Greece Bailed Out: Big Banks Rise
The market ripped higher yesterday after a consolidation session on Wednesday. Volume was jacked as the indices overcame short term resistance areas and pushed up towards fresh highs.
The market had a lot going in its favor yesterday. First, second quarter earnings have been good thus far, and the market is still riding on the bullish sentiment following AAPL, GOOG, IBM and the rest of the great technology earnings reports by big companies. Second, the EU finally got its act together and formed a bailout package.
Over the past few weeks investor debt fears have loomed over Greece. The market has known for a while that Greece is in fiscal trouble, but traders did not know how the EU would handle the latest plea for more money.
While no official plan is in place, the rescue package on the table calls for nearly $200 billion in aide. The fund would be designed to help the banking system and to intervene in the secondary bond market. Short term bonds carry a 30% interest rate, which is difficult for a distressed borrower to pay back. The program is designed to bring rates down to an affordable level.
Investors in the euro loved the announcement, and the euro rose over 1% yesterday. On Tuesday, I made note that I was long the euro with a $1.44 target. As a result, I (personally) sold half my position and the other half remains in place to see if I can get $1.47 next week.
But more importantly, the rise in the euro meant a fall in the dollar, which resulted in a jump for commodities and a pop in the market. Additionally, the support from the EU also spurred a major rally in the financial sector. This Tuesday, after Bank of America earnings, I noted banks were extremely oversold and likely to pop.
So the good news over in Europe, combined with average earnings reported by big banks such as WFC, MS, BAC, JPM, should get banking stocks moving higher again - I (personally) am long BAC. Other options to consider would be the XLF, or for aggressive traders UYG, I rarely dabble in triple levered etfs like FAS, but all three etfs are valid options for traders bullish on the big banking industry.
The weekend video will be posted to the website tomorrow afternoon and cover another round of stocks to buy. In the last weekend video I covered stocks like FEED, XPO as well as RFIL which were each up 30% over the past few sessions. I encourage you to tune in each weekend to prepare yourself to trade before the opening bell Monday.
