Stock Market - Pre Open Report for March 18th 2008

Producer Price Index (PPI) data reveals inflation still rising…

 

FEB U.S. PPI TABLE
Table Of PPI Data From Labor Department, In Percent Changes

                                             FEB.     JAN.     DEC.

PPI, Finished Goods           0.3      1.0     -0.3
PPI, Ex. Food, Energy         0.5      0.4      0.2
Energy                                    0.8      1.5     -3.0
Foods                                   -0.5      1.7      1.4
Consumer Goods                0.3      1.1     -0.4
Residential Electricity       -0.4     -1.2      0.6
Residential Gas                 5.7      0.7     -1.5
Gasoline                             2.9      2.9     -7.6
Home Heating Oil            -3.7      8.5     -0.3
Drugs                                  1.3      1.5      0.4
Autos                                  0.8      0.3     -0.5
Tobacco                              0.1     -0.1      0.6
Capital Equipment             0.5      0.4      0.1
Intermediate Goods            0.8      1.4     -0.2
Ex, Food, Energy               0.6      0.8      0.0
Crude Goods                     3.7      2.5      1.1
Ex. Food, Energy              3.3      4.0      0.2

 

Goldman Sachs (GS) and Lehman (LEH) reported earnings and each has reported a ‘better than expected’. Oh goodie, the crisis is over (if you listen to the talking heads). No need for any rate cuts now… LOL

Today is a wait and watch day. 2:15pm is when we find out what the Federal Reserve will do. I can’t remember a time when the market has been so convinced that the Federal reserve will cut the Fed Funds rate by so much and with so much confidence it will happen. Makes me think of a ’sell the news’ once it happens, if it happens.

Market Close

The markets closed in the red after a crazy short week.  Next week the big drug makers report earnings and potential market moving economic data will help make next week interesting again.  The XLF (Financial ETF) was unable to break 28.00, closing at 27.20.  Noticed that even Microsoft (MSFT) couldn’t hold that spike up on earnings and closed down 0.93% on the day.

New York City Comptroller is suing 26 financial firms that underwrote Countrywide (CFC) stock and bonds.  Also suing more CFC officers and global accounting firms.  Citigroup (C), JP Morgan (JPM),  Goldman Sachs (GS), KPMG accounting and Grant Thornton are among those named in the class action suit.

Treasury Secretary Paulson says the stimulus package may help create 500,000 jobs this year and that checks may be mailed 2 months after legislation is enacted.  Tax rebate checks are going to help create 500,000 jobs?  Someone want to explain that to me?

Caterpillar’s CEO says he expects to see record results again in 2008 and sees top line sales to be above $50B in 2010.  He expects his company’s softer markets to bottom in 2008 and that any U.S. recession will be short-lived.  Wait a minute!  Isn’t this the same guy that was wailing away last quarter that the U.S. was looking at economic conditions not seen since the Great Depression?  Guess he finally got the memo to knock off all that negative talk.

There will be more commentary and charts later and over the weekend. 

Mid-day Update

The market continues it’s weakness and mini bounces aren’t holding.  GS had OK earnings, but their conference call wasn’t as positive as most would have liked.  As of this posting, the share price is still dropping, down over 5%.  The European Central Bank injected $500B into banks today to provide liquidity through year end.  That’s $500 Billion, wow!  Again, there were those cheering this event, but man oh man oh man!  That is a bit scary to me.  I sure hope somebody out there knows how to keep this all from unraveling too quickly.  I really do. 

I’m going to jump back into the pit now, because there is money to made no matter what this market is doing.  More updates later, but there isn’t any more economic data slated for the rest of the day.

Market Close

The Dow closed at the low of day.  A rather lackluster, but down trend day.  Just not a lot to report, mostly rehashing of the same issues that won’t go away anytime soon.  BusinessWeek is reporting that the SEC and US Attorney’s office in Brooklyn is looking into allegations of insider trading at Bear Stearns.  This is in relation to their two hedge funds that collapsed.  Apparently, there may have been some insiders pulling out personal funds during the time they told other investors to stay put.

Goldman Sachs reports tomorrow.  I expect great numbers and a glowing guidance.  Reuter’s is reporting GS is starting a new stock hedge fund of $6B, could attract as much as $10B.  Are they going to use the “black box” method again?  Didn’t seem to work too well for their Alpha Funds.  If they can pull in $10B, maybe they should just put a down payment on Citigroup.  Then when Paulson leaves the government position, he can head Citi. 

Adobe (ADBE) reported earnings, and the numbers weren’t bad.  They beat consensus by a penny.  After hours, the stock lifted a bit, then sold back down.

The number of companies announcing share buybacks just keeps growing every day.  Circling the wagons, I think.

