cause some rallying, as a lot of indicators are based on GDP levels. We saw a horrible number last time around, so it will be hard to top our previous number. However, I still think there will be more sever GDP decline in the future.

So make sure to factor those into your research, along with all the government news. President Obama spoke tonight, trying to convey his confidence in our ability to overcome this crisis. To me, the speech seemed like a campaign for his new "budget", more than a economic update. I don't see much of a response from investors based on the speech tonight, even though after hours are slightly up, but you never know what Bernie or Tiny Tim might have in their pockets.

I made yet another move today. I pulled the trigger on some more FAZ call options with my account (which have great option prices by the way), that I had previous bought last week. They got as low as $4 today in early trading (which is where I got in at) and I felt that this is a great price to lower my basis. Still, nothing significant, but enough to create some cheers for profits. The option closed above $5 by close, so already that's working for me. I am not worrying about this option, as the contract expires in July and as we have seen with FAZ and the past two weeks, it can cover some big ground in a little amount of time.

SRS did very well in the second half of trading, ending up over 10% today. I had a feeling there would be some rebound from its 31% loss yesterday. This is why I ended up buying some yesterday, even though I feel that there may be some rally left. If we see it up yet again tomorrow, I'll begin pocketing some profits. I can't get greedy right?

Today's halt of the rally was indeed significant, but not by much. Proving to keep the market down again tomorrow is a better sign for bears. However, even after the two day halt of buying we saw on Thursday and Friday, we saw how the market responded Monday. So tomorrow's performance could set the tone of how we're going to go into Thursday and Friday with the GDP announcement. There is still no reason for me to think this rally can't hit 8000 and above at this point, so I still remain cautious on my positions.

So that's about it for today. I just wanted to mention some things regarding the chat. I have received a few complaints about the recent content of the chat. I created the chat in order to find good a good network of people, without dealing with crap like you see on Yahoo and Google boards. Please refrain from using profanity or degrading language. I don't mind the use of avatars and would like to keep them, but please use discretion in choosing one. Refrain from using girls, offensive pictures, etc. Remember, there are many people on here during the day that are in a work place and would like a safe, chatting environment. If I do see the problems myself, I will have to resort in banning. Enough with that, just keep the conversations mature and educational and we all can continue to enjoy it as a resource. Happy Trading everyone and have a good night.

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Treasury News Sparks Huge Rally, But Be Sure To Read Between The Lines

geithner treasury planThere are many parading the streets today cheering that the recession is over and nothing but green pastures are waiting for us in the future. I could even see it at lunch. People were offering to buy for one another again, everyone seemed to smile a lot more, and I was often catching mumbled conversations involving "I bought" and "I wish I would have bought such and such at..." Are we really surprised? I mean come on, I wrote in this post back on March 2 that I felt a strong bear market was coming. We were oversold and technicals had been pushing for a good, strong bear market rally for sometime.

It is very common during strong bear markets to see these very violent rallies. We saw the same movements in the 30's, 70's, 80's and 90's. However, never in the history of the Dow have we seen such volatile swings that we have experienced the past year. This is even more of a reason why we should expect these violent rallies to be even strong than past times. So the key, for me, is to be aware of them and to be careful around them until there is more clear direction given from technicals that the rally is easing. We are not at bottom. No actual economic data has given such evidence. You may be saying, well what about the uptick in housing sales released today? That is an increase from the previous month. There are many variables that can cause for that monthly uptick. When dealing with this data, it is better to compare apples to apples by taking year over year data instead of month over month. Year over year we are still down. Oh, and nobody is focusing on the 15% decrease in median housing prices announced today. That should help sell a bit more.

crash market stocks podcastSo, even though I am not positioned in short quite yet, I am still very much a believer that this is a short term, bear market rally that will hit a wall and a much more stronger sell off will occur, giving me a more clear path to make much more profits than the current position we are in.

I was asked many times today, what should I do? Are you buying FAZ? Should I go long? I do not have a crystal ball and too be honest, at this point in the rally you might as well flip a coin, because there is a big cloud in trading due to these government announcements mixed with a technical rebound. I don't need to make trades right this second. I have been very patient over the past three weeks and have preserved my capital, for the reason of taking advantage of good buy in points when the market is in a much more "clearer" position and trends are easier to read. That point is not right now. Tomorrow can go either way as far as I am concerned and it doesn't matter that much to me which direction it goes. This rally will take its course, then I will make my move more aggressively.

For those that have been keeping up with my site know that I said there would come a time when many would begin saying the worst is over. Well, I believe we are already there. Even many of you which read that post 3 weeks ago, have now changed your mind and believe the worst is over. That is fine and I hope the best for everyone's trading. I just feel that events are lining up just as I expected in which ends with a capitulating crash of serious lows for the market. I know it's hard to believe such things in the midst of such strong, optimistic trading, but two weeks ago, almost everybody thought it was coming. It is amazing what a little bit of time can do to perception.

