Stocks Lose That Loving Feeling??

by Larry Levin

Equities were hammered today with the indices losing more than 100% of the week's gains. The Dow closed down -283.10 while the S&P500 was off -29.65. Apparently the brief love affair between the long-only investor and beaten down stocks may be over: stocks have lost that loving feeling. Then again, there's always tomorrow, which is enough time for the government to intervene again to help the not-so-free market rally yet again.

And there are ideas on the table. This morning the SEC said, get this, that investment banks should NOT be encumbered with the same rules as commercial banks. The SEC believes these investment banks like Merrill Lynch and Morgan Stanley should be able to borrow from the FED with no strings attached. The SEC believes these investment banks can help themselves to tax payer bailout/help with no strings attached. The SEC also believes that these investment banks should, regardless of their horrendous predicaments, still be able to rack up massive 30 to 1 leverage on their balance sheets!

Now that it's on the table, it will probably happen: NO long term consequences for Wall Street. Yes sir, when you pad the right pockets in Washington DC you've got the world by the a$$. This is ridiculous!

Imagine this; your son has several car accidents while staying out late with friends. One night he's drag racing his car and slams into the squad car that is called to investigate. Big problems. After you pay to have the car repaired, he smashes it to pieces but nobody is injured. Then while driving his girlfriend's car he is pulled over by Johnny-Law for speeding and reckless driving. Of course, all of this occurs on YOUR insurance policy. Then the little devil asks to borrow your car, your new Corvette ZO6, to drive to the latest soir'e on his very busy party schedule. Like the SEC dope that you are, you respond, "sure son, have fun."

Nobody could be so stupid as to say sure son, have fun. Our fictional lad needs help! Given his track record he is one joy-ride away from killing somebody, and so are the Wall Street banks (metaphorically).

You simply do NOT go on as if nothing bad has happened, yet that is exactly what the SEC recommended this morning. How can the market improve over the long term if these investment banks are not held to a higher standard? All talk of preventing moral hazard in the marketplace would fall on deaf ears. Unfortunately, the SEC and the government in general just don't care. They are more concerned with how can Merrill Lynch's stock price get back to $97/share with new regulation and no housing market to rape?

If the investment banks were held accountable, their shares would languish at their current low levels for years. Their revenue model is GONE. But with so many Senators owning these shares from the market's peak, well, they just can't let that happen. So the SEC is sent out to prevent it.

Real Time Trading Signals*for

Trade Date: 7/24/08

E-Mini S&P Trades*
(before fees and commissions):

1) VA buy @ 8:45am at 1278.25 = b/e (1 lot)

2) TP sell @ 9:30am at 1273.50 = +1.25 (1 lot)

3) Engf sell @ 10:20am at 1267.50 = b/e (1 lot)

4) SEVERAL short-sale trades were not filled by 2-ticks or less today!

5) Algorithm trades (3)...combined total...-3.00


E-Mini Russell Trades*
(before fees and commissions):

1) Sell @ 9:15am at 714.7 = -1.0 (1 lot)...-$100


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