Saturday, September 13, 2008

Weekly Rewind - Week 37 (09/12/08)

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If you are tired of reading about how the markets "put in another volatile week," you'd better believe this blogger is tired of writing it. (Maybe that's as sure a sign as any that a bottom is in the works.)

Well, it was a nail biter as virtually all sectors were hit hard after Monday's opening GSE euphoria faded (Forbes - Investors Cheer Bailout), only to stage a minor come back after a gap down Thursday on a Lehman downgrade (AP - Lehman Plunges) and a weak jobless claims number. In fact, the S&P500 (SPY) and Dow Jones Industrials (DIA) both managed to finish the week up +1.3% and +2.2%, respectively. Among the major U.S. indices, only the NASDAQ 100 (QQQQ) came in just below flat.

Sectorwise, the Transports and Consumer Discretionaries did quite well (IYT +3.6%/XLY +3.0%) on the continued Commodities plunge (DBC -3.9%), while the beat down Utilities and Materials stocks were finally able to get a bounce in spite of it (XLU +3.1%/XLB +2.3%).

Remarkably, most commodities are now positively correlated to equities as all asset classes have been relentlessly subjected to the deleveraging effect. However, Liquid Energy again looks quite stretched to the downside (DBE RSI[2] = 5.1), as Consumer Staples does to the upside (XLP RSI[2] = 90.1). From a Style perspective, the Value quadrants once again tended to outperform (Mid-Cap Value, PWP +0.9 versus Growth, PWJ +0.4%).

Week 38 of 2008 holds a busy economic schedule, including the Federal Open Market Committee Policy Statement on Tuesday, as follows:
  • Monday - NY Empire State Index; Capacity Utilization & Industrial Production
  • Tuesday - Consumer Price Index & FOMC Statement
  • Wednesday - Building Permits; Housing Starts & Crude Inventory
  • Thursday - Initial Claims; Leading Indicators & Philadelphia Fed
Off the calendar, all eyes will be on the progress of Lehman (WSJ - LEH Deal Could Come Tonight) and Washington Mutual (Telegraph - JPM Chases WAMU), and the ultimate affect of Hurricane Ike, which now reportedly has nearly 20% of U.S. refining capacity off line (Bloomberg - Ike Forces Shutdown). Also, be aware that earnings season is far from over with Morgan Stanley (Wednesday), Fedex (Thursday), and Goldman Sachs (Tuesday) all reporting, among others. Add expirations on top, and it promises to be "yet another volatile week."
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