Monday’s Trading
On Friday, it seemed to me that the large options-trading hedge funds were holding stocks down, and that the market might spring upward on Monday morning. But now, Tropical Storm Fay is heading north from Cuba, and oil futures are up (as of Sunday night). The S&P 500 futures are holding pretty steady, so stocks are looking strong relative to oil so far.
Watch the comments section for updates throughout the day.
August 18th, 2008 at 9:29 am
Tropical Storm Fay is close by, so if you don’t hear from me, that means the power has gone out.
August 18th, 2008 at 9:40 am
Came accross some interesting charts this weekend:
Rising wedge on SP500:
http://tinyurl.com/risingwedgesp500
Diamonds:USD index:
http://tinyurl.com/DIAUSD
August 18th, 2008 at 9:40 am
Market pretty soft considering that energy and gold remain weak.
A big drop today would not surprise.
August 18th, 2008 at 9:45 am
The VIX is already up 5%. Matt is bracing for a storm and so is the market.
Good luck, Matt.
August 18th, 2008 at 9:59 am
is it just me or does anyone else feel this market is moving on thinner than normal holiday volume?
August 18th, 2008 at 10:09 am
I’m in Miami, so it looks like we will dodge the bullet today, but we are getting some weather.
SPY’s selling volume in the first half-hour of trading wasn’t excessive, though the rally may indeed be in the process of rolling over.
August 18th, 2008 at 10:15 am
Volume in Europe has been very low today. Also in countries that are finished with the holiday season (Northern Europe).
August 18th, 2008 at 10:22 am
Last two weeks of Aug biggest vaction time of the year.
August 18th, 2008 at 10:23 am
Folks, any reaction in the market to the news on Fannie and Freddie?
August 18th, 2008 at 10:23 am
this may mean wild swings ahead.!
August 18th, 2008 at 10:28 am
LARRY
Financial Crisis Is Expected To Bring More Big Shocks The year-old financial crisis is not only far from over but could actually get much worse, bringing more shocks to the US economy and stock market, experts said.
Fannie, Freddie Outlook Grim
Financial Crisis Not Over: Morgan Stanley
August 18th, 2008 at 10:40 am
It looks like I found a diamond in a haystack - and shorted it. Oops.
I ditched my MBIA position because even though I think it is a company with no earnings for a few years, it is trading very well. I don’t think it will do well in the next bear leg coming up, but there was too much air above it’s price. I was trading Nov puts, so I got out with a 22% loss (the stock is up 11% since I bought it, not counting the 20% up day on Thursday).
Larry,
FNM and FRE were down 10%, all of the big banks and brokers were down, S&P was down, and premarket everything was up.
As for the Georgia ceasefire, there was a news report of Russia moving ballistic missiles into Georgia. It is one thing to leave the negotiating table, but constantly agreeing to do one thing (ceasefire + withdrawal) and then doing the opposite is a slap in the face to the US and Western Europe…
August 18th, 2008 at 10:57 am
The short-term model that I use is showing that the Q’s are more oversold now than they have been in a long time. They should be able to manage a bounce today.
August 18th, 2008 at 10:59 am
Paul,
Exactly. The Russians are deliberately slapping Bush around. I don’t think they are going to stop anytime soon either.
Matt
August 18th, 2008 at 11:04 am
Rising with the wedge up to 1330-40 and then reversing course in September.
Assuming that the money went from oil, usd and gold into tech it will be interesting to see if the nasdaq can hold up until eoq.
August 18th, 2008 at 11:05 am
The Russian often do the opposite of what he says.
“It looks very much to us as though the Soviet Union is trying to sell the same horse twice.”
This quote belongs to George Marshall by the way, and not Churchill as I stated the other day.
August 18th, 2008 at 11:22 am
really feels like the mkt wants to go lower today. oil dropping yet SPY meeting heavy resistance at technical levels.
August 18th, 2008 at 11:41 am
Nice quote, Larry.
Natural gass (UNG) has responded to the Russian news. It is down.
6 months to go from $36 to $60 and 2 months to go back down. The leap was never justified, but it should still bounce up soon.
August 18th, 2008 at 11:46 am
Tony,
It seems like the market doesn’t want to go anywhere. The Russian news could have lit the dynamite, but it seems like the market wants to wait for an actual missile launch, or for Bush to put troops into Georgia.
The SPY trendline break may occur simply because the trendline is moving up, rather than the usual break caused by SPY moving down.
August 18th, 2008 at 12:13 pm
i see no news on Russia ,can someone provide a link
August 18th, 2008 at 12:27 pm
Mike,
http://ca.news.yahoo.com/s/afp/080818/usa/georgia_russia_conflict_us_missiles
August 18th, 2008 at 12:34 pm
Thanks Paul,yes this may roil the these fragile markets.
August 18th, 2008 at 12:38 pm
SPY has weakened badly. Take a look at the last four trips down to its uptrend line on:
July 29
Aug 4
Aug 8
Aug 14
The first three times, SPY sprang upward in strong two-day rallies. It did manage a two-day rally Thursday and Friday, however it was with the weakest price and volume of the four bounces.
