Ever since the market entered its downward trend in mid October 2007, the Four Sisters have experienced some wild weeks filled with multiple 200+ moves in either direction, quite typical in a bear market environment. However, this week takes the cake as the SPX essentially made a round trip back to last Friday’s close after plunging to 3 year lows mid week.
We have continually warned about the banking crisis and its implication for the markets. This week panic and fear finally set in as the VIX spiked to multi-yr highs Thursday morning. The SPX hit a very critical technical level of 1150 which Kevin writes about in this week’s Morning Cup of ‘Jo. While the markets have rebounded sharply on the historic measures taken by our government, risk still remains high as banks continue to shore up their balance sheets and resist the urge to lend. However, given the technical action of the tape, a tradable bottom appears to be in place as we enter into the last quarter of the year.
Top Headlines
Capping the week’s wild ride, investors cheered the government’s rescue plan Friday. In addition, a new ban was placed on short selling. (9.19)
Oil prices climbed this week toward $100/barrel after the drastic steps the U.S. government took to rescue the troubled financials. Worries of a global slowdown were eased. (9.19)
Over the past weekend, 158-yr old investment bank Lehman Brothers (LEH) filed for bankruptcy while fellow investment bank Merrill Lynch (MER) agreed to be acquired by Bank of America (BAC). (9.15)
Insurance giant American International Group (AIG) was bailed out by the U.S. government via an $85 billion emergency loan from the Fed. In return for the loan, the government will receive an 80% equity stake in the company. (9.16)
Federal Reserve decided to hold interest rates steady in a move to separate liquidity additions from interest rate policy. Despite the economic data suggesting a slowdown, the Fed is still concerned with inflationary pressure. (9.18)
Tech bellwether Oracle (ORCL) helped sentiment in the tech sector by posting a stronger than expected earnings report despite concerns of a sluggish economy. (9.19)
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