Consumer Credit outstanding fell $14.8b in Sept seasonally adjusted, almost $5b more than expected and marks the 11th month in the past 12 of declines. At $2.456T outstanding, it is 4.9% below the record high in July '08. After a flat reading in Aug, (didn't fall b/c of the CARS program), non revolving debt outstanding fell by $4.9B. Revolving (mostly credit cards) balances outstanding fell by $9.9B. To fully put into perspective today's data, look at the current level of consumer credit (doesn't include mortgages, the biggest chunk of consumer credit) relative to GDP. As of Q3, it totaled 17.2%...
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January 7th, 2009 at 7:39 pm
Where’s Charlie Gasparino when the “free market” estimator is blowing it systemically and the gubmint’s got it right (after the third revision.)
Charlie doesn’t like the “insider” at the SEC. …but he doesn’t like the inexperience of Obama.
How does he feel about Caroline Kennedy? No like? …cuz she’s inexperienced?
…and Sarah Palin was good ‘because she’s an outsider.
It makes sense to me.
January 7th, 2009 at 7:43 pm
The economy, housing and the stock market are rotten to the core. Record credit to GDP…not by a little, but off the charts. Record low manufacturing…auto sales are not in a Depression, they are in collapse…if Shiller’s charts are right, housing has 40% more to fall. It should be a surprise when the market RISES, not falls.
The market has way too much bullishness for where the fundamentals are…it rallies only when volume is on fumes. There is hardly any short interest. I cannot find a single thing that makes me think stocks will do well this year.
January 7th, 2009 at 7:45 pm
I think the market was vulnerable after a pretty good run from the recent lows.
If the economy is still falling off a cliff, it is hard to trade on expectations that growth resumes in 6 months time. It will take a massive effort just to slow the fall.
January 7th, 2009 at 7:46 pm
I’d like to know, but I think it was the half-hearted responses from Obama to the press conference. Methinks he is a better speech-reader than a leader, but still sorta hoping for the best, but way long term, like 4 years out.
Stopped out of SSO at the open, got back long in the early drift lower, then 3% loss stopped out again. That’s enough of that fun, so I’m short again. It was a cynical play anyway. I think the thesis for me now is we are without methods that can sustain our bubble and our leader will be doing nothing different than Bush, how many holdovers from the Bush Admin again? Hard to believe. The O man is bought and paid for by the same freakin bankers as the last, what a waste.
January 7th, 2009 at 7:49 pm
That plus all of the press about the next few years of trillion dollar deficits makes it tough to be bullish.
January 7th, 2009 at 7:52 pm
The unemployment claims systems crashed in OH, NC, and NY yesterday due to overwhelming user volumes.
That can’t be good.
January 7th, 2009 at 8:01 pm
It was an A-wave down, right on schedule. We should see 890 or so on the S&P tomorrow and then head back up for a bit.
January 7th, 2009 at 8:02 pm
@cali:
Thanks…I didn’t see that before…case closed – we are in a Depression.
January 7th, 2009 at 8:03 pm
The past couple of months, the market has started to sell off a day or two before the jobs number release on the first Friday of the month. Then when the jobs number was actually reported, the market rose.
That let’s the talking heads talk about how resilient the market is because it rallied on bad news.
January 7th, 2009 at 8:07 pm
From Drudge right now, “China may balk at buying more US debt… Developing…” in the dreaded red ink. No link to any story yet.
Maybe the news leaked into todays market, like news always does.
January 7th, 2009 at 8:22 pm
Steve Barry Says:
January 7th, 2009 at 7:43 pm
The economy, housing and the stock market are rotten to the core. Record credit to GDP…not by a little, but off the charts. Record low manufacturing…auto sales are not in a Depression, they are in collapse…if Shiller’s charts are right, housing has 40% more to fall. It should be a surprise when the market RISES, not falls.
