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

President 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, Zecco.com 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!

My 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.


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 Zecco.com 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.

My answer is clearly, yes. Sure, you will never hear it on the popular airwaves such as CNBC or from Mr. Cramer, but I don't see how we don't call our current economic condition a depression. Putting aside the disaster in the stock market, there are still countless reasons supporting the notion that we are living in a depression. The government likes to announce such things several years after when we are out of the bad times on the way back up, but as for me, I'm calling it now...We're in a depression.

Comparing our current conditions to The Great Depression of the 1930's is much like comparing NBA players Kobe Bryant and Wilt Chamberlain. Both are many times considered as one of the best to play the game of basketball. Although Kobe's best scoring game is 81 points in one game, compared to Wilt's 100 points in a game, there are many that feel the 81 points was a more impressive number when analyzing the current conditions each of the players played in. I believe this scenario is much the same when comparing the two time periods of the 1930's to our present day.

Numerically, times looked a lot tougher back in the 1930's, but I have arguments to say that we have it just as bad. Sure, the biggest argument was that we reached almost 25% unemployment rate by 1932. Even though we are currently only lingering in the 8-11% region, depending on where you live, I still think that number is almost just as devastating in our current economy. Think of all the sectors and industries that have been created since the 1930's. We have countless numbers of opportunities available that were never even thought of at the time. I would think an unemployment number in the 15-17% range is comparably devastating to that of the 25% in the 1930's.

Preceding the most devastating years of the Great Depression were the banks failing in 1929. Following the collapse of banks in 1929, we saw GDP get increasingly worse from 8.6% in 1930, 6.4% in 1931, and then 13% in 1932. I believe the financial collapses we saw happen last year with Lehman, WAMU, AIG, Bear Stearns and others were even worse than those of 1929. We are already falling at similar numbers dealing with GDP, between 6-7%, so we mark very close in those numbers.

The Dow fell about 89% from its highs to lows by 1932. Even though on paper, we are between 55-60% down, many of the stocks that are in the Dow have fallen 90% or more and all at a much faster rate. It took 3 years before to make it fall, we're only in year 2.

So as you can see, I am not very optimistic for the time being with the conditions of our market. This doesn't mean that I can't make money. It just means that I need to be very careful on the moves I make, because in my mind, we're worse off than the 1930's. Even though we don't see it in the "slums", with massive homeless counts, the perfect storm that is over us is one that our country has never seen. We can thank our new government and the Fed for preventing many of the problems that existed in the 1930's, but similar problems remain.

At this point, I am sure that some old man is pointing his finger at me, saying "you don't know what it was like, I lived it, and nothing compares." Sure, that may be true, but from a numerical standpoint, we're not that far off. Scary times and I'm sorry to the old man.

So, these are reasons why I'm not jumping into the market right now or kicking myself in the face for not being more heavily loaded up on shorts. Sure, I would have loved to have been more beefed up to take advantage of the recent slaughtering that took place the past few weeks, but I have my reasons for not doing it and sometimes it is those reasons that save me from getting killed. I guess it's kind of like the old saying that the only 100% way to avoid STD's and pregnancy is by abstinence. Well, I'm currently abstinent from the stock market. This is a scary market to be playing right now, so I'm double crossing my T's.

Even with all this chaos, believe it or not, I still think a March rally is coming. I just don't think the market is ready to crash. Indeed when it is, some may think I'm crazy, but I think we could reach 300 S&P levels. I know, it seems crazy, but so did a 600 S&P level a year ago. If indeed we match those great depression numbers we are looking at 2-300 S&P levels and 2-3000 Dow levels. So, as you can probably tell, I'm not going long for a while. If indeed we do end up rallying, even 15-20%, this would even more solidify my feelings of a more severe crash, as it will be in alignment with many of the deflationary models. So for me, I try to tune out all of the nonsense playing on the TV (they're just trying to keep their jobs) and pay attention to the numbers.

Tomorrow is so, so critical. After the devastating response from bears today and the massive sell off, bulls are needing a rally tomorrow. Unfortunately, they have a big beast standing in their way called unemployment. Yes, the number will be bad. But we have seen in times past that bottoms are sometimes established on bad economic news days. Also, if by chance the number comes in better than expected (which I don't see likely), the market could take off very strongly in a rally.

So, yes, another very early day tomorrow. It has been frustrating waiting in the sidelines during all this craziness, but I believe it will pay off. My Zecco.com account is waiting to go short, I'm just waiting for the right time. I am still loving SRS though! I'm glad I stuck with it and SKF. SRS has a Market Club report score of +70! Very strong (get your own symbol analyzed for free, all you need is a name and email, Click Here)... So, we wait tomorrow. Have a good night, Happy Trading and see you tomorrow.

Any hopes for new beginnings for the stock market this week was quickly put to rest as the markets opened down and didn't manage to get anywhere near green territory throughout the duration of trading hours. The Dow closed under 7,000 at 6,763 and the S&P closed just above the scary line of 700, being the lowest in 13 years.

Starting the week on such a bad note can not be good for traders looking for green in the markets. With unemployment news coming this Friday, starting the week on such a bad note sets a negative tone to a week with what looks to have a bad ending. No doubt, having AIG post the biggest losses ever caused for negative sentiment to last throughout the day. We knew it was coming last week, so I don't know why everyone was so surprised. However, amidst the tumultuous turmoil, my schizophrenic personality still remains. I have indeed been doing pretty well during these down trading days, just not as well as I would have a week ago, when I was still in a lot of my short positions. Even though it seems as though nothing but bad news is swimming around us, I do not feel this is the time for me to push the chips into the short side. Here are a couple reasons why:


Deflation
Although we have indeed experienced deflation, we have not to the degree I think we will. A deflationary down spiral was a key factor leading markets down during the crash of the Great Depression. During the crash between 1929-1932, although a big drop happened in 1929, the greatest damage by far was between 1930-1932 following the deflationary down spiral. So, even though it seems that we are in the worst of the storm, I still feel there may be worse times ahead.

