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The Day that Was - September 28th 2007

Is being written now.. Look for an expanded writeup when completed..

In the mean time take a look at something that caught our attention after the market closed:

From the Associated Press:

WASHINGTON (AP) -- NetBank Inc., an online bank with $2.5 billion in
assets, was shut down by the government on Friday because of an excessive level
of mortgage defaults.
It was the largest savings and loan failure since the
tail end of the industry's crisis more than 14 years ago. Federal regulators
appointed the Federal Deposit Insurance Corp. as a receiver for Alpharetta,
Ga.-based NetBank.
Customers with less than $100,000 deposited with NetBank
will be protected by FDIC insurance.
While dozens of mortgage companies have
closed due to soaring defaults of home loans made to borrowers with weak, or
subprime, credit, those problems previously had occurred among non-bank lenders
such as New Century Financial Corp. NetBank, in contrast, is federally
regulated.
Loose mortgage standards in recent years -- especially among
lenders catering to subprime borrowers -- have resulted in a spike in home loan
defaults.
Bert Ely, a banking consultant based in Alexandria, Va., said
NetBank was in "deep trouble" before the subprime mortgage market's woes
accelerated this year. Regulators, he said, "should have closed it a long time
ago."
While some Internet-only banks are successful, he said, operating one
without retail branches can be a difficult strategy to maintain.
The FDIC
said Friday that $1.5 billion of NetBank's insured deposits will be assumed by
ING Bank, also a major online bank that is part of Dutch financial giant ING
Groep NV. ING will pay $14 million for the deposits and receive 104,000 new
customers.
NetBank, which had no physical branches, sustained significant
losses last year "primarily due to early payment defaults on loans sold, weak
underwriting, poor documentation, a lack of proper controls, and failed business
strategies," the Office of Thrift Supervision said in a statement.
The FDIC
said NetBank had $2.5 billion in total assets and $2.3 billion in deposits as of
June 30.
The OTS oversees about 830 savings and loan institutions, or
thrifts, ranging in size from giants like Seattle-based Washington Mutual Inc.
to small community banks. By law, thrifts must have at least 65 percent of their
lending in mortgages and other consumer loans.
The last major thrift to be
closed by regulators was Superior Bank of Hinsdale, Ill. It had total assets of
$1.9 billion and was shut down in July 2001. Its failure has so far cost the
FDIC's insurance fund an estimated $273 million.
In June 1993, regulators
shut down Western Federal Savings and Loan Association, which had total assets
of $3.8 billion. That thrift's owners included former Treasury Secretary William
Simon and former Federal Reserve Board Vice Chairman Preston Martin.
NetBank
had reached a deal to sell its deposit accounts and other assets to privately
held EverBank of Jacksonville, Fla., but EverBank announced this month that the
deal fell through.
EverBank in July completed its acquisition of NetBank's
mortgage servicing business, and the FDIC said Friday that EverBank will
purchase about $700 million in mortgage loans.
"Customers of NetBank should
have confidence and security knowing that they will have access to their insured
funds in a timely and orderly manner," FDIC Chairman Sheila Bair said in a
prepared statement.
The FDIC insures bank deposits of up to $100,000.
NetBank had $109 million in deposit accounts that exceeded the FDIC limit.
Those customers will become creditors in NetBank's receivership, the FDIC said.
The FDIC has a toll-free number for customers affected by the
failure:1-888-256-6932.
AP Business Writer Marcy Gordon contributed to this
report.

Market Update

All of the major indices closed in the red, albeit slightly. The market traded all day essentially on a flat line. As the market approaches resistance levels the intensity of the move is wearing thin.

Gold is still the investment of choice for many and continues to make excellent gains. Recall our post from August 17th ( http://www.rebeltraders.net/2007/08/update_7679.html )
where we went long on GLD for the falling dollar that we saw coming. That trade remains active and we will advise when we close it. But for now we do not see any changes in the declining economic conditions so Gold continues to be bought up as it is becoming the preferred "lock box" for safe keeping ones money in a declining economy.

US Dollar

Sinks to another low against the Euro. Since the FOMC rate cut was announced the US dollar has continued to weaken against most the world currencies.

A note on the dollar. After the feds cut the rates I watched the Jim Cramer show to see what his antics would be now that the FOMC acted. Mr. Cramer was very emphatic in saying to the camera that all of his viewers should ignore people who say the dollar and the economy will weaken. He said the US dollar will not weaken and that he wanted his viewers to shut their ears and eyes to that kind of talk. Well guess what, the dollar DID tank and continues to do so. Mr. Cramer you are overdue to issue a retraction on your prediction.

Recession?

The fears of a recession is what is making the markets trade so strangely. A news tidbit this morning..


Freddie Mac (FRE) chief warns of recession: The Financial Times reports the chief executive of Freddie Mac (FRE) warned on Thursday the U.S. economy faces a 40 to 45% risk of recession induced by the housing market downturn.

It is this kind of news that keeps hitting the markets which keeps the broader markets from moving with conviction instead of anxiety.

Pre Market - September 28th 2007

I want to thank Lisa for filling in for me the past couple of days while I was busy with a funeral for a fellow firefighter. Lisa is an excellent trader and market analyst. Rebeltraders is a team effort and she is an excellent partner.

We are waiting on some economic data here in the pre market and we will post another update before the market opens.

I want to discuss a chart here for a moment. There is so much talk about technology being the 'hot' sector to be in. I present the Semiconductor Index chart here for discussion. Note the strong resistance as indicated by the blue rectangle. This will not be a 'market leader' unless it breaks above resistance, then at that point we will have tech being a leader.

But, take a good look at the chart. Notice anything? A chart technician will spot this right away. It is the formation of a head and shoulders pattern. If the resistance level holds then the risk of a very strong down trend becomes more likely. The time to add technology stocks to your long term investment portfolio is if it breaks resistance. Until then tech is off limits for long term investments.

Pre Market - September 26th 2007

General Motors settled the strike with the UAW. This has GM (DOW component) sending futures up this morning.

Durable goods data came in and it was worse than expected. We have a good news/bad news situation today. Will be interesting to see which one wins today.

Tonight and most the day tomorrow Lisa will be posting in my place as I will be attending a funeral and services for a fellow member of my fire department who passed away suddenly over the weekend.

The Day that Was - September 25th 2007

No one likes to hear things are not good, it is human nature. Everybody loves good news because it makes us feel good also. The things Lisa and I have been saying have probably not made you feel too good because we have not had good news to give you. Just as you don't like hearing it we don't like saying it. What you will always get from us is an honest and objective view of the US markets. Plain and simple.

We won't be cheerleaders, we won't be 'pumpers', we won't be telling you to buy something only because an analyst says you should. We will never be a repeater of the talking heads and their messages. We do our own research and develop our own opinions of the markets based on charts, economic indicators, objective news, and so on. Some services will tell you to buy something because it will "go to the moon" (we hate those kinds of expressions, it suckers in unsuspecting people to put their money into something and they run a great risk of losing it). Back to what I was saying, we are different and we pride ourselves on this. It is part of our mission statement to remain objective, fair, and unbiased.

So why have we been so 'bearish'? Because it is what we see. There are too many signs of a market sell off. This is why we want you to remain patient and let this market make its next move. And the move we see shaping up is down.

We want to get in the markets and start making trades, but we are not going to jump in just for the sake of "wanting to trade". We trade when the risk/reward is in OUR favor, not the markets. Some would say "but look at Apple, Google, and Amazon", and our answer is we see it too but it does not impress us. You know why? Because they are being pushed, pumped, and hyped up while the rest of the foundation which makes up the market continues to crumble around them. If any of our readers have been holders of these names (add to that RIMM and NILE) you need to be sellers. Lock in your gains before they evaporate. Part of being a smart trader is to know when to back away from the table and take your chips. Of course someone will always say but what if it goes higher after I sell? The answer is 'so what'. The idea is to keep what you earned and not risk it from falling apart on you. If you think that you are going to always sell at the top then you are in the wrong game here. Those that wait for a top to take place will often find themselves trying to unload after it has rolled over hard. And then getting out is harder. Smart traders ALWAYS sell into the strength, not into weakness.