The market has way too much bullishness for where the fundamentals are…it rallies only when volume is on fumes. There is hardly any short interest. I cannot find a single thing that makes me think stocks will do well this year.
this, above, is what is up. clear analysis, and succinct description, makes it, yet again, EZ to say: “fade those fading Steve Barry”.
the 168. HS-parade, from the MSM, is Injurious to anyone’s Health, Wealth, or Self. EOS.
January 7th, 2009 at 8:32 pm
If the market would fall on bad news rather than rising, that would be a welcome development. I don’t know if today actually showed a change in that pattern because the drop off was from an overbought condition on a short term basis.
An interesting chronology of the upward movements on bad news from David Rosenberg at Merrill:
– December 2nd: Auto sales slide from 10.5 million units (annualized) in October to 10.1 million in November, the lowest level since August 1982. The Dow rallies 270 points.
– December 3rd: ISM nonmanufacturing index declines from 44 in October to 37.2 in November, a record low. The Dow rallies 172 points.
– December 5th: Nonfarm payrolls plunge 533k in November, the worst since December 1974. The Dow rallies 259 points.
– December 16th: The November CPI plunges a record 1.7% and housing starts collapse 19% from 771k units (annualized) in October to a record-low 625k in November. The Dow rallies 359 points.
– Dec 30th: The Case-Shiller home price index slides 2.2% sequentially in October and down a record 18% on a year-on-year basis. And the Conference Board’s measure of consumer confidence slides from 44.7 in November to a record low of 38 in December (and the records began in 1967). The Dow rallies 184 points.
– January 2nd: The ISM index tumbles from 36.2 in November to 32.4 in December — the lowest print since June 1980 and the third lowest on record (data go back to 1948). The orders component actually does make a new all-time low. And the Dow rallies rallies 258 points.
Quoting Rosenberg: The Dow rallied a combined 1,502 points so this entire move off the November lows actually has come down to just six sessions and six sessions when the data were absolutely horrific…
January 7th, 2009 at 8:35 pm
it’s called REALITY!
barry – you’ll love this cartoon:
http://fridayinvegas.blogspot.com/2009/01/i-learned-it-by-watching-you.html
January 7th, 2009 at 9:00 pm
One of my amusements these days is to go to Bloombergs or Marketwatch just after the opening bell and read why the market went up or down for the day. How much reality can there be in a headline that you can write before the event happens. But most days that is the same reason given at the end of the day. We are in a period of chaos and nothing is rational. I think I will blame the day on Harry Reid getting his lunch money stolen by that washed up Illinois backbencher Burris and his corrupt buddy Blagojevich
January 7th, 2009 at 9:01 pm
TECHNICAL COMMENTARY follows….disregard if you do not believe in Technical Analysis.
Today’s price action should serve as a very clear warning signal that the highs of this bear market correction are probably in place. In terms of Japanese Candlesticks, we just got what looks like a confirmed “doji top”. In this case, it looks like a four day pattern with a confirming bearish tower matching the bullish tower from three days ago. THIS FORMATION IS BEARISH.
In terms of the Elliot Wave analysis, we’ve certainly had enough price action in terms of retracement and duration to constitute a completed Fourth Wave. It’s a little short in duration for a Fourth Wave, but this whole decline has been characterized by some “shorter than normal” durations in the Fourth Wave and fast moving Fifth Waves. So, I would not be surprised if we completed the move yesterday.
However, the most ominous aspect of the recent action is the fact that it’s definitely possible to count the intraday price action down from yesterday’s highs as a five wave decline. This is KEY. The final Fifth Wave down could not begin with anything other than an initial small five wave decline….the first leg down in many legs to come. Up until today NONE of the little declines could be counted as five wave moves lower.
For the Bulls….the hope is that the 857-944 advance completed an A leg within a larger final C wave. If this is the case we should bottom into the 890-876 zone and snap back HARD. If we take out 876 in the next few days, then we will be going lower. Even then it will still be “possible” that yesterday only finished some kind of big “A” wave up in a continuing large “ABC” corrective pattern. We may then get some kind of “B” Wave down the the 780-825 zone followed by a final “C” wave rally. This is “possible,” but I would NOT BE LONG hoping for this kind of outcome.
