Weekend Analysis for Fri August 22nd 2008

Fri August 22nd 2008
Lehman/Buffet Spur On Market But Volume Extremely Light.....
by Jack Steiman

Futures were flat this morning when the market got hit with a one two blast of adrenalin. First, Warren Buffet said he was going to buy some stocks and then  a rumor hit that Leh would be bought out but a foreign investor. The futures exploded, the market gapped open and never looked back save for one small pullback in the late morning. The one real problem with the rally is the 1.3 billion volume on the Nas which is the lightest of the year. Big money was not buying this Leh rumor nor the words of Buffet who also said his company';s business was not doing well right now. Bizarre how the market could rise on that statement. I believe the concept of getting Leh off the market is what the market wants and that's why it moved higher. it wants insolvent company's out of the way. A cleansing if you will. I can't see any other reason to rally because if that nonsense rumor on Leh was true, does anyone think they'd pay $16 for it? It would be a take under and not a take over. I don't think the market minds that. It just wants them gone. could any of us ever imagined losing both Bsc and Leh forever!!! Seems impossible doesn't it. The thing about Leh is you can see the market doesn't believe the rumor or knows it'll be a take under by the stocks behavior during the day. It opened at 15.80 and went to 15.93 at its high. Up over 15% from the close yesterday. It closed at 14.41. A massive black bearish candle. It says at the very least that Leh is not a very good play and we'll have to see what the market does with financial's next week. Leh paints a dark cloud for that sector to some degree.

Here's the truth folks. Trading even a little bit here is very difficult and probably all cash is the way. We're still below the break on the Sp and Dow yet the Nas tested the 50 day ema successfully today. Mixed bag and without the Sp and Dow joining the party, doing nothing would probably have been the best strategy. This is why we are playing so light to begin with. Simply too difficult in this environment. I'm not hearing any happy stories anywhere from anyone. The more people play the worse they do it seems. Just too much whipsaw as when things look bullish it urns around and vice versa. Again, just too difficult. The expression holds true yet again in that less is more. Until a clean break comes on confirming internals we're basically wasting our time trading. That's just total honesty.

The leaders didn't really lead again today. Gs was up some but not much and Aapl and Rimm were mixed. Bidu up a drop but many big leaders didn't join the party. That doesn't mean they won't if the market decides to make the move up and out. If Aapl takes out 180 the ebars are toast. If rimm takes out 135 the bears are toast. Watch those two leaders for more insight. if Gs can take out the 163 break down level...!!!

The lack of volume is a real concern as I mentioned but that doesn't mean it won't come in. The bears now have their backs to the wall in what we're told is the greatest debacle in history. Should that be the case then? Well it is. The bears need to put up soon or the overall losses won't be very much another week from now since the "great" bear began in October 2007. I am still very open to the fact that it's already over but may need a few months of more whipsaw before it can really get going to the upside. Those daily and weekly charts keep talking to me even though we should have been falling near term which clearly we didn't. Maybe the fact that we have a 20% bull bear inversion was enough to put the lid on this bear. Hard to say and nothing is etched in stone here. We can go a drop higher and then fall back but the bear market in the Nas is already looking weak as it perfectly back tested the 50 day ema and exploded. The bears need to get that index moving lower soon or it's a goner and without the Nas the bear will be very limited to the financial's and over time, the commodity sector which has already entered a bear in my opinion. Lots of wild rallies of course but the best days of oil, etc are over. My belief is that oil, one year from now, will be trading near $70 per barrel. Time will tell.

In my world a bear market is not confined to one or two areas. What we saw in 2000-2002 was a true bear. Massive destruction everywhere. Sure the Nas was the worst at 80% but the losses were 40% or a drop more on the Sp and Dow. Now that's a bear. No mercy. Crushed everywhere. This bear market is nasty if you're only in financial's but if you've been smart enough to avoid this area and the commodities since their bubble burst, you haven't been hurt very much if at all. It is not a true bear market. It is confined. It is contained. The nas is down about 14%. Not pretty. feels Bad. It's not a bear. You can say the worst is yet to come. Maybe. Maybe not. Those Sp weekly's say the worst is over. The daily's across the board say any retest of 1200 will be met by some the largest positive divergences you've ever seen. So yes, I think 1200 was and will be the bottom on any selling. Again, time will tell. It is not time to be too bullish however as the daily's are getting overbought and a bit top heavy on this rally off the lows. However, if we blow through 1295 convincingly we will have all the major indexes above their 50 day moving averages and you don't want to be short in that scenario. Let's see what next week brings and the message it sends. One day at a time. Hey, at least I'm not afraid to be wrong and put myself out there. If I am wrong we won't hurt you as we'll adapt to whatever the market message is.

Peace

Jack

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