As expected, we're seeing the bears attack overnight in Japan and in the early futures here.
The WSJ has a planted story about debt conduits for asset backed commercial paper related to Citibank. The writers really don't understand those assets. If the commercial paper can't be sold due to a liquidity crunch, the line of credit funds it, But the assets backing the CP are then just rolled off to repay it and no new assets are added. Since the assets are high quality, short term receivables with good credit cushions, there really isn't a risk to the liquidity lines.
[skeptics: yes, I know about planted stories - I did a few of them myself many moons ago.]
Some terror alerts, too, in Europe.
I think the ADP jobs number might be significant this morning. A very low number or a negative number would both encourage the bears and provide more support for a Fed ease.
A WSJ story shows how female & minority goups can be paid off, too: they oppose taxing their own hedge fund managers' pay as compensation. Sheesh. A old cleaning lady pays taxes at 45% including social security taxes and the rich woman beefer manager wants to be taxed at 15%. Despicable. [You can substitute "black" for "woman" in the above comment if you wish.]
LIBOR [aka London Interbank Offered Rate] has a high spread over the US fed funds overnight rate and short term Treasury bill rates. There is a shortage of Eurodollars in Europe. What is causing it? I think that perhaps OPEC or Russia and other oil producing nations might be pulling petrodollars out, or maybe China is not lending in the Eurodollar market, out of concern over European banks.
The S&P cash chart looks like a fine inverse H&S with two closes over the neckline break. I'd have preferred more volume. The beefers will probably hit it. Wait for dips to buy if you need to get invested.
The Russell 2000 looks like a W bottom and a small bullish cup & handle. Another close over 800 is needed to confirm.
Buffet's BNI is cheap. If I wasn't so loaded up and saving my last buying power for more big cap fins, I'd buy some.
The Nazz 100 is still moving after breaking the neckline of its inverse H&S a few days ago. Looks a bit extended, but those stocks can do that awhile. My big cap techs are AAPL, GOOG, ORCL and CSCO in order of position size.
The Nazz comp has the same pattern: recent break of neckline of an inverse H&S. Ditto Dow Jones Industrials.
I'll borrow from Churchill regarding this correction and "subprime" "crisis": It's not the end or even the beginning of the end, but it's probably the end of the beginning.
The markets look ahead. So when the "end" of the "crisis" can be foreseen, that will be the end of the correction. I think it's close. As mentioned before, many people have recent experience in the commercial real estate and mortgage crisis of the early 1990s so know how to do this residential subprime restructuring. Plenty of bottom-fishers are lurking to grab cheap assets.
So it's still a bull market. Buy dips. Hold longs for the next big move up.
PS: High levels of job cuts in Challenger, Gray report for August. Many cuts in financials.
PPS: low ADP jobs number, only 38,000 jobs in August. The Fed must cut NOW!