The "Q’s" - QQQQ

Visa (V)

Visa is trading up after hours on their “better than expected” earnings for the quarter. On a daily chart if you draw a trend line on the peaks over the past six months you will see that the trend line slopes down and comes to around the $81 price range. Right where Visa is trading up to in after hours.

I’m seeing quite the battle take place between buyers and sellers right now at the trend line.

Market Close

I’m not as good with the market close reports as Lisa.. She will be back soon.

Now we get to the real fun part. Tomorrow’s Q2 preliminary GDP and jobless claims, and on Friday the monthly unemployment figures. Is the market now getting ahead of itself should the data be bad, or is it pricing in a better than expected data?

Better than expected, worse than expected.. why can’t the market just report the facts in terms of real gains or losses compared to historical facts. It is what Lisa and I always do, we think the rest of the market should do the same. Of course the big Wall Street analysts would be out of a job then because their ‘expectations’ would be meaningless 

Watching the earnings cross the wire and they are looking worse than the previous few days of earnings we have seen. I’m not watching the pump jam channel (CNBC) but I’m sure they are saying how great Visa’s (V) earnings are. On paper they did great, but I don’t share their view of future growth potential in face of a shrinking credit market. Plastic is of course taking the place of cash in so many things. But I feel that the trend to ‘charge it’ will decline sharply as credit continues to tighten further, not only in the US but around the world.

Before the night is out I will get some charts up for you.

Market Internals

MARKET INTERNALS UPDATE AT 2:00PMET

 NYSE volume 860M shares, about even to its six-month average; decliners lead advancers by 1.3:1.

 NASDAQ volume 1.4B shares, about 7% above its six-month average; advancers lead decliners by 1.3:1.

Credit Crisis IS global

It’s not just an American problem, anymore….

Banks rocked as Lloyds profits plummet by 70%

Ellen Widdup, Evening Standard
30.07.08

Britain’s banks were rocked today when Lloyds TSB reported a plunge in profits of £1.4 billion - a 70 per cent fall.

The result was far worse than a pessimistic City was expecting and raised fears for high street rivals.

HBOS, which owns Halifax, reports tomorrow and Alliance & Leicester the day after.

Lloyds TSB blamed the global credit crunch and losses in its insurance business. The figures will heighten government fears that more small banks could collapse like Northern Rock. Lloyds was regarded as the most conservative of the big banks and had won praise for resisting the temptation to make risky loans during the boom years.

Lloyds said it expected house prices to fall by up to 15 per cent this year, which would push tens of thousands of people into negative equity.

Banks have come under fire from consumer groups for squeezing customers with high charges as they themselves struggle with the downturn. Critics of the industry say not enough banking bosses have accepted responsibility for their failures by resigning.

Lloyds TSB chief executive Eric Daniels warned the British economy was facing a sharp slowdown in the coming months, and will grow by only 1.6 per cent this year - far lower than Treasury estimates of two per cent.

He said the crisis in the financial markets and falling house prices “have impacted consumer confidence and contributed to lower growth” in the last six months.

The bank made £599 million in the six months to June, down from almost £2 billion a year ago.

It said its performance reflected good “momentum”. But the City is now fearful for the company. Simon Pilkington of Cazenove said: “We perceive a longterm challenge to the group’s position.”

Lloyds shares were the biggest faller in the FTSE this morning, down 19p at 302p, with HBOS falling 7p at 265¾p.

FASB Delays Off Balance Sheet Rule Implementation

This just in:

FASB VOTES 5-0 TO DELAY IMPLEMENTATION OF OFF BALANCE SHEET RULE.This is the absolute worst decision I can imagine. The market “needs” clarity. The financial institutions need to reveal what they have in their level 3 assets (search our site for ‘level 3′, we have discussed this in detail many times).

Level 3 assets are those financial instruments that can’t be priced to any current market price. And as such we can’t see the true risk associated with these institutions. Level 3 is a holding tank for anything that a bank or other institution can claim as not having a valid market for and so they can mark the assets to a “best guess model”.

The Financial Accounting Standards Board (FASB) was to put in place new rules for handling these assets and to being them up out of the basement and let the market establish a price. Their vote to delay this action is a clear sign that they wish to keep the bones buried for as long as possible. Full disclosure is what is needed to end this financial mess, not more “hide the losses”.

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 $55B  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  -77K

MBA 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 trade”. We trade when the risk/reward is in OUR favor, not the markets. Some would say “but look at Apple, Google, and Amazon”, 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.

July 29th 2008

Hello Rebels.. I apologize for not getting the wrap up posted tonight. I got buried under in database maintenance for the web site. Ran into a couple problems but I’m still working through them.

I had hoped to post new charts tonight and discuss the events of the day. But computer problems kept me very busy all night.

I will try to address the questions left for us today in the comments and emails tomorrow.

See you in the morning..

Earnings - Centex (CTX) & Metlife (MET)

Home Builder Centex (CTX) report earnings for their latest quarter:

REPORTS Q1 -$1.36 V -$1.10E, R $1.13B V $1.3BE; CEO SAYS HOUSING MARKET WORSENED IN Q1 AND DOES NOT EXPECT IT TO IMPROVE THIS YEAR

- Q1 orders -35%

- Q1 Gross Margin’s -470 bps y/y

- Q1 closings -35% y/y

Earnings coming off the wires have not looked too good. Some good ones here and there but for the most part we’re seeing a continued decline in the overall average of revenues.

Another company worth a look is Metlife (MET)

REPORTS Q2 $1.30 V $1.51E, R $13.7B V $13.9BE, CUTS GUIDANCE

- Guides FY08 EPS $5.70-5.90 v $6.15e(prior $5.90-6.20)

The full wrap up tonight…

Bear Market Rally or Fundemental Reaction?

Is there a difference? It is Deja Vu all over again. The bottom in the financials have been established… woo hoo! Hold on… we have heard that before. It reminds me of the movie “Ground Hog Day” where Bill Murry keeps waking up each day and it is a repeat.

Kitchen sink, lanced the boil, cut off the gangrene leg…. whatever. This is a bear market rally and it really does not matter much was kicks it off. If the market does not close above yesterday’s high then this rally may fail.

will have to look over the charts tonight in detail. At the moment we are watching a bear market rally that got it’s kick from the financial sector. Oh yea, Merrill news is just so good it makes me want to rush out and buy Merrill shares… NOT!

Now the rumors are being floated that Citigroup will have a few more Billion to claim as a loss. Oh, don’t let SEC chairman COX hear that there is a consensus on Wall Street that Citigroup may have additional losses. He may halt all trading…

The SEC Chairman has gone off his rocker… or he has been “pressured” by Paulson and Bush to do anything and everything to keep the market propped up.

More later..

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