S&P 500 Futures - 60 Minute Chart

QQQQ Chart

This shows the next support region for the QQQQ

Market Summary for Sunday October 5th 2008 - S&P Futures Drop as Credit Crisis Deepens

From all accounts of news we are seeing cross the wires tonight the credit situation is still worsening. Confidence is quickly deteriorating in not only the US markets, but global markets as well.

Europe is scrambling to prevent bank runs by issuing statements that the bank deposits will be guaranteed by the Government. This following the apparent failure of two large European companies this weekend; Fortis & Hypo Real Estate Holding AG. See this Bloomberg article.

The S&P 500 futures are currently down more than 20 points at the time of this writing. The market is ‘not happy’ tonight and the selling continues.

The conditions that exist within the economy and the credit markets continue to worsen, and hence the markets remain under historic levels of stress. We are potentially looking at one of the worst bear markets since the Great Depression, and I don’t say that without weighing all of the current data facing our economy. The economic data that I have reviewed this weekend paints a very bad picture for the United States going forward. In some cases the data has deteriorated even faster than I originally projected just a few months ago, and even back then I was very bearish on the economy and the markets.

The bail out bill will not save the economy nor the markets. Unfortunately the Governments passing of the bail out bill is more likely to make conditions worse, not better. The bailout bill is all about Wall Street, not Main Street as you have been told by Washington,D.C. people.

Tonight we are seeing very large moves in the currency markets as risk aversion tactics are being placed. Asian markets are significantly lower at this time and reports of foreign Governments having to step in and provide emergency support to their currency are crossing the wires.

The markets remain ever so fragile and we can not rule out a massive ’stick save’ by the US Government. Maybe even as soon as Monday morning. This may come in the form of a world wide rate cut by many central banks, another round of global liquidity injection, or perhaps something we have not even seen yet. But the markets are screaming loudly tonight that trouble is still building. Attempts to keep throwing money at the system only makes matters worse in my view. The markets must be the final arbiter in this situation, anything else only makes the situation worse and prolongs the problem.

Wall Street firms and other holders of the ‘toxic paper’ must be forced to recognize their losses, not hide them. The $700 Billion bail out package is nothing more than Hank Paulson helping Wall Street hide the losses.

Under these extraordinary conditions we have to focus on the larger picture when we look at the charts. Attempting to predict near term movement in the markets is virtually impossible with every day bringing the potential of more news that may impact the markets in a significant manner. It is clear however that the big picture view tells us that the bear market we are currently in has the potential of going much lower before this is all over with. I do NOT rule out the possibility of the S&P 500 index dropping to 470 at some future date. I am not trying to alarm anyone, I am simply pointing out that from a technical and economic perspective that this is a possibility, and you should not be surprised if we find ourselves in the worst bear market since 1929. We have been warning of this bear market and the deepening crisis for well over a year now and what Lisa and I are seeing unfold with each passing day continues to scare us.

The S&P 500 futures are currently trading down near a strong support level (~1077). At this time we are only 13 points from that price level. There is a potential for a significant market bounce from this support level. However, I will point out that I will be shorting any rally as the big picture still says we are going much lower in the future. Should there be a rally then we will need to watch overhead resistance levels to be reached before initiating new short positions. In that way we obtain the best risk/reward ratios. One should never just haphazardly buy or sell (short) any stock or index without knowing where the best risk to reward profile exists.

It also needs to be pointed out here that the potential  exists for a significant market decline. If events overnight continue to worsen then the risk of a significant market decline must not be discounted. The potential is there for a very significant event in the coming days.

This may turn out to be one of the most volatile trading weeks we have seen in a very long time. Be prepared for large moves in any direction and also be prepared for significant intervention by world Governments to continue increasing in frequency.

Capital preservation continues to be the number one priority.

(S&P 500)

(Nasdaq -QQQQ-)

(Dow Industrials)

US Market Index Charts - S&P 500, Dow Jones Industrials, QQQQ (Nasdaq)

With the dramatic events still unfolding with the United States financial markets we have to pay close attention to the primary support and resistance levels.

The following charts are of the Dow Jones Industrials, QQQQ (Nasdaq), and the S&P 500. There are multiple charts of each index with each one being a different time frame.

Dow Jones Industrials:

 

 

 

QQQQ (Nasdaq):

 

 

 S&P 500:

 

S&P 500 Chart

UltraShort SKF Chart

The SKF is presently at a resistance level. The longer term trend line is still up. Any break above this resistance level would signal a significant upward advance in this reverse ETF. Fannie and Freddie news will drive this one direction or the other.

 

 

 

 

 

 

 

 

Market Close Update

The indices closed off the lows of the day, but it was still a bloody day on the Street. Volume remained low throughout the day, so ignore any capitulation talk. Three quick charts of daily Dow, Nasdaq and S&P are at the bottom of the post.  There was a lot of talk about whether the Feds should cut or raise interest rates, due to the horrible PPI numbers.  Blah, blah, blah….I really believe they will stand pat, or they will just make things much worse.  Flight to safety into the tech sector?  If you don’t like your capital, it might be a thought.  Otherwise, are they kidding me??  Hewlett-Packard earnings beat estimates, but let’s see if they can beat next quarter with a global slow-down.  Don’t get me wrong, I don’t want a slow-down anywhere, but let’s get real here with forward guidance!

HPQ REPORTS Q3 $0.86 V $0.83E, R $28.0B V $27.4BE
- Guides Q4 $1.01-1.03 v $1.00e, R $30.2-30.3B v $30.2Be
- Q3 operating margin 9% v 9% q/q; Non GAAP 10% v 10% q/q sequential

Talk that Lehman’s may have bigger write-downs than previously estimated is floating around again.  Lehman’s stock is down almost 13% today.  Oil traded between $111-$115, ending on the high side.  The US Dollar gave up some gains and Gold is back above $800/oz.

SEC’s Cox is putting together some "new" short-selling rules for stocks.  I predict that the only thing to come of this, is that Cox ends up having to actually do the job he should have done to begin with.  (Ok, bad sentence, but you know what I mean)  He will have to enforce rules that are already in place.

Here are the charts, (Dow, Nasdaq, S&P) have a great evening:

 

Energy (XLE) Chart Analysis

 

 

 

 

 

 

 

 

US Dollar Index Chart Update

The long term trend of the US dollar Index remains intact at this time.

 

 

 

 

 

 

Market Close

The Dow closed up 82 points, all other indices in the green, so it was a great day right?  If you were day trading some individual stocks, maybe.  Otherwise, it was nothing too exciting.  Tomorrow is options expiration Friday, and anything can happen, but sentiment seems to be a gap up-flat trade day.  I wouldn’t bet the farm on that, but short term moves are tough to get a handle on, options ex. or not.  The XLF closed above $21, but just barely.  The RTH closed higher than yesterday, but still under the trendline.  Oil prices traded from $113.40 to $116.25.  The US Dollar is still hanging in there, but I’m not optimistic (sorry, Karl).  Here’s a daily chart of the Dow, and we’ll see you later this evening!

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