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Testy Tuesday – A Very Dangerous Line in the Sand

Well we are up in the pre-markets (7am) – that's something

Interestingly the global markets took our dip rather well.  The Shanghai fell 2.8%, the Hang Seng gave back yesterday's 3.5% gain, India hit the 2.5% rule, and the Nikkei fell 2.2% – a bad day but not worse than ours, as is often the case in Asia.  The DAX is, of course, leading Europe lower with a 2% loss into lunch but the CAC and FTSE are down just a point.  I had a busy evening doing a Big Chart Review and indulging in my political rant of the week about the budget fiasco but maybe that will be a weekend article as my comments alone in the members section were over 2 pages.

We went mildly bullish into yesterday's close, mainly by covering our long index puts, looking for at least a bounce off what is now a 1,100 point drop since February 9th, when we did our previous Big Chart Review.  We are actually 14% below the 8,280 on the Dow that we held that morning so another 1% down to go before we hit our next bounce, just over the 7,000 mark.  The gravity of the 5% rule dictates that we are more likely to go down than up now that we blew through 12.5% and finished at yesterday's low and getting back to that 12.5% line (7,245) will be our challenge for the day.  On the S&P we'll be looking for 760 to be taken back but we are just a hair over 738, which is the 15% drop off that 2/9 open.  The Nasdaq is about 2% over 1,352 and just under the 12.5% line at 1,392 so we'll be looking for leadership there to the upside. 

The NYSE is our most worrying index.  They are aleady down more than 15% (4,675) at 4,633 and the Russell (see David Fry's chart) is the NYSE's partner in crime, failing the 15%, 400 mark by 5 points already.  So it's going to be an easy day to look for a turn as we need the NYSE to break over 4,675 and 4,790 is our next stop.  The Nasdaq needs to hold 1,352 and get back over 1,392 and the Russell must break over 400 and return to 411 in order for us to see anything more than a weak bounce in today's action.  Notice 411 was the Russells failure point yesterday and keep in mind we are talking about numbers that exactly adhere to the 5% rule from a chart that was put up 2 weeks ago – you should take these levels very seriously!

The week's datafest begins in earnest today with Case/Shiller Home Prices at 9, Consumer Confidence at 10 and, about that time, Bernanke will begin his two-day interrogation by our clueless Congress.  It's hard to get optimistic after the partisan debacles we've seen so far whenever Congress gets on TV with our policy makers and Fed speak is so far over most of these people's heads that it would be funny to watch if not so tragic

22-feb-v2.jpgKeep in mind that EVERY Republican you see voted against the stimulus – twice!  So you don't really have to wonder to yourself – "How does he really feel."  That means the success of this stimulus would make them look foolish.  It is very much in the political interest of the Republican party to paint the bailout as a total failure already, forget the consequences of their negativity…  This is certainly not going to be a confidence booster for the market as the Democrats made mixed votes and even the ones who voted for it will probably have some serious concerns to raise.  Gloom, gloom with patches of gloom is my forecast for the next two days and Bernanke is the anti-Greenspan from a confidence building perspective.  The confidence builder in Chief speaks to Congress and the nation this evening but he will probably not be sugar-coating our problems so no help there is likely.  More positive already were President Clinton's comments on energy, the economy and Obama's performance to date

We had some nice earnings reports last night from FST, HLS (who guided UP), JWN, OWW and PSB (which was surprising).  GGP missed but not the catastrophic miss people were expecting.  This morning FWLT was BTE, FDP continued the positive run by food companies (lower input costs), MVL continued to do well (Iron Man), MHS has a nice beat, PWR beat but lowered guidance, RIGL lost less than expected and JOE had a beat that shows excellent cash management and makes me want to take a stake in them down here.   We can give ourselves a nice discount off the $20.91 stock price by selling the naked Apr $17.50 puts for $1.  If put to us, it's a net entry at $16.50 (a 21% discount) and if the stock finishes above $17.50 we keep the $1 against $8.75 in margin, which is an 11% gain in 60 days so generally a nice risk/reward profile.   

