Start Week

Lots of data this week culminating with jobs numbers on Friday. Markets act tired and cannot ignore the general uneasiness that prevail the trade business with continual talk of the need for creative measures to aid the credit world. Even daily higher highs seems difficult right now. No strength indicators currently.

Good Or Bad

The price 'constructs' for the three markets looked at on this site are of coarse the DJI, SP500, and NQ100. Their price activity over the last eight months have covered about all possible paths from giddy new highs to ugly illiquid breaks. All three indexes are tied at the hip, and a perspective view of each tells a bit about the other. For example, the DJI, would have to decline to about 10700 to catch up to the downside action of the NQ100. The SP500 would have to fall to about 1177 to get all three to be linked to a half way back price area establish from the July 06 lows to the Oct 07 highs. Price action has not been bad when looking at the long term trends. Now this may be good or it may be bad. Fed and governmental intervention occurred not long after all time highs for both the DJI and SP500. If intervention works for the indexes it will have long lasting implications for this bull trend which started back in 1982. However, if the current price constructs for each fail here, it will lead to another wash cycle pulling most asset classes into the dinger for a price exam. Markets need to get up and out of here soon.

Slightly Negative

Indexes could not get any traction during the session with the exception of the NQ100' s relative strength. After Wall Street closed the futures go hit with a negative read on Oracle. Internal strength data was slightly negative on indexes today but nothing out of the ordinary for a market back and filling. Tomorrow will be a better indicator of direction if bull or bear strength data appears.

Dullish

Quiet day as NQ100 advanced a bit with nothing else moving. DJI needs to get and stay over 12768 this week to step out of downtrend. Some successful operations, not members of bull or bear camps for a living, are still tremendously cautious and looking for a extended bearish trade. Data from models continues to be neutral with no power strength numbers that we saw in recovering from the breaks.

Rally's Strength

NQ100 caught up with the other indexes today as it rallied along with the DJI and the SP500. Seemingly strong rally had neutral to negative strength characteristics according to the models which is a bit troubling given the tendency for prices to abandon ground quickly. JP Morgan did nothing to dispel the view that they had pimped the Fed into the all but 1 billion of a 30 billion guarantee and had probably established a conscensus early they would have to pay up to get the Bear Stearns deal done. Now Wall Street is whining about increased congressional oversight, but still wants the Fed and Treasury money and most likely tax payer money eventually.

Hoping or Up

Markets will react to various economic data this week in hopes of finding more room to rally. Completely vulnerable to downside action, it is important to move out of this base area especially for the DJI which is somewhat the leader technically right now. SP500 performing OK with the NQ100 continuing to dampen upside picture for the overall index markets as it remains tired.

De-Greenspaning

There is no doubt a new view of risk is being implemented across asset classes and that the credit industry is the main driver. Leverage ratios are being recalculated and hurting any speculative positions with long open interest or holdings created in easier times. Commodity markets will receive the worst of it because ultimately they are small markets and often times liquidation is exacerbated by trading limits. Fed action accompanied by credit industry changes will lead to a deflationary path for most markets. This de-Greenspaning will play well for equities in the long run but make the search for alpha less important than benchmark methodologies.

No Go

Another failure to follow through with hardly any upside action. SP500 and Nq100 need to get and stay above 1303 and 1731 respectively.

Commodity Train

Commodities have entered the death dive price phase which always is a part of the their life cycle. The downside action is an event that becomes almost comical when observed first hand. Offers (pools) grow during the session on limit down days and traders wait for some sign of intra-day recovery or opportunity for any spread side action. Trading limits are a polite way to avoid total panic. But like someone waiting for there named to be called before they can go through a fire door during an inferno, limits can create even greater anxiety.

What started this sell off was a rally grown old, but oddly enough, the Bear Stearns collapse played a part. You see there is nothing that bothers a commodity trader more than a real event of price deflation. A sudden change in supply/demand can have quick and powerful result in price. When BSC went from 30 to 2 in one trade, that bothered anyone holding any speculative contracts of any kind. A slight nudge from margins or cashing up circles is enough to created a one way highway south.

Extending Gains

Markets need a boost on the upside. Feb 1 and Feb 26 closings had the same look as Mch 18 but really marked the end of short covering. Substantial gains today would go a long way to establish a base to work from during the Q2.

Rally Day

Rally covered the whole day and closed 'like a bull' as they say. Since the SP500 and NQ100 did not take out Friday's highs, the bears have some hope if they can get the SP500 June futures under 1316. Otherwise another leg up is looming. DJI however powered through the Friday high and has a potentially strong price set up for continued gains.

