We don't particularly feel confident on the long side these days as we watch banks blindly march through fields of landmines on a daily basis. However, there is one bullish divergence that has emerged.
Note the following two charts:
What sticks out is the divergence between the market and the financials. To put it simply, the financials are sprinting towards last year's "panic" lows while the S&P 500 is attempting to hold support. What does this mean? It signifies that the broader market is trying to hold support and not cave into the lows; but it's doing so against the constant weight of the financials dragging it down while they flirt with the dance of death.
As an aside note: in our decade + of trading/investing and to put it more broadly, in all our adult lives, we have never felt the disgust and frustration that we currently feel in regards to the incompetencies of the financial system that got us here, and the foolish way the "solution" a.k.a. bailouts have been handled. The ongoing mockery of taxpayers (an example being banks paying bonuses to executives with bail-out money) brings out visceral rage. Personal visions that would have startled us only a year ago with their atavistic violence are now commonplace in our minds. However, we understand that we live in a modern, civilized democracy and the days of public humiliation/punishment in the town square are over. The only mode of revenge, albeit a hyper-sanitized one, is FAZ, a 3x short financial ETF that every trader we know actively trades. Our ability to short the financial system is our only protection against a corrupt, incestuous system that long ago ceased to work in the best interest of the nation.
Without a doubt to a large extent it will be wishful thinking, but our hope at least is that we go forward from this financial disaster with a bit more wisdom, more foresight, and less greed.