I go into more detail on today's podcast about my thoughts and beliefs about continuing to have a very sluggish economy and why this new plan that the Treasury has unfolded doesn't necessarily do much for the bottom line of GDP (if you are not subscribed to the podcast and want to be, you can subscribe here). I believe once again the government has taken a loan from taxpayers to attempt to eliminate debt. Not stimulate spending of consumers.

Amidst all my doubts of a progressive economy, I am now a minority in my thinking. This rally could very well last throughout the week. I believe, eventually, investors will have to take profits and we should see some selling days, but I don't see a lot negative sentiment in a 500 point trading day. We have seen moves like this before in November, so people should not consider it "impossible" to drop off after such strong buying. As a side note, the volume was much lower than you would expect on such a big day. That is another thing to gnaw on.

With such fireworks, I did have to pull the trigger today. For those on the chat today at close, saw that I ended up buying a first "light" round of SRS today right before close for $49.80. Sure, we may see it go down a bit more the next couple days, I don't know, but at such a low price I felt like I could easily afford to buy some shares. That way, if we do steam off some of these profits tomorrow or Wednesday, I could pocket some quick gains. I mean come on, it was down 30% today!

My SSO was up almost 15%, so that helps swallow the loss from that small amount of FAZ options I picked up. I set a trailing stop loss on my SSO to protect my profits in case a burn off comes. I didn't expect to make such a killing so quickly with that ETF, but I'll take it.

So those are my thoughts for today. Remember the $25 Start Up Promotion for Lending Club. I'm only running it for a couple weeks, so if you are interested, sign up through the above link and you will start out with $25 in your investment account for free. Good deal. Happy Trading and see you tomorrow.

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Toxic Debt Program To Cause Some Noise

fas chart
fas analysis

FAS has a Market Club report score of +60, much better than last week.
Get your own symbol analyzed for free Click Here

There are rumors that details for the new toxic debt bailout plan could be released as early as Monday. Now fundamentally, I don't think it makes a difference of what details they unveil this week, because first of all, anything that is put into effect, we don't see the results from it until at least 3 months down the road. Second, I feel they are still very short on the amount needed to make a significant difference in the toxic debt market.

However, history has shown us that investors can get revved up on rumor and speculation. Buy the rumor, sell the news. This toxic plan could be another trillion dollar plan announced over the podium at some point this week. Obama did refer to the plan a few weeks back, but failed to go into much detail of what it would consist of. I would expect some optimistic trading as a result of the rumors. At least for a day or two, maybe. Either way, I feel it will be short lived and cause more problems for the market down the road.

This could be the news that could propel us into the high 7000's, before seeing some more serious selling. If that is the case, plan on me starting to pick up some short positions this week. I just wanted to give a quick update. The FAS trend analysis above is looking pretty impressive for the time being, however, I'm not a buyer. Happy Trading.

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New Speculation and New Worries - Who Can Save Us Now?

obama and jay lenoPresident Obama made history last night as he became the first active President of the US to be on a late night talk show, in which he made a visit to The Tonight Show with Jay Leno as his last stop in California. Once again he was quick to describe his disgust for the corruption of Wall Street and the greed of executives. However, he was quickly able to shed that problem onto Tim Geithner, as he kept referring to them as "his" or "Tim's" problems. Good job Obama, I would be doing the same thing in this mess.

After more than a week of rallying, we have now had two days straight of downward trading. Both days being led down by, once again, financials. This is why I did not get too excited to excited to jump into banks after Wednesday's Fed announcement. For even though it looked good on paper and sounded good when it was announced, the consequences of such a move that was and is being made by The Fed, is something our children will also assist in fixing. To take such extreme measures as printing/taxing multiple trillions of dollars for the sole purpose to write off debt that has no intrinsic value, but is just air and numbers on a paper, will be devastating to the economy. It may take a bit for this to come full circle, but in my opinion, we will definitely see it.

So for me, I am remaining distanced from banks for the time being and will most likely be ready for a full entry of short for banks very soon. The recent slaughtering in Treasury interest rates have actually sped up the deflationary process a bit, believe it or not. So the storm is very near in my opinion. Also, having the S&P trading at 13 times its earnings is not very reinforcing that we've reached bottom. That is a very high number for these times.

In this type of environment, it's hard to pick stocks to go "long" in, as I feel most, no matter how strong a company's balance sheet is, are vulnerable to being dragged down in this market crash. However, the most healthy companies in this type of market are those that are very cash liquid. Cash is king right now.

