IMPORTANT LEVELS ON INDICES

The 13200 number appears to be an important level for the Dow. Its around the early December lows. A close below 13200 could see a pullback to test the November lows.

The S&P 500 is currently below is support level of 1460 and is signalling a retest of 1400 is in order.

The Nasdaq appears to be ready to fill its gap around 2580 or so.

The markets are weak this morning despite the Fed credit auction that will occur later today and word of more liquidity injections. Despite current weakness I would not rule out a rally in the closing hours.

MARKET UPDATE

Will we get a strong close like yesterday or will we sell off ? The market opened weak and attempted a rally and currently it is retesting the lows. A successful test may mean a rally into the close. From a bullish perspective a strong close is good. But I am currently leaning more towards the bearish side and I wonder what happends if we don't get a strong close. The wheels could fall of the market fast.

I added more QID SRS SKF FXP a little earlier though I may sell them if I see strength going forward.

DON'T BET AGAINST THE BULL

Or perhaps don't bet on the bear. Either the bulls have remarkable resilience or the bears lack the ability to take control of the market. To be fair, the bulls have Bernanke on their side in the form of liquidity injections - don't think I didn't see that liquidity injection today Ben !

As I mentioned in my earlier post, I expected a late day rally if the bears were unable to force the issue. We got one as expected though how much of it can be attributed to Bernanke liquidity injections one cannot tell. Their appears to be a lot of indecision in the market though th efact we held above yesterdays lows is a positive for the bulls.

I added a little FXP SRS and SKF towards the end of the trading session. Sold some QID midday. SRS and SKF appear to be a better hedge than QID.

While the Dow and S&P both finished in the green, most of my major positions were in the red save HANS and NYX. 18 of 30 Dow components finished higher led by HON MSFT BA HPQ UTX . Its pretty easy to get the Dow green when you pump up some of the bigger components.

LOOKING AT NUMBERS

The market has opened weak today though the bears have not really taken full control with the bulls still hanging around. If this continues, I think the bulls could come back strong in the final two hours of trading.

A few numbers to look at. 14198 13962 13780 . These are three intermediate tops set on the Dow between early October and now with the latest figure occuring on Tuesday. The lows have been 13407 and 12724 . So we are in fact making lower highs and lower lows over the last 2 months. If 13780 does indeed stay as a high number in the short term, we are likely to see a lower low than 12724 in the coming weeks. I reckon from judging the point difference between the two lows 13407 and 12724, the next low could very well be around 12000. Perhaps even test the February/March lows of 11939.

The S&P 500 tells a similar story with highs being 1576 1552 and 1523 with the corresponding lows being 1489 and 1406.

The Nasdaq has been a different story with its late October high of 2861 breaking its earlier high of 2834. The recent high is 2734 with the low being 2539. The Nasdaq while being the strongest of the indices is also more volatile and could thus see more downside in a downturn.

FADE THE RALLY

The rally today has been extremely fadeable. I stared in shock as I witnessed the Dow up over 200 with the Nasdaq and S&P up over 50 and 30 respectively. All this because of the news that the The Federal Reserve, European Central Bank and three other central banks are moving in concert to alleviate a credit squeeze by pumping liquidity into the credit markets via auctions. This move is just another way of the Fed signalling that the credit markets are in deep shit. I think the crisis is still in the early stages and will get worse over time. The Fed is better of staying clear of the mess and allowing the market to settle things on their own way. Sure a few big banks may collapse in the process but this is the only way to prevent future such occurences. A bailout will only make things worse in the future as financial institutions fail to learn a lesson.

Today I added more QID SRS and took a position in the double inverse financial ETF SKF. Short financials and real estate will be the play for 2008. This is a trend that will continue for a while.

I sold out of my C position last week. The new CEO does not seem to be the right man for the job. More of a follower than a leader. I think C will see more downside perhaps even into the teens.

FED GIVES BULLS THE MIDDLE FINGER

Not quite the middle finger - an unchanged rate would have been the equivalent but close enough. A half point interest rate cut expectation by Wall Street was not on the cards as the Fed choose to cut rates by a quarter sending the stock market substantially lower though based on the volatility over the last few months , a 295 point drop in the Dow with 66 points on the Nasdaq and 38 on the S&P 500 is not such a big deal. The averages are still above strong levels of support and after such a strong rally the past few weeks a pullback is probably a decent buying opportunity.

Positions I had on today included QID FXP and SRS which all did well though my longs were pretty much beaten up across the board. I will continue to keep QID FXP SRS as hedges in these times of uncertainty .

The question on my mind right now is whether this pullback is a buying opportunity or the start of another leg down. If the preceeding rally was a result of hopefully investors expecting a half point interest rate cut, then is this a sell the news event considering we didn't even get the half point cut ? Are big funds going to play it safe here and close shop for the year ? - Play it safe due to uncertainty, keep their yearly gains and prepare for next year.

IS SUPRIME JUST THE TIP OF THE ICEBERG ?

The mortgage mess is just starting . Subprime was just the tip of the iceberg. This article by a mortgage insider courtesy of Herb Greenberg is worth reading. The real blow up is going to occur in the Neg Am Pay Option ARM arena where essentially people with incomes as low as $80,000 were qualifying for million dollar loans. Most of these people have good credit but unfortunately no conventional loan program is going to save them as their mortgages reset. A whole lot of foreclosure are going to occur in the million dollar plus range especially in California where home prices are ridiculously high to start with.

Having spoken to a fair number of mortgage industry insiders, I happen to believe the assessment in the Greenberg article is pretty accurate. While the whole nation and world for that matter focuses on Subprime, there is an even larger problem lurking ahead and it appears the mainstream media is not paying attention. The Fed can continue lowering rates, but this is not going to fix the issues at hand. Bush, Paulson, Bernanke and Co. can come up with all the short term fixes they want but the inevitable is looming around the corner. We are going to face a drastic real estate correction and a recession is all but guaranteed. Keep in mind most economists and market pundits don't call it a recession until we are more than half way through one. I don't recall anyone calling the 2001 -2002 slow down a recession until the later parts of 2002.

Goldmans Analyst High

The highlight of the trading day for me was reading the following

Abby Joseph Cohen, the Goldman Sachs Group Inc. strategist
whose call for a year-end rally in U.S. stocks hasn't come true, predicted the
Standard & Poor's 500 Index will rise 14 percent by the end of next
year. Cohen, 55, says the S&P 500 will climb to a record 1,675 .. Bloomberg

Keep in mind Cohen is the crazy old lady who was recommending internet stocks in 2000-2001. She disappeared from the circuit for the next few years before appearing to resurface last year.

Its hard to see the S&P 500 climbing as companies cut earnings and financials continue taking hits. In an environment where earnings estimates are being cut, the S&P 500 is likely to trend lower.

Analysing the indices, the S&P is facing resistance at its 200 day moving average at 1484. The Dow closed below its 200 day ma of 13255 and that level may act as resistance in the coming days. 13467 and 13579 are two other levels of resistance. The Nasdaq is facing resistance at 2696 and the 50 day ma 2718. I feel the market will test its lows and possibly head even lower.

WATCH THE YEN

Keep an eye on the Japanese Yen as it continues to get stronger this morning. US equities have a strong inverse correlation to the Yen and the carry trade continues to unwind with a stronger Yen.

The ISM Manufacturing Index is the major economic report out today. Keep an eye on this one as it has a strong ability to move the market.

A recession is already here for corporate profits not to mention housing. Is the US economy next ?

Moodys is cutting ratings on another $105 billion of SIVs. Further write downs are likely to follow.

Is the stage being set for a Dollar rally in 2008 ? Nobody wants anything to do with the Dollar and it appears the dumb money are moving out of the USD - think Gisele Bundchen and Jay Z. A Dollar rally will probably hasten a decline in US equities since US markets have risen in the since 2003 by the same percentage as the USD has declined. Given a scenario of a rising Dollar, US equities may fall as a result.

I added some more QID and FXP into the close on Friday. Lets see how things turn out today.

