Bleeding but no bloody yet

7/15/08

The volatility continues in this market in the Option expiration week trading. The DOW was gapped down more than 100 points at the open and sold off to as much as down 260 points. S&P sinked all the way to exact 1200 mark. Then, the market started to rally and reverse the red loss into green as high as 70 points gain in DOW. There were two major reason for the rally are oil and finance. Crude oil future has the largest one day drop in years. Banking and Finance reversed drop into little gain for a very short time. However, the market sold off into the close and ended up with 92 points. This is the third day in a row the market has attempted to rally but failed. The VIX did spike over 30 but not in extreme fear yet. The major support levels on the S&P is 1206 and next down is 1178 area. FNM & FRE both fell more than as much as 25% as the bailout plan makes it clear that equity shareholders are not getting anything. The both closed at $7.07 and $5.26 respectively. If financial and banking have not find the bottom, FNM & FRE are going to under $1 soon. The markets are still not bottom yet. It is very very ugly. But I laugh out loud on whoever so called experts had said we will have summer rally. Well, What is the point if market has already substantially down from all time highs and rally up. Also, Bernanke doubly worried the inflation as well as the threat to growth in the testimony today. Are we having the ugliest summer to get started? If history does repeat, the market might have gotten into bearish continuing seesaw though the end of September. Oh, forget to mention lots of banking stocks are making new fresh lows again. Do not own any financial or banking stocks if you are not trading in very short term. They have long way to go all way down to one digit territory. Moreover, the DOW 11000 is broken. It did not surprise me as I had that vision very early this year. Next support would be around 10750.