Today, Treasure Island of Las Vegas was sold by MGM to a buyer for $775 million. That sounds like a lot of money for some, depending on which market you live in, but is a huge steal for the Las Vegas Strip, considering Treasure Island's rooms were just recently upgraded and their location is center right on the strip. A much more worn down hotel, in a worse location on the strip was sold in 2007 for $1.2 billion. The reason why the buyer of the deal was able to get Treasure Island at such discount is because they had $600 million in cash to put down on the project, in which the rest was financed in a 36 month carry from MGM. Being that MGM is in a heap of debt from their newest project, their problems became someone else's opportunity. The point is, in this market, cash is king, and those companies that are prepared with liquidity, will make a killing the next few years. For some, generations of wealth will be created from just the actions of the next few years.

With this in mind, I feel it is important to be aware of those companies that are cash liquid. Most likely, they will be able to jockey for a larger market share and position themselves as more dominant companies in their sectors (even though most are already dominant). Below are a list of the top cash liquid companies (from Seeking Alpha):

1. Exxon Mobil - (XOM), Chart, Total Cash: $32.007 Billion
2. Cisco Systems - (CSCO), Chart, Total Cash: $29.531 Billion
3. Apple - (AAPL), Chart, Total Cash: $25.647 Billion
4. Berkshire Hathaway - (BRK.A), Chart, Total Cash: $25.539 Billion
5. Pfizer Inc - (PFE), Chart, Total Cash: $23.731 Billion
6. Toyota Motor - (TM), Chart, Total Cash: $23.151 Billion
7. Microsoft - (MSFT), Chart, Total Cash: $20.298 Billion
8. Google - (GOOG), Chart, Total Cash: $15.846 Billion
9. Royal Dutch Shell - (RDS.A), Chart, Total Cash: $15.188 Billion
10. Wyeth - (WYE), Chart, Total Cash: $14.54 Billion
11. IBM - (IBM), Chart, Total Cash: $12.907 Billion
12. Johnson & Johnson - (JNJ), Chart, Total Cash: $12.809 Billion
13. Intel - (INTC), Chart, Total Cash: $11.843 Billion
14. Hewlett Packard - (HPQ), Chart, Total Cash: $11.255 Billion
15. Oracle - (ORCL), Chart, Total Cash: $10.646 Billion

Like I said, I believe everyone is vulnerable to more downside risk, especially if we reach numbers that I believe are coming for the Dow and S&P, but I would also expect some of the companies mentioned above to make some big, critical moves during this time to position them even better in the years to come. So keep an eye on them, and if you're looking to close your eyes for the next few years, and put something in your IRA or 401K, you may want to consider some of the above.

SRS and FAZ enjoyed very large gains today, which I was able to reap with my FAZ call options. However, once again I waited too long for SRS. I still think there is risk for more price slashes to both of these stocks, so I am not loading up quite yet on them.

As I said yesterday, GS has been on my radar for shorting for quite sometime now. Due to the ties that GS has with AIG, their stock has been appreciating, mostly based on the government aid that AIG has received. However, with more problems heading towards AIG, that will most likely reflect back on Goldman's stock price as well. You think it is any coincidence that Ex-Secretary Paulson decided to bailout AIG, when he used to be the Chairman for Goldman Sachs? I believe his retirement is doing much better than others. This is just one example of some of the corruption that has been going on for years now.

I still don't think we're out of the woods yet for this bear market rally. If we continue to see some more downward pressure on trading, my position could swing, but as of now, I still believe there is enough technical support to keep us going a bit longer. However, financials may be sluggish. They're in a league of their own these days. For those looking to trade options, like myself, offers some of the best per contract prices I've seen out there. Worth checking out.

I hope everyone has a good weekend. Next week should be another exciting one. We should expect more news from the government as spending is definitely on their mind. Happy Trading!

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Investors Begin To Doubt Fed Plan...With Good Reason

fed bailoutPeer Pressure. It was mostly present during our years in middle and high school, when someone or a group of people were able to convince others that doing something (which usually was bad) would be good for you and help you be popular or successful. Yesterday, it seemed as though many were "peer pressured" into buying after the announcement of the FOMC meeting results, believing that it had to be good news. But was it? I mean over a trillion dollars to go to the purchase of bad debt and US government bonds. It sounds the savior of the economy. Just breathing the words of the announcement caused a huge jump in the Dow. So it has to bee good right? What many didn't see yesterday, may have been shown to them later on as they began to break down exactly what the Fed was doing and what that meant regarding our economy. I don't give all the credit of today's red trading to a change of mind about the Fed meeting, but as it usually does, investors seemed to return to reality.

