Earnings Day

by Larry Levin

Stocks sold off Tuesday as the market came to terms with missed earnings and depressing forecasts. The Nasdaq led the decline with a -4.14% loss. Apple's earning's, however, may be enough to turn the tide. As I pen this missive, the Nasdaq is +1.97% in the after hour session.

There were many stocks weighing on the market today, but a few of the biggies were Caterpillar and Citigroup. Although CAT managed to rack up record sales, it stock price managed to fall 5.1% Tuesday due to much higher material costs. Higher costs led to Caterpillar's 6% decline in profits. The weakness comes from investors looking into 2009 and not liking what they see. As I have said many times before, the housing recovery keeps getting pushed out and now non-residential construction is turning fairly negative. This doesn't scream buy - does it?

The other mega-cap to put a beatin' on the Dow today was Citigroup. By now this shouldn't come as a surprise to anyone: Citi is up to its eyeballs in the toxic slime that is damaging the global banking system. In case one was in denial, Goldman Sachs helped him see the light today. Goldman put Citigroup on its "Conviction Sell List," highlighting that the shares are more expensive than rivals such as Morgan Stanley.

The Goldman analyst that downgraded Citigroup went on to recommend the Banker's Spread: short C and buy MS. Since it will probably be a race to $5 each, it doesn't sound like a great trade. However, I do see Citi winning the race, so who knows?

Texas Instrument outlook was poor, which earned itself a quick downgrade from two analysts. TXN dropped 6.3% today.

But the other news that was reported as often as earnings was that of Kirk Kerkorian. Mr. Kerkorian is a famous investment/takeover billionaire - home grown in the US. A few of his recent (massive) buys were in GM, Ford, and gambling stocks. None have performed well at all.

Since Mr. Kerkorian is a takeover specialist, he doesn't care much for the trend. In fact, one could argue he does look at trends - in order to fade them. After all, you're not going to takeover a strong stock. It must be in weak hands, which can be seen on a very weak chart, like those of the US automakers. However, Mr. Kerkorian is throwing in the towel. Today he announced that he is selling his stake in Ford at a massive loss. Mr. Kerkorian has sold out of GM, which he says netted him a profit.

In total, it is estimated that the 91-yr old investment legend has LOST $21.5-billion this year.

If you gamble everything on black and continue multiplying your stake, keep one thing in mind: it only takes one spin to lose it all. Sadly, the old investor was quoted today as saying - Maybe I lived one year too long.


Previous Day's Trading Room Results:

Trade Date: 10/21/08

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


1) VA sell @ 8:30am at 972.50 = +2.00 (1 lot)

2) OTF buy @ 9:55am at 973.25 = +3.00 (1 lot)

3) Engf sell @ 11:10am at 960.50 = +1.00 (1 lot)

4) Algorithm positions (6)...combined total...+1.25

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


1) No trades filled today.



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