Who ordered the Chop-Suey?

by Larry Levin



Before the CME's version of S&P pugilism began in the pit, I sat down for a big breakfast, ordering an artery clogging steak and eggs. Mmmmmmm, steak & eggs. When my head was turned, however, a plate of cold chop-suey was plopped on the table. What the...? Other than a 15-minunte pop this morning and a 40-minute decline in the afternoon, the market was quite choppy...chop-suey if you like.

Why was there an absence of trend today? It was surely do to more bad economic news and Wall Street's refusal to trade it. Wall Street wants a higher market and therefore will not sell into this rally...yet. This could be a case where The Street is waiting to unload shares to a multitude of suckers at a higher price, perhaps the levels I mentioned in yesterday,s missive. The longer the market refuses to drop on the bad news, however, brings us closer to an eventual bullish report. And if that happens, the Street will be able to say, "See - we told you so."

So what was ignored today you are wondering? In yet another sign that the economy is slowing (as if you needed one) demand for durable goods plummeted in January and December's durable goods data was revised lower. Although economists were expecting a bad number, January came in a pathetic -5.3%...even worse than the low expectations. December's revision lopped 12% off of December's original report.

Orders for transportation goods fell 13.4%, led by a 30.5% drop in civilian aircraft orders and a 32.6% drop in defense aircraft. Orders for motor vehicles fell 0.8%. Shipments of transportation goods rose 2.8%. Orders for electronics (excluding semiconductors) fell 2.7%, including an 11.7% drop in orders for computers. Shipments of electronics (including semiconductors) rose 7.1%. Orders for machinery fell 1.5%. Shipments fell 1.7%. Orders for finished metals fell 4.1%. Orders for electrical equipment rose 1.4%.

Overall this is a bad report indeed; however, a lot of the weakness is due to aircraft data. Although a major decline in aircraft orders is considered temporary, it is still a disturbing development that came at a bad time.

In a separate report, the Commerce Department said new-home sales fell 2.8% last month despite a record 15% drop in prices over the past year. So who is right - those who say, "That's already priced in," or those that say, "The bottom in housing is not in"...I wonder?

The big news of the day was not Bernanke's Q&A session with Congress. He said what Congress and Wall Street wanted to hear: "The economy is a little cold; while inflation is a little hot so on balance we're just fine." That's my interpretation of what he said anyway. In essence he will keep slashing rates, while simultaneously fanning the flames of inflation and stealing all of your savings.

No, today's news that popped the market was a surprise announcement from Ambac (again)...just kidding...from OFHEO. The Office of Federal Housing Enterprise Oversight lifted restrictions on Freddie Mac and Fannie Mae, allowing them to buy more mortgages. This should add liquidity to the mortgage market and is seen as a positive development in the worst sector of the economy.

This news came the same day Fannie Mae reported a $3.6 billion loss for the fourth quarter and a $2.05 billion loss for 2007, citing the continuing drag in the housing and mortgage markets and disruptions in the credit markets. Is it funny or tragic that these companies lost insane amounts of money in the mortgage business...then cite a "drag in the housing and mortgage markets and disruptions in the credit markets" as the reason for their losses...then the government oversight agency says "Well done!" and encourages them to wade deeper into the cesspool? When I remind you these firms have firmly implied:

"Government support" for losses, the answer is tragic. That's your tax dollars we're talking about.

And I suppose the OFHEO announcement the on same day FNM unveiled huge losses were just a coincidence - right? That didn't, ummm, shield the government sponsored agency from taking a beating in the market today - did it? Naaaaah, just a coincidence.

And I suppose this also isn't a veiled attempt to help (once again) Wall Street banks is it? If they can (I don’t have all the legalities memorized) the big banks will unload as many toxic loans on its balance sheet to the government sponsored institutions ASAP. Do you think Congress cares if you get screwed via tax hikes to pay for Wall Street's sins? After all, it's an election year...and your elected buffoon feels he/she "has to do something." Whether it actually works is irrelevant; it makes them feel warm and fuzzy inside.

Real Time Trading Signals*for

Trade Date: 2/27/07

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



1) PP sell @ 8:45am at 1378.00 = +1.25 & b/e

2) Engf sell @ 9:15am at 1378.25 = -2.00 & -2.00

3) PP sell @ 9:40am at 1378.50 = -1.75 & -1.75

4) OTF buy @ 10:30pm at 1384.50 = +1.00 & b/e

5) OTF buy @ 12:30pm at 1385.50 = -2.00 & -2.00

6) FT buy @ 12:45pm at 1381.50 = b/e (1 lot)

7) FT sell @ 1:55pm at 1380.50 = -2.00 & -2.00

8) Engf buy @ 2:15pm at 1380.00 = +2.00 & +3.00...-8.25 points

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


1) Buy @ 9:57am at 721.7 = -1.2 & -1.2

2) Buy @ 10:11am at 719.8 = b/e (1 lot)

3) Buy @ 10:25am at 721.3 = b/e & -1.1

4) Buy @ 10:45am at 720.0 = b/e (1 lot)

5) Buy @ 11:00am at 720.6 = b/e (1 lot)

6) Buy @ 11:15am at 721.5 = -.7 & -.7...-$490.00


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