Last Friday’s equity market trading reminded us of this old Wall Street saying,
“The market bottom is defined when it stops going down on bad news.”
Recall last October the equity markets were still going down on what should have been considered good news with respect to the actions that were being taken by the Treasury and Federal Reserve to rescue the credit markets and the financial sector.
The employment report released last Friday with job losses of 533,000 in the month of November 2008 was bad news for the economy.
This week we expect to see the big three US automakers in the news again as they present their plan to Congress on Tuesday December 2, 2008. The drama should be intense as the bailout and non-bailout supporters battle to gain the upper hand.
The Speaker of the US House of Representatives recently said,
“Unless they show us a plan, we cannot show them the money.”
Will the automakers take this opportunity to show us something “really green”? Or will they delay in the hopes of getting a better deal under the new President?
Obama indicated that his administration would help the carmakers by saying,
“We should help the auto industry, but what we should expect is that any additional money that we put into the auto industry, any help that we provide is designed to assure a long-term sustainable auto industry and not just kicking the can down the road,” he stated.
Our announcement of the demise of the bear in IVolatility Trading Digest™ Volume 8, Issue 42, Bear Killer, dated November 3, 2008, now seems to have been a bit premature, reminding us of another Mark Twain quote.
“The reports of my death are greatly exaggerated.” - Samuel L. Clemens (1835 – 1910), better known by the pen name Mark Twain. Extensively quoted he was an American author and humorist most noted for his novels Adventures of Huckleberry Finn, and The Adventures of Tom Sawyer.
Now that the equity market has continued lower and with credit risk premium again increasing we are returning to the bear side once again with three more bear put spread ideas. Then we have a bull call spread suggestion for gold. First, a brief market review.