Broker/dealers are under pressure in the past couple of hours after the Wall Street Journal reported that the Securities Exchange Commission (SEC) has launched a formal investigation into the stock research practices of Wall Street Analysts. The probe follows a face-to-face meeting between SEC Chairman Harvey Pit and New York Attorney General Eliot Spitzer yesterday afternoon. Some expect enforcement action to result from the examination.
Securities Broker Dealer Index - Daily Interval
In yesterday's market monitor at 10:25:07 we alerted traders to potential technical weakness in the Broker/Dealer Index (XBD.X) at the $475 level and that may indeed have been a preemptive move ahead of today's report from the Wall Street Journal. Bears are going to be pressing the issue here as another "card of uncertainty" has been dealt to the market.
In recent weeks I've like a put play in shares of J.P Morgan (NYSE:JPM) $34.45 -3.9% as the stock attempted a rally and its bearish resistance trend. The stock is still at actionable levels for traders willing to play the options for June expiration. I feel comfortable in this analysis as it is and has been based purely on technicals and not news driven. However, a trader looking for potential SEC penalties as a catalyst for uncertainty and lower prices in the group may want to consider this trade for their portfolio. Target as previously outlined would be near-term target of $30.