Yesterday, the wind come out of Wall Street’s sails.

After gaining nearly 670 points in little over a week, the Dow slumped more than 280 points. Financial stocks made up five of the six biggest decliners. Citigroup (C) dropped nearly 10 percent. American International Group (AIG), Bank of America (BAC), American Express (AXP) and JPMorgan Chase (JPM) all fell more than 6 percent.

This comes as little surprise to Taipan Daily editor Justice Litle. He says the latest rally in financial had no substance – except another shorting opportunity when the time is right. Wachovia (WB) is a case in point, says Justice… 

We saw this on Tuesday with Wachovia, another battered and beleaguered bank. Wachovia reported a whopping $8.86 billion loss — not chump change in anyone’s book — and yet the stock soared 27%.

If there’s any evidence that hope still springs eternal in the hearts of investors, this is it. Wachovia has a market cap of $36 billion as of this writing. It also has $62 billion worth of troublesome home equity loans on the books. What’s wrong with this picture?

Existing home sales fell to their lowest levels in a decade on Thursday. And yet, thanks to Fannie and Freddie trouble, mortgage costs are marching ever higher. JP Morgan reports that credit troubles are spreading to higher income earners. Bailing out the broken system could run anywhere from $25 billion to $100 billion. And this is the backdrop against which sad-sack lenders catch a bid?

You can’t fight city hall, and you can’t fight the emotions of the crowd. But you can wait patiently and profit with a timely strike once the frenzy wears off.

Your humble editor is skeptical that this latest financial rally will turn out to be anything of substance… except another shorting opportunity when the time is right.

When the financials really do turn the corner, chances are we’ll hear the sound of crickets, not the sound of cheers. True market bottoms tend to follow the form of T.S. Eliot’s “The Hollow Men.” They arrive not with a bang, but a whimper. And they’re almost never called by the likes of Barrons and The Wall Street Journal — this must be the turn, hooray! — on the very same day.

Source: Financials, Oil and Asia ETFs