The FNM/FRE bailout was expected by the market. However, not
the form of the bailout. The market was betting on
nationalization (by narrowing agency spreads to treasuries and
dumping FNM/FRE stock), now that's off, so FNM/FRE shorts
will get the beating and this will rally the overshorted
financial stocks. They took quite a beating in
the past month as well. Not much has changed, so...
trade carefully. If the rally today fails today or early
tomorrow, the bottom for
next Monday in high 1100-s for SP (I think I had 1180, not
1160 for end of July bottom posted in June using GZ model) is
still on. As GZ says, dis
decline is not out of time yet, even though it's out of price.
GZ is waiting for a more solid buy signal <G> It all depends
on whether the market has a relief from reported financial
earnings (quite likely, since the market is expecting
Armageddon), or these earnings confirm the worst nightmares.
There is no way of knowing that. If in doubt, stay out, or
be very disciplined this week, whatever the direction you
are playing <G> Needless to say, overnight position holds
will be dangerous.
Also note that 15 billion is not enough for FNM/FRE, so the
market too can sell that after initial rally. |
