Which Way Wednesday?

Big day today!

All we have to do is hold half of yesterday's gains and we're in great shape so I'm not too worried but there are a few things we should be worried about so let's get those out of the way.

No one could make heads or tails out of the Fed minutes and the premise under which they lowered rates, the loss of 4,000 jobs, was undermined by the +90,000 job adjustment that was made to that figure this month.  If the Fed is going to conduct policy based on numbers that have a margin of error of 2,500% it's no wonder that foreigners bailed on the dollar yesterday…

Aside from the total mismanagement of our nation's future by "Wall Street's Bitches," the WSJ has finally picked up on my premise that banks are still sitting on hundreds of Billions of dollars of LBO commitments that may turn bad on them.  These were commitments that were made when money was flowing and many of these deals (which boosted the market on "Merger Mondays" pretty much all spring and summer) are undoable in the current rate environment. 

Another warning sign for us to ignore is growing weakness in the commercial rental sector (remember our shorts on VNO and BXP) as strip-mall vacancies hit a 5-year high, an indication of weak consumer spending (real spending, not the BS the government measures where they count gas as consumer spending but NOT as and expense in the CPI) and failing small businesses (see the weekend article on "ghost businesses").  Vacancies at strip malls have hit 7.4%, that means the average strip-mall has an open store – is that the sign of a healthy economy?

In states such as Florida and California, where housing markets are among the weakest in the country, retail fundamentals have markedly softened in some places. In Sacramento, Calif., the strip-mall vacancy rate has jumped to 6.3% in the third quarter from 4.5% in the year-earlier period. Quarterly rent growth in the last nine months was an average 0.3%, compared with 2006's average.  Gee, vacancies up 40% in 12 months – party on Garth!

In Florida, sales-tax collections have slipped, signaling falling spending. August sales-tax collections were down 2.7% from a year earlier, while July's were off 6.1%, according to the Florida Department of Revenue.  Some retailers have tapped the brakes on expansion plans, according to several real-estate executives. Mall anchor tenants such as home-improvement retailers LOW. and HD have seen falling same-store sales that affect the smaller shops adjacent to them as traffic decreases. In Boca Raton, Fla., banks have slashed their leasing activity for new branches, says Russell Bornstein, senior vice president with Grubb & Ellis.

Both CVX and VLO gave us warnings today, which should be great for our puts but we'll have to watch ourselves at the oil inventory as deliveries are a funny thing and we have no way of knowing how many barrels were delivered last week.  Zman and I are usually live on Market News First at 10:25 with the breaking news but the holiday has put the inventories off a day so I'll have to let you know tomorrow if we are rescheduling.

Asian markets were up off our great rally yesterday but the Nikkei dropped 100 points into the close and ended flat for the day in an almost mirror move to yesterday (but yesterday the gap open was so high the 100-point drop had little impact.  The Hang Seng also made all of its gains on a gap open also giving up 100-points during the day but finishing up 341 points.  Europe is flat ahead of our open with their indexes also giving up ground on strong opens so it's up to our markets to pick up the ball today.

Let's keep an eye on our levels but we are generally well within our comfort zones and any pullbacks that remain above our brackets are nothing to worry about (not that anyone seems to worry about anything these days!):

We actually lost ground on the SOX but the transports finally got on track, boosted by a real Buffett investment in that sector.  The Russell is also a big concern so I won't be getting back on the rally train unless the SOX and Russell can retake their breakout levels.  The Nikkei is a huge concern in Asia but the trouble they are having centers around the 200 dma at 17,300 and there is nothing too alarming about some healthy consolidation there (the Hang Seng should give consolidation a shot some time!).

So we will keep in mind that there is some bad news but we're not going to let it get us down unless we see a real change in sentiment but we're also not going to get roped into buying at the top of the market so it's lots of day trading and hedging for now until either the laggards catch up or the leaders start to fall.