Friday, November 28, 2008

More Holiday Trading

After trending sideways for the better part of the morning, buyers pushed the market to fresh session highs as the final hour of trading approached, but it wasn’t until the last 15 minutes that the shorts really got squeezed.

Interestingly, the automakers continued their recent bounce despite a lack of any apparent catalyst while the homebuilders pulled back after their recent run. However, the real head-scratcher is the action in bonds. The TLT continues to hit new highs on a daily basis, even with some positive action in equities. That suggests investors continue to seek the safety of treasuries and/or expect the economy to languish in a deflationary environment. That asset class is carrying yield of next to nothing, so it’s concerning that investors find it more attractive than equities. I plan on shorting TLT soon.

Another concern is the continued pressure on oil prices. Certainly, investors are following the momentum there, but we can’t dismiss the notion of demand destruction, which further puts the notion of economic recovery in question. It will be interesting to see what the reaction is should OPEC cut production at their meeting this weekend yet again.

The indices are running into overhead resistance, and that’s the only real insight that we can get from the action we’ve seen over the past two trading sessions. We’ve seen again and again how dangerous it is to chase strength in this market. The bears gave the bulls some room in the thin holiday environment, and I'll be watching to see if the buyers are willing to step up and provide support when we pull back.

Wednesday, November 26, 2008

Holiday Trading

Although just about everybody and their brother were fully expecting the market to give back some of its recent gains today, we had nice little day of holiday trading. Volume was thin, breadth was good, and except for a slight dip as the afternoon got under way, the bulls steadily pushed the market higher throughout the day. The bears typically give the bulls some room to run this time of year, but with the market running into overhead resistance on declining volume, it’s going to be tough for this market to make more progress to the upside.

While this is the sort of set-up that will get the bear licking their chops, we need to watch carefully to see how the market acts into a pullback. We haven’t seen any reason yet to become any less defensive, but we’ll be looking for indications that some positive seasonality might kick in as we head into December.

Tuesday, November 25, 2008

Could We Hold The Recent Gains?

More bailout news popped us up this morning, just as it looked like some profit-taking was going to kick in after a big two-day run. The bears tried again at midday to roll us over but couldn't gain any traction. That left the door open for yet another late-day lift and some fast swings in the last few minutes of the day.

Financials led to the upside due to the bailout move, while oil, gas and commodity-related names led to the downside. Breadth was nicely positive on the NYSE but fairly flat on the Nasdaq as technology stocks performed relatively poorly. Bonds were up big again and yields falling to almost nothing as investors seek safety away from the confusing equity markets.

It continues to be very chaotic trading, but the bulls have a bit of a squeeze going here with some help from Hank the Tank and his friends at the Treasury Department. These bailouts may be problematic down the road, but for the moment they are helping to boost the market a little.

After three positive days, I suspect the bears might be looking for some entries here soon, but we have the very thin and generally positive days around Thanksgiving coming up, so the likelihood is choppiness rather than any clear trends.

Most trading is focused on the indices rather than individual stocks; that gives many a much shorter-term time frame. It still is a bear market.

Monday, November 24, 2008

The Late Day Whipsaw Strikes Again

Other than another psycho 200-point move in the last 10 minutes of trading and a brief pullback following the Obama press conference, the bulls managed a pretty steady uptrend all day long. The financials, fueled by the bailout of Citigroup (C - commentary - Cramer's Take), led the charge, but it was a very broad rally with all major sectors up strongly.

Once again, the final hour of trading produced a big move with the bulls running over any shorts, but then in the 10 minutes we jerked around in a totally arbitrary fashion and whipsawed anyone trying to trade this market.

I'm sure there are traders who are enjoying this sort of market action, but most that I know are feeling extremely frustrated and/or lost. Trading lately is all about the indices and the highly leveraged ETFs, and the volatility is just too high to put much capital at risk.

I wish I had some better advice, but when the DJIA jumps 1,000 points in two days and then we have 200-point swings in the last 10 minutes, there is just not much you can do other than to stay patient and wait for better conditions. This is not a normal market environment, and if you try to force things, you will get hurt. The most important thing is to stay calm and wait it out. Things will eventually change, and we'll be able to be more aggressive, but for now we just have to watch and shake our heads at what is happening.

Friday, November 21, 2008

Another Friday Rally In A Bear Market

It’s not like the news that President-elect Obama has named Fed President Geithner as his Treasury Secretary really does anything right now to change whatever is going on with the financials. While it does remove some uncertainty regarding who is going hold one of the most important jobs in the country right now, the fact of the matter is that the shorts were probably leaning heavily on the banks, and all it took was a catalyst to trigger the sort of reflexive rally that was bound to happen sooner or later. I'm highly skeptical of the choice of Geithner, but I'll wait to see how it plays out.

Of course, even though some of the financials were able to recover from some ugly action, there’s still uncertainty regarding any sort of news over the weekend. Several big banks were trading like the market was expecting some kind of forced sale or bailout, so it will be interesting to see not only if anything happens, but how the market reacts if it does.

In the meantime, all of this recent turmoil, 7% intraday swings, and meltdowns in firms that everyone thought were rock solid really messes with Thanksgiving. Way back when the market used to act normally, we’d find that the week of Thanksgiving offered up some pretty good trading. However, this market is far from normal. It’s being driven by a short-term mentality, and we suspect that big money buyers who might be interested in doing some accumulation want no part of this craziness right now.

An example is AOD, a dividend-capture strategy closed-end fund. Trades at a significant discount to NAV; yields 37% - yes, 37%!! - as of yesterday's close and was down another 7% or so today on no news. Invests in megacap dividend-payers like XOM, ABB, etc. Obviously someone is getting out at any price. I am happily adding to my stake in the 5s. Anyway, I suspect that something is up in the financial sector, and how that plays out will determine how things shake out as we move forward.

Thursday, November 20, 2008

Is DRYS Insolvent? A Quick And Dirty Balance Sheet Analysis

With the recent crash of DRYS shares, I wanted to share a conservative balance sheet analysis for DRYS based on the balance sheet numbers as of September 30, 2008.

Shareholders equity is $2.1 billion.

Shares oustanding are 43 million.

This suggests BV of of $49 a share. Clearly this is drastically inflated given the market conditions.

So let's make some very conservative adjustments. First, write down goodwill ($692M) to zero. Also, vessels, on the balance sheet at $2.1B should be discounted by 50% because ship prices have crashed. JP Morgan came out today and noted that ships were selling for 50% less than even six months ago. The drilling rigs, at $1.4 billion can be discounted 10%. The long-term market for ultra-deep water business is still sound. Also because these rigs take years to build, I beleive that many buyers would step and pay a strong price, possibly full book value.

This adjustment totals approximately $1.8 billion, for an equity value of $330 million. At 43 million shares, this equates to conservative liquidation value of $7.70 a share.

Obviously these are my assumptions, but becasue I have written on DRYS I wanted to provide a fire-sale type liquidation value should the worst occur. Right now the BDI index is down over 90%...this has never happened before. Shipping rates are so low as to assume that we need no ships. The key is the ability to meet your debt convenants. If DRYS can do this (or more appropriate if they can convince thier lenders to sit tight), the business is worth more. Many have been concerned in light of the precipitous fall over the past few days. My goal is to provide a bare bones look. None of this assumes the 25 million shares that were to be issued for the new ship acquisitions. I can't imagine management going through at these levels...if they do, that will tell us a lot about their competency and ethics.

Position: long DRYS

a wish list

* Apple (AAPL) in the 70s
* Google (GOOG) hoping for an obliteration to a low $200 or even $1 handle
* Amazon (AMZN) in the 20s
* Adobe (ADBE) in the teens
* (CRM) in the teens
* Chipotle (CMG) in 20s
* Nintendo (NTDOY.PK) in the 20s
* Visa (V) in the 40's
* Electronic Arts (ERTS) under $15

cc from a horrible day

Columnist Conversation

Chart of the Day
Gary Dvorchak
11/20/08 4:46 AM EST

Click here for a great chart comparing four major US market bear markets.

73-74, 00-02 and this one are all -50% events. 29-32 is the next benchmark, that one was -89%. This data seems hopeful, barring a depression we've gone as low as the worst we've seen in the past century.

Of course we could end somewhere in between. The Nikkei is down 77% from its high in 1989. The Japanese experience has been described as a "lost decade" (actually two), but never a depression. So terminology may be irrelevant.

Position: None

I Scream Kohn
Marc Chandler
11/20/08 6:17 AM EST

Vice Chairman of the Federal Reserve Donald Kohn's comments yesterday were important. There are three take away points. First, he indicated that he thought the risk of deflation was small but it had grown recently. In this context risk is best understood as a product of credibility multiplied by capability. The credibility in this case may be low, but its ruinous capability is great.

That leads to Kohn's second point. Policy should respond "as aggressive as possible" to any deflation possibility. His remarks no doubt were prepared, but they are especially noteworthy in that were issued within a few hours of news that consumer prices showed their biggest decline in 60 years last month.

The third point, which is one I also have been making, is that the Fed is already engaged in forms of quantitative ease. One key way, though that it differs from Japan's experience is that the Fed's quantitative easing has occurred along side monetary easing or interest rate cuts. In Japan's case the BOJ had brought its overnight rate to zero before engaging in quantitative easing.

Because the effective Fed funds rate, which is what the futures contract is tied to rather than the policy rate, the futures are less helpful in signaling market expectations for Fed policy, but after yesterday's comments and data, there was increased speculation that the Fed may cut by 50 bp when it meets in mid-Dec.

In the currency market itself, it seems to me that the relationships that every one has been highlighting with the equity market may be weakening, but it is more as something to be on the altert for rather some thing to act on immediately...euro is holding its own against the yen and swiss franc despite the continued weakness in equities. Some EM currencies are firm, like Turkey-which cut rates yesterday by surprise. Even the ruble is stronger. But not all are firmer as the rand has been hit and the latam currencies are poised to open lower.

Position: smaller by the day

Met Life and Prudential Will Both Be Long Term Survivors
Christopher Atayan
11/20/08 7:00 AM EST

Met Life and Pru are both in the crosshairs right now as concerns are rising about their CMBS portfolio. I have had many private placement dealings over the years with both companies and have found them to be very careful and not the types of organizations to reach for yield by taking excessive risks.Moreover the quality of the professionals I have dealt with over the years was uniformly high.

With respect to the specific issues with real estate,remember, Met Life sold some of its largest real estate assets Peter Cooper Village-Stuyvesant Town and the two Met Life buildings for enormous prices at the peak. I pointed out at the time was a bearish signal for real estate as the life insurance companies are well equipped to look to long term trends in assets due to the predictable long term nature of their liabilities.

So while I am sure things are not going swimmingly for both, in the overall scheme of things my instinct is that neither is any real risk of melting down. While their is no doubt the current portfolio of investments is getting hammered , new holdings are being put on at attractive prices with very prohibitive make whole provisions. So for those with a longer term orientation both of these high qualitiy enterprises are at prices that make economic sense, as each will be a long term survivor.

Position: Long MET

Wish List
Howard Lindzon
11/20/08 7:20 AM EST

My post from yesterday was supposed to mark a bottom by me getting even more bearish.

So now that we have breached 8,000 on the Dow and Asia is slinking into oblivion tonight, what is one to do with their 188k plan?

I can only advise those who have followed me for quite some time and have been mostly in cash. To you all, I say it's time to go shopping for a few stocks. Once again, the stocks that I buy will all have pristine balance sheets because those are the only stocks that will bounce, when -- IF EVER -- we do bounce and or dare I say it ... bottom.

Here is my Hanukkah wish list for certain stocks.

