Do the Bulls Believe Wednesday Was an Up Day?

As the market opened on Wednesday the buzz was AMZN hitting its numbers. AMZN was up around 25% on the day giving rise to the pervasive view that all stocks should go up with it. The Dow was up about 100 points right out of the gate and AMZN is not even in that index. Right after the opening surge, the market started to leak and after 90 minutes of trading the Dow was in negative territory very near to the 13,670 we mentioned in last night’s post. From there we began a see-saw day with the see-saw in the up position at the end of the regular session.

Then came the news the market was waiting for—AAPL announced exciting record breaking news and the market had another A stock to cheer about in the afterhours trading. AAPL’s stock jumped 13 points in late trading up almost 10%. With it, the futures are trading up strong this evening as well pointing to what should be a strong opening.

But, that’s where the market needs to be so that sellers can come in like they did on Wednesday. “Why did sellers come in on Wednesday?”, you might ask. Well, believe it or not, there is some trouble in LBO land where deals are having trouble finding financing.

Chrysler Financing Needs a Lift and there is our old friend the Snowman, former Secy Treasury John Snow

There are some other articles on this subject in the WSJ both in Wednesday's on page C1, Chrysler's Bankers May Take on Debt, and Thursday's on page A1, Banks Delay Sale of Chrysler Debt as Market Stalls. Good reading.

Then there was the news about existing home sales dropping 3.8% in June. The market is trying to ignore these types of facts but the numbers keep coming in lower. Of course today’s spin was that inventories are down. Let’s not forget that prices went up also. Does anyone think that maybe sellers are getting tired of not selling their house, or tired of lowering the offer price? Anecdotally, we know that a family in California had their house on the market for over a year before taking it off the market. The reason to take it off was because they had lowered the price to the price they had paid for it several years ago. They decided that they were not going to lower it any more. We don’t really think lower inventories bring buyers.
The last item is the Fed’s Beige Book which states that the economy is doing just fine thank you and the subprime woes are not drastically affecting the numbers. We have two comments, one is “wait” and the other is the actual reporting of the economy is down [editor's note, this was supposed to be "done"] by people who are running the economy???

As we get to the technical part of the post we want to say that the Dow did manage to bounce off the 13,670 level so there is some minor question whether or not the down move has been confirmed. Well, it has Not been. We need to see a serious breach of this level before we can actually declare victory for the bears.

The biggest confirmation for the bears is the continued poor breadth. On Wednesday the advance decline line was negative (more decliners than advancers). This is not a strong market and the technicals are weak. The 443 new lows on the NYSE was another telling sign that there may be some trouble in stock land.

The overnight futures being as strong as they are will give us an up opening but let’s see if that can give way to a selloff later. If we get some confirmation by breaking through that level we will definitely be here tomorrow evening to discuss it. Any day that has the Dow trading below that level will be cause for us to post so you know what to do…