Investing Adventures

Initial claims are in with a reading of 348K vs. a consensus of 350-360K, down about 9K from last week.  Futures are reacting appropriately, with the YMs now up about 30 points although fair value for the Dow is about 30.  In order to estimate where the markets open, take the current future value and subtract it from the fair value.  In this case, 30-30 = 0 or a flat opening for the Dow.  My guess is we’ll see a slightly positive day coupled with solid earnings from BIDU last night most likely giving the Nasdaq a boost but I wouldn’t expect fireworks, especially with the Bernanke Put in play this afternoon and expiry tomorrow.

The past couple of days we’ve seen the markets rally and rally pretty well the entire trading day.  The only thing that’s somewhat concerning is the the volume levels the past couple of rally days.  They’re definitely not as strong as our down days but they’re not terribly weak either.  Note the moving average line on the volume portion of the graph.  I would feel much stronger about the rally if the volume were to spike as it did during the two rally days near the end of January.  In any event, we’re rallying it appears.  Why?

Remember the game plan a few days ago?  Yesterday, retail sales came in above expectations at 0.3%, sending futures skyward.  This morning we have jobless claims.  Anything under 360K I believe will send the markets even higher and could potentially signal a bottom, at least in the short term.  We still have the credit and housing issues, but rather work on those two issues and not have to worry about the consumer themselves.

Jobless claims in about 5 minutes.  I’ll keep you posted.  Current future levels are reading slightly positive by 6 points on the YMs (Mini-Dow).

This morning, futures shot up after Warren Buffett released an $800 billion (note the b) plan to help bail out the bond insurers (MBI, ABK, and FGIC).  Futures shot up over 70 points on the news.  The offer is good for only 30 days according to Buffett.  As of this morning, it appears that one of the companies has rejected the offer, but he has yet to release which company did.  My guess is it’s FGIC since they’re not publicly traded but you never know.  The dollar and treasury bonds are also spiking on the news, making Buffett the ultimate market mover.  If I had to pick one person to be my mentor in the financial world, he would be the one.

Yesterday, the Dow Jones group decided to remove Honeywell (HON) and Altria (MO) from their index and accept Bank of America (BAC) and Chevron (CVX).  BAC and CVX are better indicators of the US economy according to the index.  The index will also be recalculated in order to ensure the current price of the index remains unchanged.

Markets are looking to gap open this morning.  Potential fade of the gap?

The economic calendar for this week is chock full of reports which will sway the markets one way or another.  Wednesday brings in retail sales.  Consensus is flat at 0% from a drop in December of 0.4%.  Another drop in retail sales could confirm the recession theories out there and could potentially drag the markets lower.

Thursday brings in initial claims.  Consensus for initial claims comes in at about 360,000. An interesting fact from Briefing.com states that in the prior two recessions, the 4-week moving average hovered near 360,000.  Currently, the 4-week average for initial claims stands at 335,000.  A drop in initial claims could potentially send the markets higher.  I think the markets can deal with a credit and housing crisis.  They, however, can’t deal with a drop in employment, which is always much more serious than the current credit issues.

Friday brings in consumer sentiment with a consensus of 76.5-78.0.  Interesting fact in that during the 2001 recession, consumer sentiment was near 81.8.  Consumer sentiment last month came in at 78.4.

Overall, it’s going to be a busy week.  My guess is if both retail sales and initial claims come in under consensus, I’d expect the markets to head downward in a hurry with most of the pundits out there claiming we’re in a recession.  Problem is, I think we’ve been in a recession for a couple of months now.  As Eric Bolling’s said in his interview with WallStrip, we’re in a bear market so trade small.