Was that the low? Everyone says so, all is now right with the world as the largest hedge fund on God’s green earth, the Fed, having finished buying all things toxic, has now directed its attention to buying the “good stuff”, Treasuries. The benefit here is lower rates, especially on the mortgage front. The buys will occur over the next six months and the fact that everything is pegged off the ten year note, rates should decline substantially, just look at the action in TLT today. The risk to this is hyper-inflation but what the hell, we’ll worry about that later. The key is to fix housing and this is at least a step in the right direction. It’s a step, not a cure all, but it was enough to scare the snot out of the shorts and right now things look higher.
In my afternoon post I was reviewing the action in XLF and mentioned that although it was acting well, it needed volume to kick in, well that definitely happened, the volume on XLF was double that of yesterday and it kicked in after lunch. I had a great day with longs in MTB, PNC and AKS. The materials had a horrible morning after the NUE report after the close last night, so did energy and fertilizers, but that quickly changed and the rally was on. The reversals off the lows were nice.
So what now? I’m just playing it exactly how I see it. Are the finnies over bought? Hell yeah, but just like the financials were over sold they can stay over bought, and this can be true with the market as a whole not just a sector. I received a million tweets and e-mails today about FAZ. Is it dead? is it over? will it come back? Look, FAZ is the triple short for the XLF, right now the trend is up for the financials, it doesn’t matter why it’s up, and you can’t reason with the market in the first place, but FAZ is and always will be an essential tool for me when I play the downside in the financials. I never hold it overnight and it a strictly a trading tool for me. Technically, FAZZY got busted up pretty well, but it still has some life left, as soon as the finnies decide to stall and take a breather. Am I looking for a return to $100 again? No I’m not. I get the feeling that many folks are trying to catch a falling knife with FAZ, it’s a good way to lose a hand. Don’t ever fight a trend or a change in sentiment or you won’t be trading for that long, learn to adjust and be nimble. How many times have you seen me very short in the morning and very long in the afternoon? You must be nimble and leave your opinion at the door. The market does not care what we think.
I have some things I’m wrapping up, but I will try to get some charts up later. Don’t fight the tape!!!!!! Hope you had a great day.