Markets Oversold
There are strong technical indicators that point to the markets being oversold. Just today, 97% of volume was down volume. This is a ridiculous number and, historically, is usually followed by a strong rebound rally. Markets did put up a fight at their strong resistance points, however, faulty government plans and strong negative commentary has helped to push markets further down. Just as markets were being over bought towards the end of the year due to these factors, we are experiencing similar trends on the selling side.

This is not to say I don't believe we could keeping selling our way into a crash. Of course that could happen. I just feel that we are not quite there yet. I try not to listen to the banter of commentators and analysts, as they waffle back and forth on positions quicker than John Kerry did. It is amazing to see how quickly they will change their position of whether we've hit bottom or we've got a ways to go. I blame them for a lot of the clouding of judgement for people to make logical, sound investments. However, some of you may feel the same of my "banter", but hopefully you know these are truly my own feelings and thoughts and that of course the market moves at its own desires. I just try to tell it how it is.

People are saying that the S&P closing over 700 todayis a big hold for technicals and shows some strength. I don't know how much I buy into that, as whether it closed at 705 and 695, it was a horrible day for the market. I do think there is potential for a rally at some point this week, but I don't feel it will have much to do with the S&P closing above 700.

Then there is unemployment. Do you remember playing the game Monopoly and approaching that part of the board that was densely owned by your opponent, in which he/she had also put a variety of hotels and houses on the different properties and just praying that you rolled that number that sailed you right through that section or at least landed you on a chance? Well, that's kind of how I feel approaching unemployment. We know it's coming. I feel it is going to bad, as it has been lately and investors are just hoping that somehow we can "roll" right past it this month and hopefully move on until the next announcement. Well, I don't know if that will be the case, but I thought I would share that metaphor. At any rate, I expect there to be negativity with the number.

So I am continuing to wait patiently for a time I am comfortable to take a more aggressive position on the short side. We saw great gains from all the shorts today and are seeing more love roll around for FXP, which is always good to see. Problems seem to be magnifying in Asia, which could bode well for FXP. Believe me, I would like nothing more but to be in a strong short position, but if indeed we are due for a bear market rally, we have seen how fierce they can be and how quickly they can kill profits from the short side. I do not wish to be the "Dump and Dump", single minded bear activist and say nothing but bad things about the market. I try to make money where the momentum is, and right now I see it on the bear side, but with some short term risk of a rally.

So, on that note, have a good night, Happy Trading and we'll see you all tomorrow.

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I believe this picture does a good job of summing up the activities of today's trading. Seller's torro'd bulls along until the last 20 minutes of trading, where bulls grabbed the bull by the horns and kept him down. Trading was like a roller coaster. Volatility like this is expected in an undefined state of the market that we're currently in, where technical forces are pushing the opposite way as investors. It will indeed be very interesting to see how this market continues to move, especially with rather large announcements coming up to end the week (new home sales and the big GDP).

Existing home sales came in under expectations, which I would hope would be no surprise to anyone reading this site. Much of the morning was spent with Bernanke being drilled with questions by congress. Bernanke did his best to try and maintain optimism and continue to reiterate that there are no plans to nationalize banks. This may be the big factor why many banks ended strong today, despite the down trading for the Dow.

WFC, JPM, and BAC all traded up today as it seemed some confidence was returned to investors in regards to the banking systems. Who knows how long that confidence will last? As far as I know, it could already be gone. Financials are a big gamble right now, which can yield some serious, quick, returns, but can also kill you if you don't watch out. The only move I made in my Zecco.com account today, was I actually bought into some BAC at $5.25 (I should have bought earlier, but oh well), hoping to maybe see a rally to close. We were definitely heading there, but bears put that to an end very quickly. It closed at $5.16 after reaching $5.50. I've got some pretty strict stop losses on it, so that if we start out too bad tomorrow morning, I will close out of that position. BAC Market Club report trend score is -75, so it is moving up (Get your own symbol analyzed for free, all you need is a name and email, Click Here).

Not much has changed from the stance I had yesterday. Indeed, we ended down, but the S&P has continued to stay above the November 20th lows after our dip two days ago, which is a stronger indicator than the Dow, being the bigger index. So I still feel the market is vulnerable of a rally. I have not strongly positioning my portfolio for a rally, because as we can see, there is sill a lot of skepticism in the market. So I will continue to make small, conservative moves until I start to see more definition in the models. So far, we are right in line for a crash, just not quite now. Of course, none of this is certain, but I like to keep some faith in the technical models. We could indeed drive right into a crash this next week, so I'm not ruling that out either.

TBT was back in business today, closing over 3%. I love that fund for right now. I can't picture treasuries more overbought than they are now. Buying in back at $36 in December was a good move. My FAZ put option reached some new highs today. It got all the way up to $18. Having gotten in at $10, I was very close to pulling the trigger. However, I didn't. Hopefully I do not regret it tomorrow. I just need to keep reminding myself to not be greedy in this market! So far the put option has worked very well for me.

I expect tomorrow to be much like today was, a lot of volatility and some uncertainty. If bulls plan on taking this market for a rally, they best get involved soon. With the GDP announcement coming Friday and more AIG woes next week, they are running out of time.

I still see a lot of strength in SRS. I do feel though that it may be reaching the low 60's to mid 50's soon, so I'm waiting patient to start loading up again. A lot of the commercial real estate problems still haven't surfaced. I mean this week GGP (General Growth Properties) announced in their earnings that they are $1.12 billion dollars overdue in debt and have an additional of $4.09 billion in debt. How on earth do they plan on solving this problem in our current market? Oh the woes heading for commercial REITS. Ouch.

So, I am staying tight, waiting for the right time. It's getting real tempting for me to get back into a strong short position, but I've been caught before on the wrong side of a rally and I don't want to experience that again. It's worth it for me to wait until the timing is right and then really go for a ride. Good chatting with you today on the site, I'll see you all tomorrow. Happy Trading.

Well, our week long streak of bear hungry selling was finally put to an end on Tuesday as the Dow closed up 236 points (3.32%). Indeed we were overdue for a good rally as I was actually expecting this rally to hit a couple of days ago. Well, it's here now and it will be very interesting to see the strength of it. Will it just be a quick rebound for profit taking, or may we see some continual recovery over the next couple of weeks? A lot has to do with fate of the banks and how the government manages news that continues to hit the public.