Lets be honest, financials have had one heck of a run. Sure, they were oversold a bit to begin with, but we were beginning to hit the overbought range after yesterday's trading. Let me give that friendly reminder that, without default, there is a $450 billion dollar gap of debt coming due this year alone for refinance and that is available in the lending markets. Having the CMBS markets and the sloppy underwriting that prevailed in the valuing of the assets, has put us in such a deep mess, not even $3 trillion of Fed spending has put bank's problems to rest.

We saw a big 16% gain from FAZ today as financials finally showed its first strong day of weakness in over a week. I don't think this puts an end to the rally, but I think we've pulled the parachute out. I still think the high 7000's, creeping to 8000, is still very much attainable, before we see some more serious selling. The government is not done handing out its bailout coupons and I think we may find some more of these "false" reasons to cheer. So, although the strong gains from the shorts today could be encouraging for some to jump on in, as for me, I'm holding tight. I do still own my FAZ options from Tuesday, but I'm still catching up from yesterday's slaughter.

I woke up with another treat today. A few weeks back, I had purchased some DUG put options for $25, expiring tomorrow at $ .80 per contract. Well, oil had not performed as well as I had hoped for March, and as of Tuesday, I was looking to write the option off as it was trading for only $.05 per contract. However, with the help of Uncle Bernie and his plan to print our way out of this, we saw very big gains in crude prices yesterday and today. Well, this morning, I was able to sell my options for a healthy profit at $1.15 per contract. If only I would have gotten in at $.05, right? Oh well, I had already considered those funds lost and to end up turning it for a pretty strong profit is unbelievable in my mind, especially a day before expiration.

Gold continues to be on fire and with good reason, as we passed the $11 trillion mark with our national deficit and are still spending like it's 1993 in Japan. In fact, gold passed big technical markers today, which could mean even more gains for gold next week. I have recently mentioned three times now on this site of gold being on my "radar", but had failed to pull the trigger every time. Maybe I'll learn from my mistakes next time.

So, still staying put at the time being. If we see a rebound tomorrow and next week and FAZ, SRS, and QID continue to get hammered, I will look to start buying in lightly into them. Also, buying some GS put options are becoming very appealing to me as well. GS has received a lot of love lately, especially because of their ties to AIG and all the help they've been getting, but at over $100, I think that's becoming shorting season for GS.

I am excited to let you all know, that I was able to negotiate a special promotion for those who are interested in Lending Club (click here to read my write up about the company if you don't know about them already). For those who are interested, Lending Club will help start off your investment by giving you $25 to start in your investment account. I was excited to hear about this and hope that for those of you who are interested in it, will take advantage of this promotion. I have been invested in it now for a few months and have been on target to receive my 10.5% return I had opted to receive from the beginning. Rob, my contact at Lending Club recently emailed me this, "Lately, we have observed increased interest from traditional stock investors," said Rob Garcia, Director of Product Strategy at Lending Club, "With average returns of 9.05%, low volatility (0.35%), and little to no correlation to the stock market (Beta is -0.08), Lending Club is quickly becoming a perfect investment opportunity for those looking to diversify or migrate current investments in today's environment."

So if you are interested in this promotion, click Lending Club $25 promotion, and following your sign up process, you will begin your investment account with $25 in it. I hope to offer more promotions like these in the future to help stimulate interest in new investment vehicles. As always, I would love your feedback. Also, a new podcast update is available for those who are subscribed, which you can listen to here. If you are not subscribed, you can try it free by CLICKING HERE. So on that note, Happy Trading and have a great night.

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Fed Intervenes With More Bailouts - Good or Bad News?

federal reserve bailoutI said there would be fireworks today and indeed there was. I have to admit, even though I was considering it as an option, I was quite surprised to see the Fed do what they did today. As most found it time to cheer and buy, I was looking deeper into the decision and wondered why they would do such a move? This decision exposes a lot of the concerns the Fed has about the economy, and although it seems as though it will bring relief to the credit crisis, the side effects of such a move could have some serious repercussions on the market.

So the day reacted in my "B" scenario of what I expected to happen in the market place. Honestly, I was leaning more towards my plan "A" scenario, which was to have the market open up, due to expectation of the meeting, with a disappointing sell off after the announcement. However, the Fed decided to surprise the world with their plan. Luckily, I set up myself prepared for either direction, however, I would have done better with an ending sell off. Indeed my FAZ options purchased yesterday took a strong hit, but a lot of those losses were eaten up by my SSO gains. The options expire in July as well, so I have plenty of time for the banks to go sour once more. I'm not too worried.

So lets break down today's announcement. The Fed announced their plan to spend $300 billion over the next 6 months in buying up long term US government bonds. In addition to that, they announced that they would spend an additional $750 billion on buying mortgage-backed securities guaranteed by Fannie Mae, which now brings the total to a whopping $1.25 trillion. Also, yes also, they will be increasing their purchase of Fannie and Freddie debt to $200 billion. Those are a lot of bullets to fire in one meeting. In fact, I was very surprised to see the market only close up 90 points after such an artillery of news. So, how do I feel about all this?

