Tuesday, January 27, 2009

Morning Update/ Market Thread 1/27

Good Morning,

Futures are up this morning with the S&P up about 5 points and the DOW up about 50. The S&P is trying to claw its way back up into its pretty steep uptrend channel as you can see below. Note that the DOW futures are created what could be the start of a wedge instead of a channel:



Note that the channel is so steep that there’s just no way it’s going to hold as the top of it rises to more than 900 by the end of today. If it makes it back inside, a reasonable target might be 865 or 870, BUT… then there’s always that darn old reality that always seems to get in the way.

Speaking of reality, Shiela Bair over at the FDIC is trying to make up her own reality by capping the amount of interest banks have to pay when they borrow money. Gee, that's nice... too bad nobody is looking after consumer and capping the usury committed by the banks! More idiocy... Usury laws would be great and should be returned, but interfering in the free market world of money between banks and government is just asking for trouble. By the way, the only reason usury laws went away was because following our exit from the gold standard in 1971, inflation ragged and Volcker had to raise interest rates to the moon... way above usury levels to stop it, and it was at that time in the early '80s that usury laws went away. In Washington State anything above 12% was usury.

The Case-Schiller Home Price Index came in weaker, here’s a quote from Econoday:
Yesterday's existing home sales report showed a 15.3 percent year-on-year rate of contraction for December in what the report said is likely the worst rate since the 1930s. Today's Case-Shiller report shows steepening acceleration for November, down 19.1 percent year-on-year for the report's composite 10 index and down 18.2 percent for the composite 20 index. Month-on-month rates show declines of 2.2 percent for both indexes.

Losses out West are dramatic to say the least: -32.9 percent Phoenix, -31.6 percent Las Vegas, -30.8 percent San Francisco, -26.9 percent LA, -25.8 percent San Diego. These losses point to rising levels of West Coast foreclosures and banking failures. New home sales data will be released on Thursday and all indications point to a mid-teen year-on-year decline for home prices.

Consumer Confidence numbers come out a half hour after the open. Remember that today is the beginning of the FOMC meeting, “results” will be announced tomorrow.

Things to watch today include; the bond market which looks a little higher today, the dollar which may have topped out in the short term, and also keep an eye on the VIX which just broke below support.

Overall the setup seem to be for a bullish day, but so far it doesn’t seem to be set up for a moon launch unless it regains that channel and stays in it.

I’m going to try to get some writing done today, so contributions to the comment section are appreciated…

Best to your trades,

Nate