The market is marking time; with no good news expected anytime soon, there is a bias to the downsid

US Equity Markets week Nov 24-28 2008

The market has risen from the low of 739 . . .  suggesting a pullback in the next two weeks.

A historic US election overshadowed all market news.

Although the market has made lower lows during the last two week, it appears that much fewer sellers are left these levels. Shorter-term technical analysts would argue that a tradeable bottom has been established and the Crash of 2008 is over.

In addition to the major decline in the financials(XLF), precipitated by the sub-prime real estate problem, we had a major unwinding in the commodity markets. The media focussed largely on crude oil and the associated S&P 500 Energy sector SPYDR – XLE is shown below. XLE appears to have made a bottom too because the commodity prices have stabilised. 

Components and weightings of XLE as of 10/31/08.

The 30-year U.S. Treasury Bond Futures chart for October 2008 is shown below:

The strength of the US dollar against all currencies(except the Japanese Yen) is reflected below:

The crude oil futures contract chart for the past 8 years is shown below. At the current price levels, many alternative energy projects appear economically much less attractive and may be abandoned. This is not good from along term perspective for the world: we do need alternatives to petroluem energy soon.

The S&P500 futures posted a major low around 9:15 CST on Friday October 10, 2008 of 837.00. The alltime high was 1586.75, almost exactly a year ago October 11, 2007. The low is 52% of the high – a sobering fact !

A major down move this week . . . key global players meet this weekend to act . .  stay tuned !

Berlusconi Says Leaders May Close World’s Markets (Update1) 
By Steve Scherer

Oct. 10 (Bloomberg) — Italian Prime Minister Silvio Berlusconi said political leaders are discussing the idea of closing the world’s financial markets while they “rewrite the rules of international finance.”

“The idea of suspending the markets for the time it takes to rewrite the rules is being discussed,” Berlusconi said today after a Cabinet meeting in Naples, Italy. A solution to the financial crisis “can’t just be for one country, or even just for Europe, but global.”

The Dow Jones Industrial Average fell as much 8.1 percent in early trading and pared most of those losses after Berlusconi’s remarks. The Dow was down 0.5 percent to 8540.52 at 10:10 in New York.

Group of Seven finance ministers and central bankers are meeting in Washington today, and will stay in town for the International Monetary Fund and World Bank meetings this weekend. European Union leaders may gather in Paris on Oct. 12, three days before a scheduled summit in Brussels, Berlusconi said today, while Group of Eight leaders may hold a meeting on the crisis “in coming days,” he said.

Berlusconi didn’t give any details about what kind of rules leaders were looking to change, except to say that leaders are “talking about a new Bretton Woods.”

The Bretton Woods Agreements were adopted to rebuild the international economic system after World War II in a hotel in Bretton Woods, New Hampshire. The aim of the agreements was to establish a monetary management system, initially by pegging currencies to gold. The IMF was set up later to help manage the international financial system.

The day started with a large gapdown and proceeded straight down . . .  the low was a critical level and the rally in the afternoon suggest we may have a tradeable bottom . .  next few days will be critical.

A volatile week . . . with Congress working on the Pualson Plan, expected to be completed Sunday September 28, 2008. Stay tuned for more continued volatility.