According to Cap, someone on the YHOO message board was counting the number of times CNBC talking heads said "nationalization" this morning and, as of 8:15, they were up to 300 times.  Sadly, this is the fear-mongering that is driving the markets to new lows while Cramer continues to keep his sheeple out of protective ETFs like SKF.  So you have the man's network telling you financials are going to zero while dog and pony boy tells his minions to sell ALL the financials, causing them to go to zero – even though they could hold on and protect themselves with conta-funds, if Cramer didn't spend 3 days a week convincing his viewers contra-funds are poison.  I've never seen anything like this outside of a racketerring investigation.  Speaking of racketeering – Dennis Kucinich nailed it when he pinned that charge on Paulson and company back in November.

Meanwhile, Shiela Bair, the head of the FDIC, says key decisions on shoring up the shaky financial system will hinge in part on a "stress test" to determine how the largest banks would perform if the economy weakens further.  She cautioned against rushing to a judgment that Washington intends to take over the industry, saying "I think there's ambiguity in the word 'nationalization.' Bair said, "I think that is something that would be surprising." She said on CBS's "The Early Show" Tuesday that the stress test must be done first, "before we determine what type of additional capital investments the government may need to make."  But please, don't confuse CNBC with facts, it's 8:47 now and we're up to 330 mentions…

9 am Update: Home prices came in down 18.55%, 0.4% lower than last month and 0.3% worse than expected by people who have no concept of seasonality, the mortgage market or the overall economy but seem to be considered "expert opinions."  We are still waiting for our Consumer Confidence (or lack thereof) numbers but German Business Sentiment hit a record low in February. "On the whole the survey results do not signal a cyclical turning point," said Hans-Werner Sinn, president of the Ifo Institute.  Actually, sentiment in retail and construction improved – although from very low levels. The business climate among German services companies improved slightly, although firms plan to shed some more staff, Ifo said.

Our wall of worry continues to be a steep one.  After yesterday's failure we do not expect too much out of today, we'll be happy to just see a bottom at this point but it's looking a little more likely that we're heading into a capitulation event that can take us down to frightening levels.  The 60% line is a line the markets dare not cross but, as I pointed out yesterday, we already lost the SOX and the Nikkei, with the Hang Seng and the BSE hanging on by a thread.  Let's take these levels very seriously, if the administration can't turn it around this week – the downward momentum can easily pick up steam. 

 

 

 

 

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 No alert here either….

Say it ain’t so, Joe !
The WSJ reports this morning that accused billionaire swindler Allen Stanford has ties to Joe Biden’s son, Hunter, and Joe Biden’s brother, James.
A fund of hedge funds run by two members of Vice President Joe Biden’s family was marketed exclusively by companies controlled by Texas financier R. Allen Stanford, who is facing Securities and Exchange Commission accusations of engaging in an $8 billion fraud.
http://media.nationalreview.com/post/?q=OGI0OGI4ZGI1Mzc3NGZkMGIyMDlmOTBmNWQyZjJkODI=

4:07PM First Solar beats by $0.31, beats on revs (FSLR) 137.68 +12.84 : Reports Q4 (Dec) earnings of $1.61 per share, $0.31 better than the First Call consensus of $1.30; revenues rose 116.0% year/year to $433.7 mln vs the $410.4 mln consensus.
 
Punish those that cannot double.  They got trashed!!

Got my alert on time.

I’m thinking about opening an account with Think or Swim.  I know they were giving out a promotional rate to PSW members.  Does anyone know what that is?
Thanks.

Matt re: Phil’s levels.
 
I made a simple spreadsheet with columns at +/- 1.25% increments. I set the benchmark at 8650 and review the previous two days closing values. It is uncanny how the market reacts when values start to line up intraday. This has helped me tremendously to follow Phil and his intraday trades.

