Why I Shorted the Financials Twice In Two Days

The toxic bank ETF
The toxic bank ETF

I rarely hold anything overnight anymore. Merkel could get a hangnail, Sarkozy could get arrested in a cat house or Berlesconi could get the clap.  The market could have an awful gap in the morning and I hate having a gag reflex over my Cheerios if I am caught leaning the wrong way. You have to be clinically insane to trade this market, but because I fall under that umbrella I feel qualified to opine on things.

I hate the financials, everyone knows that, but I have stayed out of their way the last week or so because the sector has rallied. I actually traded FAS long at one point, but felt soiled and dirty and closed the trade. I know traders are not supposed to have an opinion and just trade whats in front of them, but I wish death to the financials and by being long, some twisted thread of DNA in my cerebellum made me close the trade.

I shorted the $XLF yesterday by being long $FAZ because of the chart above. As I blogged yesterday, the sector has rallied 22% in a short period and it was having trouble breaking through key resistance, (double top?) it tried and failed. I went long FAZ near the close and had a great profit at the open. I closed the trade this morning  It was a two buck trade overnight from the close the day before.

I went long FAZ again as the market started to breakdown this afternoon( $TZA too) at around 2:30 as the XLF started to fold like a tent. The financials are always my go to sector for a short because they are still the most hated group and holders are shit scared to admit they’re long. They usually shoot first and ask questions later. The financials are also a disastrous group to own in a toppy market, especially if Europe blows up, which will happen, it’s just a matter of time. As I have said before, I trust Casey Anthony with my kids more than Merkel and Sarkozy and their ability to fix anything. Oh, by the way, the IMF was tossed around today as one of the many saviors of this “Eurodrama”. You, the taxpayer, are a chunk of the IMF, so smile when you hand over a chunk o’ cash to Europe. But we bail out everyone so big whoop.

I covered 2/3 of TZA and FAZ at the close. A small gap down would be appreciated, but if not, I’m golden on both trades. I could be wicked long tomorrow and I have a ton of cash right now. Treacherous.

Trust nothing.

If you would like to see my performance, just email: [email protected]


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