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Terrific Tuesday Wrap-Up

Uh-oh!  No sooner did I punch in this title than I realized we used the same title last Tuesday as well.

Last week we were thrilled with the turnaround and we gave Paulson credit for stepping in early morning and reassuring the markets in what looked like it was going to be a bleak morning (AAPL miss etc).   Last Tuesday we came off a 100-point dip to 11,300 at the open to finish at 11,600.  Today we opened flat at 11,100 and made it back 11,400 so let's not crack the champaign just yet because we're hitting last week's lows.

Today was indeed easy because we've been paying attention to bank shenanigans long enough to have a handle on what does and does not move the XLF.  All our plays from the morning post were nice winners but we covered up a little early as I've developed a paranoid streak in dealing with financial rallies.  The good news is last Wednesday was actually flat, which we knew at the time was disappointing so Thursday's horrific pullback didn't phase us.  Let's just keep in mind that we are up just 50 points from Thursday's close so it's not quite time to throw caution to the wind just yet.

Lots of good things happened today.  Oil fell to $122.19, even after the closing pump that took them off the floor at $120.   Financials gained 7.5% and most of the indexes were at the 2.5% rule, a very bullish sign for a possible breakout.  Oil is down 30% from $145 just 2 weeks ago, that's a pretty big drop for 14 days, kind of makes you wonder if maybe the price is not really based on supply and demand unless one or the other changed by 30% recently.  Don't blame the dollar, it's at the same 73 it was at on the 7th, when oil hit $145.85.  Perhaps Congress investigating the rampant speculation has something to do with it….

Just as the oil manipulators cannot ply their trade under the light of Congressional scrutiny, the hyenas attacking the banks are unable to continue their campaign of shock and awe during earnings season as everything they say is going to happen fails to materialize.  Don't worry though, Whitney, Cramer,  et al will be right back there in two weeks, telling you to sell the financials again as investors have the attention span of 2-year olds and once earnings season ends, the jesters will once again have the floor and they will herd the sheep to their next scam until another set of facts drives them back into their hidey-holes while they wait for you to forget how awful their advice was (sadly, this is usually about 48 hours).

Tom2oc stood his groundand made a great call this week on the turn in the markets, sticking to his guns when so many were telling us to give in.  This post on the WSW Defensive Strategic Play and the subsequent posts are a great read and Tom's TA is top-notch – so much so that I see no need to go over it here as I totally agree with him… 

So yes, the financials were up 7.5% today but they lost 12% in the three days before that.  We need real follow-through this week, not just another flat-line tomorrow.  Last Wednesday I made the mistake of saying I would be happy just to hold our Tuesday gains but to hell with that, WE WANT GAINS!  This morning at 10:15 I had a meeting so I set targets for members where I thought we should cover saying: "11,400 has been tough to cross and 1,260 is resistance on the S&P.  GOOG $492 will be tough to cross (if we get past 486) and, of course, watch oil."  Well the Dow was 3 points under and the S&P was 3 points over but out of a 266-point gain, I'll call that close enough but we need MORE. 

I was VERY disturbed that GOOG could not break $486 on several attempts and also settled in $3 off that mark so maybe there's just something about 3 today.  PLENTY of earnings ahead, tons of economic data on Thursday and Friday and we're still waiting on that housing bill – this week ain't over yet folks, let's be ready!

 


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  1. MER – isn’t it disturbing that they got only 6.7B for 30.6B in CDO paper, and that 6.7B had a Q2 carrying value of 11.1B? And that they’re issuing dillutive shares to add capital? Your friend Whitney thinks it’s the light at the end of the tunnel. Haven’t we been through this already, starting with the first write-offs? Is the tunnel getting longer?
    "Whitney also said that while the company’s stock still sells at a premium to book value and is expensive, she believes the stock is getting closer to a fair value level and that the hardest work is behind the company."


  2. Much as it pains me to agree with Whitney, she is right.  I don’t really care if MER or LEH or BAC or C get 10 cents on the dollar, what matters is we have a real and final number because, on a go forward basis, they are the same companies capable of making the same go-forward moeny  they were when they were valued 300% higher.  Too bad for old investors, great for me!