Wednesday’s Trading
The 50% Dilution Rally
Even Republican perm-bull, Dennis Kneale was baffled by Tuesday’s rally. On Kudlow, he expressed confusion as to why stocks would rally on Merrill Lynch’s disastrous news. MER shareholders were diluted by an astounding 50% by the new stock MER dumped on the market. And this came just a few days after CEO John Thain said everything was cool. Perhaps this can be called “The Last Lie Rally” as the market celebrates the very last lie from the bankers.
The Last Write-Down?
But have the bankers really told their last lie? Jim Cramer says that the market rallied because we finally got a clearing price for all the junk mortgage paper on bank balance sheets: 15-20 cents on the dollar. Banking analyst Meredith Whitney also praised MER for marking to market. But is this true? If you read any of the stories on this deal, you probably noticed a lot of weird details such as MER loaning 75% of the cost of the paper to the buyer. Bizarre, right? Economist Nouriel Roubini says that we don’t have a clearing price after all because this deal wasn’t a real market-based sale, and I agree. Merrill paid somebody to take the paper off of their books. So it was more BS from the bankers.
Bankers are Allowed to Lie
On Fast Money, there was disgust over how the government is cracking down on short sellers, but bankers like John Thain are allowed to lie like rugs. While true, this misses the point. Short sellers must be silenced precisely because they are telling the truth. The only way to get Larry Kudlow’s “Summer Rally” going and save the Republican party in November is by having an army of John Thains out there dispensing a tidal wave of BS.
Will it Work?
You can see why the stock market has a history of not faltering during an election year. Every time you turn around, Paulson and crew are hatching a new crazy scheme. As Todd Harrison says, they have a mandate to get stock prices up. But will it work? I don’t think so. While they can reduce shorting activity, in the end, they can’t make you buy stock. And even though the BLS has been creating hundreds of thousands of phantom jobs with their birth/death “adjustments”, enough of the jobs truth is getting out to keep traders from clicking the buy button. And amazingly enough, during the banking panic on July 15th, Bernanke didn’t even deliver a token quarter-point rate cut. So, it doesn’t look as if the entire federal bureaucracy is successfully being marshaled to enforce this mandate.
Just Another Month-End Rally
So, if John Thain is not our savior, then why did the market rally? I think it can be easily explained as typical month-end window-dressing action. The market closed on Monday leaning short, and the light volume made it easy for the mark-up elves to get a short squeeze going. The elves should pull back and bid underneath Wednesday and Thursday, so while the market is overbought, it may be able to levitate until the end of the month just like at the end of June. Lucky for the elves, their work will be done before the jobs report hits on Friday, though they may have to burn through some extra capital if we get another bad unemployment claims number on Thursday.
What is Getting Marked-Up?
Have momentum funds piled into financials? Will they keep them up until the end of the month? I haven’t studied this closely, so if you have ideas, please post in the comments. What I did notice is that the XLE was the only sector to finish in the red on Tuesday. Of course, the big funds began dumping their energy stocks on July 1st, so nobody’s trying to mark them up now, and they should continue to be weak. And while KOL and POT finished in the green, they were down in the morning, and floated up on low volume in the afternoon. This reluctant participation in the big rally indicates to me that nobody is trying to mark up coal or ag stocks either.
What is the Pattern?
You can make a case that SPY and QQQQ are developing ascending-triangle patterns. You could draw the top line of SPY’s triangle at $129, and that of the Q’s at $46. Both will need to fight up to their top lines soon or face being downgraded to symmetrical triangles. I think the jobs data could easily trigger that downgrade. Also, it’s important to look at the patterns of leading stocks. As Paul pointed out yesterday, Google has a classic bear-pennant pattern on its daily chart. If this pattern continues to play out in textbook fashion, Google could drop another 70 points. Not good for the Q’s or SPY.
Jubilation in the Bull Camp
There was quite a lot of celebrating in the bull camp Tuesday, and that is rarely a sign of a lasting rally. Lasting rallies are met by skepticism, because skeptical traders have not yet bought in. Celebrating bulls have abandoned skepticism and bought in, indicating that everybody who is likely to buy at this level have already done so.
