LEH was crushed yesterday. The price action screams that the market has lost confidence in LEH. We saw foreshadowing of this as my partner, Steve Spencer, has been highlighting during our AM meetings. And today LEH preannounced. LEH traded above 10 and then went negative. They are on a conference call as I write. What a great trading opportunity.

So what should we be doing in this market? 1) If you don’t feel comfortable trading LEH. If there is too much price action, then don’t. 2) Look for a lack of confidence in other Financials: MER, JPM, MS, etc. Understand that GS is the gold standard. If GS starts to crack think about moving to China (kidding). 3) Oil is in play as well. Look for oil to find support at 100, if not the next stop might be 85. CHK, HK, XTO are excellent trading stocks. Find important levels in some oil and gas stocks. 4) Play the momentum. This is not a market to pretend that you know where stocks are going over the next 6 months. Apparently some big time money managers unfortunately got smoked in FRE and FNM loading up into the weakness, against fundamental trading principles. They lost their clients close to 20B. Learn from their mistake.

As traders we are not required to make market calls. This is a tremendous advantage in our present market. If a stock is trending up then find good entry spots to get long. If a stock is weak then find places to get short. But be mentally agile. Stocks can rally at any moment on a news release. As weak as LEH is. As much as the stock looks like 5 is the most likely next stop. It can be trading near 13 by the end of the week. Do not take big positions. Be light. Be agile. Play the momentum.

This is a market that we crush. These are the days that we pray to the trading gods for. Sit in your seat. Relax. Wait for your setups. And pounce on the opportunities. Best of luck with your trading.