Tuesday, April 14, 2009

No One Cares

The banks are flashing some remarkable earnings reports and filling the media with optimism. Yet where's the rally? Well, they already rallied and all the good news appears to be priced in. That, and the fact no one believes the earnings reports. Skepticism reigns. Everyone knows the books are cooked making the earnings reports meaningless. JPM, C, BAC can all report blow out earnings, but no one cares. They are assumed to have blowout earnings based on new M2M accounting rules.

And thus the problem. There is no transparency. And the market hates that. Banks will likely continue their slide. And if, for some reason, either one of the 3 fail to meet expectations, it could be a long and swift slide.

Loading up on BAC puts today was very rewarding. I split it up between April 11's and May 10's and 9's. All did extremely well today. The smart trader in me said to sell at the end of the day, but I have to believe BAC is headed under 9 this week so I will hold the April's probably until end of day tomorrow. I will hold the May's a bit longer. I will be playing with house money by then.

SPG was a great play today too. I did exit the April 40's at the end of the day with a very nice double up. I thank Erik for turning me onto that.

Tomorrow I think banks continue their slide. Again BAC and JPM are not going to get hit by a short squeeze due to the low outstanding short positions. C, on the other hand has a heavy short percentage and we saw what happened today. A short squeeze on C.

I think C will tail off going into earnings but I am not going to short or buy puts on it since there just is not enough room.

It looks like GOOG may also be overbought at these levels. They will have to blow out earnings to just maintain where they are at. Mediocre or just good earnings will result in a 30 pt slide, just like what happened to INTC.

Obviously blow out earnings are not causing stocks to move up. It is a sure sign of an overbought market. Good news is meaningless, meaning bad news rules again. We should be headed to 800 if not lower in the next week or two.

I would stay away from health care and energy right now. they will probably not be effected by earnings and they are driven by future government policies. GLL is probably a good play right now as inflation is many months away.

I am also going to get my feet wet in EEM tomorrow. I think it is a good safe long term investment which won't make me rich, but it will allow me to sleep at night and get some decent gains on trades. Sell on any 15% gains and rebuy at lower levels. It will play out just like TBT. Good safe medium term plays to buy on dips, sell on small spikes.

And forget the VIX this week. OPEX can really screw around with it. It can go down on poor market days and up and market up days. And if you own any options on the VIX, remember VIX options expire on Wednesday of OPEX week, not Friday.

Trade on!

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