SOLD!

by Larry Levin


Stocks were crushed again today due to another wave of bad economic news. Apparently it was just too much to be ignored today as evidenced by the Dow, which closed almost 345.00-points lower. Speaking of waves; whenever somebody attempted to buy today, his order was met with waves of shouts that screamed - SOLD!

The somber news came in early; first with retail sales information, then weekly unemployment claims. Although Wal-Mart sales were better than expected, all specialty retailers were worse than expected. Shoppers are avoiding discretionary items and sticking with the necessities. Said another way, consumers are running out of cash - fast - and that scared The Street.

We also got the weekly unemployment claims data, which showed that the number of workers filing for state unemployment benefits rose by 15,000 to a seasonally adjusted 444,000 for the week ended August 30. This marked the highest level of claims since August 9 and the biggest gain since the week ended July 26.

The four-week moving average of new claims, which smoothes out distortions caused by one-time events such as holidays and weather, fell by 3,250 to stand at 438,000. However, this stood at just 369,000 at the end of May.

In short, the numbers are grim but it is impossible to say just how grim, wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Commodity stocks are still going lower. Many experts are just now coming to grips with something I have said many times in the past: be careful what you wish for. Many of these so-called experts were visibly upset with the rise of commodity stocks and futures because it was sucking money away from their ideas, like the same worn out ideas of buying CSCO, INTC, and mega-cap industrials.

They were hoping commodities would plummet so that things would go back to normal. My thought was if commodities plummet it would be because the BRIC country's ( Brazil , Russia , India & China ) growth were plummeting. And if their growth was plummeting, so would the last thing that held up the market as well as it had: Exports. Caterpillar and Deere, for example, (large exporters of major equipment) were crushed today.

Now that it's plain to see that global growth is slowing, commodities are dropping fast here. However, the so-called exports didn't get their wish: investors did not plow that freed up capital into their beloved sectors. Why would they? The credit crisis is NOT over, and some argue is getting worse. At the moment, it looks to be going into cash. This is exactly what I expected, and is why I said be careful what you wish for.

Now that stocks, commodities, and housing are all falling, one needs to wonder if food & energy inflation will give way to what central fear most - DEFLATION. I believe it's too early to it has shifted, but consider it now on my watch list.

Finally, managing director of PIMCO, Bill Gross, was on CNBC today and made some interesting comments. He was asked if his massive (largest in the world) bond management company would continue buying debt offering of financial firms like Wells Fargo, Lehman, Fannie Mae & Freddie Mac, to wit he categorically said NO. And since PIMCO has been one of the largest buyers in the world of this debt (read: garbage), that was a very serious statement.

He went on to say the government needs to step in and buy this junk, with YOUR TAX DOLLARS of course. So after a little thought, it occurred to be that Mr. Gross was telling the government that if it doesn't buy this new junk, he's taking his marbles and going home - unless. Since he already has MASSIVE investments out there, what he is really saying is I'm not buying more unless my current investments get a BAILOUT!

Real Time Trading Signals*for

Trade Date: 9/4/08

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

1) VA sell @ 8:35am at 1266.50 = b/e (1 lot)

2) OTF sell @ 11:00am at 1252.25 = +2.25 & +6.25

3) FT sell @ 1:25pm at 1241.50 = +1.50 (1 lot)

4) OTF sell @ 2:00pm at 1241.50 = -.50 (1 lot)

5) Algorithm positions (5)...combined total...+13.50

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


1) Buy @ 8:13am at 118.225 = +2.0 & -2.0

2) Sell @ 9:16am at 118.210 = b/e & -3.0...combined total...-3.0


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