We saw a slow draw down yesterday, some want to blame Buffet’s interview for the sell-off – and is he to blame for the last two weeks as well. I guess it is just human nature to point at something or someone to blame for the market selling off. On that note, is smart money calling a bottom? Wilbur Ross is looking at some toxic financial assets as a place to get in now and Black Rock stated on CNBC we may be looking back at some of these prices wishing we could buy more. I think this is more of a psychological effect, rather than a fundamental one. Last year Buffet bought into Goldman and General Electric – he sure didn’t make the right call and is licking his wounds. Is Ross or Black Rock correct? At some point they will be – the “FEAR” is contagious (as Buffet pointed out yesterday) – but is optimistic euphoria? It seemed that last year every week some talking head on CNBC was saying “The worst is behind us…” it started becoming the running joke. 10k in the INDU a low, 9k a low, 8k a low, 7k a low, now 6k a low?
No doubt (as Ross, Buffet, and Black Rock have pointed out) – there are many stocks and companies who have taken a beating, while the balance sheets don’t look that bad. Economic depression can take the good and bad stocks down – the trick is twofold – picking the right ones and of course timing. Black Rock said this morning – while these are lows and we may wish we could buy more at these prices – the real question is when and how far out is that light at the end of the tunnel? 2010, 2011, 2012?
Seeing the smart money stepping in a start acquiring assets – means either they believe these are the lows (or close to them) or they have just gotten tired of the sell-off and are drawing a line in the sand. Either way – let’s hope there is more to it and they are just not fooled by randomness.
____________________________________________
Citigroup Pandit Cheerleading
Pandit (CEO of Citi) is out cheerleading saying we are having the best quarter (SINCE their last massive right down quarter) – if it wasn’t so sad it would be funny. The bar is set very low. It is funny to get excited about a bank that is now 40% owned by the government and now cheerleading that we are at a bottom. Pandit (after receiving billions after billions from the government) said, “I am most encouraged with the strength of our business so far in 2009. In fact, we are profitable through the first two months of 2009….” How can you say you are profitable with the massive debt on your books – I guess we all have a different view of profitable. Freddie, Fannie, and AIG are all profitable – right? I really not on the bursting Pandit’s fantasy bubble – and he really needs to bring confidence back to the banking sector (I probably shouldn’t be so sarcastic) – I too want to see confidence – but making such silly statements is more cheerleading than really talking about the facts.Facts are – government owns 36% of common, stock is $1, they have almost $40 billion in losses in 2008, government is looking at further measures and bailout money to Citigroup. So the bar is set low. Is the worst behind Citi, possibly – but we may not know for some time. As Black Rock said – it is really being able to see the light at the end of the tunnel.
Sure Citi is trading $1 (it is actually cheaper to buy a share of Citi than pay the ATM transaction fee). It’s a cheap bet – with lots of uncertainty. Pandit’s cheerleading is welcome – for sure – it brings some faith (the stock is up in the pre-market) – but the future is still very uncertain.
____________________________________________
Dow Chem folds…
Dow Chemical (DOW) – who initially pulled the plug on the $15 billion buyout of rival Rohm & Haas (ROH) – has now agreed to complete the transaction (after facing a lawsuit).DOW is down 10% in the pre-market
ROH is up 5% in the pre-market
_____________________________________________
Wal-mart, Unions come marching?
The bill before Congress giving Unions more power has gained significant traction in the house among Democrats. There seems to lots of debate around this bill – which curtails workers rights in secret ballets and gives Union more oversight and power – over the workers. Citigroup analyst read this as a bad sign for stocks like Wal-mart and has cut Wal-mart from a “Buy” to a “Hold”. Stock is down slightly in the pre-market.
Wal-mart, Unions come marching?
Keep an eye on this bill – as it could create issues for many businesses.
_____________________________________________
Futures Pre-market
The futures are popping a little – Pandit’s cheerleading, Ross looking to buy toxic financial companies, who knows – the optimism has returned this morning (at least for now). The spreads are in – expect ARB traders to short futures to buy the cash at the opening which should give a good pop to the market at the opening.
_____________________________________________
Support / Resistance
Bottoming?
INDU 6500 / 7000 (We are above 6500 - now we are seeing some buying the futures pre-market. Is 6750 in the cards?)
NDX 1050 / 1100 (1100 was top line support for a while, now it would be nice to see a close above that mark. It is a big move which is a long shot for a daily rally – but is optimism remains strong we could see a good rally today.)
SPX 650 / 700 (We are right in the middle – a good jolt and close above 700 could bring more optimism to the market.)
RUT 350 / 400 (We closed just below it as the RUT got hit the hardest yesterday – not a good sign. However a good upside move could bring back the faith.)
=======================
Gold 900+ (We almost hit 900 and then rallied back to 950, then backed off to 900 again.)
Silver 12+ (12 looks like support – we came off a little and the early session is showing a pull back. Does 12 hold?)
Oil 35-40 / 50+ (Yesterday I wrote about oil – it is seeing a good move towards 50, does it continue and do we see big future hedging?)
______________________________________________
Conclusion
You can only remain depressed for so long – a collective euphoric outlook can drive this market higher. Ross and Black Rock are looking to start scooping shares at what they perceive as value plays. Pandit is out cheerleading “The worst is behind us.” – will we see a euphoric rally – we could. I think a good rally to 7000 or even 7500 is in the cards in the short-term. However, let’s not forget it is based on optimism for the most part. The lurking dollar bubble is something to remember. Also look at those rally days as opportunities to get your hedge on and lock in gains (or limit losses.)
Futures Pre-market
The futures are popping a little – Pandit’s cheerleading, Ross looking to buy toxic financial companies, who knows – the optimism has returned this morning (at least for now). The spreads are in – expect ARB traders to short futures to buy the cash at the opening which should give a good pop to the market at the opening.
_____________________________________________
Support / Resistance
Bottoming?
INDU 6500 / 7000 (We are above 6500 - now we are seeing some buying the futures pre-market. Is 6750 in the cards?)
NDX 1050 / 1100 (1100 was top line support for a while, now it would be nice to see a close above that mark. It is a big move which is a long shot for a daily rally – but is optimism remains strong we could see a good rally today.)
SPX 650 / 700 (We are right in the middle – a good jolt and close above 700 could bring more optimism to the market.)
RUT 350 / 400 (We closed just below it as the RUT got hit the hardest yesterday – not a good sign. However a good upside move could bring back the faith.)
=======================
Gold 900+ (We almost hit 900 and then rallied back to 950, then backed off to 900 again.)
Silver 12+ (12 looks like support – we came off a little and the early session is showing a pull back. Does 12 hold?)
Oil 35-40 / 50+ (Yesterday I wrote about oil – it is seeing a good move towards 50, does it continue and do we see big future hedging?)
______________________________________________
Conclusion
You can only remain depressed for so long – a collective euphoric outlook can drive this market higher. Ross and Black Rock are looking to start scooping shares at what they perceive as value plays. Pandit is out cheerleading “The worst is behind us.” – will we see a euphoric rally – we could. I think a good rally to 7000 or even 7500 is in the cards in the short-term. However, let’s not forget it is based on optimism for the most part. The lurking dollar bubble is something to remember. Also look at those rally days as opportunities to get your hedge on and lock in gains (or limit losses.)
No comments:
Post a Comment