It was an uneventful day in the markets… at least as the charts are concerned. The bounce that we experienced today was much less than I thought it might have been. In some way I was expecting the bulls to put up a fight to regain some of their lost ground but it did not happen. Buyers were noticeably absent today.

Yesterday’s FOMC minutes really castrated the bulls. The bullish talking heads and the professional analysts have been trying to convince you that the economy is fine, everything will be OK, and you should just keep buying stocks. But, when the Government themselves lowers their expectations of growth potential, then that is something to take notice of. And since they are always more optimistic then we can conclude that it will be much worse than what they claim. But, we already knew the growth potential was bad, and have been saying this for many months here. This is the reason we never changed our stance on the markets and of the economy.

The Government has serious problems on its hands. They can’t wish this away, and they certainly can’t buy their way out of this mess either. The more money they throw at the collapsing economy and housing market, the more problems they are creating down the road.

I’m short on words tonight (now that is something new… LOL), but there was little action today to really sink my teeth into tonight. I’ll let a few charts speak for me tonight.

(Retail Index - RTH - Weekly Chart)

(Semiconductor Index - SOX - Weekly Chart)

(Home Builders Index - XHB - Weekly Chart)

(S&P 500 - Chart by "VIX Steve")

Some news items:

MARCH HOUSE PRICE INDEX: -0.4% V 0.6% PRIOR; Q1 HOUSE PRICE TOTAL INDEX: -0.2 % V -1.3%E
- Feb revised to 0.4% from 0.6%
- OFHEO: In Q1′08 US home prices fell a record 3.1% y/y

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United Kingdom: ECONOMISTS CONTINUE TO DOUBT THE STRENGTH OF UK RETAIL SALES DATA - TELEGRAPH
- Economists believe that official data is providing a rosier picture than reality.
- Some economists believe that official retail sales figures are failing to capture the impact the credit crisis is having on the consumer.
- (reminder from 4/24) The Times reports that some market players are doubting the recent UK retail sales figure; The article comments on now the data differed from the BRC’s retail sales report and trading updates by UK retailers.

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Ford (F) CEO DECLINES TO SAY WHEN AND WHETHER THE COMPANY WILL SET A REVISED PROFIT TARGET - SOURCE
-The CEO adds that the decision to lower its business outlook was made in the past few days.

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AIG - MOODYS DOWNGRADES AIG AND CERTAIN SUBSIDIAIRES; AIG’S SR UNSECURED DEBT CUT TO AA3 FROM AA2
- AiG parent outlook is Negative.
- AiG Commercial insurance companies cut to Aa3; Outlook is Stable
- AiG Domestic Life companies cut to AA2; Outlook is stable
-  Moody’s Investors Service has downgraded the senior unsecured debt rating of American International Group to Aa3 from Aa2. The rating agency has also downgraded the ratings of several subsidiaries, including those whose ratings  have relied on material support from the parent company, as well as those  with significant exposure to the US residential mortgage market. These  rating actions largely conclude the reviews for possible downgrade  announced by Moody’s on May 9 and May 15, 2008, following AIG’s  announcement of a $7.8 billion net loss for the first quarter of 2008.  The rating outlook for AIG (parent company) is negative, reflecting the  company’s exposure to further volatility in the US mortgage market as  well as uncertainty surrounding the strategic direction for AIG Financial  Products Corp.

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Japan:

BOJ’S APRIL MINUTES: SOME MEMBERS SAID INFLATIONARY EXPECTATIONS ARE RISING; BASIC THINKING ON MONETARY POLICY UNCHANGED
- Members agreed pace of rise in CAPEX likely to be moderate in future
- Members to assess risks as appropriate on policy
- Members agreed housing investment is recovering but remains at low level.
- Both internal and external risks to Japan’s economy are growing.
- Downside risks to US economy are rising.
- Some members said exports may slow due to expected slowdown in overseas economies.
- Some members said corporate earnings forecasts may be revised down due to the Yen’s rise.
- Some members said tensions in financial markets have eased, but nervous conditions remain.
- A few members said US may improve earlier than expected.
- One member said CPI keeps rising trend after slowing in April.

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OIL MARKETS TRADE NEAR RECORD HIGHS: AN OPINION PIECE IN THE FT DEUTSCHLAND SUGGESTS ANOTHER FACTOR THAT IS AFFECTING CRUDE PRICES IS A STUDY BY ENERGYWATCH, ACCORDING TO WHICH OIL PRODUCTION HAS PEAKED, AND LIKELY TO FALL ABOUT HALF THE CURRENT LEVEL BY THE YEAR 2030.

