Thread: This Week in Stocks: 8/18 - 8/24/07

The Lilly Pond Report
Sunday August 17, 2007
by Spaf for the Tadpole Savings Pond

The Frog Report, Le Charts, Doodles, The Lilly Pad, Tea Leaves, and The Tin Box.

The Frog Report:
Croak............................................. The 13 day moving average for SPX was trending bearish, slightly under the 200 dMA and well below the 50 dMA. The Bollinger bands retained a large width indicating market volatility. Noted the band width does appear to be reducing. The Stochastics oscillator has registered bullish with %K above %D and above 20 (at 29.80) and no longer considered as oversold. Fridays upswing was not backed with a reliable indicator, and may have been an emotional reaction of sorts from the Fed cut of discount rates.

The Stock Traders Almanac list the "Best Six Months" for the DOW between November 1st and April 30th. There are multiple factors that say lets wait and see; the subprime debacle, housing, slowing economy, and hurricanes. In tune with the Wendy's commercial, before I buy a burger I'd like to see the beef!

Le Chart
[$SPX]
Large Caps

Charts courtesy of www.StockCharts.com

Doodles:
$SPX....1445.94 -09.70 for the week....00000...........00000
Stops............................................. Alert (-1%)....Trail (-2%)

Crude closed at.................................71.98 +0.98 for the week ending.
Oil Markers.......................................<70= ok, 70-80= worry, >80= panic (maybe).
NYMEX Link.......................................NYMEX
$WTIC Link.......................................$WTIC

The Lilly Pad
Location.......................................... 100% G-fund.

Tea Leaves:
Leaves............................................ Capital preservation.

Tin Box.
TSP (week ending).............................G=12.07..F=11. 41..C=16.19..S=19.36..I=22.73
......(end of 2006)..............................G=11.71..F=11.1 4..C=15.69..S=18.76..I=22.22

My coworkers have asked me this question. What is it when the Fed injects liquidity? I'll post this brief article for those of you that have the same question.

http://www.nytimes.com/2007/08/19/we...ic.html?ref=us

The Basics
The Banks Roll Up Their Sleeves

By JEREMY W. PETERS
Published: August 19, 2007
Injections aren’t just for Botox.


In times of financial uncertainty, the Federal Reserve makes what are known as “liquidity injections” into the banking system. There’s no syringe. No needle. In fact, the Fed doesn’t even use real money. A “liquidity injection” is Wall Street parlance for cheap, easy loans to banks.

Over the last two weeks, the Fed has injected tens of billions of dollars into the market to calm financial markets spooked by fears that credit is tightening. How does that work exactly?

Injections usually are not necessary. Banks typically borrow money from each other for brief periods to shore up cash reserves. A bank seeking a short-term loan from another bank will offer up something it owns, like a mortgage-backed security, to guarantee repayment. And voil&#224;! it gets the loan.

But as recent events have demonstrated, these aren’t normal times.

Banks lately have grown stingy about making loans, even to the most credit-worthy institutions. The reason is the uncertainty about the value of the collateral after the collapse of the subprime mortgage market. Banks looking for short-term loans face the prospect of paying higher interest rates.

Enter the Federal Reserve. One of the Fed’s most important jobs is to ensure that the interest rates that banks charge one another do not fluctuate too much. To keep interest rates from rising, it can offer up liquidity — Fedspeak for a loan — to banks in need so they do not have to borrow at high rates.

“What they’re doing now is to make sure there’s plenty of cash in the system,” said Ethan Harris, chief United States economist for Lehman Brothers. When the Fed injects liquidity, it is not actually dipping into its cash reserves, but crediting a dollar amount to the balance sheets of the banks. “All they do is write down a number and credit that amount of cash to the bank,” Mr. Harris said. “It’s a bookkeeping entry.”

http://biz.yahoo.com/ap/070819/wall_...head.html?.v=3

AP
Wall Street Awaits Fed's Next Move
Sunday August 19, 1:50 pm ET
By Madlen Read, AP Business Writer Wall Street, Keeping Close Eye Out for Fed's Next Move, Awaits New Housing Market Data

NEW YORK (AP) -- The Federal Reserve may have thrown Wall Street a bone Friday by lowering the rate it charges banks, but if this week's housing market data and corporate headlines portend more gloom, it may have to toss another.

So far, Wall Street, beset by fears that credit problems in mortgage and corporate lending will cripple the economy, has been stubbornly signaling to the central bank that it wants a bailout -- ideally, by way of a cut in the benchmark fed funds rate.

With the Fed's next meeting not scheduled until Sept. 18, investors may stay jittery over the coming weeks as they watch the central bank to see if it will lower rates before that point.

Stocks got a boost Friday, thanks to the cut in Fed's discount rate, but few market participants are breathing a sigh of relief yet. Many on Wall Street are still in panic mode; even when the Fed started injecting large amounts of cash into the banking system through repurchase agreements two weeks ago, the Dow Jones industrial average continued on its steep downward slope, sliding 812 points over six trading days.

Last week, the Dow finished down 1.21 percent; the Standard & Poor's 500 index ended down 0.53 percent; and the Nasdaq composite index ended down 1.57 percent.

