Industry News

Gasp! Is the October Horror Show Over Yet?  / McClellan Oscillator Now Overbought.*

Surfersvillage Global Surf News, 31 October, 2008 : - - In what was the most fearful 3-weeks of trading world stock markets have ever experience October’s terrors come to a close. Pray God! Demons never previously even dreamed of in nightmares were visited on the investor class. Now it seems sure that the markets detritus is being sent downstream to the global economies that now shiver in dread waiting for the worst to hit, recession ET all. Hopefully the lows of the market are now established.

Likely, (and in my head anyway, I think its already happening) the Market will sense that the massive artillery that the Fed and Treasury have used is starting to take effect as the freeing up of credit - by prescient and positive moves in the benchmarks measures of LIBOR, Commercial paper, Ted spreads and short term Treasury’s give evidence of returning to a norm of sorts. Is there economic hell yet to come? You better believe it; but the market indicates, so far, that it is anticipating a recovery.

The plummeting price of energy, commodities and plusses from the recovery of Hurricane’s Ike will add to GDP offsetting some of the economic pain. A metric that we need to know is that for every reduction $10.00 in crude oil, we get an 0.25% increase in GDP. Crude has fallen from $147 to yesterdays $64. So that’s about 2% plus in GDP. We are not out of the woods yet, but our chances are light years better than they were on 10/10/08. 

Other plusses: The world’ leading economies are now in tandem as they undertake decisive measures to provide liquidity to ensure stability in their financial markets. Japan cut rates today by 20 basis points to just 0.3%. Taiwan and Hong Kong eased rates yesterday. The USA, China and Norway cut Wednesday. Germany plans a $39 billion stimulus and The Banks of Japan has announced a $51 billion package of tax cuts and government spending to offset their weakening economy.  

This morning Asian markets are mixed as Japanese stocks fell 5% despite the first rate-cut in 7-years. India shares soared 7% to catch up with a previous day's global market rally after yesterday’s holiday. 

The range in the S&P 500 (SPX) “coil” between 855 / 860 to 965 / 970 now delineates the status quo. Breaks, up or down, will define the trade going forward. A more than likely back-and-fill is the order of the next few trading days. Let’s put out there that it’s a Friday and any weakness in late session will be piled on, as it’s their wont to do. 

In the S&P 500 (SPX) support will be at 940 / 930 / 920. Below 920 we fall like a rock to the 890’s.  Price resistance levels above are at (SPX) 970 / 980 and even stiffer at 1020. 

Yesterday LIBOR the London Interbank Offered Rate, (on 3-month US dollar loans between banks) fell again to a still high 3.19. LIBOR peaked at 4.82% on 10/10/08, the lows of the market,  

The recent historic measures of negative sentiment and hyper oversoldness are now a memory. We have now moved to a mixed bag of neutral to slightly overbought reads after the all-time panic. Sentiment / fear as measured by the (VIX) still registers at very high levels. 

* Yesterday the McClellan Oscillator, (overbought / oversold indictor) posted an overbought plus 161 after Wednesday’s plus and neutral 43 after Tuesday’s neutral minus 28. The last McClellan Oscillator higher than yesterday was on 8/28/08 at an overbought 191.  

Yesterday the (VIX) closed at a still high 62.9 and had a range of 62 to 69. Recall it closed at an all-time high measure on Monday of 80.06. On last Friday it ticked a new all-time interday high of an astronomic 89.53. Those mega-high numbers in the (VIX) suggested a panic that far surpassed any historic period.  

Yesterday’s CBOE Total Exchange Volume Put / Call Ratio posted another “no problem” read of 0.80 after Wednesday 0.79. The previous high fear days we just experienced were ─ 1.01, 1.16, 1.24, 1.24, and 1.22. That 5-day series was one of the highest totals in many years.

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