Many people attribute Bernanke's remarks to big run up in financials. However, I don't think he had much to do with it. In my opinion, the market was oversold, and was just waiting for a bit of a push to get the engine started. I see it as a technical rebound, one of which may stick around for a while, at least that is what I am hoping for. The selling volume was very low and the number of new lows were minimal, which was a sign that we were quite oversold.

After selling a lot of my gold options last week, I went ahead and got out of gold completely this morning. I do feel that gold still has some more up to go, but I feel that it is vulnerable to some losses here in the short term. The market may regain some of its footing this month, which could bring gold down a bit. I plan on getting back in if we see gold get back down to $900 levels, as I feel inflation will be our next beast to slay after we spend our way out of our current problems. 1990's Japan, here we come. However, my first ride was gold was very profitable for me and I enjoyed the ride.


If you haven't already, make sure to check out the 5 Trends Video discussing the momentum of the major 5 sectors investors are watching. It gives good tips about oil, gold and other sectors. Oil still continues to be on my radar, but indicators have not confirmed a bottom yet, so I am still waiting for a good entry. I don't think there is much more downside for oil, but I can wait.

As we saw today, these violent bear market rallies can take back profits just as quickly as they are given. FAZ and FAS are both very capable to take some serious slashes at your portfolio if you are caught on the wrong side of the rally, as some of you may have found out today. I plan to be very careful the next couple weeks with the leveraged ETFs. Having the Dow close under the 2002 lows yesterday and the S&P under the November lows confirmed that we are indeed still in a bear market. However, the rebound we received today also confirms that we may indeed be starting another bear market rally. So what does this mean?

This is my plan for coming weeks. I am keeping my FAZ Put options (which is much like owning FAS, just more volatile) along with my remainder of SRS (which currently has a Market Club report trend score of +60. Get your own symbol analyzed for free, all you need is a name and email, Click Here) and SKF, which is not much. Besides my energy stocks and miscellaneous tech stocks, I will be patiently waiting. I am going to be very careful on the short side, as we may see a 15-20% rebound with this rally over the next few weeks. I may make some suttle long moves to take advantage of the rally, but not much. My real goal is to get the shorts back to a point where I can enter at some really low prices and be prepared for the big crash, which I still believe is coming. If we do indeed rally, many will believe the worst is done and that we could be starting the bull back up. Be very careful of what moves you make. As for myself, I feel very strongly that is not the case and will wait until the time is right to get back in heavily in the short position. However, I will be patient.

We may not rally from this point, but we have a lot of indicators that we are oversold at the moment and that we could indeed see a strong bump in the bear market. Like today, these rallies could be violent, so watch out. I will try to make it on chat to keep you all posted daily on my moves.

I am very excited for the times ahead. I believe the opportunity is slowly presenting itself to make a lot of money in this market. It's hard for me to fight off my compulsive nature sometimes, but deep down I believe it will payoff for me. So try not to worry if we do indeed see some green over the next few weeks and just think of it as an opportunity to see good prices for the shorts. At least that's my plan.

Tomorrow, we'll talk about Obama's speech and other new factors as they come up. One more week for the $200 Lending Club promotion. If you haven't checked it out, make sure you do, click here for details. So far, my 10.5% return on investment with them has been picture perfect. It could be a great place to park some cash. Have a good night everyone, Happy Trading and we'll see you tomorrow.

All eyes were looking for Secretary Tim Geithner on Friday, as the market was looking to close again after another strong day of selling, mostly due to concerns of nationalizing banks. But he was nowhere to be found. Finally, in the moment of despair, Obama sent out his "press secretary" (wow, the powers of this guy!), to inform the country that continuing private ownership of banks was the best option for the country. This caused for a violent rebound to almost green territory, especially with financials, until sellers again prevailed and continuing doubts kept the market down, closing the DOW at a new recent closing low of 7365.

You can see in the graph of today's trading where Obama stepped in to calm nerves, but its effect was not long lasting, maybe due to the fact that is given from the press conference and not President Obama himself or Secretary Geithner. Also, some contradicting items were discussed in the press conference as the press secretary warned that some irresponsible people would indeed be benefiting from the recent mortgage subsidization, after Obama boldly declared that no irresponsible parties would receive any sort of benefit from the bill. Analysts have been having a hay day with the bill ever since it was announced.



What use to be the enemy of bears, has now become a friend. "Speculation" is currently a big driving factor for the mass selling taking place in our markets. Prior to this past week, it was speculation of good things to come that use to reverse downward trading days and send markets flying. This negative speculation has over ridden many of the technical charts and kept the markets selling in fears of bank nationalization. I was amazed to see the movements of FAZ/FAS on Friday (I was on chat with many of you)! FAS went from $3.92 to $5.20 in about 5 minutes. During these times of speculation, we can see some serious violent jolts in the market as nerves increase or are eased. At any rate, it makes the market in a very dangerous and volatile state.

Although the selling is continuing, I am not convinced this is the big "critical mass" selling that we are to receive before we see a capitulation in the markets. The models just aren't there yet for deflationary signals. We are very overdue for a technical rally, and with speculation in the air, it makes me very reserved to make moves. As we saw from SRS on Friday, shorts can become very vulnerable in a speculative state. This a big reason for my liquidating of much of my position on Wednesday.

The only move I made Friday was the buying of FAZ put options for $65. The volatility of options are becoming greater and greater as we saw the VIX rise above 50 on Friday. Just on Friday, the range of my put option was $7-$14 (I got in at $10). So, I am choosing to short FAZ, instead of buying FAS, hopefully decay is on my side this time. This play is mostly a hedge for me, as I feel this technical rally may eventually take hold early next week. Plus, just during intraday trading on Friday, I made quite a big profit. Below is the Market Club report on FAS (get your own symbol analyzed for free, all you need is a name and email, Click Here). We also may see Tiny Tim finally make an appearance to try and squelch the concerns of nationalization better than the press secretary. At any rate, I'm not comfortable with the current models to go any more short than I am already and feel that we are very, very close to critical mass, but may still be a month or two still away. We did indeed reach new closing lows with the Dow, but not with the S&P, which is a more critical reading. So most of my Zecco.com account sits in cash at the moment, but with positions still in my "usual suspects."

