The Market Ticker

Well that was fun. NOT.

Let's review:

1. Bernanke did not confirm a "put". Indeed, he kinda hinted that he might not "put" at the market, and if he does do it, it will happen only because the economy is at risk, not some group of speculators.
2. Bush said in plain English that he is decidedly opposed to bailing out speculators! And let's be clear; this is not just homeowners who speculated, it is also banks, builders, securitizers and virtually everyone else who touched this toxic crap.

And yet we have asshat Kudblow on TV again preaching:

"I believe that free market capitalism is the best path to prosperity."

(except when it means that those who speculated and drove the price of houses out of the realm of affordability, or who speculated via the LBO "put" would have to be punished with asset price collapses back down to historical norms, which means both a 50% retracement in house prices and a 50% retracement in the stock market!)

In that case, we should bail everyone out (If we could only figure out how - goddamn it, we can't seem to make that happen! Why the hell not? Isn't everything that happens solveable by the government?)

Oh, and Alphonso Jackson, HUD Secretary, says "I'm just happy we caught it in time" on the housing mess. Now there is a total, absolute, unadulterated dickhead without a clue as to reality.

Don't worry - by Grinchmas, and you can mark my words on this, he'll be eating that statement.

The commercial paper market is of course the 900lb Gorilla in the room. And while Cokelow rants about interest-rate cuts in this regard, he's on drugs in thinking that will fix it. Why? Because that paper isn't illiquid - its stuffed full of the same toxic bullshit that nobody wants to buy any more!

And this needs to shrink. Everyone says "oh that $300-400 billion will kill the market." Well, it might. But if it does, I'd argue it goddamn well should!

Why? Because I'm sick and tired of people trying to shovel shit sandwiches into my mouth! And before you say "but its not you" the hell its not! This crap is going into money markets, its going into institutional pension funds, its going fucking everywhere and its being demanded that we eat 'em!

That's bullshit.

Oh by the way.... anyone see this little report from the Federal Reserve?

Specifically, look at the following table excerpt....

  Date        total(2)    non-       required

                        borrowed(3)


            

Oh boy did we lead with a good one.....

"H&R Block Inc., the biggest U.S. tax- preparer, said first-quarter losses more than doubled on costs to finance its money-losing subprime mortgage unit."

But its all "contained", right?

Well, sure - to the Planet Earth:

"U.K. lenders responsible for 12 percent of the nation's mortgages are tightening standards for loans on house purchases, withdrawing offers and raising the cost for borrowers with less than perfect credit."

Wow, they have subslime over there too! Cool!

Thornburg may be doing the "death rattle".....

"Thornburg Mortgage Inc., the jumbo- mortgage specialist whose shares have lost more than half their value this year, said it plans to raise as much as $500 million by selling convertible preferred stock."

Not another one?

And where are people fleeing to? Treasuries:

"U.S. Treasury notes advanced on speculation demand will rise at a five-year auction today, after a two-year sale garnered the most orders since at least 1992."

Translation: Treasuries kind of suck in terms of yield, but at least we know what they are. In short, at least you're not fucking making it all up!

The commerical paper market? You know, where the money is coming from that's going into Treasuries (among other places)? Yeah, that:

"The U.S. commercial paper market shrank for a third week, extending the biggest slump in at least seven years, as investors balked at buying short-term debt backed by mortgage assets."

No kidding.

The hedge fund implosions continue - overnight we had another one (Australian this time.) How many more are being hidden?

Sears Holdings (SHLD) reported disappointing results. They're getting pummelled a bit in the premarket - 3% or so. We'll see how they trade during the day.

Freddie Mac (FRE) reported much lower earnings due to losses on mortgage sales.

"Freddie Mac, the home-mortgage financier which is recovering from a massive accounting scandal, posted a 45% plunge in second-quarter net income as it took a $320 million loss on new mortgages."

Gee, is that good?

