Traders,
We saw a good short-term rally, unfortunately it gave up quite a bit in the last hour. Was it a rally of accumulation or liquidation (short-covering). I haven’t checked the short interest, but my guess would be that it has diminished – not a good sign that we’ll continue to get a rally out of this. However, let’s “hope” that it inspired some accumulators to start bottom picking.
We saw a good short-term rally, unfortunately it gave up quite a bit in the last hour. Was it a rally of accumulation or liquidation (short-covering). I haven’t checked the short interest, but my guess would be that it has diminished – not a good sign that we’ll continue to get a rally out of this. However, let’s “hope” that it inspired some accumulators to start bottom picking.
Yesterday, Sheila Bair (not the sharpest tool in the shed) – made another gaff, sorry I mean statement, “Without these assessments, the deposit insurance fund could become insolvent this year!” – not like we didn’t know that was coming. However, she has been on the talk circuit for a while – saying they have more than enough money and FDIC has a handle on it. Anyone that could do (or bothered to do) the math knew otherwise. Either she ignored the math, couldn’t do the math, or was “living on a prayer” – but she sure wasn’t half way there.http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aStwObH5Pyr8
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GE – a leper?
The CFO was on CNBC this morning – but it was mostly just talk. Michelle Caruso-Cabrera asked the single most important question – “Can you wall-off GE Capital?” – which is the gang-green of GE. The CFO certainly ducked that one and didn’t want to even suggest that as a possibility. However, Michelle is correct – GE’s biggest problem is GE. They are just massive and in every vertical market there is – from manufacturing, entertainment, mortgages, etc. Now if they could 
just cut out the death that is sucking the life out the company - ah there is the rub. The GE Capital side, even with all its problems, is the ONLY side of the business that has quick access and deeper access to credit – which could be used to off-set slowdowns in their other vertical markets. GE Capital is the supply line for money into the company – even thought the balance sheets are seriously weak. Well – that is what stands to reason as I listen to the CFO talk more about transparency and getting through this then actually coming up with solutions.
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GE – a leper?
The CFO was on CNBC this morning – but it was mostly just talk. Michelle Caruso-Cabrera asked the single most important question – “Can you wall-off GE Capital?” – which is the gang-green of GE. The CFO certainly ducked that one and didn’t want to even suggest that as a possibility. However, Michelle is correct – GE’s biggest problem is GE. They are just massive and in every vertical market there is – from manufacturing, entertainment, mortgages, etc. Now if they could just cut out the death that is sucking the life out the company - ah there is the rub. The GE Capital side, even with all its problems, is the ONLY side of the business that has quick access and deeper access to credit – which could be used to off-set slowdowns in their other vertical markets. GE Capital is the supply line for money into the company – even thought the balance sheets are seriously weak. Well – that is what stands to reason as I listen to the CFO talk more about transparency and getting through this then actually coming up with solutions.It is not revised accounting and balance sheet time, it is revise business model time. What loses money, what makes money, and what are the liabilities – let’s cut out the dead wood. I remember Jack Welsh talking about “Clock Radios” (I think it was) – he told the division that if they can’t make a better, cheaper, product then Sony – then WHY are they in business. They had 6 months to figure it out or he was cutting it out. Someone needs to get out the tools for slice-n-dice time.
Now they are in jeopardy of losing the AAA rating – which would make getting money harder and also more expensive. The CFO said, “I think it’s overdone, I don’t see a need to put additional capital into GE Capital.” – either he knows something we don’t, he doesn’t know anything, or he too is living on a prayer. Let’s hope he isn’t half way there.
For now – GE is a complex juggernaut that is unable to manage itself out of a wet paper bag and the market will force GE’s hand – since they don’t seem proactive, but reactive. Letting the chips fall.
It is seeing a little pressure in the pre-market and the news is also putting some negative pressure on the futures pre-market.
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Bank of England cuts!
The Bank of England has taken a page from Bernanke’s playbook. They have cut interest rates in half to .5% and will purchase (really just print money) to the tune of 75 billion pounds to fight the recession. I hope every country thinks Bernanke’s cutting rates to zero and buying your own paper (creating monetary inflation – M3) as a way to fight recession is the right answer. It no doubt is the knee-jerk answer and may even show short-term signs of slowing it down, but what does it mean for the long-term (1 year, 2 year, 3 year) – inflation – how much is the only question.
