Top line: Our target for the Dow is 12,500 which is right around the August low. If the market can punch down to there, then we can see how much downside strength there really is in this current move. If we see any support between here and there, we may need to revise our outlook but for now the stage is certainly set for a run down to test the August low.
The stock market opened broadly lower on Friday due to C's news. We still think C is doing the right thing by taking these SIV assets onto its balance sheet, where they belong. Shortly after the open, C was trading down but soon rallied on a display of strength which failed by the end of the day. C had received an analyst downgrade after their news--good timing, strong analysis.
The stock market did have difficulty as the day wore on Friday and the Dow fell 178 points by the end of the session. This was not a very good showing but one that we think is justified. This move down is not over and we should see some more selling as the week gets going. The futures are down this evening as we write but this could be just a reaction to the weak Asian markets which is definitely a reaction to the US trading on Friday; as the world spins.
We don't want to bring this up but since it is the "biggest" news of the weekend we thought it should be mentioned. Greenspan has now become an "expert" in the field of guessing what's going to happen next. He's trying to figure out if the odds of a recession are more or less than 50-50: "Whether it's above or below [50 percent] is really extraordinarily difficult to tell," Greenspan said. We'll let you read for yourself some of the other things he said. Yicks.