FAZ

Attempting to long 50% at 9.15. I plan to be very careful with this trade if it goes through.

Update: Got in at 9.12, already trading down to 9, hopefully this was not a big mistake. Lets see how they act tomorrow. Might put on the other 50% tomorrow, but I hesitate.

Update 2: Ideal target is for XLF to reach support at 9.5-9.6 or for it to close the gap at 9.2.



An inverse hammer on the last candle with weak action after hours. Tomorrow is another day and anything can happen.

Financials

Further downside possible. And right after I post this, all banks are up a few percent due to government plan.

SKF


XLF


GS - H&S if resistance holds

Financials

Financials are stinking it up again. My target for the XLF is 6.5, it can be found in my previous post. My optimistic bottom is 8. So far, the low is 8.67. After hours it is trading at 10.3. If XLF ever reaches the 6.5-8 area, it would make for an interesting long term buy.

XLF

In my previous post I said

Since the XLF is the sector that is causing all the problems, lets compare it with QQQQ during the dot com bust. It went from 120 to a low of 20, an 83% drop. So by those standards, the bottom should be... 6.5 (ouch). Is that reasonable? It seems like a stretch since the height of the dot come bubble brought about huge valuations for companies, but then again this disaster should also take away huge valuations from banks. I would at least expect continued downside from here, hopefully not straight down like it has been doing lately.

It hit a low of 9.24 today (pretty much straight down). To hit a low of 6.5 we need another 30% move down (that is only 3 more days like today).

This market is crazy manage your risk, whether long or short!

Also watch out for a rally to test the recent breakdown (SPY at 84) in the indexes.

Finding the Bottom - A Look at the Financials

I wont be recommending any longs or shorts for a few days/weeks. This market is just too crazy. Instead I will analyze daily charts and see what it takes for a bottom. Lets look at XLF

TICKER	WEIGHT PCT
JPM	9.218056651
BAC	6.510135477
WFC	6.179692435
C	5.123050887
USB	3.634949945
GS	2.955375767
CME	1.973219748
BK	1.920944935
AXP	1.78970732
V	1.620253917
PNC	1.506434474
AFL	1.371868465
TRV	1.315713295
STT	1.288288608
SCHW	1.250596422
MER	1.242658985
BBT	1.133600549
SPG	1.095058279
ALL	1.083789115
PRU	1.029060551

Now the chart.

Alright! Fresh all time low. No support! Yay! -64% from the highs. Since the XLF is the sector that is causing all the problems, lets compare it with QQQQ during the dot com bust. It went from 120 to a low of 20, an 83% drop. So by those standards, the bottom should be... 6.5 (ouch). Is that reasonable? It seems like a stretch since the height of the dot come bubble brought about huge valuations for companies, but then again this disaster should also take away huge valuations from banks. I would at least expect continued downside from here, hopefully not straight down like it has been doing lately. Right now the XLF is at the bottom of the trendline, this doesn't mean much since all other indexes have broken their trendlines, but just a thought.

SPY

-43% from the highs. 12.5% away from the from the 2002 low.

Looking at this chart, I think the most probable case is that we bottom BELOW the 2002 levels. Although this recent drop has been VERY VERY quick, it is about the same as the last and final drop before the 2002 bottom. Maybe some hope.

VIX, XLF

I think the VIX has put in its double top I was talking about. XLF also seems to have bottomed with recent lows at 20. But this is all contingent on congress and therefore can change on a dime. Expect the VIX to remain high for a while.

XLF, GS

On the GS news, XLF is up 3%. I think the bottom today @ 20 is going to be a decent temporary bottom. I wish I jumped in when it was flat at 20.1, but I was thinking we could head lower to 19 level. Oh well, another boat I missed. Don't chase it here, but if you do trade the financials, trade them to the upside (haha like there is any other choice).

AIG

I have been meaning to make a post about AIG for a while, but it keeps running up. I really think this company has a good chance at a strong comeback. They should be able to sell assets and refund the government's money, which will (hopefully) not allow the government to take an 80% stake. If this happens, the stock can easily reach 20 (currently trading 5 and has trading at 2!).

AIG Today 01:12pm - American International Group, Inc Large Holders reportedly expect to receive notice on financial position of company later today

Watch out. This can also be a catalyst for XLF to move higher.

XLF

Today's bottom in XLF will be very crucial. 20.

Financials look interesting

Here is a long term trend for the XLF. Too many lines, but somewhat necessary.


Now, I usually don't trade the financials, but I am getting interested. The trendline was violated intraday twice, but both times the index closed below it as well as the 100 DMA. You also see that it has been healing very nicely the last 3 months, as it moves sideways. As the VIX moves higher for a possible double top. at the 36-38 level



I will be very interested in trying a long in UYG. If the VIX does spike again, that means people will be panicking (again), a perfect time to buy and try to catch a bottom. If you do try this, I recommend using SMALL positions with stops. That way you can easily walk away unsuccessful.
On second thought, UYG is very screwed up do to the ban on shorting, so I am not sure how profitable this plan will be.

The extremely difficult part is determining where XLF will bottom. Right now it has closed at the 10 DMA, below the 20 and 50DMA. These might act as support, but seeing as how they have already failed, we will not rely upon them. Instead I would expect some support in the 18-19 level or even possibly slightly higher. At these prices, people who missed the first rally should step in and buy, causing another rally into the 22-23 range.

But then again, I can be completely wrong and we make new lows! But I believe the perceived value in these companies are too great for this to happen.

Fincials Gone Wild

Financials have ran up so much that they have run out of steam. Lets take a look at the S&P financials.



We could very easily test the new lows.
I managed to make some money today shorting Capital One Finance, it looks like it has more room for downside.



If you short now, you can easily cover some at 45, then at 42 before it possibly finds support at 40.