Black Friday

It was a relatively quiet week with the US Thanksgiving celebrations.

After a big meal the shoppers were out in force, but most were out looking for bargains and bargains is what they got with huge discounts offered by a number of retailers.

Coming into Friday they new that consumer spending was already down, there were job losses everywhere, tighter credit and the already reduced home values and stock portfolios from this crisis. Discounts are what were needed to get these wallets opened.

Keep tuned for the results, but the feeling is that retail spending if growing at all will be at significantly off.

Although volume was light the markets did have the best week in 2008 with the NYSE +12.9%, S&P + 12% and the Nasdaq + 10.9%. Of course for November we still have NYSE - 7.6%, S&P -7.5% and the Nasdaq -10.8%.

Although I still do not think the bottom is in place yet we cannot ignore the nice set ups in a number of stocks and following the rules take a stab at some of these rallies.

For bottom pickers we have DIS, DD, C, BA, AA, MRK, INTC, IBM, GM, and GE to name some of the Dow stocks that have had KRD's at the low and have begun to rally off.

For continuation trades try PETS, AFAM, EBS, or THOR.

All these look good if there is any follow through after this weekend.

I am still holding a number of puts but am willing to hedge with some longs depending on how things open on Monday.

You cannot forget that the market is a leading indicator and will turn before all the bad news is in place. This week we will find out how the sales were as well as a number of other significant indicators.

Let’s see how the market reacts!!!

And the Shock Waves have continued

Last week we continued to hear about the after shocks....and then Thursday the market made new lows.

Jobless claims, factory activity and a number of leading economic indicators showed worse then expected results. Claims for unemployment benefits jumped to a 26 year high!!

The money ran for the hills - treasury bills and money market that is, with 2 year treasury yields dipping below 1%. That is still a lot better then exposing your money to the risks this market holds.

Fannie Mae and Freddie Mac trying to figure out what to do about all these bad mortgages decided to halt foreclosures on 16,000 until Jan 19. They want to work out terms with the homeowners that they can afford. Get in line they are also busy paying off credit card debt and are in line for unemployment benefits. (Let’s see if they can finally figure out that age old question - how do you get blood from a stone???)

As far as companies go we saw a continued slew of earnings miss. Those that didn't miss seem to be decreasing their outlooks for the future. Either way the stocks were pounded. Look at Dell although sales are declining they were able to have better then expected Q3 earnings by cutting expenses. Of course once you cut to the bone and sales continue to decline earnings inevitably follow suit. Dell closed Friday under $10.

Anyone who has been sucked into entering the market for the high dividend yields can now expect these dividends to decrease. Look at KEYCORP as an example. It dropped its dividend by 67%. Be careful with this latest strategy!!

Another approach some are being sucked into is buying (supposedly) good companies at these (supposedly) cheap prices. How can you not be tempted by the likes of AIG at $1.60, FNM at $0.30 and CROX at $1.04? These are all off >90% from their highs and surely have only one way to go. Well there are a lot of companies that will end up at $0. High risk speculation at best.

As you know I have been waiting for this 4th wave to end and a resumption of the down trend. This happened Thursday with a new low made. Of course we did a nice rally Friday. Is this a sign the bottom?Personally I am not banking on it and in fact added puts this week. So far the Dow if off approx 40% from its high. When the Dow bottomed in 1932 it was off 88% from its high. I say this just to show the potential and why I refuse to pick bottoms. I think some people got excited about Obama polishing the new car, but just remember it is out of gas...

For those of you expecting a bounce Monday given the KRD I have a few picks for you to buy above Fridays high: BA, RY, SWY and UTX.

For those expecting a continued down move a couple of shorts NBL and NXY and of course the Q's DIA, SPY etc....

Be careful out there...

The Shock Waves Have Begun

We continued to trade in this 4th wave pattern last week with some wild swings. (Drifting lower until Wed, hitting the bottom of the channel Thursday morning, with a strong rally at the end of the day. Any excitment was squashed Friday before close.)

Anyone who is hoping for a reversal here had their dreams shattered Friday as more and more shock waves hit the news:

Retail sales plunge 2.8% (with more to come - Abercrombie and Fitch expecting same store sales to crash 28%)

Nokia cuts industry sales targets - will have ripple effects throughout the industry with suppliers like Qualcom, Texas Instruments and Broadcom to name a few beginning to feel the pain.

Sun Microsystems cutting 6,000 jobs

Citicorp cuts 10,000 jobs - and to help finances have raised interest rates on credit cards by 3%.

It amazes me that the government on one hand is helping bail out banks who are lowering mortgage rates and offering longer terms to those holding risky mortgages, but letting them screw their customers on the other hand by raising interest rates on credit cards. Is it just me or do those handfull of banks seem to be getting the best deal in town.

And the poor NYSE has been forced to lower their standards in order to keep business. They have decided to ban the penny stock restriction. Otherwise they would be loosing the likes of Fannie Mae and Freedie Mac, and for us Canadians gasp Northern Telecom which closed at $0.56 on Friday. (Some were laughing at me for suggesting shorting Thurday at $0.75 - not a bad return for a days work!!!)

The next big decision will be what to do with the auto sector - bailout or bankruptcy. Suffice it to say they may be joining the penny stock status soon!!!

As far as trading, the Alligator is sleeping and it is still best to stand aside. Personally continue to straddle with some short positions as I expect new lows before the dust settles. (The shock waves have only just begun)

And The Winner Is

Obama made history last week and has been elected the 44th President of the United States.

The markets reacted with a two day drop of 9.7% the biggest 2 day drop since the market crash of October 1987.

The week has seen joblessness hit a 14 year high at 6.5% and confirmation that the auto sector is bleeding dry.

Obama has stated that he will confront this economic crisis head-on after becoming President. Yah think!!!!

Robin Hood to the rescue. The only difference is that all will be paying for this crisis.

Having said that I still think we are in the wave 4 with almost all charts still looking the same.

We took a stab at SLV last week with a small gain but like most breakouts are not following through.

Anyone buying must be willing to cut losses short and focus only on strong fundementals.

We have been following AFAM and even it is looking over extended now. (Maybe time to short soon)


Although this is the Q's almost all charts look identical.

My advise is that cash is still king but if you are in a position to day or swing trade lets short Thursdays low (but be ready for the buy fractal just in case the market rallies from her.)

Keep your stops tight.

Peter

The Calm Before the Storm

This is the week we have all been waiting for.

When the US decides on the next Leader of the Free World.

Change is the Battle Cry, but sometimes you should be careful what you wish for. I have a feeling that the changes we will see in the next term will not be pretty. If the market is a leading indicator we know what it thinks.

October was the worst month in the last 21 years with the damage taking place in the first week of trading. Since then we have seen continued volitility as I believe a 4th wave has begun.

For those of you who have been day trading, (the only relatively safe alternative in this environment), we have seen a nice bounce off the bottom as shorts cover and a few bargain hunters start picking up percieved value).

Whether a sucker rally or a true bottom only time will tell.

We have seen the same action in the commodities side with small rallies in coffee, sugar, cattle, beans, silver, copper and crude.

However, you still can't ignore the $9.2 billion removed from mutual funds last week. Sure it is a lot less then the $43.3 billion removed from funds 3 weeks ago, but we will need to see inflows to have a sustained rally in my view.

Have you been watching those earnings announcements - not a pretty picture.

Be careful out there.