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Tuesday Top Off

Wow, what a week and it's only Tuesday!

From record drops to record pops in one day is no way to run a market and it's still a day trader's paradise as what works one day is poison the next and vice versa.  This morning we started out looking for better than 20% bounces off yesterday's drop and it didn't take too long for us to get on track.  We started out cautious but it only took until 10:04 to decide we were on an uptrend as we noticed the big banks leading the charge and I called for covers on the SKFs.  We got a nice Consumer Confidence number an a better than expected Chicago PMI at 10 and by 10:13 our indexes were testing the 2.5% rule.

The momentum picked up at 10:18 when I saw on CNBC: "Now Kudlow is talking about what the Fed, FDIC and Treasury can do without Congress that I talked about above, this is going around and may give us some traction to the upside so watch out for those financial puts!"  That led to a very large amount of bullish trade ideas which obviously worked out on an up 485 day and we ALMOST started looking at full covers at 3:17 but, just 6 minutes later, we got the word the SEC would be changing the mark to market accounting rules which allowed us to be a little braver about tomorrow. 

We're still worried about hedge fund redemptions causing an unwinding of positions but that will be part of the very large wall of worry we will be dealing with all week, even after they pass (hopefully) the bailout package.  The Dow finished above my 10,800 target by 50 points, also a good sign but we're not going to get too excited until we take back all of Monday's losses, something that will really perk up our weekly chart of the S&P measured in Euros as the dollar made great gains today as well.

Looking at our Big Chart, things could certainly have been worse:

 

 

Week's

25%

20%

Feeling

50

Index

Current

Move

Terror

Horror

Better

DMA

Dow 10,850 -4 10,644 11,354 11,808 11,339
Transports 2,120 -156 2,336 2,491 2,591 2,388
S&P 1,164 -24 1,182 1,261 1,311 1,251
NYSE 7,532 -253 7,790 8,310 8,642 8,176
Nasdaq 2,082 -71 2,146 2,289 2,380 2,298
SOX 306 -17 419 447 465 341
Russell 679 -30 642 684 712 720
Hang Seng 18,016 -856 24,000 25,600 26,624 20,805
Shanghai 238 11 441 470 400 259
Nikkei 11,259 -831 13,725 14,640 15,226 12,694
BSE (India) 12,860 -710 15,900 16,960 17,638 14,319
DAX 5,831 -237 6,088 6,494 6,753 6,298
CAC 40 4,032 -107 4,626 4,934 5,132 4,320
FTSE 4,902 -234 5,066 5,403 5,619 5,345

Well, not much worse – yesterday the sole green box in all of the world's markets would have been the Russell, which held the line at 657.  That, my friends, is the proverbial abyss we stared into and may again if Congress is determined to repeat Monday's madness.  It looks like a 66% drop was finally enough for the Shanghai, which bottomed out at 203 on the 18th and is up 17% in the two weeks since and is the only index to put in a positive week.

We still have a lot of work to do to take back our 25% levels and we'll be looking to London and Japan to make up some ground tomorrow ahead of our open.  The S&P needs 20 points to earn another green box and that's our best hope for tomorrow but the Dow MUST NOT cross that 10,644 line again as it's a long, long way to the bottom that is being shared by the Hang Seng and the Shanghai at 50% off the highs (that would be Dow 7,000!).

In the morning post, we discussed the action in Ireland to bail out the banks as well as things the Fed and Treasury and FDIC could do without Congressional approval to improve the situation and today it seems as if the government is going to be doing pretty much all of them in some form or another.  The FDIC is also considering increasing deposit insurance limits from $100,000 to $250,000 which is very nice until you realize that the FDIC already insures $4.5Tn worth of deposits and has just $45Bn in the actual fund – Now that's leverage!

"What we're seeing, in general terms, is almost irrational behavior on the behalf of some consumers who are panicking," said Scott Polakoff, the senior deputy director at the Office of Thrift Supervision, which regulates savings and loans.

