S&P500 = 1 week, 1 month and 3 month lows

Friday’s low-volume, rookies-manning-the-terminals jamjob has now been undone.

The S&P 500 took out last week’s lows, with a breach of ~1418. We are now at weekly, monthly and 3 month lows. The August 15th closing low of 1406.70 has not been breached on a closing basis.

The trendline
off of the 2003 and 2006 lows is now in danger of being penetrated — a highly dangerous condition.

My friend Paul notes that "the current red ink will have hit 19 straight days on the
S&P 500 without back-to-back up days. That’s not a record, admittedly, but
it’s now put us into pretty rarefied stock market space."

Year-to-date returns are as follows:

Nasdaq:    +5.20%
S&P500: -0.78%
Russell 2000:  -6.68%
Dow Industrials: +2.25%

Its interesting that the Nazz has the strongest performance, while the S&P lags and the Russell 2000 is worst of all.

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SPX July-November 2007
Spx_6_months

 

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What's been said:

Discussions found on the web:
  1. Eric Davis commented on Nov 26

    I thought you called a bottom, and an xmas rally?

    ~~~

    BR: I did, just delayed a day (11/27)

  2. Marcus Aurelius commented on Nov 26

    Rarefied. Isn’t that how you cook a steak? Now, where’d that bull get off to?

  3. Eclectic commented on Nov 26

    Sorry, I forgot the “o” in Barring-o-.

    It mussa been’thba wwhixzskeyt.

  4. Brian B. commented on Nov 26

    he did, and I really agreed with him. thought maybe some light volume buying to suck some more retail long for the next few weeks…. then slam!!! Today took me by surprise… luckily when I trade I take my opinions and throw them away and just watch price action, so made some nice green today!! you cant always be right, especially predicting the markets next monthly move.. heck it could still go up, you never “know”. just watch and react.

  5. Brian B. commented on Nov 26

    he did, and I really agreed with him. thought maybe some light volume buying to suck some more retail long for the next few weeks…. then slam!!! Today took me by surprise… luckily when I trade I take my opinions and throw them away and just watch price action, so made some nice green today!! you cant always be right, especially predicting the markets next monthly move.. heck it could still go up, you never “know”. just watch and react.

  6. Eric Davis commented on Nov 26

    One can also say that, things are worse now than they were in august, and we have yet to get blow that level… and things are much worse.

    It’s hard to clear a suckers rally, and call it a “correction”…

    but we could be at the bottom,

    1390 would be a good second leg of an elliot wave, or 1370

    they call that bottom every day on cnbc… and the next day, and the next, and the next.

  7. Eclectic commented on Nov 26

    Barringgolo,

    Imaa goonnna doroprdrop it toooas 4…8000 onna 10ywrr/Ttteen’n ddoubll;e tood $200.00 Bbbby cetrtiff…We goottaa-deeel?

    weee goytt gameeee??

    noooo!???, wull whattttle’tiit takke’en then?

  8. Barry Ritholtz commented on Nov 26

    We are deeply oversold — but that doesn’t mean we can’t go lower. The market doesn’t do my bidding.

    I can give you all sorts of technical reasons why a bounce is probable, even likely.

    That doesn’t change the main point of the prior post: Any rally is an opportunity to get out of whatever you are sitting in; QUOTE reposition their portfolios, batten down the hatches, and await the storm. UNQUOTE

  9. Michael C. commented on Nov 26

    All that subprime slime is much much worse than it was in August, and there is virtually no coverage.

    http://www.markit.com/information/products/abx.html

    Look at the junk. AAA is 30% lower than it was in August. BBB is more than 50% lower than it was in August.

    Anyone who thinks the announced writedowns is enough and the market has priced in most of the bad news is NUTZ!!!

  10. Greg Ip commented on Nov 26

    In an effort to offset upward pressure on short-term interest rates stemming from the recent turmoil in credit markets, the Federal Reserve Bank of New York said it would make loans extending over the year-end through special money market lending operations.

    The Fed will make the first such operation on Wednesday, for $8 billion, maturing on Jan. 10, 2008, it said in an announcement on its web site Monday. At six weeks, such a loan is considerably longer than the usual maximum of two weeks for ordinary money market operations.

