3SOF

Weekly Wrap

The dollar rallied, oil prices plummeted and stocks soared.  That is the simple summation of the week, yet it fails to capture some important subplots that spurred that action.

In terms of the dollar, it enjoyed a sharp reversal of its sagging fortune as traders unwound what had been an easy money, long trade in the euro.  Their inclination for doing so has taken root in recent weeks with inflation pressures picking up in the U.S. and economic growth slowing down in Europe.

The assumption that the Fed is more inclined to raise interest rates helped drive some dollar buying ahead of Tuesday's FOMC meeting.  As it so happened, the FOMC elected to leave the fed funds rate unchanged at 2.00% and provided a policy directive that left market participants inclined to think there won't be a tightening anytime soon.

The latter realization didn't weigh on the dollar.  In fact, the greenback picked up momentum through the remainder of the week following an acknowledgment of weakening growth in the Euro zone by ECB President Trichet that prompted traders to think the ECB wouldn't be hiking rates further to fight inflation.

Support for the euro was pulled on this view and was transferred to the depressed dollar, which gained 3.3% against a basket of other major currencies.

The dollar's rally factored heavily in knocking down dollar-denominated commodity prices.  Crude futures, understandably, garnered the most attention in the commodity selloff given the linkage they have to the macro economy.

Crude prices declined 7.9% for the week at Friday's settlement to $115.20 per barrel.  They are now down 22% from the high they hit July 11.

As to be expected, the continued declines factored favorably for the market in general and for the transportation and retail stocks in particular.  Transports on the week surged 5.4% while the S&P Retailing Index rallied 9.0% despite a battery of same-store sales results for July that were deemed by the market to be on the disappointing side of things.

The consumer discretionary sector was the best-performing sector for the week.  It gained 7.7%. The energy sector (-4.0%) and the materials sector (-2.0%), meanwhile, were at the end of the performance table.

There were some striking moves in a number of areas throughout the week.  The most striking move, arguably, was the one made by the financial sector.

Government sponsored enterprises Freddie Mac (FRE) and Fannie Mae (FNM) both reported huge quarterly losses, as did Dow component AIG (AIG).  Although the stock of each of these companies was beaten back in material fashion following their reports, the financial sector held its ground for the most part.

Although rattled for a bit Thursday after Citigroup (C) agreed to settle allegations of misrepresentation in the marketing of auction rate securities and an indication from Moody's that it has placed American Express' (AXP) A1 rating on review for downgrade, the sector quickly regrouped and put in a strong showing Friday.  The end result is that the financial sector added 1.0% for the week and is up 30% from its July 15 low.

The financial sector's relative strength in the face of bad news kept alive a buy-the-dip mentality.  A reassuring earnings report and outlook from tech bellwether Cisco (CSCO) helped support that thinking, too, and proved instrumental in the tech sector's outperformance.  Cisco's stock increased 10% for the week while the tech sector increased 6.0%.

The economic data seen during the week was mixed.  Personal income and spending for June was better than expected, but the price deflator provided a negative surprise.    The inflation fears were tempered, though, in the wake of the FOMC decision and with commodity prices continuing their decline.  The ISM Services and Pending Home Sales reports also brought better than expected results.

Friday's report on Q2 productivity provided more encouraging inflation news when it was reported unit labor costs rose just 1.3% from the first quarter.  That was a slower rate of increase than seen in the prior two quarters.

Weekly initial claims, however, were anything but good.  They jumped to 455,000, which moved the 4-week moving average to 419,500 from 392,750.  That is the highest 4-week average since July 12, 2003.  Continuing claims increased 0.9% to 3.311 million.

The claims trend is a worrisome development that bears close watching. It reflects weakening conditions in the labor market that could impact consumer spending activity.  That said, we would note that the 4-week moving average stood above 400K for 29 straight weeks in 2003, yet real GDP gains continued at a moderate pace throughout that year.

With this week's gain, the S&P 500 is up 8.0% from its July 15 low.   It's not a stretch to think it is due for a consolidation period of some sort, particularly since there hasn't been any real new money driving the gains.

To the latter point, the level of assets in money market funds has actually increased 1.8% since July 16 to $3.56 trillion.  This indicates there is still a lot of buying power on the sidelines, which can be read as a bullish development.  At the same time, though, the increase in money market fund assets in the midst of this rally suggests investors, overall, are still in a capital preservation mode.

Market Watch (SPX):


No doubts about general downtrend for the mid and long term time-frames on the SPX, this is the main force in play.
Although, the short term time frame was neutral, but developing a kind of triangular pattern, with resistance at 1291 (compatible with the ema50), and ascending support at 1261.

Friday's rally created a small breakout over the short term resistance, it still could be a fake breakout and need confirmation, but it may set up the tone for a further upside move extension, in this case the upside potential is the long term descending resistance or the 200-ema (+/- 1365), this upswing can be tradable even if its against the main downtrend on the long term time frame, but personally if the SPX manage to reach above 1350 during the next weeks, it would be a nice shorting opportunity.
Current short term support is located at 1261, a breakdown of this level could set up another down-swing to the lows.

Here's the updated chart:

best regards,

from IV board:
Old Fool Notes – 08/23/08

Last week was kind of wild for you guys.  It was a low volume week with the third string running the show.  However, Friday was a clear indication that the boss owns a Blackberry and is still shopping for "bargains".  Volume on Friday was very low at 1.4 billion with a ratio of 4.9 to 1.  That is a decent ratio for a 34 point day.

If we look at the daily chart, we can see that the 50-day EMA was briefly broached on Thursday and that the 200-day EMA capped the day Friday.  Now, if I was the boss, I would have left instructions to buy at the 50 but not to push past the 200.  I'm betting the Blackberrys were ringing off the hook about noon Thursday.  All of the indicators look good except for the OBV – but, of course, that has been the most important lately.  The Bollinger is well above the 200-day so we have room to run a bit – baring unforeseen news.

The hourly charts look very good except for the Bollinger.  Frankly, I would not be surprised by a run back to 2460.

The ratio chart saved the crossover and is in perfect position.  Don't bet against this chart.

