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goldminingXpert (29.58)

The Market Is About To Plunge (Day 8, Vol. 7)

Recs

38

May 07, 2009 – Comments (27) | RELATED TICKERS: SPY , QQQ , XLF

Instead of more reasons, I'm here to offer trading advice this afternoon. As the Nasdaq has started getting shredded this morning, my reversal signals became more and more solid. If the market closes here or lower (SPX <914) we will print a very pretty reversal daily candle on all the indices but especially the Nasdaq. Look at a chart of the QQQQ (NAS 100 index fund) and tell me that isn't screaming bearish. The opportunity we now have is to short here.

If the market reverses north of 930, one covers and suffers a 15 point loss. If one is correct and we do have a top, we score at least 50 and probably 100 S&P points of downside in the coming month. That is about 4 to 1 odds in favour of the short position. With the Nasdaq already critically breaking down with stawlarts such as Apple getting smacked around, one can expect the rest of the market to follow it down. Especially since the market leader is the fundamentally insolvent and worthless Bank of the American Government (BAC). When it reverses, the XLF will collapse back into the single digits and the S&P will dive in sympathy. Now is the opportunity to get a low-risk high-reward short entry on this overpriced and overbought market.

27 Comments – Post Your Own

#1) On May 07, 2009 at 1:02 PM, motleyanimal (83.92) wrote:

BAC will be outlining a plan to raise capital soon. I'm thinking they will be selling equity, given the meteoric rise of their stock.

I have to say that waiting for the market to plunge has been almost as bad as watching Geraldo open Al Capone's vault. And I hope I will not be similarly disappointed.

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#2) On May 07, 2009 at 1:11 PM, BigFatBEAR (29.25) wrote:

Thanks, as always, for your thoughts and guidance. I'm looking for some more confirmation of a reversal...  looks like it's coming.

The bears are going to do to the market what the food is doing to these muscians:

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#3) On May 07, 2009 at 1:12 PM, UltraContrarian (32.20) wrote:

I agree, this is a great time to open short positions.  CS looks like a short to sink your teeth into as well.  Once investors shake off the stress test results they will remember the potentially insolvent European banks which have not been comprehensively and publicly stress tested.

 

Also short: FDML, WOLF, KKD.  Maybe PALM soon.

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#4) On May 07, 2009 at 1:14 PM, gmXmkttiming (28.12) wrote:

BFB, thanks for the comments. That video was amusing--I can't believe they kept playing through all that. I played piano for 11 years, by about 1:58, I'd be far distracted to keep on going.

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#5) On May 07, 2009 at 1:16 PM, gmXmkttiming (28.12) wrote:

This is a great time to get short! The bond market just dislocated. I love me a good bond market failed auction. Interest rates are going UP, UP, and AWAY and we all know what that means for the housing market, retail and eventually stocks. S&P making new lows. Let's get this party cooking!

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#6) On May 07, 2009 at 1:22 PM, DeerHunter73 (73.02) wrote:

Your 100 points to the down side puts the S&P in the 800s not the 600s. If that happens there will be another rally to put the S&P over 1000. When it pulls back from that number it will hoover around 950. Which is what i have been saying all along.

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#7) On May 07, 2009 at 1:24 PM, goldminingXpert (29.58) wrote:

I don't think we'll break into the 600s again until the fall. I'd be happy with a move to 800, a pause and consolidation throughout the summer, than the real move after traders return from their summer vacations.

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#8) On May 07, 2009 at 1:34 PM, outoffocus (23.23) wrote:

I'm going to add about 5 red thumbs a day until i reach 200 picks.

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#9) On May 07, 2009 at 1:51 PM, goldminingXpert (29.58) wrote:

If 900 goes down on the S&P in the next hour, we're going to most likely get a waterfall into the close. If you're long and thinking about doing something stupid like moving your stops down--don't.

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#10) On May 07, 2009 at 2:01 PM, bothisellhigher (< 20) wrote:

Pretty much agree...if S&P closes below 875 I'm looking for something to short too...and listen to GMX...I would say "never" move your stops down...look for something else.

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#11) On May 07, 2009 at 2:02 PM, goldminingXpert (29.58) wrote:

Pretty much agree...if S&P closes below 875 I'm looking for something to short too

I think 875 is too much to hope for (though I'd love it) but 886 could be on the table if things play out well into the close.

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#12) On May 07, 2009 at 2:13 PM, DeerHunter73 (73.02) wrote:

Something else to think about to. "IF" AIG reports better then expected or even inline today after the close, tomorrow will be one seriously twisted day. After the stress tests played out the last 2 days wierder shyt has happened. Look at BAC last 2 days. On the flip side AIG reports worse then expected, Youll get your 875 wish tomorrow. Monday is a new week to, and I would expect a move up by Tuesday.

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#13) On May 07, 2009 at 2:17 PM, binve (< 20) wrote:

Yessir

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#14) On May 07, 2009 at 2:25 PM, ProfitMkers (< 20) wrote:

Hello All...I'm new here.

 

Let me just say that the stress test numbers that leaked out yesterday would signal the market to plunge (especially financials) but they rallied like flies on a pile of Sh>?t.  

Can anyone here explain in simple terms why the market rallied so violently yesterday on what I believe to be confirmation of bad news, in the fact that the banks are indeed in deep trouble?  As the numbers leaked out, I assumed the financials to take the opposite direction.  I figured the banks that needed more capital would dive and the banks that were ok would go up, but the opposite happenned.  What gives???

