Yesterday’s market rally has appeared to quickly run adrift. When the news from the Federal Reserve was issued yesterday the US dollar quickly gained some upside moves. But overnight the dollar headed back down again. If we use the US dollar as a measure of confidence in the US economy then we can safely say this morning that confidence quickly wore out after yesterday’s excitement.
The health care sector is being hit hard today as the rising cost of health costs are actually hurting the earnings of the major health insurance companies. So why the surprise drop in earnings of the health insurance companies? Loss of jobs and the subsequent loss of insurance premiums and what is very concerning is that people are actually putting off some of their health needs in order to pay other bills.
Housing market problems… best to just let the CEO of Freddie Mac speak for us this morning:
Freddie Mac CEO: We are in a 100-year storm in the housing market; "Worst housing market in a century" the CEO said at an analyst meeting.
- Says home price drops are only about one-third over.
The number of mortgage applications have rolled back over and are back on a negative trail.
MBA MORTGAGE APPLICATIONS W/E MAR 7TH: -1.9% V +3.0% PRIOR
- Refinance -4.7% to 2448.2
3 Comments
March 12th, 2008 at 11:41 am
Chuck,
What is your opinion about all the talk that the S&P 500 has
reached a double bottom? Do you expect the current rally to
stall out at 12,550; as it did in February? Would like to re-enter
either the SDS or QID.
Thanks Chuck.
Noel
March 12th, 2008 at 12:21 pm
To add to the question by Noel, does it count as a double bottom if it was caused by Fed’s intervention? If the Fed did not intervene yesterday we would’ve seen a waterfall in all indexes and all my ultra short and puts would have been very profitable. I’m holding on to them though, because the market fundamental is just not healthy at all. I’ve been here before many time when Fed intervene, but it always bounce back higher.
March 12th, 2008 at 2:10 pm
Great questions from Noel and Mitch. I also have a very large short position in the market (almost exclusively long QID). I grudgingly added a touch more QID into the close yesterday. I have been told to “always do the hard thing” in trading and it seems to mostly work. It was hard buying QID at the close yesterday. Hopefully I don’t get burned.
In my opinion it still counts as a “double bottom” regardless of the fed intervention. I think charts should be read without regards to other information that occurs at the time. Historical charts would be impossible to evaluate if you had to extrapolate based on news that occured during the chart pattern. I “think” pure technical analysis does not factor in these things. Now…it doesn’t mean the double bottom will hold. Like many have said…there is no such thing as a triple bottom. IF we go there again, we would likely see another break.