Bernanke showing his true colors today. He tried to act like he was tough on inflation, he only talks tough. Behind the tough inflation fighting talk is Helicopter Ben. He's a Greenspan clone, easy money boys, come get your cash!!! The Fed's panicky move is not the answer for this market, you're gonna see lower lows, this only slightly delays the inevitable. Bear market is here to stay, no matter how many dollars Ben throws at the market.
I disagree that Bernanke panicked. He was looking at the money and inter-bank markets, where there were true problems. Having said that, I expect this bounce to fail and we'll re-test - and probably fail at - the lows.
What did happen then fellas? Well for one thing the Fed was very proactive and took a page out the Rubin playbook of active govt. (Many of you will remember how great we all felt with him buying American dollars and catching everyone off guard). I have always massivly believed that that's how you run a economy you use the govt to it's fullest ability, using every trick in the book, every bullet without crossing over into over regulation. The fed could of let the market figure this all out but... Japan had just dived 5% overnight and it was heading into a weekend... too 87'ish... add to that Countrywide customers with over $100K -the US insured amount- were making a run on the bank withdrawing funds...a pretty damn US big bank for that folks!... Indeed we were probably on the cusp of a great crash....A down 20% day. So in retrospect- it was of course a great move. And we have a damn good Fed head if you ask me it's just Paulson... what a disappointment he's been. >The easy reply here is that we go lower. The depth of the damage would indicate that but let's not forget Ralph Accompora's dying last call (he's finally retiring) is for a lot more down or some down he waffled of course but he was negative and so we must all to some degree be positive because Ralph is NEVER right! > The easy reply is that adding money into the system never works, that the rooster will come home to crow or whatever but in this case it's different. The Quant funds in trouble have already made 25% or more of what they lost back.. and new investors to the mortgage market debt I dare say are probably up nicely as well. Time folks. Ben B needed to buy time. We got through this little portion of the problem but here the weasel game analogy comes into play: do you squash the problem at one point only to see the problem squirt up somewhere else? Countrywide saved but what of next month? And here we have this mid month time period which is going to be troublesome for us going out- that's when the hedge funds get their redemption requests and when they start selling to meet the requests. Watch for weak market conditions at end of month time periods going out especially in October of course... What's scary was this weird S&P proclamation on thursday before the turnarounds that a big hedge fund was about to go under... That was out of character for S&P and that feared me quite a bit and bottoms come from fear... so I'm not willing to throw away the possibility now that we have seen the worse of this mess right here. Right now... The problem is I just don't feel convinced in my bones. Technical analysis is the study of trading patterns. Technicians look for repeating patterns. The current patterns are so extreme there are not enough examples to draw conclusions. On Thursday there were 1132 new lows on the NYSE the 3rd highest number ever recorded and 33% of the total issues traded. In the late 1980's whenever there had been more than 200 new lows on the NYSE there was always a retest of the low. There are nearly twice as many issues traded now so it is probably safe to double that number. That's 400 or so we got 1132 new lows! In fact when you break out new low new high lists solely how could you not say we are in a bear market? Thankfully we have other indicators. Some past frenetic patterns that are similar to today are: On October 19, 1987 the Dow Jones Industrial Average (DJIA) closed at 1738.74; in two days it rallied 17% to close at 2027.85 then fell over the next 6 weeks to 1766.74 on December 4, 1987, 1.6% above the crash low. The crash low occurred 37 trading days after the all time high of 2722.42 reached on August 25, 1987. On August 31, 1998 the DJIA closed at 7539.07, 19.3% off its all time high set 31 trading days earlier on 7/17/1998. It then rallied 8.2% over 16 trading days before retesting its low on October 1, 1998. The DJIA reached 7632.53 on October 1, 1998 1.2% above its August 31 low. **On August 16, 2007 the DJIA closed at 12,845.78, 8.2% off its all time high set 20 trading days earlier on 7/19/2007. At this point, judging on the past there is nothing to suggest last Thursday's low will hold as the low for this down leg. But what of a real rate cut in Sept? Can we bash another weasel with that? And make a new high with less issues participating in October and then.... The all time record for new lows on the NASDAQ was set on October 26, 1987 at 1534, 32% of the 4851 issues traded that day. On October 8, 1998 there were 1343 new lows or 28% of the 4849 issues traded on that day. The 480 new lows on the NASDAQ August 6, 2007 represented 15% of the 3182 issues traded and ranks 42 among the all time high number of new lows for that exchange. Not THAT bad.... The Federal Reserve Bank cut the discount rate by 0.5% on Friday and the Dollar Index dropped 3.1%. That can not be encouraging to foreign investors. Dollar strength here is VERY important. I'd like to see it start going up for once. On the weekend before the 1987 crash then Treasury Secretary James Brady gave a speech where he stated we would let the dollar fall to defend our balance of trade. Thanks James. Corrections that magically stop at 10% are suspect>>It appears 10% was a threshold that triggered some massive buy programs. However it's a tipsy curvy world and I don't know what to expect next. >> The Europe connection... It started there but it's been strangely quiet don't you think. Several; state banks several countries are on the hook here as it sort of looks like the US package up a bunch of bad loans and risk and made it look tripple A if this really unravels the lawsuits will be massive... right now it's a stew of criminals I'm afraid we have to let resettle too much is at risk to tell the whole truth now. ~ stoney
Just stay short, no need to use stops. It's just a sucker's rally with "no volume", no need to be worried about your bear market thesis.
Great day to short at the close. This market has an excuse to go lower now that all looks well. Going into Sept. 18th, there will be a significant drop and once they don't cut, a further drop. I's like to see a different catalyst besides all this FED rate cut crap. Becoming a redundent story...
the reason the market is so nervous about interest rates is because 50% of market is on credit. lots of leveraging.