Foreign Banks

Just a quick update, Thursday I listed 4-5 European banks. With the Euro breaking the $1.30 level and Euro bond auctions showing fears of contagion through higher yields on the recent auctions and the idea of bond holder "Hair cuts" being floated again this week, it seems likely the fears of contagion are back on the table. As I pointed out this week, that combination of events that is a recent development and the stress tests of Euro banks being disclosed as highly flawed, it seems these banks are a good target for a longer term trade. All the ideas presented on these banks via our January trade list were down on Friday so they are off to a good start.

Another theme taking shape is the lower shipping rates of dry bulk, that combined with the stronger dollar gives us a couple of other themes, one will be shipping and there's trades on the list already covering that, the second is multinational corporations as the index is showing us decreased economic activity in the form of  lower shipping rates, the demand is simply fading and with the dollar stronger, that makes American exports more expensive. One stock in particular seems to be confirming this theme-take a look at KO.

KO daily chart

3C daily distribution

Yes, volume has returned, the HFTs are reprogramming their algorithms and new trends are emerging. We have seen the Cats and Dogs trades still offering gains, but they are winding down and new trends are emerging. Trades like XOMA that offered us over 200% gains are becoming more difficult to find and they are not lasting as long-this is why I'm telling you to take market gifts quickly in the C&D trades-they simply aren't lasting a long as new trends emerge.

I'll be addressing these issues in greater detail, but part of what WOWS is about is finding the opportunities and we are now at a transitional point in which the opportunities taking shape are changing. There's still significant volatility ahead, but as I've said many times, the lack of breadth in this market and the political changes that have just started with the new Republican controlled House are going to have significant effects moving forward and with the lack of market breadth, one headline can change the outlook for the market very quickly as it sits on a very narrow limb.

Enjoy the rest of your weekend.