Phil, I have been reading site extensively for past few days. I need help in one area, can either Phil or fellow memebers guide me.
How do I start investing/trading with the picks here, sometimes there are just too many in a day? How do I allocate certain % and build portfolio? and once that’s done then continue to be in and out by myself depending upon updates here at the site?  Are there any suggestive approach what % of capital shall be allocated for LTPs?
Assuming I have 50k and say I built LTP portoflio for the long haul, then how do I rebalance it?
I shall surely appreciate some sharing in this area,
Thanks and By the way I have great time with UNH and X picks. Phil I played X in a different way (decided to buy Jan 10, 15 C, and sold Mar 22.5 calls, will appreciate your thoughts on this)
Thanks, Shiv

I got my alert on time. I want to see the levels and all trades.

 Well looks like he didnt find 35 trillion in SS but he did happen to find 2Trillion in the budget 🙂 He might be a member you know 😉

Edro – Thx.

What a speech! What a comment by D. Brooks on PBS! Both are spot on, Dave had many more specifics. I loved them both. The Pres rose to the moment, no specifics but it was a terrific morale building presidential speech. The man has talent.

Good Morning everyone.
 
 
UK is following the US , up 1.52% @ 3874. Lots of good reading on the site today, thanks Ilene, that man Mish talks so much sense. I still think things are going to get a lot worse before they get better so its going to be hard to pick just when the markets will turn ahead of that. Some good reads from over here … Some UK commentators think revolution and disent could follow soon and UK savers just dont trust the banks at all.

Good Morning Phil, DB & all

Asia Markets :    Wednesday, February 25, 2009

(The following is from WSJ; please cross check with other sources to confirm.)   

Nikkei Average*                       7461.22    192.66     2.65%

Hang Seng*                           13005.08    206.56     1.61%

China: DJ Shanghai*                254.99        1.00     0.39%

Seoul Composite*                   1067.08       3.20     0.30%

Bombay Sensex*                     8902.56     80.50     0.91%

Baltic Dry Index                         2010.00   -74.00    -3.82%

*at Close

Asian Markets Pull Back from Rally, Yen Slips

Asia stocks were mixed Wednesday despite reassuring comments from Federal Reserve Chairman Ben Bernanke, which sparked a rebound in battered U.S. financial shares. The yen slid further on Japan’s mounting economic and political troubles. Safe-haven government bonds retreated as investors shifted funds into riskier assets, while gold steadied after having soared in the past few weeks on mounting fears about the financial health of countries trying to contain the crisis.

The Nikkei closed up 2.7 percent as exporters climbed after the yen hit a three-month low versus the dollar and on hopes for a possible government stock-buying scheme.Japan’s finance minister said on Tuesday the government was looking into expanding share buying to support the stock market and the Nikkei business daily said this might include buying directly from the market. While market players said the news was positive, they remained wary.

Data showed Japanese exports plunged a record 45.7 percent in January from the previous year, pointing to another sharp contract in economic activity in the first quarter of the year. But Japanese shares were helped in part by reports that the government may start directly buying stocks to support the market and ease the strain on the country’s big banks, whose large equity portfolios have suffered heavy losses.

South Korea’s KOSPI closed a volatile session 0.3 percent higher, but losses by shipbuilders and construction issues on deepening economic worries cut the main index’s earlier gains.

Australian stocks finished 0.1 percent lower, reversing early gains, as investors looked past an initial bounce on optimism over the health of the financial sector and refocused on a weaker economic outlook.

Hong Kong shares trimmed early gains to settle 0.7 percent higher by midday ahead of the index futures expiration on Thursday.

Singapore’s Straits Times Index was higher.

China’s Shanghai Composite Index swung back into positive territory, up nearly 1 percent, though investors continued to worry that an uptrend in Chinese stocks may have ended because of high valuations.

