It felt like panic today. I’ve seen and traded through most levels of fear and greed but today felt like panic. For those of you that have followed me since the blog started about ten months ago you know I have been short the financials through most of that time frame and as you know UYG was one of my favorite shorts during that time period. When the NO SHORT list went into effect I walked away from the group because I had squeezed many profits from the sector and frankly didn’t trust the manipulation by the FEDS.This past weekend I wrote a piece on why the financials should again be watched as the group was getting close to a key technical breakdown. Well, this week in all its beautiful glory, the financials imploded as I thought. Last night, after yesterdays disaster I opined that the chart looked so bad on XLF that there could be (technically speaking) a measured move in the XLF to $9 and that based on that fact, the SKF would hit $300. It had closed at $11.75 and SKF closed yesterday at $183 yesterday. Well today XLF broke to a low of $9.24 and SKF traded as high as 275 and closed the day up 39 points. A great call–did I think it would do it today? No way, did I play SKF? Oh Yeah!!!!!
On one trade alone I grabbed 12 points but with all my day trades I netted about 18-19 points. I didn’t trade SMN ( closed up 22 points near the high) today because my entire focus was on the financials and I was working with much bigger positions than normal so I had to pay attention to one group. I just felt like today they would crush the market and they did. The reason I am pointing this out in such detail, other than the fact that I am silly happy, is that I am done with the financials. After a year of being short—I’m done. Could they go lower? Sure, maybe 7-8 on the XLF but I have squeezed ever ounce of life from the sector and it’s time to move on. Maybe a quickie here and there, but my size will be reduced greatly. I may regret it as I see NOTHING that would make me own a financial for many years to come. Dividends will be eliminated, more equity issued and revenue models that are destroyed beyond repair. If it goes a lot lower than that probably means we are in a Depression anyway and all bets will be off. So XLF? Thanks for the ride-it’s been real.
As far as the market in general goes, we have real problems on a macro basis as you all know and the market is trading more like we are entering a Depression than a Recession. Oddly, I can make the same rationale for being finished with SMN as the stocks in that group have been decimated beyond stock ticker recognition. Look at AKS,BTU, JRCC, STLD,X, MOS, POT. It goes on and on.
I’m flat and real happy as we end another day. I’ve been calling for 5500-6000 and I still will defend that opinion for now, but a rally is coming soon, real soon. Just gab a dart.