today’s tape

The major indices regained over half of their gains from yesterday, though volume was much lighter than yesterday.  You can attribute the gains to an accounting change on how banks value their paper or the prospects of a slightly changed bailout bill.  Again, the government can try to push this market higher, but the rallies never last.

Everyone keeps speaking about how the banks will surge once a bill is passed, but many banks have already rallied handily over the last three months.  In fact, USB, BAC, JPM and WFC have all gained between 30% and 60% while the S&P 500 has dropped 8%.  Even the weaker banks like C and the regionals have outperformed the market.  The run in the banks may have already happened regardless of whether a bill is passed by Congress.

If any group is going to taly at this point I believe it will be the commodity stocks.  Many saw large bounces today and are still well below their 30 day moving averages by many standard deviations.  Coal oi and natural gas stocks were the big winners today.

Today’s other noteworthy item was the dollars performance against the Euro.  More European banks have been nationalized, and most are now expecting the ECB to cuts interest rates.  This helped lower gold during today’s session.

This is a market unlike any I have seen.  You cannot be exclusively long or short.  And it might be best to keep positions light for the time being.

today’s tape

I don’t think one can be surprised by today’s action.  It hasn’t been right to own the financials since last summer.  Commodities were broken over 2 months, and investors began scaling out in large numbers.  I have since warned about the performance of agriculture, coal and energy stocks on numerous occasions.  And finally, technology became a dead weight to this market back in August.  After RIMM killed the NASDAQ last Friday, AAPL was today’s culprit.

There isn’t much more to say really.  This is quite the bear market equities are struggling through.  Be careful.

today’s tape

With whispers of Congress finally passing a bailout bill, the market surged into Friday’s close off some pretty heavy losses.  And given the sector at the heart of the market crisis (the financials), you may find it surprising that the financials handily outperformed energy and mining stocks.  It’s even more shocking in the wake of WM’s fall and the prospects of WB being taken over.

But even if a bill is passed, will financial stocks continue to rise?  I don’t know.  If we see a large early morning rally in the futures, a dramatic fall in the XLF similar to last Friday may follow.  I would not be buying C, MS, STI or any other financial if they gap higher tomorrow morning by 5 to 10%.

Even though the financial crisis persists as the daily headline, the market has begin trading as if the global economy is recessing (which it probably is).  Commodity and emerging markets stocks were destroyed on Friday.  Demand for oil, steel, coal, copper and other metals is dropping fast.  I warned about the prospects for emerging markets and a specific commodity group last Tuesday.

The emerging markets have suffered much more than the US recently.  China, Brazil and Russian markets are diving.  PBR and RIO lost over 7% on large volume today.  The FXI has lost 50% in 11 months; Chinese solar stocks LDK, YGE and JASO are falling again.  Since one cannot short financial stocks, I would look overseas to take advantage of the weakness.

Commodities gave way today, specifically the agriculture sector.  TRA, POT, MOS and others dropped over 8% on very large volume.  This is significant because volume has been very weak the last two days.  Most agriculture stocks are establishing a lower highs and lower lows.  I would not own these stocks.

Every stock mentioned in the previous 2 paragraphs dropped over 3.5%, while the S&P 500 gained ground Friday.

Perhaps money flowing back into the financials is a signal of investors assuming more risk.  After all, names like JNJ, WMT, PG, CLX have seen rough times since the opening of last Friday.  Yet, the VIX jumped 5% on Friday and is still holding well above 30 level that marked the bottom on July 15th.

The market is giving so many signals – none of which may matter on lick.  Whether or not Congress agrees on a bill is still up in the air.   And which way the market may move as a result is even more nebulous.

today’s tape

With a tentative deal reached (as of 4:40 PM) to bail out our distressed banking system, the major indices were able to finish Thursday’s session with a gain of 1.5%.  It remains difficult to get a handle on the financials.  JPM was up over 7%, WFC finished slightly lower and WB gained 15% before 1 PM, only to lose it all by the close.  These stocks (and most of the market) are trading without any true direction.  As I mentioned yesterday, since you cannot short the worst financials, it’s probably best to move on.

But the financials have helped the DOW and S&P 500 out perform the NASDAQ over the last 4 weeks.  In fact, the losses on the NDX are twice the size of the DOW and S&P 500, dating back to August 26.  And it’s not going to get any better for the large cap technology names.  After the bell tonight, RIMM was getting crushed after missing its EPS target by a penny.  RIMM missed three months ago (also by a penny while) the stock was trending higher.  Now that the stock is already weak, RIMM could be headed for a downward spiral.

