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Widespread recent selling in equities and gold looks to be a panic reaction by the masses, as opposed to a calculated response to real market data.
The over 5% decline in the Dow Industrials in the past two days has turned investors’ focus back on the downside, which is different from the positive spin that prevailed just a week ago.
From a technical standpoint, I have been making the case that the rebound from the August lows was a typical flag formation. The Nasdaq Composite has been the strongest since the August lows, but the negative signals from the McClellan Oscillator as of Tuesday’s close indicated even the Nasdaq had likely topped out.
Those who sold at the August 9 lows have had almost two months to watch the market stage a typical 50% rebound. If anyone sold yesterday because stops were hit or as a result of a previously developed plan, that is fine, but Thursday’s drop suggested many were just hitting the sell button in a panic reaction.
The bearish sentiment of individual investors jumped sharply this week, as 48% are now bearish with just 25% bullish. These numbers are as of Wednesday, so they should become more bearish by next week.
Gold was also hit hard Thursday and could be vulnerable to more panic selling before the current correction is over. By looking at the charts, we can get a better idea of what may occur so that you can develop a plan based on data, not emotion.
The computer maker's moves hint at the end of an icon.
By Jeff Reeves, InvestorPlace.com
Now the iconic iPod is an afterthought, bringing in a mere 8% of Apple revenue -- and falling fast as other gadgets take over the digital jukebox role on top of many other functions.
So could Apple pull a page out of the Netflix (NFLX) handbook and voluntarily kill off a dying segment of its business? Would it make sense for Apple to refocus rather than just run the iPod into the ground?
Treasury Secretary Tim Geithner said we would not have another Lehman-caliber meltdown on our hands. But he never said there wouldn't be pain.
Does it do any good to say that the world is on the eve of another financial crisis, as I hear so many people saying? Does it do any good to catcall me for saying that Treasury Secretary Tim Geithner was just being upbeat and hopeful when he said there will be no more Lehmans?
No and yes. No, it does not do any good to proclaim we are on the eve of the next financial crisis, because it's the degree of crisis that matters. People seem to forget that the center almost didn't hold during 2008. It was only the destruction of trillions of dollars of capital that allowed us to bottom, with a tremendous number of financial institutions in this country being wiped off the face of the earth, including many that had been with us for some time, including Bear Stearns, Lehman Bros., Merrill Lynch, Fannie Mae, Freddie Mac and three reconstituted and quasi-nationalized companies -- General Motors (GM), American International Group (AIG) and Citigroup (C).
Are we going to get that kind of crisis? That's where the second point comes in, Geithner's point. There is a grave misconception about what Geithner told me last week and what I am reading, say, in the mocking Twittersphere.
After a negative September, the financial markets could get a bounce from a news turn in the right direction.
By all indications, the post-Fed market downturn is overdone.
Stocks and other risky assets dropped early and hard Thursday morning as a flood of sell-at-open trades knocked the major averages down. The fear, if I understand the bears' reasoning correctly, is that while the Federal Reserve announced a new $400 billion Operation Twist stimulus plan Wednesday, it was accompanied by a statement that there were "significant" downside risks to the economy. Not to sound trite, but duh!
We already knew this. There were indications of trouble as far back as mid-April as inflationary pressures raged. By now, the breakdown in consumer and business confidence and a slowdown in the labor market are well known. The fact that the central bank is acknowledging this -- and responding with new stimulus -- should be considered positive.
And there are plenty of other reasons that now is not the time for panic.
The former eBay chief will likely be named to lead Hewlett-Packard after the market closes. Here's why Whitman makes sense.
Are investors happy that Whitman is coming in or that HP is finally getting rid of CEO Leo Apotheker? Probably yes to both.
One analyst says the video-rental company may have split itself up to pave the way for an acquisition.
It's an amazing drop for the one-time market darling. And many observers are shaking their heads in disbelief, since this company normally executes flawlessly. Now its executives look like boneheads.
What happened to Netflix?
These major market areas are likely to continue to underperform. Use careful risk controls to avoid big losing positions.
By Tom Aspray, MoneyShow.com
The late-in-session drop in the stock market after the Fed announcement was consistent with the deterioration in the technical outlook discussed yesterday. The McClellan Oscillator has broken below support, which makes a further drop very likely.
Three of the major sectors look most vulnerable to further selling and they are likely to underperform the S&P 500. Even though technology was also lower, it continues to show better relative performance, or RS analysis, which suggests the tech sector will hold above the August lows.
For the Select Sector SPDR - Energy (XLE), it is important to keep an eye on crude oil prices. As I have frequently pointed out, crude oil often leads the stock market on both the up and down side. November crude oil was down over $2 yesterday, and a break of key support would be a negative for the energy sector and stocks in general.