THANK YOU MR. BERNANKE

Thank you Mr. Bernanke for giving the bulls hope for another interest rate cut despite the first two interest rate cuts having no positive effect on the stock market. If the bulls are foolish enough to believe that a third interest rate cut will be good for stocks then let them. This gap up open is a great opportunity to add to QID and FXP positions and perhaps some SDS DXD TWM SRS. If the market is too strong going into the December 11th Fed meeting I doubt rates will be cut. So either way the market is bound to pullback. The market is currently lower than it was before the previous two rate cuts so how can we expect this cut to have any effect ? I cannot go long here and will cut back some of my long exposure further. Either we will see a retest of the recent lows or we will get a second leg down. Either way, I believe I am well positioned.

SUCKERS RALLY ?

Having taken time off the past week to contemplate the market the action of the past few sessions appears to be the making of a dead cat bounce. I didn't see anything on Monday or Tuesday which suggested a market bottom. A large stake in Citibank C by Abu Dhabi and a speech by Fed Governor Kohn suggesting further rate cuts appear to be the impetus for the current market surge. I don't know how long this bounce will last though I cannot rule out a return to an uptrend. Here are some the the things I have done and what I am looking at :

• Purchased FXP China double inverse ETF between $70-71 .
• Purchase QID ETF under $38 .
• Carefully watching Dow 13500 , Nasdaq 2700, S&P 1490 . Closes above these levels may suggest a return to the uptrend and I will close out short positions and the above mentioned ETFs.
• Keeping an eye on FXY ( Yen currency ETF). A break below $90 may signal return to bull market. Carry trade is a major factor in market breakdown.

DOW 12800 IS THE BULLS FINAL STAND

Dow 12800 is the bulls final stand. A break of 12800 and all hell breaks lose. Right now I am waiting for a break of 12800 to buy DDM SDS QID . I did add some QLD today in anticipation of a rally into the close. I will sell QLD is the market breaks its current lows.

So far the market appears to have made it lows for the day. But I could be wrong and I probably am wrong. With this type of volatility anything can happen. Anything. Traders are emotional and rumors could send this market flying in any direction. Just look what happened to CFC yesterday.

I continue to hold 40% cash and plan on putting it to use once a clearer trend is established. I know a lot of people are expecting a bounce from these oversold conditions. But the market could easily crater another 1000 points lower. Too many people expecting a bounce is a sure way for the market to do the opposite. On the other hand valuations are still attractive and foreign buyers flush with cash may prop up these markets .

TURKEY RALLY

Looks like we are having a turkey rally ahead of Thanksgiving. Do I think this rally will last ? I am not sure. There is still a lot of weakness in the markets particularly in the financials which are not participating in todays rally. Without the financials the bull market is doomed. I would not go long in this market if I don't see a recovery in financials. We may get a little rally in the retail sector and names like TGT COST BBY WMT M AEO APO ANF may all have a nice run going into the holidays.

FINANCIAL NEED TO RECOVER

Financials need to recover in order for the bull market to continue. Without the financials, this market is lost. Sure the markets have risen without the financials the last few months but, we've reached a stage where the underperformance by financials is taking its toll on the markets. Look at the way big names like C BSC CFC WM BAC WFC MS MER LEH have performed over the last 6 months. If they continue this downward spiral we are going to be in a serious bear market. Technology cannot carry as any longer.

If the markets do recover I think beaten down former momentum names will outperform . Names like CROX UA ZUMZ VDSI RVBD BCSI NILE LDK NCTY DRYS are on my list.

I am also making a China list of stocks. Names that I like are CTRP SINA NTES SOHU NINE CNTF COGO LFT CFSG CPSL AOB SDTH CSUN STP XFML FMCN STV .

CHINESE GOVERNMENT TRYING TO CRASH MARKET

In recent weeks, regulators have quietly ordered China's commercial banks to
freeze lending through the end of the year, according to bankers in several
cities. The bankers say that to comply, they are canceling loans and credit
lines with businesses and individuals.

read here

If this is true then all I can say is that the Chinese government is trying to crash their stock market and thus bring about a global stock market crash since China is the engine that is fueling global growth.

Lets break this Chinese edict. In essence the Chinese authorities are telling banks to stop lending . Businesses requiring lines of credit and capital injections via bank loans are going to be left out in the cold. A credit freeze is going to rein in household spending and thus hurt business profits. Even though this lending freeze is temporary, the effects could be long lasting.

"If loan growth were to stop, that would seriously disrupt investment plans and would introduce a high degree of uncertainty regarding financing," says Stephen Green, an economist at Standard Chartered Bank in Shanghai.

FLOOR IN THE EQUITY MARKET

The markets have been in rally mode the past hour or so after looking rather precarious.

The news today

• FedEx sees slower growth ahead as freight demand weakens.
• US Industrial output declines as auto and appliance sales decline.
• The Fed says further interest rate cuts are unlikely.

The two most important news items though would be the Abu Dhabi government taking a 8.1% stake in AMD and the rejection by the Saudis ,of Iranian and Venezuelan demands to discuss pricing oil in currencies other than the US Dollar.

The stake in AMD by the Abu Dhabi governments investment arm shows that the US equity markets have a floor built into them by foreign governments especially Middle Eastern ones flush with cash. Keep in mid that Middle East oil producers like Saudi Arabia, Kuwait, and the UAE ( Abu Dhabi, Dubai etc) are benefitting heavily from high oil prices. Between them they produce over 10 million barrels of oil a day. They need about $25-30 a barrel for their governments to balance the budget. With the price of oil over $90 these guys are flush with cash. Take their yearly oil production ( 10 million barrels/day X 365 ) and multiply it by their surplus $60($90-$30 ) and you have over $200 billion dollars a year in money that is available for investment. As of the end of 2006, these Middle Eastern oil producers had estimates reserves of over $500 billion. A lot of that money is being put to use by investing it in foreign countries including the US. They need a place to invest that money and the US equity markets are by far the safest place to invest them and the returns are far better than Treasuries. If the US markets drop any further you will have continues buying by Middle Eastern oil producing countries.

ANOTHER SHOE DROPS

A few spikes in the final 30 minutes of trading was all that seperated this market from falling into the abyss. This could have been a 300 point down day. Down 120 on the Dow doesn't look bad.

The problem is all these shoes dropping - housing, subrime, commercial paper market, Level 3 accounting, mark to market etc etc. All these shoes flying all over the place. With all these people losing their shoes you would think it would be a good bet going long CROX huh ?

THE MARKET NEEDS NEW SHOES.


Tomorrow is the last stand of the bulls. Another shoe drops and this bull market will be laid to rest. Another shoe drops........

The 'Another shoe drops' story today was ofcourse Wells Fargo CEO John Stumpf (try repeating that fast) saying this housing crisis was the worst since the Great Depression. Try telling us something we dont already know. Add this to JC Penney missing Q3 estimates and lowering guidance.

Obviously I did nothing today. Nothing at all. Barely glanced at my monitors. Hell with the market. I have better things to do with my time like play golf though unfortunately its a little cold and overcast to play golf in Phoenix today. So I spent the day playing chess . Chess is a lot like trading trying to think 10 steps ahead and all the things that could potentially happen.




When times are tough, the market turns to Bernanke for their daily dosage of crack ..uhmm I mean liquidity.

THINK OIL PRICES CAN'T GO HIGHER ?

Think oil prices can't go higher ? Think again.

In 1900, the US started to industrialize. We were using one barrel of oil
per person per year. By 1970, we were using 27 barrels per person. In 1950,
Japan started to industrialize, they were using 1 barrel per person. By 1970,
they were using 17. In 1965, South Korea started to industrialize. They were
using one barrel per person per year. By 2000 they were using 17. Today, China
uses 1.3 barrel per person per year and India uses .7. China currently has 168
power plants under construction. Copper probably won’t go down much.

Read the rest of the article

Good stuff. Oil prices will probably pull back here. But long term unless a
substitute is found oil prices will continue the upward trend. China and India
and the rest of the world is growing way too fast. Commodities in general will continue trending upwards for another 7-10 years at the very least. I don't think one can go wrong holding commodity funds or ETFs long term. GLD SLV DBA DBC UNG USO are all great long term holds.

HEDGE FUND REDEMPTIONS

Its November 15th and that means hedge fund redemption day ( 45 days from end of quarter).

