Last Friday’s enthusiasm was quickly met with skepticism Monday morning as the Four Sisters plunged on concerns over the administration’s bailout proposal. Credit markets are in fact worse than last Thursday while equities still remain above the SPX’s snapback low of 1133. History tells us that credit is a good indicator of the future direction of equities, so it is imperative that risk is managed and position sizes are aligned accordingly. With that said, our indicators do suggest that last week’s low has provided a tradable bottom, but only tradable until further clues are taken from the credit markets.
Top Headlines
Washington Mutual (WM) became the largest bank to fail in US history this week over its huge exposure to the mortgage market. JP Morgan (JPM) agreed to buy Washington Mutual’s banking assets for $1.9 billion. (9.26)
A circus ensued on Capitol Hill late Thursday not long after leading congressional players from both parties announced that an agreement had been reached for the administration’s proposed $700 billion bailout plan. The deal negotiations broke down as House Republicans were divisively divided against the President and his administration. (9.26)
The Commerce Department reported on Friday GDP for the 2nd quarter expanded at 2.8%, below the 3.3% rate it first reported a month ago. (9.26)
Shares of Research in Motion (RIMM) were blasted Friday after the Canada-based wireless device maker forecasted higher expenses as it rolls out new product lines. (9.26)
It appears the SEC’s ban on short-selling will continue for the foreseeable future and the list expanded this week to include some interesting candidates. (9.26)
Goldman Sachs (GS), one of two major, independent brokerage firms remaining, gained a huge vote of confidence this week after Warren Buffet decided to take a huge stake in the company. (9.24)
For the PDF please click here.