New Year Action

DJIA, SP500 and NQ100 indexes all had solid rallies today as the best guesses for market direction played the odds on higher. It is hard to fade early action this year since bearish attitudes have clearly never been higher. Any redemptions aside, this market could rally substantially and still be no good in the end. Traders will follow early price action with the reasoning that it is hard to get motivated about downside potential after the death dive of last year. Trading institutions are leaning on the massive governmental rescue and putting trades on which are leveraged by excessive liquidity on the one side and the ability to purchase the best of the highest rated knocked down debt on the other. These trades have a longer time horizon but will pay well if the worst is over. The only caution today was the extremely light volume. The beginning of solid moves are built on sharp volume spikes. As today illustrated, much of the heavy lifting is being done without broad participation. Getting fund managers to deploy funds early and to flap those wings and scream like the chickens they are will take more than bull trap action this year. You cannot fool those guys all the time.

Markets 2008

This will be the last post of 2008 for BaseOp2 as the year of every possible directional swing comes to a close. While the individual and institutional investors struggle to comprehend the magnitude of hurt put on the money pile worldwide, the deep bid/offer index markets of the US continue to provide the mechanics for sorting out value. Legging into recovery will occur as professional trading strategies along with the support of governmental intervention discover what value combinations will be the underpinnings for market recovery. New rules will be part of the 2009 trading environment with less leverage, but just as much opportunity for those able to decipher risk points to buy and sell in building winning performances.

It is tough to be courageous in these markets, and is made harder when relying on those elements of the market to recover, banks and brokerage, which failed us so. They survived in large part putting transactional deals together which had no value other than passing paper. It is easy to build daily routines in business and in life which offer no challenge, create nothing of value, and ultimately fail to build wealth to power good works.

Dull Again

Not much to say today. Like yesterday, today's volume was diminished as zero rates collided with zero interest in equities. Maybe these are bargains of a lifetime but investors have little taste to partake when every five days some new disaster story hits the wires. Managers to manufactures, technology to banks, they all seem to flinch every time the morning trading bell rings.

Avoiding Road To Empty

The Fed had run out of room on interest rates so they basically told the world they would do whatever it takes to manage the current economic disaster. Gee, I hope that is enough because if it is not, we are all in for a long road to empty. Technical programs run here are happy with the rally but a couple of indicators still say not so fast.

Talent

Fed meeting today and tomorrow as they will obviously continue to provide the easing and other additional actions for a hopeful upturn from current dismal economic scene. Between revelations of money manager disasters such as Madoff's or the suspension of redemptions by Citidel, the world is still working through the unwinding of real positions initiated on perceptions of trading talent. Cheap money with lots of lending created transactional nirvana for the trading industry and now cheap money with little lending is helping drive the value of all assets lower. Real talent tells you where to buy it and where to sell it over and over again as it nets postive returns. It never works only from the buy side.

You Are Fired

Well the next phase of 'save us from ourselves' has started as banks such a BAC announce huge layoffs now that they have more than enough cash stuffed into the vaults. Rates are at zero and there is plenty of cash to go around, but like the Japan model, no lending. Well, no lending unless there are guarantees that is.

The great business class, preaching the merits of Republicanism and now once again needing to get bailed out. Not an idea what to do because the only real talent they have includes devising ways to make pigs look good.

As stated in previous post, some technical elements run at this location have rollover characteristics. The sound of the floor cracking is being heard tonight as markets sell off into Friday's session. A hard down day on big volume after repeated modest gains on light volume would not be what this market needs. These markets need to have hard upside reversals to remain base builders.

Rolling Over?

Little accomplished in today's action in either the indexes or economic events. Big 3 are going to get a small stipend and hope the rest will come later. Treasuries in the three month variety still a virtual zero and stocks slept on low volume.

Market timers will be looking for big volatility next week as the cycles start setting up for end of year marks along with the normal end of quarter positioning.

One of the indicators looked at here is starting to roll over but has not made new lows as of yet.

Negative Rates

Three month notes traded at a negative rate today as money continues to pour into Treasuries and away from just about everything else. Should those rates submerge more this week, it is likely to bring a serious attack on the legs of the current index support levels. Though there are compelling reasons to nimble on stocks with healthy cash positions relative to all obligations, that may be the basic necessity for any investments now that credit has all but been eliminated as a market driver. Generational ideas about low PE ratios now have their chance to prove they are valid entry indicators.

Obama Infrastructure

Early strength on Monday attributed to Obama's infrastructure pledge but markets are just simply finding lack of sellers as oversold conditions persist. The bottom formation of the DJIA, SP500, and NQ100 look solid enough to build on but needs a couple of stretches from powerful rallies to confirm the worst is over.

Stranger Than Fiction

The jobs number was bad but the reaction by the market to this point has continued to be one of dull interest in selling the lower end of the ranges. Big 3 pleadings on Capital Hill along with Fed cries for mortgage intervention form a backdrop to a stranger than fiction world of economic conditions being met with creative trading strategies based on building spread legs where any new positions are backed by government guarantees. Except for the limited uses of high frequency trading operations to generate income, the macro moves are being plotted to take advantage of the opportunities available over the next three years. Banks will be flush and even the worst the recession will be long passed. What is left standing besides the banks however will be of great interest.