Background:
- Last week, BSC's problem made the investement banks dived, BSC dropped 47% from $57 to $30.
- Monday, BSC was bought by JPM for $2 (0.0547 JPM shares). BSC opened at $3.17 and closed at $4.18, lost 86%. (BSC today traded at $5.5% today, I don't know why it didn't trade in the price range with JPM, will be $2+) All the banks dropped with BSC but closed higher than open.
- Yesterday, the INDU jumped 400 with better than expected ER from GS and LEH. GS +14%, LEH +33%, BSC +41%, MS jumped with all the investment banks for 14%+. Today, MS reported better than expected ER too (Expected: 1.03, actual: 1.45). MS gapped up +5.6% at $45.26 and pumped to $47.07 in the morning.
Hypothesis:
The Market is due for a pullback with yesterday's 400+ point jump. The market will go higher with yesterday's momentum and may pullback after reach the exhausted top. The banks are due for a pullback with the market for their huge last 2 days gains.
Results:
- With yesterday's momentum, the market went higher at open +69 and dropped quickly to negative, -66, 10:35. This is a sign that the INDU is weak. The market then pullup to its exhausted top +38, 11:45 and then the INDU dripped little by little with one direction till close, -293, -2.36%! There is a pullup at 14:40. Huge drop.
- The other banks (GS, MER, LEH, BSC) didn't go up much with MS and became red soon with the market. Only MS kept green +6%. Jaguar shortMS500@45.7 , 12:15 after a sign of weak (drop), it then with a fast pullup to 46 and dripped till the close. Yesterday's high is 43.22. Jaguar put a cover order at 42.7 which is higher than yesterday's dow's line (42.15). MS reached 43.07 and began to pullup. Jaguar CoverMS500@43.64+$1035 at the 1st pullup jump's pullback. The pullup go higher till 44.8, which is very big! Jaguar took a rest for the rest of the day after this hunting.
Improvements:
Should short MS after the pullup at 44.8 till the close 43.4. It is anothe $700. MS is very clear for a 2-3 days pullback. Today is the 1st day. It is safe to short again after the pullup.
Tomorrow's Preys:
Market Comments:
16:20 ET
Commodity Sell-Off Sinks Stocks
Dow -293.00 at 12099.66, Nasdaq -58.30 at 2209.96, S&P -32.32 at 1298.42
[BRIEFING.COM] Participants looking for a follow-through move to Tuesday's huge advance were sorely disappointed by the end of Wednesday's trading.
The move didn't happen - or at least it didn't happen much beyond an early uptick that was driven by Morgan Stanley's (MS 43.45, +0.59) better than expected earnings report and word from The Office of Federal Housing Enterprise Oversight that it was relaxing its excess capital restrictions on Fannie Mae (FNM 30.71, +2.49) and Freddie Mac (FRE 29.90, +3.88) to foster increased liquidity in the U.S. mortgage market.
The opening gains quickly evaporated following a broad-based sell-off in the commodity arena that hit gold hard. The yellow metal plunged $69.00, or 6.5%, to $939 per ounce. Oil was another notable loser, falling 4.5% to $104.48 per barrel, after a government report showed a build in stockpiles. Altogether the CRB Index declined 4.1%.
Heavy selling of the commodities evoked fears that it was more than simple profit taking after some big gains. Rather, the drop in prices, combined with a rush of buying interest in the Treasury market that was concentrated on the 3-month Treasury bill, engendered a sense of angst that it might be some forced selling by hedge funds looking to de-leverage or needing to meet margin calls; hence, the flight-to-quality into Treasuries.
Strength in the dollar amid the weakness in stocks and commodities supported the de-leveraging notion. In any event, it was remarkable that the yield on the 3-month Treasury bill dropped 27 basis points to 0.61%, marking its lowest yield in nearly 50 years.
A Bloomberg.com report that Merrill Lynch (MER 41.45, -5.18) is suing XL Capital Assurance over default protection on $3 billion of collateralized debt obligations added to the angst that led to a negative finish for all ten economic sectors. In fact, the major indices closed at their worst levels of the session.
The basic materials sector, which dropped 6.3%, led the list of losers, followed by energy, down 5.4%, and technology, down 2.8%. As one might expect, the defensive-oriented health care and consumer staples sectors fared the best on a relative basis with declines of 0.5% and 0.6%, respectively
...Nasdaq 100 -2.6%. ..S&P Midcap 400 -2.5%. ..Russell 2000 -2.6%.
The move didn't happen - or at least it didn't happen much beyond an early uptick that was driven by Morgan Stanley's (MS 43.45, +0.59) better than expected earnings report and word from The Office of Federal Housing Enterprise Oversight that it was relaxing its excess capital restrictions on Fannie Mae (FNM 30.71, +2.49) and Freddie Mac (FRE 29.90, +3.88) to foster increased liquidity in the U.S. mortgage market.
