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Random Thoughts: Banks at Levels Last Seen in 1995

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Citi, Deutsche Bank among financials getting hit.

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Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also Financial Staying Power.


Morning Dew - 9:28 am


Greetings as I strap into my turret following my weekly Wednesday ExCo breakfast. As I get my ball bearings in place, the following vibes are top-of-mind as we ready to hike up the Hump.

  • The big picture is made up of many little pictures and past support in future resistance. Through that lens, watch S&P 855 as a near-term level of lore. It's held numerous times over the past month and is vulnerable given the pre-market futures.

  • Pulling back the aperture and chewing through our four primary metrics, there are a few reasons why prudence is warranted. I continue to believe January 20 is an important inflection point but the destination we arrive at pales in comparison to the path that we take to get there.

  • I enter the center (saying "Yo, yo there he go") with a spate of USO and a handful of Morgan Stanley (MS) puts (one of the few financials where the stochastics are twisting near the top). I've been trading around both sides, with respective stops on the other side of recent lows/highs.

  • NYC area Minyans are invited to join me next Wednesday for a benefit at Ground Zero to support victims of terror and those displaced by the Gaza conflict. It should be a good time for a great cause.

  • Why is everyone I went to school with getting older while I remain a spry young lad? Seriously, when it comes to virtual communities, I'm the Benjamin Button of Facebook!

  • Expiration influences manifest in the sessions preceding the option funeral. While many traders attempt to "game" the direction of these events, I can tell you, after more than 200 expiry's, that the only certainty is that volatility will be exacerbated (both ways) as dealer square their books.

  • Research in Motion (RIMM) is down a paltry 40 cents with the futures down 20 handles. That, to me, smells like underlying demand and I'm willing to bet one dollar (our standard wager) that this stock flips the upside switch at a point.

  • Lemme get this out there. Think positive, Minyans, profitability begins within.


What's Shakin' Bacon? - 10:15 am

Last week we flagged the pennant in the financials through the lens of "As go the piggies, so goes the smoke."

These patterns typically "resolve" in the direction of the prevailing trend and true to form, the BKX is off 18% since Tuesday's close. Eighteen percent.

BKX 33.25 is the recent low and, beyond that, we're at levels last seen in 1995.

What else was happening in 1995?

  • The 49ers became the first NFL franchise to win 5 Super Bowls.

  • President Clinton invoked his emergency powers and extended a $20 billion loan to Mexico to avert financial collapse (keep in mind that $20 billion was a lot of money back then).

  • The DJIA closed above 4,000 (February) and 5,000 (November), the first time the average passed two millennium marks in a single year.

  • Denver International Airport opened.

  • Yahoo! (YHOO) was founded.

  • Nick Leeson was arrested for his role in the collapse of Barings Bank.

  • Forrest Gump won best picture.

  • Selena was killed by the president of her fan club.

  • An explosion in Gaza killed eight, including a Hamas leader.

  • The Oklahoma City bombing killed 168 people, including 8 Federal Marshals and 19 children.

  • The Unabomber was running rampant.

  • OJ Simpson was tried and found not guilty.

  • The NASDAQ composite closed above 1000 for the first time.

  • Microsoft (MSFT) released Windows 95.

  • The DVD, as a media format, was unveiled.

  • Cal Ripkin Jr. broke Lou Gehrig's MLB consecutive game record.

  • The Million Man March was held in Washington DC.

  • Israeli Prime Minister Yitzhak Rabin was assassinated.

  • NYSE volume hit a record 638 million shares.


We Ain't in Kansas Anymore! - 10:41 am

  • Keep an eye on Gold, or GLD $80 as a proxy, as the yellow metal sits at a critical crossroads.

  • NYSE internals are 12-1 negative, which is either a near-term capitulation or a flashing red siren to cover the heck up.

  • For my part, I've peeled out of 25% of my Morgan Stanley (MS) (-7%) put position and dipped a pinkie toe in the USO (-1%) to maintain some semblance of balance. And yes, both sides are relatively small, at least versus how I used to swing 'em around.

  • Eye-Catchers? Citigroup (C) down (another) 14%, Deutsche Bank (DB) down (another) 8%.General Electric (GE) down (another) 5% and Research in Motion (RIMM) (giggling green in the face of scream).

  • Let's Go Orange! Syracuse was picked by most to finish eighth in the Big East and is currently eighth in the country. They're sternest test, by far, will come tonight when we face our dreaded rivals from Georgetown.

  • Speaking of college hoops, who the heck is Jodie Meeks? I had the Kentucky game on as "background filler" last night and this silky smooth kid hit for a school record 54 against Tennessee. It was without doubt one of the single best performances I've ever seen.

  • Yeah, yeah, I know... FOCUS. There is a method to the madness, however, and it's called BALANCE. The Minyanville mission is to educate, enlighten and entertain and, for what it's worth, I see no reason whey we can't affect all of them at once.

  • Breathe, Minyans, we've got alotta trading left in today's session. Discipline over conviction.


R.P.

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Positions in USO, MS

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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