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Two Ways To Play: Take Bank Rally With Grain Of Salt

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Strengthen your portfolio in good times and bad.

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U.S. Banking Health

The Wall Street Journal reports U.S. bank stocks have seen an impressive rally of 45% from their July 15 low, but it may be too soon to give an all-clear signal. Foreclosures continue to mount which will lead to more writedowns, and some believe the problems that began in the subprime business are now starting to spill over into the prime mortgage market.

Further, for the past several quarters, borrowing costs continue hit the banks. Interest rates continue to rise for overnight loans between banks as well as the price of borrowing three-month money relative to the price of overnight money. See Professor Mike Mish Shedlock's column, You Know The Banking System's Unsound When...

From the Bull Pen: Bulls can consider NYSE Euronext (NYX) for an upside play; sell-stops can be set below $45.

From the Bear Cave: Banking bears can continue to play the downside in the financial ETF (XLF); buy-stops can be set above the 50 DMA ($22.30).


Oil Steady at $124

Reuters reports crude oil remained steady above $124 a barrel after the main militant group in Nigeria said it had attacked two major crude oil pipelines belonging to Royal Dutch Shell (RDS.A). Its latest gains were limited, however, as reports have shown demand from the U.S. and other industrialized nations has been sliding. Oil has fallen over $23 from a record high above $147 on July 11 marking a 16% drop in price. Read Professor Charle's Payne's column Can Lower Crude Spark Markets?

From the Bull Pen: Is the oil ETF (USO) a buy off of its 100 DMA ($98.90)? Bulls can play that stock; near-term sell-stops can be set below that level.

From the Bear Cave: Will airlines stocks retreat should crude oil resume its long-term uptrend? Bears can play the downside in Continental (CAL); buy-stops above $15.

For more ideas in real time throughout the trading day, check out Minyanville's Buzz & Banter.


Quick Check Around the World

Asian trading closed with the Hang Seng -0.24%, Nikkei +0.14%, Sensex +0.52%, Taiwan unchanged and Shanghai +1.32%.

A quick check across the pond finds the CAC -0.92%, DAX -1.04%, FTSE -0.14%,

As of 8:40 AM EST, S&P futures are unchanged at 1253, and Nasdaq futures are up +5 points to 1845.


A Look At Commodities

Commodities are lower. Crude oil is higher +0.60 to 124.63. Gold is up +0.70 to 927.40. Silver is higher +0.079 to 17.325, and copper is off -0.40 to 370.00.

The dollar index is down -0.134 to 72.720.


No events on the radar but click here for the rest of the week's events.

Good luck!
No positions in stocks mentioned.

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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