Lisa and I remain on the side of caution due to the indications that the market is going to roll over. Holding long term swing trades now is dangerous. Last night and this morning the markets got bad news. This was not just any kind of bad news, it was substantial. Retail continues to weaken and housing gets worse. The weight tugging at the market is getting heavier each day and it is only a matter of time before it pulls it down a cliff. Right now it would take some huge economic news of something positive to negate the path it appears to be heading. We watch the advance to decline ratios, the put to call ratios, yields, financial sectors, and on and on. All of these indicators are pointing to a market that will sell off. Can we be wrong? Of course we could be, so could anyone else who analyses the markets. But where we are different is that we don't play games with our money and we would not ask our subscribers to play games with their money either. Lisa and I take very seriously the fact that you are looking to us for guidance and ideas of how to make money. And your money is important to you and you don't want to lose it. Lisa and I will never be reckless towards our investment/trade ideas because we understand how important money is. Just like you we don't want to lose it. So at worst case if we are wrong in our view of the market then all we have done is kept you in cash, you lost nothing. If we are correct then you will be winners (in our view your already are a winner by waiting for the market to show us its hand instead of being in there risking your money). While others feel they "must be in there" playing the market during these uncertain times we will watch them come out with their pockets turned inside out as they lost it all by trying to ride what they thought was a 'sure thing'. There is no such thing in the markets, only odds. We play the market when the odds are in OUR favor, until then we wait.

Let me give you an example of what I mean by the foundation of the market still weakening. Today on the NYSE the decliners outpaced the advances, the same on the Nasdaq (the Nasdaq is heavy with tech stocks, so with everybody saying tech is so good then why are the declines higher than the advances?). And one more thing today, new 52wk lows today outpaced the highs.

Lisa and I will always try to keep you out of trouble. When the market gives us the real direction it will go then we will go with it. Right now the risk is higher than the reward. For those of you that have been with us since the start you already know this about us. And that is why you are here. You want someone to be honest with you for once, that is what we do and will always do.

See you in the morning...

Market Update

The markets are in limbo with low volume so far. There is a general weakness theme to today's action as there have been some attempts to advance but each time they were sold back down.

The consumer confidence numbers came out earlier and it was another decline. Consumer confidence is eroding and that is always a concern for the markets because it is a direct connection to the consumers wallet/pocketbook. When consumer confidence weakens so does the markets ability to sustain upward movements.

So far the markets have been floating with no solid direction (almost sounds like a broken record). We don't like saying it anymore than you like hearing it. But it is what it is.

Just a few moments ago Vonage (VG) had their share halted for pending news. That news was Vonage violated Sprint's (S) patents, Kansas jury decides, Vonage must pay $69.5 mln for using Spring inventions, jury says. Well, this may be the end of Vonage now.

Pre Market - September 25th 2007

I mentioned last night that we will need to monitor what Lennar Home Builders (LEN) reports this morning. Well they reported and it was a much worse than expected. The estimates for Lennar were for an EPS of negative $0.55. Lennar came in with a negative $3.25. A huge downward surprise. The company also painted a rather ugly picture of the housing sector in general.

Following the Lennar earnings release, UBS Securities issued a downgrade to 'sell' of all homebuilder stocks. I say to UBS: what planet have you been on the past 12 months?

We are seting up for a gap down when the market opens with futures all decidedly lower this morning.

The Day that Was - September 24th 2007

Today the big event bringing down the markets is the continued weakness in the financial sectors. Even now that we are approaching the one week point since the FOMC cuts the discount window and the Fed Funds rate the financials are still declining overall. While some stocks are appearing to be doing well it is only a matter of time before they exhaust themselves and fall hard. We are concerned about people "loading the boat" as some refer to it as and buying heavy long positions.

Even Apple is already showing signs of a fall coming. When you analyze the volume patterns on the AAPL chart it showed that today's gap up at the open and the trading throughout the day was on slightly lower volume than some previous sessions. A gap up on lower volume is a warning sign of a drop coming. If we had Apple in our portfolio we would be sellers now to capture this profit before it gets away. Then look to enter again down the road when conditions say it is time. Holding on to something that makes you a profit "too" long is just setting yourself up for a disappointment later. Never fear taking a profit!

During the after hours Lowes (LOW) home supply stores issued a warning for their FY07 EPS. Says they may miss their original earnings estimates for the year.

Also, Target (TGT) issued a warning for their same stores sales figures. Yes, Target. The darling of Wall Street that everyone seems to push is cutting their sales estimates. This will likely have an impact on the retail sector tomorrow.

Also of note today, 10 year T-note yields showed 'flight to safety' is building again. While is was not a huge amount it still is signalling a "second guessing" by some in the markets. Perhaps the rate cut party has fully exhausted itself now and money is going back under the bed. We will see.

In the pre market tomorrow Lennar Home Builders (LEN) reports earnings. We must see what they say about the market conditions. Any more bad news about housing and the financials and home builders will continue to weigh the markets down.

See ya in the morning!

Market Update

The financial and housing sectors have taken a turn for the worse and are impacting the broader markets. Financials, Banks, and Housing all continue to weaken here at this hour.

Market Update

Hello Rebels,

Sorry for the lack of a pre market report today. Had a small emergency this morning that had to be taken care of. All is OK now.

When the market opened this morning the US dollar had already set another record low against the Euro. The dollar just keeps getting weaker.

There was no significant news events this morning that would be market movers. But just moments ago the United Auto Workers called a strike against General Motors. At all the GM plants across the country the workers are walking off the job now. Be aware that AKS Steel (AKS) may fall in sympathy with GM as they are a large supplier to the auto industry. If you have a long swing trade in AKS you may want to cash out. No telling how long the strike will go. So why take the chance if your holding AKS.

So far the markets are trading with trepidation. The financial sector is in the red again and is pulling the broader markets in. No confidence in the financial sectors yet. Ironic, the rate cuts were supposed to benefit the financial sectors but it is not working.

Another update later.

Hope you all got to check out the new stock market show (see earlier post).

RebelTraders is interviewed on "The Savvy Trader"

The first installment of a new "Internet radio" market analysis show has been put on the web and RebelTraders is one of the guests on the show.

Follow this link to the show...

http://www.globaltalkradio.com/shows/thesavvytrader/

Click on the episode for Sep 22, 2007

Special Commentary - September 23rd 2007

Good evening Rebels,

We hope you had a good weekend and you're ready for a new week on Wall Street.

Lisa and I have been reviewing charts for many hours today. We have been looking for charts that are setup candidates for long and short positions. We have identified some stocks which are displaying signs of becoming a "confirmation" entry, but we have to see what the market is going to do next. We are being very honest in saying to you that many of the charts we have looked at are at a precipice. They simply could go either way from here.

First of all we have looked at some of the big names everyone is 'pumping' in the media. Stocks such as RIMM, AAPL, AMZN, NILE, and so many others, all have the appearance of potentially rolling over. RebelTraders does not buy into what the media says we should buy. That is just following the 'pumpers'. And usually when everyone says you need to buy something, it might be the time you should think of going the other direction. Jesse Livermore said in the book "Reminiscence's of a Stock Operator" (MANDATORY reading for anyone interested in the stock markets) that the time to sell is when everyone is in unison and saying you must buy. And the same goes for the opposite. When everyone says to sell, then you need to buy. Of course, as technical traders we apply chart analysis to our entries and just don't sell and buy blindly. We will leave that for the yahoo message board and stock picking services that only get caught up in the emotional 'pumped' stocks that everyone says is "going to the moon". Anyone can say a stock will fly to blue skies. But a smart trader will not get caught up in emotionally driven stocks. They might be good for a day trade here and there, but for longer term swing trades we look for the stocks that are NOT emotionally driven. As emotionally driven stocks will be the ones that fall the fastest and hardest.