Honestly, I think it shows the desperation of the Fed. Notice a big key missing ingredient of today's announcement. After Bernanke so proudly declared his expectation of the recession to maybe be over by 2009 in the CBS interview, there was absolutely no mention of a 2009 ending recession in the FOMC notes. At least they're not fudging the numbers too badly.

As with buying the government bonds, I believe it was something that needed to happen. There has recently been a scare of China pulling out a lot of their money that are in US Treasuries, which they own A LOT. Such an action from China would derail interest rates, only freezing the markets more. Instead, the move today sent Treasury rates sailing down, which in turn should hypothetically lead to lower lending rates. This is something the Fed hasn't done since the 1960's. So, if indeed China does pull out, this won't make that much of a net difference, just keep the Treasuries from plummeting.

The amount of money being put toward mortgage backed securities may put a door-ding in the debt that is hanging over these banks. Although it seems as $1.25 trillion is huge, it is nothing compared to the debt that is coming due and will be considered delinquent for CMBS loans. This makes a total of $4 trillion that the Fed has now spent (which will come out of your pocket), without asking the American people. Sorry folks.

fed bailout rally
This indeed is just more supporting my theory of massive inflation that will come later on, following the deflationary spiral hitting the markets. We have now had 3 consecutive months of declining PPI, which is very discouraging for the markets and which is why the Fed is acting in such a panic. Expect a beating from the dollar in the near future as well as more spikes from gold.

Already, many are on the wagon of the "we have reached bottom" club and are beginning to position themselves on the long side. Although I do believe we could rally a couple more weeks, especially with this recent news, I still very much believe that there are much tougher roads ahead. In fact, such news released today, only supports the models in setting up for capitulation. At least, that's my opinion. So I will remain patient, but the time is getting closer to getting back in the shorts.

So, it will be interesting to see how tomorrow reacts. I think, as with other plans that were a surprise to the market, people will begin to see the side effects of such a move, and its halo will begin to fade. For those looking for a good brokerage company, TradeKing is offering some really good rates for trades. Happy Trading everyone, see you tomorrow.

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All Eyes On Bernie - Makes It or Breaks It

bernanke fed meetingMy fast from shorts was finally broken today as I began to make some small moves. Actually, most of the moves I made today were in anticipation of tomorrow's big FOMC meeting. It is sure to cause a lot of noise in the markets and I thought I'd try to take a run at it.

Today's trading was much as I expected. We saw mixed trading in the morning, flip-flopping from red to green. Once again we saw huge spreads on the FAS/FAZ combo, which may have weathered good for some of you day traders (if you went with FAS of course). News of an uptick in housing construction helped flush some confidence in market towards the middle of trading. They spoke of this increase like it was the end of the housing crisis. Well, considering January is usually one of our worst selling months for houses, it is not surprise that February happened to perform slightly better. Media loves to put their spin on things.

The buying really kicked into gear towards the end of the day, where we saw the Dow settle at 7395. Supposedly, having a close above 760 for the S&P is a strong technical move and should mean there is some momentum heading toward the 800 level. I believe it was, once again, anticipation of things to come, which really caused the market to rally at the end. Tomorrow, The Fed meets to discuss any rate changes (which I doubt there will be any) as well as the new possible plan to buy up bonds from housing authorities such as Fannie and Freddie. The bill is expected to be around the $600 billion range, and with the added discussions of buying US Treasuries and corporate bonds, the number could reach over $1 trillion. That's right, one trillion dollars.

Of course news of this degree would cause for huge cheering in the markets. The question is, will they do it? I don't see how they would announce something so quickly, yet so big, without "rolling" it out, as they've done in times past. Indeed, they may report of the possibility of such action, but I believe an announcement of "possibility" will be disappointing to investors and may put the market in a tailspin in afternoon trading. However, if by chance a significant announcement is made, a 4-5% rally could be bound. All eyes are on Bernanke at 2:15 pm Eastern to hear the results.

crashmarketstocks podcast
To prepare for the fireworks, I went in and bid on some $50, July expiring FAZ call options. During the last 20 minutes of trading, I was able to get the price from the ask of $14.90, to my bid of $12.90. There definitely were some nervous traders before close wanting to dump their contracts. As a hedge to this, I also went in and bought some SSO, in case of a bigger rally. I am placing a 5% stop loss on SSO, so that if we indeed see an afternoon tailspin, my losses are minimal. Hopefully, at that point my call option profits will far surpass my losses, for a nice quick profit.

