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Trading the Market 2-9-2009

admin on 02 9, 2009

Last week we wrote about the market trying to digest the potential news of the stimulus package and Tim Geithner economic plan. The Senate is expected to pass an $827 billion stimulus bill on Tuesday. There will have to be a reconciling of the Senate bill with the House’s version that was already passed.

Treasury Secretary Timothy Geithner’s scheduled announcement for today has been pushed back 24 hours. This will probably result in some small ebb and flow in the market today. It is only raising the anxiety that investors have to digest. The plan will outline the steps to overhaul the financial bailout package passed by Congress last fall. It may include some modification on the “mark to market” rule for assets, which was a hot topic at the end of last week.

Geithner has been opposed to this, but he seems to have softened to the idea in the past few days. We find it amazing that all of the smart people in our government and financial industries can’t find a method to value these third tier assets without forcing the banks to write down 80% of the value of the asset. Lifting or modifying the mark to market rule could essential call the bottom in the credit crisis. Depending on the rules associated with the modification, banks could immediately gain third tier asset value. This would ultimately reduce the amount of capital that the government has to cough up to support the banks.

A bank can estimate what their loss will be on their assets based on any number of variables. They may be right or wrong over the long term. Letting banks use their own values is one of the problems that got us into this mess in the first place. But forcing banks to write down 80% of the value when they are forecasting only a 20% loss seems a bit overboard. Now that we are here, more transparency should be included in any plan. If we can find a happy medium for these asset values then that allows the banks to free up capital for lending, which will get the markets moving again.

As we said last week, we expect a very volatile week based on Geithner and the stimulus package . Be prepared for either direction.

Economic

Date Time (ET) Statistic For

10-Feb 10:00 AM Wholesale Inventories Dec

11-Feb 8:30 AM Trade Balance Dec

11-Feb 10:35 AM Crude Inventories 6-Feb

11-Feb 2:00 PM Treasury Budget Jan

12-Feb 8:30 AM Initial Claims 7-Feb

12-Feb 8:30 AM Retail Sales Jan

12-Feb 8:30 AM Retail Sales ex-auto Jan

12-Feb 10:00 AM Business Inventories Dec

13-Feb 9:55 AM Mich Sentiment-Prel Feb

Top 10 Average Volume Stocks with Earnings

Feb. 9 – NYX – NYSE Euronext, through its subsidiaries, offers various financial products and services. It provides securities listing, trading, and market data products and services. Recent range of $23.72 and $18.65 , makes for a pretty tight range. This is all taken in the consideration of it’s range outside the current consolidation, which was $30.6 to $16.33. The last three weeks NYX has seen a sideways market.

Feb. 10 – Q – Qwest Communications International, Inc. provides voice, data, Internet, and video services in the United States. It operates in three segments: Wireline Services, Wireless Services, and Other Services. It is only a $3.27 stock, but it trades about $18million shares a day. Recent range is $2.05 to $4.04, within the past 6 months.

Feb. 10 – NVDA – NVIDIA Corporation provides visual computing technologies designed to generate interactive graphics on consumer and professional computing devices in the United States and internationally. It operates in four segments: Graphic Processing Unit (GPU), Media and Communications Processor (MCP), Professional Solutions Business (PSB), and Consumer Products Business (CPB). It just made new swings high against December and January swing highs. This is a positive sign. Things look positive, but earnings or overall market could change things quickly.

Feb 11. ATVI – Activision Blizzard, Inc. operates as an online and console game publisher. Similar pattern to NVDA above, but the volume seems to be drying up on this up move. It has a pretty tight range of $8.18 to $10.18. Look for either side to be tested.

Feb. 12 – KO – The Coca-Cola Company engages in the manufacture, distribution, and marketing of nonalcoholic beverage concentrates and syrups worldwide. The major low $40.29, seems to be holding, but any negative guidance will put a true test together.

Feb. 13 – PEP – PepsiCo, Inc. manufactures, markets, and sells snacks and beverages worldwide. Unlike KO, PEP continues to slightly break the lows. The first low was $50.66. They have generally supported the stock with current low of $49.05. Just like KO, if guidance is poor then look for these lows to be tested.