The weekly was down but the chart still looks OK.

The Wilshire chart looks very good.  It has pushed back above the 50-day EMA and has a positive OBV.  All of the indicators look good.  If it manages to take out that resistance area around 13350, life could get very difficult for the bears.

The P&F chart put in a double top breakout and set a target of 2460.  For a change, the target looks about right.

The NASI and NYSI resumed their upward push and that is positive.

This market is still fighting the seemingly never ending stream of financial company bad news.  And is doing a fairly good job of it.  If we could calm some of that negative noise down, it would run.  Counteracting news has been coming like lower oil and gold prices and a stronger dollar.  Look carefully at the daily chart – the stage is set for a push back above 2475.  If that happens, it will probably take two pushes – one to 2460 and then another to 2475.  We will see what happens but I feel reasonably positive – assuming we do not get any bad news along the way.  Unfortunately, I was not trading the market this week.  If we look good Monday, I'll join the crowd.

Charts link below:

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2071209

Market Update and Holiday

The markets continue to trade in a range of support and resistance whilst still overall within a downwards bias. This being a Holiday weekend and the summer, volume has been light. Thursday action was good, but really only took us up to resistance as you can clearly see on the main indexes attached below - SPX, COMP and DJIAA.

I guess Friday again will be light on volume as people take an early break so I don't expect too many fireworks.

Enjoy your long weekend.

Hi Aussie and everybody

Just sending this EMail to bring up a "hurricane season play"... as you know this is the time of the year that we have some hurricanes... and if the destruction is what is prjoected to be with Gustav and perhaps Hanna then IPII can be one of the plays... please take this in consideration
Thank You and love to your babygirl!!!!!!!

fyi:
Old Fool Notes – 09/01/08

We bang up and then we bang down – looks like tomorrow will be more of the same.  Volume on Friday was 1.6 billion with a ratio of 5.1 to 1 in favor of the bears.  That's about normal for 44 points.  I have been out of trading except for a couple of days over the past few weeks and frankly - it feels good because I cannot watch.  Now if you can watch, and are quick on the trigger, you can make a bunch of $$ in a market like this.  An interesting observation is that we just came through a Cat 3 hurricane and oil is down significantly.  I expect the lessons learned from Katrina have put us in a position that we will not see much damage and, obviously, most of the traders agree.  We will see tomorrow.

The daily chart still has a downward channel working but the indicators don't look terrible.  Given the looks of things overall, this is not a chart to buy but it is not a sell chart either.

The hourly charts are interesting in that they show that we have been marching sideways for about 10 days.  The boundary conditions are 2345-2410.  That is support and resistance – write it down.

The ratio chart got hit on Friday but not as bad as the Naz fall might suggest.  The positive crossover is still in play.  Don't bet against this chart – LOL.

The weekly chart is still in decent shape but we need a positive week.  A negative week would be very bad MoJo.

As you might expect, the WLSH chart got hot on Friday but not nearly as bad as the NAZ.  The chart still looks pretty good with positive indicators all around.

The P&F chart got clocked pretty hard with the 40 point decline.  2340 is the magic number for the bears and 2410 is the magic number for the bulls – sound familiar?

The NASI and NYSI both put in positive days on Friday so internals still look OK.

I apologize for my lack of input lately.  I am swamped and that doesn't seem like it will change much in the near future.  Fortunately, it looks like we have a number of very active members with lots of good ideas and input.  I am going to hang out and probably not do much between 2340 and 2410.  Those are real important numbers – so pay attention.

Charts link below.  Throw some votes in there on SC - first of the month.

http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID2071209

On Aug 29th I posted three charts of the main indexes highlighting the trading within support / resistance ranges (with an overall downwards bias) and that the prior day had just moved everything up to and stopped at resistance.

Yesterday we saw those indexes break support in a significant way, I will show all 3 charts again. I am re-assessing some of our positions and may liquidate some purely because market conditions are not conducive to holding. That said there is no point panic selling at the open because we likely will see a gap down sell off and then recovery later during the session so any market open selling could well be right at the lows. The contrarian angle says that we could also see some great buying opportunities. Just depends which way you look at it.

Not only are the markets acting up but my PC also. It had a power supply failure and I have to get a new one out of the US, should take a few days. Until then I am using my backup charting and other applications,so my ability to do my normal activity is somewhat compromised. That said, the market is such that right now I am in no hurry to open new positions, unless, the trading direction is short or if long, with a very short timeframe (a few days or intraday). Our position trading / swing trading / portfolio building with longer term outcomes just is not working in the current tough environment.

Ramsburg and I will be sitting down and analysing strategies/approaches/market sentiment and direction over the coming days to make sure we 're-set' our approach to the current trading environment. Suffice to say we remain committed and focussed to getting our continued`approach profitable and to deliver an edge in trading the markets.

Lets all be careful out there

Knobias Sector Commentary
Monday , September 15, 2008 15:59ET

Energy

The Energy sector gapped lower at the open before paring those losses through the morning session. After mid day, selling pressure increased and pushed the sector back to the lows seen earlier. Oil prices were off by $5 for most of the day which ushered the area lower. Overall selling pressure after the outcome of two in the financial crisis also didn't help while economic data added even more fuel to the fire. Oil and gas producers were marginally lower while smaller caps were leaders to the downside. Equipment and Service names were similar with steep declines. Overall, the soured sentiment from the financial crisis spread throughout the market while oil's decline helped the sector even lower.

- KMP: Not Significantly Damaged by Hurricane Ike
- MTRX: To Acquire Engineering And Construction Assets And Technology From CB&I
- SWSI: To Acquire Oilfield Service sssets from Diamondback Holdings for $270M
- GMET: Raymond James Ups to Mkt Perform from Underperform

Materials

The Materials sector gapped lower at the open before cutting into those losses through the majority of the morning session. Chemical names were lower while metal and miners led to the downside. MOS and POT were both upgraded at Soleil but the rating action did little to stem the overall selling pressures. Overall, the soured sentiment from the financial crisis spread throughout the market while negative economic data helped push the markets even lower.

