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Wednesday Wrap-Up: Financials Rally In A Red Market Day!

|Includes:American International Group Inc (AIG), AMBC, BAC, CIT, CSCO, GS, JPM, MBI, PNC, WFC

Finally, the market gets a down day.  But, there were still plenty of winners.  Financials charged up higher today.  XLF (financial ETF) added +3.45%, closing above $14!  SKF (financial ultrashort ETF) closed at a new low, below $30, at $29.29.  AIG was the big story in the sector, jumping +62.72% on the day, up +$8.48 (reporting Friday before market opens)!  Other big winners include: RDN +83.11%, CIT +37.62%, ABK +34.07% (reporting Friday before market opens).  MBI, which was down 3.83% during the regular session, reported a surprise 2Q profit after the market, sending its shares up +15% in after-hours trading.  Besides the beaten-down, troubled insurers, the more robust financial institutions also rallied.  The "financial horsemen" were all higher: WFC +5.74%, BAC +6.52%, JPM +3.9%, GS +2.1%.

We took the opportunity to lock in some gains in our financial plays:
August 05, 2009
12:29 | HappyTrading GS ($168.80) Sold to Close GPYHM Aug 165 calls, at $6.20 +49%
12:02 | HappyTrading PNC ($41.55) Sold to Close PZHIB Sep 39 calls, at $4.00 +48%

The GS calls were purchased last Thursday:
July 30, 2009
07:18 | HappyTrading GS ($163.50) Bought to Open GPYHM Aug 165 calls, at $4.15

These options traded as high as $6.25 today and closed at $6.

and, the PNC calls were purchased this morning:
August 05, 2009
08:29 | HappyTrading PNC ($39.40) Bought to Open PZHIB Sep 39 calls, at $2.70

The PNC options traded as high as $4.21 and bidding at $3.8 at the close.  Our exits on both positions were near the day high.  (To find out more about our services, click here: Services)

In the Trading Room, we also played AIG and FAS:
HappyTrading August 5, 2009 8:49 AM
GS finally pushing higher? if yes, watch FAS, it'll go up fast....

HappyTrading August 5, 2009 9:04 AM
has been on a tear since crossing above $50...

HappyTrading August 5, 2009 9:05 AM
technically speaking, $80 is the next resistance...

HappyTrading August 5, 2009 9:25 AM
aug 68 calls: when I mentioned FAS 1/2 hour ago were at $4.7, now at $5.4

HappyTrading August 5, 2009 11:53 AM
those $68 calls are almost $7!

Skymist August 5, 2009 10:24 AM
AIG - what a prodigy.
Bought a few of the Aug 19's.

Skymist August 5, 2009 10:34 AM
AIG going ballistic! My calls up 25% in minutes. I can't believe it.

Skymist August 5, 2009 10:51 AM
Aug 19 calls AIGHS bought at $3.15, sold at 5.20, only 26 minutes later, gain of 65%.
Reminds me of the day I was short LEH. Fast money indeed.

After the market, CSCO reported earnings that beat the estimates, but, investors did not particularly warm up to comments made by the company's officials in the conference call.  CSCO shares fell 3.43% after the report.

The Dow finished down 39.22 points; SPX fell 2.93 points; Nasdaq lost 18.26 points:

Techs were mostly lower.  BTK (biotechs) fell 1.83% and SOXX (semiconductors) dropped 1.09%.  USO (oil) and UNG (natural gas) both managed to close up, but, OIH (oil services) and XLE (energy) were both in the red.  GLD (gold) and SLV (silver) closed higher.  XLF (financials) added +3.45% while HGX (housing) gained +1.43%.  FXI (Chinese ADRs) lost 2.34%.

Click to enlarge 
SPX fell 2.93 points to close at 1002.72.  Its daily MAs were up.  The MACD flattened.

Click to enlarge
Nasdaq lost 18.26 points to close at 1993.05, below 2000.  Its MACD went lower.

So, at last, the market took a breather.  After the market, the reaction to CSCO's earnings was not particularly positive.  SPX was still unable to break above 1005, and Nasdaq closed below 2000 today.  It looks like the market is ready to take a little break.  Like I said on Monday, "If it does not make a quick jump to catch the daily upper BB, it may need to rest here for a bit and establish a new base before going higher again."  We'll see how the market does with techs tomorrow after CSCO's earnings.  Financials are on a breakout and the commodity sectors are holding up well after trading flat for the past few days.  Therefore, the market may tread water until Friday's unemployment report.

Good night and HappyTrading! ™