If we see a rally, I will enjoy some strong gains with SSO, while holding onto my call options. Considering the expiration is in July, I have plenty of time to see the downfall of banks to see FAZ strengthen again. I was glad I was able to get in.

So, that's the game plan. It should be a very interesting day tomorrow, one of which could spawn some more moves on my part. I almost pulled the trigger on some SRS today, but tomorrow's announcement held me off for the time being. I am hoping that I don't regreat that and am hoping for more green in my account tomorrow.

Today I posted a new podcast for you subscribers, which you can listen to here. If you are wanting to subscribe, CLICK HERE. I am anticipating an exciting day tomorrow and hoping for the best. We continue to move as planned for the bear market rally. I just frequently remind myself of the crash around the corner. Happy Trading.

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Buying Streak Ends - March Perspective

executive bonusesIt looked as it was going to be another straight trading day in the green this morning, as once again the market was soaring, having the Dow almost reach 7400 at one point in the day. However, as the anticipated "last hour" of trading arrived, the selling began, and the Dow gave back all of today's profits closing down 7 points. I am actually surprised it took so long for people to take profits. I thought I was the last person waiting until Monday to cash in on my financials. As I said I was going to do on Saturday, I ended up selling my BAC in the morning at about $6.75, when the market was still good. I felt that a 6 day consecutive rally in one of the biggest bear markets we've seen is more than I could ask for and that I should take profits and run. Good thing, as BAC ended up closing at $6.18.

Nothing significant came from the FASB meeting on mark to market, as expected, which could have contributed to slow up in financials today. I didn't see much that they would be able to do, but of course we had to hype it up. These hype rallies can be dangerous.

So what kind of perspective does this last hour sell off give me for tomorrow? Not much. The trailing trend looked like your standard, profit taking slope to close out the day. Even though after-hours is also down, I do not necessarily believe that this trend means that we open up tomorrow in the red. The profit selling was, in my mind, overdue and Mondays always like to start out the week with some adversity. I am not ruling out a red day for tomorrow, as always, there are continuing negative influences that keep surfacing. In fact, as I said on the chat today, my plan was after selling my BAC, to buy a light round of FAZ and SRS, this being earlier in the day when FAZ was at $35. However, due to a forgotten immediate lunch meeting appointment and some technical difficulties with my Blackberry, I was unable to buy either of two. This was too bad, considering that now FAZ is at $42 and SRS is at $72. Even though I feel I will have another opportunity to buy them, I did miss out on a nice, quick 15% swing. Oh well, stuff happens right?

We will see tomorrow just how good/bad a decision that was for me to go to lunch, since as of now, I see the market going either way. Another mixed day of trading is what I really see happening tomorrow, which could be a good opportunity for you day traders. We may see some more of these intra-day 10-15% point swings for FAZ/FAS, which is nice for a quick profit, that is if you time it right.

Obama got a lot of flack for a survey result that polled Americans in their feelings of the recent corporate bailouts. It seems that over 80% of Americans disagree with the government's choice to write checks to the big companies and in fact over 30% are considered "very angry" in the decision. This is all happening while more news surfaces about AIG executive's cash bonuses, which can't make it any better for Obama.

I still think we have potential to see the Dow climb up back in the high 7000 range. Sure, there are going to be selling days, we're in a bear market, but last week's rally streak is a big move for technicals and should definitely stick around the next week or two, the keyword here being "potential." I never rule out the possibility of a sell off, but my current expectations are what make my short buying "light" at this time.

There are still some lingering elements, which could still cause some significant momentum in either direction. First, being the GM problem. Yes, they're still around. They are like a scab that won't go away. GM still faces the big possibility of going under. If such a thing happens, I would expect a pretty dramatic response from the market for a couple days, even though most have expected it.

Second, the uptick rule. As I have said before, I don't feel that any changes with the uptick rule will directly effect the ETF's I play, from a value standpoint, but they may effect people's confidence in them. Either way, we could see some sluggish movements for a couple days with the shorts if that's the case. It was this way when the financial short ban was announced in October. The shorts got killed the first day or two, only to end up tripling their numbers.

Lastly, new stimulus rumors of a number in the trillions. If Obama has the tenacity to unfold such a trillion dollar plan, that could have a huge influence on short term trading. Stages of planning may be in early or not at all, but if indeed signs of a plan of this measure are shown, I would expect a large short-term rally.

So March remains unsettling for me, which is why I still remain in mostly cash at this point. If shorts remain reasonable tomorrow, I will look to buy a light first round of SRS, FAZ, and maybe QID. With there still being some risk of rallying, I will make sure to not overspend myself. However, I'd like to have some, in case of a 90 degree crash.

