Day of the downgrade

by Larry Levin

Today's first 40-minute range was clearly a sell-off of Friday's late afternoon rally. But why? The opening bell was rung with multiple financial downgrades hitting the tape such as; Capital One Financial, American Express, Discover, Wells Fargo, and Wachovia. Analysts, it seems, believe the consumer will be less confident as the year ages and will be a drag on earnings.

Today's only economic data came from the factory order report that was released at 9am CST. From that point to the NYSE close, today’s trading action could be summed up as follows:

zzzzZZZZZzzzz...ZZZzzzzzzzz...wha?-whas-ZZZzz-wha?...ZZZzzzzzzzzzzzzzz.

The market was devoid of action. It was dead. Those first forty-minutes of the day equated to 75% of the entire range of the day (using the NYSE close) in the S&P futures pit.

There was more news today regarding the monoline insurance companies, but the news didn't clear anything up. The potential "rescue" plan is apparently only concerned with the muni-bond portfolio. Said another way, the rescue funds would not be going to shore up CDO insurance claims.

The reason would-be Sir Galahad's are weary of rescuing the whole portfolio is the unknown. "If we worry that we can get shot from the shadows by something we can't see coming, it is not for us," says the managing director in charge of financial service investments for one of the leading private equity funds. "The financial guarantors pass neither the shadow test nor the ability to understand test." The latter being the most problematic.

Real Time Trading Signals*for

Trade Date: 2/4/07

E-Mini S&P Trades*
(before fees and commissions):


8:31 VA Buy 2.50 = -.75 all

9:32 ID VA Buy 84.50 = +.75, +1.25

9:36 ID VA BUy 84.00 = +.75, +1.50, +2.25

1:40 FT Sell 81.75 = -1.50 all

1:55 ID VA Sell 83.25 = -1.25 all

2:13 OTF Sell 84.75 = -1.25 all

2:36 ID VA Buy 3.50 = +.75, +1.50, +1.00

E-Mini Russell Trades*
(before fees and commissions):



1) Sell @ 8:54am at 723.6 = +.4 & +.7

2) Sell @ 9:35am at 723.2 = -1.2 (1 lot)

3) Buy @ 9:56am at 725.2 = b/e (1 lot)

4) Buy @ 11:01am at 726.1 = -.5 (1 lot)

5) Sell @ 11:33am at 726.0 = +.5 & b/e

6) Sell @ 12:15pm at 726.3 = b/e (1 lot)

7) Sell @ 1:11pm at 725.8 = +.5 & b/e

8) Sell @ 1:58pm at 725.0 = b/e (1 lot)...+$40.00


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