* Apple (AAPL) in the 70s (I own it)
* Google (GOOG) will add some to the sheets in the morning and hoping for an obliteration to a low $200 or even $1 handle
* Amazon (AMZN) in the 20s
* Adobe (ADBE) in the teens
* (CRM) in the teens (I own it)
* Chipotle (CMG) in 20s
* Nintendo (NTDOY.PK) in the 20s
* Visa (V) in the 40's (I own it)
* Electronic Arts (ERTS) under $15 (I don't think it will bounce hard because of earnings preannouncement)

I will be plunging back in from a mostly cash position if we break 7,800 and get pretty invested for a trade at 7,600 and below.

For me, pretty invested right now would be 30% net long.

As a hedge fund manager in this environment, my having a good year means nothing. Even my most loyal investors can pull at a moment's notice. It's just a part of the business you have to factor in to your decision-making.

The stock market is broken and you must not be in a hope mode. You can't hide your statements. The companies on this list above are far from broken.

I am truly getting excited for owning some of the best brands in history at what I think are bargains. Time will tell as always.

Position: long AAPL, CRM and V

Reader Response to Buying From Bankrupt Automakers
Steve Birenberg
11/20/08 7:21 AM EST

Yesterday I posed the question to readers of whether they would buy a car from an automaker operating in bankruptcy. I received a large number or responses, many with well thought out comments.

By a 3 to 1 margin, Real Money subscribers say yes they will buy from a bankrupt car maker. However, many of the yes answers came with the same two caveats. First, everyone wants a discount. Second, and related to the first point is that people want to make sure the warranty would still exist but if it didn't a lower price to subsidize third party warranty would suffice.

Based solely on this aspect of the responses, I think that the CEOs ought to be revising their sales pitch for the bailout money. Based on what I heard, they kept going back to "no one will buy form us if we are bankrupt so bankruptcy is the same as shutting our doors and the ramifications of that for the economy are too great to risk."

Several subscribers noted a parallel between flying on bankrupt airlines and buying a car from a bankrupt company. A few noted this but qualified by stating that an airline flight is just a few hour commitment while the car has warranty issues.

One reader compared the issue to the runs on banks and brokers and felt a similar run could occur on a bankrupt automaker in terms of buyer boycott.. Another reader noted that resale value on US cars is already very poor compared to foreign cars so bankruptcy really would not matter.

A few readers indicated that they would buy form a bankrupt company but would not buy now when they don't know what form the company will be in a few days, weeks, or months.

This brings me to my final point. A few readers replied with tales of dealerships. One dealers says there have been zero, I repeat zero sales for several weeks. Another said that just one or two cars have been sold in the past month. Part of this could be due to the fact that uncertainty is keeping folks away form buying that would be buyers from a bankrupt company.

But more importantly, the urgent tone of the CEOs emanates from right here. Sales have slowed to virtually nothing. This is why the cash burn rate is so high and accelerating.

Position: No positions.

Memo to Prince Alwaleed
Doug Kass
11/20/08 7:27 AM EST

Prince Alwaleed is on the Dow Jones tape, saying that Citigroup (C) is materially undervalued.

Memo to the Prince: You have been saying that over the course of the last 46-point drop in Citigroup's shares.

Position: None

Fortress Worries About Obama's Plans
Michelle Leder
11/20/08 7:35 AM EST

Last Thursday, we had the spectacle of five top hedge fund managers testifying on Capitol Hill. Several Congressmen honed in on the current tax code which allows hedge fund partners (and other partnerships) to be taxed at a lower rate because of the rules on carried interest. At last week's hearing, George Soros and Jim Simons agreed that the rules should be revised. John Paulson, Philip Falcone and Ken Griffin offered several conditions.

The folks at Fortress Investment Group (FIG) weren't on that panel, but that same day they reported its first quarterly loss since going public in February 2007 and announced that redemptions were running around 25%. But it was some of the new disclosures in the 10Q they filed that piqued my interest.

While the warning about the potential change in the tax code in terms of carried interest has been in previous filings, the last line was new:

If legislation were to be enacted by the U.S. Congress to treat carried interest as ordinary income rather than as capital gain for U.S. federal income tax purposes, such legislation would materially increase the amount of taxes that we and possibly our equityholders are required to pay, thereby reducing the value of our common units and adversely affecting our ability to recruit, retain and motivate our current and future professionals. Senator Barack Obama, the President-Elect, has publicly stated that he supports similar changes to the tax code.

Also new was a warning of the increased attention on hedge funds by members of Congress and the additional regulation that this could bring. Among the concerns singled out was the SEC's rule on short-selling, which expired last month, though companies are still required to file the Form SH until next August: "Compliance with any new laws or regulations could make compliance more difficult and expensive and affect the manner in which we conduct business."

Of course, given Fortress' performance -- the stock has declined a whopping 93% since February 2007 -- new regulations seem like the least of their problems.

Position: none

The Princely Boost
David Sterman
11/20/08 8:13 AM EST

With all the current turmoil, it is too soon to expect an M&A upsurge. Those deals will come en masse when things quiet down and it is clear that we are just falling into a profound recession and nothing worse. Before then, actions like today's large buy of Citigroup (C) by Prince Alwaleed bin Talal bin Abdulaziz Al Saud is one of the few panaceas available to this market right now, single-handedly turning the futures around.

There have been a lot of investors on the winning side of trades these last few months, and seeing some of that money flow back into equities would be very supportive to establishing any floor.

Position: none

Dysfunctional, But Not Irrational
Geoff Johnson
11/20/08 8:14 AM EST

As the market makes new lows a fair number of market commentators and managers are out arguing that the problem is that the market and investors are irrational and are forcing stocks to trade at prices below their estimation of fair value. I continue to believe the coming drop in earnings will fully bear out the appropriateness of the stock price, especially in terms of multiples. In fact, there seems to be some sense of entitlement as to what a reasonable multiple is for a stock. I believe this may be a function of the fact that most of today's investors have not lived through a low multiple world and are adamant that whatever caused low multiples in the past is history, cannot happen again and that there is no new event that could make it happen now. Oh, really? I can't tell you what the low-point multiple will be, but I can say now is a great time to be open to the idea that it will be low.

I noted once before that given the market swings and volatility, this market is certainly dysfunctional, but the pricing of stocks does not strike me as irrational.

Position: none

Rev Shark Keeps Throwing Strikes
Doug Kass
11/20/08 8:17 AM EST

I am not worthy! I am not worthy!

Rev Shark continues to throw strikes, and his opening missive today is spot-on as he moves closer to winning the 2008 Cy Young Award.

Position: None

Coal...just ugly
Bob Byrne
11/20/08 8:18 AM EST

As an example of how ugly some sectors have become, I thought I would point out that the basket value of the Coal stocks I follow (ACI, BTU, MEE, CNX and FCL) has plummeted from 460 as of 7-1-2008 to a meager 77 as of yesterday's close...a decline of more than 83%

I know Doug has been or is short a number of these stocks...if your still holding short, what would make you cover?

Position: none

Should You Buy It? Addendum
David Peltier
11/20/08 8:32 AM EST

Sierra Pacific (SRP:NYSE) is changing its name to NV Energy today, and will trade under the new ticker NVE. Nice timing, Dave.

Also, another item that initially drew me to the name but didn't make it into the final copy is the recent insider buying in the stock.

Two insders, including CEO Michael Yackira have bought a total of 15,500 shares this month on the open market.

Position: none

Econ Numbers
RealMoney Staff
11/20/08 8:40 AM EST

Initial Claims came in at 542k vs 505k consensus. Prior weekly claims were revised to 515k from 516k.

This is the first time we have had 2 consectuive weekly readings over 500k since 2001.

Continuing claims came in at 4.01 million versus expected claims of 3.90 million.

Position: n/a

Futures did a fake out
James Altucher
11/20/08 8:41 AM EST

right before the unemployment data came out, futures were up slightly, now they are down about a percent as the unemployment data came in weaker than expected.

I called around a bunch of traders/money managers yesterday after the close. The comments from people can be summarized as follows:

- Most of the managers think we get one more whoosh down, hit 770 or so, and then "rip up".
- the qualification being , "unless the system is broken".
- People loved Alan Farley's comments yesterday on the site that perhaps the entire trading mechanism in the US markets is broken, particularly with the lack of an uptick rule. the idea being that at the end of the day the only volume is the electronic trading systems which are just smashing stocks down by shorting without the uptick.
- Mark to market remains a big debate. As Jeff Miller pointed out yesterday, many of these assets (securitized mortgages, etc) are performing fine, but hedge funds have marked them down to 20 cents on the dollar in some cases.
- Spoke to one fund manager of distressed debt. They are getting mega-redemptions from funds of funds that were leveraged up. However, the gates are going up. Hedge funds (some of them) are finally starting to say, "listen, we have to get out of these in an orderly manner and we are allowed to gate your redemption - meaning, you get it back when we feel like it."

My personal take: In the future things will be higher than they are now. Significantly higher. The bulk of the selling has been hedge funds and electronic trading. But, who really knows if we see more pain today or tomorrow or next week.

Position: none

Morning Prep
Ken Wolff
11/20/08 8:42 AM EST

The Market has been down all morning and was not helped by the jobless claims numbers... We are currently at 26.47 with no buying so far... We are oversold in the short term and should see a bounce this morning... I will be looking for minimal selling and an early pop anywhere from QQQQ 26 to 26.20 with a pop to 27.... Stay awake because if we get what looks like capitulation, we can pop 3 bucks on the QQQQ ... 25 to 25.50 would be what I would expect for capitulation numbers... Financials will lead us today if there is any serious buyers lurking...

Position: NM

If Only They Were Lending Right Now
David Sterman
11/20/08 8:51 AM EST

It's hard to overlook the associated drop-off in bond yields. The 10-year is at 3.25%, and the 30-year is nicely below 4%. That should be great for mortgage rates, car loans, etc. Hopefully, when things quiet down, rates will stay put and increased lending activity can keep economic activity from falling off a cliff.

Position: none

PDCO - no tooth fairy in dental land
Justin Ferayorni
11/20/08 9:00 AM EST

PDCO missed the quarter, putting up 40c vs. 46c consensus, and guided down their fiscal year earnings to 1.73-1.77 from 1.94-1.98. Dental consumables were flat year over year - dental consumables growth has held up until this point. Doug Kass and I discussed yesterday that we've been surprised by the consumables resiliency. No more. PDCO's equipment was actually ok relative to my expectations - basic equipment up 7%, while overall dental equipment up 1% year over year (implying much weakness in the high end). But to add insult to injury, the company expects equipment to weaken further as the installs this quarter represented "orders placed prior to economic turmoil."

Position: Short PDCO, HSIC, XRAY

Baseball.....and Oil
Daniel Dicker
11/20/08 9:00 AM EST

You know what keeps me watching baseball still after 45 years? It's the wonder of the game--whenever you think you've seen it all, the game surprises you and you see something just a little (or wholly) different.

Ok, you know where I'm going here. But let's keep the analogy confined to oil. 25 years in the trenches and of course, I've never seen anything like this. There's no story from a fundamental point of view and probably won't be for a long time; all the abuse I took in the summer arguing that speculative premium in oil accounted for at least 40% of price at $145 now rings as a hollow victory in the light of the recent carnage --

The most unfathomable is the continued NEGATIVE value of gas cracks, virtually COSTING the refiners money every time they create a gallon of gas. As a temporary financial aberration, I've seen it before -- but for the last 3 months???? Don't give me a story, either, about demand destruction.......check out my piece on RM, it lists gas sales figures that show AT MOST an 6% decline and mostly less -- hardly reason to keep gasoline $4 dollars UNDER the price of crude.......