The charts that we looked at throughout the day today gave us some trading setups, however as I said above, they can go either way. The major indices have floated upwards over the past few sessions and this gives rise for concern and is why we have not been a supportive (yet) of this market advancement. We need proof, and the financial sectors are not on board with this advancement. If you look back over time you will observe that the financial sectors are necessary components in a bull market. At this time the financials are not speaking 'bull' at us here.

We will share with you some of the stocks we are looking at as possible setups and we will monitor for trigger points to be reached, at which point we will then communicate to you in more detail the trading plans for these stocks.

Apria Healthcare (AHG) on a weekly chart is trading in a downward channel, which is actually a bull flag formation over the long term. If AHG can make a move to the $29 to $30 range then this will be a trigger point for a long term swing trade.

Fuwei Films (FFHL) has been on a steady decline since its IPO last year. The IPO price was $8.00. On the chart for FFHL the $8.00 region has been a significant price level with multiple interactions over time at that price. Currently, FFHL is attempting to move past that $8.00 point. What will happen here is it will either fail and pullback again or it will garner enough strength to make the move above that point. But you should not buy the instant it breaks above $8.00. If FFHL is on a course to reverse itself and head upwards then there will be plenty of upward potential in the future for a good swing trade. The problem with some trading services or chart technicians is that they identify what may be a good pattern on a chart and buy the instant it crosses a threshold instead of waiting for a proper confirmation to be achieved. The result by not allowing any trade to achieve a confirmation is that, more often than not, it will be a failed swing trade. This is one of the things you will find with our swing trades. We will give you trades with confirmation points, not just a buy point.

We are also watching for direction indicators on American Commercial Lines (ACLI) for additional signs of a new uptrend in the making. There is current a chart formation which would suggest that is is being accumulated but there are other signs that are negative so we are going to watch. this Tuesday ACLI will be making a presentation at a Jefferies conference so there may be a catalyst for the stock to negate some of the bad signs.

Tele Norte (TNE) has a good pattern for a long term swing trade if it can get above $23.00 range. Even though this has a nice setup the overall market conditions may disrupt all good setups and turn them in the other direction very quickly. We will watch this one closely and keep you advised if it will become a play.

United Technologies (UTX) is one that we will watch for a setup to form. Currently it is extended and due for a retracement. At which time we will see if the interest continues to accumulate shares, and at that time we will provide a trigger and confirmation entry point on this.

An example of a stock which looks good by itself, but warrants caution due to the sector it is in, is Nordstrom (JWN). On the weekly chart the pattern is good for a swing trade once it makes a move past the $53.50 area. But what give this stock the potential of being a failed swing trade is the sector in which it resides, retail. Herein lies the dilemma of so many stocks at the moment, they may look good in themselves but in the whole context of the market and sectors they are poised for a failure.

We are not bearish or bullish on the market. We are neutral and cautious. There is nothing wrong with waiting for confirmation of movement before entering trades. If we are, in fact, going to see a powerful bull run to the end of the year, then there will be plenty of time to saddle up. We will not risk our money on speculation, and we sure won't advise anybody else to enter risky trades. This isn't a game, it's business, serious business.

RebelTraders... our edge is the human mind

The Day that Was - September 21st 2007

Good evening Rebels...

We were watching the markets today for signs of where the money was. Unfortunately it is still not moving into the financial sectors. We need the financials to show some solid strength in order for there to be a bull market. The run up in the indices today was mostly in energy, health care, and utilities. Common sectors for money to be moving into with a weak dollar and rising commodity prices (and fear of a recession).

The market is "floating" upwards. The required strength to sustain it is lacking still. Could we have put you into some swing trades? Sure, and we would perhaps made some nice returns in a few days. But without strength in the underlying fundamentals of this rally why would we put your money at risk by "taking a chance". You would not like us very much if we told you to "jump in" and then suddenly the drain was opened and the pool goes dry. There is nothing wrong with waiting for the right time to enter. It makes you smart! The others are taking chances and anyone that is loading up on long positions in the past few days may be in for a sobering surprise soon if the technicals prove to be correct and the market sells off again soon.

In any recovery from a market sell off like we have experienced over the past couple months there are always a sequence of events which take place as the market tries to reestablish itself. Each advancement will be followed by a reality check selling. And then another try at advancing again. What Lisa and I are watching is the levels of advance/decline ratios, volume, sector performance, commodities, and so on. While some people will just tell you "buy buy buy" just because they are hyped up following the FOMC rate cut is foolish. Those that have been around a while will sit back and watch the children frolic in the pool knowing all to well that they will be coming out of the pool disappointed because it got too cold. We will let the kids that their play time and when the time is right the pros will get in.

We are going to provide you with swing trade as soon as the market looks as if it can sustain itself. The market right now is being sustained on emotions, not fundamentals and technical indications. Don't be surprised if Lisa and I give you swing trades for going short! That's right, if we see signs the market is going to roll over hard we will be going short on the market. We will play which ever direction the market chooses to travel when it hits the gas...

More commentary to follow soon...

RebelTraders goes on the Air

RebelTraders takes to the airwaves

Rebeltraders was selected to be a guest for this weeks show on a new Stock Market talk show called "The Savvy Trader".

I was interviewed by the host for about 10 minutes and I will provide a link to the show when it airs.

Pre Market - September 21st 2007

Futures are currently pointing to the upside. Keep in mind that is options expiration day and there may be some added volatility towards the end of the day as people establish new or get out of positions before heading into the weekend.

One thing I am going to be watching closely today is how the financial and housing sectors perform. Will there be more profit taking?

Stocks that have a strong to China are approaching overbought and/or very extended. An example is BIDU. This stocks appears to be reaching a climax and a sell off in the near future would not be a surprise.

So far there have been no significant events in the pre market so we are going to see how this options expiration unfolds as the day goes on. Don't get fooled by early buying or run up in prices. On a Friday with options expiration there is a chance of high profit taking by the close. This is what we will be watching for today to see how confident people are in leaving money in the market over the weekend.

The Day that Was - September 20th 2007

The Debate Continues

Now that 2 days have passed, the debate about the decision by the FOMC to lower the Fed Funds rate and also lowering the rate at the discount window still rages on. Just as people still debate to this day if Alan Greenspan did the right thing when he dropped rates many times in previous years. The actions of Tuesday will likely be debated for just as many years in the future from now.



As Lisa said in her earlier post this debate is a kind of 'noise' which can over time just get under your skin and make you emotional. And emotional traders make bad trades. What is done is done and now we monitor the markets for its effect. For that is all we need to worry about, the effects. If a recession is going to come then we adjust to it, if inflation returns then we adjust to it, whatever the markets do we adjust to it. And the reason we have been keeping you in cash over the past many weeks is because the markets have not adjusted to the situations yet. The market itself is confused and lost and is trying to finds it's way. Technical indications of confusion and uncertainty have persisted and increases the risk of having trades go bad. The market is still in the 'round-a-bout' (our readers in the United Kingdom will understand that one).

An example of a technical indication of a market which is still unsure of itself is in the financials. With all of the hype being pushed at you by talking heads on TV and from some of the other financial sites telling you that everything is fine and now is the time to buy then why is it that people are still selling out of the financials? Rebeltraders is all about reducing risk and increasing chances of a profitable trade. Not betting on 'hope'. If the markets are going to get a footing and start it's way up the bull road then we will be in there when we see signs of this happening. For us when we see dumping of shares in the financials and the housing sectors, even after the rate cut then we are not seeing a confirmation of a bull market. We are seeing continued fear which could topple the market and bring it back down. This is what we mean when we talk about viewing the broad picture. To look at a stock chart and say "this looks good" and take a trade based on that chart alone is being potentially reckless unless you broaden your vision to see the whole picture. Would you want to get on a roller coast ride at an amusement park where the bolts that hold it together are popping out and breaking? Not me! That is why we walk around it to inspect it and kick the tires before we say "I'll buy it", or in this case get on for a ride.

