A Fresh Start?

by Larry Levin

With the wildest week in memory behind us (maybe of all time?), I can't help but wonder if the mania will continue or the market will get a fresh start. Will there be more forced liquidation and mutual fund redemptions? Will the market be able to put this behind it and look towards economic data? Will it want to?

Friday's new home starts report was poor. As usual, economist's expectations were too rosy as the actual housing starts in the U.S. fell more than forecast in September. Construction of single-family homes plunged to the lowest level in 26 years. Is the real-estate depression getting worse?

Starts of single-family houses dropped to record lows in three of four regions in September, led by a 24% slump in the Midwest , which prompted the following quote. These things are putting a new nail in the housing market's coffin, David Seiders, chief economist at the National Association of Homebuilders, said in an interview on Bloomberg Television. This sort of vicious feedback loop is still in play.

Most of the so-called experts said housing would bottom in 2008, then in early 2009. Since these so-called experts are almost always wrong, I'd guess it's more like 2010. Why wouldn't it be at least 2010? After all, there is still a huge amount of inventory nationwide, so a slowdown in construction starts is actually necessary.

Measures of consumer confidence are another data point to be taken down in these times. Confidence among American consumers fell by the most on record in October; raising the risk that spending will slump as job losses mount and financial markets crash. As I have said before, however, this is not only necessary but a good thing. We need to become a nation of savers, not instant gratification spending junkies.

A few days ago I penned a blog that stated: Recession Is Here. But it's not only here in the U.S. - it's just about everywhere. The following are some recent reports from the North America to Europe; US leading indicators have biggest weekly plunge in 37 years, US leading indicators are at 33-year low, US Consumer sentiment drops most on record to 57.5 from 70.3, the biggest decline since monthly records began in 1978, US big-ticket purchase sentiment slumped to 58.9, the lowest level ever, from 75, Canada Consumer Confidence Drops to 26-Year Low, German investor expectations slumped to minus 63 from minus 41.1 in September, French manufacturing confidence slumped in September to the lowest in 15 years.

If last week's mini-rally continues, look for a pop to 1050 - 1080.00. However, if a hand grenade is lobbed into the market soon, the resulting swoon should take the S&P to 800.00 - 770.00.


Previous Day's Trading Room Results:

Trade Date: 10/17/08

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


1) VA sell @ 8:30am at 925.50 = +3.00 (1 lot)

2) OTF buy @ 10:30am at 942.00 = +2.00 (1 lot)

3) OTF buy @ 1:15pm at 973.50 = -1.75 (1 lot)

4) FT buy @ 1:40pm at 957.25 = -2.00 (1 lot)

5) Algorithm positions (5)...combined total...+6.50

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

1) No trades filled today.



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