The opening gains quickly evaporated following a broad-based sell-off in the commodity arena that hit gold hard. The yellow metal plunged $69.00, or 6.5%, to $939 per ounce. Oil was another notable loser, falling 4.5% to $104.48 per barrel, after a government report showed a build in stockpiles. Altogether the CRB Index declined 4.1%.
Heavy selling of the commodities evoked fears that it was more than simple profit taking after some big gains. Rather, the drop in prices, combined with a rush of buying interest in the Treasury market that was concentrated on the 3-month Treasury bill, engendered a sense of angst that it might be some forced selling by hedge funds looking to de-leverage or needing to meet margin calls; hence, the flight-to-quality into Treasuries.
Strength in the dollar amid the weakness in stocks and commodities supported the de-leveraging notion. In any event, it was remarkable that the yield on the 3-month Treasury bill dropped 27 basis points to 0.61%, marking its lowest yield in nearly 50 years.
A Bloomberg.com report that Merrill Lynch (MER 41.45, -5.18) is suing XL Capital Assurance over default protection on $3 billion of collateralized debt obligations added to the angst that led to a negative finish for all ten economic sectors. In fact, the major indices closed at their worst levels of the session.
The basic materials sector, which dropped 6.3%, led the list of losers, followed by energy, down 5.4%, and technology, down 2.8%. As one might expect, the defensive-oriented health care and consumer staples sectors fared the best on a relative basis with declines of 0.5% and 0.6%, respectively
...Nasdaq 100 -2.6%. ..S&P Midcap 400 -2.5%. ..Russell 2000 -2.6%.
Yesterday's Market Comments:
16:30 ET
Brokers, Fed Drive Market Rally
Dow +420.41 at 12392.66, Nasdaq +91.25 at 2268.26, S&P +54.14 at 1330.74
[BRIEFING.COM] What a difference a day makes.
On Monday the market was rattled by the news that Bear Stearns (BSC 5.91, +1.10) agreed to be acquired for $2 per share and the fear that other financial firms might face similar solvency issues that precipitated that fire sale.
On Tuesday those fears were cast aside following better than expected earnings reports from Goldman Sachs (GS 175.59, +24.57) and Lehman Bros. (LEH 46.49, +14.74) that produced reassurances from both firms regarding their liquidity position. The ensuing response led to a massive rally in the financial sector, which gained 8.5% on the day - its largest gain since March 2000 - and led all sectors in the broader market.
The broad-based nature of Tuesday's rally led to gains for all ten economic sectors, the lowest of which was a 1.8% jump in the defensive-oriented utilities sector. That is respectable in its own right, but it qualified as an underperformance in Tuesday's market where the S&P 500 advanced 4.2% - its biggest one-day percentage move since October 2002.
Aside from the aforementioned earnings reports, the FOMC decision served as the other major trading catalyst. The committee ultimately approved a 75 basis point cut in both the fed funds rate and the discount rate to 2.25% and 2.50%, respectively. It should be noted, however, that the vote on the fed funds rate carried dissents from Dallas Fed President Fisher and Philadelphia Fed President Plosser who were in favor of less aggressive action.
The major indices backpedalled some in the wake of the decision as many participants were expecting a cut of 100 basis points. The disappointment soon faded, though, and stocks were quick to regain their winning form.
Notably, the FOMC acknowledged that uncertainty about the inflation outlook has increased, yet it still holds the belief that inflation will moderate in coming quarters. In turn, it left the door open for more rate cuts, saying downside risks to growth remain and that it will act in a timely manner as needed to promote economic growth and price stability.
The bulk of today's gains, however, were achieved ahead of the FOMC decision. To wit, the Dow was up approximately 300 points just minutes ahead of the FOMC decision at 2:15 p.m. ET.
Joining the financial shares in a leadership position were the homebuilding stocks. They got a lift from a better than expected Housing Starts report for February and a measure of hope that conditions may be starting to ripen for improved housing demand with the Fed's actions and reports that the regulator for Fannie Mae (FNM 28.22, +6.01) and Freddie Mac (FRE 26.02, +5.40) may soon ease its excess capital requirement for the government sponsored enterprises in a bid to improve liquidity in the secondary mortgage market.
The Producer Price Index was the other economic release today. It carried mixed news with total PPI up 0.3% (consensus +0.4%) and core-PPI, which excludes food and energy, up 0.5% (consensus +0.2%). The market managed to look past the core-PPI number, however, since it followed a tamer reading on core inflation in the consumer price index.
Separately, the equity market rally sucked some life out of the Treasury market as the 10-year note fell more than a point, driving its yield up to 3.46%. The commodity-driven CRB Index jumped 1.9% while the dollar index increased 0.2% in response to the smaller than expected interest rate cut
...Nasdaq 100 +4.4%. ..S&P Midcap 400 +4.0%. ..Russell 2000 +4.8%.
No comments:
Post a Comment