The markets are experiencing some very severe attempts to breach levels set over a decade ago. The S&P and DOW futures are pointing to a higher open after the major selloff yesterday and the big question in traders mind is what is going to happen in the next 60 days prior to the Obama administration taking office? Will the Bush administration step up to the plate again to calm markets by approving a bailout of the automakers? Will Citi survive this latest run on its business? I would recommend letting the markets test the lows before going long here.
The troubling aspect of the Treasury’s lack of follow through on the purchase of illiquid mortgage assets, as was originally proposed, is also having a detrimental psychological impact on the market. Questions are being raised as to the depth of the crisis in lieu of Paulsen’s about face. The VIX settled at above 80 again yesterday and with today being November options expiration, it should be an extremely volatile session with potential for huge up and down intraday movements.
We will be looking at the market action at around 750 on the S&P and 7500 on the Dow. If we get a good bounce from these lows set yesterday we may be forming another short term bottom and may be able to entertain some ranges for the upcoming expiration cycle. In these markets fundamental analysis really takes a back seat to technicals as everybody knows the fundamentals point to a market that is very “cheap” but in the absence of leadership, short term trading will rule the day and long term investors will continue to sit on the sidelines.