How will this effect the market ? August 15th was the previous redemption day and the markets moved decisively lower culminating in a bottom on the 16th. Is this a possible scenario or will we slice the August lows like a warm knife through butter ? Just a thought to keep in mind as this trading day unfolds. I would in particular look for moves lower in the momentum type names like AAPL GOOG SPWR CMG RIMM AMZN BIDU FSLR and all the other big gainers of the last 3 months if this case were to unfold.

The Yen is up against the Dollar this morning suggesting a move lower in the markets. The CPI consumer price index rose 0.3% with the increase in gas prices being a major factor. Jobless benefits were also up. Futures point to a lower open across the board.

I believe today and tomorrow are going to be very telling days for US equities and global equities for that matter. A break of Mondays lows and perhaps even those of August suggests a bear market is upon us. I would be very cautious by keeping plenty of cash at hand and staying as hedged as possible.

RECAP

Market summary in one line : The Bears came back at 3:30pm and shot the Bulls.

Tomorrow is going to be some more pain for the bulls. The bottom is not in yet. All this talk of a Thanksgiving Rally is premature. Alot of traders who are bullish may not afford Turkey come Thanksgiving. Hell they may not even have a roof on their head.

Weakness in the semis are a real problem . Take a look at this chart and see how the SOX is in a downtrend . Until the SOX bottoms and starts making lower lows I don't see this market turning up. Financials and homebuilders are dead money. Semis are weakening. Momentum and tech is being sold. How is the market expected to go up ?


Here enjoy some Britney.

MARKET UPDATE

Trading has been pretty volatile today. The Nasdaq in particular has been switching between red and green every 2 minutes almost like a traffic light. I see no reason to go long or short today. I am currently less than 60% long with 40% in cash. I am adding some QID today for protection. I am contemplating SRS though I missed a good chance in early morning trading at below $94.

I sold have my ETFC position between $4.70 and $5.40 yesterday. I am holding the rest looking for prices above $7. If not I will sell if the price falls below $5. Nonetheless this has been a very profitable trade taking advantage of panic.

Oil, gold and silver are all up today along with other metals and commodities in general. I had lightened up on some GLD and SLV on Monday. The Dollar is weakening against major currencies once again.

The China double inverse index FXP is down over 7% today. A good buying opportunity or proof that these double inverse indices come out at the worst possible time, case in point QID DDM SDS in July of 2006 near the market bottom.

SELL THE RALLY

Sell the rally. It won't have legs to go all the way. I don't see a bottom here. I think we test August lows at the very least.

ETFC has done well for me this morning. Analyst from BMO came out with a note stating bankruptcy was 'highly unlikely'.

Financials are doing well today with big gains in GS C MER BSC ( Which is below its August lows) LEH . A bounce in financials was expected anytime and its happening here.

Better than expected earnings from Walmart and a declining Yen were two catalysts for todays bullish start. Lets see if the Dow holds 13000. One could make the case for going long here with a stop at yesterdays lows. Either way I prefer to see a huge plunge and recovery before going long. The Dow will face resistance at its 200 day moving average at 13223. If going short a stop at 13250 may be wise. The S&P and nasdaq can also be shorted with stops at the 50 or 200 day MA. I'm sitting tight here with close to 40% in cash. I'm leaning more towards shorting.

MARKET UPDATE

This is starting to look, feel and smell like a bear market. The financials have been in a bear market for quite some time and today ETFC is being axed. Nevertheless , I am going long E-Trade as I believe the selling is overdone and things are no where near as bad as some people would make you believe. If things were really as bad you would see the insiders dumping and that is not the case.

I sold 60% of my HANS today above $48 with hopes of buying lower $40-$44. Added more SLV under $146 and a little GLD at $79ish. I cut back on some other positions as I approach 30% cash with hopes of deploying it once a clearer trend become apparent though it seems that trend will be to the downside after a bounce. If we can't rally in November we are in a bear market.

BEAR MARKET OR CORRECTION ?

Is this a bear market or a normal correction ? This is a question that appears to be on a lot of investors minds as Monday approaches. Some things on my mind ;

• How long can a bull market continue without the all important financials ?
• Are further sub prime losses priced in ?
• If the answer to the above question is yes than we should see a bottom soon
• If not look out below !
• What happens to the metals in a bear market ?
• How many investors are going to use FXP has a China hedge ?
• Are we in a secular bear market ?
• CROX is going to bounce hard one of these days.
• Load up time for NIHD . Heavy insider buying.
• Are you a 'Hood Figga ?'

RECAP

A crazy rollercoaster of a day. Who needs Six Flags when you have the stock market ? Who needs Vegas when you have the stock market ? Seriously this was a crazy ride. Maybe we bottomed though I don't think so. I think we rally till next Tuesday. Then the bears take over. The tape was painted after 3pm and it was obvious to all. The FED needed to avoid another sell off into the close. Give the market a little confidence ahead of the weekend. If we had another 300 point sell off today which carried into tomorrow, can you imagine what Monday would look like ? Black Monday anyone ?

I went gambling today rolling the dice on HANS doubling my position under $39 and I ended up catching a lucky break. I sold some into the close of $43.50. I took some shots at CROX and C too and bought turned out good. DIVX and NYX bought had really good days and SLV wasn't too shabby either.

I think I am turning to trading mode. No buy and hold. Just some quick trades in and out. I can't risk buying and holding in a market this volatle. Makes more sense to go long or short for a few hours.

NEWS ALERT

Ben Bernanke has a new solar power helicopter. Bernankes old chopper ran out of gas yesterday hence the 360 point plunge.

SELLING

I've been selling a lot today. Up to 15% cash currently. Bought some HANS under $39. If this drop continues I might have to put 10% of the portfolio into HANS ( currently 4%). I may look to buy more DIVX since its showing ridiculous strength. All in all I am getting rid of all non core positions. That means all ugly mofos like JADE LLNW MPEL BRLC etc etc. UGLY !

In other news this market blows. Seriously this is horrible. I think we deserve a huge crash. I'll sell everything and go long QID SDS DXD SRS and make back all my losses. In between I'll trade and pick bottoms AND go long QLD SSO DDM . Off note, I'm off 6% this week. Maybe more.

MARKET ANALYSIS - PAIN

Looks like we will be seeing another day of pain if you are bullish unless you are long FSLR . In that case life is good. More pain for HANS as a 3 cent earning miss ( 46c v 49c) has the stock down over 15% in pre market trading. CSCO is getting murdered in the pre market though I believe anything under $30 is a great long term buy. The problem in a market like this were liquidity is being ejected out the system is that stocks can fall by ridiculous amounts.

The plan today is to sell lesser positions while adding to core ones that have fallen. I think picking up HANS below $50 will be a steal. I did sell half my position a week ago at $62-66 and I am thinking of buying back here.

I don't really expect much from the market. It appears the bulls have run for the exits. The bears are in full control here. If we breach 13200 on the Dow look out below. Even though I believe there is a lot of bearishness out there and this should be bullish for the market added to the fact we are in November which is historically a bullish month. But the fact we have had 3 300+ point declines in the last 3 weeks tells me something is wrong. I don't think there is anything bad about going to cash and waiting this out.

MARKET UPDATE

Down 7 figures today. Feels really good huh ? I got a butt kicking in INAP HANS DFS C and pretty much everything save Silver and Gold and the Euro. Maybe we are in a bear market now. Who knows ? AAPL RIMM GOOG FSLR SPWR CMG are still bullish. Financial and housing are being taken to the cleaners. High flying tech stocks are being murdered along with other high flyers like CROX UA FTK NTRI etc.

I might have to go 50% in cash and wait for further hits to the market before loading up on SSO QLD DDM . Or maybe I'll just buy a load of SRS DXD QID SDS and wait it out. Its starting to feel like this bull market is dead. 5 trading days of November gone and we are down over 5%. Perhaps Bernanke had to turn of the printing presses with the declining Dollar. I suppose nobody wants to invest in the US with the USD falling so rapidly. Makes more sense to keep your money in Europe with a strengthing Euro or Asia. My current problem is I'm too heavily invested. Sitting on 5% cash which is not good enough. I got bullish starting November because of the bullish nature of this month historically. Could things have changed ? Could November be the month the bear market started ? We should know by next week. If we don't get a strong rally soon I would think a bear is here. Next stop 13000 on the Dow and lower.

