SP500 Weekly Lows

SP500 took out last week's lows while the Nq100 and DJI were just able hang onto to theirs.Last Friday's late news by CNBC, drilling the bears, that Ambac had would announce a workout early this week was sheepishly covered with ten minutes left in trade today and revealed a workout never materialized. Oops. Well, if there is news, it will sure be news to CNBC.

Catching Cold

The bears have the early lead today so far with last week's lows as the target. If they are successful, there will be much groaning and despair among the TV talking heads as they struggle to understand the meaning of the decline. To them, up is up and down is, well, down is TV off. So what would stop the bear from hacking through the ratings? In actuality, their ratings and the hopes of the markets may rests on how much the expanding wealth of the outside world will step up and bale out the US markets by applying the power and velocity of world investment cash to the purchase US assets. The US catches cold and the rest of the world sneezes might be replaced with the end tag 'the rest of the world pleases.' This could have some uncomfortable side effects, such as possible greater foreign influence on domestic economic corporate affairs, but that may be the world created by the desire for ever expanding world financial interplay. The current value of the US dollar certainly is a factor in the overplayed commodity markets and may be as powerful in the foreign acquisition of US equities, real estate, and debt. Making a market for the rest of the world is a liquidity pool filled with players, fools, and opportunities. The question then, is this the opportunity for fools or players?

Banking and Brokerage Brothels

Looking at this week's action one can ask whether or not the action for the week indicates a top or a bottom. There is some range building being done which is needed to lift the markets, but direction could easily turn into another leg down as overall price action is linked to continued bad news from virtually every brokerage and banking brothel. Once again these guys have proven their profitable endeavors have been derived via transaction fees from financial products so poorly conceived they are almost useless in protecting any asset. These geniuses are great a marketing but not at making a market. If the market has misjudged the underlying strength of the current price construct, it will quickly adjust to the south.

Mixed Indexes

The Indexes ended mixed today as Bernanke testimony continued to sound more worried about growth rather than inflation and left the door open to more rate cuts. That really means he is seriously worried about the banking system and the consumer who has been virtually responsible for all of the economic growth over the last ten years. If the job market were to worsen appreciably, the financial outlook for the US could become unclear and possibly worse than imagined up to this point. Further, the US dollar continues to slide against the Euro in direct response to the Fed's interest rate inclination. New home sales sunk to a new 13 year low and banks may soon find themselves in a mortage bind do to a class action suit soon to be decided upon in federal court.

The bulls need to take this market to the next level higher or face the test of the lows. Testing the lows has been viewed as a buying opportunity by some trend traders, but it is one thing to talk about and another to act when the market gets there. In trading, the expression is Cancel If Close.

MBIA and Bernanke

Standard and Poors and Moodys have declared that they now trust MBIA, the battered guarantor. This confidence provides real bank balance sheet relief but hopefully a psychological boost to the fixed income and stock markets. But an interesting article in Bloomberg points to what the opinion of the debt investors is regarding MBIA value based on the bid and offer. In short, based on where comparable problem company debt is trading, the market believes it is junk.

Bernanke speaks today so the pounders and the lifters will be slapping at the big ball.

Moderate Action

Indexes continued the rally with moderate gains helped by the IBM buyback plan. While IBM's action does nothing for the larger issues facing stocks, it is another bit of news that peppers the bears. SP500 and DJI are continuing to add on to Friday's gains without much of a look back. They still need to make new monthly highs before a turn can be declared and as of the close the SP500 is 100 points below with the DJI 600 under. Despite the two and a half day rally, the indexes have shown short covering to be the only feature.

Driving PPI

Indexes reacting to PPI number early. Bears have been on their heels since late Friday's session and are looking for something to drive. Going through yesterday's lows would be the first meaningful objective for them.

The Gaming of Expectations

SP500 and DJI rallied strongly today as the market anticipated and received confirmation from S&P that the AAA rating would remain, at least for MBIA. Not much of a surprise really but the gaming of expectations seems to be the only way to get the inside track on a move these days. One can imagine the downside opportunity for those in the know if a snag were to develop at the last minute on the deal for Ambac Financial. But that is what the markets are left with since the general economic picture seems devoid of meaty move scenarios. Traders know however that even bullshit action can be powerful, so let the big dogs eat. The large cap techs such as AAPL and GOOG are having a tough time of it presently and the overall market will have trouble to produce a bull argument until they sort out a bottom.

Testing Friday

Markets will test the rally strength from late Friday as they get underway this week. A data heavy week which includes Bernake testimony will provide plenty of churning. Volatility has been declining for a month now as the markets have become more range bound. The consumer has taken some direct hits from energy inflation to housing de-flation and stock markets are unsure whether stimulus events are anything more than short term trade opportunities.

Bear Drilling

Friday's rally which began with about thirty-five minutes left in trading saved the bears from a lousy week. The bulls got drilled as short covering escalated into a rout after CNBC reported a possible workout might be announced early next week for Ambac Financial which holds about 500 billion in guarantees. As mentioned in the previous post, daily price action can be a trap and that works both ways with Friday's action. The bears got way to comfortable late, leaving the bulls to do hardly any lifting as the shorts scrambled. But the bulls will have to abide by the same rules in these ranges and be cautious of any action that does not lift the indexes to new monthly highs.