Speculative Trade

Positioned the portfolio to 40% short XLF at the close today.

By no means am I a trader. I don't even follow any type of technical indicators. However, just by watching the price changes of about 150 stocks simultaneously throughout the day I can tell you that the rally is losing steam and topping out.

The earnings for the big banks are out and all financial earnings have been offset by losses (even though they didn't report it that way, if you read the FS properly you can easily see that). The only play left for "the bulls" (or maybe I should say "the government") is the "distress" test, which I'm speculating will work like this: banks will be given letter grades of A - D and the worst any bank will be graded is B+. No details will be given, just ranges of capital that need to be raised.

The market hates uncertainty like that.

In the intermediate run I have 12% unemployment by 2010 backing me up as well as a roughly 20 PE ratio on the S&P 500 assuming earnings are $45. Not to mention that unemployment will stay above 10% for years and earnings growth will be non existent.

Margin interest rate is reasonable too these days, possibly aiding this rally as it's cheap for margin players to lever up.