Give and Take.....Sure Tests the Soul

Well what the Federal Reserve gave us on Tuesday was taken back Wednesday. After recovering 400 points in the DOW on Tuesday, due to positive Fed Speak, the DOW fell over 500 points as worries over the European debt crisis again became center stage. A little side issue is brewing and may impact investor sentiment, KOREA. It seems there are itchy trigger fingers at the 38th parallel both sides lobbed things that go boom at each other. No reports of injuries but this simmering geography may show itself to be more of an issue than the market currently appreciates.

We saw some cracks in the market before the trading session opened, we even told you to walk away after making any strategic buys. Well if you did not walk away, the roller coaster ride left your heart in your mouth. These points are re-entry opportunities but tread lightly and carefully. YHOO however, interestingly enough, held its ground and reported better search gains in July. According to the STREET the MicroSoft BING deal is starting to generate positive results.

Financials are taking a hit but most bank exposure to Europe is limited and Bank of America has almost no exposure. Wells Fargo and Morgan Stanley are quality buys under the circumstances.

Congratulations to Apple (NASDAQ: AAPL) they are now the most valuable publicly traded company surpassing Exxon by almost $30B in value. By the way AAPL has over $70B of cash and equivalents in the bank.

Settling down for the evening and some star gazing....Remember you never lose by taking a PROFIT!

The Prophet

Federal Reserve to the Rescue?

Words do make a difference ......

At 2:15 pm yesterday the Federal Reserve made our prophetic Blog of the day look good, if not scary. What happened, not much other than the Chairman, Mr. Bernanke informed the markets that interest rates will remain low until at least 2013 and they stand ready to assist the economy when conditions merit additional assistance. Mere utterances by Mr. Bernanke resulted in a 400+ point increase in the DOW with financials leading the way. Now, if only the politicians would take some notes from this lesson, CONFIDENCE. The economy is about confidence not number crunching. Pointing fingers and sniping will not solve the ills influencing the economy.

Now the markets will sway a little as it absorbs the meaning of the action or lack thereof, of the Fed. It is a pickers market and YHOO was up over 10% yesterday. Commodity firms are feeling the pressure of dropping prices and their prices are reflecting the uncertainty of the volatility. We are staying clear of this sector. Financials were strong and should head north of their current prices. Bank of America (NYSE: BAC) and Citi Bank ( NYSE: C) are risky but the upside looks much better than the downside. Wells Fargo (NYSE: WFC) or Morgan Stanley (NYSE: MS) are solid upside contenders. Oil is on hold and Gold is certainly a bubble waiting to happen but neither is worthy of a "short". 

THIS MORNING:

Markets seem to be looking for some profit taking this morning. Pick you entries and then walk away unless you have a strong stomach. 10 year Treasuries hit 2.07% yesterday but settled at 2.27% yield...that yield is about equal to the S&P 500 dividends which have a lot more upside potential. These are indeed interesting times. 

Remember to look at YHOO, we still think this is a takeover opportunity with a better than 50% upside from here. 

The Prophet