Global Crunch
Starbucks is closing most of its stores in Australia. Wasn’t Australia supposed to be a strong resource-based economy with huge exports to Asia? And now the Ausies can’t afford coffee any better than Americans? What is going on there? This can’t be good for S&P 500 earnings which have benefited from the global economy and weak dollar.
Tuesday’s Outlook
I actually had “MONTH-END MARK-UP” penciled onto my calender for Tuesday, so I feel stupid for putting my short positions on too early. However, I don’t think SPY, XLE, KOL, or POT are going to run away from me, so I will just have to put up with any mark-up action on Wednesday and Thursday. When June’s mark-up action ended, the market opened on huge gap down July 1st. It did rally back, but then rolled over and took out the March low. So, perhaps we will see another post-mark-up plunge, even if the jobs numbers don’t throw cold water on the rally.
Watch the comments as I will be posting updates during the day Wednesday.
July 30th, 2008 at 6:43 am
Good post and rather clear thinking.
July 30th, 2008 at 7:02 am
Asia and Europe up 1-2% after yesterday’s “rally” in New York. The decoupling story is dead, both in the economy and in stocks.
Matt, you are hitting the nail with the Global Crunch. It is vastly underestimated among the Western analysts/investors and media.
Here from Economic Times in India today:
“NEW DELHI : The auto industry is bracing for a really bumpy ride. The fresh round of interest hikes is likely to prompt a further cutback in vehicle loans and dealer finance. Worse, the credit squeeze may stall capacity expansion plans and the demand skid may lead to production cuts at automobile companies.”
July 30th, 2008 at 8:41 am
Thanks JT.
July 30th, 2008 at 8:45 am
Hi Larry,
The news that India’s auto industry is decelerating is pretty jarring.
I suppose that if another bear-market rally were beginning here traders might delude themselves like so: “Yes, the rest of the world is going into recession, but they are lagging the US economy which is just now beginning to rebound.”
Matt
July 30th, 2008 at 8:55 am
The futures were suspiciously flat over night, and that signals mark-up action to me.
The ADP employment report has now triggered a pre-market rally with an implausibly good headline number. But like they have done before, they took it all back in the small print:
“Though July’s figures showed a slight employment gain, the ADP Report’s recent three month average of negative 14,000 suggests that the weakened employment situation continues.”
The ADP release is here (click the July link):
http://www.adpemploymentreport.com/press_releases.aspx
But the market will not read the fine print and we will open up on a gap, which will likely prove to be an exhaustion gap.
July 30th, 2008 at 9:01 am
Any thoughts on the XLF this morning? Certainly they look very strong pre-market.
July 30th, 2008 at 9:07 am
Lots to think about here, Matt. I had heard the Starbucks news, but hadn’t thought about this in terms of Australia’s economy though. The India auto news is also important. Wasn’t India and China supposed to buy huge amount of cars, making the US oil demand destruction irrelevant? I had told people that it doesn’t make sense that Inidans and Chinese could afford gasoline when US consumers couldn’t. It is just a matter of time before the gas subsidies in Asia are reduced, crushing demand there as well.
I think energy will continue down, but I’d keep a tight leash on the SPY puts.
My latest thoughts: the rally lasts until the end of next week. The FEDs are once again making noise and creating new ways to today to help their banker buddies. The FED deperately wants a strong market next week, so that they don’t look weak on inflation when they leave the rates the same. If they are stupid enough to lower rates, they will lose credibility, the dollar will be crushed, oil will spike, and equities will go down - I don’t think lower equities is what the FED wants. Also, the SEC extended the naked-short temporary ruling until the end of next week. The hedge fund have probably loaded up on puts in the mean time, and they’ll drop the brokers on August 11. Oh, did I mention that August 11 is an options expiration week?
I think I will try to get 90+% in cash today, and leave it that way this week until after the FED speaks next week, unless their is an easy trade.
