MON. OCT. 27- Is The Bottom Finally Finally Near?

As crazy as it sounds, Friday was actually a respectably decent day for the stock market. The Asian and European markets were routed earlier, futures were limit down coming in, and the news media was all ready for a meltdown. Instead, what happened was a sharply down day to be certain, but volumes were lighter than they were on Thursday and seemingly random sectors and stocks higher (insurance stocks, certain oil stocks, and such). With the dollar at multi-year lows against the yen, oil falling despite an output cut by OPEC, and the bond market up (but well off of its highs), one would have thought it’d be historically bad. It wasn’t. That makes it good. An interesting history lesson here would be to go back to 1973. The Dow topped out at 998 in October 1973, fell to 573 by October 1974, rallied to 692 the next month, and bottomed out at 570 in December 1974. The Dow was up 38% the next year.

Data table here:

http://finance.yahoo.com/q/hp?s=%5EDJI&a=09&b=1&c=1971&d=09&e=31&f=1977&g=m


The catalyst for that decline was the oil crisis, but once the economy accepted the shock, prices rebounded violently. Now, circumstances are entirely different this time of course, but the excesses are being totally worked off and the potential for a bounce exists as people begin studying history and playing all these what-if games. Add in to the mix that while there was precious little buying pressure on Friday, the selling volume just was not there. Thus, if things stabilize with no more major shocks to the system particularly following a further Asian collapse overnight. Money from the TARP begins flowing this week, the Fed will be out cutting rates in all likelihood at their meeting, and let’s not forget that next week is an election week so it is in the best interests and hopes of the incumbents to see an up market this week to make a fresh impression on the minds of voters. When everyone sells who wants/needs to sell, it creates a vacuum once things change. The nut of all this: be extremely careful on both sides, but be aware that what has worked in the past may not work in the future as Friday was the first day in a long time that the market had a shot to be drubbed…and it just wasn’t. Again, this is not a clarion call for a market bottom, but it is a clarion call to be extra-observant of any reversal particularly in a week in which reversals historically occur.

Overnight, Asian stocks further collapsed. Korean authorities cut interest rates by a record amount to no avail. Prices were down anywhere from a couple percent to as muc has 12% in Hong Kong. European bourses are weaker as well with prices down 3%-5% across the board. State-side, futures are well down, but not as much as one would think. This is one of the most critical days in one of the most critical weeks for the stock market in several decades. If the market holds opening levels, we may be in for a gigantic reversal today. However, if the first hour is sloppy with no signs of a bounce, it will likely hte beginning of the end of this process with a gigantic decline. VOlumes will not be all that heavy at first; there will be some forced selling and people afraid to step in. However, again noting, if the volume is exceptionally low on the initial downdraft and a few buyers come to play, it could well be a vacuum higher.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified


Good-

NIHD- major reversal on Friday; if it opens lower, looking to buy thru unch and/or A-B-A2 to upside if it opens higher

MET, PRU, AFL, HIG- among insurers which were up Friday in a weak tape; look for more strength today if market is good

ACV- on “Mad Money” Friday

BEAV- upside earnings

HUM- raised guidance for fiscal 2009

SOHU- good earnings and raised guidance

Bad-

PLD- closed near a low on Friday; it was very weak..if it opens higher, looking to short at 12

LVS, WYNN- very weak once again on Friday; news in one of them will affect the other in all likelihood

TKR- bad earnings Friday and closed near a low

CAH- weakest of the healthcare stocks on Friday

JWN- weakest of the retailers on Friday

RJF- weakest of the brokers on Friday

MAC- did not bounce Friday; looking for short thru 21.95 if it opens higher and/or A-B-A2 to upside if it does not go down fairly soon after open

HLF- fell to a new yearly low on Friday

HPC- extremely weak on Friday; looking for short thru 13

NFLX- continued extensive downtrend; will likely follow market today

SAFM- weakest of poultry producers

LBTYA- weakest of media companies on Friday

FITB- performed wretchedly on Friday; looking for short thru 7.80

THOR- warned of its devices failing…can cause death

Earnings list:

MON OCT 27 BEF

ACI BEAV EXP

FPL HUM L

LO ONB PENN

PBKS SOHU TDW

VZ




MON OCT 27 AFT

ACF AFG ALB

ATHR BBD BWLD

CF CR EWBC

FIS HPC MPG

MTH PCL PRXL

RCII SLG UHS

VRTX WMS


Good luck today.



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