Hey, just another triple play while the runner steals home.........after a balk ---


Position: TSO

Jobless Claims Surge
Tony Crescenzi
11/20/08 9:05 AM EST

Jobless claims increased 37,000 to 542,000 in the week ended Nov. 15 to their highest level since the week ended July 25, 1992. Excepting that reading, which was an anomalous spike well outside the trend at that time, claims are at their highest since December 1982.

Continuing claims increased 109,000 to 4.012 million, the most since December 1982. A key metric that helps keep these statistics in perspective by accounting for population growth and more specifically growth in the size of the labor force is the unemployment rate for insured workers. It stands at 3.0%, the highest since June 2003. Following the 1990-1991 recession, it went as high as 3.3%. In the 1981-1982 recession it reached 5.4%.

The current level of claims is consistent with monthly job losses even higher than that of the past two months, which saw payrolls fall an average of 262,000 a month.

More in my blog shortly.

Position: n/a

Denying The Black Swan
Alan Farley
11/20/08 9:06 AM EST

A huge part of the populace still doesn't believe we are in a crisis that could hit depression level economics in 2009 or 2010. Part of the cynicism comes from the September bailout drama, in which our government officials predicted immediate and dire consequences.

The non-believers figure that, since the worst hasn't happened yet, it isn't going to happen anytime in the future. What they don't realize is this is a sequential crisis, in which very bad dominoes are lined up and ready to fall, one by one.

The head-in-sand mentality isn't confined to one political party. On the right, the Bushies have decided nothing new will be addressed until Obama takes over in two months, even though two months could make things far worse.

On the left, MSNBC's Rachel Maddow needs to get "talked down" because she sees the bailout as nothing more than a clever way for fat cat companies to steal government money.

With all this disbelief churning around, I'm concerned the financial markets have a long way to go before they "price in" what's about to happen in the world.

Yes, I see the 2002 lows, expect a big bounce and "hope". those levels contain the downside But I'm no longer confident we're anywhere close to the end of this bear market.

Position: n.m.

Ken Wolff
11/20/08 9:21 AM EST

Consider going long USO around 41... Its looking like a very oversold condition.. It has been trading up and down with the market... Unusual behavior, probably due to electronic trading with baskets of ETFs..

Position: NM

Morning Trade
Bob Byrne
11/20/08 9:22 AM EST

800 on the emini does not have any real value as a support/resistance level...other than its a big figure. I will be watching for a spike through 775 down towards 770 on any early morning purge. S&P 775 was the bottom back in 2002.

In the event that the market advances...initial resitance will come in at 813.50-815 followed by extremely strong resistance around 829-831.

It doesn't matter which side your playing on...if its a trade, don't let it become an investment (long or short).

Position: none

GE Is a Poster Child For Too Much of Corporate America
Tom Au
11/20/08 9:24 AM EST

Doug "Papa Bear" Kass hit the nail on the head this morning when he pointed out that General Electric (GE) had to go to the well for capital again, essentially telling the world that it is undercapitalized.

Unfortunately, the company is far from being an isolated case. GE has long been a poster child for too much of corporate America, under a formerly iconic (and overpaid) CEO, a culture that valued appearances over substance, and a resulting habit of sweeping problems under a mattress. Those problems are now coming out of the mattress,which is why investors are (in some cases literally), putting their money back in.

With the dividend yield now approaching 10% (through a price fall), maybe ordinary investors will finally get the returns that Berkshire Hathaway (BRK/A) got with its preferred deal.

But are GE bonds really an AAA credit? Fuhgedaboutit. The rating agencies have been asleep at the switch, again.

Position: LOng BRK/A. No longer long GE.

Justin Ferayorni
11/20/08 9:25 AM EST

Doug, I saw it this morning and it did send shivers down my spine. GE has been one of the scarier animals to me over the last few months, mostly because the implications it would have on the debt and equity markets, if its magical AAA rating was marked differently. How many orphans, widows, pension funds, etc own GE debt and equity? Shouldn't GE cut its dividend to shore up capital? This line of logic gets very scary to me. I don't claim to have answers, but I do know leverage is not a friend in the current environment, and they have quite a bit of it.

Position: Short GE

With everyone looking for 765...
Jim Gulbrandsen
11/20/08 9:34 AM EST

We either don't get there or materially overshoot.

Position: None

Plummet in Money Market Rates
Tony Crescenzi
11/20/08 9:37 AM EST

Back-month eurodollar futures contracts, which are contracts used to place bets on where three-month eurodollar rates will be in the future, are trading down over 40 basis points on the day, reflecting the idea that interest rates will stay low for a protracted period of time.

Eurodollar contracts maturing June 2011 and beyond are all down 40 basis points or more (the June 2011 contract is trading at 2.92%, down 41 basis points on the day). Numerous other indicators in the credit markets, including the yield curve and swap rates, for example, are also moving sharply on this idea.

Position: None

Quick Service Restaurants
Scott Rothbort
11/20/08 9:44 AM EST

I am seeing some relative strength in restaurants exclusively in the low end (but high quality) quick service names in the early trade prints. I don't know how long that lasts because the first ten minutes is nothing like the last half hour. My guess is we lose those bids as well. Later today I will have a Real Money Idea on Nathan's Famous (NATH).

Position: none

Bob Faulkner
11/20/08 10:02 AM EST

If anyone's heard anything on ALVR this morning pls shoot me an email. Not complaining about it being up 15%, would just like to know what's going around.

Position: The Telecom Connection model portfolio is long ALVR

JP Morgan Downgrades Dry Bulk Shippers
Sham Gad
11/20/08 10:04 AM EST

JP Morgan's downgrade of several dry bulk shippers continues to hammer the entire industry. The reason is possible breach of debt covenants based on decline in assets values: "After a long absence of second-hand vessel sales during the accelerating rate decline since the end of the summer, a couple of modern ships have now been sold at prices that are more than 50 percent below last-done deals for similar assets,"

Position: none

Memo To Doug and Tom RE GE: Abandoned Balance Sheet Management Which Was Very Un Singleton Like
Christopher Atayan
11/20/08 10:06 AM EST

Doug and Tom your both absolutely correct about GE. Mr. Immelt is the antithesis of Dr.Singleton. Singleton believed above all in the primacy of the quality of the balance sheet.Cash return on assets was sacred and the principle upon which executive bonuses were paid.The rules were strictly enforced.For example It was a career ender for someone in audit if they missed on an inventory valuation. That is why Teledyne had enormous reserves and survived several downturns in the various sectors it was involved(all of the same that GE is involved with by the way).

As Tom pointed out many times over the years on this and our old sister street insight,it was the arrogant corporate culture at GE that contributed to its current condition.At its peak under Mr. Welch it was famous for its anti customer approach.In that regard I have given Mr. Immelt some credit for at least trying to change it. Although that is something that will take decades to reverse. At the end of the day most corporations only do business with GE if they are forced too. There was a reason they used to say GE Capital was the lender of last resort. As they where famous for retrading deals at the closing table.

Position: none

Conquer the crash
Todd Horlbeck
11/20/08 10:17 AM EST

Robert Prechter's wrote a book entitled Conquered the Crash back in 2002. He made a very persuasive case for deflation. At the time I held both gold and gold stocks the intention of holding them permanently. After reading the book I certainly believe that deflation was a possibility. He aptly pointed out how poorly commodities do during deflation. After reading the book in 2002, I no longer viewed gold as a permanent holding and ultimately sold my holdings in 2006. In other words, as deflation materializes gold will go down along with everything else. He recommended holding only very short-term treasuries and short selling in a deflationary environment. Whether you believe we're in a deflationary environment or not, his recommended investment strategy for deflationary environment certainly worked. Unfortunately, Prechter's books came out in 2002, and as a result of the ensuing rally, the views, while not totally discredited, were certainly not taken seriously. Had his book been published in 2007, I believe it could have saved people a lot of money. We are in a deflationary bust. There is too much debt and the ability to service its debt has been impaired. This impairment has taken many forms including large losses at banks and unemployment. Paying debt is now a struggle. Interestingly, gold is had a mysterious bid. I know technicians are going to say that goal should be plummeting, and soon will, but its actually been doing quite well. There is no way that I would bet on deflation long-term. In fact, I think we are very close to the end of deflation given recent Fed and Treasury actions. I have not repurchased my gold yet as we still are spiraling down, but holders of gold today understand the only solution to our problem: Direct Inflation. The government will stop monkeying around with these bailouts and they will do what every government has done in the past, and that is send citizens money directly. The government can easily issue ten trillion in treasuries to the Fed for 30 years today at 3.7% and send every household in the U.S. $100,000. Why not? Would the debt-laden public complain? The savers and the rich will be hurtby this, but are a minority right now and they are unorganized and unpopular politically. I am not advocating this, but I think it is a possiblity.

Position: noe

Ken Wolff
11/20/08 10:31 AM EST

I am long QQQQ off 26 expecting at least 27... and USO off 40.66 expecting 42.50 ...

Position: USO and QQQQ

Wake Up, Chris Cox
Arne Alsin
11/20/08 10:34 AM EST

Christopher Cox can't defend the indefensible -- namely, doing away with the uptick rule -- based on a sample of Russell 3000 activity during 2005. It was a ridiculously low volatility sample. His study did not incorporate a "stress test," or a period with unusual volatility.

Originally implemeted by Joe Kennedy in the aftermath of abuses during the Great Depression, the absence of an uptick rule has contributed to bear raids during the current decline. Citigroup (C) et al. should be screaming in his ear, waking him up from his nap and demanding that the uptick rule be put back in place.

Position: None

Still Q's Over S's
Doug Kass
11/20/08 10:49 AM EST

I've still got the Q's over the S's.

Position: Long SPY and QQQQ

That Was Weird
David Peltier
11/20/08 10:52 AM EST

There was a brief swoosh up that momentarily pushed the Dow higher for the session, but we're now back down around down 70 for the session.

A fair amount of green on my screen for what's a stomach-churning day. Mostly consumer-related names.

Position: none

Helene Meisler
11/20/08 10:59 AM EST

It's been a while but the AAII folks really pulled in their horns this week with a reading of only 24% bulls. Last three readings in the low 20s were: July 9th at 22%, March 12th at 20% and January 9th at 19.6%

Position: none

OPEX tomorrow
Bob Byrne
11/20/08 11:05 AM EST

Don't forget about expiration tomorrow...the craziness should continue. The 786 are should prove to be decent support on any pullback in here.

Position: none

Where Are Insiders?
Steve Birenberg
11/20/08 11:13 AM EST

I totally agree with Doug's comments on insider buying. He points to the turn in BXP and notes the signal a Buffet buy of BRK would send. I am getting lots of reader and client and friend comments about the lack of insider buying and lack of company buybacks.

I understand the stress the credit markets are having on personal and corporate balance sheets but at some point it seems insiders and companies need to step up if their pontifications that things are alright are to have an credibility.

Position: No positions.

Rate cuts a plus, but...
Jim Gulbrandsen
11/20/08 11:19 AM EST

Jim: I agree that Bernanke could push for another round of global rate cuts but the 1,000 points on the Dow to the upside will come if they suspend mark to market accounting, if only temporarily to let companies truly assess pricing in this sea of forced selling. I am quick to criticize my own advice as being a short term issue, however, it's needed. I also doubt the true solution--providing banks with an opportunity to mark down principal mortgage balances to consumers--will happen.

Position: none

VIX Tricks
Dan Fitzpatrick
11/20/08 11:19 AM EST

Good morning. I've posted an 8 minute video over on Stock Market Mentor with some thoughts on the current state of the market, as well as some suggestions for managing your portfolio.

