Ben's Helicopter is Still Humming

by Larry Levin

Helicopter Ben is still throwing dollar bills from his helo. He probably has a nice view of us here in "fly over" country. Although he persuaded the majority to vote for another rate cut today, he may be losing his grip. Two voting members of the FOMC voted to stop turning the US currency into toilet paper. These members didn't vote to increase rates, but they broke from the majority - believing the FOMC should have held steady.

I have been saying for quite some time now that the S&P would rally to 1400.00 - 1410.00, but the question would then be - what does the market do for an encore? Is today's high of 1407.00 in the mini-S&P a top? Only time will tell. However, there are few things more dangerous on Wall Street than the combination of vast consensus and rampant optimism. Does NASDAQ circa 2000 "it's a new paradigm" ring any bells? How about the more recent "housing prices only go up?" Both assertions were equally absurd, yet everyone believed it. But that seems to be the case with how the Street is viewing the Fed's move on interest rates: either a cut or a pause is great for stocks.

"There's still a bias toward easing at the next two meetings," former Fed governor Laurence Meyer told CNBC. Hmmm, that's not how the Street sees it. Mr. Lawrence, does that mean the economy is so weak it needs more stimulus? Only time will tell.

I failed to mention Citigroup's recent dilution of shareholder value. Excuse me, I meant "great" sale of $4.5-billion common stock. Just a week or so ago Citigroup said it didn't need to raise new capital. So what gives? Citigroup says it's just rebuilding its capital, which could be all there is. However, my first reaction was - "Oh boy, they're doing this because another big write-down is coming." If the latter is true, at least you won't be surprised.

Today's early rally was led by GM's "fantastic" quarterly earnings report. Ummm, maybe it shouldn't be called an "earning" report since the company didn't earn on red-cent - it LOST $3.25-BILLION. For this incredibly bad performance the stock traded up 13.2% early in the day. How can this be? Easy...it could have been worse.

I pulled up GM's stock chart expecting this massive rally to have come off a beaten down low. Alas, that wasn't the case. Yesterday's close was $21.20-share, which is almost exactly where it was one quarter ago. If the "experts" (and I use that term loosely) are expecting a colossal loss of around $6-billion, why wouldn't the share price be lower than last quarter's price? Isn't the market a forward looking mechanism? GM's price did trade as low as $17.47 and rallied to $21.20...so wasn't the better than expected loss "priced in?" Sorry, what was I thinking…only bad news is "priced in."

"The market continues its retesting of recent highs with Proctor & Gamble and GM numbers leading the way -- things are weak, but it's an expectations game; corporate earnings are sluggish, but people are buying stocks on the belief the worst is over," said Peter Boockvar, equity strategist at Miller Tabak. "That's what bear-market rallies are all about, hopes and wishes the worst is over."

And if Pollyanna wishes and hopes real hard...she just might get a 1450.00 S&P!

Real Time Trading Signals*for

Trade Date: 4/30/08

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

1) VA sell @ 8:35am at 1395.50 = -.75 (1 lot)

2) PP sell @ 8:45am at 1397.00 = b/e (1 lot)

3) VA buy @ 8:55am at 1395.50 = -1.00 (1 lot)

4) 80% sell @ 9:35am at 1396.50 = +.50 (1 lot)

5) FT buy @ 10:45am at 1397.50 = +1.00 (1 lot)

6) OTF buy @ 11:15am at 1397.25 = +.50 (1 lot)

7) FT buy @ 1:25pm at 1400.00 = b/e (1 lot)

8) VA sell @ 2:40pm at 1389.25 = b/e (1 lot)

9) Algorithm trades (1)...combined total...-1.00

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

1) Sell @ 12:18pm at 724.8 = +.4 (1 lot)

2) Buy @ 1:50pm at 721.8 = b/e (1 lot)

3) Sell @ 2:09pm at 717.1 = +2.0 (1 lot)

4) Sell @ 2:43pm at 715.7 = +.4 (1 lot)...+$280


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