Support

by Larry Levin

Yesterday I mentioned that this morning's open could be wild, but it was thinking more like a large swoon or gap lower followed by a sharp rally. There were sharp moves alright, but it was more like the vivisection of one's account rather than large fast moves. The first 70-minutes of the day were so unbelievably choppy, you would have to experience to understand how bad it really was.

Eventually the S&P500 dropped below our critical 873.00 support level but with the help of a 10-YR Note auction, the market was able to rally. In fact, it closed above that level. With this close, we may see an attempted pop tomorrow.

I read an interesting piece today on loan defaults in the US and Canada by Ian Mathias. I hope you enjoy it.

The number of U.S. consumer loans in default has hit a record high, reports the American Bankers Association. The ABA just polished off its first-quarter delinquency report (little late on that one, fellas) and revealed some disturbing results: Of all the consumer loans in America, 3.23% are more than 30 days in arrears. That's the highest level since at least 1970, when the ABA started keeping track.

Of course, it's no shocker that things got tough in the first quarter. But what of the most recent three-month stint, during the best of the sucker rally? "The No. 1 driver of delinquencies is job loss," hints ABA's chief economist, James Chessen. "When people lose their jobs, they can't pay their bills. Delinquencies won't improve until companies start hiring again and we see a significant economic turnaround."

So practically no one expects the unemployment rate to stop its accent until at least 2010. And just as many are willing to admit there are boatloads of souring loans still on bank balance sheets. Hmmm....

While certainly better off than the U.S., Canada could face a consumer debt crisis of its own, reports the Bank of Canada. In its biannual Financial System Review, the BoC said yesterday that "There has been a further deterioration in the financial position of the Canadian household sector." The average ratio of debt to income has hit a record level for Canadians... household debt there is averages roughly 140% of disposable income. Here in I.O.U.S.A., it's closer to 170%. Suffice to say neither ratio is desirable.


Previous Day's Trading Room Results:

Trade Date: 7/8/09

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

1) Engf buy @ 1:40pm at 867.75 = +1.75 (1 lot)

2) Algorithm positions (4)

3) "Reading the Tape" positions (2) ...combined Secret's, Algo, & "Reading the Tape" total...-4.50


Electronic (YM) Mini-Dow:

1) None today



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