3/18/08
The Federal under delivers. With just reduce .75%, Federal is playing dangerous game and do not expect the market strength to last too long. They are delaying the inevitable with a statement still concern about the downside risk of the economy. They have done a lot over last 30 days. Since February, they cut interest rates to 2.25%, brought the discount rate down to 2.50%, open up new lending facility to primary broker dealers, announced be auctioning up to 200 billion, expanded the collateral to take investment grade debt securities. In addition, the fed bail out Bear Stearns with lending 30 billion worth of Bear's less liquid assets to JP Morgan. I suspect the reason that Fed only make 75 basis point cut that they want to leave window open if they need to give another surprise rate cute before next schedule meeting ( April 29th & 30th) in case another big trouble come out.
Technically, Dow is closed above the 12250-12300 level which is very bullish. But, with VIX is going close to 22( Today VIX index is close at 26) and expect market would be top if up another 300 point( near 12750 +- 50 points). Financial and banking stocks are bouncing strong because they have been beaten too much in very short period of time. Also, traders want to build a good atmosphere for the biggest IPO in US history the Visa company debut tomorrow.
Final, I still remain bearish for the stock market as well as our economy. One big gain day do not solve the problem. Otherwise the Federal does not need to work everyday( even on weekend ) to eliminate the credit financial crisis. Let's see how market perform tomorrow.
Tuesday, March 18, 2008
Monday, March 17, 2008
Fed definitely in panic mode
3/17/08
With Fed announced new round of rescue plan to save financial crisis, market is tested the support area 11750 and close in Green territory to celebrate St. Patrick Day. But Nasdaq & S&P still close below water. Market is so nervous that Lehman brother would be next to fall(If you are big client of Lehman, would you like to withdraw whole account and get cash or still believe the Fed could inject enough money?) The new lending facility created by NY Fed to help primary investment banks(MER,LEH,MS,GS,STT,....etc) prove the Fed need to restore the balance of the credit market. But the time will tell if this act would really solve the issue or just another bandit to cover the wound. Expect tomorrow the Fed must reduce 100 basis point to restore confidence for the economy and market. If Fed does give surprise move of 125basis point( 1st time in 23 years to reduce interest rate more than 75 basis point), market would rally up or trade above 12300 level. Financial stocks probably would get the greatest benefit from the Fed move and market need it to give good mood for Visa IPO debut on Wednesday this week. Market is closed on friday(Good Friday). Let see how the Fed do more magic to bring back people confidence.
With Fed announced new round of rescue plan to save financial crisis, market is tested the support area 11750 and close in Green territory to celebrate St. Patrick Day. But Nasdaq & S&P still close below water. Market is so nervous that Lehman brother would be next to fall(If you are big client of Lehman, would you like to withdraw whole account and get cash or still believe the Fed could inject enough money?) The new lending facility created by NY Fed to help primary investment banks(MER,LEH,MS,GS,STT,....etc) prove the Fed need to restore the balance of the credit market. But the time will tell if this act would really solve the issue or just another bandit to cover the wound. Expect tomorrow the Fed must reduce 100 basis point to restore confidence for the economy and market. If Fed does give surprise move of 125basis point( 1st time in 23 years to reduce interest rate more than 75 basis point), market would rally up or trade above 12300 level. Financial stocks probably would get the greatest benefit from the Fed move and market need it to give good mood for Visa IPO debut on Wednesday this week. Market is closed on friday(Good Friday). Let see how the Fed do more magic to bring back people confidence.
Sunday, March 16, 2008
Bear Stearns Burst
3/16/08
Friday CPI data was inline with expectation and markets were performed good momentum before and shortly after market open. All of sudden, Bear stearns announced lack of liquidity and has asked help from federal bank of N.Y. It really means the credit market is in very very very deep trouble. If Bear stearns can bust, so can be washington mutual bank, Citibank, Lehman brothers.....etc. that all are holding the CDOs investment garbage(currently with people lack of confidence and do not know how to figure out the actual amount of the total asset) So, stock market has shifted again to downward right away when that news come out. Now, trend has resumed and will be retested the 11650 and I think it will not hold and the next support would be around 11000-11200. I have mentioned before do not buy or hold any banking and financial firm stocks because they are all in deep trouble.
Now, JPM will take over BSC with $2 a share(BSC last close price is $30) and with Japanese Yen and Euro both march to freshly new high, expect market will open low. Also, market has credited the Fed meeting surely reduce .75% interest rate.