I’ve sent out a note to clients and friends this evening asking them to EJECT from any of the length they picked up on my “bottom picking” calls. This party is probably over. Trying to make money in a Fourth Wave is like drawing water out of a stone. We managed to do it…but now it’s time to prepare for lower prices.
The other consideration is that even if this analysis is incorrect and we do have higher prices coming…what is the risk/reward? If we finished a bear market correction yesterday and now we’re launching into Fifth Wave it targets 600-625!!! That’s 300pts lower than here. My rosiest scenario has the S&P trading up to 965-1030….that’s 65-13o pts higher than here. The bottom line is that risk is to the DOWNSIDE at this point in time.
Today we got a flashing warning light….if we settle below 876, then you should definitely be exiting any long positions. For any new bears on board, you might have to ride a rally back to 932 tomorrow, but I would be a scale seller at the 50% retracement at 923.
Good Luck
- AT
January 7th, 2009 at 9:04 pm
Though I am bearish for fundamental reasons, I can’t help but view the rally in the context of the gentle uptrend we’ve seen since late December, and that uptrend was not violated. This is still a technical, and not emotional, market. I don’t think any technical damage was done, let’s put it that way. 903 in the spoos was an old level and they defended it, so it will take another shock to send us back toward the 50-day at 888, 875, 868, 857, etc. Michael Woolfolk of BNY Mellon has good commentary on the psychological groundwork laid this morning by the ADP: https://gm.bankofny.com/Research/FXComment.aspx?ReadMore=Yes&ContentManagerID=7915.
January 7th, 2009 at 9:19 pm
Couple of other “non Elliot Wave” technical thoughts….
In terms of classic chart reading, the break above 919 on the SP500 was potentially hugely bullish development. That “should” have been a breakout above the previous two highs that peaked at 919. We “should” have made a “Run for the Roses” (S&P 1000+) after the break, but all we did was chop and grind and meander and today failed…we broke back below that 919. That’s not great.
I RARELY look at moving averages. Moving average analysis is really the most simplistic, least relevant form of Technical Analysis one could use. HOWEVER, there are still plenty of people who look at things like the 50 day moving average. It’s pretty clear looking at the 50 day, that there was a rush of buying when we solidly took out the 50 day MA around 890 ish. That 50d still comes in around 890ish…so that’s probably another line in the sand. That being said, it’s no coincidence that the 61.8% of the of 857-944 move comes in at 890 as well…..
The Battle Line is drawn pretty clearly for the Moving Average crowd and the Fibbonacci/EW crowd….890.
January 7th, 2009 at 9:53 pm
Dude. I am thoroughly pissed with WordPress. I tried to login 20 times, before resetting my password four times. And each time I reset it, it wouldn’t let me log in. So now, rather than utilizing my handle “TrickStar” which has lots of street cred, I’ve been forced to add another “r” to my name – “TrickStarr”. Every time I say the new one, I sound like a pirate. TURDPRESS stinks.
January 7th, 2009 at 9:56 pm
I like bonds. Bill Gross makes some good (albeit biased) points. I bought bonds this week. Including junk.
January 7th, 2009 at 9:59 pm
Ugly Day ? Not even close. Dow 3000 before 2010.
January 7th, 2009 at 10:18 pm
I have had the same thoughts about WordPress…
May they be denied TARP funds…
January 7th, 2009 at 10:31 pm
To review –
I am looking for the equity markets to make new highs over the coming weeks – followed by a test of price action similar or slightly higher than today’s closing high – followed by a new marginal high. In essence – whipsaw, with highs in between.
After that, I expect the bear to continue its course.
new post –
tradepostings.blogspot.com
January 7th, 2009 at 10:33 pm
I agree with AT (@ 9:01); the risk/reward is just not there for the longs at this point. That said, the rally could limp along for another two weeks.
In the event that SPX does manage to make it to 950, I’ll add more to my existing short positions.