July 30th, 2008 at 9:11 am
I forgot to mention: gold (GLD) is down 2% premarket, which is extremely bullish for stocks. The dollar is up, and oil is down (slightly).
July 30th, 2008 at 9:17 am
Mortgage applications hit a new annual low. See this morning’s news release here.
July 30th, 2008 at 9:22 am
SPX futures are up 5-6 to 8, implying a test of the critical technical target area of 1269-71 (28 DEMA) at the open.
A reversal from 1269-70 would be expected in the bearish case to test and eventually fail support at 1247, setting up tests of 1200s-10s and a target of 1160s-70s.
A break above 1270 sets up a monthly-close test at 1280 and the recent high of 1291; however, 1270 is important in that it is above weekly-close resistance and sets up a test and potential close above 1280, which would support the bullies’ case and imply at least another 3-7% rally.
The 60m chart for the SPX is approaching overbought and the important resistance mentioned, including the 28 DEMA, so the trend still is slightly favoring the bears but only precariously at this pt.
There is an obscure, yet-to-be-confirmed technical pattern that implies the potential for a high at 1267-70 and reversal with a target in the ~1204-26 area.
I am personally agnostic about which way the SPX turns, especially ahead of the GDP, ISM mfg., and employment figures; however, 1247-70 is the critical ST support-resistance zone, with 1257 as weekly-close support/resistance and 1280 as resistance for Thursday’s close.
Watch the critical 1269-70 area for an intraday reversal and close below 1257 to suggest further lows. For the bullies, a breakout above 1270 increases the probability of a run into the 1300s.
More tomorrow.
July 30th, 2008 at 9:24 am
The media will not report on the crunch in India. China is more complex due to gov’t price controls creating energy shortages. Economic growth is weakening in both countries.
2. GS sticks to year-end target of 149 usd/oil. They still haven’t gotten out of their positions?
3. Baltic Dry Index down 0.55%. It’s now down 14 days in a row.
July 30th, 2008 at 9:49 am
So far, the tape is much weaker this morning. While that can change, I think the market may have peaked.
July 30th, 2008 at 9:53 am
spy looks like it is chasing oil now, potential oil break 120. watch out below
July 30th, 2008 at 10:05 am
Up 9000 jobs? Any credibility that ADP may have had is now officially gone.
Rich,
Thanks for the info.
July 30th, 2008 at 10:06 am
Matt,
http://finance.yahoo.com/advances
http://stockcharts.com/h-sc/ui?s=CPC&p=D&yr=0&mn=6&dy=0&id=p47125693043
http://stockcharts.com/h-sc/ui?s=VIX&p=D&yr=0&mn=6&dy=0&id=p47125693043
Complacency persists; very little fear here.
There are few ST bearish divergences emerging on the SPX charts (yet . . .).
Still, the 60m chart is now as overbought now as was the case at SPX 1291.
SPX 1250-60 is now ST support.
http://stockcharts.com/h-sc/ui?s=BKX&p=D&yr=0&mn=6&dy=0&id=p47125693043
BKX at the critical resistance area at 67-68.
July 30th, 2008 at 10:08 am
For whatever reason the market bounced yesterday, it did so at almost exactly it’s 618% Fibannaci retracement level. It was do or die, and it looks like no one died:)
Technical analysis Elliot Wave also calls for a run to around 1325, as Rich noted as well, before the next leg down.
July 30th, 2008 at 10:10 am
China is closing factories and reducing power output “to reduce pollution for the Olympics.” I wonder if part of the reason isn’t that demand for Chinese exports is being reduced? Similar to the effect of a strike at a GM truck plant.
Larry, interesting about GS. It does seem strange that they are keeping to their guns at this point. Year-end they may be right, but not sure why they are pushing it at this time unless they are long. Maybe GS will show a loss next quarter that they have been evading so far.
