Sep

28

Observations and Market Sentiment

Filed in Daily Observations (For Everyone) | Start Discussion 

As we go to press, news of the proposed rescue package is all over the news. [FULL TEXT]

While Larry Summers obviously had his analysis in the can prior to the announcement, what remains to be seen is how many house Republicans will vote for the deal tomorrow given the “bailout revolt” from their constituents. [MORE]

I have no idea how the proposal will affect frozen credit markets. As one of my friends said last week, the “bottom line is that you’re not going to trade with someone or lend them money if you don’t know that they’ll be in existence from one day to the next.”

From that standpoint, it seems to me that the government’s market economy experiment of letting Lehman Brothers fail was the defining moment, the tipping point that set off the final round of falling dominoes. Since the rescue package would have to be rolled out over a period weeks, if not months, the proposal before Congress might have more to do with stopping mass panic and hysteria than anything else. Any bank or brokerage that is now teetering might still go under. Uncertainty is still with us.

In so far as Goldman and Morgan Stanley are now officially banks, they will survive the storm. The titans will be able to charge a premium from now on and make some righteous bucks like their Canadian counterparts. Take a look at the JPM chart. It’s not half-bad.

ADDED 2008.09.29: The next wave is happening in Europe:

What Do I Do with My CASH?

I’ve been in this game for a long time, and I don’t think I have EVER heard this question more than I have over the last few days. Everyone is in cash. Everyone is hoarding cash. It’s cash over cachet.

WaMu ultimately went under because there was a run on the bank where depositors removed $16 billion in one week:

WaMu’s demise had been anticipated. Depositors had made a run on the bank since Sept. 15, withdrawing more than $16-billion and leaving the bank with too little cash to continue. Its stock price plummeted 95 percent from a 52-week high of $36.47 a share to close at $1.69 Thursday.

The entire nation is engaged in a tragic Lord of The Flies swarming of financial institutions. If you ask me, perhaps the best thing to do with cash would be to pay off the mortgage. Those with a lot of spare cash might consider buying some rental properties — with cash.

This would be a bold move, perhaps even bolder than buying Treasury Bonds at the top of the interest rate spike in 1980. At least they will have more back yards in which to bury their gold, and attract homeless people willing to till the land as indentured servants should the worse come to pass. Throw in a few chickens and it’s all good. LOL!

52-Week Highs and Lows

I noticed that TradeStation now has 52-week new high and new low data for the major stock indexes. This is very cool, because Justin Mamis wrote about this in The Nature of Risk. He showed a chart with a divergence on an intraday basis during the 1987 Crash. And now, we can have it too:


CLICK the Daily Chart of 52-Week High/Low for the S&P 500 Index

I whipped up a study in TradeStation to plot the net new high/low, and by golly, there is a divergence on the daily chart of the S&P 500 Index. Imagine that!

TradeStation has more to come. Apparently real-time custom scanning of entire stock universes is coming in 8.4.

Sentiment Survey

The InVivo Objective Sentiment Survey tracks the number of buy and sell signals generated by InVivo Universal Stops amongst the constituent stocks of the S&P 100 and NASDAQ 100 indexes.


InVivo Objective Sentiment Survey

Questions and Comments

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