- CYT: Jefferies Cuts to Hold from Buy; Cuts Tgt to $52 vs $66; Analyst Notes
- NBF: Q3 EPS (4c) vs (5c) Meets (4c) Est
- MOS: Soleil Ups to Buy from Hold; Keeps Tgt @ $155; Analyst Notes
- POT: Soleil Ups to Buy from Hold; Keeps Tgt @ $239; Analyst Notes

Industrials

The Industrial sector gapped lower at the open before attempting to cut into those losses. After failing to find support with half of the losses recouped, the sector reverted back to the opening levels and chopped along with steep declines. General industrials were all lower while aerospace names also saw healthy losses. Support services declined while heavy construction names led the sector in losses on falling oil prices. With oil down $5 for most of the session, industrial transports outperformed the rest of the sector. Railroads and marine transports were void of any buying but truckers and delivery services were leaders. Overall, the soured sentiment from the financial crisis spread throughout the market while negative economic data helped push the markets even lower.

- MPS: Baird Cuts to Neutral from Outperform
- HHGP, KFRC, and KFY Downgraded @ BARD
- NATI: Thomas Weisel Ups to Market Weight from Underweight; Sets Tgt @ $35; Analyst Notes
- LPX: Downgraded to Underperform from Sector Perform @ RBCM
- PHH: Friedman Cuts to Mkt Perform from Outperform; Cuts Tgt to $14 vs $20; Analyst Notes

Consumer Discretionary

The Consumer Discretionary sector gapped lower at the open before fighting back to the unchanged level at mid day. After testing those areas, the sector sold off in the afternoon and continued in a tight range for the remainder of the session. Media names were all lower on the day. Retailers performed a bit better. Travel and leisure names were split. Restaurants were mixed with fast food names marginally higher. Other diners were down with PNRA bucking the trend after reaffirming guidance. Gambling, hotels and tourism names were laggards while airlines and recreation names were leaders after oil prices dropping again. Overall, the soured sentiment from the financial crisis spread throughout the market while negative economic data helped push the markets even lower.

- BBY: To Buy Napster
- HD: CSFB Cuts to Neutral from Outperform; Analyst Notes
- LOW: CSFB Cuts to Neutral from Outperform; Analyst Notes
- BBBY: SG Cowen Starts @ Underperform; Analyst Notes
- HD: SG Cowen Starts @ Neutral; Analyst Notes
- TVL: Retransmission Contract with Time Warner Expires October 2, 2008
- LOW: SG Cowen Starts @ Underperform; Analyst Notes
- WHR: SG Cowen Starts @ Outperform; Analyst Notes
- WSM: SG Cowen Sets @ Underperform; Analyst Notes
- PNRA: Reaffirms Previously Issued Third Quarter 2008 Earnings Guidance and Announces Third Quarter Earnings Release Date
- IACID: Canaccord Adams Starts @ Buy; Sets Tgt @ $22
- ZICA: Expansion of Licensing Agreement w/Sony Ericsson
- NAPS: To Be Acquired by Best Buy for $2.65 Per Share in Cash
- IGT: Extension of Licensing Agreement w/International Game Technology
- AMR: UBS Securities Ups to Buy from Neutral; Analyst Notes
- CAL: UBS Securities Ups to Buy from Neutral; Analyst Notes
- DAL: UBS Securities Ups to Buy from Neutral; Analyst Notes
- LCC: UBS Securities Ups to Buy from Neutral; Analyst Notes
- UAUA: UBS Securities Ups to Buy from Neutral; Analyst Notes
- JBLU: UBS Securities Ups to Neutral from Sell; Analyst Notes
- SWK: Raymond James Cuts to Mkt Perform from Outperform

Consumer Staples

The Consumer Staples sector gapped lower before quickly recouping those losses and chopping along marginally lower for the remainder of the session. Beverages, household goods, tobacco, and personal goods were all marginally changed. Food products were mostly lower while homebuilders and autos led the sector in losses. Overall, the soured sentiment from the financial crisis spread throughout the market while negative economic data helped push the markets even lower.

- FRZ: Announces Paul D Smith Appointed Executive VP and COO
- DHI: Smith Barney Cuts to Sell from Hold; Analyst Notes
- PHM: Smith Barney Cuts to Hold from Buy; Analyst Notes
- RNT: SG Cowen Starts @ Neutral; Analyst Notes
- RCII: SG Cowen Starts @ Outperform; Analyst Notes
- VPS: Q3 EPS 5c vs 3c EPS +67% Y/Y
- WFMI: Pali Capital Starts @ Sell; Sets Tgt @ $12; Analyst Notes
- SWY: Pali Capital Starts @ Sell; Sets Tgt @ $21; Analyst Notes
- SVU: Pali Capital Starts @ Sell; Sets Tgt @ $20; Analyst Notes
- GAP: Pali Capital Starts @ Neutral; Analyst Notes
- KR: Pali Capital Starts @ Neutral; Analyst Notes
- PBG: Davenport Ups to Buy from Neut

Health Care

The Healthcare sector gapped lower at the open before quickly recouping the majority of those losses by mid day. For the remainder of the session, the sector chopped along marginally lower. Pharmaceuticals were all lower on the day while biotech names were a bit more mixed. Medical device names were mostly lower while the supply names performed better. Healthcare providers all declined. AMLN was a bright spot after Carl Icahn raised his stake in the company and an upgrade at Pali Capital. MEDX also saw buying interest after a data release on Ipilimumab. Overall, the soured sentiment from the financial crisis spread throughout the market while negative economic data helped push the markets even lower.

