Not A Bad Start

The beginning of the rally came right on schedule with the Dow Jones up around 165 points today.  What was impressive about today’s rally was the fact that we were down big twice and the market recovered two times to end much higher.  At the open, there was 94% downside volume at one point and then we rallied.  Then, we fell back and then rallied in the afternoon.  Looking at the internals from start to finish, it wasn’t that impressive.  However, I’m willing to give it the benefit of the doubt since you had two markets in one day.  Down in the morning and up in the afternoon.

Materials were strong again.  They started out very rough but turned the corner.  The steel ETF was down about 5 or 6% this morning only to finish up 2% to give one example.  A huge turnaround.  I expect more gains from this area as it appears maybe the hedge fund selling is exhausted.  Heck, even the financials turned around based on various rumors I’ll discuss in a minute.  Technology is standing out to me and is one area I’m looking at closely for purchase.  Besides materials, it’s one of the most beaten up and oversold sectors.

Lehman Brothers

After the bell, the Treasury announced they are brokering a deal basically to get Lehman Brothers sold to someone else.  This is very similar to what they did with Bear Stearns.  I’ve been writing and talking about the fact that the Fed & Treasury are basically bailing out who they want depending on the type of impact they think it will have to global financial markets.  In the meantime, they want to show they are tough, so they let the stocks go to zero.  Nobody knows the details yet but they hope to have a deal done by the weekend. There are rumors that various private equity firms are involved, Bank of America, & Goldman Sachs.  But, Goldman Sachs denied the rumors earlier in the day.

Having a major financial company not go belly up is a morale boost to the market.  They are basically saying let’s fix it now and worry about the ramifications later.  They don’t mind if an FDIC insured bank goes under (as probably 100-200 more will), but they do mind if a large financial instituiton with institituional and international investors does.


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September 2008
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