The U.S. Stock market was down over 7% across the board today, the biggest one day drop since 9/11/01, as the House of Representatives failed to pass the Paulson bail-out plan. The fact is, there is absolutely no leadership in the U.S. Government at the present time, and neither presidential candidate offers a decent alternative to the current administration.
We now have a situation where the U.S. Government has actually gotten in the way, and made things worse than what they could be. The roots of this issue go back to the early 1990’s when the government wanted to make it easier for mortgages to be available to homeowners that normally would not qualify. This was part of the Community Re-Investment Act. Easy money provided by Alan Greenspan put more air in the balloon, and the whole world thought that real estate values would rise into eternity, a classic bubble. The bubble burst, credit conditions became tight, and the Fed and the government failed to act over a year ago when it became apparent something needed to be done.
We now have the most partisan Congress in history when the country is in need. We also have two presidential candidates that do not have a clue about how to get this economy back on track. Obama wants to increase taxes the richest Americans, those that typically are in a position to provide job opportunities, while sending money to the middle class. The fact is, those people will lose jobs, and will simply use that money to make a mortgage payment or two. He also wants to spend hundreds of billions of dollars on new spending initiatives, particularly involving health care.
On the other hand McCain clearly has no coherent economic plan at all. He only suggests cutting spending in Washington, which will be impossible to do with a Democrat controlled Congress. He may want to cut some taxes, but that will also be impossible since this bail-out plan will eventually get passed, albeit in a different form. He will have to make concession after concession, and as long as the current Democratic leadership remains in place, he will get no meaningful bi-partisan legislation completed.
As a result of the debacle in Congress and the stock market today, Treasuries rallied strongly, and surprisingly, the Dollar rallied today, while Gold was also up. Based upon recent trading, it doesn’t make a whole lot of sense for all of these markets to move in the same direction, so I view it as a one day anomaly. There is no surprise that the Treasury futures rallied on a flight to quality move. Also, since Crude Oil plunged along with most other commodities, the inflation issue is temporarily off the table, and that also helps Treasuries. If the Dollar can also continue to rally, my original thesis that strong underlying fundamentals could eventually help the economy and stock market get back on track. However, a deepening of the current crisis will undermine this thesis no matter how low interest rates can go and how high the Dollar can rise, at least in the shorter run.
Still, for long term investors, this is looking like a fabulous opportunity to start accumulating shares of high quality companies that sell products that consumers use on a consistent basis. And clearly, it could be a terrific opportunity to re-examine companies that deal in alternative energy and have pulled back significantly with the market. Do not attempt to catch a falling knife, wait until it appears to have hit the ground.
For traders looking for hot momentum stocks, this is clearly not the environment to look for these stocks, unless you are good at shorting stocks. Aggressive traders on the long side should stay in cash, but continue to monitor these strong stocks for when the market bottoms.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Monday, September 29, 2008
Stock Market to Open Lower on Monday
The U.S. Stock market is set to open much weaker Monday morning in spite of the fact that Congress appears set to pass the Bush/Paulson financial bail out plan, althought it may be a close vote in the House of Representatives. News that Wachovia is being bought out by Citigroup is pressuring the market, along with concern that the bail out package may not pass in its current form.
Nasdaq stocks are being pressured by some downgrades to Apple as consumer spending is likely to slow in the coming months.
In the face of the forecast economic weakness, Crude Oil is dropping sharply this morning, and the Dollar is rallying as a result.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Nasdaq stocks are being pressured by some downgrades to Apple as consumer spending is likely to slow in the coming months.
In the face of the forecast economic weakness, Crude Oil is dropping sharply this morning, and the Dollar is rallying as a result.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Saturday, September 27, 2008
Weekly Stock Market Re-cap
The U.S. Stock Market ended a tumultuous week on an up note, in spite of the fact that Congress did not pass the Bush Administration’s financial bailout plan. The Dow finished with a triple digit gain, although the Nasdaq indexes finished modestly lower.
In consideration of the bad news that came out on Friday, the market’s performance was nothing short of miraculous. Overnight Thursday, the government forced a buyout of Washington Mutual, the largest bank failure in U.S. history. J.P. Morgan ended up buying the bank for a mere $1.9 billion. It was also reported the 2nd Quarter GDP was actually a bit weaker than the 3.3% growth originally reported. Also, housing data came in very weak for the month of August. And finally, Research in Motion (RIMM), came out with an earnings forecast well below market expectations, which sent the share tumbling nearly 30%, weighing down the tech sector.