January 7th, 2009 at 10:40 pm
@ AndrewShaw 8:07:
Here’s the link.
http://www.iht.com/articles/2009/01/07/business/yuan.php
January 7th, 2009 at 10:40 pm
ADP helped but that wasn’t it;
1. Im fairly certain roughly 80% of stocks on the S&P are trading above 50 day MA’s, last time that happened was Oct. 2007/ yeah AT this is simple but it is worth noting, after all Oct 2007 was a pretty good time to sell or go short, you know, like everyone on this blog did.
2. It’s now Wed. everyone is back to work and reality, traders are back, the holiday fun or ignoring of the problems stopped on hump day with the early morning smack of the ADP number.
3. Today showed just how uncertain earnings are going to be, INTC, vs. MON so until there is some clarity there I don’t see how we are going to move higher and it becomes easier to send it down on bad news, we have horrible news so of course that makes it worse.
4. Political Uncertainty, no explanation needed on this one, this is a global thing
5. Announcement of Satyam helps to delay investor confidence, as if it were coming back soon anyway, but this just makes it worse, it’s no longer a bad reaction it’s just the expectation that more will come.
I don’t know, I could probably go on forever just a few other reasons I could think of.
My plan is to wait until the end of Jan. to pick the sectors I’ll overweight and I’ll most likely just use the Almanac MACD signal to move out, worked perfect in 2008, and has worked great since 1950.
January 7th, 2009 at 10:41 pm
AndrewShaw @ 8:07
“China may balk at buying more US debt…”
It would serve us right if that’s what they decided.
In the debate over government spending versus tax cuts, Robert Reich recently said that he opposes the tax cuts because a lot of the money will then go to buy goods from China.
And there are rumors that Obama’s infrastructure package will contain prohibitions against buying products or services from foreign countries.
So if we are going to be protectionist (if only obliquely) it would serve us right if foreigners retaliate.
January 7th, 2009 at 10:43 pm
I guess I should make an adjustment to my number 2 b/c of course not everyone is back to work, there are few million that weren’t going in on Monday.
January 7th, 2009 at 10:53 pm
ben22 @ 10:40
“…roughly 80% of stocks on the S&P are trading above 50 day MA’s, last time that happened was Oct. 2007…”
Another historical parallel might be the period 7/22/02 to 8/23/02; this is relevant because of the magnitude of the drop (of the SPX) below its 50 day MA, similar to the magnitude of the drop on 11/20/08. If so, SPX 930 is a good place to get short.
January 7th, 2009 at 11:04 pm
I get queasy every time someone mentions Robert Reich. Doesn’t anyone remember him as Clinton’s doofus Secretary of Labor? Or the awfully stupid book he wrote? As far as I’m concerned he’s just another political hack that never had an original thought in his life. Flame off.
January 7th, 2009 at 11:07 pm
Trickstarr:
I had the same trouble last night. Wound up closing Firefox and logging in IE and it worked. Went back to Firefox, deleted all the cookies from this site and it seemed to fix it. There was something screwy happening there.
January 7th, 2009 at 11:14 pm
I don’t think we can tell much from the past week. Volume bad all week and the market was easily moved by traders one way or the other. I tried two small trades yesterday, somewhat in opposite directions. Bought a little DUG yesterday thinking oil had run up too quickly. Tight stop and got stopped out after a couple of hours. Of course, today it’s up 6%.
As someone demonstrated about the rallies on good news, this market is irrational and not trading particularly on fundamentals.
January 7th, 2009 at 11:16 pm
Oops – In case anyone read my ramblings, I meant rallies on BAD news.
January 7th, 2009 at 11:20 pm
excerpt from Lee Adler’s report today.
“The Fed this week discontinued its regular Tuesday rollover of $20 billion of 28 day 1 day forward term repos. They took no action yesterday or today, allowing these repos to expire, thereby draining $20 billion from the system today. That drain is probably part of the reason why the market is as weak as it is today. The media blames today’s bad economic news, but that’s just the excuse. The economic news is bad every day. It only matters when liquidity is contracting.”
