Thursday, August 9, 2007
The financials and real estate.
The financial spiders (XLF) above should be contained on the upside via the 50-62% retracement into 'the box'. Using the May 31 high the box is 35.96-35.79 and using the July 18 high the box is 34.48-35.07. The 2 busted trend lines should and will act as significant resistance to the rally along with the 50 day ma now the 200 is turning down which should be viewed as further re-enforcements for the bears. The area I highlited would be an add point for people already in a short position or a spot for latecomers to initiate one. Again the BNP news overnight is added evidence of a problem spinning out of control. The ECB bailout shows just how serious they know the problem is and a puny band aid bailout is not gonna fix the problem.
DO NOT BELIEVE what you are hearing on TV. THIS CREDIT PROBLEM IS NOT CONTAINED. IT IS SPREADING. (like gang green) The sooner these banks and holders of the crap bite the bullet the better. Why you ask. Just ask the Japanese banks why, they thought just burying it would make it go away and look at the debacle there.... and still going 17 year later !!
The real estate I-shares (IYR) is rallying right into the broken trend line along with the 50day ma. This is as I like to call it simple and elegant. Lots of guys are using a lot more complex stuff than I do and it works for them, great ! I need to keep it simple. My friend Dennis Gartman has said if you want to know which way the price is moving show a 5yr old the chart and ask em' which way its going. Both the IYR and the XLF say down. I am playing the XLF via the Ultra short financial pro shares SRS and the IYR via the Ultra short real estate pro shares SRS. This would be an entry area for people looking to get in who missed the first leg down. This is not a recommendation as I am no longer a registered to give investment advice I am just calling it like I see it Do your own homework and keep your losers small and let your winners run.
Not to bring up Cerberus and Bob Nardelli again but please read this piece for an insightful and spot on analysis of his hiring. I would recommend the Autoextremist for anyone interested in the car biz as Peter does a great job. It is must reading here in Detroit and while they won't admit all the auto CEO's read it religiously.