Manic (Not Merger!) Monday
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2007-06-11 16:05 by Karl Denninger Ignore this thread
Manic (Not Merger!) Monday
Now that was a wild ride.....

The SPX and DJI moved slightly higher, but the Nasdaq Composite moved lower; nothing changed by more than 0.10%.

Except for.......

Up another 0.37% today.

Tick.... tick.... tick......

We've had several sideways periods here of a few days, followed by explosive upward yield changes. The PPI and CPI this week on Thursday and Friday may prove to be a repeat performance in that regard if they come in anything other than tremendously tame.

Here's the SPX again:

Right on that resistance line!

So is the Nasdaq Composite, by the way.

We continue to see the same sort of divergences in the market today that have marked it for the last couple of weeks. The A/D line was negative on the Dow, but money flows positive. The S&P posted positive A/D (barely) but negative volume and tremendously (2:1) negative money flows. The Nasdaq 100 posted a positive A/D line, negative volume and more than a 3:1 capital flow in the negative direction!

These divergences are bearish; they show that while the indices (other than the Nasdaq) rose modestly, all of the heavy lifting was done by a few names, and the general sentiment in the market was decidedly negative, despite the small advance.

Bet 'ya don't hear that on CNBC!

Homebuilders got whacked again, with most losing 2-3% on the day - big declines. Countrywide financial lost 1.2% while two of Cramer's "Horsemen", Apple and Amazon, both lost around 3% on the day; the former after it was revealed that there would be no native development access for the IPhone (this, by the way, is far worse than one would first think; phones have terribly limited CPU capacity due to battery considerations, so forcing applications to run through a browser imposes a huge penalty on performance - and the user experience. Beware if you're bullish on Apple based on the IPhone - this ditty may prove to, ultimately, make it a cult device rather than a "must have." Yes, it really is that important.)

In short I see nothing here to indicate that the declines are done. I took my SDS and QID positions off today, but played the downside on the Qs via options going into the close and added a PUT position on CFC this morning. We shall see how that turns out; it was flat on the day. My other shorts were all profitable today.

Later in the week we also get earnings on Bear, Lehman and Merrill, as I noted earlier. The earnings reports aren't the interesting part - what will be interesting is any guidance they choose to provide going forward.

The key indicator in terms of a BIG (rather than sideways or an orderly) decline would be a breach of the 50 on the major indices that holds into the close. For the DOW this is at the 13,130 level (!), while the SPX has this indicated at 1491. If we break it on the SPX then I will be all over the DXDs, as there's a very good chance that the DOW will follow the S&P down. The Nasdaq's level is at 2538.

LATE UPDATE: Check the ABX indices today! When I originally posted the ticker they had not yet been updated - I had been checking them throughout the day - but there is now one tranche now just over the levels set prior to the February meltdown! In addition to that the "A" tranche is about to cross into territory last seen at the time of the meltdown. In addition, the "BB" (junk) tranche of the CMBX also spiked today on a near-parabolic trajectory! This is a warning of a potentially severe credit market shizstorm about to hit the fan!

Have a great day tomorrow; will be updated if anything interesting happens overnight.