by Larry Levin
The bearish data keeps flowing into the market like a constant leak in a rowboat. A shout from the beach can be heard: "Jimmy, make for shore before ye vessel submerges!" Jimmy ignored the warning and stayed out for "one more cast." The market, until today, ignored its warnings too. Will Jimmy and the market make it to shore in time, or will the leak turn the Lilliputian-vessel into the next Titanic?
Whatever gains the indices had been able to claw back this February were erased today. Selling started before the official open when the first bit of bad news hit the tape: weekly unemployment claims are getting worse. The government reported a rise in weekly jobless claims, with those filing for state unemployment benefits rising by 19,000 last week to hit their highest count since late January. "Although the four-week average fell by 1,250, the upward trend in this moving average since the end of last month suggests that labor markets remained weak throughout February," said Lehman Brothers economist Drew Matus.
"The level of claims this week now matches the four-week average recorded at the end of February 2001, immediately before the recession began in March," wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics. I can hear our friend on shore again...“Jimmy, yer vessel...she's takin' on more water!"
The GDP report didn't help equities either. The economy slowed sharply in the fourth quarter, growing at a pathetic 0.6% annual rate, unrevised from last month's estimate. For all of 2007, the economy grew at the weakest pace in 5-years.
“The realization of a weaker economy is starting to hit home," said Kevin Giddis of "Morgan Keegan & Co. Inc.
Mr. Bernanke was on the Hill again today. "We are facing a situation where we have simultaneously a slowdown in the economy, stress in financial markets, and inflation pressures coming from these commodity prices abroad," Bernanke said. He went on to say, "Our current view is that inflation will moderate this year as oil and food prices don't rise as much this year as they did last year." Oh well then, nothing to worry about. Pfheeew, glad that's over.
But wait Ben, didn't you and Sir Greenspin both say the housing problem were "well contained?" Whoa...way off there buddy, unless of course you guys just meant that housing problems were "well contained...ON EARTH." As of yet, mortgage problems haven't reached Mars or Saturn...give it a little time.
Helicopter Ben's speech was a little different today, however, which helped the market go lower. He said he is sure that several small to mid-sized banks will fail due to being heavily involved in the subprime CDO scam. He also noted that he was worried about the "interaction" between the turmoil in the credit markets and the weak economy. The concern is a vicious downward cycle in which the weakening credit market leads to less lending, which leads to slower growth and which further weakens the credit market in turn.
Gold traded near an all time high. Oil closed at a new all time high, trading over $103-barrel for the first time in history. The US dollar was pummeled into the dirt once again. Good thing the Fed and Congress have it all under control.
Our friend calls again, "Jimmy...oh Jimmy can ya hear me? Yer taken on water at a fast clip! Get out of there mate!"
The aforementioned news all came during the day. Oh, but the news keeps on rolling in after the close. Dell reported a 4th-quarter profit that fell 6% from a year ago despite a rise in revenue. Dell was hit with several charges related to acquisitions and restructuring efforts leading to the profit decline. But I can hear it now, "If you exclude this...and ignore that...VOILA, Dell made money."
And who said massive derivative losses were in the rear view window anyhow? AIG (American International Group) reported a considerable $5.29 billion 4th-quarter net loss after the close today. The insurance giant took a gigantic charge related to the estimated market value of credit derivatives, a charge of $11.12-billion.
Now our friend on shore is SCREAMING..."Jimmy! Listen to me. You're going DOWN! Am I too far away...oh crap...I forgot, Jimmy's deaf."
Real Time Trading Signals*for
Trade Date: 2/28/07
E-Mini S&P Trades*
(before fees and commissions):
1) V-A sell @ 8:40am at 1373.75 = +4.00 (1 lot)
2) 80% buy @ 9:35am at 1373.50 = +1.00 & +3.25
3) OTF buy @ 10:00am at 1372.75 = -1.25 (1 lot)
4) OTF sell @ 11:00am at 1367.75 = +3.00 (1 lot)
5) FT sell @ 11:45am at 1369.50 = +1.50 (1 lot)
6) Engf buy @ 12:05pm at 1368.00 = -1.75 (1 lot)
7) Momo sell @ 12:45pm at 1368.00 = -1.00 (1 lot)
8) Engf sell @ 1:05pm at 1367.75 = +1.00 & -.75
9) Momo sell @ 2:45pm at 1370.00 = +1.00 (1 lot )...+10.00 points
E-Mini Russell Trades*
(before fees and commissions):
1) Buy @ 9:55am at 710.0 = -1.3 & -1.3
2) Sell @ 10:20am at 706.1 = +2.4 (1 lot)
3) Sell @ 12:05pm at 705.6 = -.2 (1 lot)
4) Buy @ 12:29pm at 705.4 = +1.0 (1 lot)
5) Buy @ 1:40pm at 708.0 = +2.0 (1 lot)...+$260.00
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