Thursday November 20, 2008
Navivest

The stock market is trading in and out of positive territory in late AM trading after opening to the downside with losses in all the major indices. While it is a bit too early to determine whether we will end up the day to the upside, we are looking for stocks to rebound if not today, then tomorrow.

Traders should start positioning themselves now by taking long positions. A rally would be broad-based, but we would just place bets on the markets overall, by buying the major indices as represented by QQQQ, SPY and DIA, which is a bet on the Dow 30 stocks.

For those looking to buy the stocks that are showing strength in a weak market, Boeing (BA), Verizon (VZ) and Walmart (WMT) are all up over a dollar, with 3% plus gains.

Tags: Stocks

To paraphrase President Franklin Roosevelt, Monday 09/15/08 is a day that will live in infamy. The two last serious potential acquirers of Lehman Brothers (LEH), Bank of America (BAC) and Barclays Bank have pulled out, with Bank of America (BAC) pulling a suprising move and offering $29 per share for Merill Lynch (MER) instead. As a result, with no acquirers to rescue the company, Lehman (LEH) is filing for bankruptcy.

The futures are indicating that we will see a drastically lower open and the only potential saving grace will be the Bank of America (BAC) offer for Lehman (LEH), which might temper the loss in stocks of financial companies.

With the markets getting closure of sorts on Lehman Brothers, Wall Street will now start looking at whom the next financial company to fall will be and the most likely candidate is AIG (AIG).

AIG will be announcing a restructuring plan later on Monday although it is unlikely that the plan will completely assuage investors concerns. The root cause of the problems we are having in the markets and in invidividual companies still exists and as such the smart money will be betting on the fall of at least one more major financial company.

We will probably see further declines in stocks over the next few days, so while traders who are not already properly positioned might miss out on the bulk of the losses for this week, there are still gains to be had by going short.

Traders should consider puts on the S&P Ultra S&P 500 Proshares (SSO) and Powershares QQQ (QQQQ).

If AIG opens above $7, traders should consider buying puts on AIG as well, or shorting the stock itself.

Tags: Lehman  Merrill Lynch  QQQQ  Lehman Bankruptcy