Sunday, July 27, 2008

Two More Banks Fail

Top Line: We have probably already started down to find the lows of 2008. Here at the Update, we think that the NASDAQ has a small possibility to rally for just a little while, maybe until the Friday morning jobs' report, but ultimately it will follow the blue chip indexes into the cellar.

While we think the NASDAQ can rally, the market may have other ideas, so we are cautiously bearish on the NASDAQ until it gets into gear on the downside...which should happen in a very, very short period of time. As we like to think, it's much better to be a little early (which we normally are) than to be just a little late. We try to get ahead of the move and then the media can figure out just why the market did what it did...good luck with that.

Last Friday the market enjoyed a bounce based on Juniper Networks' (JNPR) news on Thursday evening. So, here we have good earning's news from One company and the world is so much better. The members of our FSI index were particularly strong except for AMZN which was up 10% the day before.

So, trading was strong on the NASDAQ due to all the good fortune at JNPR. On the blue chip side there was a little more trouble. Our thought on the situation is that the blue chips have gone below the lows of March and are now struggling with that resistance. Once support levels are broken, they become areas of resistance. On the NASDAQ side, the March lows have not been violated which gives rise to the relative strength in those indexes.

On Friday evening after the close, the FDIC revealed that another two banks had failed and their assets were being taken over by Mutual of Omaha Bank. So far the world doesn't seem too concerned about US banks failing or the fact that the government is thinking about taking charge of the GSE's Fannie and Freddie. As long as the government is taking care of us, we don't have to worry. We hope you do not think this way.

Your homework assignment is this fine article from the NY Times.

The WSJ links we provide sometimes require more than just a quick link but we want to provide them to you in case you can read them. We see this evening that the Minneapolis bridge collapse is going to be mentioned in a front page article on Monday. The article describes the effect that less gasoline usage is having on highway funding. Isn't it ironic that higher gas prices mean there is less tax revenue? These are the unintended consequences.

Happy Trading...

FSI: 82.53 (bound to head down to the lows of 2008 shortly)

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