    “The timing and amounts of subsequent term operations spanning the year-end will be influenced by market and reserve developments,” the New York Fed said. (Read the statement.)

    Open market operations are the standard tool by which the Fed implements monetary policy. Each day, through a series of auctions, it advances money for terms of one day or more to a group of Wall Street dealers, accepting as collateral Treasurys or mortgage-backed securities. The Fed adjusts the size of such operations in order to guide the federal funds rate, charged on overnight loans between banks, towards the Fed’s official target, currently 4.5%.

    Such operations aren’t unusual near the end of the year when banks need additional cash both to meet customer demand for holiday spending and to avoid a shortfall at year end which could force a bank to borrow from the Fed’s “discount window,” and acknowledge the fact in its annual report. So-called discount window loans carry a stigma, since they are usually a last resort for a bank unable to borrow at reasonable cost elsewhere. The Fed conducted similar operations in 2003, 2004 and 2005.

    This week’s however will be larger than any single operation conducted in those years. “Admittedly, the increased uncertainty in credit markets since August has heightened concern over meeting year-end requirements,” a Fed official said Monday. Lou Crandall, chief economist at Wrightson Associates, wrote in a note to clients that “By pre-announcing its intention to conduct multiple operations, the Fed gets more psychological mileage.”

    Since August, banks have been unusually reluctant to lend to each other for more than just a few days. That reflects a combination of factors: a need to have cash on hand to fund unanticipated commitments such as to affiliated structured investment vehicles; possible mistrust of each other’s creditworthiness; and a greater-than-usual aversion to showing a shortage of cash at year-end. As a result, interbank lending rates have been unusually high recently. On Monday, three-month Libor, or London Interbank Offered Rate, quoted on dollar loans between European banks, was 5.05%, up from 5.03% Friday. That is unusually high not just relative to the Fed’s current 4.5% target for the federal funds rate, charged on overnight loans between banks, but even more compared to the 4.25% the funds rate is expected to be in January.

    “Given the high level of attention focused on the coming year end, we hope to reassure market participants of our commitment to providing sufficient balances at that time by starting to provide those balances now,” a Fed official said.

    “Each year, factors that reduce the levels of balances available in the banking system grow ahead of year-end,” the official said. “As these factors grow, they need to be offset with open market operations. These seasonal change are usually handled by growing and shrinking the size of outstanding 14-day repos. In order to offset some of the factor movements over a longer term horizon, the desk will occasionally do longer term RP’s as this one just announced.”

    The New York Fed’s announcement follows a similar announcement by the European Central Bank Friday that it stood ready to provide funding over the year-end to counter strains in the euro-zone money markets.

    Also Monday, the New York Fed took several steps to make it easier for dealers to borrow from the Fed’s portfolio of Treasury securities. Such securities are heavily sought as collateral for short-term loans, especially now when other securities, such as mortgage backed securities without some kind of federal imprimatur, are being shunned to some extent. The New York Fed said it was expanding the range of securities in its portfolio available to be borrowed, to anything with a maturity of more than six days from the previous 13 days; expanding the amount available to borrow, to 90% of an individual issue from the previous 65%; and how much any single dealer may borrow, to 25% of the amount available in a particular issue, from 20%. (Read the statement.)

    The Fed has other tools in reserve if needed to further alleviate the demand for cash. In 1999, in anticipation of such needs during the century-date change, it offered options on fed funds.

  11. Norman commented on Nov 26

    BR:

    Pray tell us what is “interesting” about “the Nazz has the strongest performance, while the S&P lags and the Russell 2000 is worst of all.”

    Stuff being “interesting” has never made me a buck.

  12. scorpio commented on Nov 26

    i would like to take this opportunity to remind folks of the obvious boomer-generational double top from 2000 to 2007. we are now going down that right shoulder. we’re gonna go way down. we are going to take out the Oct 02 lows. when we get to 1995 i think the market will take a breather, poke its little over-priced head up, look around, think about how difficult it is to project more than a 10 P/E (on dramatically reduced E) when the world is liable to look like a giant dung-pile > 10 yrs out, and then recommence its downward plight until we get to circa 1990. then maybe i’ll buy it.

