Stock Market Summary for June 30th 2008

Have you ever had a mouse or other rodent die somewhere in your office or home? And you become aware of it by the smell? Well, that is what is happening in the financial sector. Something has died and the odor is spreading throughout the market. The market may not be able to put it’s finger on who or what has died and is rotting away, but it is reacting by getting out of the way before the carcass shows up.

Numerous financial stocks sold down significantly today, Lehman (LEH), Ambac (ABK), Merrill (MER), Citigroup (C), Wachovia (WB), Bank of America (BAC), and so on. Something is smelling up the joint and people are still trying to get away from it. While the broad indices remain oversold on a technical level, it has not stopped the selling.

Today was another episode in the never ending saga of the bond insurers. MBIA (MBI) has sold some of its municipal bond portfolio into the market to raise capital, although they claim they really don’t need it and they have enough cash to cover any claims. But the key thing is will they have enough to cover ‘future’ claims? There in lies the big question. My guess is no, they along with Ambac (ABK) are in for a lot more problems down the road and we may be witness to one (or both) of these companies becoming insolvent. What is worse is if they become dependent on the US Government to bail them out. Then you and I just took on another dependent as us tax payers will ultimately be footing the bill for one more disaster in the financial community.

Florida has joined the list of states who have now filed suit against CountryWide Financial (CFC). This bring the list of states suing the company to four. And more are very likely to follow. Bank of America (BAC) says they are still proceeding with their purchase of the company. Why? Bank of America has enough evidence with these suits being filed to easily get out of the deal on a ‘material change’ clause. Once Bank of America takes Countrywide on its books they are ultimately responsible for all the lawsuits now being filed. If I was was the CEO of Bank of America I would be running away from CountryWide Financial faster than Angelo Mozilo gets a tan each day. And it would appear that all of the cases being filed against Countrywide will be easily won by the plaintiffs for the evidence of what Countrywide had been doing for years is widely being disseminated into the media. And it most likely will not stop at CountryWide either, other lenders will be next.

So we have reached the end of the 2nd quarter and it did not improve as so many analysts had claimed it would. Suddenly the Government has been quiet, no more "the fundamentals of the economy are strong", even that claim is too wild to be passed on to the average person for they know it is not true.

Where are we going? Well you know our long term view remains bearish, but the short term is really up in the air with the indices oversold and the financial’s acting as if a big shoe is about to drop. I think we are in a wait and see mode right now, waiting for the carcass to float to the surface.

Completely off topic here…

If anyone out there is a computer and technology nut like I am then you are probably aware that today is the last day that Windows XP will be sold. Microsoft has taken XP off the market for good. And the only option people have now is Windows Vista (other than Mac). And if you are also a computer nut then you know that Vista ’sucks’. Well, in memory of Windows XP I bring to you this video made by someone else who thinks Vista is bad..

 

Good night Rebels.. see you in the morning.

Market Close

I’m just adding to the same post today.  The comment has a part of an article that suggests the sell off in LEH was due to "reverse window-dressing" and is a favorite of short sellers.  I don’t buy it, but we’ll have to wait until the truth comes out.  Today was a non-event, in my book.  It was a day to trade a couple of individual stocks while the indices traded in a very tight range.  I’ve seen weaker days, but there is no pronounced fear in this market, either.  We’ll have more later!

Update:  OK, has everyone gone on vacation, except me?  Or are we holding our collective breath until this market breaks one way or the other?

 

I have no solid facts for why this is happening, but it’s got the market a bit spooked:

LEHMAN MOVES OUT TO A NEW 52 WEEK LOW, BREAKING LOW SEEN IN MID-MARCH WHEN LIQUIDITY RUMORS HIT LEH AFTER THE BEAR STEARNS BAILOUT; LEH AT LOWEST LEVEL SINCE MID-2000

No Rhyme Or Reason

The indices have gained a little ground, but individual stocks are all over the place.  Not much rhyme or reason to how anything seems to be moving.  Oil is off it’s highs, but still above $139bbl, and the Energy people say US oil consumption is down 3.9% y/y, the lowest in April since 2002.  No buying conviction or selling conviction.  There’s some talk that the S&P will hit 1300….The Fed’s set 3-day repo of $6.75B.