So tomorrow should be interesting. It is amazing how many less and less cars are at my office building everyday. It's not a good sign. More and more people are trying to work from home. If you've made recent occupational moves, Try RingCentral Online FREE for 30 days, which is a great company that does phone and fax services. Rates are some of the best I've seen, and is far cheaper than going through Pac Bell or Verizon. Perfect for a job at home, or a company you are working on the side. Check it out.

Expect a podcast tomorrow for those who are subscribed. Like I said yesterday, I plan to do two or three a week (or more), depending on the significance of the day and what news was given. If you have not already and are wanting to, CLICK HERE TO SUBSCRIBE TO CRASH MARKET STOCKS PODCAST. There is a 7-day free trial for you to "feel it out." Have a great evening, Happy Trading and see you tomorrow.

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Big Rallies and Big Meetings

geithner bailoutEnding the week with the fourth consecutive day in the green is something we have not seen in the market since December 2008. We all remember the times of December. It was not a good time to be positioned short. Not to say that March will be the exact same, but this buying is definitely more than just a couple day fluke. It is behaving much like your standard bear market rally and may have a bit more left in it. The dangerous part is trying to guess when it ends. I keep reinforcing my choice to stay lucrative at the moment, besides my small trading I've been doing here and there. This is because I do feel there will be point where the shorts are at a price that is just too low and I want to have the capital ready and available to make my move. I think we are very close, but I do feel that there still may be some rallying the next week or two, so I am remaining fairly cautious.

I did almost pick up some SRS for two consecutive days now. However, on Thursday and Friday my $59 buy order was unable to hit. SRS enjoyed being up almost 10% on Friday, but as buying persisted, it found itself back at the $60-$62 range where it ended up closing at. SRS is definitely holding up the best during this bear market rally as it is clear that commercial real estate is just scraping the surfaces of the problems coming their way. If we indeed see SRS dip back into the $50's next week, I'll will buy my first round.

Monday is the big anticipated FASB meeting to discuss mark to market accounting principals and the possibility of altering it or completely doing away with it. I don't see how they would just do away with it all together without severe reporting problems, so I assume if they do make a move it will be an alteration that maybe allows multiple options for banks, kind of how businesses have the opportunity to choose either FIFO or LIFO for reporting their Cost of Goods sold. So all eyes will be waiting on Monday to see what is the outcome from the meeting. We do have to attribute some of this financial rally to the anticipation of an outcome, so staying in financials for all day Monday, could be a gamble. If banks get one more push Monday morning, I most likely will get out of my remaining BAC in case of a post meeting sell off. At any rate, the outcome will not eliminate banks problems and there will still be a pile of distressed debt waiting for banks to deal with, so either way I don't see much to cheer about for banks.

In just a few days, we have seen the destruction of FAZ, which is the big reason I held off in buying some at this point. At $40, it's hard to pass up on it and if it indeed gets any lower, I have to start considering getting in. Even if we see FAZ drop lower, I don't see it getting lower than $30. So, as you can tell, I am becoming very antsy to get in, it's just that past experience has taught me that a bit of patience can pay off big time. So, the time is close, and I assume by this week I will begin taking positions on the short side.

One problem we face in our current economy, is the nature of our cyclical capitalistic economy and how the current government is working to try and stimulate it. Although much credit is given to FDR's plan to pulling us out of the Great Depression, I don't feel it had much to do with it. Sure, there were some benefits that helped "preserve" some jobs and keep things stable, but it was time and World War II that, in my mind, were the big driving forces pulling us out of the depression. Today, we have much of the same style of government which has the theory of big government spending, increasing taxes, and having the government try and to stimulate the economy by controlling where money will be spent and than taking care of the people. At some points, it sounds nice, but I feel it can also be a crutch to us in our recovery.

In his interview this past week, Warren Buffett said that he thought he could see an increase in taxes for the wealthy in the future, but that this was not the time to do it. Other areas need to be more focused on. From the chart below, take a look at the change of the marginal tax rate following the depression. From 1931 to 1932, it more than doubled. So you can probably expect taxes to get significantly higher in the near future. Considering over 70% of our GDP is measured by consumer spending, it is so important to make sure that consumers continue to spend! By taking half of their income in taxes, this will not create that spending. I believe we need to be focused on getting more money into consumer's pockets and really focus on job creation and preservation. Those two driving forces can have the greatest influence in increasing GDP. So, I believe if we continue to go down the road of taking money away from small businesses and consumers, it may take much longer to see us come out of this crisis.

marginal tax rates
It is for this reason I chose to run a MyCorporation banner discussing starting up LLC's or S-Corps. These entities can provide a big tax shield for those making significant incomes, especially through stocks or other investments that have large short term capital gains. An accountant or MyCorporation can consult with you on how these vehicles can help save thousands of dollars in taxes. I, myself, am a independent contractor, so these types of entities are very appealing and provide a huge service. In the future, the terms of these entities could be changed by the government, so it's good to look into them now while they're still up and running.