When the FOMC cut the rates so many people have said this will fix everything. Well we are not seeing it yet. The declining financial and housing sectors to us are bolts popping on the roller coaster ride. We will stay off the ride until we see the signs that it is holding together and is not falling apart. Preservation of ones capital is job 1. You only win in the stock market (swing trading, day trading, or long term investing) when you learn to protect your capital and adhere to risk mitigation.

One of the bolts that popped out of the roller coaster ride today was what happened with Goldman Sachs (GS). This morning they reported earnings that were much better than what the analysts were expecting. Even though they suffered losses over the past few months they were able to (at least by what was said in their press release) stem their losses and they performed better than what the analysts were fearing. So if it was so good then why did the Goldman Sachs sell off today? It was the classic "sell the news". Recall a recent post I told you that the pros will always sell into strength. They take advantage of people buying the news to get out. When someone has substantial holdings of a stock and they want to get out they must have the trading volume in order to unload their shares. That is what happened today. With the news of a better than expected earnings report people were buying in on the idea that the stock would go skyward after that news. So people kept pouring money in while at the same time those holding large amounts of shares were dumping out. If the so called 'pros' or 'smartmoney' or whatever you want to call them are selling huge quantities of their shares at the expense of the momentum players and other buyers hoping on a huge gain then that says other people are seeing the bolts popping out of the roller coaster and they want out. We want to see the mechanics come and put the bolts back in before we get on!





Tonight I am showing the Goldman Sachs (GS) chart.

Sorry for the delay...

Had a meeting to attend this morning which ran much longer than I anticipated. Lisa will be posting some information on today's market soon.

Goldman Sachs beat their earnings by a significant margin. And Bear Stearns missed by a large margin. Currently market is trading down. There will be much more shortly.

One more important item...

Also of potentially market moving events tomorrow is Fed Chairman Ben Bernanke will be testifying before the House Financial Services Panel on the matters of the credit crisis. The market will be listening to his every word.

The Day that Was - September 19th 2007

The day started out rather well with the strongest volume being in the first few hours. Then by mid day the volume tapered down and the markets pulled back. The momentum was quickly wearing off as viewed on the chart patterns.

The news today out of Morgan Stanley (MS) was that they missed their earnings estimates and during the conference call that followed the share price continued to drop as they discussed their losses. This had an impact on the financial sector (XLF) but what strike me as even more important is that the trading volume on the XLF was almost 1/2 of what it was yesterday. If the rate cut is supposed to be so good for the financials, banks, brokers, and home builders then why would the XLF be showing weakness today. Could be the party from yesterday has ended and people are waking up from their hangovers and getting a clearer picture of what the rate cut may mean for the markets down the road? There was some real hesitation in these sectors today.

The home builders sector (XHB) was actually in the red today and the volume of selling today was higher than the buying volume yesterday. This is telling us that an uneasiness remains in the markets and the world is not so perfect after all today.

Tomorrow we have additional market moving events with Bear Stearns (BSC) and Goldman Sachs (GS) both reporting before the markets open.

The sectors which did the worst today were consumer discretionary,technology,banks,bio tech, retail, brokers, and the financials had trouble staying above water towards the end of the day.

Something else which caught my attention early in the day was the big drop in the advance/decline ratio. Yesterday it was mostly all up. Today that ration came back hard and the decline numbers started going back up again.

Tomorrow will be yet one more day in this crazy week of events. Stay tuned..

Market Update

Could it be that the euphoria in the market is quickly wearing thin? Price action is showing strength but some of the market internals are showing a drop in the intensity of buying (or short covering). At the moment it seems we have hit a ceiling. May only be temporary or maybe the hangover from yesterday is setting in and reality is taking over..

The Advance/decline ratio is showing signs of profit taking increasing. And the trading volume has been tapering off.

The Day that Was - September 18th 2007

As Jim Nabors used to say from the old TV show "Gomer Pyle, U.S.M.C" ...

Surprise, Surprise, Surprise..

Well Ben Bernanke did exactly that today. Everyone was caught by surprise by their actions and the statement that followed. Over the past 6 weeks we have heard from every FOMC member and non member talking about how the FOMC is not responsible for bailing out the markets. The repricing of risk in their view was just a way of saying "oh well... you placed a bet and lost, not our fault". And the economist's agreed, it is not the job of the Feds to bail out the hedge funds and brokerage houses for their deep reliance on assets that carried high risk. So as some hedge funds experienced large losses (and some folded up completely) and the brokerage houses talked gloom and doom the view of the FOMC has been "too bad". The various speeches over the past 6 weeks signalled that they would not bail out the markets and that bad investments would be just that. In their view the markets would have to re-price themselves and their job was to be responsible to controlling the broader economy and inflation/recession risks.

So after all the talk about how the market will have to fix itself and the FOMC would not be pressured into making decisions based on stock market action seemed to be completely tossed out the window today and the FOMC kneeled before the markets and did exactly what it wanted, even if it was irrational and potentially dangerous in the long run. Ben Bernanke today became the parent of a spoiled child. And the spoiled child is the stock market.

The announcement of a 50 basis point cut in the Fed Funds rate in addition to an additional 50 basis point cut in the discount window was the Gomer Pyle "Surprise". It went far beyond what most were expecting and far above what most everyone thought they would ever do based on their spoken views over the past 6 weeks. I'll play devil's advocate here for a moment. Does their action mean that they are seeing other data that foretells a much worse economy is in the offing and which required such an aggressive move? Was their action motivated by Government political figures who want to restore faith in the economy (even if it is for a short while)? Was their action motivated by events in the United Kingdom and NorthernRocks' 'run on the bank'? All good questions.

The FOMC statement all but wrote off inflation and was centered on growth. They essentially have decided by their actions that the value of the US dollar means nothing to them now. In our view that is reckless. A decline in the US dollar is going to come back and bite us in the behind down the road. And it will not be pretty. Bernanke recently stated that they were in touch with the brokerages and financial institutions. Was Ben giving into the markets or was it that these CEO's and Bernanke discussed some real evidence of a hard recession coming?

There have been some well respected economists who stated that a 50 basis point cut could be interpreted as a panic by the FOMC that things had gotten out of control and the economy is in worse shape then we realize. We can't say because we don't know what has taken place behind closed doors with the CEO's and the Feds. But if the 50/50 cut is not a panic move then it is at a minimum a move out of desperation to make a screaming child shut up for the short term. You know what happens when you give too much to a child, they only want more later and become even more demanding.

Our job at Rebeltraders is to help you understand the markets, learn about how they work, and how to make money in the stock markets over the life of your trading endeavors. Over the past two months we have been witness to a plethora of news events, employment data, mortgage meltdown, earnings reports, credit crisis, falling dollar, and Fed comments. All of which combined removed confidence from our markets. And is why we have been keeping you out of harms way while this fierce battle has been raging. The past two months have been a war.

During my years of working in the Aerospace industry I became familiar with a term which the military uses in various types of equipment. That term is called "Battle Short". A battle short is essentially a switch (or a series of manual processes) that disables all safeguards in a piece of equipment and forces it to keep operating even if it is broken. All electronic equipment has various protection systems in it. When something goes out of whack the equipment will flash a light (like a light on your dash board in a car) saying something is wrong. In normal situations the equipment would be shut down and sent to the shop for repair. But in times of battle you can't shut the equipment down, you have to keep it going at all costs. Even if it means the equipment will burn up eventually. This is what a battle short switch does. It disables all protection/safe guards and allows the equipment to keep running even though it may be burning up inside. In a time of war the equipment is secondary to everything else so anything to keep it going, even for a short time longer, will be done. Think of it as you driving a car even though your oil pressure gauge says you have no oil. Normally you would stop and have it fixed. But in a war you keep pushing the gas and get every last mile out of it knowing that eventually the engine will seize up.

Today Ben Bernanke pushed the "battle short" button.

So where do we go from here? It all depends on how many miles the market can go before it seizes up. But in the mean time we put together a play list for you to work with. We are going to watch the markets very carefully (as we always do) this week as we still have more market moving events coming. And let us not forget that this Friday is 'Tripple Witching" day with options expiration.

