Aug 29, 2007 Speculative Stock Analysis, TTT.net Updates
The general market ate up the bulls today with the Dow ending the day down 280 points. Two culprits i believe to be the cause. 1: The Dow had made a very strong rally off of its recent bottom and came to a halt once price had risen to the top resistance line of a short term bearish channel which would be a signal for going short. Technically the market is looking fairly bearish and wont be surprised to see the dow around 12,800 in the near future.
2: In the Fed’s meeting apparently investors were hoping to hear something about the Fed cutting the rates to fix all this credit mess that has sparked this recent bearish activity over the past months since the Dow hit a record high near 14k. I think its likely we won’t hear anything about a rate cut until the Feds Sept 18th meeting, if the rates get cut at all.
At this point the markets tough to bet on as many stocks fundamentals are looking very strong yet that doesn’t seem to matter to the street in the face of credit problems and the question of what the hell is the FED gonna do about it. With the market in constant turbulence i’ve been taking this time to take a small step back and enjoy the sun and the last days of my summer which is why i’m 60% cash and haven’t been too active on the blog or boards. I’m taking one last summer vacation this coming weekend before the 90-100 degree weather here in Boise says adios amigos until next June. Every year me and a group of best friends head out to the Columbia Gorge to watch Dave Matthews perform 3 nights in a row at one of the most magnificent Amphitheater’s around. Maybe I’ll see some of yah there 
I’ll be gone this thursday – Monday.
August 28, 2007, 4:11 pm
Posted by David Gaffen
The dogs today were financial stocks, after Merrill Lynch provided the impetus for selling with a downgrade of Citigroup, Bear Stearns and Lehman Brothers, citing debt exposure. Those stocks lost 3.5%, 3.6%, and 6%, respectively, and being a peer of those companies, Merrill also gave up 3.7%, and it’s not hard to see why. As of last year, these firms were more or less money-printing machines, but now they’re facing the same winds blowing into their faces. Debt issuance, so important to the expansion in the last several years, has dried up; deal activity has diminished, and revenue from sales and trading on the behalf of hedge funds and other active players has dwindled. With earnings due from the largest investment banks in just a few weeks, the accountants hunkering down at the end of the quarter are going to be wearing long expressions. Merrill’s downgrade isn’t the first of it by a long shot — according to Zacks Investment Research the majority of analysts (seven of 13) still have “buy” ratings on Lehman, for example.
After July, 1990 and 1998 didn’t end well.
Today’s plunge represents the unwelcome return of a scattershot selling approach that comes as a result of not really knowing what to make out of the various threads pulling investors apart at the seams. A downgrade for the brokerages, lousy consumer confidence reports, news of losses in funds at State Street and opaque reports of bailouts by hedge funds of other funds, wrought an unsavory cocktail that resulted in one of the worst days of the year. The late slide in equities was triggered after the release of the Fed minutes, although it’s hard to point to why the minutes would be the catalyst — but perhaps some used the release as a selling point.
Sometimes it’s hard to avoid noticing similarities. While lines on a chart that look alike don’t necessarily mean much, Birinyi Assoc. noticed recently that the Dow peaked this year on July 17 – same as in 1990 and 1998. What transpired after wasn’t pretty, with 20% declines in each of those years.
AutoNation became the latest company with a CEO pounding the table for the Federal Reserve to cut interest rates. Mike Jackson, CEO of the car dealership chain, says the economy is “at a tipping point,” telling the Fed it should cut interest rates, following in the footsteps of other struggling CEOs from the auto and mortgage industry demanding the Fed rescue them. Since today’s Federal Reserve minutes were for the most part, useless, it’s going to be a long slog to the next meeting to see if the Fed will indeed lower rates, or rather, confirm what’s been allowed to happen in open market operations, where the effective funds rate hasn’t been anywhere near 5.25% in weeks. Some believe the spillover into the economy is starting to become evident, with today’s data on housing and consumer confidence, and these risks will prove enough to force the Fed to act. “The end result of what’s behind the scenes in the market is, these events appear to be weakening consumer discretionary spending and are going to put added weakness on housing numbers,” says Michael Strauss, chief economist at Commonfund. For now, the central bank is attempting to keep that chip in its pocket.
