Didn’t we see this kind of news flow and trading before?
After the close WSJ reported that Bank of America is knocking on the Government door for more money to help “digest” Merrill Lynch Acquisition. BAC is trading below 10 after the close. I don’t know why Steve Job’s ill health is “news” – Apple is down below 80 and recovered some.
S&P held a support at 840 and closed above this level. Kissed the lower BB and closed a tad above.
VIX spiked touched upper BB, traded above 50 and closed a closed a tad below the upper BB level.
Last time S&P traded below lower BB and VIX near upperBB, the bounce was spectacular. Only for this technical reason I am expecting a bounce tommorrow. However, if you go back to Sept and Oct trading, as VIX traded along the upper BB, while S&P traded along its lower BB. So, it may be premature to think that selling is over.
Commercial mortgage paper spreads are threatening again. The last time CMBX.NA.AAA.5 traded over 750 was in mid November. We all know how the markets behaved back then, don’t we? (I am still long SRS.)
Here is something Jamie Dimon said today, which I saw rather late.
“The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009,” said Mr Dimon. “In terms of our sector, we expect consumer loans and credit cards to continue to get worse.”
Check these indices also:
- CDX NA HY (North American High Yield Corporate) back above 1300. from close to 1100 just last week. Panic at 1500.
- Europe Cross-over Index: Back over 1000. Panic at 1300
ECB is expected to cut interest rates by 50 bps tomorrow. Some are expecting even 100 bps. This will probably give the markets a chance at the bounce or mini-rally.
On a personal note – I closed my Jan put positions and sold FAZ at the close (before BAC news) because a) JPM is reporting tomorrow – I just don’t want to get caught on the wrong side; b) as I said above, I am expecting a technical bounce tomorrow. I don’t expect this bounce to be huge. Even if the bounce doesn’t happen, I will get back into FAZ sometime tomorrow.
Isn’t JPM report on Friday?
Moved up to Thurs.
As for AAPL, herd mentality. Buying calls to fill the gap down.
Mohan – what about the TED spread? It seems to be coming down. Will that have a greater impact on lending?
What is the consensous as far as S&P targets if we have a bounce?
http://social.stocktock.com/profiles/blogs/why-to-get-to-know-signor
has resistance zones and Fib levels. 50% retracement from current 840ish levels back toward the 940ish top would be 890ish, and the subsequent fall would finish a H&S top in the S&P.
Since the distance between here and the old top being retraced is about $100, the fibs are easy. Mohan (below) is looking for a 23.6% bounce to 865. 38.2% would be 875-880, 50% 890ish, 61.8% would probably home in on those old 918ish short-term tops, which I don’t expect — lotta resistance in the way now.
I don’t think everything is as bad as it was in October. Somethings have obviously improved – like credit is flowing again, TED spreads improved – which are still high compared to historical terms.
One other reason I am expecting a bounce tomorrow is the ECB is expected to lower the rates by a min of 50 bps tomorrow. If they lower by 100 bps, the market and the financials could bounce for a day or two.
My high S&P target is 865.
Check these indices:
CDX NA HY (North American High Yield Corporate) back above 1300.
Europe Cross-over Index: Back over 1000.
CMBX-NA-AAA-5 (as of yesterday) at 675 (Panic level was above 750)
http://www.markit.com/markit.jsp?jsppage=indices.jsp
BAC is Toast Toast Toast……the whole wheat kind that taste like cr@p. I’ve said that before as you probably recall when BAC was at $14. Really sad. Oh well.
WFC is also going to suprise to the downside and required a hand-out…but their report timing is good and the affect on banks of the commerical colapse has not been revealed yet. Luckily, they are also somewhat shielded by the SBA. Look into the SBA exposure – it will be a tital wave.
I’ve got a SBA loan myself on a large commercial building. Only had to put 10% down! Yeah!
“Last time S&P traded below lower BB and VIX near upperBB, the bounce was spectacular.”
Careful — look at the BB, 20dMA, RSI, and MACD curling upward. Then look what happened starting in late Aug after similar indications. We may see a spectacular move, all right — in the $VIX, with S&P heading below November lows.
We may indeed get an $SPX bounce here, and i an half in cash to try to harvest some bargain FAZ at the top of it, but we need to be alert to the possibility of a bounce being of short height and duration, as influenced by Fibs and resistance zones shown in
http://social.stocktock.com/profiles/blogs/why-to-get-to-know-signor
“if you go back to Sept and Oct trading, as VIX traded along the upper BB, while S&P traded along its lower BB. So, it may be premature to think that selling is over.”
Right — the slaughter may just be getting started. Late Aug – early Sep’s similar action to recent $VIX events heralded the worst two months in the 59 years of S&P data I downloaded. This chart summarizes my disjoint posts:
http://i39.tinypic.com/2r7lbis.gif