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Two Ways: Markets Bleed Red on Geithner's D-Day


Strengthen your portfolio in good times and bad.

Treasury Secretary Timothy Geithner announced a financial stabilization plan that would earmark approximately $2 trillion for the banking sector. Yet despite his words, stocks sold off on persistent investor concern: Very few specifics were offered as to what actions the government will take.

What is known about the bailout is that the administration will rely on the private sector as well as federal funds in an effort to stem foreclosures and accurately price troubled assets. Banks will also face required stress tests in an effort to provide more transparency and instill confidence in the markets. The aim, Geithner said, will be to "restart the flow of credit, clean up and strengthen your banks, and provide critical aid for homeowners and small business."

Geithner added that the capital provided to banks would come with conditions so that "every dollar of assistance is used to generate a level of lending greater than what would have been possible in the absence of government support."

Market participants were disappointed yet again: No details were offered as to how the housing crisis, among other things, will be addressed. The administration will expand upon the plan in coming weeks, Geithner said.

S&P 500 closed -42 points, or -4.9% to 827.16. The Dow Industrials closed -381 points, or -4.62% to 7,888, and the Nasdaq Composite finished -66 points, or -4.2% to 1524.

From the Bull Pen: Today's session was a case of overly high of expectations and no delivery. Yet the trade remains to the upside. Bulls can consider the financial ETF (XLF), but remember to keep tight sell stops.

From the Bear Cave: As for short plays, crude oil had another rough close. Professor Adam Michael mentioned on the Buzz his sub $30 price target by spring. Bears attempting the downside can consider the ETF (USO) with a tight buy stop near $28-29.
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No positions in stocks mentioned.

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