I expect to see more stronger and more volatile movements going into next week. It will be interesting to see if speculation continues to drive trading or if we indeed get back on track with technicals. Watch out for the leveraged ETFs, as with the increasing VIX numbers, they become more and more volatile. It's great when you're on the right side of the momentum, but not the other way around. Have a good weekend and Happy Trading.

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It was interesting to watch the Dow move up and down today, as it seemed to react in the exact same way I was feeling. I was definitely torn coming into today about where the market was going to head. There looked to be a variety of forces on each side and it resulted in me teeter-tottering back in forth from Bull to Bear. In the end, I compromised and tried to fulfill both of my desires. So, it was very comical to me to see the market trade today exactly how I felt. I guess I was not alone in my identity crisis. In the end it worked out for me and hopefully I have set myself up in a good position for either way the market decides to go tomorrow.

I found some extra time today than I usually have, so I enjoyed being on the chat (right sidebar) with many of you and discussing the mid-day movements. If you haven't already, definitely check it out during the day as there are a variety of intelligent people on there sharing good thoughts and strategies.

So I ended up selling a lot of SRS as it hit $80 today. I of course have plenty of shares left, I just felt this was good time in the market to take some profits. A lot of this I kept in cash, but I did pick up some FAS at $5.60 and believe it or not, a bit of LVS at $2.95 for my Vegas fix. Both have pretty strict stop losses in case of a crash. I still am not sure who will win the battle of technicals and emotions in the market, but I don't want to be caught naked on either side it decides to turn. I would tally today's trading to the bears, as with all the news, they were able to keep the trading in the red for most of the day, even with some violent spurts that looked dangerous, but were quickly smacked down back into the red. So another victory for bears tomorrow and most likely technicals will have been overruled and that can be a very dangerous position for the market.


I am still not ruling out the strong possibility for a pretty violent rally this week. I know many of you feel that there is no news that could spark such a rally. There doesn't necessarily have to be any moves, especially when you are dealing with a technical rally. There was no news in November, when we hit our original lows and pulled a huge u-turn and ended up over 3% the same day. So, I continue guarded in case of the rally, but still have a bulk of my portfolio in cash and shorts for the time being. RIMM going any lower and I will be looking to pick up some options.

I was not impressed with Obama's speech today. After cutting through all of the BS from the beginning (it felt like one of his rallies from his campaign), there once again wasn't much encouraging information that was released. In fact, I kind of became fearful during the end as he started leveraging TARP funds. Saying, if you cooperate, you'll get a piece of the pie. It smelled a lot like beginning stages of nationalization and a bit of Socialism. This makes me even more weary of me being in FAS right now, but I still think we're a ways out from that if it does indeed happen. Also, he plans to spend $2 billion on neighborhood campaigns to helping solve foreclosure problems. Are you serious? This kind of wasteful spending drives me crazy when I file my taxes.

GM's fate could become a mover for the market if the government does indeed not come to their rescue this time around. Nobody seems to be on the auto's side this time, but I still find it hard to believe that the government will turn the other cheek. A failure to come to their rescue now will blatantly show that our original bailout money was a complete waste of spending. If something does happen though, it could cause some serious movement. Check out Ford's Market Club report trending score, -90 ouch (get your own symbol analyzed for free, all you need is a name and email, Click Here)! So, I will not be playing any auto stocks.

Tomorrow acts as a critical day for market direction. I'll try to get on chat again throughout the day and chat with you all. I believe the market will be pretty decisive in the direction it plans to go. Stay tuned tomorrow too, I will be sharing some thoughts from a friend who has spent most of his life in the oil industry. With oil being on my radar, it was great to hear from him. Have a great night, Happy Trading and see you tomorrow.

With not many more arrows left in his quiver, President Obama heads into this week hoping to be able to combat the army of more economic data being released, that so far, is not looking to be good. As he mentioned last week, Obama hopes to layout his plan more thoroughly this week to subsidize mortgages in his effort to limit home foreclosures. As he is running out of options to consider in stimulating the economy, I expect him to continually try and create new programs to hopefully attempt to bring confidence back into the markets. The problem is failing to create worthwhile plans and programs results in a waste of spending and more let down to an already battered investor. Being green and wet behind the years, I don't see much let up from Obama and his attempts.

I was actually surprised to see the market react the way it did on Friday. With the long weekend, coupled with the "new plan," I thought there may have been some buying going into the weekend. Also, many of the shorts got out of the market on Thursday. As we saw right before close on Thursday, the market shot up from a -200 point loss to almost in the green by close. Sure, Obama's announcement caused for buying, but after looking at the numbers, many of the shorts we're covering and getting out in anticipation of the long weekend. A lot of the shorters didn't want to be stuck in their shorts going into the long weekend, with the risk of new developments of Obama's foreclosure plan. Being that the volume was pretty low on Thursday, the market was very sensitive and reacted the way we saw it. Volume remained lower on Friday, but there were still a plenty of sellers in the market as it closed down over a percent.

Obama has his hands full going into this next week. With more employment, housing, and manufacturing news, which is looking to be the worse in 25 years, I expect the government to have some ammunition set aside in attempt to combat the news. However, as always, I think it will be tough to numb the pain, considering the significance of the numbers being reported. I am guessing housing starts will be the worst we've seen thus far, with jobless claims and manufacturing not far behind. This is indeed a week that could set the stages for a crash, but still much depends on how the government reacts.

I'm keeping an eye on oil as many analysts believe we will know by March whether or not we have hit a bottom. I am guessing eventually oil will settle near $75 a barrel. I'm keeping DIG and USO on my watchlist to maybe look for an entry point. I don't see huge surges from oil in the short term, but definitely some growth over the long term.

TBT is continuing to perform strong, see the market trend graph below (get your own symbol analyzed for free, all you need is a name and email, Click Here). It dipped a bit as corporate bonds received a lot of flack and many started buying treasuries again, but I still feel there is a lot of upside in this etf as foreign nations are bound to pull out of our treasuries as our instability and economic stress increases.

