The Bear Is In Charge
Kevin Haggerty is on vacation for two weeks. During this time, we’ve asked
Joe Corona, Senior Trader for Tony Saliba, to write the lead morning piece.
Kevin will return on August 12.
The market is
set to open lower this morning on the back of follow-through from
Friday and weakness in Europe. Evidence that economic growth is stalling has
led to heavy selling this morning in Europe with DAX getting pounded for almost
4 % at one point. In the U.K., factory production fell at the fastest rate in
over two decades, and the FTSE is down about 1.5 % at the moment.
The reason I am mentioning weakness in Europe this morning is because I think
when you add up the poor economic numbers in the U.S. last week with the poor
numbers coming out of Europe this week, it spells rate cuts. If the cuts were
to be coordinated, it might even prevent the dollar from receiving the beating
it would take if the Fed were to act alone. All it would take is for a nice
stiff sell off here today, and it would definitely be on the front burner. The
interest rate futures are starting to price it in already.
So what does that mean to us? If the first twelve rate cuts didnâ€™t work, what
difference will another one make? Ultimately, I believe it will make no
difference, but in the short term it could be enough to generate a nice short
squeeze, give a temporary lift to bank and financial stocks, as they get to
feast on an even steeper yield curve, and may set off another round of
refinancing which could further inflate the housing bubble and give retail
sales a nudge.
A Quick Rantâ€¦
So the market is
lower and I am short, why am I not happy? I am not happy because I hate to see
people getting hurt. Not the professionals mind you, but the average people
that got sucked into this thing and are now hurting. I am also not happy
because the Socialists (known by some as Democrats) are attempting to spin this
sell off into more votes in November, when all the pieces for this tragedy were
put in place during the â€œKeep Slick in Officeâ€ bailouts and futures pump jobs
of the late â€˜90â€™s. Iâ€™d like to see Bob â€œLaying Lowâ€ Rubin hauled in to
enlighten us about some of those operations.
â€¦And Back to the Markets:
This is a bear. Sell all rallies until it hurts, especially in tech, and keep
your eyes on sectors that look as though they might be up to something
(biotech, telecoms), and keep your eyes peeled for movement on the interest
rate front. As always, donâ€™t be a pig, use stops, and if something doesnâ€™t feel
right, is usually isnâ€™t, so get out!