January 7th, 2009 at 11:23 pm
OR perhaps it was the realization that the CBO announcement of the expected 2009 budget deficit of nearly $1.2 Trillion DID NOT include Obama’s spending plans of nearly $800, nor any of the probable state bailouts over the coming 12 months….they’re only asking for in aggregate $1 Trillion. So pick your poison, locked in nearly $2 Trillion at least deficit for this year at a time foreign financiers are financially constrained. Big Ben needs alot more than helicopters.
January 7th, 2009 at 11:25 pm
Stuart:
20 billion? Chickenfeed….! Paulson wouldn’t answer the phone for that..
January 7th, 2009 at 11:32 pm
ben22 Says:
“1. Im fairly certain roughly 80% of stocks on the S&P are trading above 50 day MA’s, last time that happened was Oct. 2007/ yeah AT this is simple but it is worth noting, after all Oct 2007 was a pretty good time to sell or go short, you know, like everyone on this blog did.”
You make my point about the Moving Average crowd….according to MA analysis you would get long and mindlessly stay long stocks above the 50 day moving average, whether or not you’re getting whipped around or not, whether or not the tide was going out and you were about to get stranded, whether or not there were a lot of other indicators suggesting it was time to exit.
I don’t mean to suggest that moving averages are totally simplistic…I’ve seen some novel applications of several M.A.s all at once…i.e. running the 8,13,21,34,55,89,144 day (all fibbo #s) and use them as a type of momentum indicator or sorts. There are ways to use Moving averages in a sophisticated way, but too many people use it in a very simple and not-so-useful fashion.
Regards.
January 7th, 2009 at 11:45 pm
AT,
Thats my own special way of agreeing with you. mindlessly getting long stocks above that 50 day just seems lazy to me, it’s like you want to lose.
I’m not a big TA guy but have found it very useful over the last 18 months, your Elliot analysis is always very interesting. It also always makes me think about phi.
January 7th, 2009 at 11:54 pm
In a trending market, moving averages are one tool out of many that can be useful.
In a volatile market, they have far less value as a market-timining indicator.
I think it’s worth noting how little time the SPX has spent above its 50 day MA since October 07. I think its about due for a submersion.
January 8th, 2009 at 12:28 am
Here’s a thought: how about as part of a stimulus plan we open up trade with Cuba?
Then in exchange for their expertise in organic farming and cost-effective medicine, we help them modernize their infrastructure (roads, electrical, internet).
January 8th, 2009 at 12:37 am
it was not ugly for me. i had sold ure one day earlier. i bought it again today. i think i got lucky.
the question is “are we in still bear market”? probably yes. so i am short some etfs, long some double etfs,
and have sold calls against them. my plan if the market goes up my double exposure will do good even though i lose on shorts. if the market goes down i’ll make money on calls and on my shorts. i will be losing some on double etf exposure. i’ll close my shorts if dow jones goes down like 7k.
January 8th, 2009 at 1:05 am
cbosco76 @ 12:28
“ how about as part of a stimulus plan we open up trade with Cuba?”
I’m not sure I fully understand the politics of this, but my impression is that the majority of residents of Florida are opposed.
Florida is worth 25 electoral votes.
(But it’s probably more complicated than that).
January 8th, 2009 at 1:30 am
@Mike in Nola – Thanks for the tip! I will try that. Now that I’ve got two handles (TrickStar and TrickStarr), I’m thinking I may have each take the opposite side of each of Barry’s posts. Arrrr!
January 8th, 2009 at 1:40 am
Per my three line break chart SPX needs to close above 968.75 to indicate a trend change. As this move up crept closer to that level, it acted as if Jason, Michael, and Freddy K were waiting for them at 968. Also this is the first time that Germany had a failed auction. They’re supposed to be one of the better European economies and if they can’t get money then it doesn’t bode well for anyone else.