I still don't know for sure that Congress will approve the bailout package, I still hear enough conflicting information to make me think it may not pass but plenty of things are being done and the markets were certainly encouraged today and there were no new bank failures (even WB gained 90% and NCC picked up 28%) so we'll take what we can get, one day at a time for now….

 


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  1. Good Morning everyone.

    UK up 1.5% off its highs on open an hour ago. The passage of the bailout plan seems to be the cause. No goo news elsewhere. Given the rally yesterday I wonder if the eventual passage will prove a "sell the news response" rather than the expected rally ?


  2. Sell the news – Maybe, also be aware that the Senate passing the bill has nothing to do with the House passing the bill, who are the people who rejected it Monday.  I see many international investors are confused by this and it may be good to go short into a big rally. as even if the Senate approves the bill, people will then realize there is still no bill until the House votes maybe Thursday night.


  3. Good Morning Phil, DB


  4. Even if Senate votes for a bill, will House the consider the same bill to vote on ? If the House bill is different from Senate bill there will be conference to hash out the details and then they have to vote on the amendments or the news bill. We are talking next week. :-)


  5. Asia Markets :    Wednesday, October 01, 2008
    (The following is from WSJ; please cross check with other sources to confirm.)   

    Nikkei Average*                     11368.26    108.40    0.96%
    Hang Seng*                           18016.21    135.53    0.76%
    China: DJ Shanghai*               238.94         1.00    0.42%
    Seoul Composite*                 1439.67        -8.39   -0.58%
    Bombay Sensex*                 13083.34     222.91    1.73%
    Baltic Dry Index                       3217.00   -287.00    -9.80%

    *at Close


  6. Asian Markets End Higher on Bailout Hopes

    (The Singapore, Indonesian and Malaysia markets are closed for the Eid holidays. The Chinese and Hong Kong markets are closed for the National Day holidays. Hong Kong will reopen Thursday while China will reopen next Monday.)

    Volumes were thin as many markets in Asia are closed for national holidays.

    Stocks in Japan and Australia bounced higher Wednesday and the yen steadied as investors edged away from safety plays on hopes that a salvaged Wall Street rescue plan in Washington could keep global equities rallying.

    The Nikkei  closed up 1 percent, financials leading the market higher, reflecting moves on Wall Street. But longer-term worries about both the global and domestic economies were preventing extensive rises, with investors inhibited by a Bank of Japan quarterly "tankan" survey showing Japanese business sentiment turning negative for the first time in five years.

    Seoul shares finished 0.6 percent down. This was offset by some blue chip issues, which traded lower on persistent caution in the markets, as investors remained anxious about the outlook for the economy.

    Australian shares rose 4.2 percent, after the Australia’s regulator cleared BHP’s bid for Rio.  BHP added 5.6 percent while Rio jumped 12.4 percent.

    BSE Sensex was up 1.65 per cent at 13072, off the earlier high of 13203.86. IT and banking stocks continued the lead while realty and oil & gas were in red.


  7. Autos Push Euro Stocks Briefly Into Red

    European shares turned briefly negative by late morning on Wednesday, led lower by automakers.

    The FTSEurofirst index fell 0.1 percent at 1,062.55, having been up as much as 1.1 percent earlier. By 1007 GMT, it had ticked up again, 0.2 percent higher at 1,065.95 points.

    The automobiles sector took most points off the index, with Porsche falling more than 10 percent after it reported that full-year revenue and sales stagnated, and  declined to give a forecast for the current year.

    Daimler fell 8.3 percent despite denying that it was about to issue a profit warning, while shares in Renault and Peugeot more than 4 percent. Trading in Fiat was halted for excessive losses.

    Trade in Italian bank UniCredit was also suspended. The stock was indicated 8 percent lower. Banking stocks were the top weighted risers on the index. Barclays, UniCredit, Royal Bank of Scotland, Credit Agricole and HSBC were 0.7-6.2 percent higher.

    Eurogroup Chairman Jean-Claude Juncker said European Union countries will not let any big bank fail during the financial crisis, on Wednesday, adding that the repercussions of the turmoil would be felt for months.

