DJIM #47 2008

Normally, as in recent years,  going into a holiday week in November would mean a paradise like setting for the traders.   At least, that is the case when we were in a bull market.    This year, well, most traders probably want a full holiday week as oppose to a four day trading week.

Has anyone heard of the term "bad bank" prior to today?   We haven't, not until tonight!   The big news this weekend,  other than the naming of the new economic team by the next administration, is that the current administration is trying to work out a bailout deal with Citi bank.      The concept is pretty simple,  shove all of the bad assets into a separate entity called "bad bank" so the bank(Citi) can get rid all of the toxic assets and claim itself as a champ.    This deal, according to WSJ, is only targeting specific companies on a case by case situation and there's not a whole lot of details available yet.   So what's the catch?    Basically, no matter the specifics of the plan, you, the taxpayers will have to share a bigger burden if those bad assets turn sour,  if the credit situation worsens.    Oh well, bailing out Citi is kind of expected from the government,  the final blueprint will probably emerge in the morning.

Back to this market!   We had a pretty rapid fire kind of rally during the late session on past Friday.  Oh, what else is new?.   This was triggered by reports of the next Secretary of Treasury.    Basically, traders were using that as a catalyst to cover shorts and flip off a very oversold market.   Any excuse for a relief rally when the market is so oversold for the week.   Looking at the final box score, we were still down an unbelievable amount for the week!!.    Just a couple of days ago, we wrote that we were tired of the useless reversals.    We feel Friday's reversal, might turn into another useless one.   It is much easier to short on strength these days than to chase bounces.    If you look at the weekly closes of most of the plays that anyone cared to track, they have been going down by a big percentage every week.

Technically, we are near, but not quite close to the previous year low, which can act as a strong resistance.    For this short week, we have quite a few economic reports to digest.    Most analysts are projecting some bad data and we'll have to see how strongly this market reacts to these numbers.     It's pretty clear that Citi is on top of the agends agenda of policy makers' this week.   One way or another, something will happen to Citi and market will react to it.   The Auto debacle, will probably wait till after the holiday to be dealt with.

We've had the feeling that once both Citi and GM have been dealt with, this market may finally find a place to rest.    We are probably very close, it won't hurt to wait a little longer.