Market Dumps Again as some Senators Bicker

Pre-market futures are flat ahead of testimony by Treasury Secretary Paulson, Fed Chairman Bernanke, and SEC Chairman Cox to the Senate Banking Committee. That will be an interesting "state of the financial markets" meeting.....

Financial sector stocks will continue to be volatile as Regional Banks become the latest target of negative chatter, although the negative could become positive if some of the Regionals get acquired for a fair price. Also, the credit-default swaps market may be getting close to finally becoming a regulated market, which is a good idea since it is estimated to be a $43 trillion - $60 trillion dollar market worldwide.....

The drumbeat goes on today. If the markets drop much more than yesterday's low then we may see too much chart destruction to hold the Intermediate Term Neutral posture. Or if the market goes too much lower than it is now, it's at least headed for a test of the previous lows. We shall see.....

8:55 am MT: I nibbled on AEM calls and KMB calls. I wanted to pick up some WY calls as well, but the spreads were too wide. The spreads are still too wide on most Financial stocks and the market continues to consolidate the big Thursday – Friday moves on Monday – Tuesday.

9:15 am MT: I dumped the AEM calls for a small .10 cent gain, and I dumped the KMB calls at breakeven. I just don’t feel like fiddling with stuff that gets fussy. Fussy is not what I like in a violent and spastic market. Hank and Benny are talking to the Senate Banking Committee, which is supposed to give the final ok on the $700b bailout. Unfortunately, (and who in the universe couldn’t see this coming), certain politicians are stonewalling because they either want to attach their own projects to the bailout (greed) or they want the economy to continue to fail until after the elections (power). So this little get-together is going to last for awhile.....

10:00 am MT: Energy and Commodity stocks are seeing some profit taking and some are rolling over. This isn’t surprising after the huge two day jump in oil prices. I like how some of the stocks are rolling over in Chemicals (TRA, MOS, CF) and Coal (WLT, BTU). I’ll look at those for puts later in the day.

1:00 pm MT: I took awhile, but the Chemicals and Coals bounced enough for me to nibble on puts for TRA and BTU.

1:40 pm MT: I took profits on the two put trades. BTU was a .29 cent profit or 4% gain and TRA was a .32 cent profit or 6.5% gain. I pulled in another $659.00 in the “paper” money account today. I would normally hold some of the positions overnight, but this ain’t “normally” times.....

For now, I’m content to nibble around with smaller risk type trades and keep pulling in nice returns on very short swings. I’ve picked up over $1500.00 the first two days this week and over $5000.00 in the past week basically just chugging along here and there. I don’t want to get too aggressive right now, I just want to keep grabbing some green.

1:55 pm MT: With volatility so high I decided to price a nice, wide-wing Iron Condor on the SPY. The spreads are all over the place between the bid and ask, but if they close down to .02 - .03 cent spreads, which is more normal, then the IC has some nice potential. I am going to ask for .30 cents for the October 108/109 130/131, which is a potential 43% return for 23 days of time. The strikes are above and below long term resistance and support. It may be that the wide spread environment makes the fill unrealistic, but I will float the IC in the morning just to see if it gets filled. The biggest risk is to the downside, so as always, to reduce risk I keep it to one a point spread between strikes.

3:00 pm MT: Market Wrap: The stock market was up sharply on Thursday and Friday and down sharply on Monday and Tuesday. The major indexes haven’t made a full round trip, so the net net is that the market is still holding above the recent lows. I’m still Intermediate Term Neutral, but it’s a wild, violent, newsy, cataclysmic Intermediate Term Neutral.

There’s not much to add to what I’ve already yapped about earlier today. And until the Senate Banking Committee makes a decision, I don’t expect any type of bullish bounce – if we get one at all…..I don’t want to throw a lot of analysis out on a day like this, it actually makes things more confusing. Just call it a big, hairy consolidation day, and a giant wait and see what the government does next. It’s too bad that big Financial Institutions can’t take care of their own problems without government help, but it is what it is right now, so we wait on the Senate Banking Committee and the politicking of our elected officials.....