Financials vs. Oil

VS
















by Larry Levin

Today's title bout was not between two Olympic pugilists, but between the financial and oil sectors; the victor would make Mr. Market do its bidding. Oil fell yet again, but news from the financial sector stunk up the joint (yet again) as badly as spoiled milk. The persistently bad news from the financial sector couldn't be ignored today even as oil fell again, which led to profit taking in the Dow and S&P500. Of course tomorrow is another day, and if we try real hard, all the bad news will just go away.

While the financials and oil beat on Mr. Market, he simply used the Muhammad Ali defense: rope-a-dope. Unlike Ali, who would come off the ropes and beat his pugilist adversary into next week (Down goes Frasier, down goes Frasier! comes to mind), Mr. Market fell to the canvass. He succumbed to the beating at approximately 2pm Central, after many a trader had been chewed up during the rope-a-dope marathon.

Taking the market down was an afternoon admission by JP Morgan that it had lost $1.5-billion from housing-related investments since July. Wachovia added another $500-million reserved for a regulatory settlement to its housing related tribulations. And a second-quarter loss of more than $300-million by Swiss banking giant UBS didn't help. Moreover, UBS clients are so upset with management that they are fleeing the bank in droves. Umm, I thought the credit-crisis was over?

Applied Materials, the No. 1 computer-chip equipment maker, posted a lower quarterly profit today as revenue slid 28% to $1.85 billion from $2.56 billion. AMAT says its industry is slumping. It also said net income for its third fiscal quarter fell to $164.8 million, or 12 cents per share, from $473.5 million, or 34 cents per share, a year ago. Sounds pretty bad, doesn't it? Not so much - in Bizarro World. The market is cheering this rotten news with an after hour bid in AMAT shares of 4.44%.

Finally, U.S. economic growth is expected to slow more sharply in the coming months than previously forecast with employers laying off employees into next year, according to a survey released by the Philadelphia Federal Reserve today. Growth in U.S. real output over the next few quarters looks slower now than it did just three months ago, the Philadelphia Fed said on its Web site.

Real Time Trading Signals*for

Trade Date: 8/12/08

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

1) VA buy @ 8:35am at 1299.00 = -1.75 (1 lot)

2) OTF sell @ 10:00am at 1297.25 = -1.75*2

3) 80% buy @ 10:40am at 1299.25 = b/e & -1.25

4) OTF buy @ 11:30am at 1298.00 = b/e*2

5) Algorithm trades (2)...combined total...-6.50


ZB (30 Year Bond) Trades*
(before fees and commissions):

1) Buy @ 8:10am at 116.070 = +5.5 & b/e*2

2) Buy @ 9:41am at 116.140 = -2.5*3...combined total...-2.0


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