Minyanville's Before The Bell: Comments From Big Ben, Goldman Accusations, Futures Lower
Big Ben spoke on housing last night and accusations are that Goldman has a lot of paper profits. Futures are lower.
In a speech in New York last night, Fed Chairman Ben Bernanke said the current housing slump will likely deteriorate further and be a "significant drag" on the economy through early 2008. Although conditions in the financial markets have improved since the worst of the storm in mid-August, a full recovery of the markets will likely take time and "we may well see some setbacks."
Bernanke also added "it remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and the tightening credit conditions." (From Washington Post) Read Professor Zucchi's The Recent History And Future Of Housing. Also please view Minyanville's Subprime Package for more on the housing crisis.
The Bull Pen: Contrarians may look to Meritage Homes (MTH) with a sell-stop below $14.00. Ryland (RYL) may remain in play with a reverse head & shoulder pattern (bullish) so long as it stays above $24.
The Bear Cave: While HGX 185 remains the best short-side entry level, those looking for tighter and more defined risk could roll their buy-stops to slightly above HGX $173, which was the near-term high. Peripheral plays include Lowes (LOW) which is teetering on near-term support at $28 and faces another layer of support at $29.
A Fading Star
Goldman Sachs (GS) is coming under fire this morning. Based on its recent filing with the US Securities and Exchange Commission, some analysts believe the firm may have inflated profits in the third quarter to the tune of $8.23 billion. Analysts claim almost a third of the bank's revenue originated from "short" positions on the lowest tier of mortgage derivatives and other forms of highly risky debt that are extremely difficult to price. More than $2.62 billon of declared profits were made entirely on the basis of the bank's estimate of the underlying value. (From Daily Telegraph). For more on the banking sector read Professor Shedlock's article Problems For Banks, Problems For You? and Professor Depew's Special Edition Five Things You Need To Know.
The Bull Pen: Goldman Sachs remains on a point and figure buy signal (226 would be a sell signal on the chart) and the S&P Financial Sector Bullish Percent in a column of Xs meaning that underneath the hood demand is in control of that group. That could change, but if you believe the worst is over for financials then additional selling in the group is a positive, not a negative, since it means these stocks can be picked up on sale.
The Bear Cave: BKX 111.50 has worked like an ursine charm. Note yesterday that the piggies also poked below the 50-day. Traders who wish to play the downside may use a trade above the 50-day ($107) as a near-term buy-stop.
A Quick Check Around the World
Markets in Asia ended mostly lower. Japan's Nikkei fell -1.27%, Hong Kong's Hang Seng fell -1.98%, and India's Sensex fell -0.04%. China's Shanghai Composite and Taiwan's TAIEX gained +1.03% and +0.78% respectively.
Markets in Europe are mostly lower. The DAX is down -0.34%, the CAC is lower by -0.82%, and the FTSE is lower by -0.38%. As of 9:00 AM EST, S&P futures are lower by -4.5 points, and Nasdaq futures are lower by -10 points.
A Look At Commodities
Crude oil continues its streak, up +1.40 to 87.53. Gold is higher +3.3 to 765.50. Silver is down -0.07 to 13.78 and copper is lower by -3.40 to 365.20.
Net foreign purchases is due out at 9:00 AM EST. The previous figure came in at $19.2 billion. Both Industrial production and capacity utilization are set to be released at 9:15 AM EST with consensus estimates at 0.1% and 82.2% respectively.
Here are some notable companies reporting today:
BMO: JEF, JNJ, WFC
AMC: CSX, INTC, YHOO
Click here for the full Minyanville Trading Radar.
Good luck and have a great day!
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