Monday, December 29, 2008

Morning Update 12/29

Good Morning,

Israel now claims that it is in “an all-out war” with Hamas. Oil and gold have responded as they always do to geopolitical crisis, they are going up.

Yesterday evening our futures were down about 100 points on the DOW, but climbed all the way back to even or a little higher this morning – but with a half hour to the open, the DOW is down slightly, and the S&P is off by about 3 points from Friday’s close.

Other news over the weekend that could impact the markets include: IndyMac Bank is supposedly close to a deal with a group of private investors who will buy it. The details are not known, but if they buy it with all its debts attached, all I can say is good luck! Most likely they are hoping to stick their snouts into the government trough – a gamble that they can offload the stinky parts on you and me. Great system we have there!

In other news, Kuwait killed a $17 billion dollar deal with Dow Chemical. Oil revenues hurting? That’s what happens in a deflationary/deleveraging environment.

Democrats are talking about adding Municipal bond tax breaks. Be careful in this arena if that happens. Municipalities will be hurting big time in the next couple of years as their tax base shrinks and their expenses climb. There are going to be several, if not many, municipal bankruptcies this coming year, count on it. That will make raising money via debt more expensive and harder for them.

On the technical front, we are still in the same old range, killing time. I expect light volume to continue this week and that should pick up by the next week. The oscillators say that we are near overbought on 60, 20, and 10 minute scales, so in the short term it’s possible for a little upside, but I would favor the downside over the next day or so. Otherwise, we still have crosscurrents with a buy signal on the weekly and sells on the dailies.

There is also a turn window that we are in at this time. The direction into it is not clear as our motion is basically sideways. There’s still a good chance that wave ‘c’ up of wave ‘B’ will come (a lot of people are still expecting “the Obama rally” – but gee, what happened to the “Santa rally?”). We’re flat because the bad news has piled high against positive seasonality and “hope.” Which of these forces will win in the short run? Flip a coin, red or black, the technicals are not telling ME which direction at this time. I think there’s NO DOUBT that we are going to see much lower prices going forward, but does it happen soon or is there more rally first? I need to see us escape this range before I can answer that with confidence, and that means that I don’t have any money riding on it in the short term. If I see a clear direction with this turn window, I’ll let you know – right now I don’t have technical targets that I like and am willing to say the odds favor.

How’s that for unequivocal equivocal? Clear as mud! If you’re new to following my market updates, you will know that there are very few times that I’m neutral or don’t offer a good read. This time is different in that regard… I could pick a direction and HOPE I’m right, but that would be gambling, and that’s not what I like to do. So, the way I see it is this; if you’re a “long term/buy and hold investor,” you are going to continue to get KILLED, as in wiped out – not just over the next year, but over the next decade. If that’s you, wave ‘B’ will be your last chance to exit the market with any semblance of your wealth in tact. If you are playing the current trend, which is still down, then you need to consider your investment vehicle and the timeframe over which you have for that vehicle to make you money. I don’t like this location here as an entry point, but again, as I see one I’ll let you know. Please stay tuned.

Have a good day,

Nate