By Ray on October 30, 2008
The market opened up +200 points today because Asia was up and, I guess, people like the confirmation that we are in a recession? We do not get it, but apparently buying stocks is a good thing when the economy shrank by .3% and consumer confidence is at 38.
While we think the market was oversold at 8100, we think the market is now way over bought. There is no reason to buy stocks today, the data stinks to high heaven. Although, this is the first hour of trading, but we do expect rationale people to come into the market soon and say, are you kidding me?
Based on the data the market should be much lower than it is. We see the technical’s kicking in to support the market, but fundamentals typically trump the technical’s. We speculate a loss by the close of trading today, but hell, if you like negative growth then go ahead and buy…
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By Ray on October 29, 2008
Regardless of what happens next week the one thing we know that is going to be a fact is that there is no tax cut coming, for anyone. All those campaign promises are just the stuff to get the person in office and once they realize that Congress has to approve it and they have to pay for it somehow.
Both candidates say that there will be tax cuts, but it just is not possible. If either of them get what they want then we are, long-term, in big trouble. We have too much debt, as the financial meltdown has shown us, and there is no one to bail out the government if it fails, well no one we want to bail us out, huh, hum China…
No matter who wins the election there is no way we can keep taxes where they are. They will have to go up in order to boost revenue in the short-term. We do not want to see it happen, but there is simply no other way out of this huge deficit we have. Neither party can deliver the tax cuts or their talking point programs there simply is no money to fund them with.
When they figure this out then they will look to us, again, to pay for their pet projects and staggering debt. Taxes go up and down, but now they will have to trend higher. Sorry, and keep your political comments to yourself please as we believe both candidates are very, very flawed.
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By Ray on October 29, 2008
As expected the markets opened to the downside and has been volatile today. Although the volatility is more reminiscent of years past rather than the 4% swings we have seen in the previous weeks.
With only a 200 or so point swing it reminds us of the good old days before the FMOC revealed their interest rate decision. This is good news and even better news is the fact that the Dow is holding above 9,000. While the decision is still 45 minutes away we do suspect that the Fed will cut only by .50%.
Anymore would signal that the Fed is panicking and any less would send the markets plummeting. We believe only a .25% rate cut is enough, but the Fed has gone from making monetary decisions to now accommodating the equity markets. Even upon the news of the .50% cut we suspect that profit taking will ensue as the markets tend to buy on the rumor and sell on the news.
The pundits will be out saying that they should have cut more, but that is an opinion based on greed rather than necessity. Banks carry the US government backed guarantees now, they have plenty of funding and the last thing the Fed wants to do is take all of its recession fighting power away with one single huge cut, of the 1 – 1.25% some nut jobs say they should do.
So, as far as the markets, no matter what the decision it will more than likely lead to a selloff today. We could be wrong, but with the huge run up from yesterday before the news it is a pretty good bet that negativity will take over.
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By Ray on October 28, 2008
Today Wall Street saw its second best point gain in history. The positive news carried over into Asia with their markets up pretty substantially for the second day in a row. Is this the end of the bear market? Not by a long shot.
While we were happy to see the almost an 11% gain in equities we were not pleased with how it happened. Just like on 10/13/08 we saw significant gains in equities, but the volume was so weak. The market rallied for a few specific reasons.
1. Mutual funds making year end trades, a very big deal.
2. Traders foresee an interest rate cut, which they will get, but they are expecting a .75 – 1% cut, some see a 1.25% cut. That speculation is being priced into equities today, it is clearly buy on the rumor sell on the news. We will see a .50 to maybe a .75% rate cut with the former more likely.
3. Short covering. When the market was up 600+ points with 15 minutes left to go the shorts started covering their positions. This creates liquidity and up tick volume – shorts don’t destroy markets crappy management does.
4. A typical bear market rally. During periods excessive downturns in the market we not only see wild volatility, but also dramatic rallies and selloffs. This was one of those rallies.
However, we did cross a couple of important bench marks today. The market crashed through the 8,500 and 9,000 mark. These levels are technically important, but they are also physiologically important as well. The important day will be tomorrow and whether the markets can hold these levels.
We expect to see some profit taking in the morning and wild swings throughout the day, yeah, we know really going out on a limb there. We fully expect to see a selloff tomorrow afternoon, but with the Fed meeting it could be another very good day. If they deliver a .50% cut then the market will selloff. If it is a .75% the market will probably stay flat to up.
There will not be any cut greater than .75% and it is entirely likely that we will only see a .25% cut at the end of the day which will send the markets into a free fall. This is all speculation at this point as futures are thinly traded at night and there are so many variables in the overnight markets.
We may have indeed hit the bottom, but the next couple of days will confirm that.
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By Ray on October 28, 2008
It looked as though the market was going to have yet another day of a downward spiral, but our prediction of a rally came to fruition after all. Yes, we were thinking the rally would not hold unless we had significant buying power enter the market, but the buying did come in after all.
The Dow broke through the 8,500 mark and it needs to close above this mark. It is physiologically important, but also technically important. While the long awaited rally is here we still have an hour and a half before the closing and anything can happen.
This would be an opportunity to sell some loosing positions, but wait before you start to buy randomly. This rally is just a short reprieve from further declines and may not even hold through the close of the day.
We do expect to see a nice close today, for a change.
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This is What We Were looking For
By Ray on October 28, 2008
It looked as though the market was going to have yet another day of a downward spiral, but our prediction of a rally came to fruition after all. Yes, we were thinking the rally would not hold unless we had significant buying power enter the market, but the buying did come in after all.
The Dow broke through the 8,500 mark and it needs to close above this mark. It is physiologically important, but also technically important. While the long awaited rally is here we still have an hour and a half before the closing and anything can happen.
This would be an opportunity to sell some loosing positions, but wait before you start to buy randomly. This rally is just a short reprieve from further declines and may not even hold through the close of the day.
We do expect to see a nice close today, for a change.
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