Surreal:  Having the disorienting, hallucinatory quality of a dream; unreal; fantastic

Surreal, that pretty much sums up the actions that have been taking place of late. The events that transpired at 3:30pm last Friday almost make me think of Rod Serling and the old television show "The Twilight Zone". In my commentary on Friday night I discussed the highly suspicious nature of the timing of the news release regarding the bond insurer Ambac (ABK) which took place at 3:30pm on Friday. It seems that this view is being shared by many more people as over the weekend there have been more discussions on the web concerning this event. And it appears that the level of suspicion of this event is rising.

President Bush: (September 20, 2007) "I say that the fundamentals of our nation’s economy are strong"

Throughout the credit crisis, rising inflation, housing market crisis, rising foreclosures, record losses by financial institutions, rising unemployment trends, retail spending deteriorating, and a United States deficit near record levels the President says "the fundamentals are strong". Unless I need glasses I would say that the fundamentals of the economy are collapsing and no where near strong. Where is the strength that the President sees? I think he is the one that needs glasses.

Maybe he did get some glasses because now he says:

President Bush: (January 18, 2008) "The long-term fundamentals of our economy are strong" (emphasis added)

So throughout 2007, when we have been warning our readers about the worsening economic conditions, the President said the economy was strong. But as the problems became even worse the President could no longer hide behind that same line anymore, so his speech writers added two words to his line.. ‘long-term’. So now he changed his tune somewhat to say that the fundamentals of the economy are strong, not now, but down the road. The President seems to be about 6 to 8 months behind the curve of what the data shows us and what the President tells the public.

The question now is how far in the future (long-term) do we have to wait to see these strong fundamentals? The $160 Billion dollar economic stimulus package is only going to raise the United States deficit to even higher levels. ‘Strong fundamentals’ I feel is a very long time away from now.

The coming week brings us many economic data items to chew on. On Monday morning I will post the list of events for the coming week.

Some questions about various stocks are answered next…

Deckers Outdoor (DECK) is a stock with a very low share float (number of shares available on the open market). A low float always creates a stock that can reach nose bleed levels without much in the way of any substantial financial justification. I see DECK as having more downward price moves to come. Spotting an exact entry price to short this stock is not an easy one, but in the chart below I have identified the strongest resistance and support levels. One could short DECK as it reaches resistance (stop out on the break above resistance) or short on the failure below support (stop out on the break back above support). Below the chart I have included a screen shot of the stock’s current structure.

 

 

 

 

 

 

 

 

 

(DECK) Daily Chart

 

 

 

 

 

 

(DECK) Stock Structure - observe the very low float

 

Another chart analysis requested is for Cummins Inc. (CMI). This stock also appears to be setting up for a good short play (HJ - good eye on your T/A). See the chart below for our technical analysis of CMI.

 

 

 

 

 

 

 

 

 

(CMI) Daily Chart

 

One more chart for analysis is the United States Natural Gas Fund ETF (UNG). This ETF tracks the performance of natural gas. This commodity has been in demand lately and has been reflected in the price. But we would be wanting to protect any profits on this trade as opposed to adding to a long position. The T/A shows us some signs of strong resistance just ahead. We we would not necessarily short this sector here, but we would take profits out of any long positions in natural gas if the price appears to be hanging up at resistance.

 

 

 

 

 

 

 

 

 

(UNG) Daily Chart

 

And my final chart for the night is a recap of the S&P 500…

 

 

 

 

 

 

 

 

 

S&P 500 Daily Chart