Incredibly, the Dow Jones Industrial Average and S&P 500 managed to post decent gains on Friday, while the Nasdaq tried hard to claw its way back to breakeven, falling a little short. Does this mean we no longer need the Bush bailout plan? The public remains skeptical, and we continue to hear both sides of the argument. Credit markets have clearly frozen up, so some sort of plan is required. The question is, does it need to be this big government bailout, or is it something the private sector can fix with some creative solutions? And, does it really need to happen this quickly in order to avoid Armageddon in the financial markets on Monday?
The end result of the week is that the major averages closed lower than the previous week, but still well above last week’s lows. The trend is down, but we could possibly be set up for a test of last week’s lows and a rally from there. A number of indicators suggest there is some divergence at last week’s low. A re-test and bounce off of that low will confirm that.
In other markets, Treasury futures prices managed to rally a bit on Friday due to the weak economic data. The Dollar managed to hold relatively steady on Friday, as it was generally mixed against the major currencies. In the energy markets, the focus seems to be returning to global economic weakness as the driving force behind price direction. Crude oil closed down a bit over a dollar, while Natural Gas appears to be resuming its downtrend.
Gold and Silver prices were up modestly on Friday, but were up significantly for the week. These markets are in neutral after significant rallies off of their lows in the last couple of weeks due to this current financial crisis. A big bail out plan that suggests inflation is in our future down the road will move these markets higher.
In the grain markets, it appears that Corn, Soybeans and Wheat are all ready to resume their downtrends as it appears that the current crop situations, and supply and demand factors indicate that lower prices are in order. Most other commodity prices appear to be heading lower as well, with the exception of Cocoa and Sugar.
Stay flexible!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
In consideration of the bad news that came out on Friday, the market’s performance was nothing short of miraculous. Overnight Thursday, the government forced a buyout of Washington Mutual, the largest bank failure in U.S. history. J.P. Morgan ended up buying the bank for a mere $1.9 billion. It was also reported the 2nd Quarter GDP was actually a bit weaker than the 3.3% growth originally reported. Also, housing data came in very weak for the month of August. And finally, Research in Motion (RIMM), came out with an earnings forecast well below market expectations, which sent the share tumbling nearly 30%, weighing down the tech sector.
Incredibly, the Dow Jones Industrial Average and S&P 500 managed to post decent gains on Friday, while the Nasdaq tried hard to claw its way back to breakeven, falling a little short. Does this mean we no longer need the Bush bailout plan? The public remains skeptical, and we continue to hear both sides of the argument. Credit markets have clearly frozen up, so some sort of plan is required. The question is, does it need to be this big government bailout, or is it something the private sector can fix with some creative solutions? And, does it really need to happen this quickly in order to avoid Armageddon in the financial markets on Monday?
The end result of the week is that the major averages closed lower than the previous week, but still well above last week’s lows. The trend is down, but we could possibly be set up for a test of last week’s lows and a rally from there. A number of indicators suggest there is some divergence at last week’s low. A re-test and bounce off of that low will confirm that.
In other markets, Treasury futures prices managed to rally a bit on Friday due to the weak economic data. The Dollar managed to hold relatively steady on Friday, as it was generally mixed against the major currencies. In the energy markets, the focus seems to be returning to global economic weakness as the driving force behind price direction. Crude oil closed down a bit over a dollar, while Natural Gas appears to be resuming its downtrend.
Gold and Silver prices were up modestly on Friday, but were up significantly for the week. These markets are in neutral after significant rallies off of their lows in the last couple of weeks due to this current financial crisis. A big bail out plan that suggests inflation is in our future down the road will move these markets higher.
In the grain markets, it appears that Corn, Soybeans and Wheat are all ready to resume their downtrends as it appears that the current crop situations, and supply and demand factors indicate that lower prices are in order. Most other commodity prices appear to be heading lower as well, with the exception of Cocoa and Sugar.
Stay flexible!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Friday, September 26, 2008
Congress fails to pass Paulson Plan, Stocks Open Lower
The U.S. Stock Market is opening lower this morning as Congress failed to pass the Paulson bailout plan on Thursday. Talks broke down over night as Republicans in the House of Representative have balked at the huge cost of the plan.