- IDIX: Registers To Sell $100M In Stock For Holders
- AMLN: Carl Icahn Raises Stake 7.33% from 6.54%
- POZN: Baird Cuts to Neutral from Outperform; Analyst Notes
- PBH: SunTrust Ups to Buy from Neutral; Sets Tgt @ $13; Analyst Notes
- AMLN: Upgraded to Hold from Sell @ Natixis
- MEDX: New Survival Data from Phase 2 Trial of Ipilimumab in Metastatic Melanoma
- AMLN: Pali Capital Ups to Hold from Sell

Financials

The Financial sector gapped lower at the open before finding buying interest and trading higher to its best level in the first hour and cutting some losses. The level, however, couldn't be sustained and saw the sector add to the decline for the remainder of the session. Lehman's bankruptcy filing and Merrill's proposed merging with Bank of America took a toll on the sector and market. After the conclusion to the two situations, AIG was put on the clock and was supposedly in negotiations for with officials to raise capital to ease its liquidity problems. Large cap banks were all lower with WFC being a lone name weathering the selling pressures. Regional banks were mixed with some WB, WM, and NCC being leaders to the downside. Investment banks were overall leaders to the downside though Merrill sported a decent gain after being bought by BAC. Other general finance names also declined. Non life insurance names were marginally lower though AIG was off by over 50%. Life insurance names also sported large declines. Overall, the soured sentiment from the financial crisis spread throughout the market and caused a broad based decline while negative economic data helped push the markets even lower.

- NCC: Announce New Multi-Year Brand Agreement and Expanded Debit Relationship with Visa
- TROW: Downgrading to Hold on Valuation (Jefferies)
- WTNY: Downgraded to Reduce from Neutral @ RHCO
- WTNY: SunTrust Cuts to Reduce from Neutral; Analyst Notes
- MS: Smith Barney Cuts to Hold from Buy; Cuts Tgt to $45 vs $65; Analyst Notes
- LEH: Smith Barney Cuts to Sell from Hold; Analyst Notes
- AIG: Smith Barney Cuts to Hold from Buy; Cuts Tgt to $14 vs $25.5; Analyst Notes
- BPO: Merrill Lynch Cuts to Underperform from Buy
- SLG: Merrill Lynch Cuts to Underperform from Neutral
- VNO: Merrill Lynch Cuts to Underperform from Buy
- WB: Morgan Keegan Cuts to Mkt Perform from Outperform; Analyst Notes
- BXP: Merrill Lynch Cuts to Underperform from Neutral
- NLY: Merrill Lynch Cuts to Neutral from Buy
- JPM: Merrill Lynch Cuts to Underperform from Neutral
- GS: Merrill Lynch Cuts to Neutral from Buy
- BPO: BMO Capital Cuts to Market Perform from Outperform

Information Technology

The Technology sector gapped lower at the open before cutting into those losses through the first hours of trade. The move couldn't be sustained and caused the sector to trade in range through the rest of the morning hours. During afternoon action, the sector saw selling pressure resume and help the sector to its lows for the day. Semiconductors were overall laggards, though TXN and AMAT weathered the selling. The rest of the sector traded with steep declines. Overall, the soured sentiment from the financial crisis spread throughout the market and caused a broad based decline while negative economic data helped push the markets even lower.

- TRAK: JMP Sec Ups to Mkt Outperform from Mkt Perform; Sets Tgt @ $23; Analyst Notes
- CTXS: Jefferies Cuts to Underperform from Hold; Cuts Tgt to $25 vs $32; Analyst Notes
- SMTK: Cypress Semiconductor Completes Acquisition Tender Offer
- DIOD: Raymond James Cuts to Outperform from Strong Buy

Telecommunication Services

The Telecom sector gapped lower at the open before cutting into those losses for the first hours of trade. The move higher couldn't be sustained and sent the sector lower throughout the rest of the session. Both fixed line and mobile names saw sharp declines but mobile names lagged with the largest moves lower. Overall, the soured sentiment from the financial crisis spread throughout the market and caused a broad based decline while negative economic data helped push the markets even lower.

- TI: Morgan Stanley Ups to Overweight from Underweight; Analyst Notes
- FRP: Borrows Remaining $100M Under Term Loan

Utilities

The Utility sector gapped lower at the open and continued to add to those losses through the first minutes of trade. After bouncing off the daily low and trading above opening prices, the sector stabilized and traded in a tight range until the final hour. Into the close, selling pressure increased and sent the sector lower but still above the worst levels of the day. Electricity names were all lower with the exception of SO, ED, and PNW which were bright spots. Gas and water names were laggards and led the sector lower. Overall, the soured sentiment from the financial crisis spread throughout the market and caused a broad based decline while negative economic data helped push the markets even lower.

- XEL: Closes Offering of Common Stock
- DUK: Finalizes Catamount Energy Acquisition

Nice sector summary La-onda. Huge losses all around due to the continued financial debacle that is continuing to unravel.

Some people are calling this latest turn of events the start of a capitulation bottom, others that there is more hell and damnation to come. It doesn't really matter which camp I fall into (probably the latter) because ultimately the market will show us the direction, not the headlines.

Actually with the FED stepping in to 'save' all these financials, if they carry on in that vain it won't be long before you the people own all these once private corporations via proxy of the Govt. It will come at a huge cost though of Trillions of $ of debt.

Today we have a potential double whammy from Goldman Sachs (GS) announcing results prior to open and then the FED deciding on interest rates. The previous indication and sentiment was that rates would remain on hold,  the recent few days of turmoil have gotten more and more people speculating that we may see a 0.25 or even 0.5 basis point cut.

For me prudence has stepped in and I am remaining on watch. There is far too much uncertainty, manipulation and volatility to trade confidently. If I recommend any positions it will either be a short sell or a very specific short term profit target based long idea.

nice interview  :

Zacks Analyst Interview Highlights: Lehman Brothers, Merrill Lynch, Bank of America and AIG
Tuesday , September 16, 2008 06:00ET

CHICAGO, Sep 16, 2008 (BUSINESS WIRE) -- Zacks.com releases the latest Analyst Interview. Today's interview is with Director of Zacks Equity Research Dirk van Dijk, who discusses Lehman Brothers (NYSE: LEH), Merrill Lynch (NYSE: MER), Bank of America (NYSE: BAC) and AIG (NYSE: AIG).

Can you give us some perspective on the seismic shifts we've already seen in trading this week?