MARKET UPDATE

I smell a strong Rally coming. Stocks have been taking to the cleaners the past few days. Momentum stocks are being targeted in a 'seek and destroy' operation. CROX VDSI ALGN NIHD BCSI UA AMZN FTK LVS are some of the names that have been run over the last few weeks.

NTES BOOM LLNW INAP are some of my holdings that have something going today. Sort of. Everything else is being taken to the cleaners.

I am buying some CROX ( $42.35) here as a trade and a gamble. Maybe we will get some lucky bounce to $50. Either way its a pure gamble on an oversold stock.

I though November was a month that was always bullish. So far its been more bearish that September. This subprime nonsense is killing the market. I think things are not as bad as people are making it to be. Seems to be an overreaction. Then again, things could continue to get worse.
I should really stay put and see how things play out but I want to make money and I think staying long is the smartest choice of action vs getting short and seeing a huge short covering rally. I still believe 15000 is on the cards for the Dow by year end. There is too much negative opinion in the air. All this negativity means there are a lot of short players out there who could fuel a rally. I want to see a strong bounce in financials.

First day of November recap

November is the strongest months for stocks. Boy did this month get of to a great start ..... if you read charts upside down or if you are a bear. 2.6%, 2.6% , 2.4% the respective percentage declines on the Dow, S&P and Nasdaq. Financials got obliterated with banks down over 5% . Citi C was to blame with analyst downgrades on rumors that further asset right downs, would leave the global financial giant short on capital.

While I write this Asian markets are plunging and fear and panic gripes the globe. I see this as yet another buying opportunity unless we cut through the loans we made a couple of weeks back in which case we may see the Dow back to 13000 or lower. I am preparing to cut more positions and raise cash in this inevitability.

I did buy some C today because I believe this stock is too damn cheap. Anything below $40 is too cheap and I got some gifts under $38.50. I expect a double within 24 months.

I added some more to my NTES position because this Chinese online gaming stock bucked the overall trend and was up an amazing 7.7% in a terrible tape. SNDK MU BOOM INAP also looked strong until later on in the day. Once 3:30 came along the plunge was in earnest. Nothing stopping the bears.

The less I talk about my other positions the better though I am thankful I sold out of LVS and COGT in light of this evenings massacres in both these issues.

While I don't like the looks of the market , we may get a rally on the back of strong employment numbers tomorrow. I would however be reluctant to buy a higher open preferring insead to buy SRS QID SDS DXD as protection . A weak open will be bought atleast on my part.

I did buy more SLV today on that dip below $140 . I see silver prices with a lot more upside.

Halloween Recap

Well it was an enjoyable Halloween . Bernanke and company handed out candy to the bulls via a quarter point interest rate cut. Woohoo !! The market reacted with an initial dip which was great for me as I managed to buy a boatload of QLDs and SSOs on the cheap. See there was a reason for me cutting down a lot of positions the last few days. I wanted to take full advantage of today.

I believe tech stocks will continue to do well though I dumped FFIV at $36 today. Tired of playing with this stock. I will continue building up positions in AKAM LLNW INAP NTES OVTI and other tech names that are doing well. I think NTES may be the most undervalued play in China . Would not be surprised to see $40 by December 31st.

Speaking of tech, I also like SIRF. This stock was a steal at $16 a few months back. Too bad I did not take a position. I was planning on but brushed it off after reading their annual report. Thats why reading annual reports don't make much sense. Too much bullshit in there. Making money in stocks is all about price volume action.

And CROX finally took a beating today. At $57 I think CROX might be a decent buy. Trades at less than 22 times next years earnings. Pretty cheap for a stock growing this fast.

TRICK OR TREAT ?

Thats right. Halloween is right around the corner. What will Mr. Bernanke have in store for us ? Thats the million dollar question . "To cut or not to cut ?" Half a point cut and we will get a good rally. Quarter point and perhaps a little upside. No cut and we will probably collapse like a stack of cards.



I think we will get some sort of rate cut. Bernanke has his hands tied. Credit market are in a tight spot. Long Gold and Silver are my plays for tomorrow. We got a slight pullback which allowed me to add to my GLD and SLV positions. I expect them to soar on a cut. Financials and Homebuilders should get a good boost too.



I continue to clean out my portfolio dumping out stuff like IBKR among others. When all is done I expect to be down to 25 positions or so. I'm tired of holding underperforming positions. Its time to add quality. I'm expecting a recession. I don't think the US consumer is going to be around much longer. The fall in home values added to increasing prices at the pump, grocery stores and retail establishments is pressuring the consumer. Once the layoffs pick up, the party will be over. No amount of rate cuts will save us. I think we need a good hard recession. Some hardship is good. Makes one stronger. Us Americans have become a lazy bunch, always expecting someone to help us out.

Well tomorrow is the big day. Everyone better be prepared.

UPDATE

The market looks fairly strong so far. Tech is doing well and the Nasdaq leads the way.

Oil continues to stay high partially due to rumors of war with Iran. I still think oil is peaking here. I believe we will see lower prices in the next month or so.

Fed meets on Wednesday and the market is predicting a rate cut. is a rate cut already priced in ? What happens if the Fed does not cut ? Those are two questions I am currently pondering.

I have dumped my position in SBUX. I think Starbucks has serious problems and will move lower in the coming months. I just don't buy their story anymore.

I have been adding to my positions in BOOM LLNW INAP MCHX AKAM MPEL NIHD QLD HANS this morning. I like what I am seeing with the above names.

I think CMG is grossly overvalued and will drop after earnings. On the other hand I could be wrong.

BIDU continues to move higher and it looks like $400 is on the cards. I continue to sell my position in small increments. I bought this between $95-110 and it has been my best gainer this year.

Pre Market Brief

Great earnings from MSFT and a positive outlook from CFC this morning have send the futures racing skyward. I expect a strong rally today and continuing into next week. I think the bears have had their chance to cover. Any attempts to bring the market down will only in further rate cut rumors sending the market upward. Microsoft is up over 12% in premarket and Countrywide is up over 21%.

I started building a position in NIHD yesterday below $55. Keep an eye on this one. There is still plenty of growth ahead.

Got into BOOM prior to earnings. Earning growth continues to be solid and I will continue adding.

I think financials are poised to rally today particularly the mortgage lenders on the back of CFC solid outlook. Brokers are alos a good place on the back of IBKR blowout earnings. Have been long IBKR since the IPO at $30. Added as it went lower.

I expect a very bullish trading session.

MARKET UPDATE

Overall market is looking weak today. I expect strength into the close. Shanghai fell hard overnight. Gold and Silver are going through the roof in anticipation of a rate cut. Broker stocks are doing well too.

In IPO news ULTA is soaring. I am long. Got in at IPO price $18. Currently at $30. Will buy more below $28 ( if it gets there). I see $50 in 12 months.

I am adding to DFS. I cannot believe how low this one is. Should be a top 10 position by year end.

My NTRI position is picking up steam. We saw the bottom. I expect a strong rally in the coming days. I added more after hours and pre market today.

Buying some NIHD here. I've been keeping an eye on this. I think below $55 is a good place to take a position. Even if the company earns $3 next year which is 20% below consensus, at 25 x next years earnings this should be a $75 stock. I will keep adding each $1 this stock falls. We may see $45-50 but I think Latin American telecom growth cannot be ignored. I plan on making NIHD one of my top 5 positions.

Market Recap

In After Hour trading my positions in FFIV and NTRI got blown away. I was stopped out of half my FFIV position during regular trading hours. I like RVBD better and will probably buy some in the next few days. I will probably double up on NTRI because I don't think things can get any worse though I felt the same 20 points back ....

Lets break NTRI down. They will earn around $3 this year. At $25 a share that is a PE of 8.33. They will likely do atleast $3 next year if you factor in international growth . I figure NTRI will double its earnings in 5 years to atleast $6 a share. Even at a conservative PE of 15 thats $90 a share in 5 years. Thats an annualized return of better than 25%. To top it of, management is repurchasing up to $100 million of shares in the coming months. And Tiger Global management recently doubled their stake.

