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Market Commentary - 8.03.2008

August 3, 2008

Anyone ready to hurl yet? This week in the market was a rollercoaster ride of ups and downs. We had triple digit swings on multiple days beginning right out of the gate on Monday of last week when the market dipped almost 250 points only to rebound 300 points Tuesday going into Wednesday. Things began to smooth out mid-week but then as things closed Thursday going into Friday the market fell of a cliff again plunging over 200 points to close the week right where we began. This only leads us to believe that no one has any clue of what the future holds. We also think that following the technicals is the best way to try and weather this storm. There have been some Elliott Wave and Fibonacci chartists that have called some of these moves right on target.

Elliott Wave and Fibonacci chartists that have called some of these moves right on target

Elliott Wave and Fibonacci chartists that have called some of these moves right on target

Right now the direction of the upcoming weeks is going to be determined by what Oil does and how we close out the last part of this quarters earning season. So far it has been a mixed result of good and bad, most recently GM reported a $15.5 billion dollar loss, sending the markets back down to close last week’s trading. This coming week’s earnings are listed below.

In addition we have the Oil factor. Oil has been helping to lead the charge for the volatility in the markets. A mix between over bought/valued oil, shortage concerns, and the recent attacks on some of the pipelines in Nigeria have led prices to be all over the place. Oil has dropped from 140 to 125, a 10% dip in the last few weeks. Oil had been lower however, recent reports on nuclear activity in Iran led to a bump up on Friday before the weekend.

The economy in general continues to lag with employers cutting 51,000 jobs, which is the 7th month in a row where this number continues to increase. We also have an unemployment rate at 5.7%, the highest it has been in 4 years.

Strap in ladies and gentlemen the bumpy ride is going to continue, in every market across the board including the strength of the dollar is volatile and the outlook is bleak. We are leaning towards the continued Bear market but with all the instability that has been seen lately don’t be surprised if these triple digit swing days continue with no definitive direction. Please remember Cash is a position too, if you don’t like the choppy market and the risk associated with it, keep your hands in your pockets, don’t click the mouse and stay on the sidelines until things calm down.

The week ahead

Earnings

2nd quarter earnings season slowly winds down this week, as most of the major names have already reported. The focus this week will be on energy and utility companies, as these two sectors have been weak since the start of July:

  • Monday – Andarko Petroleum (APC), Dish Network (DISH), HSBC Holdings (HBC), Humana (HUM), IntercontinentalExchange (ICE), Pitney Bowes (PTI), Principal Financial Group (PFG),
  • Tuesday – Archer Daniels Midland (ADM), Cisco Systems (CSCO), Covidien (COV), Duke Energy (DUK), Emerson Electric (EMR), MGM Mirage (MGM), Molson Coors Brewing Co (TAP), Pioneer Natural Resources (PXD), Proctor & Gamble (PG), Ultra Petroleum (UPL), Weyerhaeuser Co (WY), Whole Foods (WFI)
  • Wednesday – Agrium (AGU), American International Group (AIG), Devon Energy (DVN), El Paso Corp (EP), Foster Wheeler (FWLT), Freddie Mac (FRE), Marsh & McLennan (MMC), PG&E Corp (PCG), Polo Ralph Lauren (RL), Spectra Energy (SE), Sprint Nextel (S), Tenaris (TS), Time Warner (TWX), Transocean (RIG)
  • Thursday – Barclays (BCS), Cardinal Health (CAH), Consolidated Edison (ED), Deutsche Telekom (DT), Progress Energy (PGN), Public Storage (PSA), Sara Lee (SLE), DirecTV Group (DTV), Williams Companies (WMB),
  • Friday – Brookfield Asset Management (BAM), Edison International (EIX), Mirant (MIR), Progressive Corp (PGR)

Economic Data

This week will be fairly light, as the focus will be on consumer data:

  • Monday – Personal Income, Consumer Spending, Factor Orders
  • Tuesday – ISM Services, Fed Decision & FOMC Policy Statement
  • Wednesday – Crude Inventories, Consumer Credit
  • Thursday – Weekly Unemployment Claims, Pending Home Sales
  • Friday – Nonfarm Productivity, Wholesale Inventories

Strategy/Outlook

In an attempt at brutal honesty we are doing the best we can to continue to pick high probability trades but with the markets the way they are, this becomes more difficult and risky. Please be smart and don’t invest what you don’t have and if you don’t like the additional risk use your better judgment and sit tight. Right now we are going to avoid the Energy sector as a whole due to volatility and focus on some more stable sectors. Stable can mean steadily increasing or decreasing as long as it is going in one direction or the other consistently, we can find an Options play. The challenge here is to find those stable sectors, they are few and far between. There is a lot of uncertainty, some of the talking heads say this is the “bottom” and the big turn around is coming. However we don’t know which version of the market they are looking at but we have yet to see one shred of evidence to dictate that there is a light at the end of this long dark tunnel. HpTrades is going to continue to hibernate and remain Bearish until this market can put together a few good weeks on any kind of news that doesn’t start with the words “Bail Out”.

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Posted by admin | Filed Under Free Market Commentary 

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