..let the dust settle
Wednesday, February 11, 2009 at 07:53AM Tonight the shock and awe of the financial rescue plan is still very prevalent. Fortunately, we were prepared and will not harp and/ or dwell on the subject. Simply, everything we feared… "..if not enough is done on the toxic assets, we’ll have an unhappy market….if the plan is just an overview and lacking major details, clarity, we won’t have a happy market.” Honestly, it seems like a bad dream we wrote out that happened right before eyes today!. The repercussions of today’s events will be the trading theme as long as nothing is tweaked or changed. Right now, as it stands, it is doomed to fail. We’ve seen this before from Paulson and it’s inevitable here because there are a lot of unhappy campers. This is what we actually can look forward to (hopefully) to present us a big upside day in the future. The words ‘mark- to- market’, even if it seems to be the last thing on Geithner’s mind judging by one part of the plan may eventually be heard again. If you we ever hear those words speculated on or something on the asset guarantees front, we’d almost guarantee a day opposite of today.
As traders, we pack our packs after nearly a 50 point move in the SPX and wait for the market to digest the loss, wait for the dust to settle in this case. Simply, we cash in the profits and look forward to other opportunities. We pointed out the overnight support at 852 or so and after it got busted another 25 pts was shaved off, incredibly, we are at 827 which is isn’t all that bad considering where the November lows are. Basically, we have progressed even though it may not feel that way looking at the damage tonight.
On days like this, you simply see follow through in sectors as they run side by side with SPX tape. The financials get crunched (notably, regional banks took it on the chin and the Insurers got flooded by being surprisingly excluded from the Plan so far), the energies followed, the coal names as well. As far as the shippers, we warned enough despite trading the upside and today’s lesson is even if the BDI is up 8%, there are other things to watch and consider. In this case capesize/ panamex rates plummeted 20% midday and a morning negative WSJ article led to big profit taking. The USDA report was neutral, many AG names got taken down (DE AG), but the Ag-chem/ fertilizer names here like POT MOS MON outperformed. CF’s results AMC are positive for the sec’, but we already knew that from MON’s earnings at the beginning of the Q.
It is best to let the dust settle now and watch for details, structural changes to the plan to evolve over time. Also, important is to listen to the ‘Credit Markets' noise off this plan, today the bias was weaker and the equity markets followed.