Loading ...By Jim Comiskey
The markets have continued their volatile ways. It has been two months of sharp drops and big rebounds. Overall, the stock market and many commodity markets have trended much lower and it’s really hard to call a bottom in these markets. (more…)
Stocks Decline, But Indicators Looking Better
Stock index futures are down this morning amid bleak news globally on the manufacturing front, but the big question on many people’s minds is whether the bottom is in after a strong finish to November. The past couple months have been a bloodbath, but there seems to be an abatement of fear in the past few days, ever so slightly.
Stock index futures saw a five-day streak of gains to end the last week of November with their best weekly gain in 34 years, according to Bloomberg. The Dow Jones Industrial Average rose nearly 10 percent in the holiday-shortened week, to 8829.94 points; the S&P 500 gained 12 percent, to 896.24. (more…)
Stock index futures surged on news the Federal Reserve will commit as much as $800 billion to revive lending, with the December S&P 500 futures last trading up 21 at 869. The S&P 500 has rallied 13 percent from an 11-year low on Nov. 20, and posted its best two-day gain since 1987, according to Bloomberg. Lind Plus Senior Market Strategist Jeff Friedman said technical indicators, the Stochastics and Relative Strength Index (RSI), are turning neutral and hinting at some relief. However, he’d like to see closes in the December S&P futures above the 20-day moving average at 896 to increase confidence a near-term low has been posted. If the market turns lower, he said the 75 retracement of the 2002-2008 rally marks the next downside target, at 717.
Stock index futures are down in early trade after more somber news from the housing front. U.S. housing starts and permits for future construction both dropped to record lows in October, signs the housing downturn may extend into a fourth year. The Commerce Department reported residential construction starts fell 4.5 percent in October, while building permits dropped 12 percent to the lowest level since 1960. Inflation appears to be a non-issue, as a separate government report showed the consumer price index fell 1 percent in October, the biggest drop since 1947.
Despite all the doom and gloom, apparently there are some investors are optimistic about the stock market’s prospects. According to an investor survey conducted by Merrill Lynch, 36 percent of the 180 investors surveyed said they were now “overweight” U.S. equities, the highest since at least 1998 and double that of last month. Thirty percent also said the outlook for earnings in America was “most favorable.” Read the full article as reported on Bloomberg.
Lind Plus Senior Market Strategist Jeff Friedman said Tuesday’s stock market gains were somewhat of a surprise given weak fundamental news, dubbing the rally as a combination of bargain-hunting and short-covering. “Economic news continues to be grim and likely will be for some time. The market is going to have a hard time rallying significantly. We are still in a bear market,” he said. Friedman said a move in December S&P 500 futures above 884 should bring 900 in view, and a move over 905 – 910 will chase away some of the bears. He said support is at 838 today and expects 832 – 825 to hold.
Panic Selling in Stocks Has Ebbed, But Still Bearish
By Ben Kim
The economic crisis of 2008 is on the forefront of everyone’s mind and has affected CEOs and blue-collar workers alike. The stock indexes have been incredibly volatile as a result and the market remains bearish from both a fundamental and technical perspective.
The S&P 500 index saw a high in January 2008 above 1460, and this past month we saw a low for the year under 820, representing a 44 percent drop. While I do believe most of the panic selling is done (unless we get severely unfavorable fundamental news) the volatility and downward trend is likely to continue. (more…)
Hedge fund liquidations have pulled down stocks and commodities alike. They are now sitting on some cash, and that may help the stock market find its legs, said MF Global Research Senior Interest Rate and Equity Analyst Nick Kalivas (See a sample of his 11/17 morning comments below).
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Financial Market Comments From MF Global Analyst Nick Kalivas
Hedge funds are flush with cash. How much more are they going to sell? The market may be sold out.
There’s an interesting story on Bloomberg which suggests there has already been a large liquidation. I think there has been fear of more liquidation by hedge funds, but it already looks like there has been heavy liquidation. Story highlights below:
Hedge-fund manager David Tepper entered the third quarter with $3.1 billion of U.S. stocks and exited with $648 million, selling most holdings to reduce risk and raise cash as carnage spread across the financial markets. “We moved a lot out early because we didn’t want to lose money,” said Tepper, 51, president of Appaloosa Management LP in Chatham, New Jersey. The firm, which switched some money to bonds, has between 30 percent and 40 percent of assets in cash.
