Stocks enjoyed a roller coaster ride on Wednesday as stocks found it difficult to maintain a trend intraday. Crude Inventories surprised to the upside causing the oil pits to recalibrate positions. However, stocks didn’t find too much comfort while crude headed lower. The bigger story of the day was what FRE and FNM were doing. These two GSEs were getting clobbered once again as traders sold as much stock as they could. One thing to keep in mind, it appears stock holders are fearing a government bailout would wipe out equity holders in the deal. At any rate these two continue to weigh on the overall market. Overall, financial stocks are weighing on the market and we simply can not move higher with these stocks continue to drag on the market.

I am in contact with many different market participants, whether it be stocks, bonds, futures, or forex. There is a definite feeling out there that this market is beginning to feel much like it did in March when the Bear Stearns debacle happened. Whether or not this is true, most likely could be false it spells out there is much fear in the credit markets regarding financial stocks. There is even word that there is in the neighborhood of $500billion in Option Arm (POA) loans where an 80% default rate is expected. Simply amazing statistic and you have to begin and wonder why didn’t anyone write this off earlier and get it over and done with? A question that can only be answered by the CEOs of these banks.

Stocks simply do not look appetizing to build any type of size. Low volume markets are most difficult because price swings are easily manipulated. They tend to create headfakes that lead to further downside movements. The most important thing to do is “DO NO HARM.” That is, do not lose money and protect your capital for the next bull market.