The surest way to put the brakes on the upward action is to give a hefty boost to the margin requirement. The current $6000 for an $180,000 contract is just too rich a target to pass up.

On the financials which, to my mind, are being given a well deserved beating, I'm looking for another "Christopher Cox" moment. For those who may not remember the last time our nation's highly regarded bankers (including the holy of holies, Robert Rubin) received a drubbing, Cox issued a prohibition against shorting stocks in the nations 20 or so largest financial institutions. I recall it well as I had a large SKF position which really got nailed.

However, I was still in the green, though substantially less so. Cox, apparently aware of some lingering gains and a recovering SKF, shortly thereafter expanded the "may not short" list to include something like 719 financial institutions. The party was over.

I wouldn't be surprised to see it occur once again as the usual ranters (who remain remarkably quiet during bullish bubbles) are heaping complaints on the HFT system and its contribution to the current downdraft on banking equities - complaints that are gaining traction as the French now feel equally grieved as their banks just underwent a similar brutalization..

I find myself in a similar situation currently with precious metals (long) and banks (short). I've attempted to partially hedge each position with the appropriate ETFs but am skeptical that it's enough. Wall Street's Cramers and fellow-travelers get especially nasty when their icons get shellacked. However, mums the word when dotcoms and real estate go parabolically skyward - just ask Al "Irrational Exuberance" Greenspan. The Street will exact its pound of flesh.


By the way, someone commented that Prechter has been wrong all along on gold. That is absolutely correct - he has been similarly mistaken on silver.





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