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Two Ways: Rally Getting All the Credit; Banks Still Not Issuing Any


Strengthen your portfolio in good times and bad.


Credit Markets Still Cold

Don't get too swept away by yesterday's stock-market euphoria: The credit markets aren't showing signs of improvement. According to Bloomberg, the 3-month London Interbank Offered Rate (LIBOR) -- the rate that banks charge each other for 3-month loans -- rose to 1.33% yesterday, the highest rate since January 8. The LIBOR-OIS spread, a comparison between LIBOR and the Overnight Index Swap Rate used as a gauge of banks' reluctance to lend, likewise rose to its highest level since January 9.

This spread averaged just 11 basis points from December 2001 to July 2007. During the height of the panic triggered by the bankruptcy of Lehman Brothers, it jumped to 364 basis points. Yesterday, it stood at 107.

From the Bull Pen: As Professor Smita Sadana suggested, keep an eye on the Dow Transportation Index to assess the health of the market bounce. One can use United Parcel Service (UPS) or simply the Index ETF (IYT); a sell stop can be set below $40.50 for both securities.

From the Bear Cave: As Toddo said, the weakness in the dollar is a necessary precursor to higher asset prices. The chart in the Bearish Dollar ETF (UDN) appears to be improving. Those playing it can consider a sell stop below $24.

Quick Check Around the World

Asian trading closed with the Hang Seng 2.02%, Nikkei 4.55%, Taiwan 1.90% and Shanghai -0.91%.

Glancing towards Europe, we see the CAC 0.98%, DAX 1.33%, FTSE -0.05%

As of 8:00 AM EST, S&P Futures are trading +7 to 793, and Nasdaq futures are +13 to 1119.

A Look At Commodities

Crude oil is trading -0.64 to 45.07. Gold is +4.50 to 900.40. Silver is +11.50 to 12.650, and copper -1.00 to 167.45.

The dollar index is –0.850 to 88.0900.

On the Radar


07:00 MBA Mortgage Applications
02:00 Monthly Budget Statement $-202.8b

Click here for the full trading radar.

Hump Day! Good luck!

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No positions in stocks mentioned.

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