Bombay Stock Exchange’s Sensex ended at 8892.60, up 70.54 points or 0.80 per cent. It slipped from intra-day high of 8995.04 and touched a low of 8889.18. Indian equities gave away most of its intra-day gains on Wednesday ahead of February expiry as traders booked profits at higher levels. Auto, IT and metals ended higher after announcement of cut in indirect taxes. Capital goods and realty space ended lower.

Euro Shares Lifted by Banks, Bernanke

European shares rose early on Wednesday to snap a three-day losing streak as financials surged, tracking advances on Wall Street after the Federal Reserve signaled that bank nationalizations were not imminent.

The FTSEurofirst 300 index of top European shares was up 1.1 percent at 727.35 points, after it had fallen 1.4 percent on Tuesday to a six-year low. The index has fallen 12.6 percent so far this year.

The broader STOXX 600 index rose 1.3 percent, led by banks and oil stocks.

U.S. stocks had risen late Tuesday, recovering from a 12-year low, afterFederal Reserve Chairman Ben Bernanke signaled that nationalization of big banks was not at hand, causing relief in the markets.

Financials were among the biggest gainers in Europe, with Deutsche Bank, BNP Paribas and UBS up between 6.6 and 8.3 percent. The DJ Stoxx European banks sector index was the strongest sectoral gainer, up 4.2 percent, and has fallen 25.2 percent since the beginning of the year. Deutsche Boerse rose 5.8 percent, after the German stock exchange operator released solid results late Tuesday.

Shares in British confectionery giant Cadbury also rose, and were up 3.1 percent, after the company reported a 30 percent rise in 2008 profits.

Pharma stocks dropped, with the DJ Stoxx health care index the biggest sectoral decliner, dragged down by heavyweight Novartis, after the Swiss company said first-quarter results would be hit by foreign exchange movements. Shares in the company were down 3.4 percent.

Utilities were also down, with GDF Suez, EDF and EDP Renovaveis and Gas Natural down between 0.3 and 0.9 percent.

Around Europe, UK’s FTSE 100 index rose 0.9 percent, Germany’s DAX index was up 1.2 percent and France’s CAC 40 was up 1.1 percent.

Oil Pushes Above $40 as Stocks Rally

Oil held above $40 a barrel on Wednesday after a 4 percent rally in the previous session, as equities gained and investors looked ahead to U.S. inventory data expected to show rising supplies. The price of oil has become closely intertwined with equities, a barometer of economic sentiment, in recent months.

US light, sweet crude [  40.69    0.73  (+1.83%)] was up.

London Brent crude [ 42.69    0.19  (+0.45%)] , trading at an atypical premium to U.S. crude because high U.S. inventories are weighing on the U.S. benchmark, was up.

Attention will focus later in the session on the latest snapshot of oil supplies in the United States. The U.S. Energy Information Administration releases its weekly inventory report at 10:30 a.m. New York time, which is expected to show that crude stockpiles probably rose 1.4 million barrels last week.

American Petroleum Institute data on Tuesday showed crude stockpiles rose 341,000 barrels last week.

OPEC oil ministers meet to set policy on March 15, and the group is expected to consider deepening its output cuts.

Dollar Erases Losses vs Euro; Yen Falls

The dollar erased earlier losses against the euro on Wednesday as concern about the global economy crept back in to boost the perceived safe haven currency, while the yen continued to fall broadly. The U.S. currency had started the day on the back foot against the euro as equity markets took heart from Federal Reserve chairman Ben Bernanke’s signal that bank nationalizations were not imminent.

But analysts said the rally in riskier assets, which also bolstered currencies such as sterling and the Australian dollar, was looking shaky, although European shares remained up 1.3 percent.

