Wednesday, September 17, 2008

Pre-Market

Futures sharply lower following dismal housing starts. Despite the AIG bailout and better than expected earnings from MS , financials are gapping lower - AIG, MS, C, GS, MER, WB, AIB...

CNBC reported senior people at MS concede that further zig-zags in the co's stock price could, and possibly will, force it to change course and seek a merger partner, probably a well capitalized bank.

Also gapping down: select Chinese names following weak Shanghai markets ACH, PTR, CEO, CHA...

Too much uncertainty remains so it looks like we could retrace a good portion of yesterday's gains.

Crude inventories a 10:35.

Gapping Up: ADBE, HOKU European banks LYD, BCS

Bloomberg reports that the TED spread has widened to the most since the crash of 1987. Not sure what that means, but it doesn't sound good.

6 comments:

Christian said...

TED spread:
http://en.wikipedia.org/wiki/TED_spread

Aimable said...
This comment has been removed by the author.
Aimable said...

Hi Jamie,
I had some GS SEPT 125 puts that I bought yesterday, which I sold soon after the market opened today when the stock was at 122. I did this because I thought the AIG bailout would be good for financials and also because the options would have expired this Friday. Now I have been watching the stock at it hovers around 100 for the past two hours. This morning, was there a way that I could have realized that 120 was not going to be the low for the day?
Thanks!

Jamie said...

Thanks for the TED link Christian.

Jamie said...

Aimable,

I think you did the right thing with the GS options. Ideally, you would want to hold if GS tested and took out yesterday's lows. But clearly, it did not get low enough for a test before reversing.

I'm not sure how options work, but another way you could have played this is when GS failed at yesterday's afternoon support (now resistance) around $126-127. You could have re-entered the trade, or risk a portion of the profit from the first trade on at least a retest of the ORL. As it turns out, the ORL and yesterday's low were taken out in a matter of minutes and price swooned to the $100.00 level. Draw in your support/resistance lines prior to taking your trades and let those be your guide. When price tested resistance, it carved out a red inverted hammer with long upper shadow on the 15 min., a strong rejection signal once price took out its low.

Aimable said...

Great, thanks Jamie!