Pre-Market Update

Good morning, Rebel Traders.  The futures were up big earlier this morning, but have since dropped to just barely on the plus side.  Hewlitt-Packard reported positive results and has everyone jumping for joy!  Pundits are saying since PC sales are up that means consumer and business spending is alive and well.  I’m glad they are doing well and they are gaining market share.  This is good.  But, I’m not jumping on that bandwagon.

Goldman Sach’s Global Alpha is looking at a $6B loss for 2007 from trades and investor redemptions.  Freddie Mac (FRE) posted horrible numbers and say they need capital.  They are “seriously considering” cutting their dividend.  Nordstrom (JWN) had a good earnings report and guidance, but Target (TGT) is sinking.  TGT announced a proposed share buyback of up to $10B (about 20% of outstanding shares), sounds a bit desperate to me.  Dillard’s (DDS) has announced a buyback of $200M.

Research In Motion (RIMM) has been given another upgrade, and pre-market the share price is jumping.  I expect to see plenty of selling into that jump.

Housing starts came in at 1229K vs 1170K consensus.  Building permits came in a bit lower at 1178K vs 1200K consensus.  A little mixed, but overall it’s nothing to write home about.

The FOMC minutes are due out at 2PM ET.  Many traders/investors are so entirely focused on getting another rate cut I’m surprised they remember to breathe!  Be careful out there if you’re trading, volatility is still king.

Big Day on the Dow?

The Dow was up over 300 points, the Nasdaq Comp. up almost 90.    Goldman Sachs says they are “short” the housing problem and they don’t seem to have any exposure to the CDO’s or SIV’s.  The other broker/bankers also reported that the whole SIV/CDO problem is contained.  Wal-Mart had decent earnings and forecast in-line revenues.  The Nasdaq 100 QQQQ’s jumped up, too.  Is this the “all clear signal”?  It all sounds good, right?  Two questions I would have is, why is GS “short” anything  and why did Citigroup, Lehman’s, et al., want an SIV bailout fund if all the problems are contained?  New lows outpaced new highs today and there is still a lot of selling into any strength.  Yes, some stocks recovered some of last week’s losses.  We said to expect a technical oversold bounce and that is what we got.  Nervous shorts were definitely covering.  The anxiety and fear in this market runs on the buy or the sell side, whether selling, buying, selling short, and covering shorts.  That’s why we are getting such big point swings on a day-to-day basis.  The bias is still to the downside at this point.

It is very difficult to keep emotions out of a day like today.  Seems like everything is going up and it will never stop.  There isn’t any real evidence of an “all is well”, we just had a technical rally and the Q’s experienced a short squeeze.  Option’s expiration is this Friday and I expect a wild week.

More later!

Goldman Sachs

I wanted to show you the GS chart. Just wanted to bring up that the GS (and the financial sector) is at risk of a hard pullback. If the financials fall again then the markets will follow.

The Day that Was - September 20th 2007

Now that 2 days have passed, the debate about the decision by the FOMC to lower the Fed Funds rate and also lowering the rate at the discount window still rages on. Just as people still debate to this day if Alan Greenspan did the right thing when he dropped rates many times in previous years. The actions of Tuesday will likely be debated for just as many years in the future from now.

As Lisa said in her earlier post this debate is a kind of ‘noise’ which can over time just get under your skin and make you emotional. And emotional traders make bad trades. What is done is done and now we monitor the markets for its effect. For that is all we need to worry about, the effects. If a recession is going to come then we adjust to it, if inflation returns then we adjust to it, whatever the markets do we adjust to it. And the reason we have been keeping you in cash over the past many weeks is because the markets have not adjusted to the situations yet. The market itself is confused and lost and is trying to finds it’s way. Technical indications of confusion and uncertainty have persisted and increases the risk of having trades go bad. The market is still in the ’round-a-bout’ (our readers in the United Kingdom will understand that one).

An example of a technical indication of a market which is still unsure of itself is in the financials. With all of the hype being pushed at you by talking heads on TV and from some of the other financial sites telling you that everything is fine and now is the time to buy then why is it that people are still selling out of the financials? Rebeltraders is all about reducing risk and increasing chances of a profitable trade. Not betting on ‘hope’. If the markets are going to get a footing and start it’s way up the bull road then we will be in there when we see signs of this happening. For us when we see dumping of shares in the financials and the housing sectors, even after the rate cut then we are not seeing a confirmation of a bull market. We are seeing continued fear which could topple the market and bring it back down. This is what we mean when we talk about viewing the broad picture. To look at a stock chart and say “this looks good” and take a trade based on that chart alone is being potentially reckless unless you broaden your vision to see the whole picture. Would you want to get on a roller coast ride at an amusement park where the bolts that hold it together are popping out and breaking? Not me! That is why we walk around it to inspect it and kick the tires before we say “I’ll buy it”, or in this case get on for a ride.