Dow up 125. Google: DOWN. The market needs QQQQ and Goog to keep the rally going. The VIX is also down 3+%. Combined with yesterday’s VIX plunge, a correction is due. My non-technical analysis: up today, down tomorrow to counter today. If Thursday and/or Friday aren’t 200pt down days, the rally will continue next week.
July 30th, 2008 at 10:33 am
Google has popped, flopped, and popped again. It could take the Q’s over $46. I can’t say I understand the move, but I am long the Q’s for a trade.
July 30th, 2008 at 10:39 am
Technically, the QQQQs are setting up a H&S pattern, with the break out at $46.00 +. Am also long the QQQQs, but should have bought the QLD instead.
July 30th, 2008 at 10:48 am
I bought some QID Monday and today, avg price just under 44
July 30th, 2008 at 10:48 am
GOOG my interpretaion: no one wants Goog at this point, but the invisible hand understands the importance of this stock for the rally.
July 30th, 2008 at 10:51 am
I see USO and xeg.to (Cdn energy eft) up…
July 30th, 2008 at 10:51 am
What’s the deal with those downside blips on SPY? (~126)
July 30th, 2008 at 10:55 am
ST bearish divergences are now appearing, albeit modest and in need of confirmation from intraday pullbacks.
Money flow and OBV confirm the bullies’ case at the moment.
Eli, a prospective bullish structure now implies 1305-10, a possible pullback to 1262-80, and then on to the 1370s-80s, rather than the earlier target of ~1320.
A close below SPX 1250-51 negates this prospect for the bullies and would then set up a decline to the 1160s-80s area, with a stop in the 1200s-20s along the way.
One more thing about the BKX, a possible ST bearish structure only suggests a projected low to the recent low at 46-47, which my implication supports a more bullish case overall for the market.
However, the larger BKX technical structure suggests quite clearly that the current really is so far corrective with a lower target of the 20s and eventually the 10s by late ‘09 to spring ‘10.
Crash, thanks.
That’s all for today.
July 30th, 2008 at 10:56 am
check out notable calls take on ELN. this trade sound enticing.
Elan (NYSE:ELN): After selling for the wrong reasons, now is the time to buy for the right ones- Leerink (ACTIONABLE!)
Leerink Swann out defending Elan (NYSE:ELN) saying they are making no changes to their valuation of ELN shares and view any weakness today as a buying opportunity.
The harsh sell off in the stock that could occur today will likely be fueled by overblown expectations for the Phase II data and the difficulty in presenting a cogent analysis of a complex trial in a complex disease in a 12-minute presentation.
MEDACorp consultant who was involved in the Phase II trial noted that data were reviewed over a two and a half hour period during an investigator’s meeting night before last, speaking to the complexity of the data and the relative inability to distill it into an “elevator pitch.”
To the firm, no new data emerged that causes us to revisit their thesis that bapineuzumab is effective, safe and worthy of advancing into large scale pivotal testing and could be a much-needed therapy for treating AD.
Lack of a clear dose response should not be overly surprising, especially in ApoE4 non-carriers, given that three of the four doses tested in the Phase II trial are being examined in the ongoing Phase III studies.
Although the safety profile may be understandably complex, the fact that the FDA has permitted a large Phase III trial suggest that the risk/benefit is favorable. Certain neurological anomalies may be acceptable in deference to mitigating quality of life-threatening dementia.
Lost on investors may be the fact that measures of efficacy reported from the Phase II trial that include ADAS-cog, NTB, CDR-sob, volumetric MRI and biomarkers such as phosphorylated tau are conducted by different medical professionals, e.g., psychiatrists, medical doctors, nurses, caregivers and radiologists thus enhancing the corroborative nature of the findings, they believe.
Notablecalls: Well, Leerink sure knows their stuff. I’m calling this one Actionable with ELN trading around $21 in pre mkt.
Please see below for further colour.
posted by notablecalls # 8:27 AM 0 comments
Elan (NYSE:ELN): Bounce?
