The last time financials were down 17% in a day was on Dec 1...and they rallied more than 30% higher in the next 4 trading days (60% for UYG). None of these banks are going to fail in the next 30 days...this market will recover and wait for Obama's administration to announce a plan. The Govt will likely buy troubled assets without diluting investors...as costly as that will be to the taxpayers.
Tomorrow we have a reaction to IBM posting an upbeat 2009 forecast indicating a recovery. The market has been looking for something to rally on and you can bet this is it. Additionally, US Bancorp is reporting tomorrow morning and was already beaten down severely today...very likely to rise and bring the sector up.
If you think JPM is going to stay at 18, youre missing the boat. Its the best of financial stocks and is still well capitalized. No reason for it to be at 18 given its earnings projections.
And guess what, the auditors aren't playing the game like they did last year. They know they are the next target and their neck (and firms) are on the line...they remember Aurthur Anderson's demise oh so well. They aren't playing ball anymore, no more "negotiating" mark downs, game over. It's every man for himself. The "cooperative spirit" that has prevailed between bank and auditor, is soon to be a thing of the past. Without a co-conspirator, how do you hide, like before?
You haven't not seen the lows here or in the financials.
Who cares about the lows. I'm just in this for a trade. Check out the last time UYG made a new low on NOV 21. Within a week it practically doubled.
The Govt will step in soon and bring back some confidence in the financials. Don't forget they have to protect their interests. Whether they do something with mark to market, bring back the uptick rule, or create an instrument to back back troubled assets, something will get done. Shorts will cover and the market will temporarily rally.