The bank stocks’ celebration of a steepening yield curve appears to have gone flat, presumably because the Fed’s December-or-bust rate-hike posturing has no place to go when January arrives. Whether the token increase of 25 basis points that everyone expects will be enough to trigger the inevitable bear market is arguable. But any further tightening would be out of the question, since the economic recovery, such as it is, rests entirely on higher stock prices, auto sales driven by cheap loans, and the steady growth of minimum-wage jobs. All three of these factors could vanish overnight, undermining the already flimsy rationale for record stock prices. Even now, there are just a handful of stocks still rising ostentatiously enough to keep the bull market visible: Amazon, Google, Facebook and Microsoft. Regarding the Bankster Index, I’ll suggest shorting near p2=76.80 with the purchase of put options. Stay tuned to the chat room for timely updates, however, since the puts could prove too illiquid to work with.________ UPDATE (December 8, 1:37 a.m,): BKX has sold off $1.60 since topping on Friday at 76.91, 11 cents above the rally target flagged above. If I hear from anyone in the chat room who got short near the top, I’ll establish a tracking position. In the meantime, set a break-even stop-loss.
