Buzz Bits: Dow and Nasdaq Finish Down
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Bell Buzz! - Todd Harrison - 3:53 PM
- Yeah Mon, more swings than a Hedonism Vacation.
- Never underestimate the motivation of a cornered animal.
- Was it Hank, was it Hank, that's what Boo says, every single market rippin' spank.
- You think trading this tape is hard? Dude, try trading it and writing about it at the same time. That's a serious recipe for a Friday night face plant!
- What to do? Well, I walked through the work stuff. Now, all that's left to do is hit the hardwood and ground some boards. I really feel sorry for anyone who wanders into my paint tonight.
- Professor Markman makes a great point. Carlye is about as far from sub-prime as you're gonna get. Sorta makes you wonder how a humble little community like Minyanville could craft a road-map for contagion last spring and the most powerful central bank in the wildly whiffs. No salt here, just a bit troublesome if these are the same folks who are supposed to save the day.
- Anyway, we'll figure it out next week. Keep your head on and make smart decisions into the close. Capital preservation, debt reduction and financial intelligence are allies to us all.
- May peace be with you.
Credit Troubles? - Jon Markman - 3:13 PM
I'd like to note that the Carlyle news is really a game changer. That is a white shoe firm and the news shouldn't be underestimated. It's supposed to be smart money.
We've been talking a long time about the fact that it doesn't matter how much the Fed cuts rates: if the banks don't want to lend, the game is over. If you are levered 32:1, as Carlyle was, then credit is your oxygen. But you see, what sucks is that the Carlyles of the world have the most access to credit. So if they can't get it, it's just not available.
Someone was saying, "Well, foreclosure rates really aren't that bad -- What's all the fuss about?" The problem is that the mortgage-backed securities that all these people hold are predicated on a much lower foreclosure rate. So even though the rate seems ok, it's below the levels at which these securities were predicated on, and are leading to downgrade and default.
Once the downgrade/default ball gets rolling, all the securities used as collateral are in jeopardy. They are seized, and then this vicious chain of collateral seizure, asset sales, further downgrades and markdowns, etc., gets rolling.
It's really bad! It's not "fake" bad. This is not a drill.
Ominous S&P Chart - Michael Paulenoff - 1:53 - PM
The very big picture of the S&P 500 chart -- SPY for traders of the ETF -- shows the making of a giant double-top pattern that could be on the verge of downside acceleration that breaks the January low at 1270 and begins to fulfill its "natural potential" on the way towards a revisit of the 2002 low.
Yes, that is an extreme forecast, but that is the look that this pattern exhibits. No, it will not happen in a straight line, and more than likely any decline in the SPX that violates the January 2008 low at 1270 will find support at the 50% support area of the entire 2002-2007 bull move, which is at 1174.00. Be that as it may, this is a very ominous longer-term chart picture.
Click to enlarge
Randoms - Fil Zucchi - 12:26 PM
The "we'll take anything" TAF move by the Fed is the first tangible move toward nationalization of the mortgage markets. I know, it's a 30-day facility, but wait. It could be six months. But wait, why not just forget about it and keep the paper to maturity. The Fed does not have to mark-to-anything after all.
- No details on Ciena (CIEN) yet, but just by the headlines I am confident in saying this: these results are way above what the sellside feared after the last call. Watch for upgrades and estimate bumps sooner than later.
- Crude at $106 and the Oil Services Trust (OIH) down $3? And the UltraShort Basic Materials (SMN) - with a fair amount of ag related names in it - up 5%.
- One of the driest names in the recent beating? How about McDermott (MDR). Lots of resistance is now support; I am stepping into this one pretty hard with a January 50/35/20 butterfly spread under it.
- To go with the first bullet, I am waiting for 107"05 on the June long bond (USM07)(mid of today's range) to start putting some out. Loads of downside risk in this one in my humble opinion. This is paired with a short in equity index futures.
Position in CIEN, OIH, SMN, MDR, USM07 and equity index futures.
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