So I plan to be pretty bearish this week. I will be careful entering into mid-week as I do feel there will be more given on the plan to subsidize mortgages. As crazy as the plan sounds, I am sure it will cause some to cheer. I have been very pleased with SRS. I would expect VIX levels to continue to increase, and with that, stronger movements for the leveraged ETFS. So hopefully I can continue to see gains from my shorts.

I apologize for the delay in my post. I thought with the long weekend, it would be better to wait a couple days in case of anything coming out over the weekend. I will maybe get on chat tomorrow to discuss upcoming developments with the coming week. I also plan to discuss the list of restaurants experiencing leverage risk (I'm staying away from their stock). Remember, two more weeks for the $200 Lending Club promotion. Enter and win with no money required to invest, see here for more! Happy trading and I hope for much green in your trading this week.

From trading on Friday, you would have never guessed that we received the worse job loss report in 34 years as the market blew right past that number on Friday and turned to new hope for bailouts and freedom from debts by closing the Dow up 217 points. As I said last week, currently, we are very vulnerable to these short term, violent rallies as speculation has become the steering wheel to market trading. As I also discussed earlier in the week, we knew we were expecting something from Obama to combat the dreaded unemployment number that everyone expected to be devastating. The term "Buy the rumor, Sell the news" seems to be in effect currently as everyone jumped on the bank buy train on Friday(including myself) hoping for some serious news over the weekend. The only news that happened Friday, was a pretty mediocre press conference from Obama talking about his "plan" to stimulate the economy, and the rest were a bunch of leaks that made it to the news talking about what is suppose to be announced Monday (I'm sure the government didn't mean to leak that, right?!). They estimate that over 3 million jobs have been lost since we began the "recession in December of 2007. Over half of these jobs have been lost the past three months. This is a very bad sign, as it clearly shows we have not reached the crest of this job crisis. So I continue to believe this rally will be short lived.

I woke up early on Friday in anticipation to the big day. Seeing the futures trading up, I had a feeling we were going to be experiencing the day we did. I also knew that Ken Lewis, Bank of America's CEO, was planned to be interviewed on CNBC. In most cases, CEO's go on air to sell a company to the public. If it is bad news, they usually send the accountants or lawyers. I knew Lewis would be selling B of A to death and that's exactly what he did. So, I ended up buying into BAC in the morning, even though it was already up 14%. Lewis talked of their successes and that he has not once talked of or been talked to about nationalizing Bank of America. He also said that the plan was to pay back TARP funds by three years. Just during his speech, the stock jumped another 7% and eventually got as high as 33% up. As for the validity of his words, who knows and frankly I don't plan to be in his stock for very long.

My stop loss came into effect with my FAZ and I ended up making a pretty good profit, considering FAS ended up almost 20%. Sometimes, this strategy doesn't work if we reach a volatile day with the Dow bouncing back in forth. However, I felt that Friday was going to go only one direction, and it would go that way with conviction. The market trend FAS technical score is -75, so I don't know how excited I am to stay in it much longer (get your own symbol analyzed for free, all you need is a name and email, Click Here). However, as for now, I am remaining in both my BAC and FAS for the time being.

SRS was showing a lot of strength in early hours of trading as you can see from the chart. However, during mid-day, a big sell off began. I think bailout hopes and more rumors surfacing convinced many investors to get out for the time being. I am remaining in SRS, as I feel it is one of the better shorts for 2009. I do think they are vulnerable to some losses during all this mess, so I may be averaging down as it may continue to go down.


Obama's bailout team has revisited their original stimulus plan over the weekend and have supposedly made some changes (I personally feel they did because they knew they didn't have the vote!). Anyway, it seems as if the bailout amount will be reduced to $750 billion and that there have been a lot of changes to the "bad bank" plan, which wasn't getting a lot of popularity with the media and republicans. They still will supposedly have a toxic asset protection program but are straying from the "bad bank" plan and working on a "ring fence" concept. In a sense, the "bad bank" would buy up to $500 billion in troubled assets and then perform stress test on banks to see if they need more.

Now, where market to market accounting gets changed is when these assets are transferred. As of now, a bank would have to take a loss on their books to transfer these assets, which would kill bank's balance sheets to transfer a lot of these toxic assets. So, rumor is that they may be altering the accounting system where they can "carry market value" in hopes to keep bank's balance sheets healthy. A lot of moving pieces are in this plan and a lot can go wrong. Let's hope they know what they're doing. Secretary Geithner is suppose unveil the plan on Monday. These kind of announcements make me very timid in this market, which is why I am pretty hedged right now and sitting in a lot of cash at the moment. So we'll see how it goes. That mixed with the stimulus vote, which is planned for Tuesday, could cause one crazy trading week next week. In the end, the fundamentals are still very bear, so that is where I remain. I am just waiting for the right time to get in my bear positions fully, and that time may be coming soon.

So, it will be another early morning for me on Monday. I am expecting more volatility this next week in the market as I believe there could be a lot of "exhaust selling" after all of these announcements are done with. "Buy the rumor, sell the news."

I wanted to end with a clip from CBS news featuring the Lending Club we've been talking about. They have been getting a lot of publicity lately, which continues to reinforce my decision to invest in them. So far so good! Remember, the now $200 promotion ends this month for Lending Club, so check it out if you haven't already, click here.

Just as I anticipated, we encountered a pretty volatile day which made a sharp u-turn around mid-day, resulting in a pretty strong sell off of most everything, tech holding up the best. Once again we have dipped below the 8000 mark and may stay there to end the week, pending some big announcement that I am not foreseeing. Talk of the town today has been Obama's decision to regulate bank executive's salaries to a maximum of $500,000 annual. They do have stock option bonuses, but there are still lots of restrictions of when they can cash in on those. Sure, there is a need to regulate some of the antics that are going on around some of these companies and an accountability for spending, but I don't know if this is the right move.

I worry about Obama attempting to go to war with the upper class as he will most likely lose. There has to be a cohesive plan that can benefit all parties without dragging the upper class through the mud. We will see what response is given from the banks and the market dealing with this new development.