The Fed's latest maneuver may be bad for banks in the long term, but there are some defensive picks.
By Dan Freed, TheStreet
Wells Fargo (WFC), JPMorgan Chase (JPM), SunTrust Banks (STI) and City National Corp. (CYN) are the banks best positioned for a flatter U.S. Treasury yield curve now that the Federal Reserve has flattened it in a move dubbed Operation Twist, according to a research report published Wednesday by Evercore Partners.
There had been widespread speculation that the Fed would perform Operation Twist -- which aims to raise short-term interest rates while pushing down long-term rates -- before the Fed officially announced the plan Wednesday. The hope is that the move will attract foreign capital while keeping financing costs low, the Evercore report stated before the Fed made the move official.
Overall, Operation Twist would be bad for banks in the long term because it would negatively affect net interest margins, which represent the difference between banks' cost of capital and what they can charge borrowers.
The chance of a market bounce is diminishing, but high-yield stocks will start to attract more money from long-term bonds.
Did anyone get the license plate of that truck? I think it was a vanity plate. I think it had the word "significant" on it. Because that's the word that the Fed inserted before the term "downside risk," a word that didn't exist in the Aug. 9 statement that jumped at you this time around.
So we get one of those old-time sell-offs, one that takes down not only the companies that do poorly when there is significant risk -- you know, the usual suspects they shoot every day when things are said to be bad, such as rails, chemicals, papers, minerals -- but also the "recession-rich" stocks -- new term -- the ones that make you rich if there is a recession.
Yep, it was an S&P 500 ($INX) jailbreak. Everyone is, indeed, selling everything. Didn't we see this before? Except then we were in better shape to handle it.
The former eBay CEO was named chief of Hewlett-Packard Thursday afternoon. While she grew the auction site dramatically, cutting the fat at bloated HP will be a different challenge. Can she pull it off?
Can former eBay CEO Meg Whitman fix Hewlett-Packard?
HP's board named Whitman their new chief this afternoon, after two days of reports the move was imminent.
Hewlett-Packard (HPQ) shares soared as much as 10% Wednesday on rumors that the tech giant's board could be kicking chief executive Leo Apotheker to the curb, with Whitman waiting in the wings. Shares fell almost 5% on Thursday, a little worse than the market overall.
But don't be fooled -- this is just the latest dumb move at Hewlett-Packard, a company plagued not just by a revolving door in the corner office but by a glue-and-sticky-tape approach to its current ugly state of affairs.
Forget about Operation Twist. Next week's bond auction has the most potential to disrupt the markets.
Wish we were on a gold standard? Think again.
When you post any thoughts about gold, you're inevitably going to end up with some folks who bring up the currency issue. "Gold is a currency," they say. "Gold has been favored since the time T-Rex ruled supreme (the dinosaur, not the band)." And of course, "Gold is going up because our fiat money is being debased and rational people are doing the only thing that makes any sense by buying yellow metal."
One commenter, for instance, posited: "Gold is trading as a currency. Yes it could be somewhat overvalued today, and may fall back, but in 12 months it will be up against all fiat currencies that are clearly being devalued."
But here's the problem: If gold is acting like a currency, it's acting like a really, really bad one.
Amazon is finally making e-books for its Kindle reader available at libraries across the country.
Barnes & Noble (BKS) worked out a similar partnership for its Nook reader a long time ago, but Kindle users have been left out of the library loop. The deal won't immediately help Amazon's business, but it may eventually entice more people to buy the device if they can borrow books on it for free.
Here's how it works:
With Congress gridlocked, the central bank acts to keep the economic recovery on track.
The wait is over. Federal Reserve policymakers announced Wednesday that they are ready and willing to support the flagging economic recovery with another dose of monetary policy support.
Specifically, they will more directly target long-term interest rates by shifting the average maturity of the Fed's bond holdings by buying $400 billion worth of Treasury bonds with maturities over six years while selling an equal number of Treasury bills with maturities of three years or less. The move has been dubbed Operation Twist in honor of a similar action taken in the 1960s.
Essentially, they are taking money out of their left pocket and putting into the right, but the impact will still be positive, since it will push down the interest rates that price mortgage loans, car loans and other consumer credit.
Here's why the Fed did the right thing -- and what to expect next.
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[BRIEFING.COM] The stock market continued its strong start to the week with a broad-based Tuesday rally that sent the S&P 500 higher by 0.5%. Nine of ten sectors registered gains while the benchmark index extended its week-to-date advance to 1.4%.
Equities received an opening boost from a pair of economic data points that crossed the wires this morning. An in-line CPI report suggested inflationary pressures remain contained, while a better than expected Housing Starts report ... More
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