Top Line: The market has maintained its position to drop from these levels. The market opened strong on Tuesday with a steady leak all day long reversing the strength into weakness. This pattern of up early and selling after that is a typical bear market pattern.
Our thoughts are mostly centered on the continuation of the bear market this evening and we will keep our eyes open over the next few days for further weakness confirming our position. Tuesday's market was filled with higher commodity prices, oil over $100 for one, which was cited as one reason for the turn around in stocks.
Wednesday we get three things, the CPI, the January housing starts, and the Fed's minutes from its January meeting. There shouldn't be too many surprises in these numbers but the market could interpret any one of them as bad.
After the market closed on Tuesday Hewlett Packard (HPQ) announced good earnings pushing that stock up in after hours trading. Funny thing is that the rest of the market continued heavy even after that news. And, as we write, the US futures are down about a half a percent and Asia is down a couple of percent.
We have mentioned credit default swaps on occasion here at the Update but these derivative securities have now been mentioned in an article by Gretchen Morgenson of the NY Times, someone we have mentioned here also. This time she has given us some good info on the subject and will be our primary item this evening. She says that the world of CDS's is arcane and could be the source of another problem.
Her point is that risk is now being traded away and there is no real way to do that but people have become complacent on the way they look at risk, thinking they have traded it away. The idea is that if a problem occurs, there may not be a good way to find out who has taken the risk and who should pay. It's a good article about an important topic.