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MV Weather Report: Tornado in Global Equity Markets


Rain or shine, we review the day's biggest stock stories.

After a much-needed 3-day weekend, traders awoke to find the global equity markets selling off. The sell-off continued in the US on fears that some banks would have to be nationalized.
Here's Bennet Sedacca's view of nationalization from today's Buzz:

"Preferred securities and hybrids of financials continue to get pounded. As nationalization looms and stress tests fail, I continue to expect these preferreds to not pay dividends in the near future.

"This would put them into a coma much like Fannie Mae (FNM)/Freddie Mac (FRE) preferreds. This may be a painful exercise for retail and institutions, as there are hundreds of billions of dollars in this space.

"I still don't think it's too late to sell."

It was not too late to sell as it was a no hope close for the S&P 500 today, closing at 789 - the low for the day. It was the first close below 800 since November, which puts the 741 November low front-and-center on the trading radar.

Today on the Buzz, Jeff Cooper gave his take on the market's technical action.

"This morning's convincing break of the triangle on the S&P breaks the 'tail' from last Thursday, which saw an upside reversal. It also violates the extreme internals registered on December 1.

"The inference is that an extension lower is probably not a test but a new leg down, unless 800 is recaptured convincingly on a closing basis. There are 250 to 260 points of power stored up in the S&P triangle (1007 to 741), which would project to 600 if a leg down is in the cards.

"While the cycles didn't call for weakness to exert until March, technicals remained weak and one can only wonder what that indicates when the cycles do in fact roll over assuming the market recovers somehow.

"The seventh cycle of 360 degrees below the 1576 master square of the all-time S&P high is 661."

For another technical take on the market, check out Kevin Depew's Five Things.

There's a slew of economic data that traders will be watching: Housing starts, building permits, industrial production and the FOMC minutes. These will serve as an excuse for a rally or sell-off during tomorrow's trading session.

The real focus of the day will be holding the lows - and it's going to be a great old-fashioned slugfest between Hoofy and Boo.

Have a safe night, Minyans!
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No positions in stocks mentioned.

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