As Lisa stated earlier if we were already setup for day trades we would have taken you in and out of some good trades already. And that will be coming soon. Lisa is a very good trader and you will learn much from her as we progress to the fully operating web site. We are working on the server, software, web site programming, and a whole host of other things necessary in order to be fully operational for our subscribers. The swing trades of course will be there as well and will always be there. The day trading aspect of our service is just one way to make money when the longer time frame is not 'swing trade friendly' which has been the case over the past two months. .

Lisa and I will be discussing again in great detail what the plan going forward will be based on how the markets absorb today's action. Today was a party, we have watch now for sings of a hangover.

I would like you to take a read of a commentary from someone I respect in the financial community. Please read Frank Barbera's commentary tonight at "Financial Sense". You can read his write up here: http://financialsense.com/Market/daily/tuesday.htm. Frank goes into more detail on some of the ramifications that today's FOMC move may have in store for us.

Pre Market - September 18th 2007

Lehman (LEH) came out and beat their estimates for the quarter. The estimates were already lowered substantially so perhaps the estimates were too easy to beat. But that is a subject for another day. The statement released by LEH painted a picture and they could have given it the title of "not so bad". So how will this play into the FOMC decision?

Best Buy (BBY) issued a surprise and issued an upside to their sales and quarterly results. This is considered a surprise as it was expected the market would see some additional evidence of a weakening consumer spending. It is of course only one company but could the Fed look at that too?

PPI came in and it was supportive of a rate cut.

So where are we? Right where we started. Confusion to the max. 2:15 pm today. Will be a crazy day!

The Day that Was - September 17th 2007

First lets start with happened at the end of the day. Bank of America (BAC) has come out and stated that the credit situation will have a "meaningful impact" on earnings for the quarter. Then E-Trade (ETFC) released a statement that they are guiding much lower for the year and have developed a plan to streamline business operations. They will exit the wholesale mortgage business as part of that business restructuring.

So at the end of the day we got more bad news on how the credit situation is impacting companies. Tomorrow morning we learn what Lehman (LEH) will say. It will be important for Lehman, as well as all of the other banks and financial institutions to report as honestly and accurately as possible. If they can't value certain assets then they need to get it out in the open. The markets are smart, they don't want hidden numbers or obscure statements. Let's get it out in the open, it will help to heal the markets faster if they do that. Ok, off my soap box.

The market traded today in a completely 'confused' state. No conviction for anything. It has been said by many, including us that tomorrow is indeed one of the most important FOMC statements in many years. Please see the post from last night for our analysis of the situation.

Tomorrow we are going to be closely watching the action. But unless your a daytrader (and experienced at that) then there is no reason to be trying to trade the aftermath, it could very well be short lived and you will be on the losing side. again, please re read last nights statement for the reasons why we are going to remain in cash until further notice.

Rest well.. tomorrow will be a wild day.

Pre Market - September 17th 2007

The situation in the United Kingdom continues to get worse. Long lines of customers are waiting to withdraw their money from NorthernRock. The UK market is down and this action is weighing on our futures so far this morning.

We see the situation in the UK as having the potential to spread and we must watch the outflow from NorthernRock.

There is no significant events in our markets at this time. Futures responding in the most part to the action overseas. We are remaining in cash for now.

It All Comes Down To One Moment In Time...

Tuesday at 2:15pm is that one moment. Fortunes will be made and fortunes will be lost on that very moment.

Over the past two months we have witnessed some of the most intense market speculation in a very long time. Speculation over the economy, global growth, employment, credit crisis, retail spending, commercial paper, oil, gold, the value of the dollar, and so on. The speculation has created heated debates of the like not seen in recent years. For every point made, there is a counter point which has merit. The debate continues, but the future remains an unknown.

While the general consensus on the street is that the FOMC is going to issue a 25 basis point rate cut, we remind you that it is only a consensus, not a fact. More importantly, has the market already priced in a 25 bp cut? Or, has it priced in an even stronger cut? There are valid arguments to be made in saying that if the market gets a 25 basis point cut it may rally for a short time and then sell off. And, if the market has been pricing in an even stronger cut and does not get it, then the markets will sell off even faster. One more argument out there is that the economy is the driving force of whether money moves into or out of the market, and with signs of economic weakness, neither a 25 or a 50 basis point cut will keep the market from selling. In some ways a rate cut may do more harm than good if the dollar weakens any further. Now what happens if the FOMC does not cut rates at all? All very interesting points to ponder. And why Lisa and I have arrived at the following recommendations.

We want any of our readers who took the short trade on ClearWire (CLWR) to close out that trade tomorrow. It is a good gain and we want to close it and lock in profits. We are recommending that NO new trades be taken going into the FOMC announcement. This will be placing a bet and RebelTraders do not place bets. That is for Vegas, so leave it in Vegas. Now, after the FOMC announcement, lies a very difficult call. Lisa and I have discussed this and we have arrived at the decision that we do not recommend buying or shorting any swing trades immediately after the announcement. The reason for this departure from my recommendation weeks ago is due to the movement of the markets and other developments which have occurred over the past couple of weeks . What we see happening after the FOMC announcement is a surge of emotions which will be followed by more rational movements of money. So to say that a rally that begins right at 2:16pm will last is not fair to say. For that rally will (if there is one) perhaps only last a short while as sellers are cashing out on the strength. (Important trading lesson here: The smart money movers and traders will sell on strength. It is strength that allows them to move large amounts of shares out on high buying volume. Otherwise they have trouble unloading the large amounts of shares). So if there is a rally it could be short lived. It may be a few hours or a few days.

Another reason we are not recommending 'jumping in' after the FOMC announcement is the other events which will take place this week that will be market moving events in their own right. On Tuesday, Lehman Brothers (LEH) reports earnings before market. On Wednesday, Morgan Stanley (MS) reports earnings before the market opens. And on Thursday, Goldman Sachs (GS) and Bear Stearns (BSC) report their earnings, again, before the market opens. With the substantial speculation over the impact of the credit situation, the mortgage market meltdown, the commercial paper (which for the most part still can't find substantial buyers), all eyes will be fixed the largest financial firms in the country, to gauge the impact to their bottom line. What they say could change the direction of the markets very quickly.

Now, if that was not enough, Fed Chairman Ben Bernanke is scheduled to testify before the House Financial Services Panel on Thursday, regarding the nations financial mess. So this is a week of LARGE market moving events. Taking on a swing trade at 2:16pm on Tuesday is no longer prudent. In one swift moment any trades (long or short) could gap in the other direction and create a substantial loss. So for these reasons we are going to sit on our cash and let the bulls and bears go at each others throats. It will be a wild week and one that will be for the history books I see.

If we were currently setup for our daytrading and live market member access service we would perhaps take a day trade on certain events, but as that is still being written in software for the RebelTrader member site, we have to stick with our swing trade recommendations.Let's stay out of the mess until this subsides. I would much rather sit on my cash instead of trying to guess which way the market is going to go each day this week with so many substantial events happening each day.

Don't feel like you may miss out on "the big one" or that you 'need' to be in there this week. We can assure you that there is much money (and safer risk) to be made even after the volatility this coming week subsides and we can grasp with more clarity what direction the market is going to go. We are at a crossroad here and the traffic light is burned out. We can't try to cross the street until the light is fixed.

Oh, and one other thing. the BBC has reported that the situation in the United Kingdom last Friday concerning the bank and mortgage company NorthernRock resulted in patrons of that bank to withdraw in one day 2 Billion Pounds (that's 4.011 Billion US dollars to you an me) in a run on the bank due to their announced financial crisis. Oh... remember American Home Mortgage? They were one of the first casualties of our mortgage disaster. Well it was reported today that some of their checks are bouncing. Yep, payments by American Home Mortgage to pay property tax bills are bouncing. This is not good...

See you in the morning Rebels..

The Day (and the week) that Was - September 14th 2007

Good evening Rebels...

