The Week Ahead

The news currently is that the government is converting the preferred into common equity at Citigroup. That sent futures from down 6 to up 8 so about a 1.8% move. The stupid thing about this is that the government has $45 billion in preferred and they are converting into the common equity with a market value of like $8 billion and only getting 40% of the common. Talk about getting hosed. I don't know all the details but that is one more step to nationalization. The equity is a call option at this point so it will probably increase the value of the option sending the stock price up.

The real story is still Europe. Whether we are up tomorrow and even this week depends alot on Europe. The American press is still not covering and try to link the U.S. stock market moves to things that are happening here and while you can do that to a point I guarantee you last week the US markets would have been up if Europe would have stabilized and gone up.

Technically we are way oversold. There are times I have no idea where the market is heading and this is one of those times. We could easily bounce back up to 800 as we could go to 740 (about a 4% move in either direction). If we get the bounce expect gold to sell off. I would love to see it pullback to 940 to 960. I think that would be a decent pullback to add. Gold I also think is heavily dependent on Europe. The first paper I glance at is no longer the WSJ but the UK Times and the Financial Times. This Citi news and any other news that comes out of Washington could help the bounce but the U.S. is no longer ground zero for systemic risk and I think most industrial companies would stabalize around here except for the fact with how Europe is deteriorating.