    In the UK, the government is considering matching an Irish move to guarantee all bank deposits in response to the global credit crunch, the Daily Mail newspaper quoted unnamed government sources as saying.

    The FTSEurofirst 300 lost 11 percent in September, making it the second-worst month of the year, and the index is down 29 percent in 2008, punctured by a credit crisis that has piled up losses at banks and slowed the economy.

    Energy stocks were higher as oil extended its rally, rising 1 percent to hover at just under $102 a barrel.

    BG Group, BP, and Tullow Oil were 0.35-1.5 percent higher.


  8. Oil Rises Toward $102 on US Bailout Revival Hopes

    Oil rose above $101 a barrel as part of broader rallies on global markets on Wednesday due to hopes that a revamped U.S. financial rescue package will be passed.

    U.S. light, sweet crude [  100.93    0.29  (+0.29%)]  was higher, after rising as high as $102.24.

    London Brent crude [  97.9    -0.27  (-0.28%)] rose.

    On Tuesday, U.S. crude settled $4.27 higher at $100.64, rebounding from Monday’s sharp $10 loss that was in reaction to the rejection of the original rescue plan by the U.S. House of Representatives.

    Analysts said that economic slowdowns would keep oil demand relatively weak, however, weighing on oil prices. Oil traders will watch U.S. weekly oil data for supply-demand fundamentals in search of market direction. Analysts in a Reuters poll expect the government data to show an increase in crude oil stocks and drops in oil product inventories when it is released at 3:35 pm London time.

    The analysts forecast a 2.4 million barrel increase in crude oil inventories in the week to Sept. 26.
    Distillate stocks were seen falling 1.2 million barrels with gasoline inventories seen down by 1.6 million barrels.

    Dollar Dips Against Euro After Surge on Bailout Hope

    The U.S. dollar dipped against the euro on Wednesday a day after the U.S. currency surged on hopes that U.S. lawmakers could still reach agreement to revive a $700 billion bank bailout plan to stem the credit crisis.

    Talk that lawmakers may agree to a bailout package soon and speculation that global central banks could cut interest rates encouraged investors to take risks on Tuesday, sparking a sharp rebound in U.S. stocks after Wall Street saw its biggest one-day sell-off since 1987.

    The euro [  1.4149    0.0058  (+0.41%)   ] edged up 0.1 percent from late U.S. trade to $1.4110.

    On Tuesday, the euro plunged 2.4 percent against the dollar, posting the biggest drop since the single currency was introduced in 1999, after news of another bank bailout in Europe worsened fears about widening fallout from the credit crisis.

    The dollar [  106.11    0.04  (+0.04%)   ] rose 0.2 percent against the yen to 106.30, after jumping nearly 2 percent the previous day.

    Traders said Tuesday’s surge was partly explained by repatriation of overseas assets by U.S. investors, as well as a dollar-shortage at some institutions before the end of the July-September quarter. The market showed a muted reaction to the Japan’s tankan as the outcome was mostly in line with expectations.

    Gold up on bargain buying before US bailout vote

    Gold rose 1 percent in Europe on Wednesday as a slightly softer dollar encouraged bargain hunting after the previous session’s more than $30 dip, with investors seeking safety in the metal from economic turmoil. The other main external driver of gold, crude oil, is also climbing, which should be supportive. Oil rose on hopes that a new version of a proposed U.S. financial rescue package will be passed.

    Gold was quoted at $877.95/879.95 at 0926 GMT, up from $869.95 late in New York on Tuesday.

    Silver tracked gold higher, rising to $12.30/12.38 an ounce from $12.02 late in New York on Tuesday. The metal is also benefitting from strong ETF demand.

    Platinum climbed 3 percent to $1,030/1,050 from $1,000 an ounce. The metal is rebounding after slipping to its lowest level since February 2006 on Tuesday.

    Palladium climbed to $202/210 an ounce from $194.50.


  9. Good morning!  These bill changes are creating a total disaster, the Senate will pass today but I’m really not sure about the house.  New post is half up, I’m writing about it there.