Journey - Don’t Stop Believing- Play the song while reading the article.
A new Dawn has arrived for the US as the Beauty of the American Process was shown today with the peaceful transfer of power between two US presidents. Without bombs and without bloodshed….American Democracy at its finest. Whether you are RED or Blue, you were certainly proud to be Red, White and Blue today. Obama being sworn in with the largest crowd ever assembled for a new US president, gave hope to hundreds of millions if not billions of people worldwide. In the markets it was all about the financials today as PNC, STT, XLF, WFC all took huge hits. The thought that Cramer put out there is that it is from the SKF buying which in turn is depressing the financials since it is an Short Leveraged ETF. By buying the SKF, it pushed a basket of stocks within the SKF which didn’t have any correlation to each other other than they were all compnents of this ETF the SKF. The STT news of the day really started the day off the wrong foot and the day’s ending was not too pretty as some rails made new lows and the XLF (financials ETF) touched its 52 week low. Remember that the new market table is comprised of the financials (XLF), basic materials (XLB), tech (QQQQ), and energy (XLE). Without leadership to the upside in these components of this market the table will be slanted and will falter. ^QGRI (QGRI) which is the ETF for the TARP companies who have taken at least $1 billion from the TARP is making new lows and is one of the components to my leading indicator for the economy and market. If this ETF fails the market should weaken further.
Here is my LIB (Leading Indicator Basket) formula to get a grip of where the market is going in the short term. The formula changes as the market changes character and looks at different things, because the market is a collective engine which is comprised of a collection of different bright minds looking at different indicators that change…;)
Myhappytrading Room comments in sequence (Come join us to add to the collective intelligence or read about the market events in real time from hedge fund managers, ex-hedge fund managers and high level option traders):
7:20 AM
–>State Street dives 50% after announcing unrealized losses
State Street (STT) announced in an 8-K filing late Friday that it had $5.5B of unrealized losses as of December 31, 2008. The company said that the losses are “associated with our portfolio of investment securities available for sale and held to maturity.” State Street explained that the market values for the securities in its portfolio dropped significantly last year due to disruptions in the capital markets. Furthermore, State Street said it had $3.6B in unrealized losses from issuing asset-backed commercial paper. Meanwhile, the company reported Q4 EPS of $1.18, versus analysts’ consensus estimate of $1.14. The company’s revenue was also higher than expected. However, Ladenburg analyst Bove believes that State Street’s 8K form reinforces the risk associated with the shares. The analyst thinks that State Street may see the need to consolidate its off-balance sheet conduits. Such a move could cause State Street to sell 140M new shares, and a share sale of that magnitude may not be possible in this market, Bove adds. State Street’s stock sank $18.77, or 51.64%, to $17.52 in early trading. State Street competitors Bank of New York Mellon (BK) and Northern Trust (NTRS) declined 28.75% and 9.96%, respectively
Success is NOT the key to happiness… Happiness is the key to success… If you enjoy what you’re doing you will be successful. –Albert S
JPM: November Low in View
The November low appears certain to be tested today. That low, at $19.69, needs to hold to avoid a potentially more severe downside reaction. What we have on the chart is in essence an “h” pattern. This pattern is also evident on a long-term weekly chart. When the second descender of the “h” is broken, the downside can accelerate rapidly. In that event, support levels to watch as potential downside objectives are at $19.50, $18.91, $18.58, $18.22, $17.86, $16.96, $16.50, $16.13
Weakness in the global financial system drives stocks lower at the open
As expected the averages opened sharply lower. The weakness in the global financial system is being attributed to the weakness. European banks are sharply lower as the Royal Bank of Scotland (RBS) said they would have additional multi-billion dollar losses. The announcement came on the heels of last week’s multi-billion dollar losses from Citigroup (C) and the Bank of America (BAC). The markets may have a chance to rebound given the optimism surrounding the presidential inauguration of Barack Obama.
The market cannot find its footing with this type of weakness in financials and energy….
S&P Sector Watch: Safety gets a fractional bid
The only two sectors still on the plus side this morning after the first hour of trading are Consumer Staples (XLP) and Utilities (XLU). Both are fractional gainers. The trouble spot of the day remains Financials (XLF) off (-8.47%), Materials (XLB) down (-2.7%), Consumer Discretionary (XLY) off (-2.5%) and Industrials (XLI) shedding (-2.2%).