My first podcast will go out today. I plan to do two to three a week (or more depending if significant news needs to be talked about). I will expound on subjects that don't make it to the post and also discuss my portfolio changes more thoroughly. The service I use is a paid service to maintain the podcast, so there is a small monthly fee to subscribe. My hopes is to provide additional information that can be useful in breaking down this market and the significant movements that will be coming in the future. As soon as it's up I will post it in this post as well as in the sidebar.

So Monday should be another day of fireworks with hearing the results of the FASB meeting. Hopefully, I can start making some moves into the shorts and can begin on the road to profits. Have a great weekend everybody, Happy Trading and see you soon.

****Update- The podcast service is up and the first podcast is available. I am making the podcasts free for a week so you can see if it's for you. Enjoy! CLICK HERE TO SUBSCRIBE TO CRASH MARKET STOCKS PODCAST

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Bear Market Rally Catches Fire - Perfect As Planned

market false hopeIt seems as though this bear market rally is here to stay for the time being as it made a pretty bold point to investors as the Dow closed up 240 points, getting back above 7000. We also saw the S&P close a hair above 750, which show two strong technical moves indicating that indeed we could be heading back towards that 8000 Dow level again. I would expect resistance to be built up around the 8000 level and at that point it will be very interesting to look at the deflationary models to see if we are indeed on target for capitulation.

Just as I expected in yesterday's post, we started out pretty flat in the morning. However, more and more "perceived" positive news slowly kept driving the market up until it hit fire around mid day. Financials really caught fire after several banks announced their "stable" state and that they believe they will no longer need aid from the government. The sun must be shining bright wherever they're at, because unless they're lying, that is almost impossible. However, the announcements from Citi and Bank of America helped investors feel comfortable as BAC finished up almost 19% and FAS finished up a whopping 25%. I was a little upset that I had sold a lot of my FAZ put options yesterday, but I was able to sell the rest today at a strong $18.30 a contract (It actually got over $20!). So, I'm glad that worked out, considering they expired next Friday. Talk about a close call. BAC's Market Club report score is a +60, a huge upgrade since last week (get your own symbol analyzed for free, all you need is a name and email, Click Here).

Three days of rallying. Something we haven't seen since January. As I anticipated, already we are seeing everybody convert back to bottom believers and are now playing the part as the bull. As for me, I am currently in a "partly bullish" state, but am still very much a bear. As you can see from CNBC's screenshot above, they are already running the headlines "Market Looks For Glimmer of Hope." This alter in psychology is right in line with the expectations of a crash. Having people in "bear mode" like we all have been the past month (even many of the bulls), makes it hard for the market to capitulate, since many people were hedged and in cash. With the hope that we've reaching bottom, we will most likely see the volume start pouring in, and that's when the fear selling can be spawned.

I had a buy order in for SRS at $59 and unfortunately it only got down to $59.70. I may be upset I was off by 70 cents tomorrow, but I am sure I am going to have the opportunity to get it lower than $59. Even though I feel it will probably go lower, I felt it was a good price to begin a light 1st round of buying in case we have an exhaust day tomorrow and decided to take back some profits. I think it is realistic to think that we could be picking up SRS in the $40's. If that's the case, I'm loving it.

As for financials, my only current play is holding onto my BAC. I have some trailing stop losses set in case of a rapid sell off, which I don't really expect, but you can never be to sure. With all this new confidence in BAC, we could see it get back up in the $8 range. However, financials scare me the most, because they are also the most vulnerable in this market and I know of a lot of the troubles that still lie ahead for them. Their loan activity has been almost zero, which means their profits are very low (despite what they say). With more and more debt coming due and becoming delinquent, that will most likely require a significant amount of government aid. So I'm not going anymore long in financials now, and definitely not buying FAZ yet, although it's very tempting at $40 isn't it?

I think the trend will continue upward for the month of March, but we will definitely have our big down days still, so there is still value in trying to play the bumps for the leverage etfs. It just hurts when you play it the wrong way like on days like today for FAZ players. Ending the week with another strong up day will definitely keep that rally spark going into next week. In my opinion, THIS IS NOT THE BOTTOM, not even close. So be careful if you're convinced to load up on all the industrials now for the long haul.

Due to a number of people wanting the podcast, I am in the process of getting it set up. I will give more details when I finalize it. So tomorrow may be another mixed trading day, considering we have now spent 3 days straight buying. I will be ready to pull the trigger on some shorts if they take another pounce tomorrow, but only a light 1st round buying. Have a great night everyone, happy trading and see you tomorrow.

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After Many Ups and Downs, Dow Squeaks a Green Close

fannie mae crashIt 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 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 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.

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