Traders,
We I have to hand it to Bernanke – he has improved on his cheerleading skills and today is we should see a stellar finally. The market had another terrific up move pushing into those resistance barriers with strength, the RUT getting above the 400 marker and closing there has brought wider confidence in the broad market. Let’s see if it can hang in there. Remember we are also going into quarter end – so we could see some large deployment volumes enter the market at the end of the month – maybe giving it a little more boost.
We I have to hand it to Bernanke – he has improved on his cheerleading skills and today is we should see a stellar finally. The market had another terrific up move pushing into those resistance barriers with strength, the RUT getting above the 400 marker and closing there has brought wider confidence in the broad market. Let’s see if it can hang in there. Remember we are also going into quarter end – so we could see some large deployment volumes enter the market at the end of the month – maybe giving it a little more boost.
The AIG bonus is taking a life on its own – it is frankly silly. The government just gave them another 30 billion just a week or two ago and the government KNEW about the bonuses (if they claim they didn’t they are the fool – meaning they should know ALL the contractual obligations, risks, balance sheet, cost, etc – before handing over billions upon billions of our money.) Additionally – they SHOULD know that there is ANOTHER plan bonus for 2009. If they act surprise if and when that is paid out – they have no one to blame but themselves. Now Congress is talking about taxing them – how stupid can they really be. They OWN 80% of the company, are giving them billions of dollars, and many of these employees are not even in the U.S. – they would be taxing themselves and some of the large bonuses are to employees that don’t pay U.S. taxes. Congress is seriously a bunch of tards, it is almost embarrassing. These fools we trust with our tax dollars – and some of them don’t even PAY taxes (Geithner & Daschle) – great way to lead by example. Oh well – today Congress gets to pound on the AIG CEO (for no reason and will do nothing – other than a dog-n-pony show for the public), just like the Financial CEO pounding. And tomorrow they will give AIG more money and ask for the CEO’s help. This circus is getting rather stupid.__________________________________________
Mexico carries through with threat
Mexico will impose 10% to 45% tariffs on goods estimating to be excess of $2 billion dollars and will take effect tomorrow. Obama has entered his first trade war with his neighbor – at least Obama is carrying through with criticism of NAFTA during his campaign – focusing on a protectionist and isolationist stance. Europe and Asia have embraced the move by Mexico as it has traditionally been difficult to penetrate the Mexican market with US at its doorstep.
Obama is trying to defuse the situation, but Economic Minister of Mexico, Mateos can’t begin to negotiate with the U.S., since Obama has yet to appoint a Commerce Secretary. “We’re waiting to begin work,” Ruiz Mateos said. “Unfortunately, the U.S. Senate hasn’t designated our counterparts yet.”
Mateos summed it up, ““This is the antithesis of competitiveness!”
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Sun Micro (JAVA) rallies
The stock is up as the Wall Street Journal reports that IBM is in talks with Sun to buy out the company for at least $6.5 billion. These might be the times of seeing more mergers and takeovers. Initially it was only in the pharmaceutical business – but we might see more of the same in the tech sector as price competition and margins get squeezed.
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GE’s red headed step child
GE Capital is still looking to be on the ropes. A story in Bloomberg indicates they have larger risk exposure than initially thought and many believe that the parent company (GE) has no handle on what is happening at GE Capital. GE Capital’s operation include the world’s largest store-name credit card business and lending in Russia. When the Russian currency began to collapse – default rates skyrocketed, leaving GE Capital with large exposure. While GE Capital is estimating a $5 billion revenue stream for 2009, credit rating agencies disagree. S&P doesn’t expect ANY return and downgraded them from AAA to AA+. GE seriously needs to spin off GE Capital, but it is a double edge sword – as it is a serious source of funding (and access to government bailout money). Could GE go it alone and separate from GE Capital? Maybe not in this market – it’s the red headed step child.
GE did make a good run from 7 to 10 in the recent weeks as the market rallied, but I would not put too much faith in it until the GE Capital problems can be resolved.
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Futures Pre-market
We are seeing the futures pull off – expect the Arb traders to put pressure on the market at the opening as they unwind their spreads.
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Support / Resistance
Nice rally – getting deeper into those resistances levels.
INDU 7000 – 7500 (A visit to 7500 or back down to 7250 is in the cards today – the Bernanke factor?)
NDX 1150 – 1200 (Could we see 1200 – sure why not. Futures coming off at the opening – but watch the close.)
SPX 750 – 800 (It’s about the perception and the Bernanke factor today.)
RUT 400!!! (Do we close above it – giving confidence to the broader market?)
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Gold 900+ (Still bouncing off that upper support area after the big run up.)
Silver 12+
OIL 35-40 / 50+ (We are getting closer to 50!)
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Conclusion
We have seen a good rally, almost too good. A strong market would move on big volume and up .5 to 1.5% per day, not 5% in a day. Those kind of up jerk moves are more indicative of short covering and sellers (shorts) taking their foot off the accelerator. Just like in at Bull market you have single big down days, in a Bear market you have upside big moves. I don’t think we are out of the woods yet. True we may find a slowdown in the jobless claims and foreclosures (simply because they are a finite measurement) – but we may not SEE an increase of jobs or home purchases for some time. People are not going back to work right away.
The other issues that concern me on a broader area – is still the dollar issue and now this isolation protectionist stance with the first salvo been shot at Mexico. What I find surprising is how fast and strong they reacted. They see we are down and weak – and they are holding back nothing. Obama has yet to defuse a situation with our neighbor that could get uglier – he NEEDS to fill his cabinet to handle these problems NOW!
I would lock in gains and hedge positions – Bernanke can go either way and it really depends on how people read into it – it is perception and not fundamentals that will drive any volatility today.
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