Bank of America sinks almost 20% after firms release negative notes
Several analysts issued pessimistic notes about Bank of America (BAC), after the bank on Friday reported weaker than expected results and announced that it was receiving more government aid. Friedman Billings lowered their target for Bank of America to $5 and maintains an Underperform rating on the stock. In a best-case scenario, Friedman Billings does not believe that the bank can be profitable before the second half of 2009. The firm contends that the bank’s pro-forma tangible common equity of 2.6% is too low, and they reduced their 2009 operating EPS estimate for Bank of America to (40c) from $2.00. Meanwhile, noting that Bank of America interfaces with 50% of American consumers, Oppenheimer’s Meredith Whitney wrote that Bank of America is as vulnerable to the drop in home prices and employment as any bank covered by the firm. Whitney also slashed her fiscal 2009 EPS estimate for the bank to 70c, reflecting deteriorating credit, the worsening economy, and additional preferred dividend payments. Whitney maintains her Perform rating on the shares. Stifel Nicolas downgraded the shares to Hold from Buy, citing uncertainty regarding government intervention, possible political pressures, and shareholder dilution, among other reasons. Bank of America’s stock declined $1.40, or 19.50%, to $5.78 in mid-morning trading
Markets weaken but oil rises
The market averages have weakened during the past hour as concerns of a global banking crisis continue to weigh down the market. Each of the economic sectors in the S&P is in negative territory but the financial sector is down almost -10.0%. Crude oil prices, which had been lower in the early going, have reversed and are now higher by almost a dollar to $37.42 a barrel. The inaugural ceremonies are getting set to begin as the volume on the exchanges slows.
European Markets Wrap-Up for Tuesday, January 20
European stocks declined on concern earnings will deteriorate due to the deepening economic slump…In the UK, the FTSE closed down -0.98% to 4,068.02. Elsewhere, the German DAX fell -1.77% to 4,239.85 and France’s CAC decreased -2.15% to 2,925.28…MARKET NEWS: SAP (SAP) fell 2.3% after Capital magazine said the company will push back the timetable for hitting margin targets and will not give a 2009 sales forecast next week at its earnings press conference… BNP Paribas (BNPQY) fell 13% after Societe Generale said the bank may need to raise up to $10.4B… Lloyds (LYG) dropped 32% on concern the lender has too little capital. A spokesperson said the company has a “robust capital position” and that business is “satisfactory”… Metro AG, Germany’s largest retailer, rose as much as 9.8% on news it will cut 15,000 jobs as part of a plan to increase profit by $2B over four years… Royal Bank of Scotland (RBS) promised to make available $8.7B to UK borrowers. If the bank cannot work out its problems and they’re pushed onto taxpayers, the government may take full ownership, according to the Wall Street Journal’s “Heard on the Street”… National benchmark indexes decreased in all 18 western European markets.
U.S. Mid-Day Markets Wrap-Up for Tuesday, January 20
The markets retreated at the open today, and were lead lower by the financial sector, on the day that Barack Obama was inaugurated as the 44th U.S. president, inheriting the worst economic crisis in three-quarters of a century. At mid-day, the Dow was down 165.03 to 8,116.19, the S&P was down 23.27 to 826.85, and the Nasdaq was down 48.48 to 1,480.85…MARKET NEWS: Royal Bank of Scotland (RBS) yesterday warned that it may post a $41.3B loss which would be the largest in U.K. history. Today, State Street Corp. (SST) plunged after unrealized bond losses nearly doubled. Wells Fargo & Co. (WFC) slid on an analyst’s view that it will cut its dividend. Polo Ralph Lauren Corp.(RL) was down after Goldman Sachs advised to sell the stock. Alcoa (AA) tumbled as aluminum prices continued to sink…MAJOR MOVERS: Among the most active stocks were Bank of America (BAC), Citigroup (C), J.P. Morgan Chase & Co. (JPM), Cisco Systems (CSCO) and Microsoft (MSFT).
The true beauty of the American Process………no bombs, no bloodshed…
Stocks lower as President Obama takes office
Stocks are lower after President Obama was sworn in as the 44th President of the United States. The volume and news flow have been light for the past hour as all eyes have been on the inauguration. The new president spoke about the many challenges in the country and said the economic crisis calls for “action, bold and swift.” He also urged unity and a “new era of responsibility” in the U.S.
News flow has been quiet as has been all year…..very strange
QGRI gonna be down 50% here since its start about 2 flippin weeks….ughhhh not good……
UNP new 52 week lows …not good for the Dow Theory which states:
In Dow’s time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market, usually by rail. Dow’s first stock averages were an index of industrial (manufacturing) companies and rail companies. To Dow, a bull market in industrials could not occur unless the railway average rallied as well, usually first. According to this logic, if manufacturers’ profits are rising, it follows that they are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signs of health in manufacturers, he or she should look at the performance of the companies that ship the output of them to market, the railroads. The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air. Both Barron’s Magazine and the Wall Street Journal still publish the daily performance of the Dow Jones Transportation Index in chart form. The index contains major railroads, shipping companies, and air freight carriers in the US.
We cannot have weakness in the Rails such as UNP and BNI because they are a leading economic indicator for the current economic activity and future economic activity.