2nd Quarter GDP figures have also been revised lower, and some stock earnings reports came out very weak. RIMM presented a disappointing outlook for later in the year, and KB Homes reported weak home sales.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
2nd Quarter GDP figures have also been revised lower, and some stock earnings reports came out very weak. RIMM presented a disappointing outlook for later in the year, and KB Homes reported weak home sales.
Stay Tuned!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Tuesday, September 23, 2008
Stock Market Slide Continues
The U.S. Stock Market continued its downward slide today as Congress is not yet ready to sign off of Treasury Secretary Paulson’s $700 billion plan to shore up the U.S. financial system. It is no surprise that there is a bit of a rebellion against the plan due to the sheer cost. The debate is of course the lesser of two evils…take your chances and see how things end up, or spend the money and hope the plan works, knowing that it will cost the taxpayers dearly.
I don’t envy the position our politicians find themselves in, but the fact is, many of them are part of the problem. And now, we are watching them all point the finger at everyone else but themselves. Par for the course in Washington, D.C.
As I have stated over the last week, traders simply need to stay cautious until the markets settle down. You don’t need to trade! All of the rules in the playbook have been thrown out in recent weeks and months, so the best thing to do is wait for a return to normalcy. Even if you are simply a daytrader, the whipsaws in the market have been enough to cost you big time, so you at least need to scale back your trading size.
Sooner or later, the markets will settle down, and whichever trend emerges, be prepared to hop on. In spite of the volatility in the markets in recent days, and some big moves in commodities and currencies, I still see many of the underlying trends have remained in place. Keep that in mind when you decide to plunge back in!
Good Trading!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
I don’t envy the position our politicians find themselves in, but the fact is, many of them are part of the problem. And now, we are watching them all point the finger at everyone else but themselves. Par for the course in Washington, D.C.
As I have stated over the last week, traders simply need to stay cautious until the markets settle down. You don’t need to trade! All of the rules in the playbook have been thrown out in recent weeks and months, so the best thing to do is wait for a return to normalcy. Even if you are simply a daytrader, the whipsaws in the market have been enough to cost you big time, so you at least need to scale back your trading size.
Sooner or later, the markets will settle down, and whichever trend emerges, be prepared to hop on. In spite of the volatility in the markets in recent days, and some big moves in commodities and currencies, I still see many of the underlying trends have remained in place. Keep that in mind when you decide to plunge back in!
Good Trading!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Monday, September 22, 2008
Stock Market and U.S. Dollar Plunge - Ugly Monday
The U.S. Stock Market plunged about 4% across the board today as worries continue to mount regarding the crisis in the financial sector. Over the weekend, the government asked Congress for $700 billion for the bailout plan. That sent the Dollar into a tailspin as it is clear that U.S. government debt will rise at an unprecedented pace.
Whether or not this bailout plan is needed or not is not the issue. The financial markets are in a tailspin, and going forward, it is clear that the U.S. economy, and likely the global economy, will be weak in 2009. The next U.S. administration, whether it is Obama or McCain, will have its hands full, and you can pretty much forget about any kind of tax break next year.
As a result of the Dollar weakness, and the fact that the Treasury will be printing dollars at a fast pace in the near future, commodity prices took off to the upside today. The October Crude Oil contract, which expires this week, was up over $21 per barrel at one point. Gold rose back above $900 per ounce. Treasury yields jumped significantly. Can you say STAGFLATION!? With oil prices appearing set to test $150 again in the foreseeable future, there is no way the global economy has any expansion. A colder than normal winter will send heating costs soaring, and as a result, the holiday spending season will likely be weaker than normal.
I am not in the business of forecasting stock market prices or even direction. But, it doesn’t take a genius to figure out that with the current conditions in place, it will be difficult for the market to go up. Just last week I wrote that the underlying fundamentals suggested the economy and the stock market could get through this current crisis and set up a rally into the end of the year. However, with the Dollar pulling back sharply, Treasury yields rising and Oil prices ready to soar again, it looks like those positive fundamentals were fleeting.
Today is just one trading day, and you can’t really forecast direction with one day. But, alot of other negative things have occurred in the last few days that suggest this market has a lot to overcome.
Stay Cautious!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Whether or not this bailout plan is needed or not is not the issue. The financial markets are in a tailspin, and going forward, it is clear that the U.S. economy, and likely the global economy, will be weak in 2009. The next U.S. administration, whether it is Obama or McCain, will have its hands full, and you can pretty much forget about any kind of tax break next year.
