SSG, UltraShort Semiconductor ProShares, is showing the breakdown of the semiconductor sector, hitting a low at market open of 70 and now at 80.71 with the market reaction to the Fre/Fnm and the subsequent sell off. It is up 23% for the week. This shows you have to be able to stomach these wild swings in a bear market and my stomach hurts.

This is a quote from the “big picture” by Barry Ritholtz



"Another weekend, another bailout, another market reaction:



How many Sunday press releases is it going to take to save the financial system from ruin? If you’re are keeping score at home, this is now the sixth Sunday night/Monday morning press release in 14 months aimed at saving the financial system. Consider the recent history of these weekend rescues:



• August 2007, when the credit crunch was officially recognized by the Fed, when they cut the discount rate.

• December 2007, with the announcement of the TAF and other credit facilities.

• January 2008 Soc Gen panic, and a 75 bps emergency cut.

• March 2008 with the Bear Stearns bailout.

• July 2008 the first Fannie/Freddie rescue attempt.

• September 2008 the actual Bailout of Fannie/Freddie.



Observations/questions/takeaways from the past of weekend rescues history:



1. A strong rally lasts for a while, but it eventually fades and makes a new lower low.

2. Each "rescue rally" has been shorter in duration and weaker in intensity than the immediately prior one.

3. Friday's close becomes your new line in the sand; If and when that is breached, look out below.

4. The pre-Asian open news pattern reveals the Asset price focus is a large part of these issues; It also speaks to our overseas creditors/Overlords.

5. What form of free markets have we evolved into? It is not Capitalism, it is not Socialism, it is not intelligent regulation. WTF is this?!?



Lastly, who wants to bet me that this will be the very last bailout? Any takers? Any?"

Once again, everything bear market "ultra short" were today's top performers in etf's - REC, DUG, EEV, FXP, SMN, SKF, MZZ, SRS, SSG, SSK, & TWM. for an average gain of 7 to 13% in the group for the day. I suggest to you again that if the market continues down, this is a way to start making money. The problem will be that if the market starts going down too much and too fast, the next Fed rescue of the market will be reducing the interest rate again. If Lehman keeps going closer to zero, we will probably have another rescue this weekend as zigzagman suggested. Need to have tight stops for these Fed interventions for the big upswings that only seem to last a day before the downward slide happens again. Since this 200 point up swing was only a day, you could buy more bear market etf's rather than stopping out your current holdings.

Stockman:

I've been considering a similiar strategy, shorting previous top gainers from basic materials and/or shorting stocks that are above key technical levels - as too many of them were broken in this sector. However, oil is near probably the strongest support in the market $100, and if it reverses to around 110-115 then all these shorts would be losers.

Commodity Crush
Posted By:Tom Brennan
Topics:Commodities | John McCain | Natural Gas | Stock Picks | Stock Market
Sectors:Oil and Gas
Companies:Agrium Inc. | Potash Corporation of Saskatchewan Inc. | Mosaic Company | United States Steel Corporation | Cia Vale do Rio Doce

Commodities have been crushed and it doesn’t look like the decline will stop any time soon.

Why’s this happening? Cramer put the blame on a few key factors:

China, the once-great consumer of commodities, has virtually disappeared. Oil, steel, copper – you name it and China bought it with near insatiable fervor. Now that demand has dropped, and so have the prices of these commodities, as well as commodity-related stocks including infrastructure names and the rails.

Then there’s the McCain factor. He’s either pulled even with Obama in the polls or he’s ahead. And this is a guy who wants to drill, drill, drill. That means more supply and as a result lower prices. Cramer said a barrel of oil could drop to $80 and prices at the pump to $3.25.

Natural gas is hurting oil prices, too. Turns out we’ve got a ton of it here in the U.S. in shales spread out across the country. T. Boone Pickens has been talking up the resource is his pro-alternative energy commercials and now people are thinking we have enough nat gas to drop the price per 1,000 cubic feet to $5 from $7. Nat gas stocks could drop right along with the fuel.

Hedge funds have also played a roll in the commodities crash, but not exactly the way people think. These funds have huge investments in commodities-related stocks, and recently they’ve taken big losses. Now their clients want their money back, so the hedge funds are being forced to sell their positions en masse to raise money for these redemptions. So it’s not so much that hedge funds are hurting futures prices. In fact, they’re hurting the stocks that deal with these commodities. Cramer called the decline as a result of this huge sell-off “breath-taking.”

Another problem is that none of these stocks have dividends. If they did, then there’s probably be some buyers looking to pick them up on the cheap. These are the buyers – dividend seekers – who usually save a stock from total collapse when the market takes a downturn.

Cramer predicted a worst-case scenario for these names: They could lose all the gains they’ve seen since April 2005. That means Vale [RIO Loading... () ] drops 68%; U.S. Steel [X 96.06 2.37 (+2.53%) ] 50%; fertilizer stocks like Potash [POT 142.61 2.35 (+1.68%) ], Mosaic [MOS 79.79 2.78 (+3.61%) ] and Agrium [AGU 67.83 1.18 (+1.77%) ] could fall 80% to 90%. But this is only if you believe that the rise of these stocks was due solely to the increased value of commodities and not any growth by the companies themselves, he said.

So what’s it going to take to stop this? The world’s central banks – U.S., Europe, even China – have to cut interest rates. Industry consolidation would help, too. A rate cut in China might revive that country’s appetite for commodities, and that would mean investors would be getting a great discount on all these stocks right now.

If China doesn’t come back, Cramer said, “the commodity collapse has the potential to bring down the whole market.”