Thursday, February 26, 2009
Today
The daily chart higher time frame had new momentum lows on its 3/10 oscillator and has started to correct up, price has now formed a 3 day triangle breakout mode. Breakout mode can take out either side, price pivots to watch on Thursday 751.25, then 739.75 and upside 779.50 then 796.50. Breakout after the first hour of trading will suggest the trend direction for the day. This says it all, do not grt to opinionated go with the flow
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FAIR VALUE = -70
ReplyDeleteBUY PROG = +30
SELL PROG = -170
CASHIN'S COMMENTS
THURSDAY, FEBRUARY 26, 2009
[AN ENCORE PRESENTATION]
On this day in 224 B.C., a world-shaking event struck the Middle East. And for a change it was not a battle nor a religious revolution. In this case it was just a geologic world-shaking event-the type we call an earthquake.
It ruptured and demolished the statue of Helios which stood at the entrance of the harbor at the then vibrant city of Rhodes. Crafted of bronze remnants of the war machines of earlier military victories, this huge sculpture by Chares of Lindos was deemed a wonder. In fact, it was nearly 12 stories high and became known as the Colossus of Rhodes, as you certainly recall - one of the seven wonders of the ancient world.
Though it fell in only the 60th year of its existence, no one attempted to rebuild it. Through the birth of Christianity and later of Islam it lay as a broken dream. Finally in 672 A.D., the then current rulers of the town sold it to a scrap metal merchant from Edessa.
To celebrate buy a colossal drink for some misguided modern day Middle-East potentate. Explain that eternal glory is a tough thing to measure on a current quantum-mechanics space/time continuum. Then drop him off at the fallen idols junkyard.
There was a lot shaking in the markets yesterday and some of it left a few traders shaky but not totally shattered.
Could We Get A V-Chip for Government Officials? – It was all Washington most of the time yesterday. The fact that the stock market was weak whenever a government official was on TV was painfully evident. When the House hearings with Mr. Bernanke finally, finally ended, the Dow rallied about 150 points, only to roll over in the final half hour when it was announced that the President would make a statement just before the 4:00 stock market close.
We won't waste time postulating on the causal link between the TV appearances and the selloffs. The coincidence of who's on the TV screen and the market direction has been undeniable over the last several weeks.
The market opened lower, we think, in mild disappointment to the President's non-State of Union speech. The disappointment seemed to be based in the emerging concept that the financial crisis/recession was starting to be used as a beard/catalyst for various other programs that have been on some wish lists for years or decades.
The early, mild, disappointment – softness was exacerbated by some dreadful data on Existing Home Sales. Then the House hearings filled the TV screens and the bulls headed for the showers.
When the hearings ended, as noted above, the stock market embarked on a rather nice looking rally. In the earliest stages of the rally there was a nifty little exchange on the floor. As prices started to rise, a young specialist turned to a senior associate and asked – "Why are they rallying"? The elder replied – "They just went to a commercial."
The last half hour fade was heavily influenced by the program players. That is evident in the final results. The Dow, the S&P and the Nasdaq each fell an absolutely identical 1.1%. That suggests the selling was not the result of news specific to any stock or sector. We sure could use that V-chip.
We Still Like Suspending Mark To Market – Chairman Bernanke admitted that "mark to market" was inefficient and maybe counterproductive in thin markets. But he shied away from endorsing a general brief suspension. We think he should rethink that posture. Markets for the CDOs which have turned into toxic assets are not just thin, they are virtually non-existent.
Our friend, Kevin Ferry, was on CNBC this morning talking about a market based proposal for amending or adjusting mortgage pools.
The proposal, which comes from the folks at Derivatives Bridge LLC, is based on the Treasury using TARP funds to buy up whole mortgage pools from the banks. The idea is to pay 60 cents on the dollar (triple some estimates). Each mortgage is re-offered to the homeowner at 60 cents on the dollar. Should the homeowner pass, the mortgage could be auctioned.
Cashin's Comments
Thursday, February 26, 2009
Page 2
The proposal can be found on the Safe Haven blog under the title "The Chicago Solution to the Mortgage Crisis."
Cocktail Napkin Charting – We, along with some other napkin aficionados, held out hope that Monday's brutal selloff might set the stage for a significant bear market rally. The recent action has introduced some doubts.
The Rally Case – The McClellan Oscillator, relative strength indices, and other oversold indices all reached levels usually seen right before large rallies erupted. There was a bullish divergence between the Dow, which broke its November low and the S&P which held. A savvy friend notes that the S&P held at a 61% (Fibonacci) retracement and then made a next day high. Some Elliot Wave counts suggest an up-leg looms. Finally, and perhaps most importantly, the S&P appears to be forming a reverse head and shoulders formation. A move above 783 could cause a breakout.
The Failure Case – is primarily that the market in the last few days has behaved far more weakly than the above conditions say it should. Additionally, we cannot forget that we got a Dow Theory sell signal last week.
Net/Net – Something big will be resolved in the next few days.
Consensus – The bulls have the ball. Will they advance it or fumble it away? Stay very, very nimble.
Trivia Corner
Answer - The hidden "fish" were: A) Feeling; B) Shakespeare; C) Spike; D) Embassy; E) Pray.
Today's Question - Do the Obama people know this? In a small county election there were four candidates: Larry, Charles, Sal and Ivan. The total votes cast were 8,341. Larry won beating Sal by 560 votes, beating Charles by 830 and Ivan by 981. How many votes did each candidate get?