End Of Month

End of month marking yesterday will try to be supported by managers today hoping that the redemption monster does not appear with a wave of selling. Credit conditions are improving for world bank flows but rates in the mortgage markets are on the rise as overall demand for safety competes for debt supply. Lots of liquidity out there but credit standards restrict the ability to gain broad participation in a world which has come accustomed to large volume on thin margins. Less people borrowing less reduces risk but is a lousy growth scenario.

Nervous Trade After Fed

Volatile trade late in the session today as thin trade became vulnerable to profit taking. Different news stories are always attached to this kind of action but the real reasons are technical in nature. Either way, bulls cannot be happy with the close and now must defend prices as the market spins not only into the week's end but also the month end. There is talk of buy side influence to be applied by managers who will mark prices before the last trading day of the month, though there was little evidence of it today. This is a bottoming process and may take longer than the friendlies would like.

Charge

The rally today had great net change numbers but was a bit shy on volume. Market clearly trying to form a bottom as bear traps continue to be the biggest volatile feature. Higher on the week now for the DJIA, SP500, and NQ100 but as in life, it is not how you start it is how you finish. A bottom can be confirmed this week with a few more blasts such as today. A reversal tomorrow after a Fed rate cut would be a problem for the current technical base but would only be part of the basing process.

Transactional Voodoo DooDoo

The Fed and Treasury are now trying to figure out how they can help insurance companies avoid the same financial problems banks are having. Geez, banks and insurance companies. Two groups who have lobbied their way into legislation which empowers them to every business advantage possible. Two entities every American has had to bend to so that they may comply on loans, liability, and asset coverage. These two groups have had a license to steal and still screw it up. If they are going to give money to these folks, there is a great argument for wiring all the cash directly to the general public.

The mighty hedge funds have been smoked in this market. Citadel has taken pipe because it turns out they never were really very smart after all. They thought that if you simply accrued enough cash and rode the same mania trades as everyone else, great profits and sizable fees would result by the shear size of the mountain of money being managed. This transactional frenzy into illiquid voodoo doodoo was their real strategy, just like the banks and the insurance companies. As for Citadel's reputation for poaching the best and brightest traders, apparently they hired a bunch of smart guys who in the end were just clerks.

Bubbles and Sweat

Before the highs in 2000, the hubris surrounding the 'new economy' as it was called, had the same conviction to joy as the current market has to despair. While the bubble unwinding and the events of 911 took the markets down some 35% over two and a half years, this market is spinning into its first 50% retracement in 26 years. Ridiculous values on the tops and frightening opportunities on the bottom are always the result of the market's over shooting during the price discovery process. The violence of sell offs, as every professional trader knows, is a faster animal compared to the best of breed rallies. While there is still hedge fund unwinding going on, this morning early action is just plain panic. Remember, this is part of the bottom, not the top.

Bear Hunt

Counting the weak links in the current technical picture is easier than usual. As mentioned in the last post, for traders, shorting here may provide a short term opportunity, but why bother. Yes, the number of big name stocks dragged down the stairs are now at a point where they are sitting or leaning on the very edge of ugly. GE made another 52 week low today under $18 and IBM is near the $80 mark, after an unusually hard break from the summer highs of over $130. CME is now over 60% off its goofy ass high of 705 when every moron was convinced trading profits would never end. Now they are tied up in the exchange jumping where there will be some reckoning over the future of transactional volume. Looks grim, but the downside price construct will only provide peril to traders as bear traps abound.

Fishing The Bottom

A general retreat again today but hard to muster any reason to be short and have a future in it.
Liquidation and redemptions are one thing to watch but initiating shorts is generally a bad idea here. Pessimism is the predominate attitude, just as twelve months ago I warned of the toppy nature of the markets. Now only a fool sees a opportunity on the last percentages of a downward move no matter how long they stretch the bear clock.

Bring Out Your Dead

Bad stories about big name individual investors from the corporate and hedge world keep being counted in the lines of wounded who have been liquidated, stopped, or margined-out during the October break. Previous hard corrections such as LTCM or even in the crash of 1987 never quite had the dose of slammage which has occurred in 2008. And while the interventions has been unprecedented, never have all concerned been so unsure as to whether the worst of the price erosion is over, or whether the current action is just a relief rally. When repeated testimonials acknowledge that losses of up to 50% of retirement eggs has now altered the future investment strategies of the mutual and 401K armies, there is a problem with the up in upward. There are even reports that there are not even enough pallbearers to carry out the dead among those who thought they were professional day traders. Anyway, the new trend may be born sideways.

Monday Morning

Indexes are somewhat quieter this AM with what would be called modest gains of 150 in the DJIA as of this post. Bernanke speaking today said he was not adverse to another stimulus package to help the public through what is generally viewed as a tough year ahead.

Oil has gone beyond the 50% retracement of the rally so any additional downside will be limited.

Markets should begin a process weaning off of volatility as the month draws to a close although trading ranges will remain historically wider.

Friday Raceway

Indexes recovered well today as liquidations faded and buy programs began about one hour into the day session. Big banks found early buyers as traders became mindful of the Treasury's warning it would be watching the performance of certain financial stocks. So the indexes now sit at or just below the mid point of this week's range. Just enough to provide a point from which Friday's trade can whip back and forth, with the last hour of trade to be claimed by the bulls or bears. A powerful rally tomorrow would confirm the worst is over for the diving team, while another hard break would be seen as a invitation for grim volatility.