When the FOMC cut the rates so many people have said this will fix everything. Well we are not seeing it yet. The declining financial and housing sectors to us are bolts popping on the roller coaster ride. We will stay off the ride until we see the signs that it is holding together and is not falling apart. Preservation of ones capital is job 1. You only win in the stock market (swing trading, day trading, or long term investing) when you learn to protect your capital and adhere to risk mitigation.

One of the bolts that popped out of the roller coaster ride today was what happened with Goldman Sachs (GS). This morning they reported earnings that were much better than what the analysts were expecting. Even though they suffered losses over the past few months they were able to (at least by what was said in their press release) stem their losses and they performed better than what the analysts were fearing. So if it was so good then why did the Goldman Sachs sell off today? It was the classic “sell the news”. Recall a recent post I told you that the pros will always sell into strength. They take advantage of people buying the news to get out. When someone has substantial holdings of a stock and they want to get out they must have the trading volume in order to unload their shares. That is what happened today. With the news of a better than expected earnings report people were buying in on the idea that the stock would go skyward after that news. So people kept pouring money in while at the same time those holding large amounts of shares were dumping out. If the so called ‘pros’ or ’smartmoney’ or whatever you want to call them are selling huge quantities of their shares at the expense of the momentum players and other buyers hoping on a huge gain then that says other people are seeing the bolts popping out of the roller coaster and they want out. We want to see the mechanics come and put the bolts back in before we get on!

Tonight I am showing the Goldman Sachs (GS) chart.

Breaking News

You don’t see this very often. Goldman Sachs has just been downgraded to a “sell” by Ziegel Analyst & Co.

A sell rating is not a rating you see very often. (remember my views of analysts, they will always say to buy no matter how bad things are). But a sell rating on big name Goldman Sachs is now bringing the other big brokerages down. Who would have thought we would ever see a “sell” rating on ‘ol Goldman Sachs..

The market is a tennis match

And we are all sitting right in the middle of the court. We are in the middle of a war here in the market right now. We have a situation where the markets are “trend-less”. It is trading in a range of indecision and any news sends the bears or the bulls running. Only to have another piece of news switch the ball to the other side of the court.

When I sold all my open positions last week it was to protect the gains I had accumulated up to that point. And I have not recommended taking any new positions since that time because when the market is lost, like it is now, and trying to find a road to take we don’t know if the trend will go up or if the trend will be to the downside once it makes up its mind.

When the major indices are trading in a range between two points it is pointless to try and take new long or short positions until the market shows us her cards. The key is when the indices move up or below the current range they are in. Only then we can determine some sense of market direction. Until then it is safer to wait it out. I feel the only thing that will have a large enough impact on the market direction will be the FOMC meeting announcement on Thursday. The wording of their statement will be pivotal in helping set the market on some sort of course. Until then we may have some more extreme swings in the markets. And trying to swing trade while these emotional fluctuations in the markets are taking place is just asking for trouble.

Some would say that since the market seems to be in trouble here should going short be the best thing to do? Yes, if the market trend was to the downside. But we don’t have a trend here. What we have is fear and greed battling over every morsel of news thrown into the pits. At some point either the bulls or the bears will be driven out and what were left with will decide how we should position ourselves for our financial benefit.

An example of the feeding frenzy today is the news that came out around 2:30 that Goldman Sachs may have some problems relating to the sub prime woes. That news sent the bears charging into the pits and devoured all the bulls within a couple of hours. The chart shown here is a 5 minute chart of today’s trading on Goldman Sachs. Pretty scary chart.

Now what happens next to Goldman Sachs will depend on what the details are of this sub prime issue. The sell off in Goldman Sachs today was more of a “sell and I’ll worry about it later” reaction. People did not want to take any chances and they sold out quickly. Now it may turn out that the news is not so bad after all and then we will have a surge of bargain bull shoppers running in to grab up the pieces left by the bears. But only time will tell.

The financial sector was a big downer today (helped along by the GS story). When financials start selling out then that sends a new type of fear into the markets. And a type of fear that we have to watch and see how it unfolds. Adding more salt to the wound was a report that the SEC is looking into Bear Stearns and their restatement of losses at one of their hedge funds.

And to top off the day (actually started the day off) the housing data was released and it showed that existing home sales fell to the lowest level since 2003.

Just where does all of this leave us? A lot of people are licking their wounds tonight. They got burned big time by the massive drop today. At mid day we were having a bull rally and then all of a sudden panic fear took over and selling took over in force. Left a lot of people with wounds to take care of tonight. Tomorrow should be a lighter than normal trading volume day because nobody knows what the market is going to do next. And because of this more people are going to nurse their wounds instead of getting back on the horse.. just yet.

Fp80

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