No Diving At This End

Both DJI and NQ100 avoided taking out last week's lows and the commodity markets were hit with heavy selling. Those positives elements are what is needed to work through the current market mess. An early rally provided enough courage to fight off a mid session break. Much has been made of the Morgan play and the reasons for it but it is clearly an absolute benefit to have Bear Stearns off the screen. Look for liquidation to be absorbed readily as long as there are no new big revelations. Real nervousness is prevalent for the first time in years and the super bears are convinced the current declines are not deep enough. Hmm. Sounds like the makings of a bottom. No one is happy except JP Morgan who has historically been a part of some significant lows.

Before Opening

Indexes down hard this AM, off there lows as of this post and tough to convince most traders to initiate shorts down here. The natural inclination is to look for a buying op and play that into something more. BaseOp2 programs seeing hands off indicators on opening but Gbase1 looping trend side model is friendly.

Tricky Play

When you have to sell, it can be very ugly. When you are forced to sell, you get $2.00 bucks a share. That is what Bear Stearns got at the end of an 80 year run. Now the boys at the Fed have crap all over their shoes and are in a battle to convince everyone they mean business when they say they will defend the markets. They have to punish the sellers some how and that is heavy lifting. Can they do it? Absolutely. But a what level? They seem willing to let the air out of the markets slowly if they can and have the PPT boys help with the ballast. Tricky stuff for anyone.

100 Year Flood / The Waterline on Risk

JP Morgan one hundred years later in the middle of a rescue plan to save the markets from internal meltdown as it did during the Panic of 1907. Just as then, the waterline on risk has been raised on financial instruments. The transactional hunger which drove the subsequent positions based on sub-prime executions are coming into the the transparent light of the marketplace and are an example of how the markets will continue to move from opaque to clear trading. However, even given the additional clarity, the edge for traders will continue to move into the value created by analytical methodology as knowledge based trading flattens. The cost of information will continue to be driven towards zero as will the cost of transacting business based on that information.

Tough Week / Sweet Deals

Interesting week. Indexes finished unchanged or higher on the week with NQ100 have a outside week higher close. But the action was dramatic with swings against troubling new from investment bank Bear Stearns and others. It seems there was a run on BSC when the likes of legendary fund manager John Simons of Renaissance Technologies decided to move billions out of BSC to another location. Simons, who had taken pipe of about 9% in August was not going to let this one get away from his once top dollar hedge fund of 30 billion. This and other events created enough worry to get Bernanke out of bed in the wee hours and create a battle plan. First, the Fed, JP Morgan, and BSC invented a financial wonder. The deal works this way; BSC gets a line of credit from Morgan, Morgan borrows the money from the Fed on the cheap, and the Fed guarantees the the money. Nice.

Discussions of where to put the money goes on continually now as managers struggle to understand what is 'investable' in this risk adjusting environment. There is serious talk by some that commodities, hard assets, present reliable alternatives. World demand has created a need for a range of commodities, it is reasoned, as price action has demonstrated. But it seems the reason for investing is merely that they are going up and any idiot can tell you piling onto a directional trade will give you misery as a return, as it did in tech stocks and real estate of recent times. Commodities are a trade, not an investment. Jim Rodgers, the ultimate commodity bull has been wrong for most of his entire life. He has been touting commodities from the day this trader walked into a trading pit in 1981. He is finally seeing a big run. It only took twenty seven years. Great call Jim.

This coming week, Fed rate reduction may leave traders looking for some catalyst for direction. Markets will just have to grind it out unless a mega price move points to market direction for the balance of the year.

Still Mixed

Markets recovered from steep sell off but in the end resolved little as to the recovery bottom or the downtrend. Standard and Poors announced that it thought the write downs for sub prime were about finished or half way through. Why should anyone believe any analysis of theirs since they have trouble judging risk as a business anyway. Friday is wide open for any direction and Monday will be a wait day for the Fed.

Failed Weekly Highs

Indexes could not put together a killer day and ended the session being chased on the downside. Lower highs and lowers low on the weekly price action are the current look for the DJI, SP500, and the NQ100 and that needs to be changed to get some type of traction. The overall mood is decidedly bearish and the cover stories about bad paper highlight a tremendously bearish attitude. The bears will try to set the table for a Friday rejection in hopes of sending the indexes lower for the third Friday in a row. The DJI is net just over two hundred higher on the week and well within disaster range.