Lehman Brothers (NYSE: LEH), a firm dating back to before the Civil War is gone, bankrupt, kaput. Merrill Lynch (NYSE: MER) was pressured by the Fed to put it up for sale to Bank of America (NYSE: BAC), but was able to negotiate an extremely generous price of $29 a share, a huge premium from the $17.05 price they closed at on Friday.

While the strategic rationale for BAC to buy MER is pretty obvious - it weds the biggest retail bank to the biggest retail brokerage firm - what possessed BAC to pony up that sort of price is far from obvious. They could have had LEH for maybe $0.05 a share if they wanted it. If they had waited a week they could have probably picked up MER for $10 a share. I would not be shocked to find out that there was some sort of inducement from the government for them to step up the price, so there would be some "good news" for the markets today.

It also appears that the largest insurance company in the U.S. is now seeking federal protection?

Right - meanwhile, it appears that AIG (NYSE: AIG) turned down capital-raising offers from several private equity firms and is now going hat in hand to the Fed.

Apparently the rule of law means nothing on Wall Street now. There is nothing in the Federal Reserve Act that would allow a non-Depository financial institution that is not even a Primary Dealer (and even that is stretching it big-time - but was the basis the Fed was part of the Bear Stearns [BSC] bailout/shotgun wedding) to have access to the Fed window, and certainly not to the tune of $40 billion which is reportedly what they are looking for.

This is crazy. There is no Fed window anymore. A window implies that it is something that could be open and shut, so that access to it could be controlled. This is no window, it is a gaping hole in the side of the wall. To the extent it is still a window, it is like all the windows of the J.P. Morgan Tower in Houston.

fyi as always!
cheers
Oliver

Knobias Sector Commentary
Tuesday , September 16, 2008 15:59ET

Energy

The Energy sector gapped lower at the open before setting a daily bottom and cutting into the losses for the remainder of the day. AIG and Fed interest rate decisions caused a lot of volatility throughout the session which weighed on investors. Oil prices were also depressed at the open and failed to recover. Large cap oil and gas names were relatively unchanged while small caps were declining most of the day. Equipment and service names were also under pressure as crude prices declined into the close. Even so, the sector rallied in the final hour and sported a gain by the end of the day. Overal, most of the focus was pointed towards the financials and AIG where a decision was looming and could cause additional volatility.

- ATW: Morgan Stanley Starts @ Equal-weight; Sets Tgt @ $54
- OII: Morgan Stanley Starts @ Overweight; Sets Tgt @ $85

Materials

The Materials sector gapped lower at the open and chopped along throughout the day in volatile trade. The Fed's decision on interest rates and the Treasury's decision on AIG weighed on investors and the global market. After setting a low in the first couple of hours, the sector chopped higher and stabilized going into the afternoon hours. In the final hour, the sector rallied to its highest point and finished near that level. Chemical names were marginally higher while metal and miners were lower for the majority of the day. Overall, the focus of investors was the financials and AIG where a decision was looming and could cause additional volatility.

- CPSL: Q4 EPS 15c vs 12c Beats 8c Est
- WPP: Sidoti & Co Cuts to Neutral from Buy
- ASH: Susquehanna Ups to Positive from Neutral; Analyst Notes
- ARA: Raymond James Cuts to Mkt Perform from Outperform
- VCP: Raymond James Cuts to Mkt Perform from Outperform

Industrials

The Industrial sector gapped lower at the open and set its daily low. For the remainder of the session, the sector cut into those losses and briefly traded higher during the morning session. During afternoon trade, the sector stabilized into the Fed's decision. After the announcement of unchanged rates, volatility ensued which saw the sector fall back to the lows and then a spike higher to its best levels. Overall, the focus of investors was the financials and AIG where a decision was looming and could cause additional volatility.

- PLL: Q4 Adj EPS 61c vs 46c Beats 60c Est; Guidance In-Line with Consensus
- LPX: RBC Capital Cuts to Underperform from Sector Perform; Sets Tgt @ $8.5; Analyst Notes
- MAS: UBS Securities Cuts to Sell from Neutral; Sets Tgt @ $15; Analyst Notes
- MDR: UBS Securities Starts @ Buy; Sets Tgt @ $41
- FWLT: UBS Securities Starts @ Buy; Sets Tgt @ $58

Consumer Discretionary

The Consumer Discretionary sector gapped lower at the open before quickly setting a daily low and chopping higher into the lunch hours. Heading into the Fed's interest rate decision, the sector stabilized. After the decision to keep rates unchanged, the sector quickly sold off along with the rest of the market to test those lows. After successfully testing those levels and holding, the sector spiked back to the marginally higher area. General retailers were mostly higher while travel leisure names also sported nice gains. Media names were mostly laggards while airlines were leaders again after oil's decline. Overall, the focus of investors was the financials and AIG where a decision was looming and could cause additional volatility.

- PSS: Caris & Co Keeps @ Above Average; Ups Tgt to $21 vs $18; Analyst Notes
- PSS: Sidoti & Co Ups to Buy from Neutral
- BBY: Q2 EPS 48c vs 55c Misses 57c Est; Guidance In-Line with Consensus
- KIDS: Todd Edebohls Named Chairman of the Board
- JBLU: Argus Ups to Buy from Hold; Analyst Notes
- AXL: Merrill Lynch Ups to Neutral from Underperform

Consumer Staples

The Consumer Staples sector gapped lower at the open and proceeded to chop along in a tight range heading into the Fed's interest rate decision. After the announcement of unchanged rates, the sector quickly sold off and tested lows from earlier. Following the test of those levels, the sector spiked to the best levels of the day, near unchanged levels. Beverages, household goods, and personal goods were all marginally higher. Autos were mostly lower while food producers were split. Overall, the focus of investors was the financials and AIG where a decision was looming and could cause additional volatility.

