Tuesday was one of those days in the market where there seemed to be no place to hide. Whether you held some currencies, gold, energy, technology, domestic funds, Emerging/Latin countries or the Commodity Index, you only found red numbers on the computer screens.
The push to the downside was mainly caused by further weakness in the financials, as rumors swirled all day that Lehman Brothers may have to raise billions of dollars in more capital and that they may have borrowed emergency funds from the Fed’s discount window. That rumor was vehemently denied all day, but the damage was done, and major indexes closed down.
Not helping matters was Fed chairman Bernanke’s position that interest rates were “well positioned” to promote growth and stable prices.
To me, the Lehman Brothers story confirmed again that not all is well with the books of major financial Wall Street firms. The Subprime/credit crisis is alive and well and will continue to haunt the markets via sudden sell offs if there are negative new stories being unleashed.
It’s too early to tell for sure, but maybe we are slowly reaching the point where Wall Street is no longer in denial that the credit crisis has passed. From my viewpoint, it may only take one more casualty like Bear Stearns to derail the current Buy cycle and send us back to the sidelines.
For right now, we’re still in it, and our Trend Tracking Indexes (TTIs) are situated relative to their trend lines as follows:
Domestic TTI: +1.10%
International TTI: -2.77%
We continue to stay committed to our current positions subject to our sell stops.