Look Out Below!

Futures are getting pressured heavily this morning —

S&P500    -13.80
NASDAQ    -17.00
DJIA         -115.00

Not that we are anywhere close to them at the moment, but watch the August 9th lows. A break on any volume on the Dow and the Transports will issue a major sell signal.

For the Industrials, thats Dow 12846; The Transports are not too far the low of 4672. These are your lines in the sand.

A break of both gives a Dow Theory Sell Signal . . .

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  1. Brian B. commented on Nov 5

    China down over -1500…-3300 off its high just over a week ago… going to be a great next few months for traders….

  2. UrbanDigs commented on Nov 5

    Barry – I think we are on the verge of some major problems here. Not only will the new accounting change on NOV 15th re-adjust what assets fit into Level 3 criteria, raising concern, but its sure to mean signficant more write downs in the quarters to come.

    Doug Cass makes a very valid point as a result of all this. Add in the fact that these mortgage insurers are on the verge of bankruptcy given the mess we are seeing here in the securitization asset holdings. ABX Indices have plunged in the past 3 weeks, meaning we have more carnage to come. If the insurers can no longer support claims, or provide insurance (PMI, RDN, etc.), or even cut the level of insurance for these securitized assets, we are going to see a meltdown of assets currently held at a level far beyond anyone’s expectations.

    This credit crunch is far from over.

  3. Bill commented on Nov 5

    And dollar contracts are up thia a.m. – Oil Gas Precious metals down – I agree , we are in for something nasty – Citigroup will lead the charge out . This ain’t good !!

  4. Werner Merthens commented on Nov 5

    If those levels are broken, the Dow Theory would signal a trend reversal.
    The venerable Dow Theory is at the considered by many the foundation of Thechnical Analysis. It also has its critics of course.
    But does the Theory work? How well does it work? It is likely impossible to find a conclusive answer that satisfies everybody, but it is possible to test many of the Theory’s tenets and evaluate the results. The final verdict will vary from individual to individual.
    You can follow this link for the results of my tests:

  5. SINGER commented on Nov 5

    Let’s wait and see…With this much Money Supply Growth and interest rates this low…it will be tough for stocks to collapse…of course, anything is possible!!!

  6. DavidB commented on Nov 5

    The final verdict will vary from individual to individual.

    Is that another way of saying there is no conclusive evidence?

  7. peter from oz commented on Nov 5

    when dow theory was established was there a PPT?
    the simple indicator now is the last 60 minutes and how many days in a row “they/it” don’t pull the trigger
    two’s the record so far
    interesting week
    must be some big ticket metal commodity speculators nervous with sputtering prices and rising interest costs
    this bear sleeping fitfully
    rgds pcm

  8. Stuart commented on Nov 5

    Look out below Indeed. Per below, anyone who thinks Citi is done with the writedowns even after this next $8-$11 billion is deluding themselves.

    From MarketWatch: Citigroup reports $134.8 billion in ‘level 3’ assets

    Citigroup Inc. … said its so-called level 3 assets as of Sept. 30 were $134.84 billion. Level 3 assets are holdings that are so illiquid, or trade so infrequently, that they have no reliable price, so their valuations are based on management’s best guess.

  9. michael schumacher commented on Nov 5

    I gather that Citigroup will be joining those at Merrill selling those “watches” out of the back of the van while they think no one is looking.

    The “watch” market turned into shit already and these guys have a ton of supply waiting to cut you a “deal”…..

    I’ll say it again….anyone who thought they could just roll over assets and collect the month to month spread on them FOREVER (as it seems that is/was Citi’s strategy) deserves whatever they get….unfortunatly “Chuck” will benefit handsomely from this.

    I see the latest “downgrade” just came out on C…….cut to accumulate from strong buy…going out on a limb there-LOL


  10. Francois Theberge commented on Nov 5

    “From MarketWatch: Citigroup reports $134.8 billion in ‘level 3′ assets

    Citigroup Inc. … said its so-called level 3 assets as of Sept. 30 were $134.84 billion. Level 3 assets are holdings that are so illiquid, or trade so infrequently, that they have no reliable price, so their valuations are based on management’s best guess.”

    That would free markets at work as per the neocon’s credo I guess. If you’re among the chosen few, you have the right to guess how much the assets are worth, at your discretion and convenience, shareholders be damned.

    You even get to shop for the most favorable “objective” rating on these assets. No need to bribe, just mention, en passant, that business is so good that a loooong-term relationship would be great for all parties at the table.

    And there are STILL, some people wondering why governments jump in with an “irresistible” urge to regulate left and right, usually after the damage is done, of course.

    It goes without saying that we shall avoid the following inconvenient truths:

    1) If top regulators were doing their job instead of professing political inclinations just to please (should I say brown-nosing?) their political masters of the moment and try to match the facts to those, maybe, just maybe an ounce of prevention would avoid a ton of pain.

    2) If the above mentioned politicos were really conducting the business of the people instead of outdoing one another in their drive to reach ideological purity and flatter their “base” (can you hear the sound of the barfing river triggered by this word?) then, perhaps the next bill landing on their desk could be read. Pity them, since they spend 70% of their waking hours raising money. Kinda of hard to get some legislative work done if they’re in D.C. from Tuesday noon to Thursday 2PM max. Plus,a person needs to sleep, eat, obey the calls of Nature and all that jazz.

    Understanding these simple facts goes a long way to explain the preference toward minimal regulations. Why spend the time and energy to carefully craft sensible regulations? Better to argue a ideological construct that avoid to work too hard.

    3) About money and politics: Who do I work for? The one(s) who pays my salary right? So, who do the politicos work for? Those who pays for the campaigns. Is it you and I?

    No? Hmmm! Is it any surprise that S&L, stock options, Internet bubble and Housing bubble and the resulting credit mess have developed a nasty habit of popping like zits on a teenager’s face in the last 15-20 years? All these affairs have one dominant common factor: Either the Fed, Congress or the White House had had opportunities to step in and limit the damages BEFORE a crisis. But the color of contributions and the pressures of lobbying made sure that people put in charge supposedly to ensure a minimum of order and level-playing field in the Markets’ playpen were asleep at the switch, when not downright hostile to the Cassandras. BTW, I’m spreading the blame to Dems and Reps here. Just read Maggie Mahar’s “Bull!” chapter 8 p.123-149 as an example of how perverse the political system has become when it is the time to use common sense in financial matters.

    We’re not out of the woods yet. Sooner or later, it’ll hurt aplenty.


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