Finally, we are starting to get some purchase from people believing that Bernanke has the balls to hold interest rates stable. Will he? That's impossible to know at this point, and let's not forget that Bernanke is "jawboner in chief", not "mover of markets in chief". And let's not forget - Bernanke has only one knob, and only a few bullets in that gun. When he runs out of firepower, that's that. What if he cuts rates - and then the market takes a 20% shit? Now what does he do?

Last night I identified a pattern in the futures and S&P cash that might portend that we "hit the wall" with that rally yesterday and put up a video "Tick" on it. This morning it appeared that indeed that pattern is confirming, but now, the pump monkeys are out trying to run the indices.

How come?

Tech - specifically, people think this "non-announcement announcement" from Apple means something. Oh Horseshit, for one, and second, anyone remember what happened to Apple during the tech wreck? Better pay attention kids!

The 2Q preliminary GDP number came in at 4%; personal consumption dipped only modestly. The prices side came in with expectation up 2.7% (Ed: anyone think Bernanke is cutting rates with inflation above target by 40%?) Jobless claims ticked up a bit, up 9,000. The futures totally ignored all three, flopping around less than two points, in one of the more muted reactions to a major economic release I've seen in a while.

Dell reported after the Bell and beat by a penny; the market didn't seem to like it much on the instant reaction, hitting the shares a bit after the market closed. Not much movement all-in.

The market and CEOs are basically throwing a tantrum right now demanding rate cuts, along with Larry Crudlow. This is a total crock of shit; reality here is that the Fed is not here to bail out people who got into a credit crunch because they inappropriately stuffed the commercial markets with derivatives.

Let's be straight on this one - before Alan Greenfuckup cut interest rates whenever the market whined, there were no mortgages written to strawberry pickers who claimed to make $200,000 a year, and there were no businesses issuing one commerical paper tranche backed by their building and a second one backed by their fucking coffee machine and an unregulated OTC swap that some hedge fund sold them for a thousand dollars.

One would hope that Bernanke is smarter than Greenfuck. One never knows. But this much is certain - this mess is not a liquidity problem - it is an insolvency problem and the only fix for it is for those who got their tits in a wringer by playing fast and loose with sound lending principles to face the music - and perhaps go out of business.

Late in the afternoon a news flash came across that a judge has denied Bear Stearns' attempt to gain bankruptcy protection in the US. Good for him. I like "no" when it applies to someone who has been jacking people around.

Ok, technicals.... here's the video!

Ok, out of the gate...... retail information coming in mixed - Dillards not good at all, Big Lots stronger. Indications? Tough to read - a specific-store story? Maybe. Tough to know for sure. But - if this becomes a trend, and I suspect it will, it will start slowly and get nasty from there (bye-bye Chuckie, your credit cards are blackened eh?)

Mortgage volume declined (again) by 4% in the last week. More importantly in this data is that ARM mortgages are down huge - 50% less in terms of percentage - over the last year.

Cheyne (a commercial-paper house) is in deep trouble and is apparently liquidating assets. This is - at this point - orderly. Will it stay that way? No way to know, but I wouldn't bet on it. These sorts of stories keep coming, along with more mortgage lenders either curtailing operations or imploding outright.

The true big story inside this one is here:

"S&P lowered the credit rating on the commercial paper issued by Cheyne Finance by two levels to A-2 from the highest level of A-1+. The rating on senior debt was cut six levels to A- from AAA."

That's not supposed to happen.

These assclowns in the ratings agencies better step up and start dropping ratings sooner. Six-grade downgrades are supposed to be impossible - one of those "six sigma events" that, barring an asteroid impact, are not supposed to be able to happen.

While this is not the sort of catastrophe that a cut from AAA to junk would be in one swoop, its close, and if these clowns don't cut this shit out nobody will use these ratings for anything other than toilet paper in the very near future.

The pump monkeys are still trying to find some way to castigate the Fed for the credit market mess. How about trying something new - like, for instance, not screwing people by backing your so-called "safe" debt instruments with worthless swaps written OTC? How about all derivatives and structured finance vehicles being sold via exchanges, so we have price transparency and the ability to perform surveillance on margin requirements?