January 8th, 2009 at 2:05 am
Somewhat unrelated, stumbled across this ETF analyzer which allows you to get performance figures on lots of ETF’s over various lengths of time.
http://www.etftrends.com/etf-tools/etf-analyzer/
It seems to confirm show that the decay some have discussed does exist and that while Ultrashort ETF’’s may be good for short term trades, they are not necessarily good long term vehicles as suggested in this video:
http://www.thedisciplinedinvestor.com/blog/2009/01/06/video-wsj-on-2x-etfs-steer-clear/
For example, QQQQ is down 33% for the past six months and 35% but QID is up only 24% and 21% respectively. While it’s a nice profit, as SB has mentioned
, it’s certainly not 2X.
Even worse, QQQQ is down about 7% over the past three months, leading one to believe that QID would show a profit, but QID is actually down 28%
January 8th, 2009 at 4:14 am
How about: the market was overbought?
Now, it’s going to get oversold. And so it goes.
January 8th, 2009 at 5:13 am
When did Meredith Whitney’s new note on banks hit the street? I think that had more to do with it than anything. Bad days for financials= bad day for the market, period , end of story.
January 8th, 2009 at 9:15 am
Mike in Nola, I’m with you on the overall theme that double ETFs are not quite as advertised, however in your analysis you need to factor in the dividends/distributions that they pay out. QID just paid out something like $5 a share a couple weeks ago.
January 8th, 2009 at 11:00 am
@ Mike in Nola:
“For example, QQQQ is down 33% for the past six months and 35% but QID is up only 24% and 21% respectively. While it’s a nice profit, as SB has mentioned
, it’s certainly not 2X.
Even worse, QQQQ is down about 7% over the past three months, leading one to believe that QID would show a profit, but QID is actually down 28%”
How much longer are they going to run these things with that type of historical performance? Think there’s a lawsuit brewing somewhere? Those are WAY off of advertised targets…
January 8th, 2009 at 11:27 am
CPJ13 – I totally agree. If you overlay FXI vs. FXP, or DIG vs. DUG, or any other pair of related ultra ETFs, it becomes evident that they are either a fraud, or hugely mismanaged funds.
January 8th, 2009 at 11:34 am
Those QID figures from the past three months go far beyond ’slippage’. When something should be up ~14% based upon the prospectus and it’s DOWN ~28% … there’s more there than meets the eye.
I know the math says “up 10% then down 5% is not the same as up 5% from the beginning”, but those numbers are astounding. Thanks for sharing.
January 8th, 2009 at 12:06 pm
Actually, I was way off, the QID distribution was $9.50 a share.
January 8th, 2009 at 12:37 pm
E Says: True that dividends need to be counted. I can only plead lateness of the hour when I posted. Looking back 3 months, even with the divident, it is still down $10.
I don’t agree with those who slam them. They can be useful. I made some bucks with them last year catching some moves.
January 8th, 2009 at 9:31 pm
Wow. This thread re the inverse ETFs serves as a pretty clear mirror showing some of the problem that has led to this current financial meltdown. Look at the FRONT COVER of the Proshares Prospectus. (You know, its that thing the broker sends to you that you don’t read when you are “swing trading” or “day trading”.) I don’t know how much clearer they could say that the 2x (or 3x in the case of the Direxion etfs) returns are based on DAILY performance. Folks that are complaining that this is misleading might also belong to the set of folks that started smoking AFTER the warning labels were placed on cigarettes, and then want to find out how to sue the tobacco companies when they discover a “spot on their lung”.
Ok, a bit harsh. And I should save some invective for the clever twits that saw the opportunity (to exploit the greedy starry eyed “investors”) by structuring these products. (I’m waiting for one to create an inverse on the QUARTERLY results.
Madoff investors who lost money via a feeder fund that didn’t explain that ALL of the investment was heading to Madoff can complain… but the investors who crossed their fingers and winked when the returns rolled in come hell or highwater (half suspecting some shenanigans, but hoping they’d not get caught holding the bag) should have their names published in the paper to reap the scorn they richly deserve. ETF complainants can be similarly sub-classed.
R in NY
PS: The dividend does not compensate – particularly since it is by definition a short-term distribution and taxable at your marginal rate.
PPS: I use the inverse ETFs in hedging swing trades and overnight day trades. And made some good money selling call premia (cf. the decline in QID, SDS, DUG).