Monday, August 20, 2007

The Dow, Wachovia, Indymac, and Citigroup.

Remember this chart (DIA) I posted last week? The bounce back thru the neckline looks very suspect. Let us watch this close as I think 120 is in play here.

The above chart of Wachovia Bank (WB)speaks volumes. We are getting an oversold bounce and nothing more. The bounce should be contained by the 50 as the 200 rolls over. For anyone who follows and knows moving averages this is not nice for the bulls. I believe we have a nice bear flag forming and a break below 45 (actually 44.75) would be ignition for the next leg down. Now remember, this is the outfit that bought GoldenWest Financial back in Sept of 06' (at the top?) If memory serves me still, GDW was a top 3 mortgage player in California. Do ya think they are immune to what is going on? Do I expect major 'impairment' announcements from Wachovia regarding this? Do I have a bone to pick with them? Absolutely, I was short GoldenWest Financial, just as buying mortgage brokers was in vogue, and am lucky to live to talk about it. Proof yet again that the market can remain irrational far longer than any of us can remain solvent. I would advise the cats who orchestrated the GoldenWest deal to get their resumes out ASAP if they haven't already.

The above daily chart is of Indymac Bank (IMB). Again another bear flag as the stock gathers itself for its next descent into oblivion. No amount of Fed easing will save these poor excuses for lenders the graveyard.

The Citigroup chart above shows another bleak picture. The weekly and monthly pictures(not shown) exhibit massive negatively diverging momentum. This cannot bode well for a top 3 player in derivatives. Steve Cohen(SAC) can add to his holdings of this all he wants but the tape tells the story. Besides, how many loans did they commit to and now are stuck with, Chrysler comes to mind but there are others. Believe me they can tell you how great this is now that they cannot move the paper but don't listen to that crap for a second. If it was so great they would have kept it for themselves in the first place. Remember the news conforms to the tape. Trend lines have been broken. The stock looks ripe for a move to $40. A break of $45 should burst the dam although same aggressive types may short up here into the 50 area. with good stop management. Good trading to you all.

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