Friday, December 25, 2009, 8:14AM ET - U.S. Markets Closed for Christmas.

Top Trader: Window Closing on Recent Stock Rally

Posted Aug 25, 2008 11:22am EDT by Aaron Task in Investing, Recession, Banking
Related: AIG, LEH, FNM, FRE, ^gspc, ^ixic, ^DJI

Updated from 11:22 a.m. EDT 

The uptrend from the mid-July lows remains intact but "the window is closing" on the rally, says Todd Harrison, CEO of Minyanville.com.

Harrison's concerns -- and view that volatility would increase this week -- were confirmed Monday as rallying crude prices and weakness in financials like Lehman Brothers and AIG had U.S. stock proxies in retreat.

Update: As of 1:30 p.m. EDT, the Dow was down more than 200 points while the S&P was off 1.7% at 1270.32. Harrison says S&P 1270 is key level in terms of the short-term uptrend remaining intact. S&P 1270 is  also the lower band of a corresponding flag pattern, which result from price movements in a narrow range that often mark a consolidation period before the previous move - in this case lower - resumes. 

Fannie Mae's and Freddie Mac's collective need to refinance some $233 billion in debt by Sept. 30 is the big concern on Harrison's mind. Even if the financing is found for Fannie and Freddie via public or private means, "the real problem would arrive when the next leak springs in the dike and make no mistake, there are alotta [leaks] and just so many fingers," he writes.

On a separate but very much related note, action in the credit markets -- for junk bonds, mortgage-backed securities, agency paper and bank-to-bank lending -- suggest "danger signals for stocks," The Wall Street Journal reports.

If nothing else, the past year should have taught investors the folly of ignoring such messages from the credit markets.

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10 Comments

Yahoo! Finance User
Yahoo! Finance User - Monday August 25, 2008 11:36AM EDT

Is it me or does this guy Harrison throw out a cliche every other sentence?

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jason m
jason m - Monday August 25, 2008 11:42AM EDT

The trend is down!! HaHa!!

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Che-lu
Che-lu - Monday August 25, 2008 12:27PM EDT

Talk is cheap.

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sportsmadness
sportsmadness - Monday August 25, 2008 12:33PM EDT

Mattress sale with convenient space to store cash. lol

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Walt
Walt - Monday August 25, 2008 01:22PM EDT

I used to be an investor... saw the folly of parking money for years at a time. Studied economics and now I refer to the lot of us as either short-term speculators or long-term speculators. Our money does not reach the companies whose shares we buy, only the folks selling the certificates. Traders or Investors, the only difference is the time of holding. On a 24 hour planet, trading goes on somewhere every hour of the day. To get any sleep, many folks just pull their money out each day as their market closes. I used to hate that notion, but now I accept it as readily as inflation in Argentina.

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Yahoo! Finance User
Yahoo! Finance User - Monday August 25, 2008 03:50PM EDT

... from Beat the Dart ... interesting take ... Today's Action .... Update- August 25, 2008, 10:15am ... ...Fannie Mae (FNM) - last $5.08 and Freddie Mac (FRE) - last $3.00 - Federal government projected to buy $25 billion in debt instruments by establishing special fund as an indirect means to enhance capital reserves. Morning's successful debt underwriting suggests government's intent. Retain existing long positions. Yesterday's Action - August 21, 2008, 9:35am ... BUY Fannie Mae (FNM) - last $3.70. FNM provides funds to mortgage lenders through the purchase of mortgage assets, and issues and guarantees mortgage-related securities that facilitate the flow of funds into the mortgage market in the United States. Possibility of a government bailout of Fannie Mae and Freddie Mac is likely in long term, but first move would be to "right the ship." Such an event requires transferring a major portion of delinquent securities to the government in the form of a "debt swap" that would add subordinated capital. Near term support held to warrant PORTAL POINT within Subjective Probability model (SPM). SPM+69 LONG. ...9:35am .

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__A_YAHOO_USER__
__A_YAHOO_USER__ - Monday August 25, 2008 04:19PM EDT

Todd Harrison, did you say that the trend is up...? Which planet are you on ? And I thought you were a smart guy...

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JARAA
JARAA - Monday August 25, 2008 05:55PM EDT

rally? what rally?

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JJ B
JJ B - Monday August 25, 2008 11:08PM EDT

Getting my hands wet in the first batch of sub prime distressed debt being slogged around. Paying 24 cents on dollar, underlying assets showing 56% in default. Secured by realestate in WVirginia. My net invest is $150K and each of 6 partners in with same. Will be disecting to see if we will be buying more. Being sold by major bnk re

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First Namerobert
First Namerobert - Tuesday August 26, 2008 02:17AM EDT

I think the real problem with Fannie & Freddie debt lies in their preferred stock, which nearly all US banks own. They have 7 kinds of preferred stock, I believe. I think Paulson will honor the prefs. for overseas investors. But not for US investors. The cost would be too great. So he will, I think, let the US banks take their losses. It will have a considerable impact on US banks.

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