Position: nm

Same old song
Todd Horlbeck
11/20/08 11:27 AM EST

This looks to be a session, once again, where traders are trying to pick a bottom. By the end of the day, however, these same traders will probably not want to hold their stocks overnight in the face of what's happening to Citigroup and General Electric. Breadth remains horrible, new lows are expanding, we've violated support, and the VIX remains elevated. They're simply not much like here.

Position: none

Dental consumables
Justin Ferayorni
11/20/08 11:30 AM EST

From the PDCO call - dental consumables grew in the low-to-mid-single digit range in August and Sept and weakened in October to get consumables flat for the quarter - the math works to high single digit percentage decline year over year. fyi

Position: Short PDCO, HSIC, XRAY

Not All of the Insiders Are Hiding
David Peltier
11/20/08 11:36 AM EST

But they're also proving that they can lose money as fast as the rest of us.

Lew Frankfort at Coach (COH) picked up 50,000 shares today.

The CFO of Walter Industries (WLT) also bought 35,000 shares Wednesday, but according to the Form 4 filing, he bought between $16.25 and $17.75, and the stock is now changing hands down around $13.

A director at Hertz Global (HTZ) bought 55,000 shares earlier today, and he's already 27% underwater.

And that's not to mention Jeffrey Immelt's latest buy of General Electric (GE) of 50,000 shares last week between $16.41 and $16.45.

Position: None

Breadth update
Jordan Kahn
11/20/08 11:50 AM EST

According the data I look at, yesterday's breadth showed downside volume on the NYSE totalled 98%. I have not seen any mentions of this today, but I would have to think this is some sort of record.

Anyone have any historical data on this?

Also, I like the bounce today off of SPX 776, but realize it's how the market closes that counts. And on that front, we still have an eternity of trading ahead of us today. Can someone hit the fast forward button?

Position: nm

Jim Cramer
11/20/08 11:58 AM EST

time-honored, pathetic hidden-hand nasdaq rally developing that is a coin-flip for a plus 2% down 2% outcome

Position: none

What is C worth?
Jim Gulbrandsen
11/20/08 12:06 PM EST

If this vicious cycle of mark-to-market continues?

Vince Farrell and I are on the same page. If we want to talk about more money losing bailouts, keep market to market. If not, suspend it.

Position: None

Numb Investors
Alan Farley
11/20/08 12:13 PM EST

It's nearly impossible to take issue with any of Tony C's filings in the last few months. They've been amazing.

But I really wonder if investors are nearing the numbing point, in terms of bad news. This has been a continuing theme in his columns since September.

In line with my post earlier this morning, I believe a good share of the investor population still believes this is a routine bear market in a routine recession in a routine economic cycle.

Nothing could be further from the truth. It "is" different this time around.

Position: short with helmet on...

Index Stats
Eddy Elfenbein
11/20/08 12:22 PM EST

The S&P 500 hit an intra-day low this morning of 776.76. That's the exact same level as the closing low from October 9, 2002, the previous bear market low. Incidentally, the closing Dow low of August 12, 1982 was 776.92.

The Dow is inches away from reaching 10 times the S&P 500 for the first time in 42 years.

Position: none

Jim Cramer
11/20/08 12:25 PM EST

The rally is not led by the financials, which would be a blessing, but by the recession proofs, which is better than the minerals. Of course, it is XOM that is the tell..

Position: none

786 held...for now
Bob Byrne
11/20/08 12:26 PM EST

I agree that the final hour of trading is all that matters anymore...but for the tick chasers out there, as long as the 786 area holds I would lean bullish. A hard break of that level should give us another swoosh lower.

USDJPY is holding and drifting higher...Crude, for the time being, is holding. 815 and 829-831 are both stall points if your swinging long. Everyone is waiting for the oversold bounce (myself included)...

Position: Long ETFs USO

Screaming on TV
Steve Birenberg
11/20/08 12:28 PM EST

It probably only represents the tension we all feel but it seems like the hosts on CNBC are yelling all the time. At each other, at the guests, at the viewers. Seeing as they have paying jobs not tied to the level of the market I don't understand why they are so tense. It doesn't matter I guess but it is very annoying and is leading me to keep the sound off even more than normal.

Not to toot our horns but the discussion here in CC is pretty intense at times a helluva lot more respectful.

Position: No positions.

Jim Cramer
11/20/08 12:34 PM EST

You have to love a good manipulation upward led by the major oil company when oil futures are crashing!

Position: none

buying OSK and TEN
Bob Byrne
11/20/08 12:35 PM EST

Buying OSK and TEN for of GM F.

These are risky trades !! Be quick if you play.

Position: Long OSK TEN

Eight-Point Plan? Add One More - The SEC
Jeff Bagley
11/20/08 12:45 PM EST

There is most definitely a growing consensus on this site and pretty much everywhere else that bold, aggressive action is necessary to stem the vicious cycle of declining asset prices and their effect on worldwide economic growth. That's nothing new, but the fallout from Paulson's TARP reversal is now really starting to hit home.

Cramer's eight-point plan is good, but it should be a nine-point plan. He forgot the SEC. We need immediate action to fix what is now an extremely dysfunctional market (yes, the uptick rule!!), and then a subsequent complete overhaul of the SEC.

This is from the SEC's website:

The mission of the U.S. Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.


Position: N/A

US Auto To Get Federal Aid
Scott Rothbort
11/20/08 12:48 PM EST

Apparently bipartisan support for aid to US automakers has been reached. GM and Ford are rallying ringing the market higher as well

Position: none

Taking off depression from the table
Jim Cramer
11/20/08 12:50 PM EST

Remember that every time we get some injection of capital into the private sector it DOES matter. If we are able to salvage something from the autos without causing massive unemployment, we have a real chance to forestall anything negative,. Of course, those buying these common stocks of GM and F are playing with fire but the fire goes on until we find out the deals!

Position: none

THis time the rally is "for real"
Jim Cramer
11/20/08 1:05 PM EST

Just to address the bears on my piece to the left, i simply think that we could get a snap back from levels where we are because of option expiration and some auto deal,. If no auto deal bets are off. i am relying on news reports, which these days is probably not a great bet, just a good one...

Position: none

Bottom has been postponed
Todd Horlbeck
11/20/08 1:10 PM EST

If the market reacts to the proposed bailout of the automakers like it is reacted to every other bailout, we should be starting a new leg lower. Every single bailout has been sold thus far. This leg lower, however, might be different (worse) because the market never rallied on the supposed "good" news.

Position: none

Tenke Fungurume You! FCX at $18.00.
Geoff Johnson
11/20/08 1:10 PM EST

After all the fireworks, FCX traded under $18.00 today, the price I argued it would trade at based on my copper/gold/moly price decks. Actually, at this point copper and moly are well below those points and if that continues FCX will not earn anywhere near what I predicted if anything at all. One of the many counters to my argument was that it was inconceivable that FCX would ever trade to that level because I was told that as a market leader would ride over the valley of economic weakness. And that was the nice commentary!

Not that I look so smart. In fact, I feel a bit like the manager who can't short straight. I shorted FCX poorly off a chart with a steep decline. I covered too early with only a meager 7% gain (mostly because I'm trying to cover most everything when the market gets oversold, a nice strategy but still wrong). I did add to my overall copper short on a lift by shorting PCU which helped me net a bit more profit, but that was the only saving grace.

I'm bullish on FCX long-term, but until I do fresh homework I have no opinion. However, that does not mean I lack concerns. I see the inflow of new projects demanding copper contracting sharply in the coming year or more and with the most major impact coming in the second half 2009 and 2010 (after we get through construction projects already in the pipeline). It could be a long drought and given that existing projects will continue for a while I doubt the demand drop has barely hit. I see copper at risk back down to $1.00 or lower, where it was last recession. Gold? I don't know that one, but I'm not ruling out deflation and gold going lower if it happens. Miss Moly isn't in good shape either.

FCX bulls, what is downside here if any? Is the dividend safe given the continuing plunge in copper prices and continued inventory build? Or, at least where do you see copper/gold/moly going and at what price would the dividend be at risk? Would a dividend cut matter? And what about Tenke Fungurume?

Position: None

How can retail stocks be bouncing higher
Chris Versace
11/20/08 1:12 PM EST

i'm sitting here watching the tape and while the S&P 500 bounces up and down, positive to negative and back, I am amazed that certain retail stocks - ANF, ANN, BEBE (who just lost a key executive) and several others are moving higher and are outperforming the S&P 500 today. Yeah the sector has gotten slammed of late but with good reason as the economic data has shown. With the jobless claims number in and the Philly Fed Index in as well, its hard to see dramatic upside in these names. Recent company meetings over the last few days underscored that the key concern in 2009 will be consumer activity.

Position: Short ANF

Ken Wolff
11/20/08 1:14 PM EST

We had a classic "jump on the bandwagon" news event with the auto makers bailout announcement... F was very easy to trade, GM a bit faster but easy also... This is the type of opportunity short term traders thrive on... The news itself is not the gift that will keep the market moving up... Most stocks were already rising off of early lows as the QQQQ Hit 26... I hate to say it but we can go back to the lows later.. I don't see any real bullish momentum..

Position: NM

Jim Cramer
11/20/08 1:20 PM EST

We need some sort of deal in autos to get the market rallying, and i have said that over and over. My rally piece will not hold without it for certain

Position: none

Watch the Phantom tax
Tim Melvin
11/20/08 1:55 PM EST

I had a conversation this morning with a good friend about his investment portfolio. I took a look at his portfolio of mutual funds and discovered something most of us probably have not thought about and it could be expensive. A lot of traders and investors also own mutual funds so I though I would mention it here.

A lot of funds have sold stocks they have owned for years. They may have just wanted to take profits or were forced to sell to meet redemptions. Either way, in some cases they were multi year holdings that had large gains. Those gains will be distributed to shareholders at year end, and if held outside a retirement plan, they are taxable. I lookrd at serval mutual fund websites and found that there are funds out there down 40% on the year that will have gains to distribute. I cannot imagine antyhing more frustraing that paying taxes on an investment that has fallen substantially.It's worth the few minutes to check on your funds for possible year end gains distributions.

Position: na

Jim Cramer
11/20/08 2:06 PM EST

The endless avoidance of the Lehman issue--no authority blah blah-is a TOTAL COVER-UP, The federal government has a constitution and the government is supposed to promote the general welfare and it has the ultimate emergency authority to do what is necessary. They continue to deny they could have helped lehman or that it was even important,. They are liars and fools and the pain of their dissembling cuts deep into the core of finance as there isnt a single serious person in finance who doesn't know that they blew lehman,.

Position: none

Balance Sheet Analysis of DRYS - A Possible Fire-Sale Liquidation Value
Sham Gad
11/20/08 2:18 PM EST

With the recent crash of DRYS shares, I wanted to share a conservative balance sheet analysis for DRYS based on the balance sheet numbers as of September 30, 2008.

Shareholders equity is $2.1 billion.

Shares oustanding are 43 million.

This suggests BV of of $49 a share. Clearly this is drastically inflated given the market conditions.

So let's make some very conservative adjustments. First, write down goodwill ($692M) to zero. Also, vessels, on the balance sheet at $2.1B should be discounted by 50% because ship prices have crashed. JP Morgan came out today and noted that ships were selling for 50% less than even six months ago. The drilling rigs, at $1.4 billion can be discounted 10%. The long-term market for ultra-deep water business is still sound. Also because these rigs take years to build, I beleive that many buyers would step and pay a strong price, possibly full book value.

