The Market Ticker

Pretty wild chart here.



Gee guys, can you spell "trapped"?

They just can't make a convincing run at it, can they? The RSI is back in "overbought" territory, acquisition/disposition was almost flat today (after reversing up yesterday) and the MACD hit on an impending crossover and flattened. Stochastics are just short of flashing a "buy".

In other words, the market doesn't know which way it wants to go, but its out of room to maneuver. So, just as with yesterday, the vise tightens further, and the break - when it comes - is getting wound up tighter and tighter.

Tomorrow has a fairly high probability of being the deciding day. If not, next week we simply run out of room. Whichever way it breaks, that's the way you trade it - but beware of a break to the downside - remember, you need to break support for it to be convincing. I've put two support lines on the graph - the first is outside of the wedge (just barely) and the far more significant one is at the 50 and 100DMA. The third is the obvious one - its at the February Lows, and is also roughly at the 200DMA.

A violation of the first is technical confirmation - but may not hold the trend. A break to the 50 and 100, but one which fails to penetrate and then reverses, may be a buying opportunity - that's right in the middle of that gap, and would qualify.

But a break below the 200 is very, very bad. If we get that, look out below!

A strong and convincing run above the channel on strong volume and with strong internals voids the pattern for now. I'm going to be tough to convince that anything other than an explosive breakout is "real" however - the MACD and RSI are both in "stupid" territory on the upside, and while a market can remain there for a long period of time the MACD in particular hasn't seen this sort of level since late '03 and right at the turn of the year into '04! A weak "push" above the wedge could easily be a sucker punch in wait.

Ok, on to more fundamental things.

Chavez rattled his saber some more today. This man is a true nutball but he's now threatening the Venezuelan steel and banking industries! He's also taken over their oil industry. This is bad simply because we buy a lot of our oil from him, and having it pinched off would hurt instantly and deeply. With the market as tight as it is he can also find other customers for his oil, which doesn't help our case.

International Paper made a profit, but only on asset sales. Revenue was down. What do they make? Duh. Why less paper products? Gee, you think that might have something to do with business?

A Dutch court froze the sale of LaSalle Bank, threatening the ABN/HSBC bank deal. I'm having trouble finding out exactly how much leverage is wound up in this one; being that its outside the US its a bit tough to get my arms around it. I don't think this deal blowing up creates an "exogenous" event....... I'd love to be able to say that with certainty, but I can't.

In the US, The Senate had legislation introduced today to force lenders to assess mortgagees ability to pay before granting mortgages (gee, responsible underwriting?) The House is trying to increase the maximum agency loan amount (dumb) and lowers down payment requirements (dumber). Finally, the Fed announced that it will hold a public hearing on potential regulations (which do not require Congressional approval) to tighten oversight. Most importantly, the Fed can impose regulations on other than banks, which many people do not realize. The Senate Bill and Fed moves sound good - the House is another matter. Agency requirements are stupid loose now - if anything, they need to go the other way.

UBS reported lower earnings amid what smells like a blowup in their credit hedgie Dillon Read. Ok, "blowup" might be a bit strong. But certainly, they had a little problem with a bad bet or three.

If you didn't have enough evidence that the economy is slowing and consumer spending power is drying up, you might want to read this little ditty..... gee, do you believe this is a trend yet or what? Target, WalMart, a bunch of "working class" restaurants, and now Sears/K-Mart.

Oh, and finally, this - now we've got the lawsuit gravy train starting up. I have severely mixed feelings about this. To the extent that borrowers were intentionally misled, I support it.

But to the extent that the borrower was a party to the fraud, its a different matter. And since essentially all of this will turn on "he said, she said" when it comes down to what was talked about between the broker and borrower, I'm having trouble swallowing it.......

One "gotcha" to pay close attention to - bond ratings and prices (corporate paper, especially of mortgage lenders and related.) It looks like the downgrades are either starting or about to. There are rumblings all over the street about it; if that does get going fast and furious, it will precipitate serious problems with corporate liquidity - exactly the short of exogenous event that can break the back of a Bull Run.

Oh yeah - the Canary. He's being chased by the Cat. So far, he's getting away....... so far.....

More if anything interesting comes up this evening.....

You have to wonder.

First up is of course the 900lb Gorilla, GM, who reported earnings. To say that this report was bad would be the understatement of the quarter. Not only were the firm's North American auto sales bad but their mortgage unit lost a billion dollars. That's with a "b". Gee, is that good? Guess not - but the most recent bid is only down 24 cents premarket. Oh, they weren't the only one - BMW's profit fell 38% last quarter.

Next, we have one of my favorite whipping boys, Countrywide. The man-with-the-ugly-suits-and-ties has decided to take a pay cut. I suppose after you've siphoned off a half billion in compensation over the last few years, you can afford to slow down a bit. Somewhere in there is the real story - that corporate boardrooms remain incredible dens of inequity, blackmail and stupidity, allowed to continue only because stockholders have about as much of an attention span as a classroom full of sugar-spazzed 4 year olds.

Oh, and it doesn't stop there. Last night DowJones posted a new story about a "summit" on The Hill at which Mr. Dodd, among others, asked lenders to agree to a "principles". Among the companies that said "go screw Mr. Dodd"? Countrywide. Notably, Wells Fargo also was included in the "bite me" list. Hmmmm...

Curiously, about three hours later, the story was updated - with the only material change being that the statement that Countrywide and Wells Fargo had refused to sign on disappeared from the updated release!

One has to wonder exactly why "naming names" suddenly became unpopular. Note that there was no correction - so it is logical to assume that the original report wasn't an error.

Non-farm productivity up 1.7%, revised up. Unit labor costs plunged - up 0.6%. Jobless claims down a bit. Minor bounce on the futures, but the big number is tomorrow.

More than 10 seconds of thought explains this one. Business is poor, so The Boss squeezes the employees. Either put out more for the same wage or........ "You're FIRED!" Yep. Not hard to figure this one out. Is this is a good number? I don't know - it might hold. After all, if you're the employee under that jackboot and you quit, can you get another job? That's really the kicker.

Bond investors are starting to get upset. Why? Well, some of them are getting very nervous about this whole "mortgage mess." As well they should. This whole rating agency thing is starting to stink like dead fish. The guys who pay for this service are of course the issuers, and Countrywide made clear that it is trying to "convince" ratings agencies to see things their way (said on their conference call.) Yee who pays the piper usually calls the tune, and that's not so good when the guy doing the buying is the one who wants to be protected here. I'm not quite sure there is a fix for this - deal flow is pretty much everything to the ratings guys as well...... when a market gets to "the more you do, the more you make", and that's the only thing that matters, inevitably a good number of bad deals will get done.

Finally, to finish this morning off we have two more articles illustrating the depravity of the banking industry in stark relief. First we have The Quams, who without argument should have never been offered their mortgage.

And to close it off, we have companies that want to loan money to lawbreakers. And they're not little banks either. JP Morgan, Citigroup, Fifth Third and Wells Fargo.

I think we need to start locking up some bank executives for this last one.

What's next? Special loan programs for crack dealers? After all, they make a lot of money, don't they? They certainly should be able to afford that house - up until they get busted, that is.

Enjoy today - look like we're headed for a mixed open. The market still feels darn frothy, and as noted last night, we're right up against the top of the channels. I wouldn't be surprised at all to see a sideways market today, waiting for the economic data tomorrow morning.

Have a profitable day!