AKAM released earnings an beat by a penny. The stock was up a little in after hours trading. I believe AKAM should be trading at $45-50 and not where it currently is ($33.54). Having averaged better than 100% annualized growth over the last 5 years and and expected growth rate of 30% over the next 5 years I believe at even 30 times next years earnings ($1.66) AKAM shoud be $49.80.

NYX continues moving higher printing $90 today. I think $100 is close at hand and perhaps even $120 by years end.

AMZN got beaten up today. While hope is not a viable investment strategy, I really do want to see AMZN back at $50. People who paid $100 for AMZN are stupid. This is a retail play. AMZN will not grow at better than 40% annually over the next 5 years. Even 30% growth is pushing it. How can you justify paying even $87 for a stock that has earned 87 cents per share the last 12 months ? Even if AMZN does $2 a share next year which is 30% higher than consensus it still trades at almost 44 times 2008 earnings ! The only thing that keeps AMZN up is Bill Miller and Legg Mason. They own 20% of the company and are reducing holdings by half by years end. AMZN is an old lady and Legg Mason/Bill Miller is her walker. Take the walker away and the old lady crumbles.

The market appears to have put in a bottom today. Oil is looking toppy. A Fed rate cut is coming. The Bulls are hungry. The Bears defeated. I sense a strong rally tomorrow.

I continue buying SNDK. This chip stock has been beaten up for no fault of its own. Trading at 17 times 2008 earnings with a 5 year growth rate of 35% and expected to grow at better than 22% going forward, this is a great buy. I see an easy $100 inside of 3 years.

AFTER HOURS MARKET SUMMARY

AMZN earnings beat was actually a disappointment. 19 cents a share does not quite cut it. Many investors were looking for a blowout something along the lines of 22 to 24 cents a share.
The stock is taking it to the nuts in AH trading down 10%. A beautiful island reversal beckons on the charts if AMZN continues sinking in the days ahead.

RVBD is getting punched around like Apollo Creed at the hands of Ivan Drago. RVBD is a buy as long as $36.50 holds tomorrow. Investors pay for growth and RVBD is a growth story. Earnings were great; guidance a little weak. No big deal. I'll probably take a position in the coming days. I've owned RVBD before. FFIV is down as a result in AH. Earnings are out tomorrow. I'm long FFIV.

Comcast admits delaying some subscribers traffic. Shame on Comcast. Who cares if people share files. The world has changed. Got over it. Either you keep up or get killed.

CFC has appeared to have started its second leg down. This stock appears it may ultimately fall down into single digits. CFC is dirt cheap and any one with cojones big enough to handle this volatility will have a pot full of gold a few years down the road.

LVLT was massacred today. Wasn't Cramer pumping this a few months back. Put a $6 handle on it ? At $3.24 it must be a case of 'back the truck up' right Booyah boy ?

I think DUG might be a good buy here. I think oil prices are topping out short term. Oil is sold in November and bought back in March.

I like having all this extra cash lying around courtesy of getting stopped out a multitude of positions. Allows me to relax, refocus and put money into winning trades. You always need 10-15% of cash lying around. Feels really good. The market could drop 30% tomorrow and I would still feel good.

And NYX is a BUY here. I feel a run to $100+.

Market Summary

Yes I notice I haven't blogged in 20 days. I needed a break. The damage was done on Friday. Was today a bottom ? I don't know. This is what I am doing. Actually better yet like me break it down point by point.

• Keeping tight stops thus protecting profits.I don't like seeing 200% + profits disappearing on holdings like BIDU.
• Hedging via SRS. The real estate sector stinks and will lead the way down during any pullback.
• Raising cash. A lot of my stops have already been hit. I am out of OXPS LVS (Valuation) HANS (50% out) COGT GDX DDM SSO AKAM( 75% out) RACK .
• Ready to deploy cash into QLD . As the market pulls back I am adding into QLD since the Qs are the strongest group here.
• Watching GOOG AAPL RIMM CROX GRMN BIDU CMG SPWR carefully. These are the markets top dogs and their failure will ultimately lead us into a bear market.
• Keeping an eye on the 10 year Treasury. At 4.39% I don't think we are heading into a bear. I need to see 5.5% plus before I push the sell button. Money is always looking for the highest yield.
• Drinking JW Blue Label religiously. It just tastes so much better.

Market Commentary

The major indices did not go anywhere today though stocks as a whole did pretty damn good. The sector that impressed me are the casino stocks with huge gains in two of my holdings LVS and MPEL. Home builders powered upwards since they are heavily shorted and anything can send them rocketing. Ridiculous gains in HOV TOL KBH DHI BZH MTH RYL . I am thinking of adding SRS as a hedge if this craziness continues. Homebuilders will be a great short very soon.

Broker stocks have been doing well as of late. I sold out my GS position between $204 and $212 with a cost basis of $174. GS printed $228 today. It was a short term trade and I was ok with it. OXPS is the broker I love and I am long and will continue to hold till this prints $35 or gets bought out.

In the semis/chips, MU had a solid day though gave back some in after hours after a not so cheery earnings report. OVTI continues powering higher and I continue to stay long. This has been one of my best plays this year. I bought between $13 all the way till $18.

AKAM and LLNW put on a little show today. I have been pounding the table on AKAM for quite some time now and it looks like some big funds are taking notice. What you have here is a growth play that offers tremendous value. FFIV is another one of my networkers that put on a show. I like RVBD too. Its been strong the last few sessions. I owned this between $28 and $45 and am considering taking a position again here.

BRLC and JADE are in my dog house along with JSDA. I have strong expectations on these names in the long run. I could sell now , take the loss and buy later. The problem is these micro caps run so fast that by the time you notice them running up, they are already up 100% or more. All 3 are spec names and constitute less than 3% of my portfolio. So I am not too worried.

BIDU continues its crazy ascent. This stock is easily my stock of the year. I sold half my stake over 100 points back and this monster continues its climb. I am looking at taking more of the table because once again BIDU is creeping towards being my biggest position. I am trying to keep BIDU to around 5% of the portfolio but am failing miserably though I am not complaining.

Gold and Silver had a poor day. I sold a major portion yesterday after I felt a pullback was due. I didn't expect to time it so perfectly. I think I will hold of buying till next week.

The market looks like it wants to continue going higher. lot of skeptics out there. Nobody believes in this rally. The Dow will likely print 15,000 before year end. I think oil peaks here and heads down below $70 by end of the year. I would be long DUG.

AMZN V GOOG

AMZN will need to grow earnings 40% per year or better over the next 5 years to justify its current valuation. If GOOG was able to grow earnings 40% per year over the next 5 years, its present stock price would be $1200+, more than double its current $567. Now you tell me, which company would you pick to grow quicker over the next 5 years - AMZN or GOOG ?
An online retailer vs the most dominant force in the internet world ? Seriously folks, either AMZN is massively overvalued or GOOG is massively undervalued. The truth is probably somewhere in between.

Of note, AMZNs largest shareholder at 22% - Legg Mason and its legendary manager Bill Miller is preparing to tone down risk in the portfolio by reducing sizeable positions . Could this mean cutting down the $8.5 billion worth of AMZN stock he currently owns ? Me thinks so. AMZN is Millers largest position. AMZNs second largest holder T. Rowe Price is also cutting back.

Market Update

Consumer spending Up. Big surprise there. With home equity being tapped out, its likely consumers will be turning to the plastic. Thats good news for MA and DFS.

Business activity continues to rise. Strength in exports is a big factor.

The Dollar continues its slide. Thats good news for the Euro, Gold, Silver and commodities. Long FXE GLD SLV DBA.

Stocks to watch : AAPL GOOG BIDU CMG GS CROX GRMN RIMM When these stocks are having a good day, so is the market.

