Well, the Dow was green for about fifteen seconds this morning. But not all of the thirty stocks had opened. Nevertheless I guess that was our bounce.
I read that yesterday’s action violated all sorts of technical levels; I don’t pretend to understand all of it. And I was taught that technical analysis has never been academically proven to add value. Yet, I refer to charts all the time. I like to check the volume, the 50 and 200 day moving averages. Even if you dismiss technical analysis as tomfoolery there are so many (including me) watching charts that a herd mentality, at a minimum, makes it right. And there seems little to disprove that stocks breaking out or down from patterns tend to keep going in that direction. Until they don’t.
As suggested repeatedly, Bank America has gone below $10 in a historic collapse on enormous volume. Shares are off 20%+ this morning. I had heard that the Merrill integration was not going great, but I had no idea another several billion dollars was necessary to complete the merger. Harvard MBA’s will be studying Ken Lewis’s purchases of Countrywide and Merrill for years.
SKF. the ETF that goes up as financial stocks go down, has risen almost fifty points since the first of the year. I bought a small amount yesterday. And I retain SDS, the ultra short (2x) S&P index ETF.
There is growing talk that the European Union is in danger of splitting. Yesterday, Greece’s debt was downgraded as S&P described the country’s ecomic and budget forecasts for this year were so optimistic as to be “unattainable”. The EU has a 3% debt-to-GDP maximum for its members and Greece is in violation. S&P also threatened downgrades of Ireland, Spain and Portugal. In further evidence of EU trouble Germany has given up its third place rank of industrial might to China.
To help stem the tide the European Central Bank cut rates to 2% and most expect another cut to 1 1/2% in March.
What about that idiot who flew his plane, called in a mayday saying his windshield had brokern, scambled F-18’s to search for him, parachutted out, hopped his motorcycle he had hidden, let his plane crash 200 mile away, checked into a KOA campground then slit his wrists? It gets curiouser and curiouser.
Lastly, when Goldman Sachs’ management gave permission yesterday to employees to sell their GS stock that had previously been locked-up, they couldn’t wait. All those pinstripes swelled the average daily volume by selling. These folks are the epitomy of NYC bankers living too high. Too many have huge mortgages on NY condos and vacation homes and are about to have their incomes cut by a half or two-thirds.