It has been a different week for the market and there are a few things on my mind which will most influence my upcoming trading. These 5 things are:

Effects of Restricted Bank Salaries
This may look like a good plan on paper, but there could be some pretty bad consequences if this plan backfires. No doubt there has been ridiculous spending by some executives that should result in some accountability. The problem I am worried about are banks losing their top executives to foreign competition. I mean how easy is it for foreign countries to match the $500k cap, not to say blow it out of the water. This filter will not only put a leash on the bad-performing executives, but also the good ones. If we risk losing some of our top executives, I can't see that being a good sign for banks and our overall economy.

S&P Closing Below 820
It has been a while since we have seen a sub 820 close for the S&P. Knowing the technicals are pretty strong at that point, I am very curious to see if we close under 820 sometime this week. If this is the case, I would expect there to be some extra downward momentum, possibly sending the S&P close to 800. Below is the recent market trend analysis for the S&P (get your own symbol analyzed for free, all you need is a name and email, Click Here).

Unemployment - Record Setting
I am very curious to see what unemployment numbers we see reported on Friday, as I personally feel they will be record setting. If you have been tracking the layoffs as I have, you have noticed the daily massive job cuts which have been going on. This is not to mention all of the mom and pop layoffs that are going on behind the scenes. This could be a big drag on the market.

Bad Bank - Nationalization?
I have not been able to wrap my fingers around this bad bank plan. I see them wanting to set up a similar system as the RTC program in the 80's and 90's, but I don't see how this plan works without instilling the nationalization of banks. And if that's the case, I would think that most of the shareholder's equity would be wiped out. Having Citi's or BAC's equity wiped out would most likely kill confidence in the financial markets and maybe cause a market crash.

Stimulus & Government Intervention
I still am waiting for Obama's bag of tricks. He has a good gift of linguistics and can do a great job of selling the country on hope. However, he has been very careful of not leading people's hopes astray. I think that's good. More false hope can cause even more problems in the long run. Still, I can't help but think that Obama has something brewing to attempt to counter this plunge and try to spark a big rally.

These things have been going in and out of my thoughts and continue to keep me guarded of what to buy. Indeed I am still heavily short, but have not gone as short as I would like because of some uncertainties. Hopefully, more clarity is brought the next couple of days and I can get back on track. Until then, I guess these thoughts keep creeping. Your Thoughts? Happy Trading.

PS - Seems as though the chat is working good. Good call on the recommendation. I will try to comment as much as I can during the day, however, I am often away for other business. By the way to clear some of your questions, Zecco.com is still offering free monthly trades, you just need to have more than 25 trades a month, which I'm sure most of you, like me, are doing. Just to answer those that thought the promotion was over.

Free Trading Analysis Video click here

What an interesting day it was. Today, trading felt like a boat being out in the middle of the ocean looking for wind to take it to shore, but the direction to head is unknown (hence the chosen picture for today). Volume was in the marketplace today, it just seemed like investors couldn't make up their mind of what they wanted to buy and sell. It was a very weird day of trading. The Dow was down 64 points, but the NASDAQ was up 18 points. Some banks were up, some were down big. Some shorts were up, some were down. I was even questioning what moves to make as nothing seemed to be getting wind behind their sails. The market did manage to close under 8000, which is a pretty big technical move, however, the S&P stayed over 820. As the market was looking to be down spiraling, there looked to be some sort of force (can you say PPT?) that came in right before close and tried pushed the market back up, but eventually lost the fight.

With another down day of trading for Bank of America it made it real tempting for me to pick up some shares, especially with the good possibility of some more bailout news this week (see today's market trend report below, get your own symbol analyzed for free, all you need is a name and email, Click Here). However, there were more forces pushing me away from the buy button for the time being. Sure, I may regret not having bought long in the next few days, but here are a few reasons why I chose to pass today.


Unemployment Data
I believe this month will be our worst month so far. Macy's announced their plans of cutting thousands of jobs. These announcements are going to keep continuing, most likely, at a more rapid rate. With this Friday being unemployment date, I thought I should steer clear for the time being.

Continued Bad Earnings
The only good news from earnings now a days is "beating market expectation." Aside from a few exceptions, no one is posting positive earnings these days and the cut that has been placed to last years profits has been devastating for many companies. Scandisk reported earnings today which initially sent the stock up. However, after looking at the results for a second time, I think investors realized it was not as good they had originally though, as the stock is down over 16% in after hours.

Forced Selling
Although we have seen some strong selling, we haven't seen as much"forced selling" as I would think at this stage in the recession/depression. Much of the selling has been elective selling from anticipation of lower future markets. There have been some hedge fund liquidations, but not many. Many analysts believe upcoming redemptions could be significantly larger this year and take a big toll for hedge funds causing some more selling. As these markets keep creeping down near the previous bottom levels, people most likely will become more fearful, which can result in panic, forced selling. These two forces are usually the fuel behind a capitulating crash.

Obama's bailout is looking to be voted on sometime next week, so we should expect several press conferences and and press releases with updating news that could potentially influence momentum. I would like to have some financials picked up a bit before voting to try and take advantage of a possible short term, violent rally. I just feel that right now is not the time for me.

So for today, I stayed with my shorts, Gold, and other investments. Like I said this weekend, I feel we are getting very close to a defining bottom. I believe as deflation takes this market by the horns, we will see capitulation where we can finally exhaust this guessing game and I can begin going long again. I enjoy making money on the long side much better. It is good for all parties.

Due to last minute popularity and some late emails, I have decided to extend the deadline for the Lending Club promotion to the end of the February and up the promotional prize money to $200. I have gotten a few emails of good feedback from some of your involvement and I, myself, am continuing to enjoy the experience in my investment with them. They can also benefit you as a borrower if you are looking to consolidate some of that nasty credit card debt. Click here to learn more about the promotion.

Tomorrow, I would expect some more violent movements in trading than we saw today. We should start seeing an increase in volatility at these lower levels. The question is whether it will be up or down. I will be up very early tomorrow. Let's see if we see the S&P close under 820. If so, we could have a new wind of selling. I will be making comments on my moves tomorrow. Have a good night, Happy Trading and we'll see you tomorrow.