I am now kicking myself for not participating in the rally since early March, but I figured since the fundamentals have not really improved and the second wave of forclosures in residential and now commercial real state is about to hit; that this rally, based on Citi claiming they made a profit and "green shoots" comment by Benny were only good for about 700-750 range on S&P, but definitely not where we are now.

 SOMEBODY PLEASE EXPLAIN!!!

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#15) On May 07, 2009 at 2:27 PM, drummnutt (< 20) wrote:

THUD! I fell off my chair laughing. 

Ok, let me get this straight;

We're up 5% in 4 days, and we correct with 1.5% (at time of writing), and we are getting bearish!?!?!

LOL. I'll give you my address so that you can send me your shorting funds, and I'll take your money now..... or later on my longs. Either way, I'm not in any rush.

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#16) On May 07, 2009 at 2:40 PM, goldminingXpert (29.58) wrote:

Drum, watch the Nasdaq. It's where the action has been. It's uptrend is clearly busted if we close here. -3% and counting. SPX is down 3% from its intraday high. This is a massive intraday reversal if we can hold it into the close. If we close under 900, we bears are golden so just one more push down please.

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#17) On May 07, 2009 at 2:48 PM, notsolilaznboi (38.91) wrote:

Hey GMX just curious, what stocks are you currently holding?

You said you bought FAZ at $9? Did you put a stop on that and sell it already?

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#18) On May 07, 2009 at 2:55 PM, goldminingXpert (29.58) wrote:

FAZ (no stop--it was a hero or zero all along) and a whole load of QQQQ puts at different strikes and durations. Also SDS calls.

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#19) On May 07, 2009 at 2:56 PM, StopLaughing (< 20) wrote:

The banks stocks went up for a couple of reasons. The leaks indicated that the banks would not have to raise more real capital in the real markets. Instead they were just going to convert the preferred stock into common. The dilution was already priced in but there is a big difference between raising new capital in this market and converting the gov preferred.

The banks no longer have to pay the preferred dividends. They also do not have to buy the preferred back in the future. It is more like a gift (free money).

Second, Obama bet the future of the Dem party on the banks. They have a lot of skin in the game now. If the banks aren't higher by the next election the Reps have a great issue to beat up on the Dems with.

The key thing is that many people expected the stress tests to require the banks to raise new capital and instead they got a gift from the gov, got the Dems for partners, and got a verbal that "none of the banks were going to be allowed to fail". If they do not have enough capital the gov will give them some more.

Further, 90+% of the toxic assets are still making thier mortgage payments. The banks only lose 50% on the 10% that default. At the moment the yeild curve is normal and the banks are making a lot of operating profit (even before creative accounting). Without mark to market the banks are not really all that stressed. C and BAC and WFC and a few others have problems but they are not going to disappear. They will most likely get back up to thier previous highs in the next few years.

Remember, the banks (and shadow banks) own both parties. The banks will do okay no matter.

 

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#20) On May 07, 2009 at 2:58 PM, notsolilaznboi (38.91) wrote:

So why the QQQQ puts and sds calls but faz shares?

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#21) On May 07, 2009 at 2:59 PM, goldminingXpert (29.58) wrote:

Second, Obama bet the future of the Dem party on the banks.

Time to go long Repubs then.

Further, 90+% of the toxic assets are still making thier mortgage payments.

I highly doubt that. What's your source of info for that claim?

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#22) On May 07, 2009 at 3:26 PM, ProfitMkers (< 20) wrote:

thanks STOPLAUGHIN;

However, I have to disagree that the common shares will not be diluted further; While the dilution was priced in when the stock prices were about half of what they are now, they're definitely too expensive now, based on earnings.  

Further, 90+% of the toxic assets are still making thier mortgage payments.

I also doubt the above statement, we have not seen the second wave of foreclosures yet as people continue to lose their jobs. First wave was the subprime loans that matured and couldn't refinance; those are mostly done; but now we have the regular fixed rate loans that are defaulting because 600K+ people are losing their jobs every week!

ALso, mortgage rates are going up so that will put a damper on real estate sales and the amount of toxic assets (or foreclosed real estate)  the banks will be able to unload.

Any other comments welcome!

 

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#23) On May 07, 2009 at 4:11 PM, ProfitMkers (< 20) wrote:

WFC has just announced they're offering $6 billion stock offering, and I'm sure others will follow as well since the stock prices have gone up so much, banks will be taking advantage of that.  More dilution = lower stock price, correct?

 

Any thoughts?

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#24) On May 07, 2009 at 4:15 PM, DeerHunter73 (73.02) wrote:

Didnt fall below 900 but that could change. There concentrating on the STRESS TEST results which most already know about. Wait till bloomberg gets AIG results and they will be sayin what stress tests once they start pickin that apart. That report alone will make or break tomorrow!!!!

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#25) On May 07, 2009 at 4:29 PM, RainierMan (74.58) wrote:

Check out Market Ticker today for useful discussion on this.

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#26) On May 07, 2009 at 5:40 PM, ProfitMkers (< 20) wrote:

MichaelinWa: Please post the link for that discussion.

 

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#27) On May 07, 2009 at 7:33 PM, RainierMan (74.58) wrote:

Here is the Market Ticker link cited above.

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