Over the weekend there will be much more posted on out thoughts for the upcoming week. And you will definitely want to check in Sunday night to catch up on what our views are for next week.

Today started out on really bad news out of Europe. NothernRock (a company that is equivalent to CountryWide) which operates in the United Kingdom, reported outright terrible news concerning their financial situation. The company may be the next in line of many that will not last in the long run. In the U.K. today there was long lines of people withdrawing money from the savings side of NothernRock business. A rather gloomy picture of fear and some panic mixed in.

Our market reacted this morning with some large selling at the open. And the rest of the day was a very casual and low paced short covering, selling, and some buying. For the most part the smart money is remaining on the sidelines waiting for next week. Speculators and high risk traders are buying into the market on the hope there will be a rally next week. However Lisa and I are very concerned with the anticipation the market is "building into" the price and we see a risk for for a "sell the news" situation once the FOMC releases their statement. More on that over the weekend.

Tune in over the weekend for expanded information on what we see for next next week. Keep in mind that Lisa and I are also working on improving the access to our site. As stated in a previous post we have very quickly outgrown this web hosting service. It was a great way to get started but the readership and subscriber levels continues to grow and we need to move the site to a dedicated web host in order to provide clean and fast access to the site. Many good things coming for our followers..

Have a great weekend Rebels.. and don't forget to check back in over the weekend for more on events for next week.

Market Update

Early morning selling with somewhat high volume ended with low low volume buying and short covering as more and more people just want to "get out of the way" of next week.

Next week the fun really begins and the markets are going to rally or tank. No body has a clue which way the FOMC is going to go. Everyone has a guess, but no one knows for sure. And because RebelTraders plays on facts we are not going to place bets ahead of the FOMC in 'hopes' that the ball lands on our number.

At this time no one should be trying to take on new positions with just two sessions left before the FOMC announcement. Next week will be wild indeed. And the volume WILL return next week after the announcement, regardless of any holiday, or any other reason the talking heads on TV have been trying to claim as the reason for the low volume. Low volume is lack of confidence in the market and waiting on the sidelines waiting for a sign from the FOMC (and the economy) on where they should put there money. Holidays have nothing to do with our current low volume situation.

Pre Market - September 14th 2007

Futures are down rather significantly thus far this morning on news overnight from Europe that Northern Rock, a mortgage company is now in trouble by the fact that they have had to seek emergency funding in order to remain solvent. Also this morning retail sales figures were released and the data was a downside surprise. A weaker retails figure add the fear back to the markets in that a recession may pan out and become reality.

The pre market volume is higher than it has been in recent days. And on the subject of volume I want to address a comment left last night that the low volume is a result of various religious holidays. One can always find an excuse for low volume, but these days the prevalent reason is, without a doubt, investors/traders sitting on the sidelines. As long as "down" days show higher volume than "up" days, any other excuse is just that--an excuse.

An alert for the short trade on AZO. We want our readers who have entered a short position on AZO to close that trade today while you still have a profit. The reason is that next Tuesday AZO will report earnings. While the recent trading would suggest that there is more downside potential it isn't prudent to hold through earnings. There will always be another opportunity to enter again if earnings prove to be negative.

The Day that Was - September 13th 2007

Low volume was the primary indicator that stuck out like a sore thumb, but in this case not a swollen sore thumb but instead one which was chopped off. The moves the markets made today was on volume levels which are even lower than over the previous days of movements. When volume is low any move is exaggerated. One can not put faith into any movements in a stock or index when the volume in which is driving it is very low.

There was some early news which drove shorts (and there are a lot of them still) to cover some of their holdings. The biggest was in General Motors (GM). They announced early this morning that they may have a plan that will remove from their books billions of dollars in current and future debt by moving certain retire benefits over to a union run benefit package. This news of a potential debt reduction followed by an analyst upgrade this morning sent GM running as shorts were covering. As of the last update on short interest GM has 11% and that is a rather healthy amount considering the float structure of GM.

Also this morning there was a report that the LIBOR rate had stopped going up as has been the case over the past few sessions.

In addition to the above the initial claims data this morning gave added hope that the Feds will cut the fed funds rate next week. But as I said this morning it is not proof until it happens. The markets could very well be setting itself up for a hard fall. We still remain firm with our position and will advise of any changes, however at this time the market is moving solely on speculation and not fact. Everyone is guessing what will happen next week and unfortunately the market may be in for a big disappointment.

Today the DOW attempted to break resistance but it was unable to close and fell back to the resistance levels. This would give us a technical indication of a possible sell off tomorrow.

Pre Market - September 13th 2007

Bad news turns to good news in the futures. Ironic that the markets 'hope' for bad news and that was received this morning in the form of the initial jobless claims. Although the number this morning was not extremely high it was just the fact that it was higher. Traders view this as another sign that the FOMC will cut the fed funds rate. However we note that nothing is a sure thing until it happens.

Over the coming weeks watch for Rebeltraders to move to a dedicated server with a new software platform. This is the next step in the process of Rebeltraders moving to a complete web site with member forums, chat, etc. The Blogger web host was good for us to use to get started but we have already outgrown this software platform and we need to move to our own servers to keep up with the growing readership.

The Day that Was - September 12th 2007

The first hour of trading this morning brought some buyers who were trying to move the market but after 10:30 the volume just vanished. And by the end of the day sellers took it back down. A text book case of 'no conviction' to step up to the plate and take a swing. In many aspects today had the appearance of people just wanting to go home so they went down on the field and just collected whatever loose change they could find and took it home.

The fact that oil hit $80 today made the energy sector light up a bit but otherwise the effect of the rising oil price seemed to end there. It does not appear that the oil price held the markets back today, the markets were held back today because no one was playing. After the large run up yesterday on low volume it was a signal that there would not be much enthusiasm for a follow through. Remember that volume is ALWAYS a key to understanding the markets behavior. Price movements may look great by themselves, but always compare it to the volume to understand the "intensity" of any movement.

The markets are becoming increasingly 'worried' about what the FOMC will do next Tuesday. Speculation is running wild, everything from 25 basis points all the way to a full 1%. One analyst today claimed that the damage to the economy is so severe that it would take a full percent cut in order to return liquidity and stabilize the economy. Only problem with that is a cut that severe will panic the markets because it would be a sign that the economy was "real bad". In which case there is nothing to support the markets to keep running higher. Keep in mind that the prices people are willing to pay for a stock are tied to the economy. If the economy is weak, then companies are earning less, so the stock in that company has less value. A thriving economy creates growth in all aspects of business, more money invested by the companies, more sales, more products, etc. This drives the earnings up of the companies and in turn the perceived value of the stock and hence people willing to pay up for it.

When the economy softens and/or weakens it is not just the average person who feels the economy weaken, it is every company. A company is only good if people are willing to spend money, buy the products, sign contracts for new work, and so on. The economy is a large spider web, a disturbance in one part of the web shakes the entire web. In our case right now the web has holes in it from a bad storm and the FOMC is in charge of trying to repair the holes before the web completely breaks apart. But are they too late? There is a chance that another storm could hit before the current repairs are completed.

The lack of volume is saying that people are staying in their homes for fear of getting caught in another storm. And in some cases people have good radar systems and they can see the dark clouds looming in the distance. So they are collecting their bottles of water and other rations for a long stormy recession. The FOMC is caught in the classic "rock and a hard place". Because they have been sounding the "all is well" tune so long they have let the damage get too severe. Now they will have an even harder time trying to correct the situation. A drop in rates will lead to an even weaker dollar (which is already in the basement) and that will soften the economic picture even more. If they don't cut rates then they will fail to add the liquidity that the market is not hurting for. In either case the chance for a recession is likely and the long term picture for our markets is down.

On the day the FOMC makes their decision if they announce a rate cut I will expect to see the markets rally on the news. But I also expect it will exhaust itself out rather quickly and sell off. Could be hours, days, or a few weeks later but it will fall. If they don't cut the rate then I would expect to see an immediate sell off. Whatever they decide the chances for a recession remain the same in the near future.

