Gold (GLD) Chart - July 17th 2008 - Technical Analysis

S&P 500 Charts - July 17th 2008 - Technical Analysis

The following charts are that of the S&P 500 Index. Each chart highlights a different perspective in time and method of analysis.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Market Summary - July 17th 2008 - Google and Microsoft say "oops"

Today was another wild day with a rally right out of the gate to only be quickly killed when the Philadelphia Fed data was released at 10:00am. It showed a continuing decline in the manufacturing industry with more layoffs and lower outlook for the future. That news sent the markets quickly and then they rallied once again. These bear market rallies can end in an instant.

And the bear market rally may have hit a big speed bump tonight when Google (GOOG) and Microsoft (MSFT) released their earnings and they were not liked one bit by Wall Street. Nasdaq and the S&P 500 futures dropped significantly upon the release of the news. At this time it appears that Friday’s open will be significantly lower. But, we are likely to see some extremely wild swings with options expiration put in the mix as well.

Merrill (MER) also reported and they experienced losses of $9.75 Billion is the second quarter. And it was not long before another CNBC reporter said that this must be the ‘kitchen sink’ thrown out the window. I have lost count of how many times the phrase "kitchen sink" has been reported by the media.  Merrill closed today at $30.79 and after they reported their significant losses they dropped to $28.65 in after hours trading. One other bit of news out of Merrill was that they have sold their prized stake in Bloomberg LP for $4.4 Billion. They must be having a hard time if they are having to sell their prized possessions to raise cash. I wonder how long it will be before we see office furniture and coffee pots for sale on Ebay from other financial institutions to raise capital.

Capital One Financial (COF) also reported and here again it was not a rosy picture. The CEO stated during the conference call that losses in just about all divisions of their business would see additional declines as the year progresses. What does their television commercial say "What’s in your Wallet?" I guess we should turn the tables and say to them "What’s in THEIR wallet?  Apparently less then they want.. ha ha

We are at the early stages of a possible bear market rally. A lot has happened over the past few days with the Fannie and Freddie catastrophe in the making, the incredibly stupid attack by the SEC on the ‘naked short’ issue, and wild price swings in the currency markets. It is enough to make ones head spin.

There was also a report today by the media that "we have left the bear market". They are referring to the magical 20% number that has been tossed around for many decades as the criteria for a bear market. The fact is we have been in a bear market since last November and we are still in that same bear market to this day. Bear market rallies do not negate the primary trend of the market which remains down.

Charts to follow shortly…

Some market humor:

Market Close with IBM, GOOG, et al

My mistake, crude options expire today.  This drop in oil prices doesn’t mean the end of a "bubble", as I’ve heard some say.  CNBC has been all over the "is this a commodity bubble bursting?" analysis today.  One day is not a sudden trend change.  I knew there was a good reason why I wasn’t listening to them anymore.  So in this options expiration week, the market has gone from oversold to (almost) overbought in the blink of an eye.  Who can take this seriously?  Ok, besides CNBC.  But, an oversold bounce has been in the works for awhile now, so it’s not a big surprise.  I do get a headache watching mania, but that’s all right as long as I’m preserving capital and making a few bucks, too!

IBM, MSFT (Microsoft), GOOG (Google) and MER (Merrill Lynch) earnings reports are listed below.  GOOG and MSFT missed, but some analysts are encouraging a buy on dips for GOOG.

GOOG REPORTS Q2 $4.63 V $4.74E, R $3.9B (EX-TAC) V $3.87BE
- Q2 paid clicks +19 %     - Q2 international revenue $2.8B
- Had foreign exchange rates remained constant from the first quarter of 2008 through the second quarter of 2008, our revenues in the second quarter of 2008 would have been $88M lower.

MER REPORTS Q2 -$4.97 V -$1.91E, R -$2.1B V $3.26BE
- Total client assets $, % y/y
- Total U.S. CDO exposure $4.5B v $ q/q
- Q2 net write-down $
- To sell financial data services
- Had $1.7B investment portfolio losses
- Had losses of $3.5B on super sr ABS CDOs
- Had $1.3B resident mortgage exposure losses
- Had a $2.9B credit valuation adjustment negative
- Merrill Lynch completed the sale of its 20% ownership stake in Bloomberg, L.P. to Bloomberg Inc., for $4.425 billion, and as part of this transaction has entered into a long-term service agreement. Merrill Lynch is also in negotiations and has signed a non-binding letter of intent to sell a controlling interest in Financial Data Services, Inc. (FDS), based on an enterprise value for FDS in excess of $3.5 billion.<

IBM REPORTS Q2 $1.98 V $1.82E, R $26.8B V $25.92BE and has upped FY guidance

MSFT REPORTS Q4 $0.46 V $0.47E, R $15.84B V $15.65BE
- Guides Q1 $0.47-0.48 v $0.49e, R $14.7-14.9B v $15.1Be
- Guides FY09 $2.12-2.18 v $2.16e, R$67.3B-68.1B v $67.3B  They are guiding lower.

More later!