HOLDINGS

TOP 10 HOLDINGS MAKING UP 50% OF PORTFOLIO

1. GE
2. SLV
3. GLD
4. HANS
5. BIDU
6. LVS
7. NYX
8. NTRI
9. SBUX
10. AMGN

MIDDLE OF THE PACK 35% OF PORTFOLIO IN NO PARTICULAR ORDER

• DBA
• OMRI
• DFS
• COGT
• AKAM
• NTES
• UNG
• FXE
• QLD
• SSO
• DDM
• BWLD
• MPEL
• GDX
• ORCL
• FMCN
• AA
• OXPS
• OVTI
• HNR
• MMS
• SNDK
• MU
• IBKR
• FFIV

BOTTOM 15% SPECULATIVE PART OF PORTFOLIO IN NO PARTICULAR ORDER

• RACK
• BRLC
• JSDA
• JADE
• LLNW
• BBND
• INAP
• GRZ
• UXG
• KRY
• WGDFF
• GNPI
• DIVX
• PNWIF
• KNOT
• VCLK
• CUUEF

Market Commentary

The market defies gravity and continues to soar higher. The bears are full of excuses and concoct imaginative reasons as to why the market should fall. It seems the bear trade is over crowded and thus the market continues it ascent. All time highs are round the corner.

New speculation involving Buffett taking a stake in Bear Stearns continues to propel this market as another buyout falls through the cracks. Seems like Buffett is rumored to be taking a stake in every company out there from Countrywide to Hovanian and this time Bear Stearns. What next ? Home Depot ?

How do you help a mentally challenged President ? This is how.....

WHAT NOW ? Thats the question on a lot of investors minds. Do we invest for the long haul here ? Do we go into cash and wait for a fallout from the coming recession ? The best strategy is probably to stay long and wait for a breakdown in the leading stocks such as GOOG AAPL AMZN BIDU GRMN CROX BCSI CMG . Once they breakdown its likely the overall market will fall soon after.
TCG TIP: The leading stocks breakdown well in advance of the overall market.

MARKET UPDATE

The market continues to advance. Oil, technology and housing are some of the sectors leading the way. Solid earnings growth from Oracle and Nike are contributing tho this wave of bullishness. Billionaire Wilbur Ross bid for American Home Mortgage servicing unit is another bullish factor.

Shares of Harman International are plunging on speculation that KKR and Goldman Sachs will abandon their bid to buy the audio equipment maker.Buyout and private equity transactions are going to be more select going forward . Money is not as easy to come by these days. Interest rates may be lower but, the cost of debt financing has increased. Investors will only do deals that make absolute sense. Nothing of a speculative nature that we so in the not so distant past.

The Dollar continues its decline into the dustbin of history. Great for Gold, Silver, the Euro, Oil and anything that is denominated in the greenback. Foreign banks will reduce their dollar holdings. Eventually oil and other commodities will be priced in a currency other than the USD.

A quick review of some of my holdings. NYX is looking to break out of its slump. The past few sessions have been bullish as Borse Dubai takes a 20% stake in the Nasdaq and Qatar takes 20% of the LSE. I reduced my position in LVS which continues to advance in relentless fashion on news of strong turnout in Macau. HANS continues its rise to new 52 week highs. Same with OVTI. My biggest holding at 8% GE has been another solid performer. I sold off my GS position between $204 and $210. BRLC and JADE have been very frustrating do I've increased stakes in both positions to around 4% of the portfolio combined. My AMZN short continues to leave me with a headache. Amazon needs to grow earnings 40% annually over the next 5 years to justify its current valuation. A recession and retail slowdown will not help. Once Bill Miller starts selling the fall will occur. Patience is required.

Market Recap

"Hell hath no fury like a Bull scorned" - The Capital Game 09/18/2007

All of last week and leading into todays Fed meeting the consensus was that the bulls were treading on shaky ground and a rate cut would lead to a sell off. Time and time again, the strength of the bull was questioned and today the answer was provided in resounding fashion.

Did the Fed really need to drop rates by half a point ? Maybe not. Is a half point cut a sign that the economy is a lot worse than the Fed are letting on ? Probably. Will we have a recession ? Very likely. So why did we rally 336 on the Dow, 43 on the S&P 500 and 70 on the Nasdaq ? Optimism, jubilation over a rate cut,more buyers than sellers and the fact that the stock market operates independently of the underlying economy. Traders see a rate cut as a sign that the economy will improve down the road. I would use todays rally as an opportunity to lighten up on some positions especially the more speculative names.

Today was a ridiculously good day in the portfolio courtesy of some huge gains in GS DFS OXPS BIDU HANS GE LVS AKAM QLD DDM SSO . I expect some continuation of this rally tomorrow though I intend to reduce around 5-10% of my long exposure. September is not a good month historically especially the latter half and sitting on cash will allow me to pick up some bargains when they come.

Markets Mexican standoff - "the asymmetrical nature of a Mexican standoff means that - in the event of conflict - each party will face a tactical decision as to which other party to strike first."

USD moves to record lows against the Euro as a Fed rate cut looms. How will our biggest creditors Japan and China feel about this ? Not too good I'm sure.

Paulson points his finger at the mortgage lenders for the subprime crisis. Paulson needs to remember that for the finger he points towards the mortgage lenders, there are three finges pointed back at him. Was he not the boss at Goldman Sachs during this period of subprime excess. Did Goldmans not help securitize and sell mortgage CDOs to investors ?

The market so far has opened very bullish. Probably a good move would be to fade this rally. Gold and Silver are weak though with a falling Dollar I expect them to gain strength.

Good One

A fictional (or real ?) conversation between LCD maker Syntax-Brillian Corporation BRLC CEO Vincent F. Sollitto and CFO Wayne A. Pratt. BRLC postponed their earnings release today for no apparent reason.

Vince:
..." Hey Wayne....aren't you supposed to deduct operating costs instead of adding them?

Wayne:

..." Oh @#$% Vince, you might be right...let me double check on my Accounting 101 book. You are right!!...damn...hey Vince do you have a calculator?

Vince:

.." are you nuts? we don't make calculators....we make LCD TVs here"...besides, if you buy one you will lower the EPS by one cent. Keep doing what you have been doing. Do it by hand"

Wayne:

...Don't we have a CC today?....or is that tomorrow??

Vince:

..."@#$%, today is the 11th....we have to issue a quickie PR to postpone this @#$%. I hate CCs, I much rather be counting money...."

Wayne:

..." Okey Vince ....you are the boss"

Vince:

..."there goes your bonner you idiot"

.......and so on....

Funny Stuff.

Market Update

The market has put on a solid showing so far perhaps as a patrotic gesture on 9/11. The last two hours will be crucial as always.

Bernanke gave no hints as far as whether rates would be cut in a speech in Berlin today. He did say global interest rates were very low. Perhaps the Fed will not cut afterall. I don't believe they will cut.

Stocks moving up on heavy volume include URGI CORT IMCL GIII ASIA COGT DLLR DRL TSL IVN CRZ

Gold and Silver continue their strong up move today. The strength in precious metals has been unbelievable as of late. And to think I nearly gave up on Gold a few weeks back.

Market Update

The world is ending today or so it seems based on the bearish drop to start proceedings on Wall Street here on Friday September 7th 2007. The reason for the drop is ostensibly the deteriorating economic situation made visible in todays payroll numbers which showed the first loss of jobs in 4 years. Job losses in construction, manufacturing, transportation and government swamped gains in education and health care, leisure and hospitality, and retail. Employment in financial services was flat. Well now we have a good snapshot of the sectors which are expanding and those which are contracting.Keep in mind the last job decline was in August 2003 and the US stock market was coming out of recession and expanding at a phenomenal rate back then.


Gold, Silver and precious metals are going through the roof today along with the Euro. Gold finally seems to be distancing itself from the overall market. A move over $700 and perhaps closer to $800 in the coming months. GLD SLV GDX FXE are all doing brilliant this morning.

Market Update

STOCKS cheapest in 12 years ? This seems to be the consensus based on this article. However despite the fact stocks are 'cheap' , one needs to take into consideration the fact that we are closer to the end of a multi year bull market and past the peak of the economic cycle. In other words, I believe stocks can still get cheaper.

Mortgage insurers MGIC Investment Corp. and Radian Group Inc have agreed to terminate their merger agreement some two months after the deal became jeopardized by losses at their subprime-mortgage joint venture. MTG and RDN are both great stocks to short. Mortgage woes are going to get worse and these insurers are going to bear the brunt of the fallout.

U.S. private employers likely added 38,000 jobs in August, far fewer than analysts had expected and the slowest rate of growth in four years, a report by a private employment service said on Wednesday. With slowing job growth, increasing unemployment, slowing consumer spending, decreasing home values and slower economic growth, I am surprised we are not already in a recession.

