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

As expected, we saw the belated rebound rally occur today, which was sparked by not only more profit taking, but also by some favorable earnings reports. Bed, Bath and Beyond reported a rather strong earnings report, which shot their stock up near 10% today. Also, home builders got some love from buyers, as Lennar reported less "cancellations", however, their earnings report still remained rather dismal. It is important on the earnings reports to pay attention to their NET income and not just their revenues. Retailers are still having record slash to prices for their goods, that many of them are selling much more of their inventory, however, their margins have shrunk dramatically.

The 172 point rally for the Dow was sorely needed after several consecutive days of down trading for the index. Like I've said in prior posts, I still believe the momentum remains on the downside, but we can of course expect sporadic up days like today. In fact, I found it a good opportunity to pick up some more SRS and FAZ shares today, as I continue to feel that there will be weakness in the financial and commercial real estate sector.

Yesterday, Warren Buffett was interviewed on CNBC, and definitely had more discouraging things to say than encouraging, regarding the economy. Being a CEO himself, as well as having one of the most prestige stock symbols on the exchange with Berkshire Hathaway, sometimes Buffett is forced to play into politics. However, he did not hold back much yesterday, when he explained his concerns about this troubled economy.

When being questioned about the state of the economy and if we've seen some growth, Buffett gave this response:

Well, it's been pretty flat. I get figures on 70-odd businesses, a lot of them daily. Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while. There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true.

No bounce, he said. Buffett's biggest resource are his vast array of companies he manages and is privileged to know the state of their balance sheets. Such knowledge definitely gives the old man a bit of an advantage to be able to see the early seeds of a turn around.

In response to being asked whether he's personally seen these so called "green shoots", he said:

(Laughs.) I looked. I wasn't seeing anything. I had a cataract operation on my left eye about a month ago and I thought maybe now I'll be able to see green shoots. We're not seeing them. Whether it's retailing, manufacturing, wherever. We have a big utility operation. Industrial demand is down like we've never seen it for a simple thing like electricity. So it hasn't happened yet. It will happen. I want to emphasize that. But it hasn't happened yet.

In times past, Buffett has always tried to paint as optimistic of a picture as he could, with also stating true facts. However, much throughout his interview, he continues to stress his belief that it will be a very long road back to economic health. Sure, he does feel that some sectors have already endured the worst and that the economy will get back on track, but he feels that the road is long, and probably not ending this year.

Much is still to come in our economic crisis, in my mind. This is why I continue to hedge myself on the short side, especially as more opportunities arise. I discuss some concerns I have in the residential real estate market in tonight's premium podcast (subscribe here) as well as some more S&P data that is showing new trends. My Zecco.com account has performed quite well this past week and I will be looking forward to some more green. Happy Trading.

There we have it, The Bull wins today. It was a hard battle up until the last hour. With the help of Obama's cabinet picks, especially the new Secretary of Treasury (Timothy Geithner, the New York Governor), the market made a dash for green and far beyond. Once again we see the sensitivity of the market in action. The speculation of the new Secretary of Treasury ignites a 500 point rally? Really? These are the times we're in. Wow.

I discussed the probably of a strong short term rally, based on a new band aide fix that temporarily numbed our current pain. Which is why I keep my long options as a hedge. Even the guy's hamburger shop that's about to go out of business got a bump today with this rally. However, unfortunately, I remain a realist. Our volatility increased more today, as well as our volume. In my opinion, this just keeps pushing us closer to capitulation. The more this market sets up emotional traders to play in the market, the more vulnerable it is for a downfall. In a recession, people are far more inclined to sell during a down day, then to buy during an up day. This is why you usually see the down days hurt more and last longer. That is exactly what caused Black Tuesday.

The bad news. I know, I should have sold out of FXP yesterday, right? Although I did expect a strong rally today, I did not expect FXP to take this much of a beating. Still, no worries for me as I have said before, I plan on holding this time around for a couple of months. We just have to start over again, ugh! China is experiencing some serious Government intervention, which is causing people to think that it could still be a profitable place to invest money. I don't buy it one bit. We're talking about the country that lied to the world to get a gymnast into the Olympics. In my opinion, pretty soon we will see very bad days in China as more and more businesses are shut down and the poverty level increases. I remain VERY BULLISH on FXP, even more so on the low price.

I did not buy more of FXP, as I am already heavily into it. I did, however, pick up some more EEV shares. Not much, but enough to earn back some of the losses that happened today. So yes, my shorts got killed today, but let's not forget how great they were this whole week. 4 days for 1? I'll take it.

The good news, were my long options shot out of the park. My GDX options were up 133%! Gold has been waiting to launch, it just needed some market support. I continue to be bullish with GDX. With a rate cut approaching, I think gold will be in high demand. My DIG option was up 40%, and my other options were up about 20% combined. So even on a day where I should have gotten killed, my losses were severally less, because of these options I hedged with. This is exactly why I choose to buy them, even in this crappy economy. These bear market rallies can be fierce!

I chose not to sell any of my options today, despite the very large gains. There is still one variable that hangs and could potentially spawn another big rally like the one we saw today. That is the GM bailout. Expectations have been lowered, dealing with the possible bailout of the autos. If next week or over the weekend they were to announce a bailout plan for them, we would most likely have another rocket of a day. In case of that, I want to be hedged with my shorts on a day like that, where we could see a big potential for green. So I will hang on to them for a bit.

Fundamentally, nothing changed today that wasn't there yesterday. What did happen is that there was no news announced (which is a good thing for the market these days). Also, there was the new Secretary announced. This does not change our daily increasing jobless numbers, broken down banking system, failures of small business, and a holiday spending season that should be a record low. When you mix emotions with trading, it may feel like the worst is over on a day like today. However, when you look at the facts, it's easy to see that the worst is yet to come.

For next week, I will look to see how the market is established on Monday. We have some key announcements next week. The one I am especially eyeballing is Consumer Confidence on November 25th. Confidence has been thrown out the door this past month and should be devastating. Existing home sales should also be a doozy on Monday, so we could see this rally put to a quick halt with some of our REAL economic data. Thanks for all the comments and to those that have donated! It is much appreciated. I enjoy the comments as well. Have a good weekend and we'll see you Monday. Happy Trading.