As a result of the Dollar weakness, and the fact that the Treasury will be printing dollars at a fast pace in the near future, commodity prices took off to the upside today. The October Crude Oil contract, which expires this week, was up over $21 per barrel at one point. Gold rose back above $900 per ounce. Treasury yields jumped significantly. Can you say STAGFLATION!? With oil prices appearing set to test $150 again in the foreseeable future, there is no way the global economy has any expansion. A colder than normal winter will send heating costs soaring, and as a result, the holiday spending season will likely be weaker than normal.
I am not in the business of forecasting stock market prices or even direction. But, it doesn’t take a genius to figure out that with the current conditions in place, it will be difficult for the market to go up. Just last week I wrote that the underlying fundamentals suggested the economy and the stock market could get through this current crisis and set up a rally into the end of the year. However, with the Dollar pulling back sharply, Treasury yields rising and Oil prices ready to soar again, it looks like those positive fundamentals were fleeting.
Today is just one trading day, and you can’t really forecast direction with one day. But, alot of other negative things have occurred in the last few days that suggest this market has a lot to overcome.
Stay Cautious!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Sunday, September 21, 2008
Weekly Stock Market Re-cap
The funny thing about the stock market this week is that it ended the week virtually unchanged. Of course, it happened to be an incredibly volatile week as well. Historically though, we have seen higher volatility, and we have seen worse down markets.
So what does this all mean going forward. Well, over the weekend, it was reported that the cost of this mortgage bailout is going to be at least $700 billion. Hmmm…do you think there are going to be any tax cuts next year, no matter who is president? If anything, we can probably expect a tax increase before any tax cuts.
Over the next few days and in coming weeks, the market will digest the impact of this past week’s events on the economy. Based upon the reported cost of cleaning up this mess, it is quite possible the impact will be deemed as somewhat negative. What we will need to see is a return to normal trading in terms of volatility and volume, and then ultimately, the market will show its hand in terms of which direction it wants to go.
Pay close attention to the performance of the Dollar and interest rates going forward. If the Dollar can stay within its current uptrend, while interest rates remain favorable, there may be a chance for the economy to still recover. Again, after the election, we enter a seasonably favorable period for the stock market. For now, caution should rule the day.
Good Trading!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
So what does this all mean going forward. Well, over the weekend, it was reported that the cost of this mortgage bailout is going to be at least $700 billion. Hmmm…do you think there are going to be any tax cuts next year, no matter who is president? If anything, we can probably expect a tax increase before any tax cuts.
Over the next few days and in coming weeks, the market will digest the impact of this past week’s events on the economy. Based upon the reported cost of cleaning up this mess, it is quite possible the impact will be deemed as somewhat negative. What we will need to see is a return to normal trading in terms of volatility and volume, and then ultimately, the market will show its hand in terms of which direction it wants to go.
Pay close attention to the performance of the Dollar and interest rates going forward. If the Dollar can stay within its current uptrend, while interest rates remain favorable, there may be a chance for the economy to still recover. Again, after the election, we enter a seasonably favorable period for the stock market. For now, caution should rule the day.
Good Trading!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Friday, September 19, 2008
A Crazy Stock Market
Stocks enjoyed a huge boost today from the Federal Government, which seems to be coming together on a plan to deal with all of the bad mortgage debt that has been the root cause of the seizure in the credit markets. The details of the plan have not yet been agreed upon, but the overall concept appears to be gaining traction.
As much as stock traders were acting irrationally when the market was heading down, I noticed a good bit of the same today. Take T. Rowe Price (TROW), a mutual fund company based in Baltimore. The stock traded in a range between $53.00 and $70.00 today. This is just your typical mutual fund company that happens to trade with some volatility. However, what were traders thinking when they were buying the stock at $70 today? This is a 52 week high in price by nearly $5! I noticed some small bank stocks that such as Trico Bancshares (TCBK) that have made new all time highs (up 46% today alone to over $32) when just in July this stock was at new multi-year lows under $10.
The point being made here is that it is still a good time to be cautious. Wait for this market to get itself sorted out, and then the new leaders will emerge. Sometimes the best thing to do is just to sit tight.
Will write more over the weekend.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
As much as stock traders were acting irrationally when the market was heading down, I noticed a good bit of the same today. Take T. Rowe Price (TROW), a mutual fund company based in Baltimore. The stock traded in a range between $53.00 and $70.00 today. This is just your typical mutual fund company that happens to trade with some volatility. However, what were traders thinking when they were buying the stock at $70 today? This is a 52 week high in price by nearly $5! I noticed some small bank stocks that such as Trico Bancshares (TCBK) that have made new all time highs (up 46% today alone to over $32) when just in July this stock was at new multi-year lows under $10.
The point being made here is that it is still a good time to be cautious. Wait for this market to get itself sorted out, and then the new leaders will emerge. Sometimes the best thing to do is just to sit tight.
Will write more over the weekend.
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Thursday, September 18, 2008
Government Intervention to Boost Stocks
The Federal Government has taken more steps to boost confidence in the financial markets, and this is sparking a huge rally in futures ahead of the open. The Dow futures are set to open up 400 points this morning on the back of this news, which includes banning short selling on some financial stocks. The government is also providing a back stop to the money market funds.
Investors are piling into the market as a result, however I still believe traders should use some caution here. An important bottom has likely been put in at yesterday’s lows, but it is important to let things shake out for a while. Once the markets have calmed down, traders and investors can resume using their normal methodologies for picking stocks.
Enjoy the weekend!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Investors are piling into the market as a result, however I still believe traders should use some caution here. An important bottom has likely been put in at yesterday’s lows, but it is important to let things shake out for a while. Once the markets have calmed down, traders and investors can resume using their normal methodologies for picking stocks.
Enjoy the weekend!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Key Reversal for Stocks?
The U.S. Stock market ended a roller coaster session with substantial gains today, when rumors that the government may set up a Resolution Trust Corporation type facility to deal with the residential mortgage mess that has lead to the freeze in the credit markets. Clearly, the market welcomed the news, as the major averages gained anywhere from 4% to 6%. In fact, the Nasdaq Composite actually closed above yesterday’s highs, as did the Russell 2000. Even more amazing, the Russell 2000 never came close to trading below its July, March and January lows.
As I have mentioned in prior posts, September is often the weakest month of the year for the stock market. Downtrends often accelerate in September, and bottom in October. I believe we may have put in an important bottom today. This bottom was accompanied by a significant spike in the VIX, which peaked over 42 today, the highest level of this bear market. It then reversed and closed about 33, down from yesterday’s close of over 36.
There were significant reversals in other markets today as well. Gold was up significantly again today, but after pit trading hours, was actually lower on the day. The Dollar also reversed its losses.
Friday brings a new trading day and we hope to see some sense creep back into the market, and a lessening of the volatility. What we do now know is that the Fed and Treasury, along with other central banks across the globe, appear to be willing to do what it takes to achieve stability in the financial markets. Once that stability returns, the underlying fundamentals in the economy will be allowed to take hold. It will likely take a couple years for the residential real estate market to fully recover, and hopefully, new credit requirements will not be too tight when borrowers seek to achieve the American dream of owning a home. Today looks like a first step towards the process.
In the coming days and weeks we will look for a good follow through day off of this low. I do not expect this market to go straight up from here, especially since we have an election ahead of us in seven weeks. Expect a period of consolidation, and quite possibly, new lows. Once we get past the election, the market will be free to do its thing, and that will hopefully involve a new bull market!
Good Trading!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
As I have mentioned in prior posts, September is often the weakest month of the year for the stock market. Downtrends often accelerate in September, and bottom in October. I believe we may have put in an important bottom today. This bottom was accompanied by a significant spike in the VIX, which peaked over 42 today, the highest level of this bear market. It then reversed and closed about 33, down from yesterday’s close of over 36.
There were significant reversals in other markets today as well. Gold was up significantly again today, but after pit trading hours, was actually lower on the day. The Dollar also reversed its losses.
Friday brings a new trading day and we hope to see some sense creep back into the market, and a lessening of the volatility. What we do now know is that the Fed and Treasury, along with other central banks across the globe, appear to be willing to do what it takes to achieve stability in the financial markets. Once that stability returns, the underlying fundamentals in the economy will be allowed to take hold. It will likely take a couple years for the residential real estate market to fully recover, and hopefully, new credit requirements will not be too tight when borrowers seek to achieve the American dream of owning a home. Today looks like a first step towards the process.
In the coming days and weeks we will look for a good follow through day off of this low. I do not expect this market to go straight up from here, especially since we have an election ahead of us in seven weeks. Expect a period of consolidation, and quite possibly, new lows. Once we get past the election, the market will be free to do its thing, and that will hopefully involve a new bull market!
Good Trading!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Wednesday, September 17, 2008
Blood In The Streets! Stock Market Debacle Continues
Not much that can be said about today’s stock market debacle. Everyone is aware of what is going on. Wall Street is in a panic, and pretty soon, Main Street will be in a panic. All we are hearing in Washington is the blame game. The Democrats blame the Bush administration, the Republicans blame the Democrat led Congress, and they all blame Wall Street. In our own towns, borrowers blame lenders for unfair lending practices, and plenty of people blame appraisers for inflating property value estimates. There is plenty of blame to go around, and the only people that get hurt in the long run is us regular people on Main Street.
At this point in time, in light of the extraodinary circumstances facing the market, it is best to stay on the sidelines, until all of this shakes out. Don’t get greedy! The greedy pigs on Wall Street and in the real estate industry are getting slaughtered. There is clearly Blood in the Streets, which means that this will ultimately become a significant buying opportunity for long term investors. But, there will be more pain to come. Let the market tell you when it is time to start buying.
Today, the VIX closed over 36, and is now just below its yearly highs. It still has a ways to go to reach the peak seen in 2002, which was near 57. That marked the bottom in the great bear market that began with the bursting of the tech bubble. I am not sure we will go much lower from here due to the number of big name financial stocks that have fallen 90% from their peaks. There will clearly be a re-shaping of the financial industry, and likely a lot more regulation. Ultimately, good companies in good businesses should thrive going forward, and many are trading at bargain prices.
Once the market puts in at least a short term bottom, there are some high momentum stocks that are just itching to jump higher. They are currently trading within UPTRENDS, but consolidating as the market goes in the toilet. These are the stocks that will be the leaders of the new bull market.
In the futures markets today, everything was turned upside down. Crude oil was up, Gold had its biggest one day up move EVER, and the Dollar got crushed. The Treasury market rallied today as the broadening crisis on Wall Street will clearly lead to a slowdown. Housing market news was also negative, as housing starts slowed and permits declined. However, this will help the market eat up some of the huge overhanging inventory.
Keep your chins up! Tomorrow is another day and the sun WILL rise!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
At this point in time, in light of the extraodinary circumstances facing the market, it is best to stay on the sidelines, until all of this shakes out. Don’t get greedy! The greedy pigs on Wall Street and in the real estate industry are getting slaughtered. There is clearly Blood in the Streets, which means that this will ultimately become a significant buying opportunity for long term investors. But, there will be more pain to come. Let the market tell you when it is time to start buying.
Today, the VIX closed over 36, and is now just below its yearly highs. It still has a ways to go to reach the peak seen in 2002, which was near 57. That marked the bottom in the great bear market that began with the bursting of the tech bubble. I am not sure we will go much lower from here due to the number of big name financial stocks that have fallen 90% from their peaks. There will clearly be a re-shaping of the financial industry, and likely a lot more regulation. Ultimately, good companies in good businesses should thrive going forward, and many are trading at bargain prices.
Once the market puts in at least a short term bottom, there are some high momentum stocks that are just itching to jump higher. They are currently trading within UPTRENDS, but consolidating as the market goes in the toilet. These are the stocks that will be the leaders of the new bull market.
In the futures markets today, everything was turned upside down. Crude oil was up, Gold had its biggest one day up move EVER, and the Dollar got crushed. The Treasury market rallied today as the broadening crisis on Wall Street will clearly lead to a slowdown. Housing market news was also negative, as housing starts slowed and permits declined. However, this will help the market eat up some of the huge overhanging inventory.
Keep your chins up! Tomorrow is another day and the sun WILL rise!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Tuesday, September 16, 2008
Stocks Reverse, Government aid to AIG
The U.S. Stock market arose from the depths of despair today after a shaky start. Stocks rose in spite of the Federal Reserve holding steady on interest rates, much to the chagrin of floor traders, who booed the announcement at 2:15 pm ET. Initially, stocks sold off a bit, but finished with a strong final hour on news that AIG would potentially get some help from the government. As I write this commentary, CNBC has announced that AIG will get a bridge loan from the Fed, and the government will take a big stake in the company. In electronic trading, stock futures are popping up on the news.
The Fed’s explanation for holding steady included a continued worry on inflation and the fact that the Fed’s previous interest rate cuts have yet to work their way through the economy. Rates are already quite low, and it is really just a matter of banks beginning to ease lending requirements to get this economy moving. Easing lending requirements will help the real estate market recover. In just the last couple of weeks, mortgage rates have finally come down over 50 basis points.
After the Fed announcement, interest rate futures reversed course and closed lower on the session, at session lows. The Dollar rebounded from earlier losses and posted a modest gain. It remains my contention that the stronger Dollar gives the Fed much more leeway and flexibility going forward if economic weakness persists.
In commodity markets, Crude Oil dropped another $4.00 to just over $91 per barrel. Most other commodities were lower again as well. Commodity markets are generally dropping on continued global economic worries.
In regard to the stock market, it is still clearly a time to use caution. However, a sizable rally on Wednesday could signify a successful test of the July lows. Furthermore, the VIX made a new high over 32 today and reversed, closing below yesterday’s close. It has clearly formed a spike on its chart, and it spiked above the July high. We are getting some so-called blood on the street, with the bankruptcy of Lehman Brothers leaving thousands unemployed. The recipe for a new bull market is clearly in place…a stronger Dollar, declining commodity prices and low interest rates. Maybe John McCain actually did have it right!
Stay with the trends!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
The Fed’s explanation for holding steady included a continued worry on inflation and the fact that the Fed’s previous interest rate cuts have yet to work their way through the economy. Rates are already quite low, and it is really just a matter of banks beginning to ease lending requirements to get this economy moving. Easing lending requirements will help the real estate market recover. In just the last couple of weeks, mortgage rates have finally come down over 50 basis points.
After the Fed announcement, interest rate futures reversed course and closed lower on the session, at session lows. The Dollar rebounded from earlier losses and posted a modest gain. It remains my contention that the stronger Dollar gives the Fed much more leeway and flexibility going forward if economic weakness persists.
In commodity markets, Crude Oil dropped another $4.00 to just over $91 per barrel. Most other commodities were lower again as well. Commodity markets are generally dropping on continued global economic worries.
In regard to the stock market, it is still clearly a time to use caution. However, a sizable rally on Wednesday could signify a successful test of the July lows. Furthermore, the VIX made a new high over 32 today and reversed, closing below yesterday’s close. It has clearly formed a spike on its chart, and it spiked above the July high. We are getting some so-called blood on the street, with the bankruptcy of Lehman Brothers leaving thousands unemployed. The recipe for a new bull market is clearly in place…a stronger Dollar, declining commodity prices and low interest rates. Maybe John McCain actually did have it right!
Stay with the trends!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Saturday, September 13, 2008
Weekly Market Re-Cap
The U.S. Stock Market closed a mixed week on a mixed note Friday, as many eyes were focused on Hurricane Ike in the Gulf of Mexico and its potential devastation on the Houston oil and gas refining areas. As I write this, it is still unclear what the final damage will be, but gasoline prices have spiked in response to at least a slight temporary shutdown of these refineries, which produce 20% of the gasoline in the country.
The other major news Friday was that the Treasury Secretary Paulson indicated that there will be no taxpayer funded bailout of Lehman Brothers, which then looked for buyers of the company. Market pundits suggest a deal may be struck by Sunday.
Clearly, not much could be determined from the price action of the market on Friday. If anything, it was relatively cautious. I suspect their could be fireworks on Monday. This week will be a big options expiration week as well, so look out for potential volatility. The overall tape is still pointing to down as the favored direction.
In the futures markets, the big move of the day was the U.S. Dollar, which sold off hard against most major currencies. Traders are betting on the potential for a rate cut later in the year. However, interest rate traders did not necessarily share that view, at least on Friday, as prices fell, resulting in the highest yields of the week. Due to the size of the move against the Dollar on Friday, it is a good bet at least a short term top is now in place. This has been a sizable move over the past couple of months, and the Dollar will likely need some time to consolidate much of these gains.
Traders in the energy markets remained cautious ahead of Hurricane Ike on Friday, but we will likely see a spike on Monday. Other futures markets were primarily mixed on Friday, with some strong moves in Gold and Copper.
Stay with the trends!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
The other major news Friday was that the Treasury Secretary Paulson indicated that there will be no taxpayer funded bailout of Lehman Brothers, which then looked for buyers of the company. Market pundits suggest a deal may be struck by Sunday.
Clearly, not much could be determined from the price action of the market on Friday. If anything, it was relatively cautious. I suspect their could be fireworks on Monday. This week will be a big options expiration week as well, so look out for potential volatility. The overall tape is still pointing to down as the favored direction.
In the futures markets, the big move of the day was the U.S. Dollar, which sold off hard against most major currencies. Traders are betting on the potential for a rate cut later in the year. However, interest rate traders did not necessarily share that view, at least on Friday, as prices fell, resulting in the highest yields of the week. Due to the size of the move against the Dollar on Friday, it is a good bet at least a short term top is now in place. This has been a sizable move over the past couple of months, and the Dollar will likely need some time to consolidate much of these gains.
Traders in the energy markets remained cautious ahead of Hurricane Ike on Friday, but we will likely see a spike on Monday. Other futures markets were primarily mixed on Friday, with some strong moves in Gold and Copper.
Stay with the trends!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
Thursday, September 11, 2008
Stocks Stage Late Day Rally
After charging lower early in the session, the U.S. Stock Market staged a late day rally that carried it to over 1% gains nearly across the board. The lone exception was the Russell 2000, which ended with a far more modest gain.
The main focus early in the session was the continued problems faced by Lehman Brothers, which lost another 40% in value today, and is now over 90% below its 2007 highs. Later in the day it was reported that top executives at the firm are considering the sale of the entire company, rather than just pieces. Wall Street seemed to like that news, and that allowed the market to rally.
It is worth noting that the major averages are in the process of testing significant lows. Today could be a short term bottom, but there still does not appear to be the type of capitulation we would like to see to market a longer term bottom. Although the Dow was down as much as 150 points earlier in the day, we probably need to see it down at least 300 points, and then see a reversal that carries it up a few hundred points of that session low. Another issue is that the VIX closed at under 25 today. This indicator needs to rise to over 35 in order to mark a significant bottom.
In the future markets, commodities were generally lower again, led downward by Gold and Silver. Crude Oil was also lower, but due to the impending impact of Hurricane Ike on the Houston area refineries, gasoline was up a bit today. Crude Oil is getting perilously close to the $100 level, trading as low as $100.10 on the October contract, before closing just under $101. This is in the face of OPEC indicating a 500,000 barrel per day cut in production. I guess those folks have no interest in maintaining a strong global economy! Fortunately for us, most of the producers have no other source of income so they will likely produce above the quota in order to maintain their cash flow.
The Dollar continued its rise against most major currencies today, and Treasuries were steady to higher today, as yields dropped modestly.
Although I continue to believe that the foundation is being laid for a new bull market, as I have said before, some sort of major capitulation is likely needed before we can see the beginning of a new bull move. However, it is possible that a meandering bottom can be put in without this capitulation, but the new bull move should begin with a violent move to the upside.
Stay with the trends!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
The main focus early in the session was the continued problems faced by Lehman Brothers, which lost another 40% in value today, and is now over 90% below its 2007 highs. Later in the day it was reported that top executives at the firm are considering the sale of the entire company, rather than just pieces. Wall Street seemed to like that news, and that allowed the market to rally.
It is worth noting that the major averages are in the process of testing significant lows. Today could be a short term bottom, but there still does not appear to be the type of capitulation we would like to see to market a longer term bottom. Although the Dow was down as much as 150 points earlier in the day, we probably need to see it down at least 300 points, and then see a reversal that carries it up a few hundred points of that session low. Another issue is that the VIX closed at under 25 today. This indicator needs to rise to over 35 in order to mark a significant bottom.
In the future markets, commodities were generally lower again, led downward by Gold and Silver. Crude Oil was also lower, but due to the impending impact of Hurricane Ike on the Houston area refineries, gasoline was up a bit today. Crude Oil is getting perilously close to the $100 level, trading as low as $100.10 on the October contract, before closing just under $101. This is in the face of OPEC indicating a 500,000 barrel per day cut in production. I guess those folks have no interest in maintaining a strong global economy! Fortunately for us, most of the producers have no other source of income so they will likely produce above the quota in order to maintain their cash flow.
The Dollar continued its rise against most major currencies today, and Treasuries were steady to higher today, as yields dropped modestly.
Although I continue to believe that the foundation is being laid for a new bull market, as I have said before, some sort of major capitulation is likely needed before we can see the beginning of a new bull move. However, it is possible that a meandering bottom can be put in without this capitulation, but the new bull move should begin with a violent move to the upside.
Stay with the trends!
Scott Cole
www.theultimatestocktradingsystem.com
www.kungfutrader.com
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