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Tuesday 09/09/08
TUESDAY MORNING UPDATE FOR 9/9/08 at 11:38 AM EST
We are seeing a modest pullback this morning as expected, despite the continued dropping price in Oil even in the face of hurricane IKE.
I still think we need to see one more crushing capitulation to finish off the bearish leg.
I was afraid the FNM, FRE takeover yesterday was going to create a feeding fenzy of buyers. Thankfully moderation was the watchword. The base is just to fragile at this point to see that kind of crazy buying without more foundation building, including a test of those previous lows.
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Monday 09/08/08
GSE BAILOUT EFFECTS at 12:38 PM EST
Just after I posted the weekend commentary the announcement was made with regard to confirmation that the Feds were stepping in to take over Fanny and Freddy.
I was not surprised therefore to see the 350 point DOW runnup this morning at the open.
I was most encouraged to see the subsequent decline rather than exploding up for a couple of days, only to make for a deadly pullback. The worst thing we could anticipate would be to see the markets to see this as a panacea to the declines of the last week or so. I do think that last week's low should remain as a "line in the sand" as support and it will be a successful test of that support that will make me happy.
With IKE barreling through Cuba and on its way to the center of the Gulf oil patch, we still see oil dropping this morning, down another $1.38 which just goes to support my supposition that lower oil already has a hit in supply built into the numbers and we have a lot further to fall before we get back to a "real" number.
We are liable to see some shuffeling of strength in industries over the next couple of days, so don't be too anxious to add to or take new positions until later in the week.
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