Down on Themselves

Here's something that until now I considered impossible, the banks downgrading themselves, but it's happened.

J.P. Morgan Chase & Co. (NYSE: JPM) has issued a negative bank research call for the major money center and super-regional banks this morning. Bank of America Corporation (NYSE: BAC), Citigroup, Inc. (NYSE: C), U.S. Bancorp (NYSE: USB), Wells Fargo & Company (NYSE: WFC), SunTrust Banks, Inc. (NYSE: STI), and others were all hit by the note. Analysts do not actually cover their own companies, but you can’t really get away from the notion that the analyst downgrade also throws JPMorgan under the bus as well.

What's more unusual is that downgrades usually come at the end of the sell off as downtrend and upgrades come at the top of the market.

You can see the on the chart of the Dow Jones U.S. Financial Sector or IYF that the financials have been on a mini tear from $23.15 to about $40 today. There are some other interesting aspects of the chart, namely the way prices keep bumping up against the $40 level which is clearly resistance at least near term. Also the 100 dma and 200 dma are both flatting out as if attempting to turn up. Will they? No way to tell, but on the inverse side the SKF is similarly showing support in the $55 to $60 zone.





Remember the SKF as advertised is engineered to trade at a two time inverse to the IYF. Similarly the FAZ trades at a 3X inverse to the financials. We are long 200 shares of SKF at various prices from $68 to $168 and 25 shares of FAZ from $10.92. We will want to pick up another 3/4 position of FAZ under $10 soon.


I rarely trade long term and never on fundamentals, but when all the banks are bankrupt what are you to do. I'm a bit confused by the analyst downgrade. I have to ask does the Street have another scam to screw the public with or have they finally figured out what we all know, that they are all insolvent? All I know is if you believe that all the banker's men can't prop them all up again you short them, and short them blind. I don't and I did and I'll do it again. Look for the alert on FAZ.