Free Trading Analysis Video click here

I don't know if it was all the media time Obama's new projected stimulus plan got this weekend or the perceived "good news" from the existing-home sales, but whatever the case, the market was some how able to stay up in the midst of some seriously bad employment news and other negative economic data. The Dow did spend some time in the red, but quickly recovered and closed the day up 38 points. Many perceived the 6.5% increase in home sales as good news and an indicator that we may be starting to see the bottom of the residential crisis. However, once again, people have failed to read between the lines.

There are two huge elements which helped increase this number. First, the median of housing prices are down 15% just from last year. Many of the houses that were sold were bank owned and were sold for a loss. Sure, if McDonald's lowered the price of Big Macs to 50 cents, they would probably sell more, but their profits would be down.

Second, THE DISCOUNT RATE IS AT 0%. For those that enjoy good credit, with the help of the FED, people buying houses are seeing rates in the low to high 4% range. At this rate, you could buy a mansion, rent it to a dog, and still probably be able to cover your monthly debt service. The point is, only a 6% rise in home sales with a 15% in price and 4-5% borrowing, is not encouraging at all.

Also, today we were slammed with a whole new round of job cuts. Our unemployment rate is quickly moving towards 9% and up into the teens. They are projecting another 500,000 job loss month for January, however at this rate, we're looking to be closer to the 800,000-900,000 range. I thought I would make a list of all the recent job cuts that have been announced the last week as it may become tough to keep track. I hope none of your companies are on this list:

* Caterpillar to Cut 20,000 Jobs
* Sprint Nextel to Cut Up to 8,000 Jobs
* Home Depot to Cut 7,000 Jobs
* Microsoft to Cut Up to 5,000 Jobs
* Intel to Cut Up to 6,000 Jobs
* UAL Layoffs Planned
* BofA Could Cut 4,000 Jobs
* Cerberus May Lay off 10% of Staff
* Clear Channel Cutting 1.500 Jobs
* GE Capital to Slash Up to 11,000
* Conoco to Lay Off 4%
* Pfizer to Cut Up to 2,400 Jobs
* AMD to Lay Off 1,000
* WellPoint to Lay Off 1,500
* Hertz to Cut More than 4,000 Jobs
* Motorola to Slash 4,000 More Jobs
* Google to Cut 100 Recruiter Positions
* Seagate Cutting 6% of Workforce
* Barnes & Noble Slashes 100 Jobs
* Oracle Cuts Several Hundred Jobs
* Boeing to Cut 4,500 Jobs
* Cigna to Slash About 1,100 Jobs

* U.S. chemical maker Huntsman said it plans to cut about 1,175 jobs, or about 9 percent of its workforce, by year-end to reduce costs and tackle the huge slump in chemical demand.
* Microsoft announced it would cut up to 5,000 jobs and said it could no longer offer profit forecasts for the rest of the fiscal year.
* Intel said it would close sites in Asia and scale back operations in the United States as part of a restructuring that could affect as many as 6,000 jobs.
* UAL announced it will further reduce the number of salaried and management employees by approximately 1,000 positions by the end of 2009. This is in addition to the 1,500 positions the company announced in the second quarter.
* Diversified U.S. manufacturer Eaton said it planned to cut 5,200 jobs, or about 6 percent of its work force, in an effort to further slash costs in the face of a struggling economy.
* Time Warner's Warner Bros. Entertainment said it would cut about 800 jobs, or 10 percent of its worldwide staff in coming weeks.
* Lee Enterprises, which publishes 49 daily newspapers including the St. Louis Post-Dispatch, said its quarterly profit on a preliminary basis fell 69 percent and cut its staffing by more than 10 percent.
* Rohm and Haas said it plans to cut 900 jobs, or 5.5 percent of its workforce, in a bid to tackle the slump in demand and widespread market weakness.
* Bank of America may slash as much as 4,000 jobs in its capital markets units starting this week. The cuts are expected to be in New York and reflect the consolidation of the bank’s sales and trading businesses after it bought Merrill Lynch three weeks ago.

Last month, I discussed the extreme over buying of treasuries, which pushed the yield to almost 0% numbers and pressed me to buy into TBT, the 20-year Lehman treasury UltraShort. As you can see from the graph, it has done quite well for me since I got into it. I expect this short to continue to remain strong as Obama tries to spend our way out of this mess and foreign nations begin to pull their money out of our treasuries.

Here also is the momentum graph for TBT. As you can see it is currently holding a +70 score, which is pretty strong momentum. I would expect it to keep going up for a bit more. Get your own symbol analyzed for free, all you need is a name and email, Click Here.

Banks came down later in the day due to more concerns of their ability to survive. Hello, why did these concerns ever go away? It didn't help that Fannie Mae is wanting $16 billion more from the Fed to keep a float and trust me, these secondary askings for money is just the beginning. In the next month or two all of them will be back at the table with their hands open. The debt coming due is monumental.

American Express and Texas Instruments reported horrible earnings and with the anticipation of a rocky GDP number this week, I would expect some days of down trading. However, the new Mr. Smart secretary who doesn't pay his taxes was sworn in today, and knowing this market, it could somehow cause some praiseworthy trading tomorrow. I'm sticking with my shorts and gold for the time being. I think the ticking time bomb is close enough to zero for me.

Well, tomorrow should be an interesting day. After hours are up, but that doesn't mean anything anymore. Take advantage of the free trial of INO video, because I believe it won't be offered much longer, click here. I hope to wake up in the morning to see some green in my Zecco.com account. We'll see. Happy trading and we'll see you tomorrow.

Whether it be 8000 for the Dow or 825 for the S&P, it seems as though investors have found a base to set up camp as the market may go up and down a bit, but is staying close to those numbers. The continual battle between stimulus hopes and deflation depression is causing some violent jolts in volatility, as people are not quite sure what to believe or if things are going to get a lot worse. Even if the largest stimulus considered is passed, history has shown us that in most cases, there is severe lag time for the economy to respond to an economic stimulus. Also, let me remind you that our current situation is very unique as it is a global crisis, so I would expect that lag time to be much more severe. There seems to be a definite mood change currently that is very similar to the one back in November. Even with today's Friday wanting to rally, there was a strong opposing force selling. Currently, much of the movement is a result from all the day traders, as the momentum is moving like clock work as the shorts are covered. With next week thick of economic news and earnings, including GDP, I would expect a serious move to be made.