Powerful Rally

Powerful short covering rally today as the Fed provided unique relief for bad paper. The breadth of the rally was strong with big buy programs executed, indicating the bear may have to rest awhile before being able to mount another assault. Last weeks highs of the March contracts in SP500 and NQ100 are 1345 and 1773 respectively and a close over then this week would signal the lows for the first half of 08 are in. That would lead to a retest of 1420 basis the spot SP500 futures.

Bottom Fishing

Markets continue to over-extend themselves on the downside as some sort of bottom is being fished out. News continues to be bearish with all sorts of content being published which addresses the derivative dangers and the threat they collectively pose to the economies of the world. Hell, the dollar bill is a derivative. Regardless, the price action will build into a some form of bottom either with high volume exhaustion or short covering structure which will disappoint those looking for the hard down completion.

Sleeping Comfort

Markets looking for a short term bottom with talk of an emergency rate cut. Hedge Funds are receiving margin calls with haircut requirements being raised. The result of course is the sale of quality positions by hedge funds to create some sleeping comfort for those who provide capital for speculation. Markets are oversold and are subject to short covering rallies.

Just Bad

Continued stress on the the indexes from bad data, bad price action, and pessimistic forecasts kept pressure on the markets Friday. Approaching quickly is the test of significant price areas and a potential emergence of a psychology of liquidation which can be a monster one should not waken.

Learning bad habits in good markets and learning good habits in bad markets is always the case, it is just that the former, when finally reckoned with, is so devastating, that the general trading community and the overall economy are left much thinner. The 80/20 rule is the same in trading, 20% traders know what they are doing and the other 80% do not or work on Wall street. We have moved into a new era of global electronic trading, but not new enough that extremely stupid strategies can avoid being executed. The success will always be in the strategies which identify risk first and opportunity second.

Lousy Jobs

Job's number was lousy, now the markets will try to discover a price level where a story can be built. The bottom comes when they stop selling the good stuff to pay for the bad stuff. The SP500 and NQ100 need to trade and hold above 1317 and 1746 respectively to claim any victory today.

Risk Legs

Indexes scrambled around yesterday with a quick look at the mid section of last Friday's hard break but reversed course and made new session lows. Continued negative news coming from the paper hangers with Carlyle Mortgage Fund missing margin calls several times on positions related to sub-prime loans. Also, the much awaited resolution of the Ambac problem is viewed as insufficient. All these issues continue to come from the risk issues created when positions became linked to financial products that were created from bad correlation models. In creating these instruments, little thought was given to the liquidity side spread leg which in the best of trades will only cover a portion of bad action. Risk spread legs are not made of gold, they are an admission at execution that trades are notoriously capable of moving away from you. When virtually all liquidity disappears on all products correlated to your own risk leg, there is no way to get it back. There is a trading expression which is that you only get one look at a bad trade. Meaning you get one chance to get out of a bad position. That apparently was at initial execution on the risk correlations trades formulated by Wall street.

Markets will wait for tomorrow's unemployment data to mark the week.

Late Rallies

Last two sessions the indexes have been on or near the lows only to have late rallies and end the day in fairly decent shape. Yesterday's late rally began when, CNBC's Charles Gasparino, the Judith Miller of financial television, again addressed the Ambac issue and the apparent resolution reached among the parties. The market has gotten two rallies from no agreement indicating how sensitive traders are to potential bottom action. No one wants to be left behind, just in case the worst is over. The NQ100 tested the lows and with the exception of GOOG acted well enough to avoid a dismal close. It will be the tech stocks that lead any meaningful recovery. Overall, the SP500 and the DJI are still acting as though there is buying interest at these levels, but that will disappear if there is another test of the lows.

Morning Market

Early pressure a feature again this morning with Intel talking about lower chip forecasts. Cheap dollar, crude prices, and continued bank/brokerage leaking is limiting the bull's ability to reverse prices declines. Bears looking to provide a new speedway to the lows with a lousy jobs number on Friday being the event to drive markets lower. The bulls hope if hard down does appear, it will be the end of a short, though somewhat unpleasant, correction.

Push

Market ended as a push on the day. No real buying showed up and the downside was limited to minor selling. Indexes seemingly content to slosh around this week until the unemployment data on Friday, although any sharp move before then could negate any influence the jobs data might have. Bears still have to battle election year influences.

Early Trade

Indexes trying to get a footing this AM. SP500 and NQ100 took out last week's lows overnight. Definitely a lack of consensus from all camps as to the near term outlook which usually means one can follow the current directional action.