Markets Trying to Repair Damage Ahead of Fed Announcement

Scott Redler |

Bank shares that were hit hard yesterday are rebounding strongly in the pre-market. Citigroup (C) is already up 2.5% and Bank of America (BAC) up 3.75% after announcing yesterday it was not follow-through with the $5 per month planned debit card fees. After Greece's surprise about-face, investors worried that the entire plan to back-stop banks would be lost and the sector would find itself back in a precarious position.

On a side note, more information about MF Global's (MF) bankruptcy is coming to light, including extremely troubling commentary earlie this year from CEO and ex-New Jersey Governor Jon Corzine. I wonder if he might get in some serious trouble for the comments below, which came on their Q2 2012 earnings call just last week:

"Now let me turn to a subject which has understandably clouded perceptions with respect to our profits, that is our repurchase to maturity sovereign positions as noted on slide five. As we have pointed out over the past year in our disclosures and quarterly calls, we have taken advantage of the dislocations in the European sovereign debt market by buying short dated debt in European peripherals and financing those securities to their exact maturity date. Therefore, the term repoed to maturity.

So, in short, our judgment is that our positions have relatively little underlying principle risk in the timeframe of our exposure. We continually reassess that judgment and are prepared to take offsetting actions if conditions or circumstances change. We are not adding to this portfolio and we will allow it to roll off as the staggered maturities are reached. I would also note that we carry little exposure to these countries' banking systems and no derivative exposures dependent on a country's credit worthiness.

So much for that.

TECHNICAL TAKE

If you trade the SPY the gap starts about $123.50, and it will be interesting to see if we can trade into that gap and how much we fill. I don’t see that many tight, tradable set ups besides buying in the hole and then figuring out how long you want to stay with it.

Gold (GLD) acted strong yesterday and we spoke about extensively on the Virtual Trading Floor yesterday as the trade was happening. The metal is getting a nice follow-through gap up today, likely in anticipation of inflationary talk from Fed Chairman Bernanke. There is a gap to fill up to $168.75, and the next resistance above that is $170.29, then a bigger open gap around $173.14.

*DISCLOSURES: Scott Redler is short SPY

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
BAC Bank of America Corporation 15.40 -0.12 -0.79 25,929,217
C Citigroup Inc. 46.60 -0.55 -1.17 7,295,257
SMI Semiconductor Manufacturing International Corporat 5.51 -0.03 -0.54 60,846

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