Yahoo, the struggling internet giant, has acquired BlueLithium, the online advertising group, for $300 million in cash, in a renewed effort to close the yawning gap between it and the market leader Google. I believe this should be a big boost for online advertiser ValueClick which is the biggest independent internet advertiser left. VCLK was rumors of a takeover at $40+ a share and right now the stock is $21 and change. VCLK is growing at an amazing rate and a buyout is likely on the cards.

Currently the market is taking quite a dip as investors fear the Fed will not cut rates. It appears Tuesdays are not good days for the market. We have had quite a few large market drops on Tuesdays over the past few weeks. Tuesday July 10th, 148 point Dow drop, Tuesday July 24th, 226 point drop, Tuesday July 31st 147 point drop, Tuesday August 14th, 208 point drop, Tuesday August 28th 281 point drop. Thats a 1000 points lost on the Dow on just the Tuesdays I've mentioned. And the other Tuesdays I have not mentioned from July and August were a break even if added up. Maybe the theme should be to not be long on Tuesdays or short Tuesdays.

Market Update

The pain from higher borrowing costs may be spreading as consumers and businesses follow investors in shying away from risk, increasing the odds of a recession.

``While there is no basis for predicting a recession right now, the risks have surely gone up,'' says former Treasury Secretary Lawrence Summers, now a professor at Harvard University in Cambridge, Massachusetts. ``The combination of softness in the housing sector, contractions in credit, increased uncertainty and volatility, and losses in wealth make the chances significantly greater now.'' Bloomberg

As Wall Street lowers economic forecasts and increases the odds of a recession the markets are jittery this morning. Its all about adding 2 plus 2. The market is in trouble, home equity is decreasing and consumers are no longer able to use their homes as an ATM. The net effect will be seen in consumer spending which will drop of significantly. A recession in the US will be felt across the globe since we are the worlds biggest consumer. We decrease our buying of Chinese imports which in turn leads to a recession in China as layoffs there increase due to lower demand for their goods. The effect will be like a domino as it spreads all over the globe. I am not suggesting this will happen but, thiere is a strong possibility.

This morning, tech is looking very strong with solid gains in AAPL GOOG SNDK GRMN AMZN . Other stocks making big moves include LLNW JADE BBND RACK KALU SPWR FSLR TNH NFLX VDSI BCSI CREE LEAP HOKU LOCM ASTSF.

Market Update

Here comes the big bailout everyone was waiting (hoping) for. The Bush Administration will help people keep their homes. Does this mean its all good ? You can go buy that million dollar home on a $50k/yr salary and not worry about making payments on the loan . Looks like the good times are back.

Bernanake is set to speak at Jackson Hole, Wyo right about now and the market is expecting signs of an imminent rate cut. Will they have their cake and eat it too ?

Investors are placing their money into high yield corporate bond funds for the first time in 12 weeks. The credit crunch appears to be easing.

Consumer spending rising and inflation cooling.Things are looking good so far. A lot better than they were a few weeks back. Can the good news last forever or will it all come crashing down again ?

Talking about buying homes , with this bailout coming, I am looking through some of these homes. Tough deciding which one I'll buy......

Market looks very good today so far. Financials home builders and Gold and Silver in particular are outperforming. Stocks that are doing really well are GS MER MS CFC LEND NFI KBH BZ HOV RYL DHI SPF .

JADE which I mentioned yesterday continues to do really well. Appears they are close to filing their annual report and once that is taken care of we could see much higher prices.

OVTI is one of my long positions back from April which is jumping higher due to strong earnings and even stronger guidance.

If one wants to look at a momentum stock look no further than BCSI . This one has been on an absolute tear. Another would be VDSI.

Market Update

After a great day for the bulls yesterday, the market opened down a 100 points today before rallying. I am seeing a lot of strength out there especially in the Nasdaq which is firmly in the green. Semis, disk drives and computer makers all doing really well along with biotech. Solid moves in SNDK AAPL RIMM GRMN DELL NETL AMD CELG BIIB TASR FSLR . Tech is leading the way as it has the past few weeks and being long the Qs or QLD is a very good bet.

US economic growth in the 2nd quarter was faster than estimated. Commercial construction jumped 28% which was the biggest move since 1981. It appears the US economy is still strong though the housing crisis is taking its toll.

Two speculative names that I am buying here are JADE and BRLC. I have previously had postions in them and am buying here. They both look the type that could double in a matter of weeks. HDTV maker BRLC in particular has an extreme short positions despite excellent revenue and earnings growth. JADE which is a manufacturer and retailer of fine jewelry in China has delayed filing it 2006 annual report due to a change in its auditors and the stock has been shredded over the last few months. I believe both of these stocks are poised to move considerably higher over the short term.

Market Update

We are getting a strong rebound today though I would not be surprised to see this rally fade.

Key levels to watch : Dow 12,885(support) & 13,132 (resistance) , S&P 1427(Support) and 1457(resistance) , Nasdaq 2491(support) and 2525(resistance).

Another victim of the credit crunch. Bodies continue to be discovered on a regular basis. Once this is all over the casualty list will likely be extensive.

The Yen is moving lower which is good news for equities.The Yen has had a tremendous run the last few weeks evoking fears of an unwinding of the carry trade. With the BOJ keeping rates constant I think the carry trade is safe and the Yen will continue drifting lower in the months head.

The subprime crisis was not just limited to blue collar America. Higher end homes are getting hit too. The 'Keeping up with the Joneses' mentality is taking its toll.

Market Recap

It was quite a day today. Close to a 300 point drop on the Dow with even bigger percentage drops on the Nasdaq and S&P 500. Volume was on the light side though thats expected around this time of the year. The question is where do we go from here ? A pullback was needed to consolidate last weeks gains and that is what we are getting. A retest of Dow 12,500 may be in order or perhaps a test of the 200 day moving average of 12,880 . Whatever the case, I believe the markets capitulation last Thursday and subsequent recevery was indeed the market bottom. Whether I am correct remains to be seen. Within my fund I am positioned almost 30% in cash. As mentioned I had sold 90% of my bull ETFs QLD SSO DDM MVV UWM last week. I reduced a few equity postions Monday and I feel comfortable whatever happens apart from perhaps a 50% drop in the market.

REVIEW OF FED MINUTES

Fed Minutes



The information reviewed at the August meeting suggested that economic activity picked up in the second quarter from the slow pace in the first quarter. On average, the economy expanded at a moderate pace during the first half of the year despite the ongoing drag from the housing sector. While the growth of consumer spending slowed in the second quarter from its rapid pace in prior quarters, wages and salaries increased solidly and household sentiment appeared supportive of further gains in spending. Business fixed investment picked up in the second quarter after little net change in the preceding two quarters. Inventories generally appeared to be well aligned with sales at midyear. Overall inflation receded in June because of a decline in energy prices, while the core personal consumption expenditure (PCE) price index rose a bit less than its average pace over the past year.

So core inflation is still a problem. Cutting rates will be tough in this environment.

However, a sustained moderation in inflation pressures had yet to be convincingly demonstrated.Moreover, the high level of resource utilization had the potential to sustain those pressures. The Committee's predominant policy concern remained the risk that inflation would fail to moderate as expected. Future policy adjustments would depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.

Can't take the foot of the inflation pedal yet.

Participants agreed that the housing sector was apt to remain a drag on growth for some time and represented a significant downside risk to the economic outlook.

Several participants noted the risks that house prices could decline significantly and that credit standards for home equity loans could be tightened substantially as factors that could weigh on consumer spending.

Something we can all agree with and that is the fragile state of housing and the negative effect it could potentially have on consumer spending.

Funding had become more costly and difficult to obtain for riskier corporate borrowers, but there had been little net change in the cost of credit for investment-grade businesses. Also, businesses in the aggregate continued to have sufficient internally generated funds to finance the expected level of real investment. Nonetheless, participants recognized that conditions in corporate credit markets could change rapidly, and that adverse effects on business spending were possible.

While top credit worthy businesses are safe for now, the Fed recognizes the risk in the corporate credit market as loans are harder to secure. An illiquid environment in corporate credit markets could lead to a big mess as we witnessed in subprime a few weeks back.

