Testy Tuesday

So this morning dawns to a huge futures ramp at 7 ET.

Well, ok, let's be concise. A gold ramp, a silver ramp, a dollar dump AND a futures ramp.

Just amazing. Even more so is the pretty parabola in GOOG's share price. Of course nobody's paying attention to the updated forecasts for Grinchmas coming out, all predicting far weaker sales than just a month ago.

I wonder why? You don't think the cut-off of the $5 trillion in fraudulently pumped home "appreciation" might have something to do with that, do you?

IndyMac Bank (IMB) reported a loss five times that of estimates. Wow. Trading premarket at $11.

Yet "big tech" fiddles along. How?

The odds are shifting once again, this time towards a potential blow-off rotation into the Nasdaq "final 3" + anything that has the word "solar" in it. Amazon has been thrown under the bus.

Deteriorating internals and narrowing leadership is never good for The Bull's case, but The Sheep don't look at the internals of the market and how sucky they are. They just look at the index numbers, so if you find a few stocks that comprise, oh, 20% of the index......

But what happens when they start to crack, one by one?

Oh, and don't look at the yield on the 10. You will be.... uh.... unhappy. As in bonds being sold off unhappy. With the Futures up, this smells like people bailing on equities and headed into metals.

That's spelled "FEAR" guys and gals.

Justified? Don't know. Surprising? Not to me.

For more on that, look at the EFF - effective Fed Funds. Stealth ease? Hmmm.... or refusal to defend your own targets? Either way, real rates are trading materially below target. So - does The Fed follow (and do an intermeeting cut, which is going to freak people out), or are they going to start aggressively draining liquidity?

And why is the EFF so low? Think supply and demand. No demand for bank credit... hmmm.... that'd be a problem right? Commercial credit demand falling off a cliff? Or inability to qualify?

Heh, isn't deterioration of credit quality what I've been talking about?

ICSC came in up 1% after two disastrous weeks in a row, while Redbook came in with further deterioration at -0.4% (from -0.3%). Weak overall is the best you can say when it comes to retail.

What percentage of our GDP is consumer spending again? Its 70%, isn't it?

The crack spread is starting to widen out a bit again, and gas prices are ramping. Wait until gas catches up with crude. $4/gallon is basically assured by Grinchmas.

Now add to this that Capital One (COF) suddenly blew up this afternoon with an announcement of bigger than expected write-offs and took a cliff-dive intraday to the tune of nearly $2, or 3.5%, in seconds. Uh, that's consumer credit guys and dolls. As in credit cards? You know, the fuel that powers spending for Grinchmas?

Oh oh....

But wait a second? Didn't they already report?

Indeed.

But the 10Qs have not been filed yet. And those are documents, and potential SarBox deathtraps.

Betcha this doesn't stop with Capital One!

We got a massive Hindy today - extreme elevations on New Highs and New Lows. Last time we got both this high (just before the August blowup) we were sitting on the cusp of a plunge......

Morgan Stanley downgraded the entire retail sector, saying that 07/08 estimates are too high, with the key issue being margins. No, really? You mean that the dollar going in the tank makes imports more expensive, and gee, where do we get all those clothes from that people sew for 25 cents/day? That'd be overseas, no?

Yoo hoo! Mr. Market!

Margins are being compressed and consumer demand is softening!

And today, although I don't have a link for it yet, word on the street was that S&P cut Q4 earnings estimates on the S&P to a gain of 6.9%.

Let's remember:

The market's premise for the recovery off August's lows was that we would have 10%+ earnings growth in Q4 and for all of 2008. That would put the P/E/G ratio at the top of the historical band near 1.5 for the entire market.

Now it is over 2 on forward estimates and the trend is horrifying; Q3 now looks to be radically negative in the 4-5% range, when just a couple of weeks ago it was forecast to be flat!

What does margin compression mean for P/Es and thus "reasonable" equity market prices?

Yeah.

Oh, and what's on the wire at CNBS - again?
"The market is clamoring for another rate cut."

More temper tantrums. I guess the dollar looking like this doesn't bother the pigmen eh?



Hope you like $5/gallon gasoline, because my $4 target is increasingly looking like you will be wishing you could buy it for that.

Yet we still don't have those 10,000 or 100,000 signatures on The Petition.

Maybe I need to go diving instead of writing tickers.... after all, its clear that people still ain't getting it.....just remember, I called the "putback" of fraudulently-originated mortgages six months ago.

Care to bet against me on the sky-high gas prices?

Oh hell, just bet against GM. They announced a whopper of a writedown after the close.

That ought to throw a bit of cold water on the Bull's case tomorrow.

Now add these two things - Plosser's comments this afternoon (Fed Governor) indicate that there are multiple governors opposed to further cuts in December, and Australia just raised rates. If the ECB does as well this will essentially force Bennie to defend their current rate and drain liquidity, which will have really bad effects.

Finally, consumer confidence (ABC) came in at -15. Booya.

Here's your technical!