This adjustment totals approximately $1.8 billion, for an equity value of $330 million. At 43 million shares, this equates to conservative liquidation value of $7.70 a share.

Obviously these are my assumptions, but becasue I have written on DRYS I wanted to provide a fire-sale type liquidation value should the worst occur. Right now the BDI index is down over 90%...this has never happened before. Shipping rates are so low as to assume that we need no ships. The key is the ability to meet your debt convenants. If DRYS can do this (or more appropriate if they can convince thier lenders to sit tight), the business is worth more. Many have been concerned in light of the percipitous fall over the past few days. My goal is to provide a bare bones look. None of this assumes the 25 million shares that were to be issued for the new ship acquisitions. I can't imagine management going through at these levels...if they do, that's will tell us a lot about thier compentency and ethics.

Position: wrote puts on DRYS

Stop That!
Geoff Johnson
11/20/08 2:19 PM EST

Haven't we been punished enough? Do we really have Paulson and Pelosi/Congress speaking to the nation at the same time and while the market is open? What, is the Prez busy? Couldn't they get him behind a podium speaking, too?

Position: None

Inertia Cubed
Doug Kass
11/20/08 2:20 PM EST

Jimmy, we are surrounded by reactive, unimaginative and untalented policymakers. And, in large measure, I blame the decline of the last two months in the world's equity markets on our leaders whom I have euphemistically called The Three Stooges of 21st-century capitalism -- Bush, Bernanke and Paulson.

They knew (and know) nothing!

Position: none

Be a Dentist!
Doug Kass
11/20/08 2:25 PM EST

Listening to them, "Jazzy" Geoff Johnson, is like sitting in the dentist's chair.

Worse yet, it's like owning Patterson (PDCO), Danaher (DHR) and Henry Schein (HSIC).

Position: Short PDCO, DHR and HSIC

Deal Or No Deal
Scott Rothbort
11/20/08 2:28 PM EST

The news conference by the Democratic leadership just put the kybosh on an auto financing deal. This is a disgrace. Doug - you can put Pelosi, Reid and Frank in the same category as your Three Stooges. They are about as clueless as Jerry Yang. Now Jim's C's Great Depression II is now back on its Washington fast track.

Position: none

Jim Cramer
11/20/08 2:30 PM EST

We had two attempts, Doug, to get it right: Paulson and Congress. I bet one of them could work out, it was wrong. We have nothing and now the ProShares Ultra Bear funds will take over... XOM breaks price and here we go. This one had more of a chance because of news reports of a GM deal,. THe reports were totally ERRONEOUS and i bit and believed. THe press is ludicrously value-less in this market.

Position: none

The Hank Tank
Rev Shark
11/20/08 2:34 PM EST

The Hank Tank continues to plow along running over anything in its way. It always helps boost confidence when you say things like "we shouldnt' be hasty in your regulatory response". Good point, too bad you didn't make it a month agao. What is the purpose of this speech anyway?

And of course we have Nancy Pelosi saying "we intend to save" the auto industry. That sounds like an old joke but the punchline isn't very funny.

Position: None

Amazing that they wont quit --query to dougie
Jim Cramer
11/20/08 2:38 PM EST

Doug, have you noticed, though, there is a bid underneath? Where does it come from, options expiration??

Position: none

Jim Cramer
11/20/08 2:42 PM EST

Rev, as people know that i usually have this slot on t.v right now, at least a half-dozen guys have now hit me and asked me how Paulson's speech/apologia/dissembling can be on the air.... .good question....

Position: none

Back to Jim 'El Capitan' Cramer
Doug Kass
11/20/08 2:47 PM EST

I don't see that bid, Jimmy.

Position: None

New Gallup Polls shows consumer confidence erodes further
Chris Versace
11/20/08 2:53 PM EST

I just saw this and it underscores the comments I made earlier about how it does not stand to reason that some of the retailers were moving higher earlier in the trading day. Gallup's new poll shows that after a very modest improvement around the Presidential election, "consumer assessments of the economy deteriorated significantly once again last week, with 61% rating the economy poor -- a new weekly high." I continue to be bearish on those companies that are highly dependent on disposable personal income and favor the more defensive names, like PG, CL and KMB

Position: Long PG, CL and KMB; Short ANF

Steve Birenberg
11/20/08 2:53 PM EST

Did anyone else hear a cheer in the background when CNBC cut back to Erin Burnett after Paulson finished his speech?

At least one subscriber who I IM with heard it.

Position: No postions.

Great Unwind
Robert Marcin
11/20/08 3:06 PM EST

Listening to all these politicians today forces me to repeat yesterday's point. All the rants, pleas, bailouts, interventions, stimuli, and political announcements will not eliminate the effects of the Great Unwind. We will face severe economic and financial market repercussions from a 30 year debt bubble for at least the next 5 years. I guess CNBC will be finding the bottom dozens of times in that period. Oh my.

Position: none

To Chris Versace on Retail Bounce
Geoff Johnson
11/20/08 3:15 PM EST

Chris, you mentioned the bounce in retail stocks. I was actually beginning to wonder if somewhere around here retail was discounting what is immediately ahead of us. Even if there is worse to come it seems to me that there is a point at which it is too early to discount that worse case as it is not fully clear it will happen. With that said, this is only the case if demand shock abates and we're not just in the eye of the storm of the crash, something I believe is a distinct possibility.

Position: none

Jim Cramer
11/20/08 3:25 PM EST

The oils are such a big part of the S&P now that this sell-off in the group can take the wind out of any bull's sails. And SALES!Financials are less of a factor in the index now. ..

Position: none

To Geoff - follow up on Retail
Chris Versace
11/20/08 3:37 PM EST

No doubt the market is a forward looking animal and at some point the good news will be priced in but so far (at least to me anyway) it seems the data continues to get worse be it confidence numbers or expectations for a really weak holiday season. The later part can spell real doom and gloom for a number of companies, particularly retail and especially those that derive a disproportionate amount of revenues and profits during the holiday season. All I can say is, stay tuned.....

Position: Short ANF

Same story different day...
Bob Byrne
11/20/08 3:39 PM EST

After the bounce from the 786 we tagged 815 and then spiked up to 820. I though we had a shot at holding strong...then there was Paulson (Pelosi and Reed).

And there goes 770.

Position: Long Guns and bullets

Way to go Rev Shark
Todd Horlbeck
11/20/08 3:51 PM EST

Rev, for a trader, you have remained incredibly patient with your thesis of waiting until the market goes up to buy. Readers of this site have saved themselves a lot of money and a lot of grief by listening to you. Your strategy is incredibly simple but extremely difficult to execute. I'm looking forward to when you start buying.

Position: long Revs posts

Gold Holding Up
Gregg Greenberg
11/20/08 3:53 PM EST

It's worth noting here that gold has held up much better than stocks, oil or most other commodities, despite all the deflation talk since early September. I don't know if gold demand is being driven by mom and pops snapping up bullion like its Hanukkah gelt or if it's due to investors worrying about Ben Bernanke's helicopter dropping TARP dollars; I just know that gold looks like its bottomed and is heading up.

Position: None

"Strange Game, The Only Winning Move Is Not To Play"
Geoff Johnson
11/20/08 3:54 PM EST

Further kudos to Rev. Rev Shark's strategy to win in a bear market made me think of the above quote from the movie War Games. In War Games the only way to win a global thermonuclear war is not to play. It turns out the same is true for most of us when it comes to a global thermonuclear bear market. Rev's known it from the start and he has made me money. Good call.

Position: None

SPR buys?
Bob Byrne
11/20/08 3:56 PM EST

I realize crude will never go up again (yes I am joking)...but maybe the Fed could be a little forward thinking and fill up the SPR NOW rather than wait...just a thought and humble suggestion.

Position: None...

Whole Lot of Ugly
Alan Farley
11/20/08 3:59 PM EST

The Powershares QQQ Trust (QQQQ) is closing at 6-week channel support near 25.5.

A gap down on Friday that doesn't fill in the first hour will trigger a channel break that might signal a wide range selloff day. This ugly event makes sense, with VIX closing above 80 this afternoon.

If this worst-case scenario plays out, we could see the Dow Industrials test and break 7000 by next week.

Position: n.m.

Prem Watsa Decides It's Time to Buy
Sham Gad
11/20/08 4:03 PM EST

Fairfax Financial's Prem Watsa has decided to close out the hedges on the company's equity portfolio.

"Given the unprecedented decline of the equity markets during the past several months, we felt it was prudent to promptly inform our shareholders that we closed out our equity index total return swaps this week and effectively eliminated our equity portfolio hedge. While we believe the recession may be long and deep, we also believe that stock prices may have already discounted the worst of the economic decline. As value investors, we are finding an incredible number of investment opportunities across the world. That said, in the short term we recognize that stock markets can continue to fall significantly."

Position: none

Bob Faulkner
11/20/08 4:14 PM EST

Dell's numbers are out and, althought they missed on the top-line, EPS was well above do to a significant ramp-down in expenses both at the COGs line and SG&A. Long overdue. CC is not til 5:00 PM

Position: The Telecom Connection model portfolio is long DELL calls

Rev Shark
11/20/08 4:15 PM EST

I appreciate the kind comments. My goal here is very selfish I just want to make sure that our readers keep their cash safe so they can keep on reading us when the market does improve. The best way for them to do that is not buy in a downtrend.

It is just mind boggling that the S&P500 has now given back 11 years of gains. Maybe all those academic studies that tell us that market timing is futile and that you do best if you buy and hold need to be reviewed.

Position: None

Brian Gilmartin
11/20/08 4:29 PM EST

Bob, despite the revenue miss, I'd call this a good quarter for Dell, most of it margins, and most due to SG&A. They had a slightly higher effective tax rate according to our spreadsheet, which makes it all the better.

Since Dell gives all financials with the earnings report, I see it trading at just over two times balance sheet cash with $4.50 in cash on the balance sheet, four times enterprise-value to cash-flow and five times EV to free-cash-flow.

The world has officially lost it.

Position: Long DELL (at much higher prices and still holding)

Vik Bob Desperate
Robert Marcin
11/20/08 4:37 PM EST

Vik Bob needs Cox. Chris Cox to ban shorting? Smacks of desperation. Vik Bob bad for stocks. All stocks.

Prince supports Vik Bob. Prince supported last Prince. But then chucked Chuck. One Prince a dunce. Both Princes unhappy shareholders. Both Princes not dancing.

Vik Chuck Bob a complete disaster. Bored to thank for that. Chuck Vik. Chuck Bob. Chuck Bored.

Taxpayers want nothing of Vik Chuck Bob. Really.

Position: none

Notes From Lunch At The Italian Village In Chicago With Roger Spencer
Christopher Atayan
11/20/08 4:43 PM EST

Roger Spencer,who was a top food and agricultural analyst from the old Mitchell Hutchins days and old friend,hosted me for an old fashioned investment roundtable today at the Italian Village in Chicago,where he has had the same table each day for lunch for the last 50 years or so. While I received a collegial grilling on my own businesses from the assembled group, I noted a keen interest in dividends and cashflow. In particular many of the dividend related strategies advocated by Jim Cramer recently where very much in the mainstream of thinking. All of the group had plenty of scar tissue from 73 and 74 and seemed to take the entire goings on today in stride. Moreover the intensity of interest in new ideas was amazing. By the way the Chicken Marsala was excellent.

Position: Long High Quality Stock Picking Analysts and Chicken Marsala

Forget short selling ban. Timeout on Market to Market
Jim Gulbrandsen
11/20/08 4:55 PM EST

I'm going to say it for the third time in two days: unless we want to see the Citigroup bailout discussions (those of you short would!) and a 6-handle on the S&P, halt mark-to-market immediately. I mean, NOW. I should be arguing for lower prices given my cash as % of portfolio but in this case, pigs get fat, hogs get slaughtered. In a market to market world, my cash may not matter.