Let discuss back with the problem how BSC got burst. I surely know government should not bail out those investment banking firm(they all doing speculative trading in most) but if Fed not step in to help(Fed bank is the last option), the whole credit/lending/banking are going to be dead. However, I still think the tsunami has finally come and not surprise to hear next victim would be one of the bigger banks or financial firms in coming days. Final, this act means Bear stearns is bankruptcy and we most likely would hear more to come. Good luck to everyone.
Friday CPI data was inline with expectation and markets were performed good momentum before and shortly after market open. All of sudden, Bear stearns announced lack of liquidity and has asked help from federal bank of N.Y. It really means the credit market is in very very very deep trouble. If Bear stearns can bust, so can be washington mutual bank, Citibank, Lehman brothers.....etc. that all are holding the CDOs investment garbage(currently with people lack of confidence and do not know how to figure out the actual amount of the total asset) So, stock market has shifted again to downward right away when that news come out. Now, trend has resumed and will be retested the 11650 and I think it will not hold and the next support would be around 11000-11200. I have mentioned before do not buy or hold any banking and financial firm stocks because they are all in deep trouble.
Now, JPM will take over BSC with $2 a share(BSC last close price is $30) and with Japanese Yen and Euro both march to freshly new high, expect market will open low. Also, market has credited the Fed meeting surely reduce .75% interest rate.
Let discuss back with the problem how BSC got burst. I surely know government should not bail out those investment banking firm(they all doing speculative trading in most) but if Fed not step in to help(Fed bank is the last option), the whole credit/lending/banking are going to be dead. However, I still think the tsunami has finally come and not surprise to hear next victim would be one of the bigger banks or financial firms in coming days. Final, this act means Bear stearns is bankruptcy and we most likely would hear more to come. Good luck to everyone.
Thursday, March 13, 2008
Sentiment change
3/13/08
Gold future is trading above 1000 mark today but close at 993.80. On the currency side, EUR is making new fresh highs and JPY is breaking 100 level since year 1995 against USD. As my previous blog indicate, the DOW did open below 100 points and keep rolling down to Tuesday lows 11880, then retrace back to 12200, final close at 12145. Despite the worst retail sales number, market still could hold on that what bulls want because it proves the market sentiment has shift since Tuesday rally. Next strong resistance would be 12300, if DOW could breakout this level then watch out the 12500. I would assume CPI would be worst than estimate but market still could hold steady or even slightly upward. It is just tomorrow is friday, traders may not keep pushing upward til the close of the market.
These are the sectors has testing last summer lows, 1/2008 lows & recent lows and they are still trending upward. These are Energy, Agriculture, Mining, Metals/Steel, Food & Utility. One of the stock I like is CALM in Food sector and most likely it will breakout to 52 weeks highs very soon. Good luck trading. Market sentiment change upward and bias is up for short term(1 to 3 days at least).
Gold future is trading above 1000 mark today but close at 993.80. On the currency side, EUR is making new fresh highs and JPY is breaking 100 level since year 1995 against USD. As my previous blog indicate, the DOW did open below 100 points and keep rolling down to Tuesday lows 11880, then retrace back to 12200, final close at 12145. Despite the worst retail sales number, market still could hold on that what bulls want because it proves the market sentiment has shift since Tuesday rally. Next strong resistance would be 12300, if DOW could breakout this level then watch out the 12500. I would assume CPI would be worst than estimate but market still could hold steady or even slightly upward. It is just tomorrow is friday, traders may not keep pushing upward til the close of the market.
These are the sectors has testing last summer lows, 1/2008 lows & recent lows and they are still trending upward. These are Energy, Agriculture, Mining, Metals/Steel, Food & Utility. One of the stock I like is CALM in Food sector and most likely it will breakout to 52 weeks highs very soon. Good luck trading. Market sentiment change upward and bias is up for short term(1 to 3 days at least).
Wednesday, March 12, 2008
Sell on Rallies
3/12/08
Selling on Rallies are what have been happening this year. After Dow has successfully shooting thru 12200 til 12300(resistance point if using 60 mins chart), traders are selling off/taking profit that Dow close at 12110. The 12000 mark is somehow important to watch for ongoing bulls since it does have technical meaning as well as psychological round number for Dow index. What bulls hope is market need to build higher highs & higher lows & keep the rolling up above 12300 level for coming days despite bad retail number & CPI data.
