Equity Meltdown
March 09, 2008
The Dow Futures Report
Equity Meltdown
Fri, Mar 7 2008, 15:57 GMT
by Carley Garner
Alaron Futures and Options | 822 W. Washington Blvd. Chicago IL 60607
http://www.alaron.com | info@alaron.com
**Read my new column in Stocks and Commodities Magazine, “Futures for You”
It was a sluggish day in the stock trading arena ahead of tomorrow’s employment report. Negative news out of the housing market and concern over a sagging economy resulted in approximately a one percent decline in the major indices.
Historically, early in March has been positive for the markets but 2008 has failed to deliver. Although, in March of 2001 the Dow (cash index, not futures) was down about 1,469 points from the 9th through the 22nd according to the Stock Trader’s Almanac. The Almanac also notes that in recent years, the month of March has been “rather stormy” with wild fluctuations and large gains and losses. Another interesting conclusion, March is the worst month for the Nasdaq during election years posting an average drop of 2.5%.
According to the Federal Reserve, homeowner equity is dipping below the 50% mark for the first time on record since 1945. In other words, this is the first time since 1945 (when the Fed began tracking) that homeowner’s debt on their houses exceeded their equity.
Moody’s Economy.com estimates that 10.3% of homes will have zero or negative equity by the end of the month. This amounts to about 8.8 million homes. They also claim that if prices fall 20% from their peak, about 15.9% of homeowners will be upside down on their loans.
For the reasons outlined above, as well as many other contributing factors, investors and traders alike are thoroughly confused. At this juncture, I believe that being on the sidelines is the best position.
I still like the idea of selling puts into further weakness. Stay tuned…
Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.
Equity Meltdown
Fri, Mar 7 2008, 15:57 GMT
by Carley Garner
Alaron Futures and Options | 822 W. Washington Blvd. Chicago IL 60607
http://www.alaron.com | info@alaron.com
**Read my new column in Stocks and Commodities Magazine, “Futures for You”
It was a sluggish day in the stock trading arena ahead of tomorrow’s employment report. Negative news out of the housing market and concern over a sagging economy resulted in approximately a one percent decline in the major indices.
Historically, early in March has been positive for the markets but 2008 has failed to deliver. Although, in March of 2001 the Dow (cash index, not futures) was down about 1,469 points from the 9th through the 22nd according to the Stock Trader’s Almanac. The Almanac also notes that in recent years, the month of March has been “rather stormy” with wild fluctuations and large gains and losses. Another interesting conclusion, March is the worst month for the Nasdaq during election years posting an average drop of 2.5%.
According to the Federal Reserve, homeowner equity is dipping below the 50% mark for the first time on record since 1945. In other words, this is the first time since 1945 (when the Fed began tracking) that homeowner’s debt on their houses exceeded their equity.
Moody’s Economy.com estimates that 10.3% of homes will have zero or negative equity by the end of the month. This amounts to about 8.8 million homes. They also claim that if prices fall 20% from their peak, about 15.9% of homeowners will be upside down on their loans.
For the reasons outlined above, as well as many other contributing factors, investors and traders alike are thoroughly confused. At this juncture, I believe that being on the sidelines is the best position.
I still like the idea of selling puts into further weakness. Stay tuned…
Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.
Labels: Markets, Technical Analysis
