FANNIE & FREDDIE SLIDE

Today was the day to buy Fannie & Freddie. It is doing the NT and LU dance. We get a massive scary open, and then it rallies. From its lows to its highs, it was up 77%!

The pattern today was DRY TINDER. CNBC was doing the classical LIVE FROM THE ACCIDENT SCENE reporting. The eerie quiet in the markets around 11,000 on the DOW, combined with the inability to totally break new lows was a classical sign of DRY TINDER.

I took the opportunity to unload some Aug 60 puts on the IWM (Russell). Beautiful trade as the Russell has been much strong than its large cap brethren.

Sure enough, Bernanke hit the tape with the news that he'd let FNM & FRE go to the discount window. Bonds were already getting hit on the idea that the US govt would assume all the debt. Its the SELF-IMMOLATION trade. George Soros breaking the Bank of England. PHOOEY! How about breaking the Federal Reserve!!!

Anyway, we got our pop. I saw on the chart a tradeable pattern. We broke the previous spike at 1241.50 and got up to 1250. On the retracement, I just bid there at 1241.50 and offered at 1250. Quick trade. In and out in less than 10 min.

The HINEY SPIKE did not turn into massive SCR because:

1. We already had one this week and it failed.

2. We did not break 1263.

3. If I was thinking about a Bernanke statement, others were anticipating it too, and sold into it.


So overall, we are left with a classic bear market: unable to rally, just full of misery and loathing for all.