MP 4/10/08

Traders,

Yesterday saw a continue pull of those resistances but it’s a slow drag to the down-side we didn’t break any of those short-term supports (not a place to get long – just flat). The RUT did break through 700 (-1.9%) showing the money is NOT flowing into the broader market. And it looks like we may see a continuation today. Oil keeps moving higher – but at this point no one seems to care – it’s just accepted that it will. The dollar continues to slide. Commodities continue to trend higher.

I don’t have time this morning to go into details about the housing market – and my little story (court meeting) that happened yesterday – but when I get some time – I WILL fill you in. All I will say for now – is that the house we are renting has foreclosed, owner is AWOL, and even though I come CASH-IN-HAND to buy the home or mortgage – the mortgage companies and the court system are so ingrained with going through the “motions” that they just don’t know what to do.

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Wal-mart one-stop-shop!

March sales came in LESS than expected, but Wal-Mart keeps “rolling-back” the prices and continues to drive sales. No doubt that the dollar sliding and oil prices are hurting them – but they have (unlike most retailers) diversified their risk by expanding into banking, groceries, and pharmaceuticals. It will be the one-stop-shop to get all your needs – and that maybe just what we need.
However, their forecast for a 2% growth in March came in WAY below forecast (and also analyst expectations) – growth was only .7% and if they had not expanded into groceries and medicine – well it probably would have been flat to negative. This trend clearly shows that consumers are tightening up their purchasing decisions and it’s only the staple goods (food, medicine, and the occasional flat-screen monitor – if their credit card has room).
Wal-mart continues to slash prices (by as much as 30%) to their retail merchandise – reducing margins, however it was their food sales that made up 41% of their sales. The margins in food is slim and food costs are also increasing.

Wal-mart could be an inflation fighting stock – a place that survives the economic slow-down – since it IS the one-stop-shop. But if food and fuel prices continue to climb it will slow down consumer spending and on the other side the sliding dollar is going to pinch those margins.
Wal-mart made a good run (stock price) however – it may be giving back a little as the economic slowdown doesn’t seem to be getting any better.

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Yahoo, AOL, MSFT, and Google – Rupert Murdock to the rescue?


Ok this is turning into a mess – now we have Rupert Murdock in the mix – teaming with Yahoo and then with MSFT. It looks like as the day’s move forward the deal becomes more and more complex. Even Google is involved with their ad system and now AOL in talks with Yahoo.

All I know at this juncture is that even those involved really don’t know anything either. Expect volatility with Yahoo in the center of the mix. Regardless – the stories are fun to read – but do NOT get involved in this until the dust settles.

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ECB leaves rates unchanged

The ECB continues to worry about inflation and keeping the Euro strong. While in this nation – Bernanke is knocking off interest rate points faster than Harry Callahan with his Magnum – thus sending inflation higher and the dollar lower. Printing money faster than a pole-cat in a hen house doesn’t help either. The news has put more unwanted stress on the dollar as foreign currencies continue to gain ground. 2:1 is in the cards for the Euro if this continues – so don’t be surprised!





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Futures Pre-open

The futures are off in the pre-market – the ECB not lower rates has not boosted the futures (as expected) and the Wal-mart news – while forecasts may look hopeful the consumers are not. They are front running the cash slightly – so expect some sell pressure in the basket before the opening.
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Support /Resistance

We continue to fall away from resistance.

INDU (12500) (We are at that short-term support – and as I mentioned not a place to get long. I suspect we continue back down towards 12250 – but I would only get flat at that level – longs should be gamma soft delta down there.)

NDX 1800 / 1850 (1800 is an area to flatten out shorts – however don’t get long or short hard deltas at this area. There are some overweight’s in this index that can send this sector up or down hard. Use soft deltas and gamma to get the curvature you need.)

SPX (1350) (This is a pivot area – if we break below we will drop if we bounce we can rally. It’s a place to be VERY nimble – flat hard deltas and get ready to move quickly. 1325 is a more likely scenario.)

RUT 680 / 720 (We are at 700 which is also a pivot point – I think 680 is the more likely scenario. Again – flatten your short deltas and do NOT take HARD DELTAS – unless fully hedged.)
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Conclusion

The housing market (from going through the foreclosure process as a renter) is showing SERIOUS signs of a bigger failure. My experience at the court house showed a even bleaker picture than I had originally thought. You would be completely shocked of what the scene was like – and when I have the time I will write it up in detail. No worries on our end – we will probably stay at our current location and make a bid at the auction in the coming months (2 months away) – however as renters we have the pick of the litter. The house I am in – well unofficial estimates have it worth less than HALF the paper that is on it. I am having a property appraiser review it – so I have ample knowledge before I go and bid for it.


The Wal-mart news I found rather concerning – not for Wal-mart – but rather the economic picture going forward. The consumers are certainly tapped out – they are moving towards last resort – that is Credit Cards and with the recent news of Amex and Capital One DOUBLING their reserve pools as defaults continue to ramp – well that is a clear picture that this goes WAY BEYOND the sub-prime problem.

Hedge those positions – meet with your Financial Advisor and make sure he is hedged against inflation and dollar risk. Also – remember Diversification is NOT RISK MANAGEMENT!!!! Diversification is an investment strategy – that is all. Make sure your Financial Advisor understands that VERY important difference between hedging and diversification.

Good luck – and stay vigilant.