Failed Rally

by Larry Levin

Like the “Little Train That Could,” the market chugged and puffed this morning racing up a big hill saying “I think I can - I think I can - I think I can.” But our little train had a bum car that weighed it down: the Nasdaq. The train never made it to the plateau; it fell back down again saying “What the hell was I thinking? I knew I couldn’t - I knew I couldn’t. Maybe I should quit smoking before I try that hill climbing thing again.” Try as it might, the rally failed again but there’s always tomorrow.

The early rally was due to a drug company merger. “Hurray, M&A deals are here again!” was heard on Wall Street. As mentioned above, the optimism didn’t last long. In the end, investors were unimpressed with Merck’s offer for Schering-Plough. Merck has offered Schering-Plough shareholders $10.50 in cash and just over half of one Merck share for each of their shares, which are a 34% premium to Schering-Plough’s closing price on Friday.

Perhaps investors were upset with Capital One? Capital One Financial became the latest bank to slash its dividend, following JPM, Wells Fargo and others. The lender said it will reduce its payout by 87% to 5 cents to help preserve capital. Although it eventually closed higher, Capital One fell to $7.80, a new 52-week low.

Warren Buffett didn’t help matters much either, adding to the overall downbeat mood when he said on CNBC that the economy had “fallen off a cliff” over the past six months. He noted that consumers have changed their habits in remarkable ways.

There were no major bombshells today folks. No major news; just a general sense of, well, non-optimism and the rally failed.


Previous Day's Trading Room Results:

Trade Date: 3/9/09

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

1) VA sell @ 9:00am at 687.00 = -1.75*2 (2-lot)

2) VA buy @ 9:40am at 686.00 = +1.50 & +2.25 (2-lot)

3) VA buy @ 9:55am at 686.25 = -1.75 (1-lot)

4) IDVA buy @ 11:40am at 682.00 = +.75 (1-lot)

5) TP sell @ 1:00pm at 681.25 = -.75*2 (2-lot)

6) IDVA buy @ 2:50pm at 672.75 = +.50 & +2.25 (2-lot)

7) Algorithm positions (11)...combined SofT and Algo total...+19.25


Electronic (YM) Mini-Dow:


1) Buy @ 10:55am at 6,595 = +7

2) Buy @ 11:55am at 6,624 = -12...-$25.00 net



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