Today, the stock market opened sharply higher following the news that recently downgraded Wells Fargo (WFC) is expecting a first-quarter profit of $3 billion, or 55 cents a share, which is well ahead of analyst estimates of 31 cents.
Wells Fargo is the second-biggest U.S. home lender. The acquisition of Wachovia Corp., whose overdue home loans helped cut Wells Fargo’s stock price in half this year, is now exceeding expectations … and why?
People are now refinancing their mortgages. Wells Fargo closed $100 billion of mortgages in the quarter, with an equal amount waiting to be completed.
If the banks can hide their losses, hide their bad debts and now just get to report only the good part of their balance sheets, we can all rest assured that the economy must really be on the road to recovery … right?
In case you missed this part yesterday, the U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season to avoid complicating the stock market’s recovery rally.
It just never ends, does it? Intentionally withholding information and announcing it even!
“ Remember the bank “stress tests” that the Treasury announced with great fanfare a few weeks ago? The results are starting to come in, revealing…we don’t know yet. The reason we don’t know is that Treasury has apparently decided to delay any public announcements so as not to “interfere” with impending quarterly reports by those same banks. This suggests that the findings of the stress tests are probably less than reassuring - even with the bar set laughably low. If the news were good, there would be no reason to delay its release. The financial sector is still a long way from recovering its lost glory.”
Ron Rowland-All Star Investor
The banks that are insolvent are in fact bankrupt, concealing it with the full complicity of our government, and have been for months.
The Mark to the Market accounting rule change will create a much different look in the first quarter. The earnings for the fourth quarter of 2008 for the S&P 500 came in at -0.11, but with the new accounting rule change, Standard and Poor’s is now estimating that earnings will be $12.86 for the first quarter of 2009.
Now that is impressive growth!
With one stroke of a pen, instant earnings! Hey you got to hand it to those Chicago boys … they know how to make things happen.
We are now playing by a whole new set of rules when it comes to fabricated fundamentals. We’ll see where this takes us. However, what I can tell you is “now more than ever, you have to be on guard”.
You need a carefully thought out plan, consisting of basic guidelines:
- Know how and where you are going to enter the market.
- Know how much money you are going to risk on each and every trade.
- Know how and where you are going to get out if you are wrong.
- Know how and where you are going to take profits if you are right.
- Have a safety stop in case the market does the unexpected.
- Have an approximate idea of when a market should meet your objectives; of when it should begin to make a move, and if it has not done so, get out.
The minute you step into the arena you better have a plan.
Coping with a manipulated or rigged market makes it very difficult to know how and where we should enter into the market because we can’t rely on a true picture of what is happening on the basis of fundamentals. Nothing is really what it seems to be.
However, the technical side of the market is still our best guide and if we remain true to certain rules, like following a check list in flying an airplane, we should limit our mistakes.
Technically, we are not at an entry point. With today’s advance the market has now completed what in technical terms is called a “back test”.
The back test is at the old support wedge line that was broken in February. This old support is now new resistance and we closed at this level. Next week is now the sixth week of this advance, right on schedule with cyclical highs.
Right now this is a game of psychology. It is a game of balance. Emotional extremes create an imbalance. In the elation at being successful, one often makes mistakes of greed. In reluctance to take a loss one often makes mistakes of fear.
Getting invested right before May, with the Fidelity Select Family Stochastics at %90, at the top of a back test, at an extreme in the McClellan Summation index, when the weekly stochastics next week will be over 90 percent, as volume is falling on the Wilshire 5000 --- all stack the odds dangerously against going long in the market.
This dangling worm seems to have a barbed hook within it!
Below are some short term trades. But you MUST manage these trades, they are not buy and hold. As you've read above, this rally is not a bull market rally, so anything bought here must have a stop loss and a target. If you do not have to time to actively manage your positions, then do not buy these picks.
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