Pre Market – July 30th 2008
The following information may be useful:
FED EXTENDS SECURITIES DEALER LOAN PROGRAMS THROUGH JANUARY 30
- Increases swap line with the ECB to $55BÂ from $50B
- Will give dealers the option to tap up to $50B in TSLF loans
- Extends TSLF and PDCF programs through January 30th, 2009
- To add 84-day TAF loans (3x current TAF loan term)
- Plans $75B in 28-day TAF auctions
- Plans $25B in 84-day TAF auctions
- Cites continued “fragile” state of markets for today’s action
- Note: There had been some expectation that the Fed would make such an announcement, as the loan programs were previously slated to end in mid-September.
JUL ADP EMPLOYMENT CHANGE: +9K V -60KE
- Prior revised from -79K to -77KMBA MORTGAGE APPLICATIONS W/E JULY 25TH: -14.1% V -6.2% PRIOR
- Refi -22.9% to 1074.4
Someone asked yesterday in a comment if we “had an axe to grind” and that we are too negative. Lisa and I have worked extremely hard to stay on top of the unprecedented events taking place in the economy and within the markets. We are in a bear market and any rally is a “bear market rally”. The primary trend of the market is down and until that primary trend changes then we must continue to play the market for what it is, a bear market.
On September 25 of last year I wrote the following:
No one likes to hear things are not good, it is human nature. Everybody loves good news because it makes us feel good also. The things Lisa and I have been saying have probably not made you feel too good because we have not had good news to give you. Just as you don’t like hearing it we don’t like saying it. What you will always get from us is an honest and objective view of the US markets. Plain and simple.
We won’t be cheerleaders, we won’t be ‘pumpers’, we won’t be telling you to buy something only because an analyst says you should. We will never be a repeater of the talking heads and their messages. We do our own research and develop our own opinions of the markets based on charts, economic indicators, objective news, and so on. Some services will tell you to buy something because it will “go to the moon†(we hate those kinds of expressions, it suckers in unsuspecting people to put their money into something and they run a great risk of losing it). Back to what I was saying, we are different and we pride ourselves on this. It is part of our mission statement to remain objective, fair, and unbiased.
So why have we been so ‘bearish’? Because it is what we see. There are too many signs of a market sell off. This is why we want you to remain patient and let this market make its next move. And the move we see shaping up is down.
We want to get in the markets and start making trades, but we are not going to jump in just for the sake of “wanting to tradeâ€. We trade when the risk/reward is in OUR favor, not the markets. Some would say “but look at Apple, Google, and Amazonâ€, and our answer is we see it too but it does not impress us. You know why? Because they are being pushed, pumped, and hyped up while the rest of the foundation which makes up the market continues to crumble around them. If any of our readers have been holders of these names (add to that RIMM and NILE) you need to be sellers. Lock in your gains before they evaporate. Part of being a smart trader is to know when to back away from the table and take your chips. Of course someone will always say but what if it goes higher after I sell? The answer is ’so what’. The idea is to keep what you earned and not risk it from falling apart on you. If you think that you are going to always sell at the top then you are in the wrong game here. Those that wait for a top to take place will often find themselves trying to unload after it has rolled over hard. And then getting out is harder. Smart traders ALWAYS sell into the strength, not into weakness.
I wrote this back then after someone said we were too bearish. Remember that this was last September. I hope the person who claimed we were wrong back then was able to cut his or her losses. We positioned ourselves to be “capital preservation priority one” for the bear market that we saw coming last year. And to this day capital preservation remains top priority.
Hey Chuck and Lisa.
I see that the weekly MACD is rising from a bottom (XLF,XLY,UWM,DIA,SPY, and QQQQ) and is close to crossing the 0 line on most of the charts. The XLY and UWM are showing possible bullish divergences of the weekly MACD. This is strong bullish signal. Almost all the Asian market ETF’ are showing similar patterns to the XLY and UWM. I know the economic date is bas but the charts look sweet for a rally. In addition, if these divergences are confirmed then the rally will be huge and the next sell off will probably produce a lower high or another bullish divergence. Just my 2 cents but just try be partial and objective despite the negative economic data
I am long the XLF to 23- 24 price target. I plan on re-entering when prices fall to a 11-day ema.
I am long the XLY to 31-32 price target. I plan on re-entering when prices fall to a 11-day ema.
I am long the UWM to 53- 54 price targtet. I plan on re-entering when prices fall to a 11-day ema.
Bought the XLY and XLF last Friday and the UWM yesterday.
NEVER GO SHORT WHEN THE WEEKLY MACD IS RISING FROM A BOTTOM !!!!!
Chuck / Lisa,
what’s your opinion on SKF . Financial news, day by day , is getting bad, yet this Ultra Short ETF is still sinking …. any hopes on this getting to its recent highs again ?
Major shift from commodities to financials with outlawing of naked shorts and sell off in oil.
This will likely continue for 2+ weeks and may take SPX up to 200 day EMA. Institutions may start accumlating which would trigger a big rally.
Do not go short in this market.
seeblog..
The financial sector (XLF) is currently going through an extremely oversold bounce. Yesterday’s gains on the XLF was incredible for a one day move. This shows just how oversold it was. Today’s movement in the XLF appears to have slowed down with caution stepping back in once again.
I will post updated charts on the financials and S&P later today. It was my plan to do it last night but technical ‘glitches’ had me working until 4am to ge tthem resolved.
Jim,
As long as the primary trend of the market remains down (i.e. weekly moving averages, DOW theory, or whatever yardstick one wants to use the primary trend is still negative). And in a bear market you play in the direction of the primary trend. So these price advances simply present new opportunites to short certain sectors and indexs at the right time.
As with any trade, long or short you alweays wait for the right risk/reward scenario to present itself. And at this time the market is positioning itself for the next fall. A trend is valid until is is not, and the primary trend is still down.
huh ….
i’m stuck with SKF @ 180 … wish me luck …
Myles P. says:
July 30th, 2008 at 9:59 am
Bear TRAP!!!
Jim
I like your confidence.
Naked shorts have always been illegal this is nothing new.
This is just fodder from the SEC since they have nothing better to do.
Did you put any capital to use based on your idea? If so please explain.
The FED/Treasury are allowing Treasury yields to increase (probably to support the sale of $50 billion of new Treasuries this week). This rate increase inturn strengthens the dollars and weakens oil prices.
These are all short term interventions. Treasury rates may be forced down to stimulate the economy and everything will reverse. So watch the Treasury rates and bond prices.
Relative to this site, the comments are very helpful and objective. I appreciate the hard work of Lisa and Chuck. Thanks
Please don’t worry about being “negative”.
Most of us need your postings, seeking the truth.
If the truth is unsightly, then we have the choice to ignore it. Which, usually makes us ignorant.
If I want pollyanna, then I watch CNBC, and if I need to be deceived, I watch Fox (false) news.
I am glad not to have to pay bills with trading gains. Trading a bear market is quite difficult. Protecting capital is paramount.
Good, bad or ugly (which it is), keep up the great work.
My nominee for the next Treasury secretary: http://gmy.news.yahoo.com/v/9042818