- FARM: Q4 EPS (28c) vs 9c EPS -396% Y/Y
- DMND: Completes Acquisition of Pop Secret(R) from General Mills
- BHIP: SEC Completes Investigation and Recommends No Enforement Action
- GMCR: To Acquire Tully's Coffee Brand, Wholesale and Supply Chain Business
- KR: Q2 EPS 42c vs 38c Beats 41c Est; Guidance In-Line with Consensus
- GWDC: To Acquire Ellianos Coffee Company with 8 Retail Rranchised Locations
- UL: Merrill Lynch Cuts to Neutral from Buy; Analyst Notes

Health Care

The Healthcare sector gapped lower at the open and chopped along near the opening prices heading into the Fed's interest rate decision. After the announcement of unchanged rates, the sector quickly sold off and reached a new daily but bounced off those lows and reached their best levels of the day. Large cap pharmaceuticals were all mostly lower on the day while biotechs were leaders on the session. The equipment and service side was extremely mixed with large gainers being offset with large decliners. Healthcare providers were laggards while medical supply names offset the losses with gains. Medical device names were mixed with BSX declining on a court ruling. Overall, the focus of investors was the financials and AIG where a decision was looming and could cause additional volatility.

- CADX: Revises Timing of Expected Results for Ph III Trial of Omigard(TM)
- DSCP: Getinge AB to Acquire for $53.00 Per Share
- BSX: Confirms Report of Court Ruling in Favor of J&J
- MNKD: Reports Preliminary Top-Line Results from Phase 3 Trial of Technosphere(R)
- ENDP: UBS Securities Ups to Buy from Neutral
- ARAY: Collaboration w/IMPAC Medical Systems
- GERN: Issuance of U.S. Patent for Cardiomyocytes From Human Embryonic Stem Cells
- SCRX: Completes Pivotal Phase III Program for Glycopyrrolate

Financials

The Financial sector gapped lower at the open as investor fear over capital concerns heightened. Through the morning hours, the sector retraced back to positive territory and closed the gap. After setting a daily high, the sector stabilized heading into the Fed's decision on interest rates. After the announcement of unchanged rates volatility ensued with the sector slipping lower and then quickly spiking higher to test the best levels again. GS reported earnings which were better than expected but somewhat forgotten with the recent situation in LEH and now AIG. Banks, large and small, were leaders on the day and all sported decent gains. Investment banks were split with GS and MS losing ground while MER and SCHW rallied. Other general finance names were marginally higher while insurance names were higher with the exception of AIG. Overall, investors were focused on AIG where a decision was looming and could cause additional volatility.

- BAC: RBC Capital Keeps @ Sector Perform; Ups Tgt to $33 vs $29; Analyst Notes
- GS: Q3 EPS $1.81 vs $6.13 Beats $1.74 Est
- CB: Smith Barney Ups to Buy from Hold; Ups Tgt to $57 vs $56; Analyst Notes
- TRV: Smith Barney Ups to Buy from Hold; Ups Tgt to $51.5 vs $49.5; Analyst Notes
- MER: Goldman Sachs Ups to Neutral from Sell

Information Technology

The Technology sector gapped lower at the open and set a daily bottom. For the rest of the morning session, the sector attempted to recoup those losses and stabilized heading into the Fed's decision on interest rates. After announcing unchanged rates, the sector quickly sold off and tested those earlier lows. Following the successful test of those levels, the sector spiked higher into the close and finished near the unchanged levels for the day. Overall, the focus of investors was the financials and AIG where a decision was looming and could cause additional volatility in the short term.

- CYMI: Caris & Co Keeps @ Average; Cuts Tgt to $27 vs $29; Analyst Notes
- PALM: Avian Starts @ Positive; Sets Tgt @ $9; Analyst Notes
- TSRA: Receives Third Office Action in Patent Reexamination
- PALM: Morgan Joseph Starts @ Buy; Sets Tgt @ $10; Analyst Notes
- ISIL: UBS Securities Cuts to Sell from Neutral; Analyst Notes
- SIRF: UBS Securities Cuts to Sell from Neutral; Analyst Notes
- BRCM: UBS Securities Cuts to Neutral from Buy; Analyst Notes
- ADI: UBS Securities Cuts to Neutral from Buy; Analyst Notes
- MU: UBS Securities Cuts to Neutral from Buy; Analyst Notes
- VSEA: UBS Securities Cuts to Neutral from Buy; Analyst Notes
- LRCX: UBS Securities Cuts to Neutral from Buy; Analyst Notes
- ADBE: Kaufman Bro Ups to Buy from Hold; Sets Tgt @ $47; Analyst Notes
- CNQR: Lazard Freres Starts @ Hold; Analyst Notes
- CA: JP Morgan Ups to Overweight from Neutral; Analyst Notes

Telecommunication Services

The Telecom sector has moved negative today despite a positive move in the overall market. Both Fixed Line and Mobile segments were lower. Newsmakers in the sector included: China Unicom holders approving merger with China Netcom and Vodafone approves 33.5M share buyback. The sector gapped lower at the open but moved to the upside through midday trading and ended the day near its highs.

- ECTX: Successful Implementation of FraudView(R) Platform for Mobile TeleSystems

Utilities

The Utilities sector moved opposite the overall market today and closed to the downside but off its lows of the day. The Electric Utilities segment was mixed with Entergy, Calpine and NRG Energy leading the way to the downside, while Southern Co helped balance some of those losses by moving higher during the session. Gas, Water and Other Utilities were mostly positive with a limited number of companies moving to the downside. Upgrades included Westar Energy and Consolidated Edison, while PG&E was downgraded.

- PCG: Downgraded to Neutral from Buy @ GSCO
- WR: Upgraded to Buy from Neutral @ GSCO
- ED: Upgraded to Neutral from Sell @ GSCO

update part 2:


Markets Finish Higher; Await Gov. Decision on AIG

Tuesday , September 16, 2008 16:13ET

The markets saw extreme volatility with the Dow being down 100, up 100, down 100 and closing at up 120. The volatility and indecision was definitely caused by the Fed's decision on interest rates and speculation regarding AIG's situation. After the Fed announced unchanged rates, the markets sold off and tested earlier lows. After holding those areas, the markets bounced and retraced back into positive territory. Financials were in focus and went from having a large loss to sporting a 5.5% gain. Lehman and Barclays announced a deal which would reportedly save 9k jobs at Lehman. Late in the day, Morgan Stanley announced it would pre-announce earnings for the quarter to thwart the speculation in the name. Even so, the name ended with a loss of 6.2% on the day. Seven of the ten sectors finished with gains while the Staples, Utilities, and Telecom finished lower. Oil mended some of the losses from earlier but still traded lower. Energy names were second only to Financials with an almost 4% gain while Materials also advanced 2%. Ahead, MS will report later this afternoon while others will await the government's decision on AIG. Tomorrow, Housing Starts and the Energy Inventory data will be released in the morning.

