Houston we have a transparency and communication problem. News out of France’s largest bank BNP Paribas that it froze 2.2 billion in funds from withdrawals citing US subprime concerns contradicts a statement from Paribas CEO just a week earlier citing that "our corporate and investment banking division is not impacted by the US subprime crisis because our exposure to subprime is negligible". Oh really? Actions speak louder than words. The news got the US market off to a horrendous start with the Dow futures pointing below 200 points. Keeping the whipsaw action alive, buyers stepped in right away and the market was significantly off the lows heading into the lunch hour. However, persistent rumors of problems with Goldman Sachs hedge funds sent the market into an afternoon spiral it couldn’t escape. What will happen when Goldman comes out of hiding and comes clean? How much of the concern was priced in today? It’s just really difficult to tell. I think at this point we all can agree (ahem, US govt exluded) that the subprime issue is fairly widespread and will get significantly worse towards the end of the year and on into next year. The uncertainty, the rumors and denials, the lack of transparency all makes it incredibly difficult to value the market which in turn creates tremendous volatility and can be a weight around the neck of this market for quite awhile. Not even the most sophisticated, esoteric trading systems know how the heck to trade this market. As I’ve been saying for a few weeks now.. while there are tremendous opportunities for the day and swing trader on both sides of the market, it is best for most investors to get out for now. Technically, this market continues to show signs of topping despite short outbursts of buying. Bull traps like this can wipe out profits quickly if not careful so stay vigilant and preserve capital for trading in times of more certain trends.
I mentioned yesterday, that I would consider getting more aggressive on the long side if we could retrace the 3 day surge to resistance with light selling volume. Obviously that isn’t happening but key support levels still remain in place across all indices. Tomorrow should be very interesting. There is lots of momentum to the downside and Countrywide Financial made a statement after the bell indicating "unprecedented disruptions" in credit markets could affect its financial condition. According to the Wall St Journal, additional hedge funds have raised concerns after the close of trading. Renaissance Technologies, told investors that a key fund has lost nearly 9% just in the first week of August and Highbridge Capital Management said one of its funds was down a whopping 18% in the first week of August and 16% for the year. We already know about much of the problems with Countrywide but jitters abound on any new credit concerns. Stay tuned and stay out.
::: Major Indices Performance – The Numbers :::
(Note: volume averages are based on the average over the past 50 days)
Data as of 4:00EST – End of Day August 9th 2007
Distribution across all indices.
Nasdaq: DOWN 2.16% today with volume 50% ABOVE average
Nasdaq ETF (QQQQ) DOWN 2.31%, volume 73% ABOVE average
Dow: DOWN 2.83%, with volume 32% ABOVE the average
Dow ETF (DIA): DOWN 1.11%, volume 54% ABOVE the average
S&P ETF (SPY): DOWN 2.96%, volume 84% ABOVE the average
Russell Small Cap ETF (IWM): DOWN 2.34%, volume 94% ABOVE the average
::: SelflInvestors Leading Stocks :::
The Self Investors Leading Stocks Index is comprised of stocks in the Breakout Tracker, which is a database of the fastest growing companies near a breakout or having already broken out of a base. Leading stocks were hit hard as indicated by the average decline of 3.81%! I mentioned a few days ago I had not seen an average decline above 3% since I started tracking these leading stocks. Well, we’ve reached a new low.
Summary:
* Decliners led Advancers 267 to 75
* Advancers were up an average of 2.32% today, with volume 109% ABOVE average
* Decliners were down an average of 3.81% with volume 82% ABOVE average
* The total SI Leading Stocks Index was DOWN 2.46% today with volume 88% ABOVE average
::: Where’s the Money Flowing :::
Many investing websites provide leading industries based on price performance alone. However, without accompanying volume levels, this can sometimes be misleading. The only way that I know of to gauge industry/sector strength WITH volume levels is through the analysis of ETF’s. A couple years ago this was not possible, but as more traders/investors use ETF’s they become a much better tool for gauging the health of the market and seeing where the money is flowing (or not flowing). Using the proprietary SelfInvestors Demand Indicator score which measures price and volume movements, I’m able to quickly see which sectors/industries are seeing the greatest inflows of cash. For a detailed look at how I go about gauging sector/industry strength please see the following post: http://selfinvestors.com/si/industry_tracking/
* Current Leading Sectors/Industries (over last 30 trading days):
Nanotech, Clean Energy
* Current Lagging Sectors/Industries (over last 30 trading days):
Broker/Dealers, Utilities, Financial, Health Care
* Today’s Market Moving Industries/Sectors (UP):
Home Construction
* Today’s Market Moving Industries/Sectors (DOWN):
Oil & Gas Services, Banks, Financials, Retail
::: Stocks :::
The stocks section will be an area where I highlight one stock selected from a group of stocks moving up with volume well above average and most likely breaking out of a base or consolidation.
Sorry, no stock of the day for today.