The rising oil prices will further erode the Dow Jones Transportation index. This index is necessary for a healthy market as it needs to follow in step with the other markets. I have included a chart tonight of the DJ Transportation index vs the S&P 500. Notice how they are continuing to go in opposite directions from each other. The declining transportation index is acting as one more anchor on the broader markets and will likely help to pull the markets down.

Market Update

Very uneventful day. The volume is very weak and basically the broad markets are just 'floating'. No significant movement in either direction. There was some early moves in some stocks but as the day has progressed the volume dried up and there has been no pressure to keep those gains in force.

A new tropical storm has formed in the US Gulf of Mexico and that is helping to drive oil up today. And also note that the US Dollar continues to be weak.

A very uneventful day. Almost a 'quiet before the storm' type of quiet..

Pre Market - September 12th 2007

There was a surprise overnight in Japan with the sudden resignation of the Prime Minister. The Asian markets did not react violently however it did send the Yen down. And at the same time the US greenback has also dropped even lower.

Current US Futures are pointing towards a lower open. We remain on target with our projections and our stock picks we gave you on Sunday.

The Day that Was - September 11th 2007

Hope is in the Price

Hope, that is what continues to move the market. Not fact. Today the markets made substantial gains and yet again it did it on low volume. The days that the markets go down the volume intensity is higher than on the days that the markets go up. This is backwards from what a healthy market will do.

The markets are moving on the hope that the FOMC will cut the Fed Funds rate and that will solve all the woes. And because of this hope the risk takers are buying up the market in the hope that the Feds will cut the rate and the markets will propel upwards. And all the time that the market is advancing on this weak volume the 'smart money' is cashing out, taking advantage of the hope of others. When you watch a stock and you see it advance on small trades and then a large share transaction goes through on a down tick and this is repeated over and over you see clearly what is happening. Those who are moving the largest amounts of money are for the most part dumping larger amounts of shares on the weaker advances. They are doing what all smart traders do, they sell into the strength (and hope) of others. So while others buy up the stock on smaller share increments they jump in with larger share sizes and sell down. These are key technical indications of the markets movements and why we still remain firm at this point that the market is setting up for a hard fall.

A successful technical analysis of a market is much more than just looking at one chart or one parameter and saying to yourself "we have returned to a bull market". That is nonsense and will lead a trader to disaster. The smart technical analysts and traders look at many things. You can not isolate yourself to just one or two parameters of a stock chart and think everything is OK. One must ALWAYS take into account as many technical indications of the chart movements, the volume, the buying vs selling, the sector charts, the foreign markets behavior, the movements of the dollar, and on and on. So today the market had the appearance of a strong bull rally, to the novice this is true. To the experienced and savvy trader who is keen to other indicators this was not a bull rally. It was a movement on hope without substance.

A good Doctor will evaluate a patient by thoroughly examining their patient before arriving at a diagnosis. A Doctor who makes a diagnosis without understanding everything will more times be wrong then he is right. Same with technical analysis, if you don't examine the market thoroughly then you will likely be trading in the wrong direction and set yourself up for a loss.

Today there was no significant news or financial events to offer the markets any substance. On the contrary the lack of any news today made the 'hope' factor go up. It was the lack of news which fueled those who are hoping on a rate cut to further think it is a "sure thing" and they continued to buy up the market. They are pricing into the markets that a rate cut is a done deal now.

But do we really know that a rate cut is a sure thing? Do we really know that the lack of news today meant the worst is over? Do we really think that the markets are all better now and it is time to go long? Hell no! If you can answer any of the above questions with a 'yes' and is based on factual proof then we are wrong. But there is no factual proof that a rate cut is "in the bag", there is no factual proof that no news today meant everything is behind us, there is no factual proof that everything is better and it is time to go long. There is more proof to say the opposite of all of those questions. And that is in the charts, it is in the economic indicators, it is in the credit spreads, it is in the down trend of discretionary spending, and on and on.

Today the broad markets tried to break above some key resistance levels but it failed. will it try again tomorrow? Can't say because we don't know if some news in the morning will dash the 'hopes' of those who have been moving the market. But from a technical analysis stand point there is not much room over head to move up without the markets hitting a wall. And as has been the case during this market situation every wall has been met with strong selling from those taking advantage of the weak buyers and selling them off. This is why we are not initiating long side swing trades. It is pointless to do so with so much overhead resistance and other indications that the advances have been weak and are prone to another sell off.

On the economic analysis side of things there are those who view that even with a rate cut from the Feds it will not provide the necessary 'fix' that is required to solve what is broken. And we have to agree with that. How we see the economic conditions, as they exist currently, a rate cut may only make the problems worse in the long term and our equity markets are going to suffer even greater losses. It has almost reached a point that the markets are dammed if they do and dammed if they don't cut rates. You need to realize that the markets are balancing on a tight rope, the slightest event will tip the market off the rope and send it falling. The market has a long way to go before we can safely say that it is off the rope and the risks off a large decline are minimized.

RebelTraders don't trade on hope for that would only be as good as placing a quarter in a slot machine. Smart traders don't gamble, they play when the odds are in their favor.

Market Update

Ben Bernanke essentially had nothing to say over in Germany this morning that had any impact on the market. It is still a guessing game going on as to will they cut, and how much will they cut.

The market is currently bi-polar. It has no logic, only emotion is moving the market currently. So far today the indices have been stopped by resistance levels and keeps pulling back from those levels. Don't let the green on your screen fool you into thinking that all has returned to normal. These kinds of moves are commonly referred to by the pros as "a bull trap". The moves lure people back into the market on the long side and then it sells off again leaving the amateurs out to dry with a loss.

Stick with the positions we provided you on Sunday night. Currently two of them are 'in play' (reached entry point). The remainder of the stocks remain on the watch list for their respective entry points to be reached.

The movement in the market thus far today does signal the potential of an afternoon decline so be careful.

Pre Market - September 11th 2007

We are waiting for Ben Bernanke to speak in Germany. This will take place at 11 am (eastern time). And as usual all ears will be listening to what he has to say.

Also today OPEC is meeting to discuss if changes are necessary in crude production levels. We should expect some volatility today in the energy sectors.

A thought on what happens on September 18 with the FOMC announcement. Lisa and I share the view that in light of the recent economic indicators that when (and if) the FOMC issues a cut to the Fed Funds rate we will see a spike in the broad markets. However, we feel it is likely that the spike will be an opportunity for those who are looking much further down the road an opportunity to sell out. They will take advantage of the spike to sell into the strength. It may last a day, a couple weeks, we just don't know. But we do see a rate cut as providing only a temporary boost to the market and then we will sell off again and begin our bear market. We believe the economic damage is just beginning to be known and the rate cut will only be another shot with the paddles but the end result will be "a code" (first responder talk for a death). Keep in mind that a rate cut will further weaken the US dollar which is already near historic lows now.

A Moment of Pause

On this day we need to set aside a moment in our thoughts to remember all of those on this day who gave so much...

The Day that Was - September 10th 2007

Lisa did a wonderful job describing the market action today. All I can add tonight is a chart of the S&P 500. This is a weekly chart and I wanted to highlight the building formation of a bear flag.

Also note that today two of our picks we presented yesterday became "in play" today. CLWR made very good gains today on the gap down this morning. I will expect to see some bounce but it is expected to continue working downwards so this remains a good swing short.

Also today AZO hit the confirmation point and became a swing trade also. Keep watching the remaining charts for the entry points for these short plays.

See you in the morning Rebels..

Market Update

So far here at mid day the market is very quiet and that is reflected in the trading volume which is very low. The market continues to weaken and that is reflected by the lack of volume doing any buying here.

With regard to the plays we provided you last night already one of them has confirmed and has become a short entry. CLWR has fallen 12.5% just this morning so far. Keep an eye on the remainder of the short trades we provided you and look for an entry on those when the conditions highlighted on each of the charts becomes a confirmation.

