Dressing Up or Down

Indexes fighting to leave the consolidation behind after a Monday rally/reversal and a Thursday break/reversal. The fate of LEH and other financial stock concerns probably not as much of a factor in the market as the cable business shows present but traders have to deal with all the elements playing in the markets. Index prices would look much better with strong buying on the closes over several sessions, something they have been unable to do for some time.

Bear Play

Indexes feeding on the known negatives facing the financials especially LEH. This is a bear play that feeds on itself and where the money is being made by professionals in the market. Upside relief has faded on each recent attempt so the end of the spiral lower will come from a downside reversal on record volume.

Indexes Today

Slippery slope these days as markets cannot extend rallies. Indexes begin today with little new information but are sure to once again fly around in an extended range. Key areas to attain are the same as previous post. Rational to sell down at these levels still tough.

Key Areas For DJIA, SP500, NQ100

DJIA, SP500, and NQ100 all struggling to follow up on yesterdays action. While volume is less than yesterday, the markets need to get through some key areas on the upside to prevail. The DJIA needs to close over 11632, the SP500 over 1271.5, and the NQ100, the weakest link needs to climb over yesterday's high of 1815.25.

Underwriting Freddie and Fannie

The issue regarding the G's underwriting of all of Fannie and Freddie is too simple. Housing is where 'everyman' lives and to stand by and let the trade vultures create a run on the assets because of a perception there is nothing that can be done is ludicrous. Those who talk about the 'moral hazard' created by government bale outs are the same people who believe there are truly free markets and the Cubs can actually win the World Series. Forget it. We all live in the same house although it may be a smaller house these days. Wall Street always get confused about the difference between free markets and the freedom to make markets. The former is what you talk about when you wave the flag and vote the straight business line. The latter leads to massive losses as a result of faulty trade strategies and you need the G to rescue you.

Intervention Rally

The G has stepped in to guarantee the paper of Freddie and Fannie whatever the cost. While expected if the two mortgage giants could not stabilize, the action along with the other previous interventions amount to financial underwriting without peer. It will create a bizarre spread between the housing market, which will clearly begin recovery now, and interest rates, which will undoubtedly begin a rate climb for a variety of stimulative reasons primarily as overall demand for capital will climb in a environment where restrictive qualifications matter.

As to what this intervention means for stocks will be told by the trading action this week. The professionals are short especially in tech where a value play has created perceived downside opportunities in anything acting better than the rest of the market. More importantly, like all market traders, they do what is working and down has been working better than up. So if this market is turning, the brain function to turn down to up will bring more than a hefty rally, it will bring back the bull.

Motivational Selling

Indexes defending the lower part of the range this morning with a slightly but not totally unanticipated bearish unemployment number. Goldman cutting Merrill to a sell and other financial stock headaches keep a spin on the downside. No one is riding to the rescue so far as causalities now appear to be coming to those who bought the first break in debt and stocks. Bill Gross of PIMCO cries for more intervention as he lugs large positions of bad paper he figured would have been completely covered by the G by now. He and others are caught in a value play where main street is finding professional trade desks more than willing to sacrifice the brokerage side of the industry to the downside profits and potential bargains of much lower market prices. Whether the bears can deliver new lows will require a new set of tank treads as now the technical price values have reached levels where motivational short side reasoning gets tougher.

Negatives

Action continues to be bad as of mid session today. Bill Gross's comments about the potential "financial tsunami" if the Fed does not take on more of the bad paper is certainly the kind of data stimulating negative sentiment. The Republican Convention last night did not inspire any great hope that either Pres or VP can pass an economics class regardless of how the VP delivers a speech. The indexes are extremely oversold but are nervous about tomorrow's employment data.

Tech Is Wrecking

Indexes cannot get out of their own way given the action yesterday and so far today. Tech is heavy and dragging the others along with weak price action. The overall action is in danger of setting the table for a real run to the lows as election data also adds to the prospects of a Democratic victory in November. Historically the Democrats have managed the economy much better the Republicans but the professionals on the hedge side would not be disappointed in any scare that would enable bargain hunting later this fall.

Rally/More Data

Early strength today trying to establish the lower levels as tested support. NQ100 still needs to lead the other indexes higher and will have to have a couple of big days to get there from here. Volume should pick-up now that September has arrived but would a disappointment to the bulls if it does not. Obviously a big week for data so all bull-side evidence would go a long way in putting the lows behind.