No big news lots of Volatility

President Bush signed The Housing and Economic Recovery Act of 2008 this morning, despite a plea from the CEO of Nehemiah, Scott Syphax, asking the President to save the seller funded DAP program. Seller funded DAPs will be eliminated under the new law.

Without any significant or substantially reliable economic news this week, financial markets have been wildly volatile. The Dow lost 240 points on Monday, then rose 260 points yesterday. This morning the ADP Employment Report was released and showed an increase of 9,000 private sector jobs from June to July, which was a big surprise when compared to expectations that ADP would report a loss of 60,000 jobs. Stock futures pointed to a lower open prior to the ADP report, but reversed course in a huge way upon the report's release and The Dow opened up by more than 150 points this morning.

Two reports are scheduled for tomorrow. The quarterly Gross Domestic Product, which is a key indicator and measure of the countries growth, and the Q2 Employment Cost Index, which measures the cost of wages and benefits (wage inflation).

Budget deficit, Merrill and housing

Treasuries fell on speculation Merrill Lynch & Co.'s sale of securities linked to mortgages may signal that losses at banks and brokers are reaching a peak, reducing the haven appeal of government debt.

U.S. debt rallied yesterday as stocks slid and the International Monetary Fund said there's no end in sight to the U.S. housing slump. Two-year note yields fell 14 basis points, the most since July 14, to 2.57 percent. Treasuries underperformed European bonds and emerging market bonds as investors demanded higher yields on U.S. notes to compensate for the prospect of increased debt issuance.

The U.S. budget deficit will grow to a record $482 billion next year, the Bush administration said yesterday. Government borrowing needs will rise to $171 billion in the three months to Sept. 30, $59 billion more than predicted in April, the Treasury said in a statement in Washington yesterday. The budget shortfall reflects dwindling tax receipts because of the economic slowdown, the cost of a $168 billion stimulus package and spending on the wars in Iraq and Afghanistan.

July 24 S&P 500 hits bottom target

Here we are running back on our wonderful rally. We have a 34 point range today. Needless to say it was a very heavy trend.

Selllers were committed most of the afternoon. Dependant on the gap in the morning lets see how we can play it. if we gap down and shoot through 1240 then to the 20's we go.

I don't see where the support is going to come in as hedgies have loosed their positions in the financials again. Remember our memorandum from to days ago no shorting the banks unless you have an agreement borrowing those stocks.

Shall be exciting because it will be setting the pace for the following week.

July 24 at the close financials and banks down

Look at the Red. Yesterday it was green and today they gave it back. We don't have much news tomorrow. I bet the summer holidays won't be starting early with this much movement going on.

July 23 daily after hours SP 500 emini

Looks like we testd up again today. Volume kept us up there. Looking for 1305 for major resistance and 1320 on a large volume spike. If oil keeps going down this will be an excellent opportunity to put in a longer term swing trade.

On the down side look for a reversal back to the lower tl, and dependant on what type of Gap we have open we could see it turn tomorrow afternoon.

Treasuries fall and Freddie and Fannie are saved

Treasuries fell for a second day before a record sale of two-year notes as concern dropped that financial companies' losses will widen, easing the haven appeal of government debt. What seems to be overhanging the market is the perception that the Fed wants to increase the rates. In fact, Philadelphia Fed President Charles Plosser said yesterday the central bank should raise interest rates ``sooner rather than later'' to prevent price expectations from getting out of control.
Futures contracts on the Chicago Board of Trade showed a 61 percent chance the central bank will increase the target rate for overnight bank lending by at least a quarter-percentage point, up from 25 percent odds a week ago.

Inflation expectations have fallen in the past two-and-a- half weeks as the cost of a barrel of oil has dropped about 15 percent from a record $147.27 a barrel on July 11, Treasuries indicated.
The House of Representatives is set to vote today on the rescue plan for mortgage-finance companies Fannie and Freddie. The central bank's Board of Governors on July 13 authorized the New York Fed to lend directly to Fannie Mae and Freddie Mac to meet their liquidity needs if necessary.

July 22 SP 500 Emini Daily

It was the 3.5 million volume spike that changed our direction. I mentioned this about two weeks ago that the turnaround would come after a volume sell off. The market makers are luring in a fresh batch of investors that will supposedly be buying the bargains. Watch out, don't fall in love with this rally, another investor spike will turn this around and the market makers will wipe this rally out.

Financials have had a little rally because things aren't as bad as they seem. It is bad......we will see in the next few weeks.

With all the support the financials are getting naked shorts out of the market on Banking stocks I expect a rally to previous swing high (1278) and then we will see who will be taking profits.

Will be a big day for xlf, rkh, bac, c, wfc, and wb.

After that who knows, we might see some consolidation or profit taking.

This is an example of a letter I recieved about shorting the big guys:

IMMEDIATE CHANGES TO CERTAIN US BANKING SECTOR CFDsOn 15 July 2008, the U.S. Securities and Exchange Commission (“SEC”) issued an emergency order (“ SEC Order”) that was created to protect investors against the “naked” short selling of 19 US traded financial companies. The SEC Order will be effective from today Monday, 21 July 2008.The SEC Order means that no person may short sell any of the 19 listed CFDs or Stocks, unless they have borrowed, or arranged to borrow, the security prior to affecting the sale, and deliver the security on the settlement date. This means that that a client must have borrowed the security, or arranged to borrow it, prior to executing a short sale. As it is now, the SEC Order will be effective from Monday, 21 July 2008 through to 11:59 p.m. EDT on 29 July 2

Bank of America (BACnys) • Citigroup Inc. (Cnys) • Credit Suisse Group (CSnys) • Allianz SE (AZnys) • Goldman Sachs (GSnys) • JP Morgan Chase & Co. (JPMnys) • Lehman Brothers (LEHnys) • Merrill Lynch (MERnys) • Morgan Stanley (MSnys)

INSTRUMENTS ALREADY SET AS NON-SHORTABLE (PRIOR TO THE SEC ORDER)• Barclays Plc (BCSnys) • Deutsche Bank AG (DBnys) • Royal Bank of Scotland Group Plc (RBSnys) • UBS AG (UBSnys) • Freddie Mac (FREnys) • Fannie Mae (FNMnys)

ADDITIONAL SECURITIES AFFECTED BY THE SEC ORDER BUT NOT OFFERED BY SAXO BANK• BNP Paribas • Daiwa Securities Group Inc. • HSBC Holdings Plc • Mizuho Financial
Best regards,Saxo Bank

Rally away boys.