As was expected American Home Mortgage (AHM) filed for bankruptcy this morning. No surprise here. With all the job cuts and bad news coming from AHM it was only a matter of time before they filed the legal paperwork for bankruptcy.
Over night the Asian markets were down huge. But before the end of the day in Asia they closed up from the lows. They still closed in the red but not as bad as it was at one point during their trading day.
US Futures were up earlier this morning as shorts in the markets started doing some covering in anticipation of any bounce in the markets. But during the past 1/2 hour the futures have been dropping. Will there be a bounce today? Following any huge sell off there is more chance of a bounce than not. It is a matter of large money moving into and out of short positions that mostly starts a bounce. But for the bounce to hold there has to be more than just short covering. There has to be substantial buying on the long side. Today will be a very strange trading day. I say that because I anticipate a large amount of continued fear in the markets along with risk takers doing some buying before the FOMC meeting tomorrow. A lot of speculation and taking any position (long or short) here before the FED meeting will be akin to dropping some quarters into a slot machine. There is no way to predict the reaction of the markets tomorrow. There are some well respected financial analysts who say that even if the FOMC cut the rate the bounce in the markets would be short lived and we will still end the year down. I feel that the financial situation has not been fully exposed yet. There is more to come and I anticipate that the unemployment rate report for next month will more accurately reflect the decline in the housing sector as builders have been cutting back in their work force. This will likely be reflected in the next jobs data next month. That kind of news would pull more money out of the stock market and into bonds and other perceived “safer” investments.
Fundamentally nothing has changed this morning from Friday’s bloodletting sell off. So any advance today could be met again with those still wanting to cash out on any advances. If the markets close up today it will be a signal of huge bets being placed ahead of tomorrows FOMC announcement. I don’t see any substantial buying today before the meeting.
Trading in this market is still highly risky. I do have stocks I want to watch but I any trade I take will be done with caution.
Stocks in the current newsletter are:
- Allion Healthcare (ALLI)
- Blue Dolphin Energy (BDCO)
- ENGlobal Corp (ENG)
- ExlService Holdings (EXLS)
- Layne Christensen Co (LAYN)
- NVE Corp (NVEC)
- Sun Cal Energy (SCEY)
- Syntax-Brillian Corp (BRLC)
For details on each item in the watch list download the weekly newsletter here
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