Minyanville's Before The Bell: The Beat-up Bull, Generous OPEC, Futures Point Lower
Merrill's misses with bigger-than-expected write-downs! Futures are pointing to a lower opening.
Merrill Lynch (MER) reported its first quarterly loss in six years after larger-than-expected 3Q write-downs of $7.9 billion today. That was more than $2 billion greater than what was previously announced on October 5th. The losses are mainly due to an over-exposure in risky mortgage-related securities. The news may put CEO Stan O'Neal's job in jeopardy as Wall Street ponders whether he has the right grip over the firm's risk levels. Todd saw the signs in Merrill in Answers I Really Wanna Know. See a related story by Minyan Peter in A Look Into Citigroup's Write-downs.
The Bull Pen: If you believe this news is already reflected in the weak stock price, near-term traders can use $65, support dating back to 2004, as level to lean against.
The Bear Cave: Those looking to play the short side can fade (read: sell) the stock into the $70-71 zone, which is the summer congestion.
A Generous OPEC
OPEC Secretary-General Abdullah al-Badri said today the group was implementing a decision taken in September to increase oil production to 500k barrels per day beginning November 1st. Some members may also push OPEC for further increases as the group meets in Saudi Arabia next month. The news comes as crude oil broke above the $90 level last week. Read a conversation between Professor Depew and Professor Kreuger in Is The Market Turning? What About Energy? Also get Professor Warner's A Crude Update.
The Bull Pen: Energy bulls may look to the Oil ETF (USO). The breakaway gap on Oct. 15 suggests the prior month's consolidation is over. Trades below $63 can serve as a prudent sell-stop since closure of the gap and a return to the consolidation area may suggest something more complex is going on.
The Bear Cave: Minyan Peter mentioned on the Buzz & Banter last Friday a breakout in UltraShort Oil & Gas (DUG). Trades below $39 may act as a reasonable sell-stop.
A Quick Check Around the World
Asian markets were mixed. The Hang Seng fell -0.15%, the Nikkei fell -0.56%, and Taiwan's TAIEX fell -0.63%. India's Sensex gained +0.11% and the Shanghai Composite added +1.21%.
European markets are mixed with the CAC -0.18%, DAX -0.11%, and the FTSE up +0.07% As of 8:50 AM EST, S&P futures are lower by 8 points and Nasdaq futures are lower by 14.5 points.
A Look At Commodities
Crude is down -0.29 to 84.98. Metals are lower as well with Gold down -5.0 to 758.1, Silver down -0.15 to 13.50, and Copper down -0.056 to 3.457.
On the Radar
At 10:00 AM EST, Existing Home Sales data is due with consensus estimates at 5.30 mln. The weekly crude inventories report is due out at 10:30 AM EST.
Click here for Minyanville's full Trading Radar.
Happy Wednesday! Down the stretch we come! Good luck and have a great day!
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