Why are banks failing in this rally?

Financials have taken a big hit. The mortgage mess, the poor housing market and the prospect of QE2 are destroying our financial system.

Bank Of America and all banks may be forced to buy back poor mortgages and this has a huge effect on its profitability.

Investors are fearing analysts downgrade after the banks earnings reports. Even JPM superb earnings failed to support the financials.

However, the banks that are failing seems to be the banks that BOVE love. Why is it that only the big banks are affected? I am still trying to find that out. One reason is that most of the bad foreclosure were done by these big banks.

Bank Of America being the largest bank got hit the hardest. We have seen the stock rise so much in anticipation of JPM earnings. I was lucky to short a bit at $13.5 and was scared when JPM earnings surprised. However, true enough, the poor mortgage took the bigger hit.

I have lowered my BAC buy levels from $12.8 to $12.5, and the $12.5 to $12.1.

So my new BAC buy levels are $12.1 and $12.5 (already executed – might close it if the situation gets out of hand and if theres gonna be a bearish market again).

BUY BAC at $12.1 now.