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Set-Up for a Turnaround Tuesday
By Dr. John L. Faessel
ON THE MARKET
Commentary and Insights
Dr.Faessel@onthemar.com
Tuesday - 2/24/2009
McClellan Oscillator* at Minus 366 - "next to" the lowest closing level ever.
Yesterday was another incredible, just horrible, horrible day. The stock market crashed to new closing lows of the crisis, volume was high and above average. While the S &P 500 (SPX) did not hit the low interday post of 741 the close at 743 was, should we say to quote the old saying (that says a lot) “close enough for government work.” (See below*)
AIG (AIG) seeking more $billions from the Treasury and Fed seemed to be the driver and has crumbled away in federal hands. They are looking at a $60 billion loss for the quarter. (AIG) is now a penny stock closing at 53 cents.
Sentiment and oversold indicators are now AT the extreme levels necessary to ignite significant rally.
Yesterday the McClellan Oscillator (favorite overbought / oversold indictor), posted a minus and deeply oversold 366 after Fridays 298.
The CBOE Total Exchange Volume Put / Call Ratio was 0.95 the lowest post of the last few days, after a cluster of very high numbers. Thursdays was 1.06, 1.14, 1.18, and 1.03. Option players had substantially increased their net downside insurance over the last week.
The (VIX) (FEAR INDEX) closed at 52 also the highest closing post in 5-weeks.
The TICK reached a low of -1412, indicating an extreme level of short-term oversoldness. Importantly, and very unusually, it “visited” levels below minus 1200 for each hour of the session. On Friday the TICK posted lowest mark since the markets lows of November 20.
The “End of Life as We Know It” is “priced in” and with huge short positions out there & oversoldness and sentiment ripe we are ripe for a reversal.
* Ken Gammage master of the McClellan Oscillator’s many nuances called these deeply overbought & oversold penetrations of the McClellan “buy or sell spikes.” He would bite his tongue close his eyes and buy ‘em when the McClellan got to huge negative numbers. And do the same ie sell ‘em when they were in high numbers.
Quote of the day / week / month/ year!
“The Obama administration should declare that nationalization of any major bank is off the table; that the government stands behind our entire banking system; and that our banks will continue to receive a nonvoting form of equity capital, such as convertible preferred stock, from the government to the extent needed. Yesterday's joint announcement to this effect by the Federal Reserve, FDIC, the Comptroller of the Currency, and the Treasury is a critical step toward healing our banking system and economy. Well done.” Said Mr. William M. Isaac, Chairman of the FDIC from 1981-1985.
Federal Reserve Chairman Ben Bernanke’s testimony today to Congress could also clarify the picture. Also Treasury Secretary Geithner is expected to present details of "the plan" today.
The Bank index (BKX) closed unchanged yesterday. Bank of America (BAC) closed up 12 cents and CitiGroup (C) was up 19 cents, on the news of government taking an increased position [40%] in CitiGroup, suggesting that there will be no nationalization.
The big rally off the October 10 lows came off of a McClellan minus read of an “all-time” oversold 421. The rally off the November 21 lows came off of a McClellan of a minus and hugely oversold 318. Fridays low of minus 297 is close enough to historic reversal numbers of the past - interday Friday it was below 300.
Notes re:
The Fiscal Responsibility Summit & “Living within your means” - Are you kidding me. Incredulous insanity. Just come out of your breakout groups a little later and give me the plan and I’ll fix the economy up? Simply preposterous! Flopping on the floor - convulsing in sad and distressed hilarity. No wonder the Market had the Sell button pressed on max all day.
For a listing of the crew that supposed to save your a.. - see: http://briefingroom.thehill.com/2009/02/23/list-of-fiscal-responsibility-summit-attendees/
Congress holds the purse strings, not the president! Here's what the U.S. Constitution says: "All bills for raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with amendments as on other bills." How many times have we heard politicians, pundits and guardians of our news media say that President Bush cut taxes, or Obama is going to raise taxes?
The fact of the matter is that presidents have no power to raise or lower taxes. They can propose tax measures or veto them, but it is Congress that has the ultimate power to raise or lower taxes since it can, with a two-thirds vote, override a presidential veto. The same principle applies to spending. ...
Yogi Berra on why the Yankees lost the 1960 series to Pittsburgh - “We made too many wrong mistakes.”
Dr. John L. Faessel: Dr.Faessel@onthemar.com
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