If SPY can mange one more bounce, lets see how strong it is. If it is weak, it may be the last.
August 18th, 2008 at 12:43 pm
Oil at 100. Vix at 18. Still the target.
You ok in the storm Matt?
August 18th, 2008 at 12:48 pm
Larry,
Just a some wind and rain so far.
Matt
August 18th, 2008 at 12:49 pm
Today’s selling volume has been light so far. So far…
The Housing Market Index report is at 1pm EST.
August 18th, 2008 at 1:04 pm
http://www.intellicast.com/National/Radar/Current.aspx?location=USFL0244&animate=true………………MATT……here comes probably the biggest band you will see in this storm……PROBABLY HIT YOU IN ONE HOUR OR SO…….i am in hobe sound…..about 100 miles north of you ………GOOD LUCK!!!!!!!!!!!!!!!!!!!!
August 18th, 2008 at 1:07 pm
ps click SHOW ANIMATION box upper left to loop…………..
August 18th, 2008 at 1:10 pm
Larry,
VIX should reach 25+ by October. This rally will not last past mid-Sep at the latest. So I will go 25% long on VIX if it does hit 18. However, I think that anything below 21 is a decent entry point that you can edge into provided you are buying ITM calls for Oct/Nov.
Good reminder on housing, Matt. We’ll see how long the midwest flooding boost is lasting.
August 18th, 2008 at 1:11 pm
sorry.. TO LOOP ……click box upper RIGHT
August 18th, 2008 at 1:20 pm
Housing doesn’t look good
http://www.nahb.org/page.aspx/category/sectionID=134
XHB blipped up, but is back down at its low
August 18th, 2008 at 1:30 pm
I rarely toot my own horn, but you guys must admit that I posted a bit after the open to expect a big down today.
August 18th, 2008 at 1:31 pm
No big deal yet in terms of Russian action today
August 18th, 2008 at 1:33 pm
Crimson,we need this to close down big,break 11,500 support,what do you say
August 18th, 2008 at 1:39 pm
MATT…………no response from you yet………..hope you are still there ..phil
August 18th, 2008 at 1:40 pm
GS is really struggling to hold $160. I think I’ll open a short position today, depending on how much bounce it shows.
Just saw this headline:
“The Organization for Security and Cooperation in Europe failed to agree Monday on whether to send observers to battle-scarred Georgia, but said discussions are continuing.” Doesn’t look like Security or Cooperation in Europe is working out too well.
August 18th, 2008 at 1:41 pm
Thanks Phil. Fay could strengthen and wobble to the east, but I think we will both be OK.
August 18th, 2008 at 1:57 pm
The NYSE TICK just hit an extreme low reading of almost -1000 on the 5-minute chart. These puke points usually signal a short-term bottom. The last time this level was reached was shortly before the close on August 7th, after which SPY bounced hard and set the rally high two days later. If the market can’t rally, or at least retrace, this afternoon, then it has a serious problem.
August 18th, 2008 at 1:58 pm
Paul — the Bush administration has insisted on placing a missile shield in Poland over the objections of its European allies. Russia is no longer trying to convert anyone’s political system, so what we have left is a stuggle over indirect territorial control between the US and Russia. The Europeans don’t have a major stake in either outcome. On the contrary, they depend on the force of law and trade rather than arms to get their resources, and will suffer the hotter the temperature gets. The whole rationale for NATO is in many ways gone; the US would like to use it as an extension of the empire, but have little to offer the Europeans in return. The Georgian invasion of Ossetia relied on US backing, and Russia so far has sharply demonstrated the limits of US power. Reduced US clout in Central Asia will result in somewhat more expensive energy, but these are real limits. Nice interview with Andrew Bacevitch on this topic on Friday at http://www.pbs.org/moyers/journal/08152008/transcript1.html
August 18th, 2008 at 2:01 pm
i added still more qid (1 % again) @ 38.90 this morning.
hope all is well with you weather wise, Matt.
August 18th, 2008 at 2:02 pm
Paul, I don’t trade. Just short. But I use vix to take some profits on the shorts when/if vix goes above 30. I’m not short USA, but global markets react to everything you guys do.
2. Russia vs Georgia. Politicians and cia caught flat-footed. Eu and usa. They still don’t get what’s going on. Now it’s turning into a catch 22 situation for the west because they have been asleep at the wheel. No diplomacy for last 2 yrs and too trusting and supporting of georgia. McCain really sounds embarrassing.
August 18th, 2008 at 2:09 pm
Kailash, agree. EU has turned almost libertarian. Peace, trade, sound money from ECB/Trichet, no debt at EU level and tax competition.
Georgia is a catch 22 for USA. But EU has to act like it cares.
August 18th, 2008 at 2:11 pm
SPY needs to hold $128 today. If the rally is still alive, the dip buyers will come in here. So far, they are nowhere to be found.
(Not much of a problem with Fay here so far.)
August 18th, 2008 at 2:23 pm
The Q’s have been stable for 40 minutes now. Maybe the market can hold here, but I’m not betting on it.
