Happy Holidays Everyone

Well it was a pretty quite week on the street - which is to be expected at this time of year.

It was not without its share of continued bad news however. It is getting to be a bit of a broken record with continued layoffs, decreasing earnings or increasing losses, reduced spending, etc etc.
A GUYS GOT TO DO WHAT A GUYS GOT TO DO - did you see that Apple has caved and is now selling iPhones through Walmart. Now that is a sign of the times! It is easy to sell the latest and greatest technology at premium prices and through exclusive shops when the money is flowing, but competition has grabbed a chunk of share and Apple is going to try and get it back by selling out to Walmart. With the stock off over 50% in the last year they needed to do something. They are only allowing a 1% discount at the moment. I doubt this will hold for long.
My short picks from last week for the most part came off as expected and are now set up nicely to get on board with sell fractals in place for a lot of them. Here is the charts for Dupont (DD) as an example. We can look at shorting at the $24.25 area. The same setup exists for a number of the Dow stocks.
For those looking for something on the long side: GMCR, DLTR and EBS. That EBS just keeps on motoring. It helps to have a monopoly on an anthrax vacine.

Hopefully the volume will pick up a bit next week.

All the best

As Expected $17.4 Billion in Aid

Just in time for Christmas, GM and Chrysler get loans to bide some time. The dollars come from the TARP funds. I guess Bush didn't want to leave office with GM bankrupt. I am sure he must be ready for Obama to take over.

For those that like to bash the Big 3 for creating their own troubles please note that Toyota will be posting its first ever loss for the year ending Mar 09. The recession is hurting all companies.

I also noticed that Paulson has asked for the remaining $350 billion after already commiting the first $350 billion. A billion here and a billion there pretty soon we are taking some serious change. Those printing presses must be running full time!!

Similar to lkast week, this week the markets remained relatively flat. This is the calm before the storm as the bulls and bears continue to circle each other waiting to see who will make the first move. I assume we will probably see more of the same over the holidays with renewed activity in the new year. Still waiting for the indication of which way things will go before commiting serious funds to the markets.

In the mean time continue with straddles and playing a few nice set ups. Unlike the indices we have seen some nice rallies off the bottom on some individual stocks and there is more and more talk of a bottom in place. One of our picks a couple of weeks ago was RMBS. This is the type of rally you want to be on. (It would be nice if the market did that wouldn't it??)

One other thing I have noticed this week is people using the D word. The D word is the new R word. The fear mongers will use Depression shamelessly, but you can really hardly blame them can you. Every day we continue to hear of more and more layoffs. It is going to be a difficult Christmas for a lot of individuals. Below is the commodities index. It makes you realize why the D word has surfaced.

I have warned before about getting sucked into stocks for their high dividend yields. Those yields can't get trashed if dividends are cut. Case in point Weyerhaeuser (WY) cut its dividend by 58% this week. Things don't look so great any more.

For this week I will continue straddling with an expected move in the New Year. My gut is still saying new lows and I see a very common pattern that I will highlight this weeks in my list of potential shorts from the Dow:

DD, DIS, IBM, IP

Others outside the Dow:

APH, ARO, CVD, GES, AMAT, EBAY, HON.

Its Just a Matter of Time

The big news this week was the debate over automakers aid. Thursday's Senate stale followed by the White House on Friday signalling it will come to the rescue after all by maybe using the TARP program.

Lets face it this industry and its political position will get bailed out. There is just to much at risk. It sure is a hot button though and expect to see fireworks flying once the details are ironed out.

There is a lot of pent up anger out there just waiting to be released.

In the meantime ongoing reports of layoffs, earnings misses, foreclosures and bankrupcies. There is blood in the streets and it is getting worse by the day.

Just a few more weeks before the changing of the guard at the White House. People wanted change. I just hope they have a lot of patience. This is one pair of shoes I wouldn't want to be walking a mile in.
As far as the markets are concerned, as expected we had a gap open on Monday, but no follow through. In fact the rest of the week saw selling just to end the week with things looking a lot like it did last weekend.

There are a lot of people out there saying that a bottom is in place now, but there is just as many not willing to put their money, (or what is left of their money) where there mouth is. The bulls and bears are circling each other with no winner yet. Without a trend in place we continue to play with only a small portion of our funds.

It looks like we may see some upside on Monday for those that want to test the waters again. Otherwise trading the hourlies.

Be careful.

1 in 10

Well as expected there was more bad news last week, ending with Friday's announcement of the worst employment data in 30 years. Oil maked new lows with the inevitable reduction in demand from the continued recession.

One statistic I read however really put this crisis into perspective and keeps me bearish long term. 1 in 10 American housholds with a mortgage is over due on payments or in foreclosure. For subprime loans 1 in 3!!!

BUT the market shrugged it off with a rally at the close. In fact when we reviewed the charts we can't help but feel we are in for some positive action (in the short term).

The Q's made a bullish divergent bar a couple of weeks ago and it looks like there will be a continued up move here. I believe, from an Elliott wave perspective, that we saw the completion of the major 3rd wave at that time and are now in the 1st move of the major 4th wave. Given the volitility this is one 4th wave that we may be able to play in, although cautiously.

Fridays rally has created a number of bullish set ups to test the waters with.

Even the financials XLF.

So for Monday consider:
DIA
QQQQ
XLY
XLF
XLV
XLI
XLB
XLK

Still short the commodities. GSG

Be careful out there. These are definately counter trend trades. (We are in a BEAR market)

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)