Tuesday, June 26, 2007

A Victory For The Bulls??

According to my gadgetry, the high print of the day for the Dow Jones Industrial average was 13,452.52 and the close was 13,337.66; yet a broadcast commentator opined that the "flat" close was a "victory for the bulls". What the?? A close more than 100 points below the highs is a victory for the bulls?? LMAO. It's a damn shame that good analysis is so hard to find nowadays in the mass media. The declaration that today was a victory for the bulls insults the intelligence and experience of many in the audience and on the street who know there is so much more than just looking at the close relative to the open. So much for looking at volume, breadth, money flow, other indices and internals to come to an informed conclusion about the health of trading in a given day. It is truly amazing what passes for 'good' reporting these days. Remember, most broadcasters are prohibited from owning stocks they report on and in some cases aren't allowed to trade any stocks, or derivatives at all. So what good is their critique to begin with when they have no skin in the game?

With the VIX close at the high of the day at 18.89 (back to the Feb mini crash levels) and the market sliding well off the highs again, it's only a matter of time before the market takes a real spanking. Put to call ratios look shabby, breadth has continued to deteriorate and the action in general of a strong open and weak close is bearish. A good chunk of the early bull rally, or bull victories were built on either morning dumps followed by afternoon runups, or strong opens followed by even stronger finishes. There's little to celebrate in two successive failures to cut Friday's losses in half. Someone needs to prime the discount window even more and pump more cash in... copy NY Fed??

Credit woes and subprime meltdown will continue to be themes that dominate trading this week. Don't believe subprime is getting worse and spreading? Bill Gross is an excellent read: Looking for Contagion in All the Wrong Places.

Fed policy makers start a two day meeting late Wednesday afternoon. The all important rate announcement will come on Thursday at 2:15. Stand pat and talk about risks is the likely outcome on Thursday. By fall it's also likely that Gentle Ben will look back longingly at his period of keeping Fed Funds unchanged. Surely the day will come when housing meltdown and inflation troubles will have to be dealt with directly by way of one of those 2:15 pm announcements where real action and tough pills to swallow will be doled out.

Stronger than expected earnings out of Oracle (ORCL) and Nike (NKE) are good for a quarter point gain out of S&P futures.

A VIX at just about 19... no surprise if you've been reading here. I remain of the opinion that the mean long, long term averages of the VIX are quite a bit higher than even today's level (simple method is to look at monthly moving averages). Yes, VIX is getting overbought short term and I don't rule out a spurt for the market and drop in VIX if corporate America can put together another good earnings period, but the writing has been on the wall. The pricing in of risk has only just begun as the subprime woes have only just begun and things with Iran and the Middle East start to get more interesting by the day.

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