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

It seems as though banks wanted to end the week with a surprise and give bulls an Easter gift before the weekend. Wells Fargo stunned investors with their premature earnings announcement, blowing expectations out of the water. The market expected earnings at about 23 cents per share and Wells came in saying they are expecting 55 cents per share this quarter, almost doubling the market's number. The bank released this news two weeks premature of their expected earnings date, saying they felt that this news was important to the market and should be made available as soon as possible. Investors ate it all up...and then ate some more.

We definitely saw some of the strongest gains in financials we have ever seen as many investors obviously feel that worst is over for banks. WFC +31%, BAC +35%, C +12.5%, FAS +41%, UYG +23%...and FAZ -42%! Yes, for those shorting financials at this time, this is a day you wish time would just stop. Even I made some wrong moves today, underestimating these bulls. Bulls were not about to let this rally go today and had no interest in profit taking towards the end of the day. So are the problems for banks really done? I'll get to that in a bit and I talk about it in more detail in today's premium podcast (subscribe here).

As FAZ progressed down towards $13, close to the last hour of trading, I actually bought a small amount of shares hoping to take advantage of what I though was going to be some serious profit taking for FAS holders. I mean, come on! 35% going long in one day, how can you not walk away with that. I was determined not to be holding FAZ at close, so when we hit the last 40 minutes of trading and it was down to $12.30, I got out. The losses were not that much, but combined with my small amount of SRS and FAZ options, today stung a bit. My saving grace were my Apple options, being up 50% today. So even after all the blood shed, the damage was pretty minimal. However, I would prefer not to see anymore 40% financial rallies.

Today's announcement definitely confirms my suspicion of positive earnings coming from banks. Sure, banks just had their clean up batter lead off today, which may come back to bite them, but the surprise definitely did spark some emotional trading. I would expect this to not be the only positive report from financials, as Goldman Sachs should be following suit on Tuesday. In fact, depending on the sentiment on Monday, I may go in long in GS, hoping for the positive report, only to turn around and short it the day after. That's the plan at least, so we'll see how that progresses.

As it seems that Wells has no problems, these reports should be taken with some consideration. Even though WFC claimed "minimal" effects from the recent mark to market change, on paper it makes a very big difference, especially when you are one of the largest holders of home mortgages. Sure, Wells Fargo has been one of the top institutions due to their much stricter underwriting they maintained, but even they still have problems ahead. They still have a huge portfolio of soon to be toxic assets and I would be very cautious to say their out of the woods yet. Sure, we have seen some recovery of the "sub-prime" crisis, which lead us into this crisis in 2007, but we have not begun the second wave of foreclosures that will come, due to the recent massive unemployment numbers.

Today's announcement should be one of the best for the banks in the earnings season, which is good for now, but could come back to hurt the banks. Indeed, as I said yesterday, the market was desperate for something as bulls were running out of time to give this rally a second wind. I have always maintained my belief of this rally heading towards mid 8000 levels. With the help of these earnings boost, we may see a bit more than that.

Although many people think Wells "set the standard" for banks today, that's not the case. Wells Fargo has always been a league of their own. They have maintained much more healthy throughout the crisis and has taken the least amount of TARP funds. Let's be honest, if you had an unlimited credit line from the government, you could probably make any business profitable too. Lets not forget that the government has announced over 3 trillion, just this year, in funds to help with toxic debt. So yes, I still maintain the belief of a downspiral, even in the midst of the massive financial rally today. Just remember, volume remained really low. This is not everyone getting back in the market and, in fact, I give more reasons on the podcast why hedge funds are not buying right now.

So even though on days like today where it's hard to imagine that there still may be problems, I continue to maintain my belief. That is that this is a strong bear market rally, reignited by the help of government intervention, only to retrace back down to find new bottoms. Indeed, it may take some time, especially fighting through earnings season, but the time is soon, and models are still confirming that. I look forward to reading some of the graphs and models this weekend to see what I can expect for the near future. Remember, tax season is here, so if you've procrastinated like I did, H&R Block is quick and easy and has some of the best rates out there...unless you don't plan on filing. I will give a post this weekend as well as for my thoughts on next week. Have a great night and Happy Trading.