Crash Market Stocks - Financial Tips On Making Money In The Stock Market

Well, as I expected, we finally saw a strong day of selling from the bears as a reaction to a very dismal earnings report from Bank of America. The market opened down right from the start and didn't really look back, with the Dow closing down 289, once again under the 8000 mark. This is exactly the problem I foresaw with Wells Fargo jumping the gun on their announcement. By doing so, they being the strongest of the banks, set a high standard for the rest to follow. Sure, we did see a tremendous rally as a result of the surprise announcement, but the rest of the bank's numbers just do not look nearly as good.

Bank of America indeed reported profits, as we all knew that they would. However, investors are finally beginning to look deeper into the reported numbers to try and extract the true meaning of what is being reported. With the profits came a record amount of bad debt write-offs, as well as the setting aside of $6.4 billion as reserved for future losses, which goes to show their outlook continues to remain pessimistic. They recorded $13.4 billion in credit losses and only expect that number to get worse in coming months.

In addition to that is the large amount of commercial real estate loans that they have coming due, which still haven't reached their day of reckoning yet. As a result, Bank of America's stock fell almost 25% as investors are clearly not feeling safe invested with them. Oh, and also please remember that Bank of America also received a nice lift from TARP funds of over $45 billion. You would think that would help right?

At any rate, I have constantly been discussing my concern with remaining bank problems. Even after Wells Fargo's numbers, it was far too early in our economic crisis to begin seeing such a strong rebound in our financial sector. As a result, we could see a strong punishment, considering that so many were and may still be convinced that the worse was over for banks. There still exists the very strong probability of certain banks becoming nationalized, as with increasing credit loss, many should not be able to survive.

However, with this "bad news" from banks, may come some opportunity for me. Although, I am still not fully convinced that this rally is completely over, I am definitely convinced it has slowed severely and will most likely be ending shortly, if not already. As a result, I did find it appropriate to make some trades this morning. To minimize my losses, I decided to stick with options, as bears still may be a bit vulnerable to a small rebound rally. I went in and bought up some short term FAS put options as well as SRS call options. I go into more detail of what strike and expiration date on today's premium podcast (subscribe here). Having traded options with a near expiration date, they should move with more volatility. This is my hope as I believe that the next two weeks will be a downward trading average. I hope to make enough profits off of these in the short term until I can get a strong confirmation of a big downturn from some of the models and charts.

Another opportunity I am seeing in the near future for trading is the shorting of credit card companies. As unemployment continues to rise and consumer income continues to decrease, credit cards will most likely rack up a pile of debt. Early on, the government gave a lot of bailout funds to credit card companies, which sent them soaring in the beginning of 2009. However, Obama's new plan is to restrict credit card's advertising policies and try and gain more control of how they do business. As such, I would expect much more people who have been approved in times past to start being rejected. American Express and MasterCard are two companies that I will be eyeballing very closely and see some great opportunities for shorting, especially if this sell off really kicks in.

So far, this pull back is almost perfectly mimicking the one we saw back in January. Another strong day of selling tomorrow would be enough for me to believe that indeed we are retracing to near 750 levels. At that point, I would have to re-evaluate and see where we go from there. We indeed may see more down trading tomorrow as IBM reported a very large fall in revenues for the quarter. Many were hoping for continual strong numbers from NASDAQ, but obviously this crisis covers a lot of ground.

I am very well aware of a possibility of a small rebound, which would not discourage me. After a strong day like today, profit taking would be expected. It is if the buying continues for multiple days. Technicals are looking to sell, and as we saw from this morning, all computers were set to sell, as we saw a very strong trend of selling in early trading.

As for an update on my Lending Club investment, everything is great. Payments have been on time and I have been maintaining my 10.5% return, which is good. Check it out. So, opportunity is right around the corner and times are getting very exciting. Waking up is getting easier and easier. Happy Trading.

Well, we saw the week end with yet another day ending in the green for trading, giving us six weeks of consecutive positive trading. Indeed as each day of this rally continues, more and more are finding themselves crossing over the line to the belief that indeed we have seen the worst and that we can now prepare to position ourselves on the long side. I could not disagree more with this belief.

Indeed this rally has seemed impressive, seeing us retrace above 8000. However, when comparing the downturn we have experienced recently, the gains do not compare. I believe there could possibly be a little more left in this rally, however, for the most part I feel that we have seen the most of the rally and will soon retrace downward. For our current economic conditions, certain critical technicals indicate the good possibility of another strong downward push, with a good possibility of it being worse than the previous we've seen. I know much of the headlines read that the decline should decrease in severity. I disagree.

The massive housing foreclosures filed by the banks, indicates a still declining housing market, which with an influx of an enormous amount of bank owned houses into the market, should set a new standard in comparables. Also, with our ever increasing unemployment data, the delinquencies should continue to increase, as unemployment is the biggest cause of default. This causes problems in our real estate market, bank sectors, consumer spending, and GDP. With problems in all of these sectors, I would expect to see tougher times for our economy and for the stock market.

We know that indeed a technical rally was due, as I expected in the beginning of March. Let's break down what has kept this train moving. Let us not forget the multiple trillions of dollars which were announced just in March to help buy government bonds and toxic assets. Lately, it has been the surprising strong numbers from financials that has kept investors optimistic. However, how reliable and significant our these numbers in measuring our status in our current economic state?

Citi surprised everyone with announcing 1.5 billion of profits on Friday. There were many that took this as good news, since Citi was considered as a bank in risk of failure. However, when breaking down the numbers, it is quickly to see just how reliable these numbers are. $2 billion of revenues announced were due to an accounting change that gave them the possibility to buy back assets at lower prices, thus reporting it as a profit. Another 600 million was a result of the recent mark to market adjustment. When totaling these numbers indeed we see that if not for the alterations of the accounting we would have seen yet another loss posted by the bank, which would most likely bring more negative speculation to financials. Obviously, many saw this weakness as Citi traded down 9% on Friday after the announcement.

So indeed we can see that there is some manipulation with these recent earnings announcements in the financial sector and that it is hard to rely on their data as indicators for a bettering economy.

Tomorrow we see earnings from Bank of America, which I assume will follow suit with good numbers. However, this is the last of the big banks to report. What is left? Unless President Obama has something up his sleeve, I would expect to see a turn around occur shortly as the rest of earnings season should not be as optimistic as we have seen in the financial sector. I will wait until I see this change to enter some new positions. This week should be critical in defining the trends for the next few months. Have a great night and Happy Trading.

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