On Friday, I expect the jobs report to come in strong, which might lend to further downside action in stocks. It’s well known by anyone with a modicum of sophistication that stocks do not trade higher based upon macro-news. Instead, stocks trade higher based upon the Permanent Open Market Operations (POMO)–spearheaded by Benjamin Bernanke.
Basically, if you believe the economy is in the tank, you should go out and buy short dated calls on the market, for it will trade frantically higher on a worse than expected report. If, however, the report is good, prepare to have your testicles shaved.
Bad economy= more POMO.
I like WETF, RAS, BX, APO, HOV, USG and of course IMMR. FRO is good too, but not my top choice at the moment.
Let’s put the correction aside for the moment. The prevailing wisdom is the economy is in recovery and possibly booming. This is happening because housing has recovered and is booming in many parts of the country. Due to this boom, retail stores, construction materials, mortgage lenders and residential builders are leading the market. The facade is based upon this myth. If this myth is discredited, we are without facade and the Dow is 5,000 points too expensive.
So, housing should be at the top of your buy lists, as well as REITs (non-commercial), banks and mortgage lenders. Also, banks that do better with a sloping yield curve might attract idiot hedge fund dollars. Your plays are KEY, HBAN and CMA.
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