OK, so Wednesday the buying came in fast and furious and we got a VERY nice TREND UP day at last! That's what you call a very nice SHORT SQUEEZE!
The squeeze was incited by several factors;
1)We were/are severely oversold
2)The Fed is basically saying that they will buy the stock market to avoid it going down more
3)Wells Fargo had (expected) good results
#1 is really the main reason, but the Fed really is doing investors an injustice long term. They are setting up even larger losses. We're putting together a really good onlinse seminar on HUNTING FOR BEAR, how to trade and profit from a Bear market. I think it's gonna be a home run class for a lot of reasons. One of the things I've learned over the years is that trending markets (up or down) have many similarities to each other, and if you can pinpoint them you can make oogles of money!
Today's kind of rally is a typical oversold SNAP BACK rally into a Bear market downtrend.
These rallies tend to be VICIOUS, like today's where they crush anyone short. We got long several things, including FSLR and GOOG (Option Trader intraday had a better than 50% gain on the $520 GOOG calls! SWEET!). We were/are also short the USO, which you'll notice was one of the few things/sectors downon the day, so DOUBLE Ka-chingo!
The trick/key is not to be exact in your time, the key is to limit your losses if you are on the wrong side of the market and not get greedy. SKF, which we basically called around $125 went all the way to $200 yesterday. Today it was down 20%! You need to make sure you are taking profits as things go and so if you get stopped out of a position you don't give back much of your gains. The worst thing a trader can do, and I've done it myself, trust me, is to have a nice gain and turn it into a break even, small gain or the worst - a loser!
OK, so thats the trading piece of things, though I will say that a nice gap down would be a nice buy for at least a bounce to green. Right now the futures are down here, so hopefully they stay down for the open decently and we can fade them. Remember, GOOG reports after the close Thursday and that is going to be a KEY report for the market, particularly tech near term. I think they will beat and guide up nicely, they usually do. How much by will dictate what happens to this market near term in techland. I'm hoping its total blowout like last quarter and we can get GOOG to $600s! That'll set up some nice shorting opps in the next few weeks. This is why I wanted to wait to do the TOP TEN TECH SHORTS class. So, now we'll set it for mid next week, I'll announce the date by Friday more than likely. I didn't want to do the class before we saw some earnings. JPM in the am will get the financials in gear some more, or pull them back in a bit. The question is, did we mark a near term "bottom" or was this a one day wonder rally like we've had in this Bear market several times? I think we could get some sideways action, and maybe move toward 11,500 - 11,700, but I would not be that hungry to be long here for more than trades just yet. You see the problem with these types of rallies is, they happen so fast its hard to get in, and usually what happens in a Bear market is that people get in at the last minute, when the rally is all but over.
The Fed is basically making us a socialist country. It's funny, on Tuesday there was a senator who really went after Bernanke, I didn't catch his name, so someone please email me to let me know, but he had a great line, and I paraphrase "yesterday I went to bed at night and when I woke up I didn't realize I was in France, but I was" or something like that. He was saying (and said) that the actions of the Fed, and the govt. are tantamount to socialism. The government is not, and never should (and I don't think ever has) be buying up stock on the open market. That's absurd. And, it artifically creates an illusion of safety.
Why do I say that? Think about this, a couple of months ago when the Bear Stearns debacle happened a ton of analysts said you should buy LEH stock. The rationale? That the FED had put a "FLOOR" under the stock and it couldn't possibly fall any further than the roughly $25 to $30 it was then trading at. The stock went all the way to close to $50.
This week LEH traded in the $11s (yesterday). The Fed can do anything they want, they can pump money into the economy, they can say FNM and FRE are solvent, they can make anything they want up, but in the end there is a saying, you may have heard it - Water seeks its own level.
FNM and FRE are worthless. You know what the Fed should do? They should BUY OUT FNM and FRE at $25 a share each! You want to drive the market to 15,000 in a jiff? Have the Fed do that! Then everyone who is smart and short these crappy stocks will get crushed (I'm not currently short them, but am drooling at the notion they may go higher so then I can short them! - NOT naked though! Hehe). You would then have the basic setup that the Federal govt of this country has become the world's largest investor in the US stock market.
That's almost as smart as bailing out the housing crisis by rewarding people who bought things they couldn't afford. I've used this analogy before, I lost a LOT of money in several ventures. It sucks losing hard earned money. Why doesn't the Fed bail me out of those bad investments? What's the difference? There isn't any, but this is an election year and so as I've said also before, the perfect storm is brewing and in the end its gonna unfortunately be EXTREMELY ugly.
Oh, one more idea, why doesn't the Fed just print like 10 TRILLION dollars and send every American like $100,000 check? That'd be cool, and everyone would then go out and spend and that would, I think, jumpstart the economy! Why not? They will spend that much anyway with these ridiculous things they are doing now. Might as well just give everyone a nice big fat check - ka-chingo! I'd be happy to get $100,000 check! Sweet!
I actually heard today that there are politicians talking about how they should abolish short selling! ROFLMAO! Yes, the evil short sellers! My gawd, sometimes I watch these hearings during the day and I just want to shake my TV.
Listen, you may or may not agree with what I say, that's fine either way, this is a country built on ideas. But, trust me, NONE of this problem, and I do mean NONE of it, has anything to do with "short sellers". I short sell the market SOMETIMES, and I long it SOMETIMES. That's what good traders do. If the idea is that the market needs to go up always, that's not a market, thats another handout and it'll just devalue the dollar to nothing and then it won't matter, we'll all be using a well barrow to buy a loaf of bread.
This Fed is possibly worse than the last one. And one last rant (ok, maybe two!), what's TRULY scary is that many of the ideas that booyah head is coming up with, the Fed is doing! They all watch his show and then think he knows what to do!
Oy vey. Now we go back to the uptick rule. It's unreal. You can't stop the market ultimately from falling, I'm sorry. It won't work, all it'll do is it'll hurt even more investors. It won't hurt the dreaded and evil "short sellers' it'll hurt the average investor who will have a false sense of security, only to find out that the market will fall no matter what in the end. And, that's tragic, my friends. History is and should be a good guidepost. The best way for the market to find that elusive bottom for real? Let it fall til it finds it and then we can build from there. Right now there is this insane witch hunt for who's at fault, and the TRUTH is, when you point a finger at something, THREE FINGERS point back at YOU!
WATCH GOOG, and fade the gap today!
Evil doer out,