The day started out with a gap up to new highs. They rolled over hard, came down very sharply in the morning, bounced late morning to mid-day, and then resumed the slide in the afternoon. The market reached its session low with about an hour and a half to go and then retested shortly thereafter, which may be what triggered the late rally.
Net on the day the Dow was down 102.43 to 8409.85, and the S&P 500 down 12.14 to 907.39, which was 22 points off the high. The Nasdaq 100 was down 34.02 at 1389.83, and 42 points off its high. The Philadelphia Semiconductor Index (SOXX) dropped 16.06 to 254.55, a loss of more than 6 percent.
The technicals were negative by 2 to 1 on advance-declines on New York and a like amount on Nasdaq. Up/down volume was worse than 2 to 1 negative on New York on total volume of just under 2 billion. Nasdaq traded under 3.2 billion and had a 4 to 1 negative volume ratio.
Yesterday we heard the leaks about the stress test results and today we started to get smacked across the face with secondary offering from Wells Fargo and Morgan Stanley. $ 6 billion for WFC and $2 billion for MS.. My prediction is that you will see an offering of biblical proportions from Bank of America soon. If I could ever figure out a way to go to my archives, (working on it) I would link so many posts that I made about the coming dilutive offerings by the banks. Dilution is never received as good, even in bull markets, and these will be epic. Does BAC really need $35 billion additional? Frankly, I don’t know any more, and the story continues to spin like a dradle. Maybe the market will continue to embrace these moves as it has basically come down to dilution or extinction, that may be the initial reaction but when the dust settles the banks have nothing.. This entire move off the bottom was beautifully choreographed by Bernanke , Geithner, and Buffett . First came the pump, now we get the dump. All were complicit and GS will always come out on top as they are all powerful. Buffett the sweet old codger with the straw in his mouth was in on the beginning stages of the original script and boy, would I have loved to have been a fly on the wall when he bought that first piece of GS six months ago. Easy to lay out billions when you know how the story will end. Sure there was some risk but when Paulson and the Fed are giving you a wink and a nod it’s much easier to sleep at night.
Yes these are the deep paranoid thoughts of a lunatic trader and I do think that Oswald, Sinatra, Castro and Sam Giancanna are having a laugh somewhere at JFK’s expense, but I am usually right to a degree on these things.
If your mixed up here, don’t feel bad, I really don’t have a sense of the markets next move and I usually have an opinion that I can trade by. Tomorrow is Friday and it should be another chop fest as bulls and bears alike might want to just take it easy. Even if a magic hand came in and blessed the financials they are over extended and when the short squeezes dissipate it will be time to reload on the short side.
I made a decent chart post of the XLF yesterday morning at $12 , it traded to $12.50 hours later. On this mornings blog I suggested a short at $13.00 and it traded to a low of 11.90. I caught about fifty cents of the move as I thought it would snap back, it didn’t. Many of you held and I wish you congrats and major props. These moves are epic and I hope your grabbing some of the action. The trading has been excellent and there is a lot to be said for confusion and uncertainty as it can provide phenomenal volatility and profits.
Aftermarket in the financials is a little mixed: BAC +1.24, WFC – .28, STT +3 Commercial Real Estate, VNO + .89 SPG + 45
See you in the morning.