Volume is light as stocks slump
Stocks remain lower and volume remains light. Each of the major indices is lower by more than -2.25%, with the Nasdaq down more than -3.80%. The weakness in the financials is the culprit. Declining stocks are ahead of advancing stocks by a 4:1 margin, and down volume is ahead of up volume by the same margin. Crude oil prices are higher by 3.30% after being lower earlier in the day. Gold prices are also higher and are up more than 2.75%.
10:52am
VIX starting to move up….
QGRI keeps going down about to break into the 500s….sheeesh….
XLF made a new 52 week low today…… not good ffor the market.
What concerns me is the ripple effect of all this i mean yeah the market’s dropping some parts dropping to new lows but it means Main street has further to go or will feel a longer effect….alot of my friends have been laid off or looking for a job…im just tired of it…..sad but today there was change and with change…hope.
Markets fall to the lows of the day
The averages are at their lows of the session with the markets not showing any signs of buy interest. The first day of the Obama presidency is proving to be disappointing as many felt a patriotic rally could end up lifting the averages to a higher close. That may have to wait until tomorrow when the new president gets to work. There are no economic numbers to be reported tomorrow of any consequence but the earnings season will kick into full gear which will help to dictate the market moves.
S&P 500-SPX: Breaking Support: November Low Ahead
There is support at the 814 area based on low areas from November and December of last year. Should this zone get taken out to the downside, there is only really the first November low at the 750 area as major support. A retest of those lows at this stage, especially given the weakness in financials, seems inevitable. Unless a major new positive fundamental or technical catalyst enters the picture we could be down to those lows any time in the next few days
Goldman: State Street issue more severe than Northern Trust, Bank of New York
Goldman believes State Street’s (STT) issue of tangible common falling to 1% is more severe than Northern Trust (NTRS) and Bank of New York (BK). The firm has Buy ratings on all three banks, but prefers NTRS over the other two
State Street-STT volatility spikes to 165 on financial uncertainty STT is recently down $18.35 to $18. STT reported Q4 EPS of 15c and lowered its financial outlook on capital deterioration. Goldman Sachs has a 12-month price target of $25 on STT. STT call option volume of 60,164 contracts compares to put volume of 29,016 contracts. February option implied volatility of 165 is above a level of 88 from last week and above its 26-week average of 73, according to Track Data, suggesting larger price movement
The biggest problem with the supply/demand equation with the market is that there is a Buyer’s strike going on right now with no buying support from institutions and investors…SKF is what you want to watch as well at QGRI.
For COP I know alot about. I like it but right now you don’t want to buy anything and wait for the dust to settle here. You want to make sure you pair COP with XLE and make sure XLE bottoms before buying COP. Right now the financials are taking a huge beating and this is not good for energy since XLF is making new lows and gauges the financial strength of the economy. Energy equities will follow lower since economic activity is the lynch pin for oil prices, and energy demand. Lower economic activity and lower equity exposure means lower prices for all equities….thats what im seeing right now….this is not good as a leading economic indicator and could spell further trouble for the economy and the markets BUT on the opposite hand the energy sector or the XLE should be one of the first spots to buy in when this market turns and finds a bottom. Oil prices is a leading economic indicator right now and I want to see oil prices go UP and go towards and above $50.
I want to see Oil prices higher and stabilize for showing of a possible resurrection in oil demand and thus a resurrection in economic activity…until we see oil prices stabilize (USO) and financials stabilize I would say to stay out of equities for now…..
Frosty, you feel me…..yes the Great American Process of change when leadership falters…..our fellow friends from other countries know about it (France, England, so on and so forth) but our brethern from other parts don’t and should one day…China, Russia, N. Korea, Burma, Iran…it is a dream but a dream that is destined to be as nothing lasts forever…
Companies reporting Before Market Open on Wednesday, January 21
The more notable companies reporting tomorrow before the market open include Abbott (ABT), Air Products and Chemicals (ADP), Allegheny Technologies (ATI), Coach (COH), Hudson City Bancorp (HCBK), Northern Trust (NTRS), The Progressive Corporation (PGR), U.S. Bancorp (USB) and United Technologies (UTX
Companies reporting After Market Close on Tuesday, January 20
The more notable companies reporting today after the market close include Bank of New York Mellon Corp (BK), CSX Corporation (CSX) and International Business Machines (IBM)
Goldman Sachs-GS volatility increases to 112 on heavy put volume
GS is recently down $10.58 to $62.50. GS call option volume of 37,088 contracts compares to put volume of 75,775 contracts. GS February option implied volatility of 112 is above its 26-week average of 75, according to Track Data, suggesting large price movement
WSJ: Google to stop offering print ads-Dow Jones
Google’s (GOOG) print ads program was launched in 2006, the company said the print ads program did not create the desired impact.
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