It could be just a dead cat bounce since that's all we've experienced so far; but, markets remain short-term oversold. Early cheer was received from TGT (Target) which released better than expected results and, more importantly, suggested an excellent holiday shopping season. One might wonder why this might be so with unemployment high and troubles with housing and foreclosures. Some cynically suggest some consumers just decided to stop paying their mortgages and went shopping with the money saved. That would be a Moral Hazard adopted by the public since if Wall Street and the government can do it why not us?
Speaking of housing, new housing starts data were much lower than expected. The silver lining must be less new housing is good (except for builders) to reduce inventories.
The buzz circulating around the street is about the GM deal. The issue has been re-priced and expanded higher over the past few days. Why? Institutions "must own" this issue. It will be placed in many indexes eventually given a large float with more to come. Besides, if you're an institution dependent on any deal flow from the large selling group, you'd better play ball and take some stock. The enthusiasm and hype is strong so retail will no doubt get shut-out of the deal and forced to buy it once it's marked-up. That's life on the street.
: GM shares are priced as featured
Meanwhile the Fed is ordering new stress tests on banks to see how their Treasury holdings are doing since they won't evaluate much else. I wonder if the Fed should get its own stress test.
Commodity prices overall were dragged lower by falling energy prices despite a larger than expected draw on oil inventories.
Volume was roughly 40% lower than on Tuesday's large sell-off. Breadth was mixed at best.
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is a market breadth indicator that is based on the difference between the number of advancing and declining issues on the NYSE. When readings are +60/-60 markets are extended short-term.
McClellan Summation Index
is a long-term version of the McClellan Oscillator. It is a market breadth indicator, and interpretation is similar to that of the McClellan Oscillator, except that it is more suited to major trends. I believe readings of +1000/-1000 reveal markets as much extended.
is a widely used measure of market risk and is often referred to as the "investor fear gauge". Our own interpretation is highlighted in the chart above. The VIX measures the level of put option activity over a 30-day period. Greater buying of put options (protection) causes the index to rise.
Continue to Concluding Remarks
GM is done with overallotment options for the selling group probably still to be exercised. This is the Wall Street machine at work. Once they get their act together they can pull off just about anything. GM is an important company and as such must be owned by most institutions. Barring anything unusual, you'll probably see the stock open higher when trading begins.
As an individual investor you probably won't get any new shares allotted to you. I've been through this before when as a common broker I tried getting stock, any stock, for my clients in IPOs. If the stock was hot, I might get 100 shares or nothing. If it was a cold deal, we'd get too much. It's just the way things work favoring institutions with vast cash hordes to throw around. Initially there was a lot of arm twisting to get a deal of this size placed but the street knows how to create interest when it starts to increase the deal size and the price. That stimulates the "chase" to own shares even in a crummy market environment.
Away from that, markets just look rather uninspired. Volume once again fell as clearly the Street was focused on GM with whatever funds they had.
Thursday its time again for Jobless Claims data, Leading Indicators and the Philly Fed report.
Earnings will again focus on retail with Sears, American Eagle, Dollar Tree, Ross Stores, Staples, and Williams-Sonoma. After the bell Dell, Autodesk, Dress Barn, Gap, Salesforce.com, Intuit and Marvell among others report their results.
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