  13. OldVet commented on Nov 26

    I am happy happy happy with Puts on S&P remaining in place, SwFrancs up and up and up, and so on. But WTF is up with Gold?? This desperation move by Fed should have the gnomes melting their mothers’ teeth to sell.

  14. Lloyd commented on Nov 26

    While I still think the US market is headed for rougher times, I have a hard time trusting the tea leaves of technical analysis. I realize it’s just one piece of the puzzle but I can name a few billionares that didn’t rely on charts to make their money but I can’t think of any technical wizards that made their billions by relying on charts. I’m willing to open my eyes to looking at charts if anyone has a good book in mind to supplement my bottom up research. Thanks.

  15. muckdog commented on Nov 26

    A retest of the August lows! Now all we need is the big washout/capitulation and reversal, and it’s Santa Claus ho-ho-ho all the way!

    Pass the egg nog, BR!

  16. Francois Theberge commented on Nov 26

    @Barry:
    “We are deeply oversold”

    A novice question: What does “oversold” means? I see the term time and again, yet, I can’t find a unitary definition of this term. Plus, how does knowing that a market is “oversold” help trading in any way?

    I thought that the use of qualifiers was not exactly optimal for trading purposes, but I seek to educate myself.

    Thank you

    Francois

  17. VJ commented on Nov 26

    YOUR TAX DOLLARS HARD AT WORK

    In an interview with Fortune magazine, Uncle Dick says that the government shouldn’t intervene to curb predatory lending practices because…

    The fact is, the markets work, and they are working,” said Cheney in an interview in his White House office. The same goes for Democratic efforts to curb the predatory lending practices that left naive homeowners in trouble, says Cheney: “We don’t want to interfere with the basic, fundamental working of the markets.

    FORTUNE LINK

    Heck no, he wouldn’t want to interfere with all the wide-spread fraud ranging from deceptive practices, falsification of an applicant’s income, misrepresentation to applicants about mortgage rates, failure to disclose expensive prepayment penalties to applicants attempting to refinance, and fraudulent property appraisals, being perpetrated by unregulated predatory mortgage lenders and brokers that were some of his largest political contributors.
    .

  18. DC commented on Nov 26

    VJ — Surely you don’t mean to imply that Cheney or anyone in the Bush Admin might bear even a modicum of responsibility. As any viewer of CNBC knows, Bush gets the applause when the market goes up, but when it’s crumbling the blame is laid at the feet of Chuck Schumer, Charlie Rangel, and a raft of Dem presidential hopefuls who can spook the market from a diner in Iowa. Last time someone spoke Bush’s name was when Al Hubbard recently appeared on Fast Money to blow more happy smoke up the collective American ass. God bless The Ownership Society.

  19. The Dirty Mac commented on Nov 26

    VJ makes a fair point. It should be noted that all of those fraudulent activities are illegal under existing laws. When popular baseball players were breaking home run records, nobody wanted to know about steroids. When people were buying houses despite marginal or poor credit and having accumulated little or no equity, it was the attainment of the American dream.

    If only the government had worked on curbing mortgage fraud with the vigor they have gone after transfats.

  20. Aaron commented on Nov 26

    Things look so bad now we can’t even get an oversold rally, goodness. No dead cat bounces or anything, just straight selling pressure constantly.

  21. David commented on Nov 26

    Barry,
    Great blog;
    It’s all about the dollar! The falling dollar is like rain, When it rains it pours.

    “For the rain it raineth every day.”
    William Shakespeare

  22. wunsacon commented on Nov 27

    >> If only the government had worked on curbing mortgage fraud with the vigor they have gone after transfats.

    Hmmm…dunno about that. I’m no scientist — I just play one on TV — but science against transfats has been around for longer than subprime ARM’s:

    http://easydiagnosis.com/articles/oiling3.html

    At that rate, the gubermint would start paying attention to subprime ARMs in about 2014.

    Part of the problem is: Americans are so anti-regulation and anti-“litigiousness”, they don’t want help. At least not until they’re sick with cancer or past due on their mortgages. (I exaggerate…)

    Don’t they know an ounce of prevention is worth a pound of cure?

