Wednesday changed everything. Great free video to profit from COTW!

Fellow Traders,
 
There is no question that in this environment caution is still warranted and I am not suggesting you should bet the ranch but one thing has changed. See Jonathan R. Laing's  Wednesday Changed Everything Barron's article below.  I could not have said this any better. We probably have a good S&P bottom in the 600-650 area locked in no matter how bad things get. Not sure how high is up yet.  But now for the first time in awhile we can trade both sides.  Not only is this more fun trading both sides and it’s more profitable as well. We are back to buying the dips and selling the rips.

We continue to take money out of the markets every week in the Chat Room. We do not care whether the markets go up or down. This will always be here for us. We can trade ranges, trends or whatever comes our way. Our option trades are a bonus that occurs during the later part of the week with cheap Weekly expirations. All the while we are building trading long or short positions to take advantage of the bigger swing trades that will come our way utilizing ETFs as well as individual stocks.
 
Things move rather quickly in the markets today including new government regulation and taxes!  The reflation trades (stocks that benefit from inflation) I have focused on for these last 3-4 months really came to the fore this last week with significant profits. These stocks were totally neglected just a few months ago given the demand destruction of the commodity-related products that occurred this last year.  Companies were forced to cutback, close or even outright cancel many commodity-related projects. When demand finally returns prices will explode higher as supplies will not be there. For example, a mine takes 5 or more years to bring or as many as 10 years to bring an oil find into production. Meanwhile alternative energy projects are failing as consumers cut back on these expenditures. Toyota’s Prius sales or off sharply. Solar panel sales are crashing. I still like our energy names just let then retreat a bit.
      
This week's Fed action will have a potentially negative impact on the mortgage REIT industry's earnings stream in the coming quarters. Both spreads and prepayment risks associated with a boom in refinancing could have a chilling impact on the group. However, these negatives could be offset by an appreciation in the value of their mortgage-backed securities holdings coupled with the ability to lever the balance sheets further. HTS and NLY are only leveraged about 7-1; in this environment, they could easily go greater than 10-1. My previous expectations for a positive valuation adjustment - namely, of an expanding price-to-book value - have to be tempered a bit now.

Should the REITs fall, I plan to add to my Hatteras (HTS) when under $22.00.  Annaly (NLY) had already risen sharply from $12.00-15.00 these last few weeks giving us plenty of time to sell ITM or ATM calls for downside protection. If these companies do not increase their leverage I recommend that only income accounts looking for high yields hold them. I will use these stocks as a source of cash to swap into higher beta ideas. Stay tuned. 

Someone bought over 800,000 shares of HUN at $3.06 just before the bell Friday after a significant market selloff near the close. Less than 30 minutes before I was buying HUN under $2.90. If there is no legal settlement before Monday, I'm sure the block will be sold into the market. HUN speculation is alive and well out there. It’s one big lottery ticket.

Monday we get news on toxic asset sales (i.e. bad mortgages) and how the Gov will help finance private investors purchases of these mortgages from the banks. The Gov plan could prove to an interesting wild card.

Looking ahead to next week excluding any Gov surprises I see market consolidation through earnings season starting next month then higher into late spring.