Wednesday, November 12, 2008

Well, Here We Are Again - 850 on the S&P

After a nice little 18% bounce off the closing price of 849 for the S&P 500 on 10/27, we've given up all of those gains and we're on the verge of breaking through these support levels. If we break through 850 (8200 on the Dow), the next stops are down around 760. Also, watch for hedge fund redemptions at 11/15. If the market breaks down again, expect people to buy aggressively trying to pick another bottom. This is trader's market that is not for the faint of heart.

The news tonight is painful on all fronts -

Intel - "Semiconductor giant Intel Corp. (INTC) slashed its fourth-quarter revenue view by as much as 20% because of "significantly weaker-than-expected demand," sending shares of the tech bellwether to 12-year lows and further rocking an already roiled stock market."

Applied Materials - Earnings fell 45% and "The job cuts represent roughly 12% of the company's global workforce and will come through a combination of work force reductions, attrition and voluntary separations. Applied Materials expects the job cuts and other restructuring measures to save $400 million.

The reduction is the second announced this calendar year by Applied Materials, which has suffered along with the rest of the semiconductor industry. In January, the company said it was cutting 1,000 jobs, or 7% of its employees at the time. "

Asian Markets continue to trade lower tonight on continued global growth concerns and serious questions about the US leadership on the bailout. In the middle of the bailout process, Paulson has changed the game plan AGAIN in an effort to speed up lending.

However, I think someone needs to address the elephant in the room - even if the banks were attempting to lend, who in their right mind is feeling confident enough to step into a bank and borrow? I think this is the great mistake that Paulson et al have made. They thought they could put a gun to the head of the banks and force lending, but if Frank the Baker has seen his sales slump 30% this year as Lehman and Bear Stearns shutdown, he's not going to rush to a bank to borrow under any circumstance. This is the great misunderstanding of all of the bailouts.

Our economy is finally experiencing the Great Credit Contraction of 2008. It should be interesting tomorrow.



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