last Friday with fraud charges relating to sub prime mortgages. I think most people who are familiar with Goldman and their antics were expecting something like this to happen. I for one am not surprised and fully expect other banks to find themselves in a similar situation because everyone on the street played follow the leader. Goldman was the leader and was the smartest guy in the room....
The price action which followed the news release Friday confirmed Goldman IS the market.....remember how i used to say keep a Goldman chart up because she will be your light into future? Now you understand why. Clearly all the skeletons are not out of the closet in regards to the financial's, you might expect more unforeseen events to cause market friction though i do still believe our markets are being held up through various means. I have spoken about a few of these "means" in the past on Hedge Accordingly.
Now for a little ranting... This market is damn ridiculous, yes you buy dips, yes you expect the unexpected, but when is the party going to end. This rally is one of the largest in the history of the stock market, every single gap down is retraced no matter how terrible the tape. Today for example we gapped down and traded considerably lower, -100 on the dow and about 12 points on S&P's.You can see the move reflected in the chart above.. Who the hell is buying these dips? 401k money? NO. Day traders? NO. Who is then? im guessing, cough i know.. it is the Ibanks taking down massive size which staggers the market, i see the prints. They are taking down 10k shares at time at major support points, it only takes 150-200k shares to really get the retail public to jump onto the trade in a thin market. You really think mom and pop or even your average prop trader is taking down blocks of 10k shares in the SPY for a scalp? NO.
Liquidity is the issue, and that issue is a whole other post. I am skeptical of this whole market, though i still must take it down to my machine and make money. I barely trade any puts, though i love puts because they work so well when the entire market is falling, you know the feeling...Bottom line, the issue with Goldman is much bigger than we think it is, they explicetly violated securities laws, if they lose this case they COULD be held liable for the funds AIG paid to them via CDS insurance.. If this happens GS is broke. Chapter 7.