Stock Market trading wrap-up recap Friday 10/10/08 Mondays stock market trading outlook 10/13/08
Radical Measures May Be In our future, the U.S. equities markets will require intervention, guidance, regulation, and stimulus.
The Emergency Economic Stabilization Act of 2008’s vague language gives Paulson almost unlimited power to intervene.
As the financial crisis threatens to spiral out of control, it’s more likely Treasury Secretary Henry Paulson will take extraordinary steps
through the extensive authority granted to him under emergency rescue legislation. Thursday Treasury indicated it would move by the
end of the month. In a brief speech on Friday, President Bush promised the department would move quickly. With the legislation’s main
mechanism an auction system to purchase bad mortgage-based securities remains weeks away from implementation, Paulson may have
to inject capital into any number of financial institutions even non-depository ones like investment banks, commercial banks, insurers,
companies, and hedge funds.
Bank nationalization would be a more extraordinary move for the US, during the Latin American debt crisis of the 1980s when major
money center banks were facing possible loan payment defaults by sovereign governments, the US “had a contingency plan in place to
nationalize banks.
The Fed and Treasury have already taken a number of unusual steps from paying interest on bank deposits to backing up the
commercial paper market to providing more than $100 billion in loans to the insurance giant American International Group. Potential plans
for the government to guarantee banks’ liabilities would potentially separate credit risk from funding and may encourage more lending
among banks. The Credit markets internationally and in the U.S. will require control measures and stimulation to regain confidince and
begin flowing again.
Goldman Sachs and Morgan Stanley may be nationalized this weekend.
Pressure has been growing on Morgan Stanley for days now amid speculation Japan’s Mitsubishi UFJ will not proceed with plans to
purchase a major stake. Expect an announcement from Paulson, possibly on Sunday or Monday.
GM’s reported earnings and the cash burn rate are extremely concerning. Survival is now a serious question for GM.
GM is now close to Ford in burn rate of available cash to support world wide operations. The stock was off 31% yesterday.
While the temptation may be strong to bottom fish here make sure to factor out the risk reward prospects before making any moves.
Volatility remains at extremes.
The Dow has fallen 22% so far in October
The stock market posted its eighth consecutive loss on extreme volatility.
Friday was the anniversary of the 101002 769 bear market low, and the S&P500 has declined -24% in the last seven days -0.3, -4.0,
-1.4, -3.9, -5.7, -1.1, -7.6 This decline over the last 7 days qualifies as the 8th worst bear market of the 16 bear markets since
5291946-5171947.
The stock market finished its worst week ever with a dramatic rebound from even worse lows.
The Dow Jones industrials moved more than 1,000 points during the session from a low of nearly 700 points to a gain of more than 300
before falling back again. It was the first 1,000-point swing for the DOW index.
For most of us we may never see a week like this again. It’s history for the generations.
Cash Should remain a focus however stocksshakers anticipate that there is going to be some sort of coordinated worldwide massive credit
infusion coming very soon, Possibly Sunday Night or Monday morning.
Watch the XLF and UYG which is the ETF and the Ultra-ETF for the financial stocks these ETF’s are leading indicators for the direction of
the remainder of the U.S. equities markets.
International stock markets close before the U.S. stock market rebounded, saw some of the worst sessions in decades. In Asian trading,
Japan’s Nikkei fell 9.6% and Hong Kong’s Hang Seng dropped 7.2%. In Europe, London’s FTSE fell 8.9%, Germany’s DAX dropped 7.0%
and France’s CAC declined 7.7%. 8 of 10 economic sectors posted a loss. Small-cap stocks outperformed, with the Russell 2000 surging
4.7%.
The three-month London interbank offered rate (Libor) climbed to 4.82% today from 4.75% Thursday. This is the highest level all year
and was up from 2.82% just 1 month ago. Higher Libor rates indicate a slowing in lending and an increased fear of risk in loans and
lending.
The stock market dive has seen the Dow fall 22% so far in October and has forced many hedge funds to liquidate stocks to meet margin
calls. Unless the cash gets freed up, experts say, the U.S. could face a very serious recession. Other countries may face bigger
problems. Finance officials from the major industrials were meeting Friday to discuss the situation. After the meeting, the U.S. and its G-7
allies agreed on common guidelines to address the world financial crisis, a move that opens the way for a series of government actions.
But The Wall Street Journal said the agreement falls short of the joint plan that many investors had sought.
At the same time, Treasury Secretary Paulson announced that the government will move ahead with plans to buy equity stakes in
financial institutions. The administration received authority to make direct purchases of stock in the $700 billion rescue bill Congress recently
passed.
Symbol Last Change
Dow 8,451.19 128.00 (1.49%)
Nasdaq 1,649.51 4.39 (0.27%)
S&P 500 899.22 10.70 (1.18%)
10-Yr Bond 3.8610% 0.0270
NYSE Volume 11,606,424,000
Nasdaq Volume 4,273,416,000
Advances & Declines NYSE NASDAQ
Advances 1,201 (34%) 1,457 (47%)
Declines 2,339 (66%) 1,583 (51%)
Unchanged 30 (1%) 90 (3%)
Up Vol* 88 (3%) 1,665 (39%)
Down Vol* 2,917 (97%) 2,568 (60%)
Unch. Vol* 12 (0%) 41 (1%)
New Hi’s 16 6
New Lo’s 2,631 1,709
Seeking Alpha and Relative strength? Stockshakers again suggests the markets trading enviroment is still too volitile to take lightly.
Symbol Company Name WeightedAlpha Last Rel Str His Vol Avg Vol YTDPercent 52 WeekHigh 52 WeekLow
RXD ULTRASHORT HEAL +68.70 122.98 89.95% 71.97% 11825 90.09% 131.92 60.36
SDP ULTRASHORT UTIL +119.40 122.76 87.29% 69.00% 60165 145.10% 142.61 46.67
SDK PST ULSHT RSL M +160.10 163.34 86.17% 92.29% 33860 160.23% 186.98 56.16
SJL PST ULSHT RSL M +109.60 173.15 85.44% 91.13% 18665 113.20% 194.12 67.22
SMN ULTRASHORT BASI +100.50 92.99 85.28% 100.16% 3170660 130.73% 107.00 25.59
SFK PST ULSHT RSL1K +141.40 141.90 85.15% 76.17% 43255 131.50% 159.11 56.05
RMS RYDEX INVERSE 2 +92.50 160.02 84.79% 77.74% 8195 106.98% 189.97 68.14
SCC ULTRASHORT CONS +114.60 157.86 83.31% 74.78% 279470 86.05% 176.96 65.26
EWV PROSHARES US MS +111.40 169.86 82.85% 80.62% 41175 124.84% 187.05 65.44
MZZ PT ULTRSHR MC40 +107.40 111.00 82.75% 91.54% 1194290 104.85% 127.50 46.56
REW ULTRASHORT TECH +136.00 118.52 82.68% 79.15% 171915 122.92% 133.40 46.01
DUG ULTRASHORT OIL +67.60 74.40 82.38% 119.28% 19580990 119.73% 86.50 23.37
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