Tuesday, April 14, 2009

View from the sideline

Dow -137 and S&P 500 -17 to 841.50 this morning. No surprise. Whether this is a bear market rally or not, it still needs a pit stop now and then. Breadth was against the bulls, no sense fighting the tape and forcing a trade to work. Wouldn't work without a ton of luck. I sat and watched after I sold WFC. That turned out positive since WFC closed at 18.22, almost a dollar below my exit point.

C hit 4.48 within an hour after the opening gap, but steadily slid as buyers walked out and sellers remained. I had chances to sell a portion at 4.35 and especially 4.25. C closed at 4.01 and is trading a few cents less in afterhours. Should I have sold near the high? Maybe. But this is clearly a core holding. Instead of swing trading another stock, I could do that with C, which normally has a somewhat consistent trading range intra-day. With a swing position, I would've sold above 4.35, bought back at 4.05, sold at 4.15. A 10¢ gain would've been sufficient as a goal. A lot of would-shoulda-coulda beens.

Bottom line: No bad buys today, i.e. chasing up. Chasing WFC last week turned out to be a tie. (I had chances yesterday to sell at a decent profit but held. Today I waited for it to move up so I wouldn't take a loss.) I left LVS and DNDN alone after their big gap ups. ONTY, the sympathy play to DNDN, was at 2.80 earlier and I passed. Lack of liquidity, wide spreads. Kind of like EBAY at the beginning, but worse in many ways. Closed at 3.01 on 231,000 shares traded.

BAC, like most of the financials, was down. Dropped 8.4% to 10.09, no surprise after running up 60% in the previous two days. How does BAC slide while C finishes up 5.5%? Citi had not run as far as BAC, plus there had to have been more short covering in C today; 1.2 billion shorted shares do not convert in just a day or two. Options expiry is this Friday, when C is expected to report.

Theory #1: WFC (Thursday) and GS (Monday) announced early to separate themselves from other financials. Whether they know what the other banks have or not, they believed in their numbers so strongly that they wanted to establish their positions as Alpha Dogs, preferring not to be lumped in (as if!) with JP Morgan (reports in two days) and Citigroup (Friday).

Theory #2: Obama and Geithner "requested" that leading financials -- after studying the stress-test results -- open the earnings season with their surprise announcements. This shook out most of the shorts and created the most impact on a wounded public. Both WFC and GS had similar "margin of victories" by more than doubling the estimates for EPS.

Theory #3: The White House recently (as in 3-4 weeks ago) hired a Citigroup executive. WFC shareholder Warren Buffet is a pretty close friend to Obama and the administration. Why wouldn't it be hard to believe that all of this is orchestrated by a maestro or two. Or three.

I have no problem with it. The game is what it is. Players who adjust to the officiating and rules will make money. Those who whine from their soap boxes will miss opportunities. My theories are crazy, but there might be a thread of truth in there somewhere. Obama has the people's faith, but even he couldn't stop today's selloff.

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