At Tudor Investment Corp., the Greenwich, Connecticut, hedge-fund group founded by Paul Tudor Jones, 13F holdings fell to $453 million from $5.7 billion. Jones said markets face more selling from managers. “Our concern now is less over year-end fund redemptions, as record cash balances have already been raised in anticipation, but with prospective fund closures,” Jones, 54, said in an Oct. 31 report to his clients. “This latter event represents a tipping point at which a fund’s call on the market for liquidity goes non-linear.”
SAC Capital Advisors LLC of Stamford, Connecticut, said its holdings were $7.7 billion as of Sept. 30, down from $14.4 billion at June 30. Founder Steven Cohen, 52, had about half the firm’s assets in cash in mid-October, after his main fund fell 5 percent through September. Louis Bacon’s Moore Capital Management LLC said the value of its 13F securities fell 69 percent to $1.4 billion, while at Jana Partners LLC, a firm overseen by Barry Rosenstein that makes activist investments, they fell to $2.1 billion from $5.9 billion. Both firms are based in New York.
Jeffrey Vinik, who once ran the Fidelity Magellan Fund, disclosed that his Boston-based Vinik Asset Management LP held $1.8 billion at
Sept. 30, down from $11.8 billion at June 30. “Movements in financial markets were so volatile, so unpredictable and so seemingly detached from fundamentals” that many hedge-fund managers “didn’t feel they had an edge,” said Doug Peta, an independent market strategist in New York. “The best thing they could do for their investors was to pull back entirely until markets returned to more of a sense of normalcy.”
8:25: NY Post story
Hedge funds have been rushing in recent weeks to sell risky bond and stock assets ahead of yesterday’s deadline for investors to withdraw money from their beaten-up funds. The withdrawals ahead of the Nov. 15 deadline, the first since the October markets meltdown, could lead to the shuttering of up to 25 percent of the 7,000 hedge funds, industry insiders say.
Stock index futures were down again after the latest data on weekly initial claims for unemployment insurance jumped 32,000 to a seasonally adjusted 516,000, a seven-year high. The market is closing in on a test of its October lows, at 825 in the December S&P futures.
Lind Plus Senior Market Strategist Jeff Friedman said technical momentum indicators, the Slow Stochastics and Relative Strength Index (RSI), are bearish and signaling more downside. He said if S&P futures can find support at 825, it would mark a double-bottom that may pave the way for better days ahead. However, he said he’s like to see a close over 1066 to regain some confidence. Near-term resistance is at 925, the 20-day moving average, and at 937, the 10-day moving average.
“There’s a lot of doom and gloom out there,” adds Lind Plus Senior Market Strategist Phil Streible. He said it’s important to hedge your portfolio, and one way to do that is with currency options.
The U.S. dollar has been rallying since the summer, and instead of correcting hard as some were expecting, it has seen a sideways type of correction, he said. The dollar is benefiting from the unwinding of other foreign currencies, including the euro and Canadian dollar.
“I think that should form a nice base for a move into the high 80s if not the low 90s in the ICE Dollar Index Futures contract,” said Streible. The Dollar Index represents the dollar’s standing against six global currencies. Canada is a commodity-driven economy, and dependent on large exports. Other countries can’t pay up right now for goods, and it’s hit the nation’s currency, said Streible. He sees the Canadian dollar possibly falling to 77, the euro possibly falling to about 1.10, and the British pound to 1.25 to 1.35. He recommends investors consider buying 2009 puts or put spreads.
U.S. Dollar and the Yield Curve
By Mike Hinman
The yield curve is a depiction of the difference between short-term and long-term government interest rates, and you can trade these differentials with futures contracts. Near the shorter end of the curve, a daily chart of five-year Treasury note futures shows the market hit a double top near 115, and then recently broke out above that level. This chart is looking very bullish.
Trading, Like Sports, Requires a Game Plan
by Matt Krupski
In the sports world, they say that defense wins championships. However in most instances, a skillful offense coupled with a solid defense and sufficient preparation determines long-term success. In trading, the same factors can govern your profitability. A “shut-down” defense in sports is still vulnerable if a team’s offense is ineffective and can’t score points. Similarly, a team with a prolific offense is useless if their defense can’t stop the opposing team.
Market Outlook for November
Before I get into my market outlook, it’s important to emphasize the importance of risk-management in volatile times like we have been experiencing in the markets. There are things you can’t control, so aim to control the ones to can. Know how much you are risking before you get into a trade, pick your entry and stop-loss points carefully. No matter what your opinion is of the presidential election’s result, we need hopefulness to return in wake of the dramatic freefall of the housing market, the credit market, and of course the stock market. (more…)
