Oh What a Tangled Web We Weave in Market Headlines

"Oh what a tangled web we weave,
When first we practice to deceive"
- Sir Walter Scott

"But when we've practiced for a while,
How vastly we improve our style!"
- J.R. Pope

This morning's press headlines provide plenty of reason for faith in humanity and the general goodness of people in the financial industry.

Consider the following web of stories:

Citigroup (C) gets a bailout package from the Federales....

...despite the fact that one of its primary "assets" is...err.....the tax benefit of its prior losses..

...and that Citi was one of the banks that made some, ahem, unsavoury bets against MS in September.....

...this being the same MS that went on a hiring spree in July....

....only to turn around and wield the axe in November....

....but of course, we all know how this is going to end!

Fortunately, there are some certainties in life, such as the singular inability of the British rail system to delivers its passengers to their destination on time and in comfort. Will Alistair's tax hike make its way into improving the rail system? There's about as much chance of that as of Macro Man being named Obama's Treasury Secretary today.

Moving on to markets, Macro Man has to give a tick to the Russkies, who've devalued the RUB again today. Theirs is a purer dishonesty which makes no bones about their desire to rip you off, unlike the sordid displays of "coming clean" that we've observed from (morally and literally) bankrupt Western financial institutions.

Elsewhere, the good news keeps on coming in Europe, where the Ifo registered its largest monthly drop in history (tying the release after 9/11) and putting the index at its lowest level since the post-unification recession. Naturally, the euro's gone bid and Bunds have sold off the release; ah, the joys of illiquid, position-driven markets! As intellectually stimulating as reading a technical manual...in Finnish.

Finally, Macro Man feels compelled to pass on a technical observation that he made last week, and which he's only now coming to grips with. A number of punters have no doubt observed that the SPX has broken a double top from 2001 and 2007. What's particularly chilling, however, is that the price target of the neckline break is the same distance from the top to the neckline.

In this case, the size of the top is 811 points, with the neckline at 762. This puts the SPX price target at......-49!

It's been commonly said that this financial crisis will permanently change the nature of financial markets. Macro Man can only wonder if that includes the lognormal distribution of asset prices. What a tangled web that would be for your risk management system!

Comments

[Prudent Man...:]

There isn't much news today only opinions. Even financial statements are just guesses.

I hope anyone trading on sound bites understands this is not investing.

2008 Nov 24 08:37 AM

[Archman Inv...:]

I prefer "hope".

Based on the S & P 500 chart you provided- it is clear you can see the bull market that started in 1982 on the left hand side of the chart. It followed a more "normal" pattern of a bull market with the averages returning about 10% a year- pre Fed/govt manipulation of the markets.

Then in 1995 you can see where the first bubble began to form.
It collapsed in 2000, then in 2003 the credit bubble took over and we inflated again until 2007.

Though I have no idea where things will "end up", one thing that is promising: If you look at the continuing trend from 1982, the S & P only has to fall until 700 to truly wipe out all the stock market excesses and bring us back into the with the ultra long term trendline.

Now the bad news, as you stated, anything can happen and we could break that trend line and fall to who knows where.

I am "hoping" that all in all we fall to that continuation trendline and simply get back on track per the 1982 line.

We will see.

2008 Nov 24 08:39 AM

[User 237841:]

So far it's a double top...which could morph into a triple top by way of a typical vicious bear market rally (or into a head and shoulders, since the middle is, so far, the highest point in the pattern). In other words, deferred pain...

2008 Nov 24 08:50 AM

[Still Renting:]

I'll call your "hope" and raise you "change"!

2008 Nov 25 05:14 PM