Nov
19
The game of Jenga continues as the blast radius of the subprime crisis falls “the real economy” like the trees in Tunguska.
Auto executives were grilled on Capitol Hill while England’s Woolworths entered talks to sell the 800-store chain — for £1. Cash flow of German giants BASF (to idle 80 factories) and VEM Vermoegensverwaltung is being squeezed by both canceled orders and debt service from acquisitions and takeovers done in better times. Downgrades, here we come.
A Change in Sentiment: Dow 6,000
I mentioned last week that market participants seemed disturbingly sanguine on the test of low. Member Dan gave us heads up that Dow 6,000 was bandied about on Fast Money. Louise Yamada also talked of Dow 6,000 as the next stop (along with the 1937 scenario which members were alerted to on October 14.)
These articles are from the last couple of days:
- ‘Fast Money’ Recap: Nowhere to Go
Guy Adami said he thought the Dow Jones Industrial Average was going to trade above 9,000 today. “If the Dow closes below 7,800, we will see 6,000 next,” he said. The Dow fell 223.73, or 2.6%, to 8273.58 at the close of trading on Monday. - S&P 500 ‘Almost Certain’ to Retest Low, JPMorgan Says
Nov. 12 (Bloomberg) — U.S. stocks are “almost certain” to revisit the five-year low reached Oct. 10, according to an analysis of historical trading patterns by JPMorgan Chase & Co. . . . The average Wall Street forecast calls for the S&P 500 to gain 30 percent to 1,118 by Dec. 31 — more than twice as much as the biggest-ever advance to close out a year, according to year-end predictions compiled by Bloomberg. Strategists were even more bullish at the beginning of the year, predicting that the S&P 500 would end 2008 at a record 1,632. - S&P 500 Index’s ‘Retest’ of Low Fails to Spur Rally
Nov. 18 (Bloomberg) — The Standard & Poor’s 500 Index is poised to extend this year’s 42 percent drop after a rally from last week’s five-year low lasted just one day, say analysts who study charts of trading patterns and prices to forecast changes in stocks. . . . “Historically you would’ve had a better charge from the bulls at this point, and it hasn’t developed,” said Jeffrey de Graaf, a senior managing director at ISI Group Inc. in New York, in a telephone interview. . . . De Graaf, the highest-rated technical analyst in Institutional Investor magazine’s survey the past four years, said other indicators suggest stocks will keep falling. . . . “The final low will be much lower than this,” and may not occur before the fourth quarter of next year, de Graaf said. - Berkshire’s Credit Risk Soars on $37 Billion Bet
The cost to protect against Berkshire being unable to meet its debt payments, based on credit-default swaps, is more than four times that of rival insurer Travelers Cos. At those levels, the swaps are typical of companies rated Baa3 by Moody’s Investors Service, one level above junk. The price may have risen on concern that the billionaire’s firm could lose a $37 billion bet on world stock market values more than a decade from now.
The bottom line? Everyone is resigned to their fate, projecting lower lows. Bonds were higher on today’s sell off, telling us that sell buttons are not being pressed across the board (no panic). Looks to me that the market has made the transition into the discouragement phase of The Investor Sentiment Cycle. More on correlation HERE.
The Mamis High/Low Barometer
Let’s take a look at our market barometers to see what the market says. Mamis took the 52-week new highs and new lows statistics for the S&P 500 index and plotted the 10-day simple moving average of the net differential.
S&P 500: Mamis 10-day MA of Net New Highs/Lows
He particularly liked to look at the big picture using statistics from the NYSE:
NYSE: Mamis 10-day MA of Net New Highs/Lows
I will review the rest of our barometers overnight for members.
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… There is a story about “Granny Robber”
…reminded me of the story about, elderly shoplifters in japan, But I’m suspicious this could be a disguise.
I am curious, Will there be a Micro ‘Panic’ stage in the discouragement phase?
Is one of the signs of the apocalypse, that everyone on CNBC talks technicals, and bats a higher percentage than Carter Worth?