I personally feel we are getting closer and closer to retesting the bottom and this time when we're down there, we're going to go straight through it. All of the focus is on the banks right now, and everyone's chips go with them. Let me give a few reasons why I believe the banks have much more problems ahead and why I link SKF (Financials Short) and SRS (Real Estate Short) directly go together and why I am bullish on both.

Bank of America has an estimated $64.7 billion in commercial debt and says that it considers $3.9 billion or 6% currently non-performing. Most of this current delinquency they say is from home builders who are struggling with cash flow. This doesn't even take into account the other several billions that are just now beginning to default on their loans. You can expect that number to rise dramatically. Lately it seems as if these banks are more concerned with using the TARP funds to furnish new executive offices and payoff their chauffeur. It's ridiculous. Check out the latest free videos from INO, good stuff, click here.

US Bancorp's delinquencies jumped to 3.34% during Q4, which was way up from the 1% reported the year prior. It is expected that these default rates should increase for at least the next 12 months in the commercial sector. It is also projected that over $400 billion worth of debt is to come due during this year and that there is a refinancing shortfall of anywhere between $125 to $150 billion. Where's that money going to come from? Obama perhaps? These aren't even including all of the other defaults going on behind the scenes. It is also estimated that there is over $3.5 trillion in outstanding commercial debt and that 40% of that are on bank's balance sheets, while 26% as CMBS debt. I can assure you that most of those loans are very high leveraged, anywhere from 70-80% LTV. Banks aren't lending like that anymore.

With these kind of numbers it is no wonder why I am long on SKF and SRS. I believe there is going to be more bank consolidation and maybe some government controlling until this debt problem can be sorted out. The residential credit crunch was the a taste of what is to come.

Another significant trend to note today was that Gold and the value of the dollar were not inversely related. This is very good news for my GDX and GLD options. Having GDX up almost 9%, with the dollar being up as well, shows that the inverse relationship may be breaking and they may be taking their own paths. Plus check out the fundamentals for GDX below(Click Here to analyze a symbol for free, you just need a name and an email!). I have great hope for my gold. DIG could be also taking this same route, as we saw oil jump with another OPEC cut.
Big week next week with big news. GDP should be a momentum changer, whatever it may be. I would expect some sorry numbers to set the mood for selling next week. I did put some more money into my Lending Club investment, as my 10.5% return has held up thus far, and if I can keep that consistent, it can be a good buffer for my portfolio. My $100 promotional contest I am running for them ends next week, so get in it for free for a chance to win an easy $100, click here for more. I got out of my Citi today, as I feel Monday is going to be bloody (unless of course Obama has a weekend secret for everyone which, recently, they have loved doing). Time shall tell. Have a great weekend everyone and Happy Trading.

In recent weeks, there has been a lot of talk of these inverse etfs we discuss so frequently on this site and whether they are a legitimate vehicle for investment in this market. Some analysts, such as Cramer, feel that these funds should be taken off the market. Although Cramer can say some educational things sometimes, his banter on this subject must be from a personal vendetta he has with the funds, because his argument is just plain nonsense. When I look into my portfolio from Zecco.com, I notice that most of my portfolio is made up of these etfs right now. I have made a lot money from these in the past. I have also lost some. The point is, although there are flaws (if you want to call them that) to the funds and they can cause a lot of stress, there can still be A LOT of money made with playing them at the right time and in the right way.

A key element to the success of these etfs, is the VIX level. VIX (Volatility Index of the S&P) has proven to have a strong correlation with the performances of these funds. As the VIX index is higher, so is the volatility. In turn, having the "fear index" raised during the more volatile times puts even higher premiums on the purchase of options. These funds consist largely of swaps and option purchases. This is why you see the greatest gains from these funds during the highes peaks of the VIX. And even more so downward on the low peaks (see below).



As you can see from the graph below, SKF and SRS (two of Proshares most popular 2x inverse etfs) track almost directly with the VIX , just more exaggerated. The separation is even worse on the down swing. This is why when people analyze the funds on 1 year+ holding terms, the numbers don't equal out, because the number can fall at a more rapid rate than it went up. This is largely due to where the VIX levels are at and where the momentum is. These past two months, the market became very consistently bullish, which shot down the prices of these funds much dramatically then they went up. Because of the sophisticated nature of these funds, with the swaps and options, as well as the management fees, these funds can move at a much larger rate than their claimed 2X leveraged of their measured fund. This can be a two edged sword as they can indeed yield stronger gains than just 2x the funds movement or lose more on the way down.

It is for this reason everyone is hating these funds right now, because they have lost so much value recently. However, with the combination of the even more so weakening economy and the VIX levels reaching over 50 on Friday (lows were at 38 and highs were at 80), I am more and more seeing big opportunities for these etfs again. Just from the 38 to 50 move in the index, Many of these funds have jumped 20-35% in a week. They are obviously to be played on momentum and volatility. If the VIX continues to move higher the next couple of weeks, there could be some serious gains by these funds.

It is hard to just pick a day on a calender and do a yearly analysis on these funds as you would a normal stock or mutual fund. Because of the rate of change that these funds can move at, it can be up 150% in 2 weeks or vise versa. Two months ago, no one was questioning the return abilities of them. At the time they were all $200+! It is all about timing the bumps right and getting on the right side of the momentum. Keep your eye on the VIX levels, because if it continues to push upward, you can expect to see strong gains from these funds. To sum it up, I'm a bull on SRS, SKF, FXP(or FAZ) and EEV.

UYG is one to be considered just for this week as Obama is put into office, but I'm not going to hold it for long. Banks should get some love as hopes for the biggest bailout ever is present. However, as we discussed last week, the crater to fill is much deeper than the shovels of dirt he plans to throw on it.

Here is a great trend analysis site ( Click Here) where they will take any symbol your tracking and do a great fundamental analysis on it. I've used it on these funds, and they work well. They are also offering a free video tutorial on expert training and technical analysis, Click Here. Definitely worth learning about in this market. Check them out, they'll give you free trials, all they need is your email and name.

Have a good evening everyone. Happy MLK day and lets see if Obama can tackle the biggest financial crisis this country has ever seen. Happy Trading.