Expect some currency volatility today.
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Pfizer sell puts?
According to Bloomberg this morning, Goldman recommends selling the 11 level put options based on the stocks ability to rally. Maybe Goldman is buying the 11 level puts and stock. They can be bullish too – and get their hedge on. Maybe trying to drive down implied volatility. I sure find it odd to recommend selling a Sept. 11 put for $1 as a strategy for a compelling buy recommendation? Very limited upside – no theta – and taking on downside risk? Seriously – there is more to that game then the headline suggests._________________________________________________
Futures Pre-Market
The market sold off into the close yesterday, the futures are following – with GE news, GM on shaky grounds, and waiting for a lower Jobless number tomorrow. The spread is in – thus ARB traders will be buying the futures and selling the cash at the opening – putting negative pressure on the market at the opening.
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Support / Resistance
Found supports – do we revisit?
INDU 6750 / 7000 (We got a good rally yesterday – even though we sold off at the close. Do we visit 6750 today and is that support?)
NDX 1100! (We are above 1100 – futures are showing a visit there this morning – do we hold and close above it?)
SPX 700! (Again another decent move and close above the 700 line. However, how do we close – futures looking lower in the pre-market.)
RUT 350! (We need to see a good 400 close to help the narrower indices.)
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Gold 900! (The BOE cut is interesting – I don’t know how it will play out – but a flight to gold could be in the cards sooner rather than later. Is 900 support?)
Silver 12+ (We did get a small bump and are above 13 again this morning. Is that leading or following Gold?)
OIL 35-40 / 50+ (We above that 35-40 accumulation support range – giving a little back this morning and down to 43.75. Close above 40?)
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Conclusion
We needed a pause and then rally – the market has been in liquidation mode and no money is coming in. Leaving buy side paper thin. Yesterday seemed more of a short-cover and then into a re-short at the close. The futures are giving up some ground in the AM – that means we will see a lower opening. It would be nice to get a little follow through – but I think yesterday showed clearly that you need to be nimble and the market will give you only a day if not hours to get your hedge on, lock in profits and limit losses.
Futures Pre-Market
The market sold off into the close yesterday, the futures are following – with GE news, GM on shaky grounds, and waiting for a lower Jobless number tomorrow. The spread is in – thus ARB traders will be buying the futures and selling the cash at the opening – putting negative pressure on the market at the opening.
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Support / Resistance
Found supports – do we revisit?
INDU 6750 / 7000 (We got a good rally yesterday – even though we sold off at the close. Do we visit 6750 today and is that support?)
NDX 1100! (We are above 1100 – futures are showing a visit there this morning – do we hold and close above it?)
SPX 700! (Again another decent move and close above the 700 line. However, how do we close – futures looking lower in the pre-market.)
RUT 350! (We need to see a good 400 close to help the narrower indices.)
=============================
Gold 900! (The BOE cut is interesting – I don’t know how it will play out – but a flight to gold could be in the cards sooner rather than later. Is 900 support?)
Silver 12+ (We did get a small bump and are above 13 again this morning. Is that leading or following Gold?)
OIL 35-40 / 50+ (We above that 35-40 accumulation support range – giving a little back this morning and down to 43.75. Close above 40?)
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Conclusion
We needed a pause and then rally – the market has been in liquidation mode and no money is coming in. Leaving buy side paper thin. Yesterday seemed more of a short-cover and then into a re-short at the close. The futures are giving up some ground in the AM – that means we will see a lower opening. It would be nice to get a little follow through – but I think yesterday showed clearly that you need to be nimble and the market will give you only a day if not hours to get your hedge on, lock in profits and limit losses.
Volatility is still the big game in town as uncertainty if all these plans and money are making any headway. Even GE’s CFO seems to be more about sitting on his hands in a wait and see approach.
Jobless numbers tomorrow will probably be the big driver in delta. Expect that.
Note: I will be out of town tomorrow – so no Market Preview tomorrow.
Jack Jumps Over...
illustration Elizabeth Williams Bushey www.inklesstales.com
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