This week is light on economic data, so it's improbable that the market will garner any lasting direction from upcoming government reports. One piece of data that will be widely watched, though, is the Commerce Department's report Friday on new home sales and prices. Economists surveyed last Friday by Thomson Financial predicted, on average, that sales of new single-family homes will fall in July to a seasonally adjusted annual rate of 825,000 units, down from 835,000 in June.

Most likely, Wall Street will keep an eye out for any indications from the Fed that it might take more steps to prevent the stock market from falling further, and any news from lenders or hedge funds about the state of the credit environment.

A SLIM SCHEDULE FOR ECONOMIC DATA ...

The Conference Board on Monday will report on leading economic indicators. The index is expected to rise 0.3 percent for July, compared with June's 0.3 percent decline.

Also Monday, the Chicago Federal Reserve releases its July index on national business activity.

On Thursday, the Commerce Department releases its monthly measure of durable goods orders. Durable goods orders are anticipated to have risen 1.0 percent in July, a slightly smaller jump than the increase in June.

... AMID A FEW IMPORTANT EARNINGS

This week won't bring a huge number of quarterly financial results, but there are a few that investors will be watching for insight into consumer spending and the housing market.

On Tuesday, Target Corp. is expected to report a second-quarter profit of 80 cents a share. The discount retailer closed at $61.18 Friday, in the upper half of its 52-week range of $46.35 to $70.75.

Also Tuesday, BJ's Wholesale Club Inc. is anticipated to post earnings of 41 cents per share. The discount warehouse chain closed at $29.43 Friday, in the lower portion of its 52-week range of $25.18 to $39.15.

Toll Brothers Inc. releases quarterly results Wednesday and is expected to report a fiscal third-quarter profit of 6 cents a share. The homebuilder closed at $22.63 Friday, in the lower half of its 52-week range of $18.85 to $35.64.

On Friday, Burger King Holdings Inc. is expected to post a fiscal fourth-quarter profit of 27 cents a share. The fast food chain closed at $23.67 Friday, in the upper half of its 52-week range of $12.99 to $27.04.

Fed injected another $3.5 bln and Countrywide is laying off. Good luck trying to find a job in that industry.

Fed Action Reduces Downside Risk for Stocks

Last Update: 20-Aug-07 07:51 ET

The S&P 500 index fell more than 10% over five weeks. This occurred because of concerns that liquidity problems in the credit markets would extend to the real economy. There has in fact been little change in the macro-economic fundamentals. The Fed actions on Friday are more than symbolic. They address these concerns. That reduces the downside risk to the stock market.

The Problems are Real

There is no denying that the problems caused by rising delinquencies and defaults on subprime mortgages are real.

These problems include losses at financial firms holding securities backed by these mortgages. They also include liquidity problems for firms holding these securities that are unable to price or sell the securities.

The housing sector has also been in a deep slump for over a year. The heightened subprime problems are tightening mortgage lending standards and will prolong and perhaps deepen the housing downturn.

Yet, there is still simply no evidence that the problems on Wall Street and in the housing market have extended to the broader market.

But the Concerns are Overdone - for Now

Here are some facts.

Payrolls have risen an average 135,000 the past three months covering May-July data. That is a 1.2% annual rate.

Industrial production is up 0.7% over those same three months. That is a 2.8% annual rate.

Personal consumption expenditures are up at a 4.8% annual rate for the currently available data for that same period (July data is not yet out).

Second quarter real GDP was up at a 3.4% annual rate, and nonresidential investment was up at an 8.1% annual rate.

The macro-economic data outside of the housing sector have shown, at worst, a modest softening.

It is therefore not surprising that earnings forecasts for companies outside of the financial sector have not been lowered to any significant degree. Forecasts for earnings for the S&P 500 in aggregate for the third and fourth quarter have not been altered significantly over the past few weeks despite the problems on Wall Street. Expectations call for about 5% growth in the third quarter and about 10% in the fourth.

more at........... http://www.briefing.com/GeneralConte...2TheBigPicture

This is looking like aug 98 somewhat...first leg down ~10&#37;, followed by 2 weeks of consolidation, followed by another 10% for that 20% 'bear market', but then bottomed. I don't recall the catalysts for the fall, maybe the beginning of the original 'asian contagion'?

Wow, what a difference a nap can make.

This month in stocks
by Spaf

I ran across a old Vietnam cartoon published by Hal Atkins. It kind of depicts the current Stock Market. I hope Hal doesn't mind a reposting! Ifn he does, will delete this post.....Anyway thanks Hal!

With all the volatility, here is where we are?
or is it where is here we are?

The Cartoon
[It's over sized, but smaller and it can't be read]

Cartoon.jpg

Looks like more waffling and bond are the place to be for now.

Show_me.....

I agree the "safe" funds are the place to be! This subprime debacle has spread all over the place!

Bunny hopping equities in this market is like hitting your thumb with a hammer! Put the hammer down and your thumb will feel a lot better!

Originally Posted by Show-me

Looks like more waffling and bond are the place to be for now.

If you haven't seen it, please vote for the T-shirt slogan here ...

T-Shirt Back Slogan

Thanks!