Thursday, March 5, 2009

We Haven't Been This Oversold Since--Tomorrow?

What a sweetheart welcome to 2009--down 24% and we're barely nine weeks in. Scary, truly scary. I mentioned a couple of outcomes for the market in last weekends newsletter, both outcomes were lower, but it was how we would go lower. An outright capitulatory crash or a slow bloodletting. I now realize that we will not crash at all-we are in a constant state of crash, kind of like a state of grace, except not as pleasant. I warned on twitter yesterday not to get too excited about yesterday's pathetic rally, the volume was light, the financials showed no signs of life and the close was weak. I noted that we didn't have two "up" days in a row since early February. Broken markets do that. I asked the question on the blog last night whether or not it was real. I thought not.

The market isn't stupid, the folks in Washington think they are though. Regulation, higher taxes and reckless spending is not the proper cocktail when Rome is burning. Come on guys, really. The China stimulus package is 100% geared toward job creation, ours is not, and it saddens my heart that we should be taking our cue from Communists. Do we really have to create a bureaucracy to research pig emissions? I have a million of them, don't get me started. Truly disgraceful.

We have been having a blast over on Stocktwits and FAZ finally broke $100 a share today. We have been riding it from $40. The financials are toxic death, been saying that for a year, and even when I think enough is enough, the sector continues to surprise to the downside. I do believe that if Washington doesn't get their act together soon, the possibility exist for stocks like WFC go to $5, USB to $5, GS back to $50........Why not, did you ever think Citigroup would break a buck and trade in the pennies. How about Bank of America with a 2 in front of it?

Tomorrow is the unemployment number--again. I have been heavily short every trading day prior to the number, and it has been more predictable than death and taxes. Who would ever want to hold risk overnight in front of that number in this environment? I'm flat and in cash as usual, and the rally is close, I just don't know when. Let everything fail and let's have a do over. They financials have already failed, yet we've spent trillions, who are we kidding?

We are due for a bounce but am still sticking to my DOW 5000-5500 target, but will aggressively play the rallies along the way. I'll be back later with some names. Hope you all had a wonderful day and thanks for stopping by. Later


TraderMark said...

good job Leonidas

ghamal said...

Well you were right about GE going to 5. GE However the shares with the 5 handle were grabbed in minutes, On-Balance-Volume since then has been positive and it defended 6.6 well today that the market was down. What do you think the upside could be in GE in a coming rally?

Maximo said...

Thanks for the insights, man! I sold $FAZ at $91.50 and was kicking myself when I saw it take off another ten dollars but it was a good ride. I agree about the rally. But caution is best.

GL said...

My buddy sent me a note today after the close. Deutsche Bank Economist believes the non-farm payroll number tomorrow will be -750,000. Street is looking for -650,000.

sJ said...

Trading FAS and FAZ is like playing with fire...

charts suggest oversold levels and due for some relief rally before we continue towards 5K on the Dow

2lonestar said...

Love your perspective. Why aren't you Secretary of the Treasury? Seriously.

Margaret Staples said...

The markets are not stupid, nor are they a wild uncontrolled force. They are privately held and privately manipulated businesses. The mistake the government is making is thinking that they can have a direct impact on the markets. All of the various spending projects, that some call pork and others call stimulus, are designed with the misguided impression that some set of spending practices can cause the market to bounce back up.

The best strategy the government could be using would be one where they thought of the markets like they have finally come to think of oil. It is something that we have foolishly become unreasonably dependent on and which we need to transition away from dependence on as quickly and efficiently as possible.

Let the market do what it is going to do, it can be controlled, but not by the government. They need to be making economic policy for building the economy in ways which are long term and productive regardless of market activity.

About Me

My photo
I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.