TUES. OCT. 7- Psychology And The Markets

Quick trivia question: on what date did the Dow Jones Industrial Average closed at its all-time high? Cue “Jeopardy” music. No, really…think about it. Hopefully, by the time you got to this sentence you have a guess- ready? October 9, 2007. That is right. The DJIA closed at 14164.53 less than one year ago today. Since then, the benchmark average has fallen almost 30% to a level first hit almost 10 years ago. When one takes a step back, these facts are simply stunning. First, the destruction of wealth in the American capital markets has declined at a near unprecedented rate at the margins in the last year and nominally at numbers that total literally in the trillions of dollars. Second, on a deeper and even more introspective level, the stock market (the DJIA anyway) has officially gone nowhere in nine years. Many of the kids who graduated doe-eyed from college in 1998 and were given the mantra ‘buy and hold’ now find themselves underwater in their 401-K plans with many of their pension plans (particularly in major financial companies) nearly wiped out. One cannot begin to measure the psychological impact of the financial losses many people are suffering- however, one already sees the implication of this in the fact that the government is now on the verge of taking control of the entire financial system. For day traders, we can expect more volatility in knowing that all of these quick fixes don’t solve the problem- it is psychological. The money at this point is there- it is a matter of getting people to spend it and banks to lend it.

Overnight, markets in Asia were mixed with Tokyo down again in breaching the Nikkei 10000 level, but Australia was up following a surprise bold interest rate cut. European bourses were generally higher. Futures have been all over the place overnight, but indicate a bit of a stronger open. With stocks having closed in the middle of a range yesterday, it makes day trading a very hard venture this morning as there no significant momentum to either side. Notable is LIBOR which continued to move higher; this indicates credit markets are tightening more. If this trend continues, the markets will likely sell off as the day progresses but the early strength following the BAC warning is notable.

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-

FCX- closed near a high; looking to buy thru unch if it opens down

ENER- closed near a high; looking to buy thru unch if it opens down

CHTT- on Cramer; if it opens weak, would buy in any market strength

Bad-

BAC- warned and is issuing shares

XTXI, HERO/other tertiary energy stocks- many small cap oils are due for a bounce…if oil bounces, these type plays will likely bounce hard on short covering

ASCA, MGM, LVS- among other casino stocks, they’ve suffered non-stop selling as well for days- particularly after the LVS news from a couple days ago. Due for a bounce in any rally.

DVA- closed near a low; looking for more weakness in shorting below 48.50

XL- closed near a low; if it is locatable with no bounce yesterday, would short thru 13.55.

LNY- closed weak; would short thru yesterday’s low around 13.05

HPT- closed weak would short thru yesterday’s low around 15.10


Earnings-

TUES OCT 7 BEF

ARA 1.03/575M 1.27/599M 3.28/2.19B 4.37/2.21B

AYI 1.08/539M .97/499M 3.76/2.04B 3.88/2.05B

CYCL .10/258M .09/258M .37/1.04B .48/1.07B

PAR .01/41M .02/42M .09/170M .27/224M

SWY .47/10.08B .81/14.39B 2.25/44.70B 2.41/45.53B

TUES OCT 7 AFT

AA .61/7.38B .74/7.48B 2.43/29.74B 3.35/31.26B

YUM .54/2.78B .49/3.49B 1.90/11.36B 2.11/11.61B

ZZ .08/390M .08/382M .39/1.54B .45/1.54B



Good luck today.

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