Just gotta lead with that title, in honor of Countrywide who put out an 8K in the wee hours of the morning which claimed that the firm is fine and has lots of liquidity.

Only one small fly in the ointment - the date on that data, if I read it right (and I might not have!) is June 30th.

Uh, when did these credit market seize-ups start again?

The swap market didn't like it, driving the swap prices up another 30%, essentially doubling the swap premium since Thursday.

Bear Stearns' chief of equity and fixed market trading Warren Spector resigned (does it still count as a resignation if the board is about to fire you if you don't?) and AHM formally filed for bankruptcy.

David Faber on CNBC was hilarious this morning. "Don't talk, and if you do, lie!" in reference to Bear Stearns and their conference call Friday.

Uh, David. Remember Sarbanes-Oxley? What happens when you lie nowdays? I presume you don't like SOX, but frankly, I think its a good thing. You have the choice to keep your mouth shut but if you speak, it had better be the truth.

The roaching is coming fast and hard in anything that has the word "financial", "mortgage" or "home" in its name or business plan. No mercy. At all. It is truly getting insane to the point of me starting to wonder if it really is as bad as the market seems to think it is.

Of course there are a lot of loans that should have never been made, and there will be bankruptcies. In all probability a lot of the builders will not make it, and the non-bank mortgage companies all look to be toast, with many of those who are really "non-bank" mortgage companies who created thrifts (or banks) to put a "face" on their real operation included in that bunch.

I took my own medicine this morning and set trailing stops on top of all my shorts; had one hit today (MTG) at a bountiful profit. There may be more there and there may not, but I'm done with it for now. Bears, bulls, and pigs. Giving those gains back is not something I'm willing to do.

In general markets don't go straight down (or up), of course. But it sure does feel like it about now, doesn't it?

The internals once again suck, although the divergences are amusing. At 11:00 ET the Dow A/D line is 18:13, with up volume about 1.5:1 to down but money flows are negative at 1.5:1! So the names being sold off are being sold with a vengeance, while the buying is on lighter volume. Not positive - at all.

The S&P is negative across the board with capital flows on the downside insanely high at 4:1, far weaker than the A/D line suggests (which is running 5:7).

The Nasdaq 100 has a similar horror show internally, which has a flat A/D line but an awful capital flow number at 1:2.

The New High/Low numbers are as awful as the internals suggest, with just EIGHT new highs on the NYSE at this hour and 494 new lows! Aieeee! I'll update this with the close, of course.... but this suggests that we should not expect a "good" market for the rest of the day.

In the "What Are You Thinking?" department, Cerberus has tapped Nardelli to head Chrysler. The same Robert Nardelli who made a mess of Home Depot. Yeah. Nice compensation package too. I guess this is the perquisite of being privately held - you don't give a damn what the street thinks - but if he's as good with Chrysler as he was with Home Depot, I predict much pain for Cerberus down the road.....

So what the hell was that huge pop midday, nearly parabolic for a bit?

Short-covering. Booking profits never hurt you and a whole bunch of people did exactly that midday today. I had essentially all my trailing stops taken out, but waited for the pop to subside and then shorted on the turn again in a couple of them. Its probably good to clear the board out some - it was getting crowded and harder to manage than I'd like. I'm likely to take almost everything off before the Fed though; while I rate the risk of a surprise cut very low, if it happens and you're short, you're going to get murdered, at least until the implication - that there's a recession looming - sinks in. Some of that might have been done today in an attempt to "front run" it a bit, but it looks like it got out of hand (as these sorts of things usually do.)

Of course if you're fleet-footed and have a high degree of appetite for risk, that can also spell opportunity.

National City said they were suspending apps on HELOCs:

"MarketWatch obtained a copy of the e-mail. The decision to stop taking loan applications is nationwide, Jeff Thomas, an account executive at National City Home Equity, said in an interview on Monday"

Is that good?

CNBC reported that Aegis also suspending funding today; they're partially held by Cerberus. Marketwatch confirms:

"Aegis Mortgage Corp., a mortgage lender that's part-owned by private-equity firm Cerberus, suspended all loan originations on Monday. Aegis also is unable to fund home loans that are already in its pipeline, spokeswoman Pat Wente said."

Oops.

So let me see if I got this right. We're now having lenders go out of business by the day and pull programs by the hour, we've got breadth that looks like something out of Rocky Horror Picture Show and the Dow is up nearly 200 points into the last hour of trading.

Oh, there's no "Put" under the market, right?

Psst - guys - the LBO window is closed. The homeowner MEW window is closed. Lenders are falling over like flies caught in a spray of RAID, spewing their employees out of the labor force (that's called "unemployment".) We have consumers hitting the plastic and the numbers are black and burned off.

Oh, and the internals snap-reversed on the money flows going into the afternoon.

Do I believe this thing has legs? Not for a second.

But this is an illustration of why money management is so critically important. If you got caught bad on the wrong side of this today.......

More if anything comes up after the market closes - as of right now we've reversed a few of the technical indicators that had hit Friday, which means we are likely getting the corrective bounce that was "do or die" for the major indices this morning.

BTW, anyone who thinks "this is over" - uh huh. Look at this:





You think so eh? AAA credit under 90, AA credit at 81, A credit at 60 (!) and BBB? Forget it - its trash.

CMBX? Same deal:



Garbage (the others aren't any better!)

Careful tomorrow - its Fed day and we could do anything.....