Position: None

re: DELL
Bob Faulkner
11/20/08 5:02 PM EST

I agree Brian. They've made some nice improvements in margins both on the commercial and consumer side. It will be nice to see if it continues rather that playing ping-pong like they've been doing for the last year.

As for the valuation? Hey, only 20 more trading days like this and there's no more market. We can all go home and rest.

Position: The Telecom Connection model portfolio is long DELL calls.

Strrreeeetttccchhhed Rubber Band....
Dan Fitzpatrick
11/20/08 5:15 PM EST

I no longer post on Fridays or I would go into this in more detail in an article on Friday. However, I'll direct any chart-watcher to look at a daily chart of the S&P 500. The close was more than 37% below the 200-day moving average. That's a record.

Also, the Fear Index (Volatility Index -- VIX) closed at a level we haven't seen since 1987. "When the VIX is high...."

Just passing this along to those who might be looking to do some counter-trend work.

Position: No positions in S&P

Scott Rothbort
11/20/08 5:30 PM EST

To add to Dan's comments, the VDEX made another all-time high of 4.51%. I expect it to go up again tomorrow whether the market goes up or down..

Position: none

© 1996-2008, Inc. All Rights Reserved.

min from a very, very bad day

Ryan Krueger

04:05:00 PM

No positions in stocks mentioned.

Intriguing Trading Action in SCHW
Charles Schwab (SCHW) is green while the broker-dealer index (IAI) is down more than 5% today. More intriguing to me longer term?

The brokerage analyst I quoted earlier this week in support of SCHW benefitting from departures from brokerage firms is…departing that brokerage firm.

Jeff Macke

04:00:00 PM

No positions in stocks mentioned.

Signs the End is Neigh

* I can't think of anything else to say about this market

* Half an hour ago I went to sell some of the oft-discussed SDS ETF and ended up buying instead. Trades as utterly undisciplined and rock-stupid as that are like hitting on 19 because you "feel a 2". It's really not in your long-term best interest to win trading that way. I got my 2.

* Nothing moves in one direction for as long as this market has been dropping. The jet-stream changes direction more often than the Dow. If it's open, we're going lower. If a company has even a loose connection to financial assets, I can give you 5 rumors about why they're going to zero.

* I was certain we'd seen a bottom in jaw droppingly brainless CEO behavior when the boss of General Motors (GM) asked for $25 billion without having an answer to the question "what are you going to do with it?". Then Citigroup (C) lobbied to reinstitute the ban on short-selling.

* I'd tell you all to be careful into the close Minyans but, frankly, you don't want to listen to me right now. I feel another 2 coming on and I need Adami to drag me away from the table before I wager my children on it.

Todd Harrison

03:53:52 PM

No positions in stocks mentioned.

Oops there it is!

Someone told me when I started trading that sometimes you're gonna be the windshield and other times you'll be the bug. As I watch my hind legs fly by my ears and I taste my last few meals for the second time, I'm reminded of that adage. Nobody--and I mean nobody--is smarter than the market.

The time stamp on my bull costume appendages is S&P 785, NDX 1065 and DJIA 7820, all of which are under water. That, combined with my nibbles yesterday, have made for a rather unpleasant 24-hour P&L. I share this in the interest of full disclosure--it's nosty out there--and to remind you, in the immortal words of Sean Maguire, that "It's not your fault. It's not your fault. It's not your fault."

As chatter swirls that foreign central banks have cried Uncle Sam and redirected their funds to the fixed income markets, I'm watching the clock with one eye and the tape with the other. At the risk of invoking the wrath of the Trading Gods, I'll communicate that I'm carrying home the meat of my exposure overnight. That's a shift in my stylistic approach but, after hoarding cash for quite some time, I'm (cough, wheeze, biting lip) comfortable with that. Famous last words, right?

Sorry for the cloudy compass, Minyans, as you know I take it personally. We'll pick it up manana after some well deserved rest and an eye towards the weekend.

May peace be with you.


Minyanville Staff

03:29:51 PM

No positions in stocks mentioned.

Friday Preview
Friday, November 21


Before: ANN, HNZ, SJM

Click here for the full trading radar

MV Trivia

03:20:00 PM

No positions in stocks mentioned.

Less is More...
If you had trouble getting through War and Peace, forget reading 'À la recherche du temps perdu' or 'Remembrance of Things Past' if you prefer the English translation.

À la recherche du temps perdu, the world's longest published novel, was written by Marcel Proust and published in France in seven volumes between 1913 and 1927.

Congrats Minyan Michael Taillon!

Choose your critter!

Jeffrey Cooper

03:10:00 PM

No positions in stocks mentioned.


We have a potential bearish backtest of a neck line here on the 10 minute S&P chart. However, if price moves up above 795 here, the backtest is off and the pattern is more bullish.

Click to enlarge

If a potential right shoulder on a head and shoulder 10 minute top is offset, the S&P should test toward the HOD, or high of day.

David Dispennette

03:05:00 PM

Position in C Options

All this chatter about another ban on shorts...

I can't resist. I just rolled some dice on Citigroup (C) November $5 Calls for 49 cents.

If something crazy happens, allowing C to recover half of what it lost over last two days and rally to $7 or more tomorrow, I'll make multiples on this shot... otherwise, I crap out (small lot). It really is that simple.

Jeffrey Cooper

03:00:00 PM

No positions in stocks mentioned.

Playing Favorites

A 10 minute chart of Apple (AAPL) today shows a bullish 1-2-3 Swing to a test toward the morning low.

It’s one of my favorite set ups on any time frame. A good risk to reward set up here.

Click to enlarge

Todd Harrison

02:50:56 PM

position in shld

You can't hide your lyin' eyes. And your smile is a thin disguise...

Hammering Hank comes and goes with nary a word about "something seismic." In fact, the meat of his speech was somewhat shifty, offering that it's "naive" to believe the Lehman Brothers failure caused a deeper crisis.

Further to that, he punted Fannie (FNM) and Freddie (FRE) into the lap of the next administration, saying their fate is in Obama's hands, while assuring investors that regulators have the tools necessary to maintain stability.

Whew, and we were worried...

With contra-hour underway and tension levels reaching DEFCON status, here's what I'm thinking as I rub my forehead and nibble on my nubs:

Meow Mix? This is both adorable and very disturbing.

* While I've traded some of my "in the hole" adds from this morning, I'm still leaning long and, as it stands, wrong.

* The combination of auto uncertainty, credit duress, fugly internals and broken levels is paving a prickly path for those with bovine inclinations.

* Sur-prise, sur-prise, sur-prise! You can learn a lot just by watching and along those lines, I'll note that Wal-Mart (WMT), Target (TGT) and Sears (SHLD) are all giggling green in a dicey tide.

* I don't know about y'all but I, for one, could use a break from this shake. I'll be scooting to Baltimore Wednesday for some turkey time as a start. There's something about the laughter of little kids that takes the edge off reality.

* Was Carly Simon a narcissist?

* Remember in 2006 when we said that our biggest concern was that we were at all-time highs but nobody felt like we were at all-time highs? This is the other side of that trade, when we're swimming in the abyss and nobody feels like it'll ever get better. Make no mistake--this will take time and it will take work--but to get through this, we needed to go through this. That will likely fall on many deaf ears but we, the Minyans, need to remember that. Sometimes, perspective is all we have to sustain us.

* Breathe, friend, we're almost there.


Kevin Depew

02:45:00 PM

No positions in stocks mentioned.

Under the Hood

* New point and figure sell signals are leading new buy signals 187 to 4.
* Yes, 1-8-7... on an undercover bull.
* Overall sell signals are leading buy signals 620 to 5.
* Yep, that's a washout.

Bennet Sedacca

02:40:29 PM

No positions in stocks mentioned.

30-year update

I happen to be in the camp that thinks the 30-year yields are bottoming.

I applied the inverse of the 30-year yield (its P/E) ratio to establish the correct valuation for bonds.

Click to enlarge

I calculate that the top of the channel from the 1985 high in yields/low in price to equate to 27.31 P/E or 3.66%. We are now at 3.71%.

I would be a seller of the 10-30 year sector here.

MV News

02:19:45 PM

No positions in stocks mentioned.

Street Vibes

* General Motors (GM) and Ford (F) are at the top of the radar. Everyone's watching the 2:30 pm press conference.

* The financials have been weak all day. Citigroup (C) is in focus and the fact that it wants the SEC to reinstate the short-sale ban and the uptick rule isn't exactly a good sign.

* Seeing more weakness in large cap consumer staples. We're hearing gaming and cruise lines continue to be sold because of the weak consumer thesis.

* In ETF land, retail (RTH), REIT’s (IYR), and small caps (IWM) look positive. The emerging markets (EEM) and bonds (TLT) look weak.

Michael Paulenoff

02:05:00 PM

No positions in stocks mentioned.

Downleg Near Completion in Q's

My pattern and momentum work in the QQQQ argue that the downleg from the June 2008 recovery rally peak at 50.61 is at or is very near completion ahead of a potent recovery rally period that should propel the Q's into the 33.00-34.00 target zone.

Can we loop down and retest this morning's low at 26.00 -- and possibly make new lows? Definitely, but relatively marginal new lows should be short-lived prior to a vicious snapback rally period. (12:45pm EST, 27.21)

Click to enlarge

Fil Zucchi

01:56:03 PM

No positions in stocks mentioned.

Short selling ban?!?!
Of course this is not just chatter, tomorrow is options expiration is it not? And Hanky speaks in 5 minutes...

MV News

01:50:23 PM

No positions in stocks mentioned.

Not Just Chatter
Citigroup (C) is lobbying lawmakers, SEC to resinstate short selling ban and uptick rule. (WSJ)

Bennet Sedacca

01:35:00 PM

No positions in stocks mentioned.

Credit Market Update

Spreads across the board continue to blow out.

CMBS now trading near 20%.

Corporates in every sector now widening, notably telecom, financials and retail.

Munis are getting hammered.

Junk? Pretty close to +2000.

Mortgages? Rallying, but lagging.

Until this improves, every equity rally is a mirage.

Jeffrey Cooper

01:30:00 PM

No positions in stocks mentioned.

3 Point Rising Trendline

The S&P has carved out a 3 point trend rising trend line on its 10 minute chart.

If that breaks another flush out could take place.

See 10 minute chart today here.

Click to enlarge

Ryan Krueger

01:25:00 PM

No positions in stocks mentioned.

The Roman Goddess
I am tip-toeing back into the arms of my only mistress, Ceres, the Roman goddess of harvest. I have put out a few bids for a few Agricultural commodities.

The CRB below is back to 2003 levels (the Cornhuskers by comparison have had three coaches since then). The fundamentals are not back to those levels. They are better. The deflationary (non)solutions being printed on paper now will only serve to inflate the chase for real assets later.

Click to enlarge

Todd Harrison

01:18:33 PM

position in wft

Answers I Really Wanna Know...

* Do you think folks will be bummed if we don't serve roasted rat at Festivus?

* How much of this rally is due to the circulating chatter that a three month short sale ban will be soon be implemented?

* Haven't we seen this movie before?

* Right before the September expiration?

* Or will we see some other "seismic readjustment?"

* If you were running an emerging media concern and they asked you to do a television spot on Sunday at 5pm--right in the middle of the afternoon games--what would you say?

* NYSE internals are still struggling with three red for each ahead?

* Did I really miss another week of physical therapy on my knee?

