Changing Trend

By Jim Farrish | June 23, 2008 | 9:37 AM | 1 Comment

Last week we brought financials back into the spotlight as move write downs and shadows cast on how much more is to come. Earnings from Goldman Sachs and Lehman were the catalyst, but for good measure we threw in MBIA and Ambac. This helped the index break to new lows. (AMEX: IYF), iShares Financial ETF moved below the previous low in March of $77.33 to close Friday at $74.21. This has opened the door to more shorts with the activity picking up on the bounce Thursday allowing more investors an opportunity. (AMEX: SKF), ProShares UltraShort Financials showed a gain of 4.5% on Friday. This is leveraged 2 to 1 adding to the return versus the index. The high for this fund came during the lows in March at $140 per share. Question now is will the sector continue to fall?

The answer to that question really lies more in market sentiment than the financial sector itself. Friday is a good example of what happens when emotions become exacerbated. Frustrations steps in and we emotional climax selling. Is it done? From my view no, but with the weekend to think, calmer heads may prevail. If you are short tighten your stops and manage the position relative to the risk. If you are thinking about going short wait here for a bounce (could move back towards $77, IYF) and see how it plays out. This is similar to my response to the question last week on the blog. Remember discipline is the key to successful investing. I always remember the joke my dad told me when I was a kid. “If there were ten cats in a boat and one jumped out, how many would be left?” Answer? None, the other nine were copy cats. Don’t be a copy cat, practice patience and let the market give you opportunities versus trying to create them.

Check out this article on Check out this article on marketwatch for a pretty condense summary of all the recent job cuts and losses on Wall Street. http://www.marketwatch.com/news/story/reports-job-cuts-wall-street/story.aspx?guid={1B1F4ADA-4BEC-4EBD-81DE-8F08B7462C6D}#comments "Obviously that forecast hasn't turned out too well in hindsight, particularly in the case of financials which has posted another awful month of performance," the analysts said reportedly, led by David Kostin. Submitted by greensleeves on Mon, 2008/06/23 - 12:01pm » reply |