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