The euro [ 1.277    -0.0073  (-0.57%)    ] was flat against the dollar, below an earlier session high of $1.2901,
while the pound [  1.4368    -0.0112  (-0.77%)    ] also erased gains to trade steady versus the greenback.
Against the yen, the dollar [ 96.55   -0.07  (-0.07%)] rose, not far off a three-month high of 97.35 yen hit earlier on platform EBS.
The euro [ 123.35    -0.80  (-0.64%)   ] was up versus the Japanese currency, off an earlier high of 125.18 yen.


Gold extends losses as risk aversion cools

Gold declined on Wednesday, extending the previous session’s 3 percent losses, after Federal Reserve Chairman Ben Bernanke’s reassurances on the outlook for inflation and the economy cooled risk aversion. A recovery in equities indicates a pick-up in appetite for risk and may divert investment from gold, analysts said.

Gold slipped to $955.90/957.90 an ounce at 0941 GMT (5:41 a.m. EST) from $862.45 late in New York on Tuesday.

Holdings of the world’s largest gold exchange-traded fund, the SPDR Gold Trust, were also unchanged for a fourth consecutive session on Tuesday, fuelling fears burgeoning demand for gold to back ETFs may have stalled.

Gold buying in India has picked up as prices have retreated from the record highs they hit last week. A further dip below 15,000 rupees per 10 grams may rekindle buying interest, dealers said. "We are getting calls for the first time after gold dipped below $1,000," said a dealer with a state-run bank in Mumbai. India’s buying of the precious metal tailed off as gold soared, leading some to speculate that a depression in jewelry demand could prove a major drag on prices, despite the strength of investment buying.

Among other precious metals, silver eased to $13.71/13.78 an ounce from $13.74. Holdings of the largest silver-backed ETF, the iShares Silver Trust, were also static on Tuesday, albeit at record levels.

Platinum was steady at $1,036/1,041 an ounce from $1,040.50.
Palladium slid to $195.50/198.50 an ounce from $198.

Hi Ramana

Phil… "scummy"; "distasteful" ?? c’mon.
a) I didn’t "attack" Biden and family.  I posted a news item about them (and their possibly shady dealings).  Its news; sorry if you don’t like it.  As I recall, during the election there was other news about the brother and son and their questionable dealings; its more of the same.  And you clearly didn’t read it carefully; they had a fee sharing arrangement with someone they didn’t know ?  Really ….
 
b) don’t switch parties; the other guys won’t have you !  😀
 
c)  speechgiver in chief last night:   good tone (less doom and gloom, more positive); no specifics; some of his ideas are troubling.  A for presentation.  C overall.  No earmarks in "next years" budget ??  What about the 8000 or so in this years ?

Attack Blogs ?  Hah; ridiculous.
Phil, I don’t know if there is any there, there or not with that story, which came from the WSJ, not from any so-called "attack blog"  (oh yeah, WSJ is now an attack blog b/c its owned Murdoch, I see).  And its not like these 2 Bidens haven’t been in the news before w/ questionable dealings.
Boy, do you have a thin skin this morning !  When you post a list of Phil approved legitimate news sources and blogs besides the WSJ let me know.  I didn’t invent the stink that pervades Wash DC where politicians and their families have questionable dealings.  I’m sure that there will be many many more such stories on pols of both parties that are newsworthy; and when it involves the VP’s brother and son, its newsworthy.
But, later on in the WSJ piece:

Mr. LoPresti said Stanford entities put up the $2.7 million in seed money and marketed the fund. SEC records show the fund, which was launched in June 2007, had 104 investors as of Nov. 10, 2008, with assets of $49.8 million. Paradigm Global, of New York, manages portfolios of hedge funds with a total of about $270 million in assets.
Under an agreement, Stanford was entitled to share in a portion of the fund’s management and performance fees, Mr. LoPresti said. "That’s all I’m going to say on the fee side of things," he said.

 
Also, there may be nothing untoward in this, and the article suggests that as well.  We don’t know yet.
 
And your Chris "I get a tingle up my leg" Matthews quote may have been funny to you; but others might call it racist.

Thanks Phil. I appreciate your taking time and replying.

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