WED. JUL. 23 THOUGHTS

In the last few days, selected sectors-stocks have had quite a bounce as there has been a lot of money sloshing around in different directions. Notably, the financial sector has made a very big rebound. However, what seems to be happening beneath the surface within the banking group specifically is that a grouping of haves-have-nots seems to be forming. Stocks like Wachovia Bank WB and Bank of America BAC have announced sizable write-offs yet they rallied anyway. With that in mind, many smaller bank stocks have rallied only to give back ground. For instance, Downey Savings DSL had a massive bounce, but has come back to Earth. From a broad standpoint, it seems like the bottoming action that inevitably takes place at the nadir of every banking cycle seems to be taking place with the ‘survival of the fittest’ principle in full effect. For day traders, it is important to note that there can be and indeed will be divergences of movement even intra-sector. If you note that a bank like DSL is on the verge of being Federalized and that stock is falling, it does not necessarily have the same spill-over effect to the price of Wells Fargo WFC anymore. For those people particularly interested in shorting, this is a principle extraordinarily important to become ingrained.

Markets throughout the world are higher and oil is down again. Whole day will be a macrocosm of individual stocks. If it opens higher and holds, A-B-A2 through at least midday to upside. If it stagnates on open after opening higher, will likely trade down. Odds favor the continued covering though as people are antsy right now.


Reiterating that the new code for the next few days if the whole story is not there due to an expansive number of ideas- If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specified. If something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified.

Good Luck Today!

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