Monday, December 15, 2008

Morning update 12/15

Good Morning,

Welcome to what will likely be the last somewhat normal volume week of the year. Overnight the futures tried to rally higher, failed and went into negative territory, but are back to being slightly positive, the DOW is up 25 points with about an hour to the open.

The New York Manufacturing Index for December came in at the lowest level ever recorded for that index, at -25.8 which was, believe it or not, better than expected.

Today is the start of the FOMC meeting. Their rate decision will be announced tomorrow. Most are expecting a .5% reduction from 1% to .5%, but some are expecting them to cut further, all the way down to .25%. IT MATTERS NOT in reality, as the rates actually being achieved in open market auctions are running just above .1%. The IRX is still dead, also in the .1% area – NOTHING. Now, I’m sure we might get a 30 second pop in the markets over another cut, but if you plan on playing it, you better be quick.

There is a lot of economic data coming out this week in addition to the FOMC decision. It is also quadruple witching options and futures expiration this Friday.

I am hearing mixed signals from the Whitehouse over the auto bailout. One moment it sounds like they are going to step in, the next not, the next only partially. It’s all just nuts to me.

Goldman is under pressure this morning, they report tomorrow.

From a technical standpoint, there are two things I am going to keep my eye on. The first is the VIX. It is sitting right on the bottom of that triangle, and if it breaks beneath it then I’ll be more bullish for the rest of the year. The other is the bond market. Friday’s action gave a potential reversal candlestick, but that needs to be confirmed which the bond futures are not supporting so far – the /ZN (ten year) futures are higher (lower rates).

Otherwise we are still in the same old range, sitting on a daily sell signal, a weekly buy signal and thus it looks to be another week of cross currents to me. If pressed, I would say that we should get some decline early in the week and probably higher later. I am personally still playing small. I have a couple of small short positions on, but if we get above the 900 area will take them off. Remember, there’s also still a potential bear flag in play that would be targeting the 820 area. It may not pan out, though, so again I’m being cautious here.

Have a good day,