Thursday, January 22, 2009

Morning Update/ Market Thread 1/22

Good Morning,

Futures are down pretty good this morning on bad news flow from around the world. Dow futures are off by more than 100 points and S&P futures are off by more than 13 from yesterday’s close. Bonds are up a little but coming back down and the dollar is up strongly.

Two economic reports out this morning, both are a stark reminder of the reality of the situation:

Housing permits fell 10.7% from the month before, while housing starts fell by more than 15%. Nate’s take? This is actually a GOOD thing, it is part of the healing process. When there are too many houses, the correct thing to do IS TO STOP BUILDING. Eventually overcapacity will diminish and THEN prices can stabilize, not before. Can you believe that people haven’t been seeing the folly in trying to keep building? Everyone wants THEIR business to keep going and yes, everyone wants to keep their employees employed. If an employer doesn’t like laying off their employees, then they should exercise self-restraint during “boom” times.

And that is translating now in a big way into the unemployment figures which shot up this week to a new bear market high of 589,000, an increase of 62,000 from last week. Speaking of last week, I read some research that said seasonal adjustments last week caused the numbers to be under reported by, get this, nearly 400,000! Yes, that means that when “seasonal adjustments” are removed from the data that last week nearly one million Americans filed for unemployment.

There is a bunch of other news out this morning, like dire warning from Sony and LG talking about demand falling off a cliff and thus warning about future profits. I’ll post some articles up during the day today as I see a lot of things that need to be brought to your attention.

As I’ve been typing, the futures are falling even more. It’s difficult to know where we are in the EW count as you can tell if you’ve been reading my updates. Yesterday evening I said that there were three possibilities… that we were making wave 2 and were about to start 3 down of 3 down of 5 down, or we were creating a triangle, or we had begun wave ‘c’ up of B up/sideways. Well, this move so far this morning is pretty strong and gets me wondering if we just began 3 of 3 of 5? Could be… if we break yesterday’s lows, that’s what I’ll be thinking. If we bounce prior to those lows, I’ll be thinking triangle.

As a word of caution, I can count 5 waves down this morning from the overnight highs in the futures, so shorting the hole here is probably not a super wise idea!

Below is a current picture of the overnight futures, DOW on the left, S&P on the right, so that you can see the pretty obvious 5 waves. I, however, do discount moves from overnight, as their total move should be considered within the framework of the prior trading hours movements.

Remember that we went out yesterday with overbought short term oscillators and so today will be working that off. I’ll keep you up to date in the comments thread of this post with more of the technical picture.

Best to your day and to your trades,


PS - if you're a bull, don't look at MSFT or GE!