Naw, we can't have that, can we? That would stop the bullshit and force people to have adequate reserves!

The interesting thing in all of this - so far - is that we haven't heard the hedge fund explosions. You know they're out there. I know they're out there. But boy, are they being kept quiet. I wonder how long that can hold? Maybe until the Hedgies have to own up to the explosion in their client base, which could be as late as the end of next month.

Today's price action was pretty strong, with clear (successful) attempts to spike the futures. Organic my ass. With the thin volume it held too, and was repeated once they got their teeth into it. I was quite surprised that things held on the top end, to be honest.

This was largely program-trading driven today with a belief that if the market could be shoved back over the 200 it would hold. I warned that this might happen last night, and it appears it has. For how long? I doubt for long at all - but for today this is what you had happen, and it is absolutely essential to respect the tape!

When we got our dip today I set trailers on all my shorts, only to watch them get popped one after another, then run hard to the upside. 'Tis ok - while I think we're going to roll over here soon and head south, I'm happy to re-enter shorts from a higher price and for now, take the money twice. If I miss the roll and don't get back in right at the top, its ok.

We sit here with the 200 pierced to the upside (again) on the S&P, and a potential head and shoulders forming. Play smart kids - while I expect we're going back down, I could be wrong on this!

Here's some TA for you.... in video format



See 'ya in the morning!

Well, maybe.

We started with a nice gap down, putting into practice that our downward trendline appears to be once again in play.

Financials got pounded today. Broker downgrades didn't help before the bell, but the general action was weak to start with, and this just put more gasoline on the fire.

Countryslide lost another half-buck before the market opened, and traded there mostly unchanged through the day. I had fun short-term shorting this one again the last couple of days, but other than some BK "lotto ticket" PUTs, I'm done with it unless it pops up again. The risk/reward ratio is getting out of whack here other than as a potential daytrading opportunity.

The builders got crushed with Centex, Lennar, Hovnovian and KB Homes all off 4% or better. Got shortie? Hope you didn't listen to the assclowns who said "oh we're bottoming out." I'll believe that when I see a few of these guys filing Chapter 11s. I suspect we're now arguing over who's first - not whether its going to happen.

Midmorning the market started to improve a bit, perhaps in expectation of the Fed Minutes. It sure as hell wasn't from Consumer Confidence, which was off fairly strongly to 105. Just wait until it goes under 100 - likely next month.

Speaking of those Fed Minutes, this is what they had to say about Chuckie:

"The growth of real consumer spending slowed considerably in the second quarter after substantial increases earlier in the year. The deceleration primarily reflected sharply slower growth in outlays for goods as purchases of motor vehicles decreased noticeably. Although a spike in energy prices eroded real income growth in the second quarter, there were solid gains in wages and salaries. Despite continued softness in house prices, household wealth moved markedly higher in the second quarter, mostly reflecting rising equity prices." (Ed: Not for long!)

This ought to get cute going forward..... the market didn't like it, selling off almost immediately on the release, although its probably more accurate to say that the morning selloff just continued on its course - with a bot more slope going towards the close.

In company-specific news TGIC disclosed that it drew down a credit line and was immediately pummelled for more than 20% of their stock price.

Krudlow, of course, is screaming for rate cuts. Again. Of course all was fine when the market was going his way. Gee, am I surprised? Oh hell no. Down 280, suddenly everyone is screaming for rate cuts.

Do I hear screaming for rate hikes when we're UP 300? Of course not!

I want to see down -1500. Fuck Larry Kudlow. Heh Larry, you long? Or is that something else talking?

Did you take some off the table today if you're net short? I hope so. Not because I don't think the tankage will continue - I suspect it will - but because you can't rule out more "surprises" of the nasty kind, and the money belongs in your account where you earned it! Bluntly, I don't trust these fuckers (that would be Bernanke and Paulson) as far as I can throw them.

Ok, technicals.



