Rebel Traders – Analysis Without The Hype

These 3 charts are all of the S&P 500 E-Mini Futures. Each is a different view in order to gather as many support and resistance levels as possible for the short to near term time frames.

The opening salvo from today’s Wall Street Journal…

WASHINGTON — A frantic, last-ditch attempt to forge a relief package for the auto industry collapsed in the U.S. Senate, dealing a giant blow to the immediate hopes of the Big Three.

Senate Majority Leader Harry Reid of Nevada suggested the $14 billion wouldn’t be revisited until January. “It’s over with,” he said.

The talks, which appeared close to a deal several times, broke off due to a sharp partisan dispute over the wages paid to workers at the manufacturing giants.

General Motors Corp. and Chrysler LLC, which have said they can’t last the year without federal aid, both hope the White House will now relent and allow the Treasury to provide emergency loans from the $700 billion Wall Street fund, people familiar with the matter said. Mr. Reid also urged that option.

To date, the administration has resisted the idea. But “that may be where they go next,” said Sen. John Thune (R., S.D.). There is always a chance Congress will act sooner if one of the companies totters on the brink, although that possibility appears remote.

GM, in a statement, said it is “deeply disappointed” that an agreement couldn’t be reached. GM had told Congress it needs $4 billion by the end of the month or it might not be able to keep its operations going.

Following the failure of the bailout bill the S&P 500 futures dropped roughly 30 points. That follows the 15 point drop since the close at 4PM.

I’ll have more on the auto bailout bill issue at the end of this post. But first I want to get into the charts.

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December 11, 2008 6:40PM

S&P 500 E-Mini Futures continued to fall after the normal market hours today. At this time the futures are at 856. The sharp decline in today’s market action took out three support levels on the short term chart.

The financial sector (XLF) and the Bank Index ($BKX) both reversed their up-trend in a significant manner today. I will post updated charts of these sectors along with the full market wrap later tonight.

The WSJ is reporting tonight that General Motors (GM) has hired lawyers and bankers to mull whether to file for bankruptcy protection. The story goes on to say that the company may still need protection from creditors even if a bailout funding package is approved.

Other news this evening is the possibility that the US Senate may vote tonight on the auto bailout bill. Throughout the day it was beginning to appear more and more that the Senate will not approve the bill.

More later tonight…

December 11, 2008 9:05AM

Richard Davis, CEO of Us Bancorp said this morning in a conference call that the TARP program will only delay problems. Going on to say it cannot help companies with earnings issues.

Well golly gee… we already knew that. But now banks are admitting it. Give Mr. Davis the ‘honest banker of the day’ award.

Pre Market futures have once again played with the 900 level. Following the announcement of the weekly jobless claims they sold off more.

Chinese search engine company Baidu (BIDU) issued earnings a short while ago:

BIDU – GUIDES Q4 R$131-133M V $140ME ($151-155M PRIOR)
- Cites economic slowdown in China as having a greater than expected impact on online marketing particularly in machinery and franchising

Other Economic data released this morning:

October Trade Balance

-$57.2B V -$53.5BE
- Prior revised from -$56.5B to -$-56.6B

Imports: $208.9B v $211.8B prior
Exports: $151.7B v $155.4B prior

China -$28B v -$27.7B prior
Japan -$6.05B v -$5.6B prior
Canada -$5.96B v -$7.7B prior
OPEC -$14.05 v -$13.36B prior
Mexico -$4.8B v -$4.9B  prior
Euro Area -$7.71B v -$5.99B

December 10, 2008 11:58PM

Now it is on to the Senate for a vote. I understand that this bailout bill strikes strong emotions on both sides. But, I say it once again; I am NOT in favor of tax payer money going to corporations to rescue them from themselves. We were not the cause for their years of mismanagement, so we should not be on the hook to rescue them. They can continue to operate under bankruptcy protection, and emerge better and stronger years down the road. I’ll leave it at that… for now.

Today’s was another day of “going no where fast”. The S&P 500 ended the day right back at the 900 level. It would seem that this level has magnetic properties to it.

Until there is a substantial move one way or the other it is difficult to know where the market is going. Some will say that because the market is not dropping with the recent bad news it is a bullish sign. And some would also say that the market is just to afraid to move forward and it is a matter of time before another piece of bad news ‘breaks the camels back”. From the psychological perspective of traders… both assumptions are correct.

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To say the market has been exhibiting some wild moves lately would be a gross understatement.

Over the past several days I have written about the area around 900 on the S&P 500 E-Mini futures chart being an important level. That has been confirmed numerous times over the past two days.

The chart shown to the left is a 15 minute interval of the S&P futures showing open market hours along with the pre and after market trading. It is easy to see just how important of a role the 900 area has been over these past two days. Today the trading broke back below this level, bringing into question “will there be a bear market rally”?

There is a growing consensus in the market that a bear market rally is right on our doorstep. But so far the market has been having a difficult time trying to find a footing to get a rally going.

Earnings from Federal Express and Texas Instruments yesterday after the market closed put a damper on today’s market. It seems that just when you think the market is going to begin a bear market rally something comes along to dampen the spirit of the bulls to carry through on it.

My long time readers know very well that I expect this bear market to last much longer. Any rally will be a ‘bear market‘ rally, and the downward movement of the market will eventually resume in full force. I fully expect that 2009 will be another bad year for the equities market.

What will happen during the overnight hours tonight? Will the 900 level maintain its importance for one more day, or will it finally give way?

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