Goldman Sachs is one of the few positive firms out on Elan (NYSE:ELN) this morning after the co presented Phase II Bapineuzumab data last night:
- Data clearly shows a statistically and clinically meaningful effect in APOE4 -ve patients, but with no clear dose-response due to low patient numbers. Data in APOE 4 +ve patients not as negative as previously assumed, but investors likely to stay cautious on this until proven otherwise.
As a result of the positive data, Elan will announce its manufacturing plans (a new plant) within the next two months; in our view, the capital commitment for a new plant, together with ongoing maintenance costs, as well as phase III costs, indicate the confidence in the likely outcome of the phase III programme. The magnitude of the cognitive benefits in small numbers of patients is hard to argue with, in firm’s view; the effects on function less so.
Further, the data in patients who completed the full dose schedule in the study, in both APOE4 +ve and -ve patients, were clinically meaningful, as well as statistically significant. One of the aspects of the data that they believe investors have overlooked is that these results are IN ADDITION to existing Alzhemier’s Disease therapies. In Goldman’s view, that makes the data, albeit with its limitations, more compelling.
Implications:
The stock may weaken acutely on concerns over dose response (genuine, in firm’s view) and on the deaths in the Bapineuzumab arm (irrelevant, in their view), however, as the investment thesis has not changed, their recommendation remains Conviction Buy.
Other firms:
- Piper Jaffray reits Sell and lowers their tgt to $15 from $25
- Canaccord reits Sell and lowers tgt to $21 from $24
- Cowen & Co notes that with lower conviction in Phase III success for bapineuzumab and at least two years to wait for confirmation, they have trimmed their estimated bapineuzumab value by $4-5B, or $10 per ELN share, reflecting a higher discount rate. Firm remains Neutral on ELN shares.
Notablecalls: Developing Alzheimer’s compounds has always been the graveyard shift. So, in that sense I’m somewhat surprised by the harsh 30% haircut in ELN’s stock price following weaker than expected data. Actually, there may be a silver lining - the APOE 4 +ve pats. That’s I think more than one would have normally expected from an Alzheimer’s compound.
Add this to ELN’s continued commitment for a new plant and you may have a nice bounce candidate here down 10 pts. I would not be surprised to see the stock retrace at least part of the 10pt haircut today.
posted by notablecalls # 7:51 AM 0 comments
July 30th, 2008 at 11:02 am
I just gave up on my Q trade with a nasty loss. I also ditched my XLE puts, rolled into calls and now have a nice profit on the trade. The XLE has broken above its downtrend channel, and it looks like there is a big rotation from XLF to XLE going on now.
July 30th, 2008 at 11:05 am
yes oil is back -g-
iShares CDN S&P/TSX Cappd Enrgy Indx Fnd(XEG:TSX, CA)
95.23CAD2.05(2.20%)
As of 30 Jul 2008 at 11:04 AM EDT.
July 30th, 2008 at 11:17 am
Rich,
Thanks for all the comments.
July 30th, 2008 at 11:18 am
Matt, what are the gov’t actions today?
1. Fed discount window extended.
2. FASB postpones acct changes for SIV to Nov 09.
3. Ban against naked shorts on 19 favorite banks extended.
What did I miss?
We can’t fight this animal.
July 30th, 2008 at 11:34 am
Oil is barely positive; even when it was up over 1%, the DOW stayed above 90. I agree with Larry: you are fighting the invisible hand. Very dangerous market for the next five days (either way).
July 30th, 2008 at 11:40 am
Paul, VIX is soon below 20. Alert me when the waters are really calm over there. 2 more weeks?
July 30th, 2008 at 11:50 am
Larry,
At these level, I fully expect an upward correction to the VIX tomorrow (accompanied by downward correction to the SPY).
With the VIX, two signs are if it moves quickly in one direction (13% down in two days…) or if it slowly drifts from its 20day mean (~24). I will dip long into the VIX today for an overnight trade, probably September, maybe August calls.
If it drifts below 20, then we will be in a stock rally (SP500 1300?) with momentum. In that case, I would go for deep ITM October calls and wait out the rally.
