Wall St Back to Work

Wall St goes back to work tomorrow after about a two week vacation. It will be interesting to see how the market reacts. Despite all the gyrations last week we actually finished down, definitely did not feel like it, and right in the middle of the trading range for the S&P at 1282. The bears have not been able to break 1260 and the bulls have not been able to break 1300. Last week we traveled from top to bottom, back to the top, and then finished right in the middle. Financials however put together a nice rally and the call buying in the XLF was incredible. When volume on the NYSE was about 60 to 70% of average the September and October 24 calls for the XLF on Thursday and Friday were trading over 10 times normal volume. Across the board the September and October calls were going crazy. I am not exactly sure why that would be. There is alot of chatter with Lehman and I have heard from non media sources that offers have been put on the table for their asset management division and other negotiations are in the works. Maybe the smart money is saying that once again the systemic pressures will be eased in the entire financial system and so the discount rate required would be decreased and financials across the board will rise. I don't know. What was not being bought was the calls way out in January of 2009 so this appears to be a short term bet. With all that said there is massive refinancing coming down the pipe for the banking industry in the month of September. It will be interesting to see the price of money for these banks.

The world markets continue to decline while the U.S. just sits. It is amazing to me the change in the story by the bulls. First it was a decoupling story where the rest of the world was going to save the U.S. Now all of a sudden it is the U.S. has avoided a recession and the rest of the world will slowdown but it won't affect us. Insane.

Interesting write up about Jeremy Grantham, Bob Rodriguez, John Hussman, and Steve Leuthold. I don't that much about Leuthold. The first three are definitely the bears out there. Thanks goes to Pete.

http://www.marketwatch.com/news/story/four-horsemen-market-why-you/story.aspx?guid=%7b7E15D43B-33E7-4179-87A5-06BCD94C6BF3%7d