Cashin Comments

FAIR VALUE = -250 BUY PROG = -150 SELL PROG = -350
CASHIN’S COMMENTS
TUESDAY, APRIL 28, 2009
[AN ENCORE PRESENTATION]
On this day in 1942 (according to published reports) the U.S. Navy turned to rather unusual sources for military information. Actually, if you are any kind of student of U.S. history, and particularly of military and covert operations, the Navy's source may not have been all that unusual.
At this time World War II had recently begun (for the U.S. anyway) and, while most eyes were on the Pacific, the Navy was already thinking about the invasion of Europe. And, since the only place the Allies were holding their own was North Africa, they figured that invasion would have to be across the Mediterranean. And, that meant Sicily would be the key.
Now if this was 1942, and you were the U.S. Navy and you went in the chart room you'd have a problem. Because if you looked in the draw marked Sicily you might find its latitude and longitude but little else. There would be few files on the depth of harbors and almost no data on shore defenses. Not a very good data base on which to plan an invasion.
So..…to get data on Sicily you began to think what a less politically correct government might assume in time of war. Having read the tabloids, the Navy assumed a guy named Lucky Luciano might know something about Sicily. And, since he was early in on a 40 to 50 year sentence, he would have time to listen.
Mr. Luciano (according to the same published reports, your honor) did not recall much direct detail of Sicily but (according to the same reports) thought he might know a guy or two who did. And boy, did he!
Over the next 10 months the Mafia (er... an unknown group of partisans) provided enough data on Sicily's defenses that when the allies invaded (7/10/43) they captured the whole island in 37 days. And they killed 167,000 of the enemy while losing under 24,000 - - remarkable in any invasion at that time.
The story, of course is, we are sure, just a coincidence of history. And, the fact that Mr. Luciano's sentence was changed three years later (he was released from jail in 1946 and deported to - where else - Sicily - - despite about 35 years left on his term).
The whole thing is, of course, wild conjecture (except for the facts). We also hope to disprove the Mafia/Castro/ Assassination linkage in a future episode. Imagine, the U.S. Government cavorting with gangsters. How very, very unlikely!
To mark the day find some guy named “Don” and see if he has any contacts in Pakistan
The stock market got some help from mysterious sources on Monday. A fearful flashback caused a pause followed by a sigh of relief rally.
Swine Flu Gives Bulls Early Chills But Market Moves On Other Issues – The media obsession with the swine flu outbreak helped stocks start the day in the hole. Within minutes of the opening, however, the bulls circled the wagons and stocks began to tick up, albeit slowly. Then, the bizarre event of the day, hit the markets.
Just as the post-opening rally was beginning, rumors exploded on the floor that a mysterious 747 was cruising low along the Hudson River near the World Financial Center (a block from where the Twin Towers once stood). Then there were rumors that trading desks were being evacuated. Cell phone calls from the evacuees confirmed that and added that the mystery plane was being trailed by a fighter plane.
This flashback of 9/11 caused bids to be canceled all across the floor. Prices began to slip lower again.
That fearful sense of deja-vu can be demonstrated by this email that was sent by an evacuated trader to some friends:
Let me tell you boys!!! I just evacuated the trading desk here at (name of firm)…..the first fly by missed the building by no more than 300-400 yards...with a fighter jet behind it...than we watched it circle back over NJ briefly and come straight back toward the building at a little higher than eye level (I'm on 6th floor)….I told the desk I have seen this movie end before, first hand…lets go!.... we’re all back...but….wow!
For those of us who were here on 9/11, and especially those who had been in the buildings, a low flying airliner sparks involuntary reactions.
As it became apparent that this was just an ill-conceived political photo-op, traders returned to their desks and bids returned to the market. The sense on the floor was that we were morphing into a kind of sigh of relief rally. That rally took stocks back to Friday's highs around noon. Just as they had done Friday, these levels exhausted the rally and stocks began to fade again as the media shift back to swine flu reports.

Cashin's Comments
Tuesday, April 28, 2009
Page 2
By 2:00, we were back at the levels of the morning's lows. Once again the bulls circled the wagons and tried to rally. It was a tepid effort at best and never caught fire. The final 40 minutes were quite choppy as the closes have been recently.
One junior specialist was heard to ask a senior what the latter thought of the action. "There was no game today, kid. This was just batting practice." I agree.
Cocktail Napkin Charting – As noted above, the bulls exhausted at the same levels that topped the rally on Friday. That strengthens the possibility that we may be putting in a kind of rolling top. Things like the McClellan Oscillator are also sounding warnings of a topping formation. In fact one of the McClellan subsets (the Summation Index) is moving toward a level last seen when the Bull Market peaked in Autumn of 2007.
Several highly respected technicians point to a formation known as a Bear Wedge, sometimes called a "rising bear wedge." The S&P violated the uptrend line of the wedge in last Monday's sharp selloff. The rallies since have all failed to rise above that violated line.
The napkins suggest early resistance near yesterday's highs. So we'll call it 8125/8135 in the Dow. In the S&P that looks like 870/875 with back up close by at 880/885. On the support side, we'll stick with 840/845 for the S&P with a default to 825/830. On the Dow it looks like 7950 and then 7880.
Calendar Considerations – Traders are warily watching the calendar as April draws to a close. It's not just about the "Sell in May and go away" slogan, although that was a huge winner last year. They are also wondering if portfolio managers will "window dress"……oops! Forgive me. Yes, I know manipulating prices is illegal…..let me rephrase…..they wonder if PM's will buy more of their favorites which, naturally, are already in their portfolios. Or, has the rally been strong enough to just let them bask in the glow of the month to month improvement. The answer could mean a lot in the next few days.
The Stress Test – The fallacy of the stress test concept may be leaking into the market. Citi and Bank of America are said to have been told to raise more capital. From whom? Keep your eye on the credit default swaps of both companies. Recall that we haven't fixed short selling yet. I'm from the government and I'm here to help you. Yeah, right!
Consensus – This week's action may be critical in determining the next move in the market. As noted above, we see many signs of a rolling top. We'll get some housing data and consumer confidence. The bears have the ball again this morning. Let's see if they press the bet this time. Be wary and stay very nimble!
Trivia Corner
Answer - To arrange the $1000 in 10 bags so that he could select any number from 1 to 1000 without opening a bag, the series should be: 1, 2, 4, 8, 16, 32, 64, 128, 256, 489.
Today's Question - Let's make a deal - Bob the Bridge Junkie deals three cards face down from a well shuffled deck. To the right of a King there are one or two Queens. To the left of a Queen there are one or two Queens. To the left of a Heart there are one or two Spades. To the right of a Spade there are one or two Spades. What are the three cards?