Futures showing the markets to open lower by about 1.5%. Foreign markets rallied overnight while commodities were hit hard. Crude opened lower in New York by about 6%. This morning Goldman Sachs has come out with a sell recommendation on Citigroup (C) saying its overpriced and gave a target price of $1.50. The government has shown some inconsistency by telling the 9 banks ready to pay back TARP that the government would like to convert to shares of the companies instead of receiving a cash payments. Bank of America (BAC), the largest bank by assets, reported first-quarter profits that more than tripled on gains from mortgage refinancing and trading.
My gut is that this gap down is very healthy for the markets. We needed a small pull back to continue to the push higher. Markets can only consolidate sideways so long before they must retrace. I feel like this will be a capitulation of sorts. Not the traditional capitulation, but I think we could see the markets trade higher the rest of the week following this huge gap down. I remain very bullish on crude and equities, particularly small cap, tech and the banking sector. I’m building positions in these on pull backs.