Chicago PMI

JUNE CHICAGO PURCHASING MANAGER’S INDEX: 49.6 V 48E
sub-indices:
- Prices Paid: 85.5  v 87.5 last
- New Orders:  52.0 v 56.1 last
- Employment:  46.7 v 41.2 last
- Inventories:  50.5 v 42.2 last
- Supplier Deliveries:  58.8 v 51.0 last
- Production:  45.1 v 51.5 last
- Order Backlogs:  42.3  v 46.8 last

Stock Market - Pre Open Report - June 30th 2008

Pre market futures have been a roller coaster ride with crude oil hitting a new high, inflation in Europe hits an all time high of 4.0% in June, and LIBOR rates rose by a significant amount overnight

June 30 (Bloomberg) — The cost of borrowing overnight in dollars rose by the most since at least 2001 as banks sought funding over the end of the first half to replenish their balance sheets.

The London interbank offered rate, or Libor, surged 111 basis points to 3.61 percent, from 2.50 percent on June 27, the British Bankers’ Association said today. The gain was the biggest since at least Jan. 31, 2001, when Bloomberg began compiling the data. The rate was at 2.07 percent on June 20, the lowest level since December 2004.

Bloomberg Article

The record inflation data for the European nations raises the prospects that the European Central Bank will be put into a situation of having to raise key interest rates which would put further downward pressure on the US dollar. And now the rising LIBOR rates add to an already difficult situation of mortgage rates in the United States as forces that make up the prime rates in the US are rising. And rising mortgage rates in the United States only worsens the housing market.

Is everybody in agreement with where the US markets are headed? Absolutely not. Two major banks in France both issued their current views and they could not be any further apart from one another…

Société Générale analyst Albert Edwards forecasts the Dow Industrials dropping to 4,500 by the time everything is done. And BNP Paribas says the worst is over. Sorry BNP, we don’t share your optimism that the situation is improving.

We still see more, and perhaps larger, losses within the financial sector as the credit implosion has shut down the nations flow of money.

The volatile swings in the S&P futures have us not knowing the direction of the market upon the opening bell, we have to wait and see how the sentiment settles in the first hour to attempt to gauge the mood of the market. At the moment it would seem that even the market does not know where it is going today, yet.

Stock Market Summary - Sunday Thoughts June 29th 2008 - part 2

In my previous post I provided an article from a newspaper in Holland. To answer a question, no we don’t speak Dutch. But that Google translator works pretty well

So where are we headed? A bounce in the coming days or weeks, sideways trading, or a continuation of the rapid declines from last week? Technical’s are conflicting in that we are oversold with respect to the indices, but price support/resistance levels have us hanging in mid air so to speak. Tough call here. But we do maintain that this is a bear market and that any rally’s will be short lived and an eventual decline to near 10,700 can be expected.

What happens after that point is reached is likely to be another attempt at a market rally which could last all through the summer to begin another decline lasting all the way into the end of the year. Will we go lower than 10,700? At this juncture, the economic conditions say that we will. Won’t happen quickly, but it does appear from all economic data and technical indicators that this may very well be a very long bear market.

Indeed a "generational" change in the financial markets may be upon us.

 

 

 

 

 

 

 

 

Dow Jones Industrials

 

What is on the agenda for this week? Actually a lot considering it is a short trading week here in the United States.

 

Monday:

9:45 am: June Chicago Purchasing Manager (last 49.1)

10:00 am: June NAPM-Milwaukee (last 45)

Earnings:

Before the Open: LPHI, RBN, UDW

After the Close: HRB, HMX

 

Tuesday

7:45 am: ICSC/UBSW chain store sales

10:00 am: June ISM Manufacturing (last 49.6), June ISM Prices Paid (last 87), May Construction Spending m/m (last –0.4%)

6:00 pm: Fed member Lockhart speaks on the economy

During trading hours: Vehicle sales data to be released

Earnings:

Before the Open: STZ, MSM, SMSC

After the Close: APOL, GTOP

 

Wednesday

7:30 am: June Challenger Job Cuts y/y (last 45.6%)

8:15 am: June ADP Employment Change (last 40K)

10:00 am: May Factory Orders (last 1.1%)

10:35 am: Crude Oil, Gasoline, Distillate Inventories

11:00 am: Hank Paulson speaks on the economy in London

12:00 pm: Fed member Mishkin speaks at a conference in Israel

Earnings:

Before the Open: SHLM, AYI, FDO, ISLE, SGK, UNF

After the Close: PRXI, WDFC

 

