Fannie & Freddie: The Stock Market Will Go On

"Every night in my dreams
I see you, I feel you,
That is how I know you go on."

Today's action is worth noting.

As Fannie Mae and Freddie Mac take another giant step towards zero, the stock market has stabilized and is currently posting some respectable gains.

While FRE and FNM are down more than 15% a piece, but other financials are taking an opposite path. BAC and WB are chugging 3% higher, LEH is up more than 6%, and even C has posted a 1% gain.

As recently as Monday, declines in Fannie and Freddie took the whole market for a swoon. Are the recent "jitters" coming to an end?

Woes & Jitters Stock Market Indicator

One thing that periodically irks me is financial website headline writing. At the close of each day and usually throughout the day, Yahoo Finance proudly displays a single headline to sum up the action of all of the thousands of stocks that make up the stock market.

The headline will usually point to a single identifiable reason which explains everything. Barring a single identifiable reason, the headline may simply proclaim that stocks are "fluctuating."

When the stock market declines, two words that appear in financial headlines with uncanny frequency are "woes" and "jitters."

After experiencing several days of recent declines, you may have witnessed the following headlines:

• "Stocks Lower on [ Fill in the Blank ] Jitters"
• "Stocks Fall on [ Fill in the Blank ] Woes"

Could these ridiculous headlines be utilized as a tool for identifying temporary market bottoms?

Let's look at some charts:


Source: StockCharts.com


Source: Google Trends


Source: Google Trends

You'll see that the "jitters" chart has provided some clear signals for when sell offs were approaching their extremes. The "woes" chart sends less clear signals, but also displays the appropriate spikes.

We are recently coming off a double "woes" and "jitters" spike. Is this ridiculous indicator worth noting?

Find me elsewhere

I decided to start fresh with a more focused concept.

Since things are looking absolutely abysmal, I decided it would be a great time (sarcasm) to select a group of particularly punished stocks and buy them.

View the stocks in the portfolio and follow the performance at 8 Stock Portfolio.

Contrarian Indicator Alert: VMWare

VMWare is 86% owned by EMC. Its shares traded as high as $125 per share, which nearly brought its market cap to parity with EMC.

When VMWare was trading in the 100's, EMC continually stated that they would not seek to completely spin off the company or sell anymore of their stake.

Today, with VMWare opening at $32 per share after delivering a disappointing outlook, EMC has "hinted" that they are open to spinning off VMW.

Wachovia Runs Out of Steam

After posting an obnoxiously huge loss, Wachovia rallied 27% yesterday. This was after recovering from a 10% loss in early trading.

Early this morning, Wachovia was up again by as much as $2 per share. It has since given back some of its gains.

In just seven days, the fourth largest bank in the United States went from a low of $7.80 per share to a high of $19.53 per share.

I think now is a good time to take some money out of financials and look for the next green pasture.

A couple of ideas: this morning EMC is up after posting a nice quarter. The move is even more impressive when you consider that VMW is down nearly 10%. EMC is one of the first technology companies that has posted a seemingly impressive quarter.

GE, a bargain hunters paradise. The stock is coming back from a multi-multi-year low. It's a name everyone loves to love. People late to the party might start a new party in this stock.