Traderbill’s Financial Markets Weblog

…an incredible reaction to the weak jobs report and the jump from 4.7% to 5% in the unemployment rate. But TB thinks that while this was an overshoot for a short term move, the trend is down…see stock market summary below…a lot of technical supports were broken and have now become major resistance! TB believes that while the focus was on job growth worries over the financial sector were especially troubling… Regions Bank announced a $300 loss on bad loans…every time this happens it is as if a bomb has gone off…and undoubtedly there is more to come. TB feels that if there is to be a lasting rally we won’t see it until next week as we approach options expiry, given the volatility since Dec. expiry.

The main thing is that on Friday every single sector except Utilities was negative!…and negative 1% or more: Internet -4%; Financials -2.8% (Brokers -3.9%); Tech -4.5% (if there is to be a bounce it will show in this sector…sans semiconductors); Housing -5.5%…and should it rally? Oil Services down 3.1%. Healthcare, Biotech and Pharma all down 1% or more and this could be another rallying point. But it seems for the past six months we have grossly understated every problem we are facing and it is hard to believe that this time is any different…especially when one views the technicals. So let the big guys who have to ’front run’ the market to establish positions due to their size, pay the price…not you! Once again, overnight it is the multinationals that are gaining…we had this headfake before and that was when the dollar was plunging…overnight it appears to be stabilizing with the dollar index over 76 again.

Talk is now of a 50 basis point cut by the Fed but while this may happen, will it really be a reason for stocks to rally? Fiscal policy is irrelevant as any actions will take far too long to implement. Add to this tighter credit restrictions and it seems we are just at the beginning of a decline that could last six months or even longer. Not wishing to be bearish but that is simply how TB sees it.    

The worst strategy calls of 2007 were Goldie’s Abby Joseph Cohen (she gave you good advice on tech stocks in 2000 too…right?), Citi’s Tobias Lefkovitz, and the other big investment houses…all see S&P 500 up 14% for 2008…just because they were wrong last year doesn’t mean they will be right this year!  TB thinks there could well be a 14% gain…but from the lows of the next 3-6 months, not for the year!

How about the write your own ticket IPO’s of SIV’s that got into so much trouble…toxic waste…then there were those ‘hot’ IPO’s…hedge fund manager, Fortress Group (FIG) -21%; private equity firm Blackstone (BX) -34%…both way worse from the first days close and both closed at new lows on Friday. The exception was VMWare (VMW) the spinoff from EMC on 8/13 which is +177%…but what is strange is that EMC still holds over 80% of VMW and is -10.8% over the same period! Does this make sense…especially since competitors for VMW have emerged in the meantime? Go figure!

Not going to write anymore…this is more of a time to observe than to make one look foolish later.