Traders,
We saw a good pull off from the resistance levels yesterday – but not a serious pull down like I would of thought. It seems there is still some push-pull between the buyers and seller – the buyers not wanting to give up any gains. The Tech sector did get hit pretty good – with the ORCL news in the pre-market sending the sector lower. We have moved down into uncertainty and could retest the resistance levels again very quickly today, head lower and test supports, or continue to drift in the range. This uncertainty should keep you sidelined on taking any HARD delta positions into the weekend – it’s as if the market is waiting for something to happen before reacting.
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Citi upgrades Lehman?
To start your weekend off with a good laugh, this morning a very troubled Citigroup “upgrades” Lehman another VERY seriously troubled company to “Buy”. It’s like one loser patting the other loser on the back! Wait until next week when Lehman “upgrades” Citigroup to “Buy”.
We saw a good pull off from the resistance levels yesterday – but not a serious pull down like I would of thought. It seems there is still some push-pull between the buyers and seller – the buyers not wanting to give up any gains. The Tech sector did get hit pretty good – with the ORCL news in the pre-market sending the sector lower. We have moved down into uncertainty and could retest the resistance levels again very quickly today, head lower and test supports, or continue to drift in the range. This uncertainty should keep you sidelined on taking any HARD delta positions into the weekend – it’s as if the market is waiting for something to happen before reacting.
______________________________________________
Citi upgrades Lehman?
To start your weekend off with a good laugh, this morning a very troubled Citigroup “upgrades” Lehman another VERY seriously troubled company to “Buy”. It’s like one loser patting the other loser on the back! Wait until next week when Lehman “upgrades” Citigroup to “Buy”.
It’s like the two CEO’s were having their two-martini lunch at the local pub talking about how troubled their credit lines are and how desperate they are for cash. They are both afraid of being the next Bear Stearns……then one of them, in a drunken stupor, says…… “Hey, what if we UPGRADE each other to BUY?” …….. “Brilliant” – says the other CEO.
They give each other a hug – “But wait” says the other…. “What about getting MORE needed money to stay liquid?”…… “Well, we can use the UPGRADE to convince our Middle East investors that things are not so bad. Also – our good buddy Ben will continue to lower the standards at the Discount Window, and if all that doesn’t work – we can always get him to bail us out or negotiate a deal! – but for NOW – lets “Upgrade” each other!”…… they exit the bar…..the Citi CEO makes one last statement “Make SURE you’ve got your Golden Parachute strapped on tight!”
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Consumer Spending increases at slower pace
Consumer Spending (as measured by the government) rose .1%, following a .4% gain in January. While some analyst use this to measure a recession (still saying we are NOT in a recession –based on consumer spending) – well we are heading that way. Many forget that consumers are what drives more than 2/3rds of the economy. Of course the inflation measure for last month saw little or no inflation (yeah – right), combined with this slowing number – gives the Fed the “data” needed to justify to take interest rates to 1% and lower. Several economist (including Goldman) expect interest rates lowered to 1 – 1.75%.
It’s important to note that one of the Fed Governors (Philly) voted AGAINST the rate cut – indicating that keeping inflation in check should be the priority. He would like to point to the consumer spending numbers (slowing) as a clear indication of inflationary impact – however the government’s CPI (inflation measure) tells them a different story – and that’s inflation is in check.
It’s interesting that ECB is keeping rates up fighting inflation and the US FED is cutting rates trying to spur spending (and says inflation is in check). Of course Bernanke doesn’t drive, doesn’t eat, and doesn’t buy any goods – so inflation WOULD seem in check.
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J.C. Penney lowers Quarterly Sales and Earnings Forecast
Well – JC Penny is not the retail bell-weather – it is a clear sign the consumer spending is slowing and they’re margins are also getting squeeze by fuel costs and declining dollar. Expect the JC Penny news to filter into the retail sector – creating downside pressure.
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Futures Pre-open
Futures are front running the cash this morning by 4-6 points above Fair Value. Expect Arb traders to short futures into the opening and buy the cash basket – which will create a pop in the list equity markets at the opening. However – after that it is anyone’s game.
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Support / Resistance
We spent a couple of days pushing against the ceiling trying to get through – but to NO avail. The market has pulled off the resistances and started to pull off. We are seeing some upside from the futures in the pre-open – but today will be a very uncertain day – we COULD see volatility or just see the market drift around – since we are NOT at a Support or Resistance. I believe that no one wants to take a big position either way going into the weekend.
INDU 12250 / 12500 (we are down near the short-term support – note 12250 is NOT a place to get long, but rather just flatten short delta positions. I don’t know how well 12250 would hold on large volume. We could just drift today…..)
NDX 1750 / 1800 (another middle of the range situation which could go either way – I think it will be dictated by institutional net delta positions and the need to go home flat. If they are coming in short – we could see buying, if they come in long - we could see selling. We are in the middle range and the smart paper will go home flat.)
SPX 1300 / 1350 (again in the middle of the range. Testing 1350 or 1300 is in the cards – but probably will not see serious volume until we get to one of those points to start TESTING the support or resistance.)
RUT 650 / 700 (We are just off the resistance levels and are seeing some strength in the futures in the pre-market. We could test 700 – but it will be how we close that will dictate going forward.)
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Conclusion
The Citigroup upgrade has me laughing uncontrollably this morning….I almost cannot type. It reminds me of Cramer (mad money) saying “Bear Stearns is strong and safe, don’t get out of Bear Stearns!” – only to have it drop to $2 a couple of days later. But then again Cramer’s only value is entertainment and as about as real as the WWF!