And there is also heavy weakness in the semiconductors.  The SOX is barely trading above its 52 week low from last week.  INTC hasn’t budged and MSFT is only moving slightly higher because its buying back 40 billion in stock.  Out of every sector, technology may be the worst right now.

The price of crude oil rebounded today as it now appears to be trading together with equities.  If the US economy begins to weaken at a faster pace, the price of oil may fall off precipitously.  My favorite energy play at the moment are the refineries.  On August 7, I began noticing that the group was steadying and fighting to reverse their long term down trend.

On Tuesday we saw another group start to emerge as a result of declining oil prices: the refineries. The initial catalyst was HOC, first gaping lower after reporting earnings; but the stock finished Tuesday’s session with sharp gains on huge volume. VLO, TSO and other refineries had similar sessions.  Margins were killing these companies as oil ran all the way to $148. With oil now trading near $120 (and some suspect it will continue lower) the refineries may finally be reversing their year long down trends.

Well, oil is much lower.  TSO, VLO and HOC all had strong performances today.  And after weeks of volatile up and down sessions, these stocks are now establishing higher highs and higher lows.

This market appears to be in the hands of politicians.  I’m not optimistic.

today’s tape

A quick update today.

The market took a bit of a breather.  Perhaps that is best at this point.  And given the impossibility to get a handle on the financials at this point, I think its best to find other opportunities to trade.  Specifically, I would direct your attention to oil.  After gaping much higher this morning, crude finished lower by 1%.  Demand is waning as the global economy slows, and the chart shows the USO is right at some heavy resistance.  If oil falls, commodity stocks will quickly see their gains from last week erased.  Two names worth shorting are HK and PBR.

today’s tape

I warned this weekend that nothing had changed, that the government simply artificially lifted equity prices to prevent an epic crash.  After trying to recapture some of yesterday’s losses the major indices gave way again to heavy selling.  The S&P 500 was unable to hold the 1200 level (the low from July 15) as equities retrace lower again.

Unlike yesterday, the financials did not lead the market lower.  The XLF was unchanged as investors are still weighing the potential impact of a new RTC.  Without the short selling ban on financials, I think banks like C, WB and others would be trading much lower.  Analysts are still lowering earnings estimates for the upcoming quarter.  Stay away from this group.

The emerging markets have suffered much more than the US recently.  China, Brazil and Russian markets are diving.  PBR and RIO lost over 7% on large volume today.  The FXI has lost 50% in 11 months; Chinese solar stocks LDK, YGE and JASO are falling again.  Since one cannot short financial stocks, I would look overseas to take advantage of the weakness.

Commodities gave way today, specifically the agriculture sector.  TRA, POT, MOS and others dropped over 8% on very large volume.  This is significant because volume has been very weak the last two days.  Most agriculture stocks are establishing a lower highs and lower lows.  I would not own these stocks.

The dollar strengthened and gold weakened today, reversing the moves from last week.  The long term trend of the FXE is still down (dollar getting stronger against the Euro), but the move in Gold has been overwhelming and is probably moving higher.

I don’t care whether Congress passes legislation.  There are no buyers for this market right now.  And just wait until the calendar turns to October 2 – by then the short selling ban on financials will be lifted.

today’s tape

A brief update today.

Now that the government’s artificial inflation of equity prices has ended, the market will likely resume its down trend, though a potential crash may have been avoided.  With the financials selling hard as crude oil and gold jumped about 6% today money appears to be flowing back into commodities.  It’s still unwise to be long any financial company, and since you can no longer short them for profit, investors are once again using crude oil and gold as trading safe havens.  You can talk about the supply and demand of crude all you want, but the disruptions in the market for crude oil haven’t changed that much to send the price higher by $16 in a few days.  After falling so quickly, it may be time to start looking at the commodity space for new, emerging trends.

today’s tape

As has been the case with each recent bear market rally, government intervention was required to prevent equities from falling further.  The most immediate impact was the ban placed on short selling (this time ALL 779) financial stocks.  Monday morning was likely the largest short squeeze on record.  Hundreds of financial companies – already up an average of 15% off the lows from Thursday – gaped higher at Friday’s open by an additional 15%.

But within the first 30 minutes of trading, the XLF quickly dropped 12%.  Even more important is that the financial ETF closed below the long term resistance of $23.