Niiiiice! One down plunge away from a retest. Sitting right on that nice strong support line. Now note something here though guys - if we reverse here we're in deep shit on the short side, because this could be a reverse head and shoulders!

WATCH OUT!

The Dow and Nasdaq have essentially identical chart patterns.

Now here's a longer-term view.



Assuming we do not head north again tomorrow, our next test just happens to coincide with the 23.6% retracement of the bull run! If that fails we will visit the 1225ish level, as noted before, and below that, the 50% and 61.8% retracements offer support.

Below that the chasm yawns; the 76.8% retrace is likely a false hope at that point; if we don't hold at the 61.8% level I'm looking for 780.

On internals the markets looked like dogshit. It was another 90% down day and got a lot worse as the afternoon wore on.

More ominously we are now heading for below 114 again on the Yen; if this continues we are very likely to find ourselves facing a nasty carry unwind in the morning. Asian markets are unlikely to deal well with our selloff, and it may bleed into Europe as well.

Where's the stress? In the same places - commercial paper and the credit markets. Duh. No point in repeating this one for the 493rd time.

Bottom line - absent an immediate reversal tomorrow morning (which you better respect if it happens, because it could be a reverse H&S! forming!) I am looking for a retest of the recent lows and am fully expecting we will pierce them.

From there we're headed south - perhaps on an express elevator to Hell in terms of equity prices.

Expect surprises along the way - although the certainty of a Fed Rate Cut, which many traders are "pricing in", doesn't look so certain to me. While I wouldn't rule it out I also wouldn't trade smug in the idea that we'll get one at this juncture either. That could prove to be a very expensive - and losing - bet.

Moronic if you're a cheerleading National Association of Realtors guy, that is!

Existing Home Sales. What is there to say about it?

"Sales of previously owned homes in the U.S. fell in July for a fifth consecutive month, adding to the inventory of unsold properties and showing the housing slump that triggered a collapse in credit markets will drag on.

Purchases declined 0.2 percent, less than forecast, to an annual rate of 5.75 million, from 5.76 million in June, the National Association of Realtors said today in Washington. That was the slowest pace since November 2002. Sales dropped 9 percent compared with a year earlier."

And oh, guess what? August is where the fun with mortgages really got into full swing. Its kinda likely that August's numbers are, to be blunt, "gonna suck."

Countryslide reacted as any good stock should when slammed with a hit piece in a major national newspaper. It slid. Surprisingly, not as much as I expected, but heh, hope still springs eternal for these guys and there are a bunch of institutional bagholders, er, investors , some of whom are bigtime contrarians. If and when they decide they've had enough, however, there's nothing to stop a raw implosion in the stock price. This is not somewhere to play for the timid, as one piece of news either way could result in an explosion up - or down - and it is also a very crowded trade. I'm happy to daytrade this thing and I bought some "bankruptcy lotto tickets" this morning, but hold it? Uh, I don't think so! I like my profits in my account!

Today we find out that The Fed gave another exemption on regulatory capital - this one to JP Morgan.

TICK TICK TICK TICK......

Are we gonna hear a "BOOM"?

Ok, not much in the way of news today that piqued my curiosity, so let's do technicals!



Interesting! We didn't get to the .618 retracement level; in fact, we never went above Friday's close. We are sitting at the close right on the downward trendline.

Aberration (the pop above) or is this going to be a bounce and then either a move upward at or to penetration? Not sure at this point, but the MACD rolled over today and got weaker as the day went on, indicating that we may be headed south in a serious way to test that 1370 level down there... you know, the one below which lies "The Depths of Hell"?

We should know tomorrow fairly early on; if we're going to reverse we pretty much have to do it at the open. Otherwise, it looks like our corrective rally is over and we're fixing to get a retest.



The Dow held its downtrend line and has rolled over, also weakening on the MACD.

Tomorrow morning will be a critical time in this regard. If the market cannot hold current levels and rolls through the SPX downtrend line, the next stop is our previous lows - at 1370 on the SPX and 12,500 on the Dow.

Neither of which, by the way, I expect to hold.

Have a great afternoon!