It’s been a few days since I have put anything out publicly, so below you will find a coupel of emails that went out this morning to clients. Some of the sections I have pulled, but most of it is below. Clients received the first email around 6:30AM
BOA Earnings - Of course, they blew away analysts expectations. What can I say? We no longer have an SEC so they can report whatever they want. And the analysts are no longer analysts, because they work for banks and other financial institutions. The independent analysts don’t get any face time in main stream media. BOA still needs to address the Countrywide Mortgage issues and the Merrill Lynch problems . . . not to mention piles and piles of stinky fish. And with unemployment rising, they have no hope of containing issues with consumer credit and mortgages. The initial reaction from European markets was yawn. The initial reaction in the futures was - party-time, Rah Rah Rah. The initial reaction of the talking heads was . . . party-time as well! Let’s hear from Meredity Whitney. Unfortunately, main stream media will not touch her because if they did, the big boys on Wall Street would stop talking to main stream media. We must break analysts away from the financial institutions.
Trade Alert - I am going to recommend the Emerging Market short ETF. This is a single short position and the symbol is EUM. To set a price for the spreadhsheets, I update before the call this morning with a pre-market price.
The Big News - Obama is now talking about converting Bail Out dollars to stock in the banks. I guess now we know why we saw such a rally in financials. The banks want to sell this equity at the highest prices possible to the government. We . . . the taxpayers are going to pay 2-5 times more for this stock. What can we do? Nothing, unless we can replace the Administration with guys like Stigliz, Simon Johnson and Krugman. Volcker was finally allowed out of the closet. Instead of telling us the truth, it looks like three months in the closet was enough to sway him to cave in to Summers and Geithner. Volcker could barely put his thoughts into a cohesive sentence when I heard him. Very sad, but this news should be horrifying to everyone.
Essentially, we are going to let banks keep the billions we loaned them, and we are going to get stuck with worthless stock. This will also let the bankers pay themselves whatever they want, because even though we own the stock . . . who is going to cast the vote? Obama, Summers or the dog.
If this is allowed to move forward, the financial institutions will push the bank stocks to new highs . . . taking the entire market with them. I would expect we move back above 10,000 if there is no one strong enough to stand up and say . . . this will not work. Stiglitz is doing it, but just as my fight with Goldman Sachs, one many cannot do it. Stiglitz and others like him need to form an Opposition Party type team. If not, we are even in worse shape than I anticipated.
Technicals - The big numbers was 875 and we popped above it every so slightly. Immediately, the market sold off 5 points to close just under 870. Everything right now is bearish . . . market breadth, advance/decline and the chartists. We are now in ascending wedge according to some charts. This is bearish, and even more bearish when you look at where the volume came from (Goldman Sachs) and the extent of the program trading. Now that even the head of the NYSE has called this out into the light, I wonder how much further Goldman Sachs is prepared to push this. By the way, the head of the NYSE is a former Goldman Sachs managing director. It took a lot for him to go public with these statements about program trading . . . and the NYSE numbers reveal the extent of Goldman’s program trading.
One final note here. Financials, Builders and REITs have led this rally. That’s like Obama and his teams of misfits leading the country.
Take a look at the chart below from Barrons. No words are needed.
(Note: This was a chart showing the huge spike in Insider Sales. It was the strongest Bearish reading in two years.)
Fundamentals - A lot of earnings out this week. And the government just issued a new and revised AIG program. More nonsense and another slap in the face to all of us. The immediate reaction on the futures was to move higher on this news, as it means an easier ride for AIG and more money for Wall Street. I am afraid there is little to do but step out of the way today if the markets rally today. If that happens, my plans are to sit back and wait. It will be a tough decision, and it will hurt, but with no fundamental or technical reason to move higher . . . if the market does move higher today, it can only be program trading at the request of the Administration.
The German markets are down more than 2% and U.K. about 1%. The Asian markets were up again as the party continues on the news from China that the stimulus is working better than expected. If you believe that, I’d like to show you a bag of diamonds I have for sale. Hush hush, of course.
Oil - It finally moved below $50 with a drop today of 4% and I still believe we move below $40 again. Inventories are swell and consumption is still dropping. Moreover, countries need to pump more oil to generate the same revenues they did a year ago. They don’t have much of a choice, because their economies are falling apart. I still like our short position in USO, the oil fund ETF.
Gold - We have a list of 19 miners noted below. We are setting our Metals and Mining Portfolio to these positions with a 5% purchase of each. We will use today’s opening price to establish prices for this portfolio. The techinicals for gold are on the fence, leaning towards lower gold. However, our positions are not short term and are not trading positoins. These are long term positons to take advantage of gold moving higher as inflation returns.
(List for clients only)
Portfolios - I know we are behind on this, but since we did not have anyone interested in these, we put them on a back burner. We are going to follow the positons below in two portfolios. Even though I still believe the market is headed lower, we are going to price the Long Only portfolio now, so it will have a track record. We are going to use today’s opening prices for both portfolios.
Long Only Portfolio - We have had requests for a Long Only portfolio, and you will find it below. This is a Portfolio that we will begin reporting. There are 25 positions for long term hold objectives. We have tried to put together a portfolio with those positions that will benefit from a recovery. I do not expect many changes to this portfolio, but if we do make changes, I anticipate it will be due to spotting some other opportunities that might be too good to resist. The portfolio below will be based on $100,000 with 3% in each position using a commission of $14.95 per trade and the balance in cash.
(List for clients only)
I still believe the markets are headed much lower, but for those that want to put something away just in case we move higher from here OR for longer term growth, this is it. The fee on this portfolio will be 1% of managed assets per year.
10:30AM Email - Trade Alert on Sears PUTs
11:15AM Email - Expect a move higher in the market as we move into the retail lunch hour. But I would also anticipate a further sell off to the downside . . . unless Obama calls Goldman Sachs and issues the EO to push the program trading button again. Any close below 846 is a winner on the technical side. As far as volume goes, it would be hard for anyone to put a shiny face on this for the technicians.
I am not closing out any positions just yet. There is still more to come. We are now under the 10 Day Moving Average (MA) and we are in striking range of the 100 Day MA at 829.75. For the techies these are critical cut and run numbers. I’ve been receiving trade alerts all morning from the techies we follow. There are being stopped out. And some of them that entered positions Friday and this morning are being stopped out with losses. As the techies see some of their profits erode and the numbers cross their lines, they will fuel a more aggressive dump of stocks and drive prices lower.
We have now broken out of the wedge with only a “glimmer of hope” of returning to the wedge before a more serious correction to the downside.
But . . . and this is a big but. If we get an ObamaRamaLama today with some super-natural plan, we could see this market skyrocket to the positive side and then up another 2-5%. That would take hypnosis on his part, but he basically has the American public hypnotized. He certainly has the idiots in Congress hypnotized. I still want to hear what they are going to do about taxing the AIG bonuses at 90%. Where are all the protestors? What happened? Carney Frank does it again. The reason he speaks like that is because he has his foot in his mouth all the time.
Tomorrow Capital One comes out with earnings, so let’s just sit tight for now. Our FAZ position is still in the negative but it is up 18% from yesterday’s close. We are need a shot of reality to take this market back to my line in the sand of 780. So keep your fingers crossed that BO the president, not BO the dog, does not pull a hypnotic version of his famous ObamaRamaLamas today. Personally, I prefer seeing BO the dog on TV.
If you bought EUM this morning, you have a small profit. If you did not buy it, I would still buy it in here at $66.
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