The consumer spending has the “Talking Heads” start the whole “are we in a recession” talk again – boring and who cares! However, it is interesting that the Philly Fed Governor is marching step with the ECB view of inflationary concern. I think the Philly Fed Governor just filled up his truck and went shopping with his wife and said “Hey, things ARE more expensive – I have been locked in my Theoretical Vacuum too long!”. If the government data continues down this path – it will give Bernanke the data he needs to justify continuing rate cuts – 1 – 1.75%, and I just heard this morning an economist on Bloomberg stating he could take it to 0! One thing is for sure Bernanke is running out of room – he has lent $200 billion, made special discount window rules, bailout Bear Stearns, and cutting rates faster than a chainsaw. At 0% where does he go from there.
I have a bad feeling that both the Capital Gains tax will be revoked (raised back to 30%) and income tax will break 40% - expect state taxes to go up. I also don’t think that even McCain (REP.) could avoid not raising taxes – if Bernanke keeps giving away money. Of course Bernanke could just print MORE (building up his biceps) and send the dollar lower. Either way – it does NOT paint a rosy picture.
______________________________________________
Consumer Spending increases at slower pace
Consumer Spending (as measured by the government) rose .1%, following a .4% gain in January. While some analyst use this to measure a recession (still saying we are NOT in a recession –based on consumer spending) – well we are heading that way. Many forget that consumers are what drives more than 2/3rds of the economy. Of course the inflation measure for last month saw little or no inflation (yeah – right), combined with this slowing number – gives the Fed the “data” needed to justify to take interest rates to 1% and lower. Several economist (including Goldman) expect interest rates lowered to 1 – 1.75%.It’s important to note that one of the Fed Governors (Philly) voted AGAINST the rate cut – indicating that keeping inflation in check should be the priority. He would like to point to the consumer spending numbers (slowing) as a clear indication of inflationary impact – however the government’s CPI (inflation measure) tells them a different story – and that’s inflation is in check.
It’s interesting that ECB is keeping rates up fighting inflation and the US FED is cutting rates trying to spur spending (and says inflation is in check). Of course Bernanke doesn’t drive, doesn’t eat, and doesn’t buy any goods – so inflation WOULD seem in check.
_______________________________________________
J.C. Penney lowers Quarterly Sales and Earnings Forecast
Well – JC Penny is not the retail bell-weather – it is a clear sign the consumer spending is slowing and they’re margins are also getting squeeze by fuel costs and declining dollar. Expect the JC Penny news to filter into the retail sector – creating downside pressure.
_______________________________________________
Futures Pre-open
Futures are front running the cash this morning by 4-6 points above Fair Value. Expect Arb traders to short futures into the opening and buy the cash basket – which will create a pop in the list equity markets at the opening. However – after that it is anyone’s game.
______________________________________________
Support / Resistance
We spent a couple of days pushing against the ceiling trying to get through – but to NO avail. The market has pulled off the resistances and started to pull off. We are seeing some upside from the futures in the pre-open – but today will be a very uncertain day – we COULD see volatility or just see the market drift around – since we are NOT at a Support or Resistance. I believe that no one wants to take a big position either way going into the weekend.
INDU 12250 / 12500 (we are down near the short-term support – note 12250 is NOT a place to get long, but rather just flatten short delta positions. I don’t know how well 12250 would hold on large volume. We could just drift today…..)
NDX 1750 / 1800 (another middle of the range situation which could go either way – I think it will be dictated by institutional net delta positions and the need to go home flat. If they are coming in short – we could see buying, if they come in long - we could see selling. We are in the middle range and the smart paper will go home flat.)
SPX 1300 / 1350 (again in the middle of the range. Testing 1350 or 1300 is in the cards – but probably will not see serious volume until we get to one of those points to start TESTING the support or resistance.)
RUT 650 / 700 (We are just off the resistance levels and are seeing some strength in the futures in the pre-market. We could test 700 – but it will be how we close that will dictate going forward.)
________________________________________________
Conclusion
The Citigroup upgrade has me laughing uncontrollably this morning….I almost cannot type. It reminds me of Cramer (mad money) saying “Bear Stearns is strong and safe, don’t get out of Bear Stearns!” – only to have it drop to $2 a couple of days later. But then again Cramer’s only value is entertainment and as about as real as the WWF!
The consumer spending has the “Talking Heads” start the whole “are we in a recession” talk again – boring and who cares! However, it is interesting that the Philly Fed Governor is marching step with the ECB view of inflationary concern. I think the Philly Fed Governor just filled up his truck and went shopping with his wife and said “Hey, things ARE more expensive – I have been locked in my Theoretical Vacuum too long!”. If the government data continues down this path – it will give Bernanke the data he needs to justify continuing rate cuts – 1 – 1.75%, and I just heard this morning an economist on Bloomberg stating he could take it to 0! One thing is for sure Bernanke is running out of room – he has lent $200 billion, made special discount window rules, bailout Bear Stearns, and cutting rates faster than a chainsaw. At 0% where does he go from there.
I have a bad feeling that both the Capital Gains tax will be revoked (raised back to 30%) and income tax will break 40% - expect state taxes to go up. I also don’t think that even McCain (REP.) could avoid not raising taxes – if Bernanke keeps giving away money. Of course Bernanke could just print MORE (building up his biceps) and send the dollar lower. Either way – it does NOT paint a rosy picture.
Please welcome the “new NEW DEAL!” coming to a country near you. Did I mention our new Nationalizing the healthcare and homes? We could be living in a country where section 8 housing becomes the standard and we all wait in lines for medical treatment.
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