On the downside, watch out the USD/JPY now trade at 101.51(4:30pm central time). If the currency pair breakdown the 101.40 once Tokyo start trading(7:00pm central time), it surely will give pressure to the opening of DOW tomorrow(EUR just make fresh new highs this morning). Let see how market behave with the retail number & USD/JPY curreny pair doing tomorrow.
Selling on Rallies are what have been happening this year. After Dow has successfully shooting thru 12200 til 12300(resistance point if using 60 mins chart), traders are selling off/taking profit that Dow close at 12110. The 12000 mark is somehow important to watch for ongoing bulls since it does have technical meaning as well as psychological round number for Dow index. What bulls hope is market need to build higher highs & higher lows & keep the rolling up above 12300 level for coming days despite bad retail number & CPI data.
On the downside, watch out the USD/JPY now trade at 101.51(4:30pm central time). If the currency pair breakdown the 101.40 once Tokyo start trading(7:00pm central time), it surely will give pressure to the opening of DOW tomorrow(EUR just make fresh new highs this morning). Let see how market behave with the retail number & USD/JPY curreny pair doing tomorrow.
Tuesday, March 11, 2008
Feds magic
3/11/08
What a day!! Fed injects up to 200 billion in banking system to rescue the credit market. This action ignite the Dow, S&P, Nasdaq all have biggest gain day of the year. Also, worth to say is Japanese central bank may make intervention that not let the USD/JPY currency pair trading below the 8 years low of 101.40 or 100 level since BOJ did that twice for past 10 years period. Today USD/JPY jump big from 101.41 to 103.40(It is very huge move consider the time taken only 12 hours of trading in currency market)So, with Fed and BOJ help, market can perform such mixed short covering, bargain bottom fishing day. Anyway, this is short term bottom for the market for sure. First of all, banking sector index has formed double bottom, financial also form a bullish engulfing Japanese candlestick chart pattern after three black crow down days. Moreover, market breaths(Such as New highs/new lows of NYSE was hitting historical event yesterday) and put/call ratios was close at 1.48 which both mean the very short term bottom is very close. So, both fundamental and technical are shifting upward to make such a huge jump/turnaround day. Next resistance for Dow is around 12200-250.
Well, we are still in Bear market and there are lots of issue to workout before it builds the real bottom. First, Fed injects 200 billion but if banks are not lending much from Fed( Fed did this before since 12/2007 but not too much effect or help the banking system), it makes no real means for banking system or buildup the confidence again on credit market. Also, Fed would not reduce 0.75% that market need on coming Fed meeting(18th of this month) Most likely, they will lower half percent points. Also, with NFP(Non-farm payroll) data suggest US economy is into recession(For last 100 years, whenever NFP posted 2 contraction number in a row it means most likely economy is entering into recession). Let see if Fed magic works or the Bear would come back strong.
What a day!! Fed injects up to 200 billion in banking system to rescue the credit market. This action ignite the Dow, S&P, Nasdaq all have biggest gain day of the year. Also, worth to say is Japanese central bank may make intervention that not let the USD/JPY currency pair trading below the 8 years low of 101.40 or 100 level since BOJ did that twice for past 10 years period. Today USD/JPY jump big from 101.41 to 103.40(It is very huge move consider the time taken only 12 hours of trading in currency market)So, with Fed and BOJ help, market can perform such mixed short covering, bargain bottom fishing day. Anyway, this is short term bottom for the market for sure. First of all, banking sector index has formed double bottom, financial also form a bullish engulfing Japanese candlestick chart pattern after three black crow down days. Moreover, market breaths(Such as New highs/new lows of NYSE was hitting historical event yesterday) and put/call ratios was close at 1.48 which both mean the very short term bottom is very close. So, both fundamental and technical are shifting upward to make such a huge jump/turnaround day. Next resistance for Dow is around 12200-250.
Well, we are still in Bear market and there are lots of issue to workout before it builds the real bottom. First, Fed injects 200 billion but if banks are not lending much from Fed( Fed did this before since 12/2007 but not too much effect or help the banking system), it makes no real means for banking system or buildup the confidence again on credit market. Also, Fed would not reduce 0.75% that market need on coming Fed meeting(18th of this month) Most likely, they will lower half percent points. Also, with NFP(Non-farm payroll) data suggest US economy is into recession(For last 100 years, whenever NFP posted 2 contraction number in a row it means most likely economy is entering into recession). Let see if Fed magic works or the Bear would come back strong.
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