September 30, 2008
S&P and Gold Divergence
by Phil Streible
The stock market plunged, while gold rallied in a safe-haven bid after Congress rejected Treasury Secretary Paulson’s proposed $700 billion financial bailout package on Monday, September 29. While I think these trends will reverse in the short-term once some sort of relief package passes, in my opinion, the economy is weak and the stock market remains on shaky ground. I think we will continue to see a flight into gold and out of stocks until the global economy stops bleeding, and am recommending trading strategies accordingly.
The stock indexes started the day down Monday, and rally attempts failed as the market began to crumble as the day wore on. The Dow Jones Industrial Average plunged nearly 778 points, or 7 percent, it’s worst one-day drop ever, while the S&P 500 fell 106 points, or 8.8 percent and the Nasdaq Composite dropped 199 points, or 9.1 percent. A lot of people were speculating the bailout would be wrapped up Sunday, it would be signed, and the stock market would cheer the news. You can see the breakdown on the 5-minute chart of the E-mini S&P futures when that didn’t happen.
We saw a lot of buying come in around 12:30 on the chart in the middle of the screen, where you see a very large red candle, then a small green and large green candle. That’s when the news was reporting the Congressional vote and showing more “yeas” than “nays.” But then, the market turned and fell off steeply into the afternoon when the votes were finalized and the plan rejected.
Read the rest of Phil’s article, including trading ideas.
September 29, 2008
The stock market is facing a meltdown after Congress failed to pass the proposed $700 billion financial industry bailout today. Here is a guide to price limits for stock indexes at CME Group.
Third-Quarter 2008
Market/Limit Overnight 5% (Up or Down) 10% (Down Only) 20% (Down Only)
S&P 500 and E-Mini S&P 500 65.00 130.00 260.00
Nasdaq 100 and E-Mini Nasdaq 100 95.00 190.00 380.00
E-Mini Nasdaq Composite 120.00 240.00 480.00
(more…)
Effective with the start of trading on Sunday, September 28, 2008, ICE is revising Sunday evening electronic trading hours for:
- Russell 1000® Index futures and options
- Russell 2000® Index futures and options
- All ICE FX futures and options including ICE Millions™ (coming in November)
- U.S. Dollar Index®
Trading will now begin at 5:00 p.m. Central Time, with pre-open beginning at 4:30 p.m. Previously, the markets opened at 7:00 p.m.
For all other nights, hours for these products remain unchanged with trading beginning at 7:00 p.m. and pre-open beginning at 6:30 p.m.
As of September 19, ICE Futures U.S. has the exclusive rights to offer futures and options contracts based on Russell’s industry-leading U.S. equity indexes. These products had traded at CME Group.
September 25, 2008
Given fears of a recession, market participants have upped up the odds the Federal Reserve will slash its key short-term interest rate (known as the Federal funds rate) at the October 29 Federal Open Market Committee Meeting. CBOT Fed funds futures are pricing in odds of 92 percent for a quarter-point cut, to 1.75 percent. However, the market expected a rate cut in September and didn’t get it, so we’ll have to see if policymakers have anything else up their sleeves to shore up the economy if they keep rates steady again in October. Fed Chairman Bernanke seemed to indicate the Fed was ready to cut rates in his testimony to Congress this week, trying to push though the $700 billion financial bailout plan with Treasury Secretary Paulson.
The “intensification” of the financial crisis in recent weeks is curbing Americans’ access to borrowing, making the outlook for consumer spending “sluggish at best,” Bernanke said.
That may be putting it mildly. This morning we had more dour economic news. New-home sales plunged 11.5 percent in August to the lowest level in 17 years, and durable goods orders fell 4.5 percent.
September 24, 2008
Stock index futures are on the rise after two losing sessions after well-known investor Warren Buffet (a.k.a. “the Oracle of Omaha”) took a $5 billion stake in Goldman Sachs. He also gave his support for the $700 billion financial bailout plan now being presented before Congress by Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke. In a CNBC interview, Buffett said it was clear to him that action is needed, and that his stake in Goldman was a vote of confidence that some portion of the plan would pass.
December S&P futures were last up 2.25 at 1189.25.
Paulson and Bernanke continue their second day of Congressional testimony to quickly push through the $700 billion financial bailout plan. Legislators raised questions about a number of issues, including oversight of the plan, relief for homeowners facing mortgage-related meltdowns, and possible caps on financial executives’ pay.
Lind Plus Senior Market Strategist Jeff Friedman said the more questions that have come up regarding the plan, the more negative it seems to be for the stock market. “Expect volatility…Watch for wild cards from the dog and pony show going on in Congress,” he said.
December S&P futures closed lower on Monday and Tuesday, but despite the setback, Friedman said technical momentum indicators, the Relative Strength Index (RSI) and Stochastics, remain bullish and signal sideways to higher prices. However, he said multiple closes above the 20-day moving average at 1242 are needed before he can feel confident a short-term low has been posted. He said 1136 is a longer-term downside target, but there should be support at 1186 first. The 10-day moving average comes in at 1217.
September 23, 2008
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