Market Insanity

What can I say?  This is options, shorts and just garden variety mania.  Here’s the latest pawnshop operation results: (hm…some of the collateral wasn’t accepted)

NY FED: $51.75B IN BIDS SUBMITTED IN $75B TSLF AUCTION, $50.75B ACCEPTED, BID TO COVER RATIO  0.69 V 0.85 PRIOR
- Stop out ratio 0.25%

Bank News

UBS IS EXITING THE BUSINESS OF PROVIDING OFFSHORE BANKING OR SECURITIES SERVICES TO US RESIDENTS
- Swiss-based advisors will not be allowed to travel to the US to meet with clients.
- Announcement comes as company officers testify before a Senate panel looking into tax evasion. ABC News suggested last night that Government regulators had threatened to cancel UBS US Banking license unless they fully cooperate.

So much for that secret Swiss bank account I was going to open.  Shoot!  The Wall Street Journal reports the following on Wachovia:

Wachovia (WB):  10 SECURITIES REGULATORS APPEARED AT ST. LOUIS HQ, SEEKING INFORMATION ON VARIOUS PROCEDURES AND PRACTICES IN SALES AND MARKETING, INFORMATION ON AUCTION RATE SECURITIES OPERATIONS
- WSJ notes that more than 12 securities agents were subpoenaed by the securities regulators
- The state’s Securities Division is also conducting investigations into auction rate securities sales at Commerce Bank N.A. and Stifel Nicolaus & Co.
- Missouri Securities Division launched an investigation in April into Wachovia Securities and others requesting records and information. Wachovia has not fully complied with requests, "prompting today’s onsite inspection," according to the regulator’s statement.
- The action comes after more than 70 formal complaints were filed with the Missouri Securities Division over the last four months - all from investors that feel they were misled in their purchase of auction rate securities, according to the statement.

PIMCO-Wow

PIMCO NOTES IT IS ENTHUSIASTICALLY OVERWEIGHT ON AGENCY MORTGAGE BONDS BY 6%

This came across the wire, and I saw the word "enthusiastically".  I’m almost speechless, but let me give this a shot.  PIMCO is bragging that they bet on the right side of government intervention and manipulation of Fannie and Freddie?  They are proud of this?  Have they become the new "pumpers" of the market?  Something about this stinks, to me, but I should be careful before they send the SEC after me. (kidding)

Oil prices are dropping, I believe futures expire tomorrow along with equities, so I don’t really read anything fundamental in this move.

Philadelphia Fed and other Updates

The Fed set 7 day and overnight repo’s, accepts $7B and $10B, respectively.  Yep, no problems here.  Oil prices are moving back up, but hanging in around the $135.50 area.  Market is all over the place.  Positive Spin Award goes to CNBC again for their reporting on JPM earnings and the Freddie Mac bond sale.  JPM profit down 53%, and they thought it was great that it wasn’t worse.  57% of Freddie bonds were bought by central banks, and they said it shows confidence by foriegn central banks.  They are even a bit excited that the Philly Fed number isn’t as bad as last month: (told you any bad news would be dismissed)

*JULY PHILADELPHIA FED: -16.3  V -15E;  PRICES PAID:  75.6 V 69.3 PRIOR
- New Orders: -12.1  v -12.4 prior
- Employment: -7.3 v -6.9 prior
- Inventories: -7.5  v -12.6 prior
- Six-month business conditions outlook:   18.0 v 21.3 prior<

Pre Market - July 17th 2008 - JP Morgan profit falls 53%

REPORTS Q2 $0.54 V $0.44E, R $18.40B V $16.55BE
- Q2 ROE 7.0% v 22.0% y/y
- Q2 Tier-1 capital ratio 9.1% v 8.4% y/y
- CEO Jamie Dimon said, "Our expectation is for the economic environment to continue to be weak - and to likely get weaker - and for the capital markets to remain under stress. We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer.
- Retail Card Services provision for credit losses $2.19B v $1.67B q/q sequential and about double year over year.

Headlines can be misleading… CNBC is reporting the JP Morgan news as though it is wonderful. But the facts are that JP Morgan’s profits fell 53% from this time last year. Like we have been saying for many months, the big Wall Street financial institutions have lost one of their largest money makers which was the mortgage market. Without the mortgage market shuffle (buying and selling mortgage assets for profits) the investment institutions have lost a substantial ability to generate profits.

INITIAL JOBLESS CLAIMS: 366K V 380KE; CONTINUING CLAIMS:  3.166M V 3.180ME
- Prior Initial Jobless Claims no revision from 346K to 348K
- Prior Continuing Claims revised from 3.202M to  3.203MM

————————————————–

JUN HOUSING STARTS:  1.07M V 960KE; BUILDING PERMITS:  1.09M V 965KE
- Prior housing starts revised from 975K to  977K
- no revision to Prior Building Permits
* Increase in Housing Starts attributed to change in New York City construction codes effective July 1 which added back to the survey 126K units.  Ex-the Northeast,  Housing Starts would have been down about 4% rather than up 9.1%

A change in how data is reported is the reason for the headline gain. The devil is in the details!

Pre market futures are up and the market appears that it will open higher. We are not chasing or swing trading this move yet. Too many pitfalls remain that could take this bear market rally and reverse it in an instant.