Market Summary-Bailout Bill Does Not Soothe The Market…

Posted: October 6, 2008 at 9:05 pm by Chuck

No, the passage of the TARP did not, so far, lend confidence to the markets. Borrowing rates between banks (LIBOR) hit new highs and credit markets are still not functioning properly. There have been rumors, and pleas, for a virtual global rate cut. I don’t know if enough central banks are on board with the idea, at this time, but they are all trying to calm the markets. I know it seems hard to imagine, but the world IS still running. Global production is, and has been, slowing. But, the world has not come to an end, and neither will our markets. It is a time to be extra cautious and alert in our trading, but there’s no reason to stop trading. Long term investors need to take a hard look at where our markets are headed, and decide if they want to ride this out. I wouldn’t. But, right now, I’m a trader, not an investor. There will be better entries on many stocks, if one will be patient.

Chuck posted charts the other night, and I’m reposting 3 of them here. (I added a Dow Weekly, just for some perspective). Keep your eyes on the technical levels of support and resistance, those haven’t changed. As ugly as today was, it can still get worse for the indices. If we get a bounce from here (possibly on news of rate cuts), keep in mind that people will still be selling the rallies. We don’t have any magic crystal ball to tell us how long a bounce will last, or which support level will provide a tradeable bottom. That’s why we keep our eye on the technicals and watch for market-moving news. Our long term view remains bearish.

S&P

QQQQ

Dow

Dow Weekly

Many things are being done to assist the financial community and get money moving again:

THE IRS HAS SIGNIFICANTLY RELAXED THE RULES WHICH GOVERN HOW US COMPANIES CAN REPATRIATE CASH PARKED OVERSEAS - WSJ
- The recent IRS ruling allows companies to bring back money for months at a time without incurring the 35% corporate income tax they normally would owe.
- The move could help some US companies that are finding it more expensive to borrow short-term funds, by making it easier and cheaper for them to borrow money from their foreign units.

REPORTEDLY, THE FED AND TREASURY MAY TAKE ADDED STEPS TO SUPPORT COMMERICAL PAPER MARKET
- Steps could include the creation of a special purpose vehicle.
- Treasury would have to help Fed and the Fed can’t make unsecured loans where there may be losses.
- Treasury guarantee on lending could be one way to address legal constraints.