TOP STORIES
- Rating Agencies Lower Rating on AIG
- WM: Downgraded by S&P; "Increasing Market Turmoil Contributing to the Downgrade
- LEH: Shares Bounce on Hopes of Barclays Deal
- Fed Accepts $50B in Overnight Repos
- BBY: Q2 EPS 48c vs 55c Misses 57c Est; Guidance In-Line with Consensus
- GS: Q3 EPS $1.81 vs $6.13 Beats $1.74 Est
- AIG: Private Financing Solution is Reportedly Not an Option
- AIG: Person Familiar Says that "They are Cautiously Optimistic a Brige Loan Will Be Done"
- MS: To Preannounce Earnings Later Today

ECONOMIC DATA
- ICSC UBS Store Sales (-1.6% W/W) (+1.3% Y/Y)
- CPI (-0.1% vs -0.1% est) (Core: +0.2% vs +0.2% est)
- Redbook (1.4% Y/Y)
- Housing Market Index (18 vs 17 est)
- Fed Announcement (2:15 ET)

US MARKETS
- Nasdaq (2207.90; +27.99)
- Dow (11,059.02; +141.51)
- S&P 500 (1213.60; +20.90)

COMMODITIES/BONDS
- Crude (92.74; -2.97)
- Gold (781.0; -6.0)
- 2-Year Treasury Note (1.965%)
- 5-Year Treasury Note (2.728%)
- 10-Year Treasury Note (3.526%)

FOREIGN MARKET RECAP
Asia
- Nikkei 225: (11,603.69, -611.07, -5.56%)
- Shanghai Comp: (1,986.64, -93.04, -4.91%)
- Hang Seng: (18,383.83, -969.07, -5.56%)
- Dollar/Yen: (1 Dollar = ¥104.91)

Europe
- DAX: (5,996.25, -67.91, -1.15%)
- FTSE 100: (5,083.40, -120.80, -2.43%)
- CAC 40: (4,134.82, -34.15, -0.83%)
- IBEX 35: (10,974.50, +75.50, +0.68%)
- Euro/Dollar: (1 Euro = $1.42)

from IV board; very informative imho:

Fear, the Fed and Gold
Good evening, today was one for the history books.  I don't think this type of market fear has been present since September 2001.  Yields on the short end of the yield curve collapsed, gold roared and the broader markets tanked.  As many are aware, I was predicting the Fed would cut rates yesterday via reading the market's tea leaves.  The Fed did not cut despite several houses such as Citigroup, Merrill and RBC saying they expected 0.5% Monday.  When the news came down that no rate cut happened I was extremely surprised particularly with the 500 point hair cut the Dow had taken the day before.  All of this action to me is eerily similar to what transpired January.

If you recall, the markets had been falling since the first of the year.  Friday before ML King Day, President Bush unveiled the great Federal give away to stimulate the economy.  There were some grumblings that the Fed needed to cut rates Friday to stem the market slide.  Instead of cutting, I think they were thinking the much advertised stimulus package would be enough to boost the markets.  Well, the stimulus package did not have the desired effect.  That Monday, the US was closed due to the holiday, however, overseas markets began to sell off.  By about 4 AM EST Tuesday morning (I know it well as I was awake and sweating bullets), the Dow futures was down in excess of 1300 points.  Everything was setting up to be a hugely ugly day for the markets.  Then, Big Ben and his merry men at the Fed cut rates significantly.  IMO, with the Administration's demonstrated condescension and ego they figured their give stimulus package  was enough to settle markets and therefore no interest rate action was needed.  However, they grossly miscalculated and the Feds had to act lest a huge market plunge would ensue.

Now fast forward to the present day.  Over a week ago, Fannie and Freddie were nationalized with much fan fare.  The Dow whooped it up at least for a day.  Then later in the week, we saw another Dow rally because it was rumored someone was buying Lehman.  Over the weekend, Lehman failed to find a buyer and it went bankrupt.  But in a fit of confidence building, Bank of America pays a huge premium for a teetering Merrill Lynch.  Monday the market gave the whole thing a big thumbs down with the Dow falling 500 points.  It appeared to me Tuesday that Paulsen and Bernanke were playing good cop/bad cop with their new found love with free markets by letting Lehman fail and pledging no more public funds were to be used for AIG.  Bernanke and his band of fools, IMO, thought that by not cutting rates they could give off the impression the markets were doing so well no rate cuts were needed and therefore, the markets would be fine.  To back this sentiment up, the Dow rallied 250 points.  Oh contraire, the Feds thought they could count on Goldman Sach's and JP Morgan providing AIG sufficient funds to stay solvent.  Like the crooked bunch they are unless they can screw someone else in the process, neither will put a thin dime to help anyone out.  Now, the Feds were forced last night to provide funding that they said they would not do the day prior.  Consequently Paulsen/Bernanke lost more credibility, the market began to realize that the credit crisis is expanding and market participants have gone into a white knuckled panic.  The following charts illustrate the fear and panic in the markets as evidenced by T-Bonds and the broad market indexes:

3-Month US Treasury Yield,
http://stockcharts.com/h-sc/ui?s=$UST3M&p=D&yr=0&mn=4&dy=0&id=p11587232637&a=114917469&listNum=3

6-Month US Treasury Yield,
http://stockcharts.com/h-sc/ui?s=$UST6M&p=D&yr=0&mn=8&dy=0&id=p10581127233&a=151374153&listNum=3

1-Year US Treasury Yield,
http://stockcharts.com/h-sc/ui?s=$UST1Y&p=D&yr=0&mn=8&dy=0&id=p10581127233&a=151374160&listNum=3