The financials couldn’t crack this level after the first ban on short selling, and I have my doubts whether they will be able to this time.  The government can artificially boost stocks, but they can’t change the bearish atmosphere that still surrounds many financial institutions.  (And while we’re here, why does the government stop at only banning short selling?  Why don’t they make it illegal for stocks to go down?  Anyone that sells a stock – no matter the reason – should be thrown in jail.)

Moving away from the financials, the performance of the commodities was just an interesting Friday.  The price of gold actually gained $3.5% as the dollar was crushed against the Euro.  I find this some what strange since some of the financial risk has been removed from the markets.  Crude oil gained over $6 and helped propel the energy sector higher.  Compare the one day charts of the XLF and OIH and you’ll notice which ETF outperformed the other while the market was open.  As it stands right now, commodity stocks like MEE, FCX and CHK are merely bouncing from an extremely oversold position.

Only retail stocks traded mostly down yesterday, a direct reaction to the increase in oil prices.  (The RTH put in a giant reversal Friday.)  Other than the airlines, the retail sector had been the largest beneficiary of oil topping out in mid July.  If oil begins to climb back above $100, retail may begin to lag.

As the latest round of government intervention has lifted some market risk, investors began selling the safe stocks that have performed so well over the last few months.  WMT, JNJ, PG, CL and CLX all finished lower yesterday.  We will have to see if this was just a one day event, or if the sentiment to these stocks is finally changing.

Despite the euphoria from Thursday and Friday, I don’t think this market goes straight up from here.  The market gained another 3% Friday, but the VIX fell only slightly.  Further, the index gained 5 points in a little over an hour after the shorts were down chasing equity prices.

Nothing has been solved yet, and there is still a lot of fear in this market.  Come Monday morning I would not be a buyer of this market.  I would be a seller.

today’s tape

Goodness.  After gaping higher at the open, stocks began to making their way lower, pressuring the major indices down by more than 1%.  But news of the Treasury creating an entity similar to the Resolution Trust Corp. during the 90’s S&L crisis propelled stocks to their largest one day gains in 5 years.

So now the big question of the day becomes, is this the bottom?  Of course no one knows.  But every other bottom has looked similar.  First, we had government intervention (January’s emergency rate cut, and the March bailout of BSC).  Second, there was a large reversal from an intraday low deep in the red.  Third, after the VIX spiked into the 40s and then crashed back down (this pattern is very similar to January and March).

Again, I don’t know if this is the bottom.  The DOW cam right back up to the July low.  The same can be said for the NASDAQ and S&P 500.  WIth the government trying to artificially send equities higher, it’s to difficult to determine if these levels will now become meaningful resistance.  Analyzing this market is becoming somewhat foolish as the the rules keep changing everyday.  So I’ll leave it here for today.

today’s tape

It appears the rescue of AIG was not enough to restore confidence in the global financial system.  Fears continue to mount that more financial institutions are in trouble.  GS traded below $100 today, the first time since 2005, and MS lost about 25% of its share value.

But the financial name that matters most at this point is C.  It’s the largest US bank, and the importance of its survival rivals that of AIG.  C was in serious trouble around mid-day, trading near the $13 level.  But the stock recovered to barely finish above its 52 year low from July 15.  And if you look at the 1 day chart of C in comparison to the S&P 500 you’ll notice that C actually reclaimed the $14 level in the final 30 minutes of trading as the S&P 500 dropped 1 full percentage point.  This market needs C to hold the $14 level.

Two important events happened today that speaks to the panic of this market.  First, gold had its one day biggest gain of all time.  Read that sentence again.  Other commodities also surged as the dollar is weakening again after exhibiting weeks of strength.  Crude gained over $5 and natural gas spiked 8%.  This helped commodity stocks avoid further punishment even as the DOW lost 450 points.  Look at the performance of MEE, DVN, POT and BTU – impressive relative strength.  The OIH is trying to hold the $150 support from this winter, and the XLE has become range bound for about 2 weeks.  When this market finally snaps back to the upside, commodity stocks could gain 20% in two weeks time.  Second, the yield on treasuries effectively became zero today; investors were paying for the right to buy them.  (You should read that sentence again, also).

I still think there is more room for this market to drop.  The Russell 2000 is still 30 points above its above its 52 week low.  I believe every major index will be taken down before any type of meaningful recovery can begin.  Also the double inverse financial ETF (SKF) is still 70 points (!) below its July 52 week high.  I find this shocking.  Though, perhaps this speaks more to how little money is going into the market; inverse ETFs are not gaining as much their opposites are losing.  Compare the QID and QQQQ for more evidence.

It’s so bad out there even WMT lost 4% on nearly twice their 30 day average volume.  Be careful out there.