Monday, March 30, 2009

Truth Rules!

Finally, reality hit the market via real news about GM and about banks needing more money. Hell no the banks are not profitable. Anybody playing banks thinking they are profitable is not paying attention. The banks will take years and trillions of dollars to get back to even after years of 30-1 leveraging. Don't let these analysts in the media fool you. They are trying to move the market by making their own news.

VIX had a nice run today just above its 20dma. That is very bearish for the market. But it does not mean that we go straight down. TA will tell you we should fill a gap to 740-750. Maybe we should, but I do not think that is going to happen. I think there may be more downside but I see 765 as a support level which will not be broken at least this week.

Why do I say that? Because I do think there is still sentiment that M2M accounting changes will suddenly and miraculously cure the banks problems. And I think there are hopeful longs out there willing to risk some money in financials expecting an announcement this week which will turn the markets. So look for buying on any further dips keeping the S&P away from 750.

We are, IMO, obviously in a bear market rally still. This is not a bull. This is a bear market rally and today showed that when news that is real hits the market, this market will go down and down quickly. Even the permabulls on CNBC are now doubting things. Sentiment is changing but I would not go short financials right now unless it is a quick day trade. Let the M2M news hit first and then lets see what kind of levels can be had.

SRS looked good today. There should be plenty more of that over the next 2-3 months. SRS should out gain the financial ETF's on any given day. REIT's are going to start going down fast and hard. On financials, you have to believe BAC is headed for under $1 in the next month. Sure it may change directions in the next couple of days and make a run, but by end of April, it will be $1 or less.

Watch the VIX. if it goes up to 47, I may change my mind and say we are in a bigger move down. But I suspect it will hover in the 44-46 range for a couple of days and market will edge higher.


  1. Not following your thinking on BAC. Why would it be 1 or less in a month ? Don't see it.

  2. I believe they will not pass the stress test and is probably the primary bank Geithner mentioned that will need a lot more money. it could be WFC as well but I think BAC has the most to lose here. Its just an educated guess and has nothing to do with technicals.

  3. "Believe" ?
    ok; I'll be watching.
    I agree w/ the overall premise that banks will need a lot more money; but which ones ? and who is in bad shape ?

    I am not convinced that its BAC, but we just don't know.