Wednesday, September 2, 2009


Sherlock Holmes does not work at the SEC. The questions is who does? Today a blistering report was released that pointed out how security regulators missed red flags. According to Inspector General David Kotz "Despite numerous credible and detailed complaints, the SEC never properly examined or investigated Madoff's trading and never took the necessary, but basic, steps to determine if Madoff was operating a Ponzi scheme." (1) Now investors and Wall Street alike are facing a government that may want to go into punishment mode, or use financiers as a election scape goat for their own political short-comings. Of course, the real concern should now be that the government would over-regulate... As of now, I believe government officials are afraid to touch Wall Street do to its volatility... so tongue lashings and grand standing may have to suffice in the near term... down the road many reforms may get conveniently swept under the rug.

Interesting that the market has reacted so poorly the last three trading days. Monday, it was speculation that the market has come too far too fast. I believe the Tuesday theme ran something along the lines of the ripple effects from an over-valued China. Today, worse than expected employment numbers coupled with lower than expected factory orders put the market on its heels once again. I find it interesting that no news was bad enough to stop the market rally from March to August. Now it appears a more rational approach is besetting the markets.

Downward pressure on the financials has influenced both by C 9/5 calls as well as FAZ puts. Should the employment numbers be within reason... or better than expected, we could see a sharp move up.

SRS I own common and have considered adding positions to this one since it is trading so low. I ran a hedge with puts as well and will need a meltdown reminiscent of Chernobyl to make this one work out. However, I will maintain the approach of calculated risks for calculated rewards.

I am looking for downward pressure on UNG, SLV, and a may even look at BAC should it breech $15.00. It is not that I am cracked up about the market right now. I am not. I do think that successful trades can me made, but only if due diligence is done and individual stocks can make a run. I am certain that SP 500 funds will be in a holding pattern for a while.

Shorts are starting to look more attractive again. WYNN is hitting resistence as is AMZN and FXI. Keep those birds on the radar screen.


1 comment:

AX said...

Should be an interesting few weeks. At some point UNG becomes a long-term buy just based on price. Bought a few BAC calls pre-jobs Friday, looks like I'll be in the money at open, and look to hedge with a financial loser.