* Is anyone else really excited for Thanksgiving?

* Is it possible for a stock (Weatherford (WFT)) to be down 5% and trading dry?

* If we keep saying "the nomination was honor enough," will it appease the mojo Gods enough to give Hoofy and Boo their well deserved Emmy?


Jeffrey Cooper

01:10:00 PM

No positions in stocks mentioned.

S&P Lows

As offered earlier the prior S&P low was 818 would be an important inflection point.

Only a rally above 840 will trigger the big buy stops and ignite a 20% rally.

Ryan Krueger

01:04:35 PM

No positions in stocks mentioned.

Homework Time!
When 8 of the top 10 most actively traded securities are ETFs and when the trading volume on all ETFs as a percentage of all equity trading volume has soared from the 20’s to 30’s and now in the 40%’s in the last two months alone... it may offer no clue about any key level, but I cannot help but think you have an exquisite and unusual opportunity to do individual stock work.

In good or bad markets it will prove more valuable than ever before as long as groups are being traded with no regard to underlying individual stocks. This is not another valuation call on stocks, it’s a valuation call on research.

Astonishing figures.

Long: Homework

David Dispennette

12:58:21 PM

No positions in stocks mentioned.

BIDU November $100 Puts

I could probably wait until tomorrow and watch them expire worthless, but I'm bidding for them now at $1 to book my $2 gain for the second time this week, only because at $105.56 this morning I was starting to get a little clammy in palms.

This is a sign I may not have wanted to be the owner of 5000 Baidu (BIDU) with a cost average of $116.

MV Trivia

12:30:00 PM

No positions in stocks mentioned.

A Time to Read
The first book ever published was the Bible, which springboarded millions and millions of other literature to be put into production.

What is the world's longest novel?

Be the first Minyan to answer correctly!

MV News

12:23:11 PM

No positions in stocks mentioned.

Midday News

* European Markets Closing Prices: FTSE: -2.9%, DAX: -2.8%, CAC: -3.5%.

* In December, the SEC may approve exemptions for credit swap clearing. (DJ)

* According to Treasury Officials over 1,000 private banks have applied for TARP. (DJ)

* JP Morgan (JPM) plans to cut 10% of its investment banking jobs. (Reuters)

* The UAW's Ron Gettelfinger, asked congress not to adjourn before reaching an agreement on the automakers which he says could collapse without assistance. (WSJ)

Kevin Depew

12:15:00 PM

No positions in stocks mentioned.

It Ain't Over...

...til the fat lady sings.

Just a note that intraday looks like another move to the lows, possibly below. This can happen at important market lows prior to afternoon rallies. It is never easy, but a move through the intraday lows would likely shake out some of the weakest holders.

Again, the daily exhaustion signals and divergences continue to pile up so be careful not to manage your daily holdings against intraday timeframes.

Todd Harrison

12:07:45 PM

No positions in stocks mentioned.

I've got no reason for the things I fear. The things that plague me when I see and hear.

Jenny said turn off the radio. Jenny said turn off the light. Jenny said turn off the video. If only we listened to Jenny, maybe we we could let it go, let it go, let it go. Let it go, let it go, let it go.

Some top-line vibes as Cowboy Mouth blasts in the background:

* Have no fear, Jack Bauer is here.

The semis, which were the first sector to flip the upside switch, is quietly up 3% (it ain't what it used to be but Hoofy will take what he can get in this environment).

Of course, that sword swings both ways. Banks? Swvft! A finski. The drillers? Thump! 9%. Silver? Surfing 3% lower (we haven't dabbled in silver in years but it's starting to vibe on our collective "behind the scenes" radars for a trade).

Market psychology is a funny beast, eh? When we were 50% higher last year, the bears were taking stabs and covering the first pullback (as the news was generally constructive). Now, the bulls are taking stabs and selling the first rally (as the news is grim and grimmer).

The only difference between a mistake and a lesson is the ability to learn from it.

330 Minyans cut a rug at last year's Festivus and we're on pace to eclipse that this year (which is a testament to our community given the economic climate). Word to the wise, Yo, we'll prolly close registration as we approach the 3-handle.

Speaking of the community, I would like to take a quick moment to offer a hearty congrats to Team Minyanville for having the second highest year-over-year traffic growth of any financial website on the planet.

Disney (DIS), as a teen, is on my laundry list. Ditto Yahoo (YHOO) as a hat size, particularly after side-stepping the meat of the downside heat. Perhaps there's some serendipity in that?


Jeffrey Cooper

11:55:00 AM

No positions in stocks mentioned.

Rip This Joint

Back through the prior low of S&P 818 and especially 824--one of the "master squares” will rip this joint.

You say 20% rally lickety split?

If the above plays out.

Click here.

Terry Woo

11:50:00 AM

No positions in stocks mentioned.

Hoofy n' Boo
A few updates from this morning's Two Ways to Play:

From the Bull Pen:

A tactical approach remains the strategy for bulls in this environment. Consider Research In Motion (RIMM) to the upside; sell stops can be set below $44.

RIMM is trading -1.10% to $44.83.

From the Bear Cave:

Fear is in the air. But it will subside. And so will the flight to Treasuries. Bears can consider playing the Ultrashort 20+ Treasury ETF (TBT); sell stops can be set 2 points from entry.

TBT is trading -4.64% to $53.25.

Bennet Sedacca

11:42:00 AM

No positions in stocks mentioned.

Closing in on some initial targets

Ever since I turned negative on stocks I have been trying to guess where the market might bottom.

The issue is that as yields on high quality fixed income (and low quality for that matter) continues to rise, the competition for stocks gets tougher. Lump in the fact that the 'E' in P/E becomes more elusive, the case for stocks remains grim.

About six months ago, I wrote that I thought a likely eventual bottom for equities was in the 450-500 range. I have since lowered that to 350-400 but that could be a couple of years off.

For now, I continue to focus on a 650-700 interim low and have been using November 24-25 as a window to buy for a trade. But just a trade. If we got there, 775-815 would be likely resistance.

As we fall, I am not necessarily becoming bullish, but most definitely less bearish.

What happens with Citigroup (C) (likely soon) is key to an emotional short tom low in my opinion.

Jeffrey Cooper

11:36:03 AM

No positions in stocks mentioned.

Stein & Handle

Watching for a possible Stein & Handle pattern on the 10 minute S&P, which may be putting in a handle now, on a back test of short term trendline today.

Jeffrey Cooper

11:20:00 AM

No positions in stocks mentioned.

W V on Apple

An inverse head and shoulder pattern on Apple (AAPL) counts to 90.

Will it be there for expiration?

The bigger picture on AAPL looks like a W V which often times carves out a significant low.

Click to enlarge

Adam Warner

11:12:37 AM

Position in SKF

Thinking about SKF?
So I'm thinking maybe it's time to buy some puts in these Inverse Double Latte's, Then I look at the SKF board and... whoa. Hair raising.

The Dec. 240 straddle, roughly ATM not, is about $109. Yes, that's $109 for a straddle with 29 days to go. 4 of them being a long weekend next weekend, although hard to make a case the Thanksgiving break will mean anything this year.

But hey, if that seems pricey, consider the November 240 straddle, That's now $34. It expires tomorrow.

You'd think buying the Dec. vs. shorting the Nov. makes some degree of sense, I mean conceptually if you're getting a third of the price back in under 2 days of trading, what can go wrong?

Well, volatility is insanely volatile. As is the stock right now. Where would the Dec. straddle trade if SKF moves 30 from here? Or 40 from here, or 60 from here? That's the question you have to answer.

Jeffrey Cooper

11:02:13 AM

No positions in stocks mentioned.

Right Shoulder

The SDS looks like a right shoulder checking the 10 minute chart.

While the S&P 10 minute chart looks like a possible inverse H&S with the head at/near the 780 square mentioned earlier.

Todd Harrison

10:51:02 AM

No positions in stocks mentioned.

It's Not Easy, E!

Don't believe the hype, Yo, all is not lost. In fact, it's my fiduciary responsibility to inform ye faithful that the entire Minyanville editorial desk--present company included--has gone old school in our attempt to shake up the mojo. That's right, shoes are off in the city of critters, one and all and all for one. Call it a team effort. We do it because we care.

Some udder thoughts as we find our way:

* SOX. Green.

Hoofy is watching the dollar, for he knows that any sustained lift must include a lower greenback.

Breadth? There musta been onions in them eggs as it's 5:1 negative (despite this Snapper attempt).

If there's a smarter digital media mind out there, I've yet to meet him or her.


Citigroup (C) (-22%) reminds me of the visual we used all summer of the financial dike springing alotta holes with only so many fingers available to plug them.

N's over S's, if only for a trade. I still think big beta has the potential to lead the upside speed if and when performance anxiety begins to percolate.

Time and price, friends, time and price.

Pepe just told me that he's putting his shoes on to go to the men's room. Selfish! If this rally fails, you all know who to blame.


Jess Thompson

10:40:04 AM

No positions in stocks mentioned.

Daily Forecast for the S&P 500 (SPY)

Daily Order Flow Briefing (written the evening of 11/19/08):

* Daily Review: For the Wednesday session, my firm suggested that a rally extension from Tuesday's bounce could only occur if "Daily buyers now lift SPY back above OO... to attract higher timeframe bids. "[My firm] also alerted our readers to "be aware that a second sell-side price rejection (and failure at OO (see the chart below) can lead to aggressive selling and a press to new lows going into week's end."

* Recall last Thursday's (11/13) reversal failed to extend higher as offers stacked at O1 (see chart) capped the rally and that failure led to a spell of liquidation. The context going into Wednesday was similar with O-level offers stacked right overhead as resistance and with the near-term trend (and intermediate) already down.

* Tuesday evening my firm suggested the near-term would remain down unless SPY regained OO on Wednesday. When the early rally attempt on Wednesday to extend Tuesday's rally was rejected, SPY rotated immediately lower then congested where bids were stacked at D1. Late in the day, those D1 bids were finally absorbed by offers leaving the SPY nowhere to go but into a closing tail-spin.

* Weekly Recap: Last Sunday, in my firm's pre-Monday brief, we suggested the control point for the entire week's price action would be what happened relative to OO (87.85) in the first couple of days of the week. After Monday's failure to hold OO, we said Monday evening to "expect bears to remain dominant in the near-term, unless bulls can reverse the weekly range up and prove price acceptance above the OO offer line". We consider the most dangerous periods to hold longs are those where the intermediate trend (which turned down 11/12) turns down in a primary bear market.

* Performance Demands: Wednesday's price action diminished the potential for bulls to neutralize bear dominance this week, therefore with all three timeframes (near-term, intermediate and primary) down, we expect a sell-side order flow bias to remain dominant, until bulls can prove otherwise by turning the near-term trend back up at OO (see chart).

Click to enlarge

David Dispennette

10:31:41 AM

Position in NYX, V, ISCA, NYX, BIDU

Managing the Tide
It seems like two months ago that I received an IM from Terry Woo saying what a great trade it was last Thursday when I covered all my shorts in First Solar (FSLR), Potash (POT), Celgene (CELG), Gilead (GILD), and Carnival Corp (CCL) before an ensuing one day rally.

Since then, I lost on my shot at Fuel Systems (FSYS), Energy Conversion Devices (ENER), Ultra S&P (SSO) and Ultra Dow (DDM), not to mention watched all my shorts head much lower.

I continue to hold my NYSE Euronext (NYX), International Speedway (ISCA) short, and Baidu (BIDU), which I continue to trade options around and am not sure if I want to get exercised on my $100 Puts or not, to add remaining half of position.