  23. Eclectic commented on Nov 27

    Well, Barringo… I don’t remember seeing or hearing any Samba or Bossa Nova, to date, on El Pictoro Mas Grande, so here goes:

    http://www.youtube.com/watch?v=8TqLmDhOdEc

    Supposedly, here’s the real “Girl from Ipanema”:

    http://en.wikipedia.org/wiki/The_Girl_from_Ipanema

    http://en.wikipedia.org/wiki/Bossa_nova

    Now that we’ve enjoyed a picture of 1965, when the 10-Y-T yielded… uh, well, now… why don’t you just guess what it yielded then.

    Anyhow, we’re finished with that, so let’s get down to business.

    (late note*… I’m not IT technical but you’ve posted something on TBP that’s locking my system up trying to download it)

    Now back to business:

    The word is… Ombudsman:

    http://en.wikipedia.org/wiki/Ombudsman

    A surgeon working to save a severely injured patient has two responsibilities. He or she must secure a supply of blood, plasma or other fluids needed to keep the patient’s cardiovascular system inflated, but just as importantly the surgeon must also f-i-n-d the source of bleeding and stop it.

    Theorizing and planning for the supplies of blood are indeed a practical and necessary logistic, but they are worthless until the ruptures are found and repaired. The credit markets are telling us that… No, they are in fact actually screaming it at us.

    Monetarism has NO capacity to locate ruptures and it isn’t the surgeon I’m speaking about. Only fiscally responsible executive and legislative policy can create one. Monetarism is the bloodbank… An ombudsman can be the surgeon… Must be.

    Wake up Congress!… Wake up White House! Find and install a repair system and an ombudsman with the utmost integrity and administrative talent to run it with the authority of Caesar, and do it NOW!… while it can still be done without inducing an irreparable shock into the financial system.

    A friend of mine, an attorney highly ranked in my state’s Attorney General’s office, once explained to me why real estate law in my state (and many others I think) depends almost entirely on written contracts, and yet generally ignores verbal communications (except in atypical situations according to the complex rules of “estoppel” or sometimes fraud). He told me that real estate dealings were so difficult and complex that the courts had found precedent in uniting or fixing the property only to written agreements and thus the property itself is the a-n-c-h-o-r to everything that real estate law and the courts can supervise.

    It makes sense, and it’s the key here to installing and operating a system run by an ombudsman. The property can not run. It is fixed… it has value… it has an equity that belongs to some rightful owner. Every single case will have its own individual merits. In every case there will be winners and losers on either side, and in some cases both sides will lose to some degree. Every case… every individual case will have its own forensic unraveling to be examined. If we allow that unraveling to lock up the courts or force massive attempted liquidation it might harm the financial system and public confidence beyond repair.

    What do I mean by forensic unraveling?… Well, there might be the possibility that some irresponsible lender will be found to have, in effect, gifted financial resources to some borrower because of lackadaisical business practices, and there likewise might be borrowers who, because of their own unfortunate or misguided decisions, will have setbacks applied to their equity… or possibly, in effect, they might be found to have had no more claims on equity than a renter would have had under the same forensic circumstances.

    When would both parties voluntarily enter into renegotiations? I suspect there will be vast numbers of these situations where both parties will voluntarily do this because it’ll be clear to them that it’s to their ultimate advantage. In cases where one party or the other holds a clearly constructed advantage, they’ll seek the law for performance and that should not be prevented. There’ll be instances in which borrowers could never have afforded the purchases they made, whether they would have later been able to convert variable or teaser rates to permanent fixed rates or not. Failure at attempted free-riding, even if innocently initiated, is no justification for being awarded equity.

    No responsible person would recommend that the law be subverted and that anyone should be deprived of its use in their particular situation, but only that a system and mechanism be installed that will allow v-o-l-u-n-t-a-r-y renegotiating of previously established terms. For any conservatives who would want to attack this as some sort of plan for bailing out buyers, it’s not such, and for liberals who think it’s a plan to absolve lenders or give them undue leverage, it’s not that either. It’s a voluntary mechanism that can help avoid needless punitive expense that can damage the productivity of our economy at a time when it can not be afforded.

  24. tjofpa commented on Nov 27

    Yeah, OK…
    But u really need to calculate the “core” NAZZ ==>> ex AAPL, GOOG & RIMM.!?

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