April Fools - Got Ya!

by Larry Levin

I'm guessing there were thousands of traders scratching their heads today wondering when the financial news programs were going to say, "The market isn't really up over 300-points on the Dow, we filmed this program yesterday. It's all made up. After all, another $23-BILLION loss was recorded by two banks today. Hah, hah, April Fools - GOT YA!"

That certainly didn't happen; it was a real advance to be sure. The buying was non-stop from the open, with heavy volume to boot. The reasons given were ludicrous but what does it matter, there was a fierce trend...UP...and I followed it. I hope you did as well. Every trade I made today was a buy, which is only said to show you that no matter what the fundamentals are (and they're getting worse) you should follow the trend.

This morning’s first bit of "bullish" news was a NEW write-down of $19-billion from UBS, a European mega-bank. The next bit of "good" news was a $4-billion write-down from Deutsche Bank. Wow, that's positive stuff indeed and investors went with it - surely tapping one of their many HELOCs to drive the market higher.

Wait a second, we have been told the write downs were over. On March 13, Standard & Poor's issued a report suggesting that banks would eventually write down $285 billion in mortgage-related securities. "The positive news is that, in our opinion, the global financial sector appears to have already disclosed the majority of valuation write-downs of subprime." The market rallied on that announcement.

But here we are - looking at another $23-billion loss. Prior to today, approximately $170-billion of mortgage related losses had been written down. So if they're still coming out, how could this be bullish? "We're closer to the end," they told each other today as money managers bought with both hands.

Or are we closer to the end? Goldman Sachs estimates the write-downs will total $400 to $500-billion, which means we're a far cry from the end. And wouldn't you trust GS before S&P, since the latter proved it has no standards for grading subprime debt? Oh but what does that matter? The market needed to stretch its legs and get closer to my 1400.00 - 1410.00 targets.

The other news that was spun was today's ISM data. The report was released at 9am CST this morning at 48.6, which is amazingly better than last month's 48.3 reading.

Oh, you mean that's not amazingly better? Hmmm, that sure is how it was spun. Readings below 50 indicate contraction and the sector has been below 50 for three of the past four months. This would seem terrible, but I guess we're shelving that for another day.

"The details are a bit less encouraging than the headline," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. Mr. Shepherdson doesn't know the secret - details only matter when they are bullish.

Leading (forward looking) components of the index were weak in March, he noted. March new-orders index fell to 46.5% in March from 49.1% in February, the ISM's data showed. The production index fell to 48.7% from 50.7% in the previous month.

The Commerce Dept. reported this morning that U.S. construction spending fell for at least the fifth straight month in February.

Auto manufacturers announced horrible sales data today. Ford's sales fell 14.3% from a year ago, while GM's sales fell 19.0%. Ford closed up +4.4% and GM +5.8%.

Does any of this sound great? Or does it sound more like a scene from South Park where Officer Barbrady stands in front of a burning plane crash with his hands out saying, "Move along people. There's nothing to see here!"

A few commodities were routed again today and Bob Pisani on CNBC loved it. He called it "The Great Unwind" and said the NYSE traders thought it was great. They hoped it continued and slammed all commodities as low as possible. What they're advocating is that the longs in commodities, whether they are funds or individuals, get crushed - financially. Will the Fed bailout the commodity investors as well? That's doubtful. But what made me laugh today was that if there was even a whiff of a "Great Unwind" in equities; those same people would be at the door of the Fed, pitchforks & burning torches in hand, demanding another handout. What's good for them, apparently, isn't good for everybody.

Real Time Trading Signals*for

Trade Date: 4/1/08

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


1) B/away buy @ 8:35am at 1340.00 = +1.75 (1 lot)

2) Engf buy @ 8:55am at 1342.50 = +2.00 (1 lot)

3) OTF buy @ 10:30am at 1352.00 = b/e (1 lot)

4) Engf buy @ 10:50am at 1353.00 = +4.00 (1 lot)

5) FT buy @ 12:35pm at 1360.50 = -2.00 (1 lot)

6) FT buy @ 2:35pm at 1362.75 = +1.00 (1 lot)...+6.75

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


1) Buy @ 9:09am at 698.5 = b/e (1 lot)

2) Buy @ 9:22am at 699.5 = b/e (1 lot)

3) Buy @ 12:55pm at 703.3 = +.2 (1 lot)

4) Buy @ 1:29pm at 704.1 = +.5 & +2.4...+$310


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