Overall it looks to me like the Fed is very unlikey to cut rates when they meet in mid September. The market has stabilized for now and unless we see another plunge to Dow 12,000 or below, rates are likely to stay the same. Fighting inflation is the Feds number one priority and a rate cut would be an impediment to this objective.

For now the market is not handling news of the Fed minutes well. The major indices are all down well over 1%. I did expect a pullback this week as I mentioned before. I expect the markets to be choppy the rest of the week.

TOTAL LUNAR ECLIPSE AND THE MARKET

A total lunar eclipse is expected tomorrow and I decided to pull up some recent charts of the Dow to see market performance before and after total lunar eclipses starting from 2000 onwards. 4 of the last 5 total lunar eclipses have seen big rallies in the market. It appears markets tend to change direction around the time of these eclipses.



January 21 2000 - Talk about timing a top. Dow made an intra day high of 11,513 before closing at 11,251. The market broke down with the Dow falling to an intra day low of 9,611 on March 8. Close to a 15% gain for anyone shorting the Dow in under 2 months.

July 16 2000 - Weekend. Previous close was 10,812 and the following close was 10,804 with a low of 10,653. Dow rallied to an intra day high of 11,518 on September 6. A 6.6% gain in under 2 months.

January 9 2001 - Dow closed at 10,572. Rallied to an intra day high of 11,140 on February 7. Just over a 5% gain. The market however proceeded to tumble from there onwards to an intraday low of 9,047 on March 22. If one had shorted the Dow on January 9 the gain would have been over 14% in two and a half months.






May 16 2003 - Dow closed at 8,678. Markets proceeded to rally over 24% till the end of the year.


November 9 2003 - Was a weekend. Dow closed the precious day at 9,809 and the trading session after at 9,756. Rallied 10% till the end of January.


May 4 2004 - Dow closed at 10,317. Proceeded to fall as low as 9,827 two weeks later. Rallied as high as 10,530 near the end of June. While there was volatility the markets were relatively flat.


October 28 2004 - Dow made a low of 9,900 and closed at 10,004.Rallied to as high as 10,895 near right before Christmas. A 9 % gain in less than 2 months.







March 3 2007 - Was Saturday and the market was closed. The Dow closed the previous trading day at 12,114 . On Monday, the Dow went as low as 11,973 before recovering to close at 12,050. The markets bottomed out over the next 2 weeks and started a 4 month rally all the way till July. Total gains would have been over 16% for anyone buying the Dow on March 5th (first trading day after the eclipse).

Market Update

Very bullish markets across Asia and Europe.Hong Kong soared 2.9% to new highs along with China. The markets here in the US are pointing to a lower open though I would expect a rally.

US Steel is buying Canada's Stelco as the steel industry under goes further consolidation. This should boost steel and other metals stocks today.


The other big merger news today is Gateway being bought out by Acer of Taiwan.Finally some good news for GTW shareholders who have suffered for a very long time.

August saw the biggest insider buying activity among executives of financial firms since 1995. Banks, mortgage lenders and insurance companies have been hit hard by recent market turmoil and the insider buying is an expression of confidence about their respective businesses.

UPDATE

The market has been very strong today. Strenght in the tech sector, oil, gold, silver, steel and other metals. Mortgage finance and real estate are lagging. I've gone ahead and sold another big chunk of bull ETFs QLD SSO DDM MVV UWM this past hour.So far I have sold 90% of the my bull ETF positions that I held from last Thursdays lows. I think we will test levels below 13,000 on the Dow next week as well as lower levels on the S&P and Nasdaq. I don't care much for V-shaped bottoms or the volume. September is historically a bad month for stocks with last year being an exception. I wouldn't be surprised if funds start reducing long exposure next week.

Pre Market Update

The markets across Asia and Europe are mixed. Shanghai continues on higher as usual.

Durable good orders rose sharply in July by 5.9% versus a consensus of 1%.Orders went up for machinery, automobiles, metal products, airplanes and communications equipment. That blunted a drop in demand for computers, as well as electrical equipment and appliances. This is good news for manufacturing and the economy as a hole but not so good for stocks as this reduces the likelihood of a Fed rate cut.

The markets are expected to open lower today.The trend is still pointing upwards though a pullback is not out of the question as traders cash in gains ahead of the weekend.

Market Recap

A seesaw day in the equity market with the Dow and S&P flat while the Nasdaq was down 0.4%. Oil was the best performing sector while transports lagged. SHRP ALOT GME AVGN LNDC EGI HRT TIS BSM were among the days biggest gainers. SLI FLML CCBL NWY PLCE ARGN were among the days biggest losers.

Is the Fed rate cut in September a sure thing ? Maybe not according to this piece. A rate cut would kill the US Dollar and thrust gold and silver upwards.

Mortgage woes soon to be history ? Not so fast. It is estimated that it will take roughly $150 billion to $250 billion of new capital to "normalize pricing" in the mortgage market.

Betting against Amazon will cost you. Ken Heebner learns the hard way.Just for the record I am short AMZN. It will work out in a big way eventually.

Commerical paper appears to be the new focus of the credit squeeze.The inability to sell commerical paper is having an adverse effect on many companies like Coventree for example. Investors have lost their appetite for commercial debt and the reprecussions will be huge.

Pre Market Update

Bullish markets across Asia and Europe. Shanghai has crossed above the 5,000 market. Most Asian market closed up over 2%.

The decision by Bank of America to invest $2 billion in Countrywide has boosted investor confidence. BofA has gotten themselves a great deal. Rumors of them acquiring CFC a few months back raised Countrywide stock price to $45. CFC is currently at $25. The financial sector will be strong today especially among some of the mortgage lenders like IMB WM LEND NFI FMT.

The Bank of Japan has held interest rates at the current 0.5% level signalling credit will remain cheap. The Yen is down as a result and the carry trade should continue.

Quant hedge funds including Goldman Sachs Global Equity fund had huge gains last week as the markets returned to normal. The average investor is not as lucky to be able to obtain a $3 billion cash infusion as Goldmans fund did. I don't care much for quant strategies. They could work 99% of times but, the 1% they don't, you could lose your shirt and much more. The 100 year storm happens every 100 days or so it seems.

For now long is the way to go. The markets are rebounding strongly. 13,250-13,300 is another level of resistance for the Dow. S&P has some overhead at 1480-1490. The Nasdaq at 1575. Wall Street has priced in a rate cut. If it doesn't happen we could see some more carnage in the coming months. The markets should be safe for now till the September 18 Fed meeting.

Market Recap

Strong gains in the Dow, S&P and Nasdaq all closing up better than 1%. Basic materials lead the way with big gains in steel, nonferrous metals and heavy construction. Water, consumer electronics and automobiles lagged. Big gains in NFI BCSI AVCI PLX SVT BYI ACH while the losers on the day included TWB TOA MSNQ Some notable outperformers included AMZN AAPL BIDU GOOG SPWR FFIV RVBD MRVL NVDA IBKR MGM AA TIE CRS FWLT JEC JASO .

Dubai Worlds disclosure of a $5 billion stake in MGM Mirage had a positive effect on casino stocks today with good size gains in MGM LVS WYNN MPEL BYD.

More subprime fallout as Lehman, HSBC, Accredited and H&R Block trim their mortgage businesses. Atleast the market is taking the news in stride. Announcements like this a week or 2 ago and the market would have dropped like a rock.

Another hedge fund bites the dust. The global credit crunch will continue to claim victims especially among the hedge fund industry as non-correlated and quant stratagies are not as air tight as thought. Strategies are only non-correlated until they are correlated and stuff blows up. Funny how the finance world works.

The FEDs decision to inject liquidity into the market appears to be working for now and big banks such as BofA,Wachovia, Citi and JP Morgan are tapping the discount window. However this liquidity injection is more like a bandage over a bullet wound and the problems beneath the surface remains. The bigger the liquidity bubble grows , the worse the eventual outcome. Wall Street screwed up and now they deserve to pay the price. The Fed can always say it intervened to save the average American but the truth is they intervened on behalf of the big swinging dicks of Wall Street. We all know who the Fed really works for. Its about time a few big Wall Street banks and other major banks went out of business for their poor lending and investment practices. Funny how the big boys are trying to take Countrywide Financial under when CFC has been the most prudent player in the mortgage industry.