We are seeing a continuation of what has been happening for quite some time now. Advances in the market are being sold off. The tape says people are selling into strength. We don't argue with the tape.

Pre Market - September 10th 2007

There is no significant news this morning. The futures have been drifting around. We are standing firm with our market assessment that selling on strength is taking place and will continue to do so.

Economic Data-

Monday, September 10th- 3pm: Consumer Credit...

Tuesday, September 11th- 8:30am: Trade Balance...

Wednesday, September 12th: Bank Reserve Settlement; 7am: MBA Mortgage Applications; 10:30am: EIA Petroleum Stats...

Thursday, September 13th- 8:30am: Initial Claims; 2pm: Treasury Budget...

Friday, September 14th: 8:30am: Current Account, Export Prices ex-ag, Import Prices ex-oil, Retail Sales; 9:15am: Industrial Production, Capacity Utilization; 10am: Business Inventories, Michigan Sentiment-prel...

Speakers- Monday- 7:30am: Atlanta Fed President Dennis Lockhart will be speaking in Atlanta; 11am: San Francisco Fed President Janet Yellin will be speaking in San Francisco; 2pm: Dallas Fed President Richard Fisher will be speaking in San Antonio; 7:30pm: Federal Reserve Governor Frederic Mishkin will be speaking in New York... Tuesday: 11am: Federal Reserve Chairman Ben Bernanke will be speaking in Germany

The RebelTrader Play Book for the coming weeks...

The mood of the market has shifted

The employment data released on Friday has shifted the mood of the markets. For some time the charts have been indicating a weak market but until Friday had been trading on the hopes a Fed funds rate cut was going to rescue the markets.

What happened is that the charts were saying a decline was likely has moved from a technical indication into now being an emotional indication. Now, all of you know that Lisa and I apply technical analysis to our trades and to many of the broader markets to gain a perspective of which direction the markets are going. But what is a chart? It is the reflection of the emotions (fear and greed) of those moving money into and out of the markets. To those that have been with us for a while know I have said this before but for the many new people who have been reading our commentaries the study of technical analysis is essentially the study of human psychology. It is through the understanding of fear and greed where we profit. We make money by being on the side of the market direction, not by fighting it.

The reason RebelTraders has been advising to remain on the sidelines since this turmoil began was because the emotions (as reflected on the charts) has been all over the map. There has been no clear direction in which to make a profit with a sensible risk/reward ratio. Rebeltraders is committed to being much more than "just another stock picking service". We are different (hence the name RebelTraders..free flow of ideas that are objective and unbiased). We strive to educate our readers, provide objective views, and to help you learn to be a smart and intelligent trader and investor.

Now, back to what happened on Friday. As you recall on Friday night I posted the chart for the 10 year T-Note Yield. The purpose of my wanting to show you that was the emphasis placed on the strength of the movement of money making the 'flight to safety'. In no time during the market turmoil that started in mid July was the 'flight to safety' stronger than it was on Friday. This is one form of technical analysis, to study where money is going. And that chart showed that it was not moving into stocks. Ever since August 16th when the market started to try and make some moves upwards the volume has been weak. This has been a sign of low confidence and signalling a lack in confidence in the markets. The volume is always important in understanding any market move, be it a stock or a broad market index, volume must always be evaluated along with price movements.

Since August 16th the markets were advancing on weak volume as it was "pricing in" a possible Fed Funds rate cut. Remember that "pricing in" means that the market is trading as if something that has not happened 'will' happen. When you hear the expression "sell the news" it means that some event which is expected finally arrives and because the price was running up before the event occurred and when it does then it sells off as it had reached a climax. With the markets advancing recently on the weak volume it has been doing so on the anticipation that the Fed Funds rate cut would 'rescue' the market. Then on Friday morning the employment data showed that the economy is potentially much worse and now a Fed Funds rate cut will not be the anticipated 'cure all'. Lisa and I see the markets as going through a long term decline that will experience some short term rallies but the end result will remain the same. And that is a market decline and eventual bear market.

So what do we do? First we identify some stocks that, upon confirmation (see the respective charts for details) we enter short positions on. Again, each position is a swing trade meaning that you never place all of your capital into one trade. You divide your trading capital into segments of 10% each. And you place no more than 10% of your trading capital on any one swing trade. This is how you limit the risk to your overall capital. Now, using the charts provided here watch for the conditions identified to take place, and when they confirm then you enter a swing trade (short) on that stock. These short plays could be short term of a few days in duration if some significant market event propels the markets significantly in the other direction in which case we will close them or they could be longer term trades lasting for weeks or even months as the markets continue to decline.

Now what do you do if you are trading in an account where you can't short a stock, or if you want to hedge your longer term portfolio (401k for example) with some plays that will help you in a declining market. Then Lisa and I have the following suggestions.

First you want to add some Gold (hedge for the falling dollar) to your longer term portfolio. We suggest symbol 'GLD' which tracks the price of Gold. This will be a longer term hold during a declining market.

Next, in order to profit on a declining market we would buy 'SDS' (an inverse ETF on the S&P 500, actually pays you as the market declines), and 'DXD' (inverse ETF for the DOW). We were also discussing the Russell2000 ETF short and we are considering that as well and that one is more volatile so we are going to wait just a bit longer before we tell you to consider that one. These ETF's are provided by "ProShares" and you can learn more about them by visiting their corporate web site at http://www.proshares.com/ .

The stocks that we have picked as possible short trades are:

CLWR

AZO

FFIV

GLBL

FWLT

At the end of this commentary I will provide the charts for each.

A few final thoughts for tonight. Late on Friday CountryWide Financial (CFC) announced that they were forced to lay off 20% of their workforce. This is the nations leading mortgage lender and their financial troubles continue to mount. The housing sector and the credit crisis is propagating into Main Street businesses and the ramifications are likely to mount. Our economy is more intertwined with the global economy than at any time in history. Some would say that a 'global' economy will provide a cushion and will help absorb disruptions in our economy. But our view is somewhat different, when one economy (US economy for example) begins to suffer then other countries that have a financial interest in ours will pull their funds out just like any smart investor who closes out an investment that is "turning sour".

The news last Thursday of China pulling money out of the US Treasuries may very well be the beginning of many more such 'withdraws' from our economy, and it has been because of the global movement of money that our markets have done so well in recent years. Without that global source of money flowing into our markets then we stand the chance of an even larger bear market/recession.

And one last thing before I post the charts. The following list is something that everyone has probably heard at one time or another and we find it to be rather funny. It is essentially the top excuses that stock picking gurus will use to justify why something happened that went against their prediction. Some of these are too funny to not provide you on this Sunday night before you go to bed.

10. You took my statement out of context, leaving out all the
obfuscatory elaboration, conditional clauses, counterpoints and equivocations.
Your judgment is unfair.

9. I was close enough. You should give me credit.

8. I will be right eventually; I just don't know when. (Or
sometime later: I was right, but my timing was off.)

7. I may be wrong on some little things, but I'm dead right
on all the big ones. You shouldn't count the little ones.

6. I provide risk assessments based on historical
tendencies, not forecasts. You should not call it wrong. The low probability
scenario happened, so it was just bad luck.

5. My public statements may be sometimes wrong, but I am
100% right in my private newsletter. You have to pay for the good stuff.

4. Since I am rich and famous, I must be smart. Since I am
smart, I must be right. Quid est demonstrandum. No need to check up on me any
more.

3. If brokers weren't so manipulative and investors so
gullible, what I said would happen would have happened. You should give me
credit for my compelling argument.

2. The Plunge Protection Team (or the President, or the Vice
President and his cabal, or the Treasury Secretary, or the Federal Reserve, or
the Japanese, or the Chinese) intervened to prop up the market. You shouldn't
count that against me.

1. What forecast? Let me tell you about a great new
investment opportunity!

Reprinted with permission of the CXO Advisory
Group LLC and is copyrighted.

And we would like to add one of our own:

11. The market makers are crooked and intentionally made the stock go down and stole my shares!

Now the charts...

Charts

The charts for the commentary above..