If you’re a red meat right winger you loved John McCain’s "attack" performance last night.

However ever if you were an Independent or a Democrat you loved Bark’s confidence, focus and reassuring calmness in the middle of the biggest economic meltdown since the Great Depression. CNN, CBS and FOX polls taken after the debate all gave the victory to Obama by wide margins.

David Gergen (who served in both Republican and Democratic administrations) said "McCain looked angry. It was an exercise in anger management."

Does this matter – You bet it does. When you are in the middle of a crisis you want a leader who is thinking rationally and not one who needs "anger management." This reinforced the approach that both men have taken to the current economic meltdown. – Obama more calm reassuring and focused approach vs McCain’s more erratic, confrontational and accusatory approach. The split screen in this debate was not kind to the McCain. When that 3AM phone call comes Obama has shown he’s ready and McCain’s temperament at 3AM is now a major question.

Best exchange of debate

McCain "Senator Obama, I am not President Bush. If you wanted to run against President Bush you should have run four years ago,"
Obama replied "If I occasionally mistaken your policies for George Bush’s policies, it’s because on the core economic issues that matter to the American people, on tax policy, on energy policy, on spending priorities you have been a vigorous supporter of President Bush,"

Both men scored points and McCain was the clear aggressor, but Obama was an effective counter puncher and held his own. McCain needed a game changer because he is behind in the polls and it looks like he did not achieve this. However McCain’s intensity will energize the folks on the far right.



Index % Change Volume

Dow -7.87% down
NASDQ -8.47% down
S&P500 -9.03% down
Russell2000 -9.47% –

Headline – Monday’s Huge Rally Evaporates

US Market & Foreign Markets -

Technicals – Another huge price fall that plunged lower in the last hour of trading. Volume was slightly above average and was far less than the previous two days. Volume did not confirm the move lower. All the major markets are now at or close o their Friday’s closing lows – a major support level. Technically – This is a very critical point for US equities and the world. Will support levels hold?

Technically, if support fails to hold and we establish lower lows on the price charts a long term bear market seems almost inevitable.

Fundamentals – Another bubble is bursting – global growth. Many of the talking heads on the financial channel (CNBC) were warning about some major signs of drops in China’s economic growth.

Bernanke warned in a speech that there would be no quick fix to economic problems. It looks like investors are now accepting the fact that a recession will probably last through 2009.

Lots of talking heads saying that there are a lot of hedge funds and mutual funds that still need to sell because of investors redeeming their shares.

Chart of the benchmark S&P 500

Chart of the Russell 2000

Chart of the NASDQ

Chart of the Dow

Three Month Treasury Bill & LIBOR

The 3 MTB fell -14.98% yesterday to an interest rate of 0.20%. This is not good news fro the credit markets. The minor gains of the last two days evaporated and indicates that credit is still and it looks like investors are still running to put their $ into treasury bonds as a safe haven at a phenomenally low interest rate.

Set up below is new link to LIBOR rates. Here’s a link to a definition from Investopedia

LIBOR was basically flat yesterday. What is important to notice is the huge rise from a month ago of the one and three moth LIBOR and the fact that 30 year mortgages have moved from 7.16% to 7.60% in one month.

How do you have a recovery without mortgage rates declining and credit sill frozen?

Caution Both these Links run on a 15 to 20 minute delay.

3 MTB chart

LIBOR rates


Basically stocks go up so does oil. Stocks go down so does oil. It’s all about fears of how long the recession will last.

Chart of oil (WTIC)

The Dollar

Chart of Dollar

Chart of VIX.


Short Term Outlook

Best Read of the Tea Leaves. – The real charts to watch are the LIBOR and the 3MTB and the spread between the two. Yesterday this was bad news.

Technically US equities are at a critical point. They are near major support levels of Friday’s lows and closing low. If these support levels fall, we’ll have to wait for another big volume climax sell off for a new low.

So this is where the rubber meets the road. Best guess is that support will hold because of the weak volume behind yesterday’s selling. Those who can tolerate risk, this is a opportunity to nibble a little.

This market is speculators speculating on what other speculators will do. Many long term investors will return when credit spreads narrow.

My Bias – I often have the financial channel (CNBC) on in the background as I work and they are basically cheerleaders for the markets an clearly have an upside bias.


Long Term Outlook – Cautiously Bearish

Technicals – Will the support levels hold? For right now it signs look sightly more positive than negative.

Fundamentals – financial mortgage transparency problem is far far far far far far far far far bigger than anyone thought. New worldwide rescue plan offers hope, but this rally is going to be a bumpy ride because retail investors trust has been shaken and there are other problems out there.

People feel like we are in a recession. The actual strict definition – 2 quarters of negative GDP growth has not occurred. How bad the recession will be is be is the major question. It’s beginning to look like the recession might last through 2009

Asset Allocation/Recommended Sectors (long term)

* 80% to 100% Cash – This depends on your risk tolerance

* 10% US Index Funds
UWM (ETF that does 2x what Russell 2000 does) & QLD (ETF that does 2X what the NASDQ does) DDM (ETF that does 2X what the Dow does)

*5% Emerging Markets
EWZ (Brazil) should out perform other emerging markets in a rally and under perform in a fall

*5% Alternative Energy
GEX(Alternative energy ETF) (If Obama wins you will see this sector flourish)

Chief Strategy – Buy the dips of trending sector
Traders who have a strong tolerance for risk jump in on dips and invest more. Sell into rallies. Long term Investors who can tolerate risk and are 100% in cash nibble just a little on dips. Do not buy into rallies

Changes to Bottom Line Section Bolded

As Always Do Your Own Research Before Investing

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