Tuesday, October 7, 2008

10.07.08 - Pivot/ VWAP Sandwich


Adjusted Tick is mildly positive as we roll along here. Even though the VIX has come down ten points, I'd like to see the AD line stronger. So far so (sp.) quiet ahead of earnings kick-off tonight, and the FOMC minutes later today...

9:25AM PST: Note the declining wedge formation. Looks to me more like lower-lows though. Daily Tick is headed south.

o Standard & Poors Earnings Estimate Report (MS Excel)

Note that we are currently trading at a trailing 12-month PE ratio in the mid-teens/ roughly the same on a forward basis. Forward earnings forecasts look to be about $68 per share. Let's bracket that:


PEs have typically ranged between 10 and 30, though they have certainly been both higher and lower. Note how the outlook has drifted downward significantly from only several months ago. I suspect that $68/70 may still be high. That said, as these forecasts continue to come in they will provide a progressively easier bar to surpass in the quarters ahead. [Add: I should have added this is for the more pessimistic top-down forecasts. The bottom's up forward forecasts exceed $95 per share!]

10:00AM PST: Who ate our sandwich? Price keeps drifting lower though the VIX has remained stable and it looks like we are getting some support now (level consistent with yesterday's before the final plunge). We'll see.

10:25AM PST: The Ted Spread has come down. Mr. B isn't painting a very pretty picture, though, and we're breaking down again towards a retest [of yesterday's low]. Did you hear his hint, however -- "[need to reassess policy appropriateness...]"?

o FOMC Minutes

11:10AM PST: So now we find out just how important yesterday's lows were.

12:35PM PST: A near exact hit, but still about half an hour to go...

12:50PM PST: New Lows to S1 (SPY $100.33).

1:05PM PST: SPY Breaks $100 ($99.65); RSI(2)=0.91. With all the usual caveats (quite seriously on those -- these are fat tail, risky times), for those with cash to put to work, this will probably look like a good spot down the road [for a trade in the short-term, then as an investment over an extended horizon (Add: and I do mean long, meaning only consider legging in if that's your horizon).]

o Intrade Presidential Prediction Market

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