10 Year US Treasury Yield,
http://stockcharts.com/h-sc/ui?s=$UST10Y&p=D&yr=0&mn=10&dy=0&id=p30725941107&a=141063444&listNum=3

Dow Jones - Short Term,
http://stockcharts.com/h-sc/ui?s=$INDU&p=D&yr=0&mn=9&dy=0&id=p57065039771&a=135845786&listNum=3

Dow Jones - Medium Term,
http://stockcharts.com/h-sc/ui?s=$INDU&p=W&yr=2&mn=4&dy=0&id=p27573491325&a=143726068&listNum=3

Dow Jones - Long Term,
http://stockcharts.com/h-sc/ui?s=$INDU&p=M&yr=7&mn=0&dy=0&id=p12624099644&a=128643446&listNum=3

Nasdaq,
http://stockcharts.com/h-sc/ui?s=$COMPQ&p=M&yr=6&mn=0&dy=0&id=p47771383276&a=128643093&listNum=3

S&P 500,
http://stockcharts.com/h-sc/ui?s=$SPX&p=M&yr=6&mn=2&dy=0&id=p44699714675&a=128643678&listNum=3

I think the Feds grossly miscalculated and should have cut interest rates yesterday.  The market via the yields on the short term instruments is telling the Fed they need to cut.  Now if they do cut rates it will be clearly illustrated that: 1) They misread the market.  and, 2) Are in a panic to bring back investor confidence.  The markets simply cannot have the broader markets fall into the weekend or it will be a near perfect setup for a Black Monday.  If we do see another 500+ points come off the Dow this week, I think the Fed will have no choice but to cut rates in panic.

Now onto commodities.  Gold perhaps had its best day in over 25 years.  There is an unwritten rule that gold is not allowed to rise 3% in a single day, which has been a brick wall for years.  Today, that was obliterated as shorts lost over $8000 per gold contract.  Gold stocks were not to be denied and rallied strongly although with some hesitancy considering the move.  The following charts are a summary of precious metals, US dollar index, oil and gold stocks.

Gold Futures,
http://stockcharts.com/h-sc/ui?s=$GOLD&p=D&yr=0&mn=8&dy=0&id=p13711263320&a=125323719&listNum=3

Gold Stock Index,
http://stockcharts.com/h-sc/ui?s=$HUI&p=D&yr=0&mn=8&dy=0&id=p20480054136&a=130853106&listNum=3

Oil Futures,
http://stockcharts.com/h-sc/ui?s=$WTIC&p=W&yr=1&mn=10&dy=0&id=p24529265152&a=151246794&listNum=3

Platinum Futures,
http://stockcharts.com/h-sc/ui?s=$PLAT&p=D&yr=0&mn=7&dy=0&id=p47420823100&a=108052216&listNum=3

Silver Futures,
http://stockcharts.com/h-sc/ui?s=$SILVER&p=D&yr=0&mn=5&dy=0&id=p15675868608&a=131179498&listNum=3

US Dollar Index,
http://stockcharts.com/h-sc/ui?s=$USD&p=D&yr=0&mn=8&dy=0&id=p06475580727&a=112138636&listNum=3

The meteoric rise in gold today probably has western Central Banks soiling their shorts (no pun intended).  A counter attack could come tomorrow when London opens.  However, they are likely going to need to goose up the US Dollar in the process, which is a difficult task now it is so over-bought.  I believe the chance for a counter attack on gold increases with the movement in the Dow futures tomorrow.  One thing I found as a truth in the precious metals market; if the dollar falls, gold will rise.  The quickest way for the dollar to fall is if there is any cut in the Fed funds rate.

We have been here before....

In 1907 the failure of the Knickerbocker Trust Company of New York unleashed a perfect storm on financial markets. Complex cross-holdings between banks and inadequate safety margins threatened to bring down the entire financial system. The collapse of two brokerage houses involved in the failed corner of United Copper stock precipitated the crisis. Rumors that Knickerbocker was embroiled in the scheme started a run against the famed trust company, with lines of investors demanding the return of their money. Knickerbocker was forced to close its doors and its president, Charles T. Barney, resigned. He committed suicide shortly afterwards. The panic spread to other banks and trust companies, with depositors queueing to withdraw their savings and banks wary of supporting each other in case of further failures.
The market was saved by the leadership of J.P. Morgan, unofficial head of the New York banking community. There was no Federal Reserve in those days: the panic of 1907 would lead to its formation. Trust companies were particularly vulnerable to a run because they did not enjoy the support of a central clearing house. Morgan conducted a speedy review of the most vulnerable trust companies; his young assistant, Benjamin Strong, at times standing in their vaults counting boxes of securities. They identified which of the trust companies were capable of rescue and those who were beyond redemption. Drawing a line in the sand, Morgan browbeat his fellow bankers into providing a pool of funds to support the Trust Company of America — locking them in his library until they had all agreed to participate. The trust company was saved and the panic abated.
Benjamin Strong later became chairman of the Federal Reserve. If not for his untimely death in October 1928, leaving the Fed without strong leadership, I believe that the worst of the post 1929 banking collapse would have been avoided. More than 10,000 large and small banks eventually failed, precipitating the Great Depression.
What we can learn from 1907 is the need for prompt action to identify the extent of the damage, the courage to make tough "triage" decisions about who should fail and who should be rescued, and strong leadership to force this through. Panic feeds on uncertainty. What the public and banking community need is a clear view of bank exposure to off-balance sheet SIVs — and exposure to counter-party risk in the multi-trillion dollar credit default swaps market. Attempts to sweep this under the carpet are likely to lead to further panics — and unnecessary failures. What we do not need is prevarication from Congress and attempts to postpone any action until after the November election. By then it could be too late.
Immediate steps should include restrictions on short-selling; banning SIVs and forcing banks to sell bad assets at a steep discount into a controlled entity similar to the Resolution Trust Corp., employed to clear up the S&L mess; and forcing all credit default swaps through a central exchange.

Extract from Colin Twiggs diary