Economic Bailout Fallout: Hyperinflation?

By Matt Roma

“The main cause of hyperinflation is a massive and rapid increase in the amount of money, which is not supported by growth in the output of goods and services. This results in an imbalance between the supply and demand for the money…” –Wikipedia

We have to step back and take a good long look at our economy today. These are times many of us have never seen the likes of before. The economic crisis facing our country, and the world for that matter, is going to take some time to work out. I believe there will be many adverse effects on the economy that many have not foreseen, or maybe they have and decided it is worth the risk for short-term stability. Today we are talking about deflation; tomorrow it could hyperinflation. (more…)

Treasury Bubble Part II: Three-Month Yield Turns Negative

by Phil Streible & Richard Ilczyszyn

Risk-aversion has been driving investors, and they have been rushing into U.S. Treasuries. Yields have been pushed down to historic lows across the yield curve, and in an unprecedented development, three-month Treasury bill yields have actually turned negative. The Treasury bubble is blowing up, but we think the air will eventually be let out. We recommend buying puts in the Treasury bond and note futures now. Investors will lose their fear as the stock market improves, and the safe-haven play dominating the markets over the past couple months will likely be unwound. It could result in a significant move lower in futures prices, which trade inversely to yields. (more…)

The Treasury Bubble

By Richard Ilczyszyn

The fear and the volatility we’ve seen in the past few months in the stock market has driven investors to safe-haven instruments like U.S. Treasuries, and prices for Treasury bonds and notes have soared. It’s looking like the next big bubble. Like any bubble, I think it will eventually burst. I recommend buying puts in the Treasury bond and note futures now, as these markets could come down hard, and fast. As it’s impossible to say when that will happen, options are a good way to allow you more flexibility in the timing if the bubble continues to build a while longer. You’ll also have the benefit of defined risk. (more…)

Stocks Decline, But Indicators Looking Better

By Jeff Friedman

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.

The following schedule for the Thankgiving 2008 holiday is taken from sources which Lind-Waldock deems to be reliable, but we are not responsible for any errors or ommissions. Please check the Web site of the appropriate exchange for further information or changes. (more…)

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…)

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.

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