Paul
July 30th, 2008 at 11:52 am
I should say I MAY dip into the VIX. I placed an order but couldn’t get the entry I wanted, so I’m hoping it drops below 21 again.
July 30th, 2008 at 12:05 pm
Paul,
If big funds are in Google, they would bid underneath to support it today and tomorrow. That could explain the weird action this morning - they can bid underneath, but they can’t bid it up. However, Google really looks like it wants to fall out of your pennant pattern.
Matt
July 30th, 2008 at 12:10 pm
While the tape is still good, it has been weakening all day. Declining issues have been rising steadily.
July 30th, 2008 at 12:14 pm
IWM is falling towards its opening gap.
July 30th, 2008 at 12:15 pm
Q’s struggling to stay green.
July 30th, 2008 at 12:29 pm
The mark-up elves will try to support the market as it falls, however there is no guarantee that they will be able to do so. Usually they prevail, but on June 26th and 27th, they got a major beating. Back then, the market had strong downside momentum, and that is not the case now. However, we are very overbought short-term, so if there is too much volume the elves may be routed. Oil will probably make the difference.
July 30th, 2008 at 12:40 pm
SPY 126.3502: I see this five times on today’s chart. Is that a real trade?
July 30th, 2008 at 12:40 pm
sold my qid @ 44.20 for a small profit. may reenter a bit lower if the opportunity comes up
July 30th, 2008 at 12:52 pm
Guys,
It seems to me that there is no sector in the market providing leadership for any sustained rally. Its hard to believe that financials will do it, techs have run out of steam (AAPL EPS warning, RIMMs miss, GOOG), energy tends to push the other way as oil prices rise. Basic material or agriculture?
It is a market of stocks, not a stock market. So if people are not willing to buy the individual issues then it would be hard for the market to levitate, IMO.
July 30th, 2008 at 1:58 pm
there is a lot of support for SPY at 126.5. after oil closes, i’m thinking about going long for an end of day trade. any thoughts?
July 30th, 2008 at 2:12 pm
Tony G,
The tape is very weak, I’m not going to go long anything. A day like this usually goes out at the lows. Though it is a mark-up day, so the downside should be limited.
The short-term model that I use still shows the market as very overbought. Good luck however you play it.
Matt
July 30th, 2008 at 2:25 pm
SPY has held steady as USO has soared during the last 20 minutes. The market is definitely being propped up here.
July 30th, 2008 at 2:30 pm
The tape may be staging a turn-around here.
July 30th, 2008 at 2:34 pm
S&P 500 1250 or so coming after 1274-75, y’all.
July 30th, 2008 at 2:40 pm
Don’t look now, but oil (USO) went up 4%, and while the commodities are leading *finacials are up* and volatility is lower by a smidge.
July 30th, 2008 at 2:45 pm
SPY is making a bull-flag and I am long for a trade.
July 30th, 2008 at 2:48 pm
I went long the QLD for a trade. looks ripe.
July 30th, 2008 at 2:59 pm
Matt! Young’n, you’d best be gittin’ yur little ol’ self short the SPY!
We got one a them there cityslicker skyscraper ledge patterns.
The bears be fixin’ to growl directly! Them bears gonna be feastin’ on prime sirloin on the sidewalk.
Oooo-wee, I guar-OOON-tee!
July 30th, 2008 at 3:10 pm
I’m back to cash. I’m thinking that traders won’t want to be long in front of the unemployment-claims number tomorrow.
July 30th, 2008 at 3:12 pm
I hear you Grandpa Jones. My short-term model is still reading very overbought. But it’s a mark-up day, so I’m thinking the market won’t flop over before the close.
July 30th, 2008 at 3:14 pm
The tape is holding up but has lost its juice.
July 30th, 2008 at 3:27 pm
This thing just won’t quit. Are people really betting on the ADP number?
July 30th, 2008 at 3:34 pm
hmm, i’m passing on reentring qid today, after all, last day of month is tomorrow, lets see how we open…
July 30th, 2008 at 3:41 pm
after,
If you made a little money on the short side of a day like this, you did OK.
