Monday, April 20, 2009

What Did Today Tell Us?

First, we knocked it out of the park today. From BAC to SRS to SDS to DFS to AXP. Just a solid day all the way around. I hope some of you were able to get into short positions on DFS and AXP before the open or soon after. Unfortunately for me, was too busy this morning to hit the trading desk so I missed out on the early move on DFS and AXP and decided not to chase just yet. I do appreciate the donations from those of you who did cash in. There will be more of it but not sure it now is a good time to chase.

For bears, today was a big day. A solid correction which was very much anticipated by many (other than CNBC analysts). Did you notice the Fast Money guys all saying this was expected??? Did you hear them all late last week saying banks are safe???

So, what does today mean? Well, first, on a macro level, we are in a bear market. We know that because the 200 day MA on the SPX is still on the down trend and neither the 20 or 50 day MA's are even close to it.

On a micro level, we are still in a bear market rally and today was a correction. So don't expect the entire bear market rally to be wiped out this week or even next week. It will take time.

You should have taken some profits today. If you didn't, you are a greedy pig and you deserve to lose some of it. You don't have to sell your ETFs or cover your shorts to take profit. Use options to protect profits by buying puts or selling calls. Its a great way to generate some cash and protect profits.

I think we have a bit of a bounce here but we are clearly headed to the 760 level or so. It may take a couple of weeks but we are headed there. From there, it will test how strong the bulls are. With key earnings already out, there is not much to rally on unless unemployment and retail numbers improve, which is highly unlikely.

Stress tests are meaningless now. If all banks pass with no problems, it was a waste of time and a farce. If some of them fail and need recapitalization, we already knew that but will be a wash because the strong banks will outperform the weaker ones equally.

What stress tests hopefully will do is give some transparency. And I have to believe transparency will be negative. Did you hear Ken Lewis today? How many times did he use the word "hope" when describing future earnings and revenues?

Hope is all BAC has. Hope that credit debt will improve even though it is clearly declining. BAC is screwed. They will be injected with more gov't money, dilute the common shares, and sell off some key banking units in order to survive. I have been telling you for weeks that BAC May puts are the play. And what an opportunity last week gave us. $11.56???? Are you kidding me??? Wow. I wish I had timed it right but I bought into the May puts when BAC was around $10. I never sweated it though. And now it is my time to relish the glory on BAC's slide back down to sub $5.

But keep your donations coming. :) Only if this helps you though. Google wiped out my account so all AdSense earnings are gone. Screw Google. I am shorting them now. :)

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