Financials To Resume Meltdown Momentarily

On the 16th of July, Lone Peak Asset Management initiated a buy recommendation on the S&P 500 when it was at 1,214. Since then, the index has risen 7% to 1,305 and we have exited the trade. The mantra of this bear market is 'buy the dips and sell the rips'; buy and hold has been a losing strategy.

The recent rally was the result of an oversold technical condition, government action to strengthen Fannie Mae (FNM) and Freddie Mac (FRE), rules against naked short selling, better than expected earnings and a dramatic decline in oil prices. If there is one lesson to have learned from 2008, it's that good news flow does not last. The focus will return to financial weakness before we experience a seasonal fall rally. Over the remaining 15 days in August, tread carefully as the following issues resurface: