Thursday, December 4, 2008


I stated that I was not convinced of this rally and I'm still not convinced. However, this doesn't mean that the bears are at an all clear right now. Canceling out yesterday's gains was Step 1. Step 2 is to break down below the 820 support level and today's action has made that probability slightly higher.

In addition, the decline was sharp and immediate and broke the "higher highs-higher lows" channel also know as pattern #1 in yesterday's post. An up day, let's say anything that's 2%+, will be worrisome because we will be forming a symmetrical triangle. If we do break (and cleanly close) 820, we are clear to retest the 750 low.

Expect a bounce in the morning, or even a nice sized gap up on a more favorable report. We'll have to see if it holds up and if I commit my reserve capital to short the the rally. If we gap down 2%+, we'll be testing several immediate support levels after breaking today's pre-closing flag.

Who knows what will happen since the expectations for very nauseous labor market numbers are already being priced in. Economists are calling for a -300,000 in NF payrolls vs. -240,000 in October's report. They are also calling for 6.7% vs. 6.5% unemployment in October. These numbers do not matter. What matters is what the Street expects. The Street is calling for between -300,000 and -500,000 and unemployment of at least 7%.

The important data is summarized in the Employment Diffusion Index. A sub-50 reading signals a recession (I'm not sure why it took NBER a year to figure that out). The readings are currently in the 30's (37.6 p) and since the data was first collected, the lowest reading was 33.6 in April 2001. Will we surpass this level?

In other news, for my fellow NoVA, DC, and MD folks, looks like Chevy Chase Bank is getting acquired by Capital One (COF) for $520 million in cash and stock. Our friendly, local bank holds $11 billion in deposits and apparently COF will take a $1.75 billion charge for "potential losses in CC's loan portfolio. Some people say COF may need to up that to $2.25 billion. What the heck does CC have in its portfolio? Goodness. Log into your online banking and you'll get the "memo".

In other, other news, Eliot Spitzer is now a financial commentator for Slate! If you feel like it, you can read his first article here. What's funny is the fact that he's joining Henry Blodget, the man banned from the securities industry and fined $4 million in 2001 due to Spitzer's very own top cop work.
Have fun you two.

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Anonymous said...

Hi joe here, being december - despite all neg news - terrible jobs report for every seller, ther's a buyer. (santa claus rally forming) HIG, how much higher ? take care

Anonymous said...

I agree,,on pullbacks i like Wmt and Plce for the holidays. nice blog john