today’s tape

A day after the latest faint hope was thrown to the banking sector the market collapsed again. And it was the banks that led the decline.  The major indices appear to be falling back from their 30 day moving averages, and the next move to break equities out of their current trading range is coming shortly.  If XOM’s earnings report causes a full on sale in the energy sector and if the GDP number comes in weaker than expected another large drop in the market is likely.

And if 8,000 on the DOW and 800 on the S&P are broken, the November lows are the market’s last chance to avoid the next 20% drop.

today’s tape

New trading patterns continue to emerge as the broader market remains range bound with a tight floor and ceiling.  The DOW has been unable to break below the 8,000 level or above the 8,300 mark during the past 9 sessions, but shifts in the market appear to be happening.

First, there is a bit of a reversal happening in the oil sectors.  The integrated names were easily outperforming the drillers until a few weeks ago.  Now, it is XOM, COP and CVX that are beginning to trend down while RIG, NOV and SLB that trade above their 30 day moving averages.

Conservative stocks have begun to underperform the market One month charts of WMT, CL, MCD and CLX are not pretty.  These companies were thought to be able to weather the onslaught of selling the was attacking attacking the broader market.

Gold and gold stocks have started their latest run higher.  Inflation is surely not at hand, but they may be filling the void as the new safety play.  Treasuries have started to stumble (look at the fall of the TLT), and gold may be acting as a replacement.

The government announced new steps to shore up the banking sector last night which is certain to cause another wave of short covering.  We’ve been through this numerous times.  Whether it was record cuts in interest rates or the creation of the TARP – a month later you didn’t want to be holding onto bank stocks.  If you have any exposure to the financial sector use this latest lift to sell.

Until the DOW closes above 8,300 and then breaks pass through its 30 day moving average with the S&P 500, there is nothing to get bullish about outside of a few pockets of relative strength in the agriculture sector.

today’s tape

The market has fallen back to it’s old trick: investors are buying early morning sell offs and selling any strength that lifts prices higher.  I remain firm in my belief that the bulls and bears are playing tug of war, trying to influence the market in their respective direction.  The DOW is trying to hold the 8,000 mark because another push to the November low at 7,500 will likely prove disastrous.

But we are seeing some new strength emerge in certain sectors.  The agriculture stocks are attempting to trend higher again.  MOS and POT are trying to build higher highs on top of higher lows.  The drillers have stopped their free fall.  RIG and NOV are now trading along with the larger integrated oil companies.  I am as of yet convinced if the energy sector as a whole can begin a sustained rally.

Companies continue to post disappointing earnings results (look at CAT) and shed still more workers (again, CAT).  Unemployment will surely take another giant step higher when the latest data is announced at the end of next week.  Timely passage of President’s Obama’s stimulus will also be critical.

But of course the market will ultimately trade based on the performance of the banks.  And that remains a scarey thought.

today’s tape

The market is once again at the mercy of the financials and the health of the global banking structure.  Tuesday’s trading crushed all banks to the tune of 16% – and that was the average.  C, BAC, and the regional banks are in serious trouble.  And without some assurance that the common stocks are not headed towards zero the overall market has no chance of stifling the latest drop.

Technology was a mixed bag today with AAPL providing rare spark.  But the NASDAQ was hampered by MSFT and it’s 11% decline.  Most importantly, MSFT is now trading at a new 52 week low, below the $17.50 support from November.  I can’t recall how many times I’ve heard commentators saying MSFT’s balance sheet will help them weather the current market and economic storm.  That doesn’t mean the stock will trade higher.

A new trading theme has pooped up on my radar; we are seeing a swift reversal in bonds after the recent, steady flight to treasuries.  The TLT is beginning to crash back to earth, and the inverse, TBT, looks to be starting a new uptrend.

Oil and gas stocks have been trading in a tighter range than normal of late.  I find this pattern very interesting because I am seeing mixed signals.  RIG is trying to establish a bottom as XOM is stalling to resume its uptrend.  Energy names will break out again soon, and they will likely follow the price of oil.  I see no sign of oil trading higher, so I remain bearish on the energy sector.  And watch out for CHK.  Several thousand puts were purchased today at the February $10 and $12.50 strikes.

The last three days of trading indicate that the bulls and bears are trying to gain control of the market.  The bulls don’t want to break 8,000 on the DOW as that will likely bring a retest of the November lows.  And the bears know that if we reach 7,500 on the DOW, it will likely break.

today’s tape

The US banking sector remains persistent in trying to destroy the global economy and and equity markets.  This week alone JPM had its rating lowered by Moody’s and BAC requested another $20 billion from the government.  BAC, appears to be following the path of C.  It now appears BAC did little in the way of due diligence before acquiring MER.

The XLF is not from from it’s November low, but the overall market is still trading much higher.  With the VIX still trading in the $40’s, we have yet to see volatility return to the level we witnessed just 3 months ago.  If the weakness in the financials continue to spread to the rest of the market we could see another washout to the downside.

Oil remains in the mid $30’s yet the integrated names are holding up well.  A couple months ago I recommended a short RIG long XOM pair trade that worked well.  Watch the $75 support on XOM.  If this level is broken, watch for all energy names to fall.

But for now, there is a group of energy stocks that are starting to take off.  The refiners, having been beaten down for so long are coming back into favor.  TSO, SUN, VLO and HOC are outperforming every other sector at the moment.  The has also been heavy call buying the past few weeks in these names.

It will be interesting how the market reacts to Obama’s first week in office, but I suspect the health financials will remain in focus, as will deteriorating earnings.  Other than oversold bounces, I don’t see this market moving higher.  I think the best you can hope for is trading range that limits the downside selling pressure.

today’s tape

Computer issues have prevented posts of late, but I am back on track and ready to provide daily updates.

After weeks of uninterrupted gains, equities are under pressure again as earnings comback into focus.  AA released last night, kicking off the the first quarter of 2009.  Earnings will remain in focus, but the performance of the financials appears to be weighing on the market again.  The XLF has dropped 13% over the last 9 sessions with many individual banking names losing much more.  BAC is nearly back to its 52 week low.

The other problem for the market is commodity deflation.  Crude oil, and precious metals have been unable to reverse their volatile down trends.  I expect names like RIG, NOV, FCX and others to trade back to their 52 week lows.

Technology was also roughed up on Monday.  Downgrades across the sector dropped CSCO and INTC (who already warned about their upcoming release).

I’m not as bearish as I was just a couple of months ago.  But you still cannot be 100% bullish despite the media’s claim of a new bull market.  The market may have bottomed on November 20.  But that does not mean it will trade higher.