Thursday

7:45 am: ECB Rate Decision

8:30 am: Change in Manufacturing Payrolls (last –26K), Change in Nonfarm Payrolls (last –49K), June Average Hourly Earnings (last m/m 0.3%, y/y 3.5%), June Average Weekly Hours (last 33.7), June Unemployment Rate (last 5.5%), Initial Jobless Claims (last 384K), Continuing Jobless Claims (last 3.139M)

10:00 am: June ISM Non-Manufacturing Composite (last 51.7)

10:35 am: Natural Gas Inventories

1:00 pm: US MARKETS CLOSE FOR HOLIDAY

Earnings:

Before the Open: CREL, MESA

After the Close: SYMM, PAY

 

Friday

US MARKETS CLOSED FOR HOLIDAY

Market Summary - Sunday Thoughts June 29th 2008

From ‘De Telegraaf’ newspaper in Amsterdam, Holland today we have this (rough translation from Dutch)

Fortis expects within the next few days to weeks to complete the collapse of the US financial markets. That explains the bank insurers interventions of the series Thursday at dealing with 8 Billion Euors. "We are ready at the last minute. It goes in the United States much worse than thought", said Fortis Chairman Maurice Lippens, who maintains that CEO Votron to live. Fortis expects bankruptcies among 6000 US banks that now lack coverage. "But Citigroup, General Motors, there begins a complete meltdown in the United States"

Well, now there is something to make the Sunday morning breakfast scary. We expect that there will be bankruptcies among banks and other financial institutions in the months ahead, let’s hope it is not as bad as Fortis is expecting. But, one can’t live with their head in the sand. Problems are numerous in the US financial sectors and anything is possible.

As I wrote recently, the markets are trading as if there is something very ominous about to happen. The "big shoe" is about to drop somewhere. Will it be a bank, brokerage, or some other financial institution? We can’t say, but confidence in anything related to the US financial system appears to be evaporating. Who will be the first to report they need more capital this week?

 

 

 

 

 

 

 

 

XLF (multi year chart)

 

 

 

 

 

 

 

 

 

Bank Index - BKX (multi year chart)

 

 

 

 

 

 

 

 

 

Broker / Dealer Index (XBD) - multi year chart

 

The market remains oversold with respect to technical indicators, a bounce can not be ruled out due to the oversold nature of these indicators, however the pessimism remains quite high and that may have more of an impact than anything at this time.

It was said by one financial analyst a few months ago (our long time readers know who we are talking about) that he viewed financial stocks as a "generational buy". Unfortunately, my view is that the markets as a whole may be in a "generation shift" from bull market to a completely different reality for a long time to come.

More later…

Stock Market Summary for June 27th 2008

Today’s action was somewhat reflective of investors being "in shock" from yesterday’s large loss in all major indices. Oil has increased yet again, hitting a new high intra day, gold is heading back up as well, and the US dollar is well, not good again as it is losing more value against other currencies.

The financial sector continues to be beaten down as investors are coming to the realization that future profits from these institutions are all but evaporated for many years to come. Financial institutions that have been somewhat immune from the selling recently have now succumb to the lack of confidence of their investors and are bailing. For example, today JP Morgan (JPM) reached a signifiacnt technical level which indicates that their stock price is now in trouble in the longer term. The markets remain very weak and there is a lot of chart analysis that we will be performing this weekend.

Tonight’s wrap up will be short for the reason that I want to look over more charts and do some economic trend analysis. Additionally, I am working on the new web site now as our new content management software has been installed on the server and I am beginning the process of setting it up.

Will be a very busy weekend here at Rebel HQ, but please check in over the weekend for more updates on today’s market action, as well as our thought for what is coming next week. You won’t want to miss it.

More to come over the weekend..

Market Close

So, was that a successful bounce off that S&P support?  Some thought so and decided to play a hand.  I’m not so sure that bounce was a very good one.  This was a low volume, tepid day.  At the close there was some jockeying for position before the weekend.  It’s a "place your bets for Monday’s open" close.  I don’t trust this market and I’m sure I’m not the only one. Obviously, the AAPL short was not covered and won’t be until it gets to 160.  We can wait.  This is a bear market, at some point it all goes lower.  All. 

Hope you all had a great and profitable day.

Market Update-1:44pm ET

We’re covering AAPL short at 160 area.  Market continues to weaken.  Next stop on S&P is 1270.  USD/JPY getting slammed.

Should also mention that JPM is selling down and is technically a broken stock.  It has broken out of a trading range.

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