10:45pm (EST)

If this is your first stock market rodeo, buckle up. 

Wall Street went on another wild ride as the bulls made a mad dash to previous support levels but found out the bears aren’t clowning around.  We knew stocks would rebound last Monday when Europe threw in the kitchen sink to help solve the troubled Euro and we were watching key resistance levels like a hawk. 

The $1 trillion “proposed” bailout and support package was impressive and proved their commitment to save the currency was real, but, did you really think it would go smooth?  More on that in a minute…

The bulls won the first half of the week and overall, but the bears closed it out with all the momentum.  The 11th hour sell-off on Thursday carried over into Friday as all three indexes fell nearly 2%.

The Dow dropped 162 points, or 1.5%, to finish at 10,620.  The index traded a little above the 10,800 resistance level and reached a high of 10,950ish before stumbling.  For the week, the Dow added 240 points, or 2.3%, but all signs are pointing towards a test of 10,000. 

Remember, Dow 10,800-10,900 was support when the market was moving higher so now it becomes resistance.  On Wednesday, we said the Dow could “stretch” this level but that we believed the blue-chips could test 10,200-10,250, after stalling.  A break below these levels could easily push the index back below 10,000.  


The S&P 500 fell 22 points, or 1.9%, and settled at 1,135.  The index fell below the 1,150 level after trading to a high of 1,173 but added 25 points, or 2.2% for the week.  We think the S&P could test 1,075 over the short-term.   

Meanwhile, the Nasdaq sank 48 points, or 2%, and closed at 2,346.  The index hit a high of 2,434 and breached the 2,400 level before ending the week with a gain of 81 points, or 3.6%.  However, we see 2,200 in the cards and possibly a trip below 2K. 

Turning to stocks, the Financial sector took a whipping after the government said it would give the Fed authority over the fees charged to merchants on debit-card transactions.  This was a huge blow to the industry and gives merchants more leverage to bargain. 

Businesses could impose “minimum” purchase amounts for you to use your card which could mean you pay more with cash on smaller items.  On top of that, the Fed will have the authority to regulate the fees charged per swipe.  Good for us in some ways but bad for the credit card firms.

Visa (V, $77.26, down $8.47) dropped 10%, MasterCard (MA, $212.45, down $19.86) slid 9% and Capital One Financial (COF, $42.76, down $2.16) gave up 5% in Friday’s session.

Elsewhere, TiVo (TIVO, $10.16, down $7.23) fell over 40% after a court said its patent infringement victory against EchoStar (SATS, $20.45, down $0.02) and Dish Network (DISH, $22.90, up $0.94) would be reconsidered in appeals court.  This was a huge blow to TiVo as the company was in line to receive hundreds of millions in damages from the infringement.  We are watching these developments carefully as we think there will be a great opportunity to go long or short, depending how this shakes out, in the coming weeks.

One stock that bucked the trend was Hauppauge Digital (HAUP, $3.93, up $0.90) which surged 30% after the company said its products can now stream live TV over the internet for Apple’s (AAPL, $253.82, down $4.54) products.  HAUP was at $1 on Wednesday, jumped $2 on Thursday and hit a high of $4.85 after the opening bell on Friday.  Wow.

You cannot trade options on this stock but it was cheap enough that it didn’t matter.  We aren’t sure if the recent gains will hold or if shares are headed to $10 because the company wasn’t making a lot of money before the news.  However, we are going to download the $9.95 app and see how well it works.  If it turns out to be a hit then we could see double-digits if it catches on.   

We mentioned last week not to be nervous if the market heads lower because there will be plenty of opportunities on the downside.  Most investors don’t know how to make money in a down market because they get scared.

The recent “supposed” Wall Street shenanigans have spooked investors and the trust seems to be lost.  Want proof? 

Investors have yanked nearly $3 billion out the stock market which is the most since March 2009 as people rush to “safety”.  Throw in the Dow’s 1,000-point “flash crash” or “fat finger” debacle a little over a week ago and it’s easy to see why some investors’ feel Wall Street is rigged (it’s not, although it ain’t a pretty picture right now).  There will be another hearing on Thursday on what caused the plunge. 

Any time a stock falls from $40 to a penny in a matter of hours, which is what happened to Accenture (ACN, $38.99, down $1.83) the day we got the 1,000 point drop, there is cause for concern.  Whoever got into that trade for a penny a share was lucky but the trades were eventually canceled. 

It just goes to show how Wall Street has gotten away from the human element of things as more and more electronic systems and market makers have come in over the years.  This needs fixing.

The market is always looking ahead and you can almost feel the uncertainty in the air.  Use this as an opportunity to look for some short sales or buy put options.  The trend is your friend and right now we are looking lower.

We will be back in the morning with the list of companies reporting earnings and a full update on all of our current trades.  Monday could be nasty as the Asain markets are down 2.5% as we go to press…