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U.S. HOUSING MARKET OUTLOOK: WITH HOME SALES FAILING TO PICK UP, SUPPLY IS UNLIKELY TO COME DOWN CONSIDERABLY - DIMITRY FLEMING AT ING FINANCIAL MARKETS
- "Against this backdrop, home prices are expected to fall much further, putting more and more households in trouble."

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AIRLINES: S&P PLACES THE RATINGS OF US AIRLINES ON WATCH NEGATIVE
- Airtran, Alaska Air, American, Continental, JetBlue, Southwest, UAL and US Airways may be cut.

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S&P TO REPLACE BEAR STEARNS (BSC) WITH INTUITIVE SURGICAL (ISRG) IN S&P 500 INDEX ON MAY 30

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MEXICO Q1 GDP (CONSTANT $): +2.6% V +3.3%E

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Lehman (LEH)

HEARD ON THE STREET LOOKS LOOKS AT LEHMAN’S RELIANCE ON ONE-TIME GAINS - WSJ
- The article notes that some investors are questioning Lehman’s earnings report from the prior quarter as some are asking whether its profit was due to some one-time items.
- The manager of Greenlight Capital, David Einhorn, is shorting Lehman’s shares and and has been critical of Lehman.
- For instance, Einhorn has been critical of Lehman’s large unrealized gains booked in Q1 from marking up equity positions that are illiquid.
- In Q1, Lehman had a pretax gain of $695M (total profit was $489M) related to hard-to-value equities.
- Lehman booked a $400M-$600M Q1 gain on its stake in India’s KSK Energy and the broker said that it had marked up its stake in the company because a new investor had taken a stake in KSK at a valuation above Lehman’s.
- Einhorn also believes that Lehman had not sufficiently written down $6.5B of complex debt securities called CDOs.
- Einhorn said that Lehman’s Q1 writedowns  on $6.5B of CDOs were only about $200B, yet the firm disclosed in a filing that about 25% of the CDOs were junk rated.
- Last week Lehman’s CFO meet with Einhorn to discuss his research regarding the broker

Uneventful day.. But one thing was evident, buyers were not jumping in the market. A small bounce in the broad indices was expected after a 420 point drop over the past couple sessions.

I’m waiting to see the earnings from Thornburg Mortgage (TMA). Earlier in the week it was reported that their losses would be ’substantial’.

We will have the full wrap up tonight. And I have another chart from “Steve Vix” to post tonight.

Correction- I was looking at the old earnings schedule, TMA will report sometime around June 2nd according to an update from last Monday.

The morning has been quiet. Trading has been in a very tight range as traders are once again waiting for someone to blink.

Ford (F) is getting hit hard as they lowered their earnings guidance and are shutting down some production lines due to the weak auto sales.

Some other items:

Ford (F) S&P HAS REVISED OUTLOOK TO NEGATIVE FROM STABLE

INITIAL JOBLESS CLAIMS: 365K V 373KE; CONTINUING CLAIMS: 3.073M V 3.065ME

The all important continuing claims data continues to creep up. I anticipate a rapid rise in initial claims to take place over the next 6 weeks.

Other than the initial claims data this morning, there is little moving the market. Pre market futures are still weak and it would appear buyers are just not getting excited about the market here. After two days of 200+ declines it is normal to have a bounce, but just like a rubber ball, all bounces eventually wear down in height and come to an end. Just how much rubber is in this market will determine how high the bounce goes. But we have resistance overhead once again so I expect any bounce to be short lived.

On the question of Gold.. our member Opitz is correct, support is around $890. Personally what I do in situations like these is I will buy 1/2 of a position at current prices, and buy the second 1/2 of my position on a pullback (as long as it stays above the trend line). That way, in the event there is no pullback I at least established a position before it goes much higher. Remember, if the trend line in the gold chart is breached to the down side then you go defense and sell. At this time Gold is becoming a "safety" trade again, so I expect to see more upside this year.

Lisa will be back on soon, she has been on the road for a while. So for the moment it is just me here, but when she returns we will have more time to answer the many questions being asked to us. We love the questions.. keep them coming! The interaction between our members is wonderful to see!

I do have a trade idea for you this morning. This is a ’short’ trade idea. See the chart below.I would go short on this stock when price hits $23.25. And once the price does fail the trend line, then that trend line becomes your stop loss. It may trade in this pattern a little while longer before it fails the trend line. If in the chance the stock trades back up to resistance (top line) then I will enter 1/2 of the short trade at resistance, and then add the second 1/2 of the short on the failure below the trend line. This trade will be a many week hold once entry is made. I see a profit potential of near 35% over a longer period of time.

(MKSI - Daily Chart)