Matt
July 30th, 2008 at 3:46 pm
In an ascending-triangle pattern as we have on the SPY, QQQQ, and IWM charts, you want to look for heavier volume on the up days than the down days. And that is exactly what we have.
If the market sells-off on the unemployment number tomorrow, or the jobs report on Friday, watch the volume rather than the prices. Low volume means that the pattern has survived the hit.
Also, for the market to rally like this while overbought is a very strong sign. That’s what real rallies do; they get overbought and stay that way.
July 30th, 2008 at 3:49 pm
The market made a dramatic turn after oil closed. Nice call Tony G!
July 30th, 2008 at 3:51 pm
SPY is making another bull-flag. If it had time, it could run a lot higher, but the last few minutes of the session will probably be devoted to consolidating the big run-up in the last hour.
July 30th, 2008 at 3:58 pm
Crash,
On Monday night, you wrote:
“Very low volume today. Dangerous to get too bearish here.”
Beautiful call! Keep them coming!
Matt
July 30th, 2008 at 3:58 pm
Is this rally legit? Financials are not leading today (which is a good sign). Strong stocks like the ags are leading.
Thoughts? I’m wondering if this rally won’t run for a bit.
July 30th, 2008 at 4:13 pm
Hey Matt.
I wanted to re-post it but didn’t want to brag.
This current move up is 100% technical IMO. Especially when you see oil go up over $4 and the Dow strong. Looking for a move to 12,000 in the next 2-3 weeks.
Thanks.
Crash
July 30th, 2008 at 4:23 pm
Thanks Matt. I closed my position before the close. this rally may have legs but i don’t want to get in front of the jobless claims data or NFP.
July 30th, 2008 at 4:59 pm
This market will go down tomorrow, probably 50-200 points, just to shake things out. Beyond that, I think the rally will continue through next week, but I’m less sure of that. Either way, I’m playing it cautious until after the FED next week.
Meredith Whitney is on CNBC calling BS on the financials. She really makes a lot of sense. I still don’t know why anyone would buy Freddie or Fannie stock. They are still adding jumbo mortages - West Coast style.
Lisa: “Can Lehman survive this?”
Meredith: “I..uhh…um…I don’t know.” You can tell what she was really thinking…
July 30th, 2008 at 5:09 pm
Paul Kasriel [Northern Trust] posted this chart on 7-29-2008 re: SP 500 Operating Earnings
Kasriel states “Now, the nice thing about corporate profit data is that they do not get revised as do a lot of other data that go into the recession decision. With the S&P 500 profits data there is no debate as to whether the Commerce Department is using a correct measure of prices to deflate nominal data.”
http://www.marketoracle.co.uk/images/2008/sp-corporate-earnings-july08.gif
July 30th, 2008 at 5:38 pm
The market’s ability to rally in the face of surging oil prices was very impressive.
Still the McCellan Osc. is again as overextended as it gets so at least a modest pullback is highly probable the next day or two.
ttp://www.stockcharts.com/charts/indices/McSumNYSE.html
July 30th, 2008 at 9:52 pm
Matt -
How much of your missive was invalidated by today’s action?
July 30th, 2008 at 11:51 pm
Zen,
Yes, it is legit if you agree that bear-market rallies are legit.
Matt
July 30th, 2008 at 11:53 pm
Paul,
I’m sorry that I missed Whitney on CNBC today. You always get the straight story from her.
Matt
July 30th, 2008 at 11:54 pm
Brian,
Thanks for the earnings chart. However, don’t you know that you are supposed to ex out the earnings of the financials?
Matt
July 30th, 2008 at 11:55 pm
Crimson Ghost,
Yes, a pullback is in order and exactly what we want.
Matt
July 30th, 2008 at 11:55 pm
Hedgehog,
A good deal of my missive was invalidated. But don’t worry, I have a new missive!
Matt
July 31st, 2008 at 2:51 am
Hedgehog, are you in the Gold/Inflation camp or in the Bull in stocks camp?