Not SO fast on the equity rally!

Great week was had by all the longs but a massive hangover is the price to pay for all the giddiness! Day trading was exhilarating and the shorts got squeezed!
In a bear market Longs get clobbered and THEN Shorts get clobbered!
Amazing how the financials went up an aggregate of 23% last week but our sole long holding C barely moved! $4.23 will be the death of us! After trading it long at 1, 2,2.50 and 3.25 we couldn't leave well alone!

BONDS ON SHAKY GROUND
Fed today bought $3.510BB out of $10.426BB offered. The percentage taken, 33.7%, was the highest takedown in a bond operation, though not significantly higher than the 30.7% taken on March 30. The dollar amout purchased was a high for the bond sector, exceeding the $3.025BB purchased on 4/30!
That should tell you something!
If the Fed has to both support the dollar AND bond yields in the face of repeated skepticism, there is trouble brewing.

SKEPTICISM RAMPANT
The skeptics complain that the banks have cornered The Treasury secretary and sold him on a bill of goods were more TIME is necessary to fix their balance sheet. Any stricter test would put "undue "pressure on them. As usual bankers have gotten it ALL wrong. When BAD economic numbers come out after this BEAR RALLY, bank stock will be testing and visiting other bottom dwellers.

LET THE FACTS SPEAK FOR THEMSELVES
Stress test “adverse” scenario for 2009 GDP growth:

-3.3%

Actual annualized 2009 GDP growth year-to-date:

-6.1%

Stress test “adverse” scenario average unemployment rate for 2009:

8.9%

Actual 2009 average unemployment rate year-to-date:

8.3%, with a rate of 8.9% in April

Stress test “adverse” scenario indicative loan loss rates:

3% to 4% for prime
9.5% to 13% for Alt A
21% to 25% for subprime

Actual Q1 2009 serious delinquency rates of Fannie Mae, the largest mortgage lender in the U.S.:

3.15% for conventional single family
9.6% for Alt A
18.0% for subprime

Could the American public handle the facts about Fannie Mae and Freddie Mac?

Estimate of total U.S. Treasury commitment to American International Group:

$170 billion

2008 Treasury funding commitment to Fannie Mae and Freddie Mac:

$200 billion

New 2009 Treasury funding commitment to Fannie and Freddie:

$400 billion

Total Q1 2009 nonperforming loans at Fannie Mae:

$144.9 billion

Actual Q1 2009 loss at Fannie Mae:

$23.2 billion

Total value of home mortgages owned or guaranteed by Fannie and Freddie:

$5.3 trillion

CHERRY ON TOP? PAKISTAN!
Now more worrisome and of more immediate concern than US treasuries(actually betting on !)is the rapidly escalating conflict in Pakistan...
For all the strategists that have sound dire warnings for the last 50 years, simple trips and a few drone missions won't make the Talibans retreat!


There are reasons enough not to sell ALL your gold just yet... adn some puts on the S&P 500 sound juicy enough!


Good trading to you