Change text size

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Bulls decide take profits and then some, as reignited economic concerns trump mostly decent corporate reports in Wednesday’s session. As of 16:00 ET, the “Cubes” (QQQQ) and “SPYder” (SPY) tumbled lower by 8.96% to 9.42% on lighter volume unworthy of taking the sting out.

Wednesday was not likely a good one for many bulls. Market prices and sentiment started off poorly and only got worse on an ultra-volatile and linear dose of bull bashing. Futures kicked off the day on a sour but restrained note as traders collectively opted for donning bearish headgear in coming up with reignited global recession pangs.

With little in the way of fresh kernels of information, pre-market worries of government bailouts failing to avert a severe economic downturn, greeted bulls as they awoke this morning. Things, i.e. prices and sentiment, got worse from a triple play on the officially-sanctioned economic front.

Producer prices via the PPI showed an in-line drop of 0.4%, while core prices came in two-tenths above views with an increase of 0.4%. Net-net, trader reaction sided with black gold (USO) and core prices being pressured due to worsening economic conditions—and still high prices elsewhere, likely to cheapen, but for the same concerning reasons.

A report on retail sales also disappointed market bulls. September sales dropped a sharp 1.2% and five-tenths worse than expected. The data also represented the third straight month of declines and the largest in three years.

Not helping matters, today’s weakness wasn’t related to relief at the pump, as that figure actually rose slightly. Aggravating bulls further, a third report on regional manufacturing courtesy of the NY Empire Index plummeted to -24.6 versus last month’s -7.4, indicating a more severe contraction than forecast.

Intraday, the Fed’s beige book made the economic reasons for concern a not-too-pleasant foursome on the session. The survey cited economic weakness across all twelve regions for September, with near across-the-board soft market conditions.

Selling pressure picked up during the day as testimony from Fed Chief Bernanke relayed the obvious, but for some reason, appeared to disappoint, judging by investors reaction to the keynote speech at the Economic Club of New York.

Highlights of Lunch with Ben and much to the bulls chagrin included word of the financial scandal, umm crisis posing a “significant threat” to the economy and recent executions of the New Plan Version 3.0, would take time to work through the system. “Gee whiz, it’s been like three whole days already.”

On the corporate side, the reports by and large were decent with their mostly better-than-expected results. On the other hand, mostly tepid outlooks were also the story of the day. That being said, the general reaction in names such as Intel (INTC), JP Morgan (JPM), Wells Fargo (WFC) and Coca Cola (KO) was an initial “better-than-feared” bid for those stocks. However, with profit-taking turning quite ugly elsewhere, “schnitzeling more than a little” in Wednesday’s “b-t-e” earnings crop was standard protocol by the “Closing Hell.”

All told and by Wednesday’s nasty close, many bulls chasing bottoms a bit too hard have quickly turned quite vocal in their newfound conviction of the “Mama Bottom” being nothing more than a bear market rally. For this market observer though, Wednesday’s “worrisome setback” is looking more like a deep corrective pullback and hopefully still setting up as some “business as unusual”; if the bulls can do that discounting mechanism thingamajiggy and hold it technically together above the mother of all bottoms.

Chris Tyler
Staff Writer & Options Strategist
Optionetics.com ~ Your Options Education Site
Visit Chris Tyler’s Forum
 
The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual. 

• Email This Article
• Print This Article
• Digg This
• Delicious
• Subscribe

Recent Articles by Chris Tyler, Optionetics.com

• December 1, 2008
  Midday Action: December 1
• November 30, 2008
  Weekly Outlook: December 1, 2008
• November 26, 2008
  Growth Stock Swing Option: November 26, 2008
• November 26, 2008
  Midday Action: November 26
• November 25, 2008
  Option Watch: November 25—The Other Most Actives