Buzz Bits: Dow, Nasdaq Finish Strong
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Bell Buzz - Todd Harrison - 3:30 PM
Alrightee then, nothing like a Minxy Monday Snapper to shake up the mojo. Some thoughts on the jig while the jigs still good.
- We offered this morning that the specter of help by Big Ben and his cronies might keep a bid under this tape. We further opined on the Buzz that the traction in Fannie and Freddie could spring the chicken deep into the resistance zone. Sure nuff and true dat--we're there now.
- So, am I fading (selling) S&P 1460, as I suggested I might do in my Randoms? Not yet--I'm trying to assertain if, given how oversold we are in the near-term, S&P 1490 is a higher probability short side set-up.
- I'm admittedly torn between "the sharpest rallies occur in the context of a bear market" and "we need one more lift to fulfill the path of maximum frustration." When in doubt, wait it out or, at the vey least, trade "in between."
- Market breadth is still negative, which supports the sale into this (first) resistance zone. Still, my sense (given a strong close) is that we'll have the opportunity to address this question tomorrow as probes typically follow out-sized moves.
- How can a neck hurt this bad simply by sleeping the wrong way?
- Did I say that out loud? Damn literary turrets!
- Gonna hop so I get this to you in a timely manner. Fare ye well into the bell and have a mindful Monday night.
Fannie Mae and Freddie Mac - Kevin Depew - 2:12 PM
Back in April we looked at how Congress was rushing to "contain housing woes." A spate of new laws in the spring were being batted around, targeting investors who finance mortgage lending through mortgage-backed securities. Sounds good, on the surface, but at the time we noted that because the new laws were going to make it far more risky for investors to facilitate lenders through mortgage-backed securities, the existing pool of money available for mortgages was going to be reduced, which would raise the costs to subsequent mortgage borrowers. That happened, but it happened before Congress could even get around to facilitating it. Turns out, the market took care of it.
Back in April we said "The irony is that in the long run the greatest beneficiary of these new laws won't be either homeowners or mortgage borrowers, but the government-sponsored enterprises, Fannie Mae (FRE) and Freddie Mac (FRE)." We figured that by the time Congress realized that the net result of the legislation is a full blown mortgage availability crisis it would be time for lawmakers to step back in and expand the role of the GSE's.
Well, at least we got that part right. Right now there is talk the Office of Federal Housing Enterprise Oversight, the GSE regulator, is actively working on ways to expand the portfolio caps that legislation this past spring reduced. Why? Because, as FNM interim chief executive Daniel Mudd and FRE Chief Executive Richard Syron explained to the Senate Banking Committee this past spring, the ability hold onto some of these loans and expand them can keep funding available in a crisis.
In less than three months we've gone from political pressure to limit the portfolios of the GSEs, to political pressure to expand the portfolio limits of the GSEs. Bottom line: portfolio caps also serve as profitability caps. FRE and FNM today are up 6.8% and 8%, respectively. Guess no news travels fast.
SMH Holding - Quint Tatro - 11:14 AM
It never hurts the individual to remain productive while the market is busy crumbling and others battle it out.
One observation I am making this morning is the relative strength showing thus far in the Chips, specifically the SMH. The ETF has not been immune to the weakness and has fallen from a high of $41.41. However, Minyans will note that the SMH continues to hold an all-important area as $37 remains trend line support from a downtrend going back to 2003.
This could all change in a few days or, heck, a few minutes, but it is something to make note of. Should the action settle down and offer us up an actual tradable bounce, semis may be the best place to look should this relative strength continue.
Click here to enlarge.
Position in SMH
Snap Your Fingers... - Jeffrey Cooper - 9:33 AM
The dollar broke below the 80.48 Dec 2004 low this morning indicating the perception that the market participants expect the Fed to let the markets know to expect a rate cut.
The pattern on the S&P resembles a fractal of the March low with a lower today and potential reversal fully mimicking that analogue. See the chart in this morning's column.
However, a tag close to the 1400 level which is a full revolution of 360 degrees down from the July high would make me feel more comfortable about the idea of a snapper that could last as long as into expiration possibly.
A break below 1400 that sticks means all bets are off from where I sit and opens up the option that this panic as panics are prone to o just go where its going to go sooner rather than later.
Surprises happen in the direction of the trend. Even IF stabilization occurs, I would expect extremely choppy trade that could last two days before a sustainable snapper
If a rally doesn't develop by 2:30 to 3:00 today I would expect another late storm of selling.
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