Wednesday, November 19, 2008

That's Wasn't a Pretty Day.

1) Markets - As I noted at mid-day, the markets were flirting with breaking down and they finally couldn't hold those old support levels. A lot of fast money bought the market last week on Thursday when we bounced sharply off the 8250 level. The retest held for a day, and then we began the slow gradual grind back down. This is a classic cycle in deep bear markets - rally up 10% one day and then lose 2% a day for the next 10 days.

Allow me a moment for a little tutorial on technical trading strategies. Let's say you have $100 to buy stock in the S&P 500. When the S&P started to bounce on Thursday, you might allocate 25% when the market first held, another 25% when the market was 2% off it's lows, another 25% at 5% off the lows, etc... until you are fully invested. Then you establish floors and set standing orders to sell the market if it falls to certain levels. This either locks in your gains or prevents losses depending on where you put in the floors. A lot of people had trading floors in around 8,200 in the Dow and when we took that level out more and more orders hit the floor. For an idea of where we might be headed take a look at the NASDAQ over the last couple of days since it broke support. We may bounce again sharply b/c of option expiration and the weird trading that occurs during Thanksgiving week (extremely light volume leads to weird swings) but the charts say we are going much lower and the fundamentals don't look any better.

The next levels that people are pointing to are down another 12-20% (7k Dow, 680 S&P 500, 1100 NASDAQ).

Wouldn't it be nice if we could all agree to stop watching the markets and go back to the business of business?

2) Automakers are getting no love - I really felt that a bailout of some form would come from Washington, but nothing seems to be on the horizon. The Screamer from Short Hills (aka - Jim Cramer) has said that without a bailout the Dow is going to 6,000. That's going to make some people more than a little nervous.

While I'm on the subject of bailouts - any bets on who is next to ask for a big bailout? I think it's even money between GE (yes, my beloved GE - I'm long this puppy since 1994 - what a shame) or Commercial Real Estate.

If you think the car companies can come up with some scary numbers, wait until a group of giant mall operators comes to Congress saying that without a bailout they will be forced to shutdown 17,000,000,000 sq ft of commercial space, putting 780 million people out of work (please ignore the fact that only 300 million people live in the US - we can't let facts get in the way of our plea for bailout C-A-S-H).

3) Personal Budgeting - This is a good time of year to be especially aware of loose spending habits and to try to gain control. As many of us have found out over the years any attempt to lose weight is most successful when achieved through healthy diet and exercise. It's not fun or easy (trust me -- running around Clayton in a 25 mph wind when it's 22 degrees out is the definition of NOT FUN), but it works.

When looking to cut credit card debt or avoid debt all together, the same is true. It's not easy or painless, but look for areas that have flexibility and cut back there first. I think everyone is going to have to be more cognizant of not just how much they are spending but how they are spending as banks look to improve their profitability through fees and higher interest rates.

Having said all this, the Bank of China will probably announce a new stimulus plan to give away 50" HDTV flat screens to anyone with a $40 digital converter box coupon and the market will soar 6,000 points (Normally, I charge for that kind of snark, but in the spirit of Thanksgiving that one's on the house).

In light of all the gloomy news I thought this picture might lighten your mood....

For those with tri-focals the towel dispenser says "Please try to touch "no touch" sensor without touching it". Oh, that's precious.


1 comment:

uk theses said...

probably!! looks like it was really creepy day, isn't it??