With that being said, like Todd, I too am continuing to buy stocks I don't mind holding if this attempt to trade them turns against me.

I'm buying some more NYX, adding Visa (V), and re-establishing position in SSO and DDM, which I'll trade if I get a quick 25% pop over next week.

Todd Harrison

10:24:55 AM

No positions in stocks mentioned.


There's alotta eye popping elements nestled in today's Art Carnage. In no particular order.

* Morgan Stanley's (MS) market cap just dipped below $10 billion, which is below the amount it borrowed from the government last month. Think about that for a second.

* General Electric (GE) just lost Bar Mitzvah status under $13.

* A 57 cent loss in General Motors (GM) is 21%.

* The CRB has organically split two for one since July.

Twenty beats your five, Citigroup (C). Five.

To be sure, nobody has ever seen anything like this--FDR didn't know what a derivative was--and we're in unchartered waters. It's scary, it's depressing and it's all consuming but don't give up--don't ever give up. Now, more than ever, is when lucidity will serve us in good stead.

It's possible that Dubya and Hank have tossed in the towel and passed the lame duck, er, buck to Obama. Still, please remember that the greatest trick the devil ever pulled was convincing the world he didn't exist. Expiration looms large tomorrow and IF there are any bunnies left in the hat, they'll be pulled in front of tomorrow morning.

I continue to trade from the long side. Not profitably at it stands, but that's what I'm doing for better or for worse, with two legs in my bull costume as of this morning. It's my sense that S&P 840 needed to break in order to shake the trees, clear the seas and set the stage for a potential year-end lift.

Engine room, more scream!


Jeffrey Cooper

10:12:21 AM

No positions in stocks mentioned.

Double Down Warren

We’ve all been in this position at one time or another: does Warren double down on Goldman Sachs (GS) at 50?

Does he get a free drink with the double down?

MV News

10:01:52 AM

No positions in stocks mentioned.


* November Philadelphia Fed -39.3 vs -35.0% consensus, prior -37.5

* Oct Leading Indicators -0.8% vs -0.6% consensus

Kevin Depew

10:00:00 AM

Position in QQQQ


It appears that, like the Nasdaq-100 (NDX) yesterday, Google (GOOG) has also qualified its break of the 38.2% TD Absolute Retracement level.


Again, this is not today's business. But I believe it bodes ill for the much longer-term price prospects of Google (GOOG).

Jeffrey Cooper

09:50:00 AM

No positions in stocks mentioned.

Wheel of Price and Time

Note that S&P 738, "vibrates" of October 11th and is a harmonic of 851 and 971.

Click to enlarge

Todd Harrison

09:44:41 AM

position in energy proxies

Gate Sniffage!

Jeezums, is it the trading day already? Seems like just moments ago we were signing off from the Hump Day frump. Alas, the flickering ticks are back and baby, they're better than ever. Some top of the morning vibage as I put the finishing touches on my opener while consuming bagels, shmear and a hot chocolate for good measure:

* S&P 770-840 is the new range. Mr. Valentine has set the price with a conscious nod that technicals take a back seat to the structural and psychological metrics.

* The first thing that jumped out on the opening? No, not the 5% drop in crude (I'm an aggressive buyer, for a trade)--it was the financials, which spurted green before getting punched in the throat again. Maybe something, maybe nothing but certainly worth watching.

* Other green beans in the Red Sea? Wal-Mart (WMT), Target (TGT), KLA Tencor (KLAC), Amgen (AMGN), Amazon (AMZN), Cisco (CSCO) and Texas Instruments (TXN).

* There's no hiding in the 'Ville and as such, I'll raise my hand and say "I was wrong (early) in nibbling yesterday." With that said, we mused last week that the break of S&P 840 might be a necessary precursor to a rally as everyone had their stop-loss set there.

* I'm no Polly, Anna, but I'm slipping two legs into my bull costume (50% conviction on the upside) with hat in hand and a nod to the Gods. Give it to me baby.


Kevin Depew

09:40:22 AM

Position in SPY

Analog Update

We haven't checked in with the S&P 500 1971-74 analog in a bit. This chart has been floaating around in various Bloomberg forums for months now. Here it is as of today:


Jeffrey Cooper

09:30:00 AM

No positions in stocks mentioned.

Just One More Thing

The S&P 780 level.

776 and change was the daily closing low for the bear in October 2002.

Just as 777 was the DJIA low in 1982.

Minyanville Staff

09:23:38 AM

No positions in stocks mentioned.

Vibes from Minyan Tony "Snoop" Dwyer of FTN Midwest
My near-term tactical call is now the same as my intermediate term fundamental call – I’d recommend that long/short funds stay as light as possible in exposure and long only funds stay as neutral to benchmark as possible. As I’ve been highlighting over recent days, weeks and months – the credit markets continue to be dislocated and getting worse despite all the efforts of the global central banks and governments. The three toes I "dipped into the water" around S&P 500 (SPX) 840-850 got eaten by piranha as the major equity indices broke down from the clear trading range I’ve been highlighting and basing my tactical call on.

Again, I’d caution against becoming heavily short or overly defensive in sector weighting because short covering rallies will be extraordinarily sharp and be led by those areas many would currently want to be underweight or short. The most recent example of this idea was last Thursday, which saw the S&P Energy Sector down in the morning, only to see an 11% short covering rally by the end of the day. That kind of action is extraordinarily difficult to predict, especially given the current volatility and liquidity in the market place.

The bottom line is that my tactical view is the same as my fundamental view has been – I am again "out of the way." From an intermediate-term fundamental position, I’d continue to strongly recommend remaining "out of the way" until there is significant and sustainable credit market improvement. Absent improvement in the credit markets and without a clear trading range, trying to pick a turning point is simply a guess. Clearly, I’ll back at this time as a good one to become invested, and that is my intention, as long as there is a tactical or fundamental reason to back it up. The trading range that dictated my tactical position was broken and the non-government directed credit markets are at their worst levels of this entire crisis.

As I said the day following Warren Buffet's NY Times "buy the market" article – when we look back 3-5 years from now, the equity market should be well above current levels given the Treasury and Federal Reserve actions taken to fix the economy and credit markets, but I’m trying to avoid buying blindly without reason in order to miss the kind of drops investors would have experience following Mr. Buffets lead to date.

Jeffrey Cooper

09:15:00 AM

No positions in stocks mentioned.

Pennsylvania Avenue?

180 and 1800

I just posted the harmonics of May 19th and 780 S&P.

Interesting that we are 180 degrees in time from that May 19th peak where the slide began and that at 780, the S&P will be 1800 degrees (360X5 squares) in price from that May 19th 1440 high.

Kevin Depew

09:05:00 AM

Position in SPY, QQQQ


Well, here we are.

Reminder, the 50% TD-Absolute Retracement level for S&P 500 (SPX) is 777.21. Because yesterday was a lower close than the day before, even a move through that level today will not "qualify" the downside break. That is what passes for "good news" these days.

The Nasdaq-100 (NDX) is a different story. The downside break through 1098 was qualified yesterday. The confirmation today will be a lower open AND a low that is lower than the open. Those are the rules.

Regardless, with the buy setup on the daily chart that was perfected yesterday, there is the probability of a 1-4 session counter-trend move higher.

Again, the posture I have is longer-term bearish and short-term bullish. Today has a capitulatory feel to it this morning, particularly with yields collapsing, the dollar higher and crude off 6%. Across the spectrum there are signals on daily charts suggesting all these moves as they stand are nearing important exhaustion levels.

Of course, I am very much aware that the mistake that has been made over and over by many this year is not being bearish enough. We shall see.

Jeffrey Cooper

08:50:00 AM

No positions in stocks mentioned.

Bearish Changes

Yesterday's break of the October 10th low and the new closing low in the S&P seems especially bearish because:

1) This is options expiration week, which typically closes on the upside.

2) Last Thursday's Key Reversal has been broken.

3) With Wednesday’s failure, last Thursday shapes up like a textbook Misdirection Day.

At the same time it should be important that today/Friday is 180 degrees in time from the important May 19th high of 1440 S&P

Five cycles of price below 1440 is 780. In other words today/Friday line up with the price of 1440 and 780 while we are opposition or 180 degrees in time from the May 19th high. A down open that tags 780 and holds a first hour low and turns up may forestall an undercut of the 2002 lows.

It was my hope and assumption that a large counter trend rally would play out prior to undercutting the 2002 low based on time/price and pattern. However, yesterdays break changes things and when things change you have to change.

Be that as it may I think the square out from May 19th shows we are near SOMETHING.

MV News

08:40:00 AM

No positions in stocks mentioned.

Morning News

* GMAC has submitted an application to participate in the TARP program. (WSJ)

* Citigroup (C) will buy $17.4 billion in structured investment vehicles resulting in a $1.1 billion write down. (WSJ)

* In a surprise move, the Swiss National Bank cut its key interest rate by one percentage point. (WSJ)

* Saudi investor Prince Alwaleed bin Tala bin Abdulaziz Al Saud has increased his stake in Citigroup (C) to 5% and says he gives management his full support. (DJ)

* General Electric (GE) is seeking funds from four Assign sovereign wealth funds.. (Bloomberg)

MV News

08:31:49 AM

No positions in stocks mentioned.


* Initial Claims 542K vs 505K consensus, prior revised to 515K from 516K

* Continuing claims: 4012 k. Prior revised to 3903 k from 3897 k.

Kevin Depew

08:29:29 AM

No positions in stocks mentioned.

Where We Stand

Below is where we stand with the point and figure bullish percent indicators for equities, based on Investors Intelligence data.

* NYSE Bullish Percent: Os (Negative) 16.7%
* S&P 500 Bullish Percent: Os (Negative) 19.4%
* Nasdaq Composite Bullish Percent: Os (Negative) 14%
* Nasdaq-100 Bullish Percent: Os (Negative) 19%
* Russell 2000 Bullish Percent: Os (Negative) 17.6%
* NYSE High-Low Index: Xs (Positive) 4.2%
* Nasdaq High-Low: Os (Negative) 1.1%

Jeffrey Cooper

08:05:00 AM

No positions in stocks mentioned.

Uncomfortably Numb

The velocity of the leg down in the GSCI, The energy-heavy Goldman Sachs Commodity Index , is unequaled in the history of commodity trading. Time is running out for this particular leg to end. This week should tell us whether or not some kind of a low is being carved out and bear market rallies will erupt.

On Wednesday the GSCI made another new bear market low. This low was just 2 points above the important January 2007 bottom. Is capitulation at hand as this inflection point is neared.

I bring this up as it dovetails nicely with the idea of a possible capitulation at/below the 2002 S&P lows now that key support at 840/850 has been lost on a closing basis.

When the market turns, all markets should turn together like a school of fish so continue to watch gold, oil and the dollar for signs of a reversal in stocks.

Minyanville Staff

07:53:46 AM

No positions in stocks mentioned.

On Tap Today
Thursday, November 20


08:30 Initial Jobless Claims
08:30 Continuing Claims
10:00 Philly Fed
10:00 Leading Indicators





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MV News

07:12:14 AM

No positions in stocks mentioned.

Good Morning Minyans
Traders buckle up for thristy Thursday as they find foreign markets selling off.

Asian trading closed with the Hang Seng -4.04%, Nikkei -6.89%, Sensex -3.68%, Taiwan -4.53% and Shanghai -1.67%.

Across the pond, we see the CAC -2.21%, DAX -2.40%, FTSE -1.94%, ATX -4.08%, Swiss Market -3.49% and Stockholm -1.94%.

Over in commodities, crude oil is trading down -1.28 to 50.44 while gold is up +7.80 to 743.80 this morning.

Good luck today!

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