11:40am
ES catching a bid off the lows. I don’t see a big rally coming, but more of a pause day. Weakness this afternoon would not surprise me.
11:10am
ES looks weak. I think we take out 1220 this afternoon. Oil is falling fast, down to 101.50. The dollar is making a new high.
10:56am
Washington Mutual (WM) is down 24% to 2.50
10:53am
The dollar is rallying, pressuring commodities lower. Oil lower by 74 cents to 102.50. The ES has fallen under 1230 once again.
10:35am
Inventory data: Crude -5.8M v -4Me, Gasoline -6.4M v -4.5Me, Distillates -1.25M v 2.2Me, Utilization 78.3% v 80%e
The initial reaction in crude was a spike higher, but those gains quickly evaporated and are now moving lower, only up 25 cents for the day.
10:20am
Very choppy trading this morning. ES struggled to confirm a break above the 50MA, which does not bode well for a potential rally. Commodity names are seeing a bounce this morning, but financials and retailers are weak.
10:05am
Oil inventory data due out in 30 minutes. Here are the expectations:
Crude -4.0Me
Gasoline -4.5Me
Distillate -2.2Me
Utilization 80%e
9:50am
ES attempting to rally above the 50MA again. Oil is now higher by $1.16 to 104.43.
9:38am
LEH has moved lower from the open into negative territory, down to $7.78. XLF down 1.2%.
9:32am
ES slipping lower, under 1230.
9:24am
ES attempting to rally above its 50MA (1234).
9:18am
At 7:30 this morning, LEH reported Q3 earnings of -$5.92 v -$3.35e. They cut their dividend and plan to spin off commercial real restate assets into a new company. The ES fell from 1238 to 1220 on the news, but then recovered. Shares of LEH are trading at $9.03, up from yesterday’s close at $7.79
9:07am
Oil is higher by 20 cents after OPEC’s decision to cut production, a rather muted response. It seems as though energy traders are more focused on weakening demand and global growth. The S&P E-Mini Futures (ES) traded as low at 1220 this morning but have recovered, now trading at 1232.75.
The Day Ahead
It will be interesting to see how oil prices respond to OPEC’s decision to cut production. Watch for developments in the ongoing Lehman Brothers saga. The company plans to pre-announce Q3 earnings at 7:30am and the conference call is scheduled for 8am. At 10:35am, traders will turn their attention to the weekly oil inventory data that will begin to reflect the output disruptions along the Gulf Coast.
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September 10th, 2008 at 10:38 am
Craig,
If the market doesn’t react to a positive surprise number on crude inventories with a rally, I think what we are witnessing a deflationary unraveling.
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September 10th, 2008 at 10:52 am
I agree with that theory.
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September 10th, 2008 at 11:08 am
IMO, these are hedge fund games. I did some comparisons of energy/commodities stocks. It seems the small/mid caps in these are hit less than the “popular” ones. If this was *purely* a deflationary scenario, one could assume, money uniformly running out or even less so, from the blue chip names. This to me, seems like hedge funds heavily shorting any bounce to drive others out.
The wierd thing is oil down and the market goes down. It could be that the funds are taking money out of index futures and shorting any commodity/energy bounce? This is like an arbitrage play for them I guess. For months now, oil and DOW have had an inverse correlation. So oil down and the little guys push up the stock market. In the past week or so, this relationship has become directly correlated.
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September 10th, 2008 at 11:33 am
I think the two are related. I’ve been talking about these hedge fung games since nat gas sell under its 200 day moving average with out a bounce.
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September 10th, 2008 at 11:03 am
Everybody talked about Feds taking over FRE and FNM as great news for financials. On the contrary, this take over put the Feds in a bind. Now, they cannot come to the rescue of much smaller players than FNM and FRE, but big enough to impact the economy and the sentiment.
Feds spent their last bullet on FRE and FNM. Now, LEH, WM and whoever comes next is on its own. Can’t be good.
[Reply]
September 10th, 2008 at 11:09 am
Third quarter loss of $5.92 per share
“9:18am
At 7:30 this morning, LEHLEHMAN BROS HLD
$7.97
Change: +0.18 - +2.31%
as of 9/10/2008 10:45am
reported Q3 earnings of $5.92 v -$3.35e. They cut their dividend and plan to spin off commercial real restate assets into a new company. The ES fell from 1238 to 1220 on the news, but then recovered. Shares of LEHLEHMAN BROS HLD
$7.97
Change: +0.18 - +2.31%
as of 9/10/2008 10:45am
are trading at $9.03, up from yesterday’s close at $7.79″
[Reply]
September 10th, 2008 at 11:33 am
Thanks for the correction!
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September 10th, 2008 at 11:33 am
As for TA,
there is a grey area, when you have momentum indicators oversold, you can still sell off and TA doesn’t tell you where the bottom is. Most quant models I am familiar with, rely on a trigger to buy, like overcoming a gradation in MAs or 3 day of stochs above 30 or combination of some others etc to name the primitive ones, and these usually trigger after a bottom is put in.
If you look at some of the fav hedge fund stocks and commodities, most of them have this property. Before most quant models can trigger a buy, there has more short selling. It has been exactly the inverse for the dollar.
Infact, I believe this is the case in UNG, looking at COT report, it is just large speculators increasing their short positions to record levels and in the dollar to record long positions.
Unfortunately, it is bad for a short term trader like me - these equities are so oversold and right on their lower BBs, that I have no confidence shorting them should they rip higher and my buy triggers don’t get triggered with the continued selling.
I have been noticing this pattern in many favourite hedge fund stocks across the board (GOOG, POT, ANR etc.) you name it.
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