August 18th, 2008 at 2:27 pm
Good to hear Fay isn’t a problem, Matt. $128 is definitely a must-hold for today.
However, I think that closing above $130.4 is needed for tomorrow to show the momentum is still there. When the trendline was hit on the days you mentioned, there was also higher volume and a close above the previous day’s high.
August 18th, 2008 at 2:51 pm
Matt, the last 20 minutes has been been heavy green volume yet the move is pretty pathetic. what is your assessment of this price action? thx
August 18th, 2008 at 3:00 pm
Tony G,
It’s a weak bounce so far, but both the banks and the dollar are moving up, so I’m guessing that today is not the big crack. Today’s volume is still very light. Maybe tomorrow morning’s PPI number will be the catalyst.
You are right that SPY needs to rally today or tomorrow.
Matt
August 18th, 2008 at 3:03 pm
The Q’s are making a liar out of me and breaking to new lows.
August 18th, 2008 at 3:06 pm
SPY is now trying to hold last week’s low of $127.67. If it can’t hold that, I would stick a fork in this rally.
August 18th, 2008 at 3:08 pm
I was looking for a high-volume crack of SPY’s uptrend line, and now it looks like we may get a low-volume crack. What does everybody think about that? I think a crack is crack.
August 18th, 2008 at 3:41 pm
Kailash,
It is easy for Europe not to care because the US picks up the slack. However, the way Russia is behaving, it sounds like they also want the cold war back. What happens if they take over all of Georgia and the West lets it slide? Russia willl probably go after all their former republics. Would Europe still be okay with that?
I think Larry is right that this is a Catch-22. I think that the US should swallow its’ pride on this one, and let Russia have South Ossetia and Abkhazia, altough they should intervene (along with an intl force) if Georgia itself is in jeorpardy
August 18th, 2008 at 3:54 pm
Matt,
Why the big drop today any way? The finacials started the mornign with good news (UBS).
9:15am
S&P futures vs fair value: +5.2.
Nasdaq futures vs fair value: +9.3
Russia is the only expalnation that I can think of. Any other opinions? If it is Russia, then likely best case looks like they don’t invade Georgia, which is a rather low bar. The market won’t rally off that.
With today’s weakness, I’d give the rally a 30% chance of lasting past this week. I bought some GS puts, but may be a little early. I’m still mostly cash. I’m willing to wait until tomorrow before piling in. If the SPY cloes above today’s high, rally is still kicking, if not than it’s time to load up for October.
August 18th, 2008 at 4:04 pm
Crap we had the bulls on the ropes
August 18th, 2008 at 4:09 pm
Why the big drop today any way? The finacials started the mornign with good news (UBS).
Paul,
Have a look at Fridays daily SPY / SPX / ES bar, it was a narrow range upbar on lower than the previous two days - there’s not much demand in there from the big players. I was a it wary of it considering it was option expiry day, but todays actions now confirms the weakness.
Just my two pence worth.
Regards
Darren
August 18th, 2008 at 4:10 pm
Paul,
Today’s action feels like an air pocket: a sudden, sharp drop on light volume and no news, indicating that there are no big funds bidding underneath. Even though SPY saved itself at the end of the day, I think that we have a major warning signal.
I need to study thing over some more, but at the moment, I am anxious for some strength to short into.
Matt
August 18th, 2008 at 4:14 pm
One note:
April 11 was a big lower trend break for SPY: the day’s high was below the trend line. However, the volume was low and SPY continued upward (this lower trendline support became an upper resistance). It was the high-volume day on May 21 that started the next bear leg.
So maybe we should pay less attention to the trend lines values and more attention to the accompanying volume. Shorting an uptrend is worse than being late to the party on a downtrend (if you know the final destination). Bull, bear, or pig, right?
August 18th, 2008 at 4:32 pm
If the rally were to fail at this level, with this lack of volume, and at this time the signal to the markets would be by far too negative. Wearing my president’s working group member hat I dream of a moderated, slow, low volume creep up to 1330 and then a nice short-squeeze up caused by some innovative measures
But: Gold seems to stop its free-fall right at resistance - isn’t that bearish?
August 18th, 2008 at 6:52 pm
Hate to tell you yerk but your right you are dreaming
August 18th, 2008 at 8:24 pm
I was looking for a high-volume crack of SPY’s uptrend line, and now it looks like we may get a low-volume crack. What does everybody think about that? I think a crack is crack.
I agree. Today we had light volume but decidedly to the downside with declines very broad-based. If bids are pulled, stocks will drop. This can go on for some time as we saw in the first bear market in the 70’s. It’s nice to have a big down day a day after I flip my position from bull to bear. We need a bit more on the downside with mediocre rally attempts to confirm this new leg down. On a closing basis we haven’t quite broken the upward SPX trend line; closing about 4 points above it. I think we’ll get there soon.
August 18th, 2008 at 11:25 pm
It’ll be interesting to see how this plays out — we’re all sitting ready with the trigger waiting for a high-volume break in the pattern, preferably preceeded by a convincing, high-volume top, and all we get is some indecision and then an air pocket! I’m still holding out for a top.