The market has every to melt down right now. Between numbers on the economy, the GE numbers last Friday, the recent run up in stocks, and the lowered estimates by Arch Coal, the market should be absolutely tanking.
However, all we are doing is giving a little ground against this very rough back drop.
When bad news stops driving down stocks, you know you are close to a bottom in the market. Last week WM- Washington Mutual – one of the biggest sub prime lenders- announced it was raising $7 billion from a private equity- Wachovia is said to be following suit- guess what- WM made a 50% move to the upside on the news, which was short lived.
The big money is now moving into blown out financials at bottom basement prices- making the assumption the worst of the sub prime mess is behind us, and these lending institutions will do very well in the next low interest environment.
Of particular interest is the dollar- Bernanke’s plan to provide liquidity to the system without printing money has the dollar firming. Check out UUP- that’s the ETF to go long the dollar. It has started making a series of higher lows, and looks like it could be completing a bottom process.
If the dollar firms, two things will happen- 1. The big “trade” will begin to unwind- long oil and short the dollar, and 2. International money will pour back into US equities. It has been on the sidelines for sometime as the perception is that the stocks can go up, but if the dollar goes down they make no gain.
On the micro side, SPKL is making a very good showing today on a nice volume blip. Investors are anticipating something good out of the company with the conference call coming on Wednesday. Investors are also recognizing the stock is cheap.
EFSF is also trying to make a come back- it finally appears to be ready to hold on to that elusive $.20 level- still waiting for a broadcast schedule.
NIHK still has not done their 10k filing, along with CPNE, who I really don’t care that much about anymore.
On the short term side, I am out of the RIMM trade. The theme was right, the security and the timing were wrong. I know some of you lost money, others who were smarter, had better timing, or just plain lucky made money.
Right now, I would prefer a couple of nice down days to go long. I believe the worst is behind us. Bad news no longer drives stocks down. For the most part- it’s all priced in and we are poised to return to better times.