Market is On the Edge

Top Line: The market came very close to the edge of danger with the Dow breaking below 12K for the first time since March. The Dow managed to gain its composure and rally out of the abyss...today. From our perch, the Dow is almost certainly going to attempt to test the March lows, those made around the time of the Bear Stearns takeover.

Well, it is Wednesday night and the market is on the edge. We sometimes mention that when the market is oversold there is a real chance for a big selloff. We have been at this brink a few times since we started the slide from the October highs and here we are again. Our momentum indicators were oversold last Thursday night and we got a bounce out of that but that bounce was over when the markets opened this morning.

FDX (Federal Express) announced disappointing numbers and in fact said it lost money last quarter due to some one time charges for Kinkos and of course the cost of fuel rising so fast. (In case you're wondering, we are still holding to lower energy prices over the next few months.) Then there was Morgan Stanley (MS) reporting a 57% drop in profits, yes due to debt losses. The stock opened down about 8% but pretty much rallied all day long from there. You know the story, the bad news is behind us...Again. Right.

And, don't forget the Fifth Third news that they were going to raise some capital by $2 billion assuming they could sell some preferred stock (yes, convertible to common stock) and maybe some subsidiaries. The company said that operating earnings for the quarter would be basically zero with some extra one time charges making it worse than that. They cut their dividend to 15 cents from 44 in an effort to conserve capital in addition to the other moves listed.

The rest of the news wasn't much better but these three items got the market off to a poor start indeed. As per normal though, after about 90 minutes of trading, the lows of the day were in and the market had a violent rally but that led to more selling and a little back and forth into the close. Still, the market was down about a percent across the board. As we write, the Asian markets are down about twice that and the US futures market is down a little, not much. Tomorrow's trading around the globe from Asia to the US will be interesting as the sun comes up on the various stock markets.

We don't like to say this but sometimes it needs to be said...Thursday could be an important day. We've talk about it here tomorrow evening. Let's see if the bear has any power. There is a good chance that the market could continue down tomorrow. One issue is options expiration is Friday the 20th...

What's on tap for news on Thursday is the rate decision from the Bank of England, leading indicators here in the US, and the Philly Fed report. The Bank of England has been threatening to raise rates to counter inflationary pressures but as is the case here in the US that will be difficult to do.

FSI: 94.01 (down again, in spite of RIMM near all time highs)


We received some response to mentioning the CEO dump at AIG. Thanks for the comments and our favorite Southerners are in my thoughts as usual--"Hank the Tank" is great--that would be Greenberg for those who don't know.

And, Trish, here are two pictures for you, taken on Father's day. So, the first one is of three sons and two fathers--how many people are in the picture??? Right, three. Still difficult to believe...






Then, here is the Fearless Foursome, again, ready to tee off.