Tuesday, December 16, 2008

Technical Picture - Consolidation Ahead of FED

Stocks sold off in early trade as investors grappled with ongoing uncertainty and the threat of more losses from the financial sector, as well as the latest developments in the Maddoff Ponzi scheme. The fate of the Big Three automakers remains uncertain, even though the White House signaled that a more thorough relief plan for automakers is on the way. Financials -4% made up the session's worst performers, thanks to notable weakness in major banks like JPM and Bank of America (BAC).

Investors also sent shares of GS and MS lower in anticipation of heavy losses from the pair when they report quarterly results Tuesday and Wednesday, respectively. Noticed that Cramer is endlessly harping on blame for poor performance in financials on the back of the SEC and the removal of the short uptick rule and I say he's still a bonehead. Wall St. sold the world a bill of goods with mortgage backed securities and various other questionable schemes, so why shouldn't the shares be at multi-year lows.

November industrial production slipped 0.6%, which was about in-line with expectations, but reflects the underlying weak trend. Such trends have the FOMC fighting to kick-start lending in order to induce economic growth. As such, fed funds futures imply a reduction to the fed funds target rate is certain. There is currently a 66% implied probability the target rate will be cut to 0.25% from 1.00%. There is a 34% implied probability the rate will be cut to 0.5%... The expected drop in interest rates combined with weak economic conditions has currency traders selling off the USD. Dollar weakness helped fuel an early advance in commodities such as agchem, natural gas, gold, and crude oil. Crude was up as much as 8.2% during the session, but came under pressure as the threat of a production cut from OPEC was no longer a surprise. Crude prices already advanced more than 10% last week alone. OPEC meets Wednesday and is expected to cut daily production by 2 million barrels.

Lots of forces at play as we head into tomorrow.


Glenn said...

Who needs Briefing with writing like that. Keep up the great work Jamie.

john said...

How about we have a downtick rule between 6pm and 7pm est to protect Cramer viewers from paying too much for his stock pumps.

Jamie said...

Thanks Glenn,

MS and GS set up nice trades this morning!

Jamie said...


Good point. I think his rant is self-serving because I'm sure that the ratings for Mad Money go down with markets.