Friday, March 23, 2007

Post Close Comment

A mixed day for Wall Street with the bulls not able to overcome Wednesday's S&P 500 highs and not even able to get a head of steam going for the Nasdaq. As seen in the chart above, S&P 1438 was resistance for a third session. On my market data screen in the right hand column, intraday shows a number of attempts to breach 1438 but to no avail. On the otherhand, no major trouble developed from the failure to break above that level either.

But are their cracks on the horizon? The Philly Housing Index couldn't hold gains as the day wore on. The chart below shows the spurt at 10 when the existing homes sales data came out, but then fade to red. What happened with the Philly Housing Index? The answer is simple. My Realtor wife reminds me that the existing home sales data reflects actual closings in February so the February numbers are actually reflecting handshakes that were done the previous 30 to 60 days before! The headline number spiked the market, then reality set in that the numbers were pretty useless.

We won't see the actual dismal sales activity of February show up in the Existing Homes series until the May figures come out. Isn't that a happy thought.

It was interesting to see a NON-subprime lender go out of business this past week. California based LoanCity is out of business. It specialized in A and Alt-A loans, but couldn't meet tougher warehouse lending standards - and they say subprime is contained?

One group that gave some support - the Trannies. The Dow Transports rose more than 1.6% as railroads rallied again. Intermodal traffic decline last week be damned, there's the ongoing talk of consolidation in the industry, even talk of LBOs. Union Pacific (UNP) was Union Terrific today rising by nearly 4% with active call trading in the Aprils right up to the 115 strike. Volume exceeded open interest in both the April 110s and 115s. But you've got to ask, who would buy a 145 year old railroad company with a stock market value of $28-bln? They obviously didn't ask and just bought UP along with a smattering of other railroad stocks.

Nasdaq 100 (NDX) was simply stuck today, not even trying to make an assault on the highs of the week, same for QQQQ. The bulls completely shunned any try at filling the QQQQ gap between 44.5 and 44.75 following the Wednesday rally. Today names like Microsoft (MSFT), Cisco (CSCO), Apple (AAPL) and Google (GOOG) were out to lunch. Biotech led by Amgen's chemo trial failure was also a large drag and Jabil Circuit, a huge supplier of components to Nokia (NOK) and Cisco was down more than 10% after delivering weak guidance.

Gold was spanked today, but still up for the week. The energy complex was strong with crude and RBOB rising for the week. IF gasoline prices are sustained at present levels, or go higher energy inflation jitters are going to be added to the list of items for Wall Street to worry about. In a place like California, ground zero for mortgage implosion, $3.25 gasoline could be the final straw that pushes more people off the edge.

The most tangible thing all of this meant for me today is that I took my profit on the SPY calls and decided to cash out. I can always jump back in if the bulls manage to mount an assault on 1438 S&P and succeed, but various indicators which I have discussed in various posts have popped up since the Fed rally that have made me decide to dump the SPY calls. Next week is the last week of this quarter so it's time to start looking at things with an eye towards pre-announcements and anticipating guidance and, of course, sniffing out more IEDs in housing.

No comments: