November 26, 2007

Hopefully, Friday’s post-Thanksgiving rally didn’t get you excited about the week to follow. We are usually good for one of those rallies each Thanksgiving, and while three trading days leading up to Thanksgiving were painful for market participants, Friday’s action helped provide some temporary relief. Investors became optimistic heading into the open with futures trading in the positive with retail reports stating that there was a year-over-year increase on Friday and Saturday of 7.5%, beating analyst expectations. However, knowing how the market generally reacts to this kind of news, the market should have been up very strongly in the futures pre-market, but it was not – an indication of things to come.

With that said, here’s what you need to know…

  • Subprime concerns are on the forefront again as the market sold off amid news with Citigroup reporting possible job-cuts and HSBC bailing out two of its funds.
  • Good sales report and little reaction to it shows you that the market is not concerned with the Christmas sales (yet); instead it’s the credit problems and the Fed’s reaction to it.
  • Volume was light today, but not enough to say that the sellers are running out of steam
  • Very little importance should be put on Friday’s gains (light volume on a half day of trading).
  • Recession is being spoken of on every street corner – eventually this kind of chatter becomes a self-fulfilling prophesy.
  • All three major indexes are heading into the red for the year. S&P is already -1% for the year.
  • Despite all of this, the Shareplanner Portfolio did very well, as our short positions gave us some very nice returns on the day.

Let’s look at the Charts…

NASDAQ sold off in step with the rest of the indexes, trading below its long-term trend line once again, despite the rally on Friday. Likely follow-through to the downside heading into tomorrow’s open.

The S&P re-entered negative territory for the year, as it shed over 2% on the day as it heads towards a test of the August lows. In the meantime it is in a freefall.