Dow Resistance Area 12,500 - 12,700

The Dow has gained about 1,100 points since January 22nd's low of around 11,500. This no doubt has been a powerful rally as the builders and the financials have jumped sharply. The area the Dow is in now, between 12,500 and 12,700 is important since this is a support area that had previously held before the markets eventually cratered. However as the index moves up, the previous support becomes an area of resistance. It also makes sense for the Dow to pause in this area of resistance and digest the 1,000 points the Dow has quickly leaped. My thinking is more along the line that this bounce has been a sharp counter trend rally from a much oversold condition. The test will be where the indexes go tomorrow. If the Dow is able to march through this area and approach 13,000 then the bulls may have a fair argument. If not then at the minimum a small pull back is at least warranted. Again, the jury is still out and much will be determined before the open when the employment numbers are released. At a minimum it will likely be interesting, just as the past month has been. That may be the understatement of the year.

Kerviel Went From +$2 Billion To -$7.2 Billion

Let me get this straight, Jerome Kerviel the Soc Gen trader who wound up losing $7.2 billion of the bank's capital, was actually up $2 billion on December 31, 20007! Wow that must have been a brutal 2 weeks. I thought I was having a tough couple of weeks but he had two weeks for the ages. Crazy that $9.2 billion wiped out in 2 weeks!

Here is what I would say to Kerviel, if I were interviewing him:

You are up $2 billion, why not call it a day, close the positions and ring up the register? Bonus time was coming as this was late December. You could then show the results to your managers and collect your bonus. Although one question I wonder about is what would have happened if you showed your managers that you had taken such large and risky positions even if you had made $2 billion. $2 billion is Soros like. Man you were the king, to be able do it all over again; all you had to do was tell your bosses. Or maybe what you could have done is close the positions and then see what happens as the books were tallied and an extra $2 billion popped out. Couldn't you just tell your bosses what was going on? Maybe you were not that close to your bosses. But you had to assume that at some point even if you were up a couple of bill that someone would have found out. Too bad for your sake and theirs that they did not find this out on Dec 31st when you were up $2 billion.

I read many article on this subject but this one from CBS market watch was the best one:

http://www.marketwatch.com/news/story/kerviel-wanted-make-money-my/story.aspx?guid=C603307D-4E88-4776-8C6C-D04D84A52607&dist=SecMostEmailed

GDP and ADP Tomorrow

The first estimate for GDP will be released tomorrow. In December the economy seemed to weaken as the consumer pulled back. The monthly employment figures and the retail sales point to a slow down for GDP. How slow remains the question.

The staffing firm ADP will announce their monthly employment numbers tomorrow. These numbers are important because they give a hint to which way the economy is leaning. Also there are times the numbers accurately predict the government's monthly payroll numbers which are released on Friday.

From the ADP web site:

http://www.adpemploymentreport.com/ner_faq.aspx#what_is_adp_ner ), " The ADP National Employment Report is a monthly estimate of private nonfarm employment in the United States based on aggregated and anonymous ADP payroll data... The ADP National Employment Report was developed to help meet the need for additional, timely and accurate estimates of movements in the national labor market among economists, financial professionals, government policymakers and academics. Because ADP pays 1-in-6 private sector employees in the United States every pay period across a broad range of industries, firm sizes, and geographies, it has a unique and significant perspective on the U.S. labor market. "

McDonald's December Sales Indicate Sharp Slow Down

McDonald's reported their quarterly earnings yesterday and said that December US same store sales were flat. This is another piece of evidence that shows how sharply the US consumer has retrenched since last August when the credit squeeze began. We will get a clearer picture of where GDP finished late last year as Q4 GDP will be released this week. This statistic is likely to change a number of times as this is the first estimate for GDP. That number and the January employment report to be released on Friday will be of high importance for the equity markets this week.

* Disclosure: I have no position in McDonald's and I am unaware of any position at the firm I advise.

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The strong durable good numbers just released indicate business spending still looks OK. These durable good numbers are notoriously volatile on a month to month basis though.

A Dichotomy In Housing - Texas and California

NBC news had an interesting report tonight on the boom in the Texas housing market. In an earlier post I wrote about the booming Texas economy due to the high price of oil. So even as the housing market deteriorates across the country Texas's housing market stands out as one of strength. Texas has had these boom bust cycles before. In the early 1980s after the price of oil collapsed the Texas housing market went with it. But at least for now Texas stands as a beacon of hope for the housing market.

Last week I was on the Wachovia Bank earnings conference call and was a bit taken aback by what I heard. The bank is facing losses from home owners who could afford to make their mortgage payments but chose not to. These home owners have taken this route because they owe more on their mortgage than what the house is worth. So they are getting up and leaving. Now I was a bit astounded by this when I heard it and did not want to write about this until I was able to confirm this. There are so many things said on a conference call that some times it is easy to make a mistake. Well it was no mistake as CBS's 60 Minute's tonight confirmed it in their feature. They interviewed a California couple who could afford their monthly mortgage payment but have decided that since the price of the home has dropped they were going to walk away from the home. Now Wachovia was not mentioned in this report so I imagine that they are not the only bank facing this problem so I do not wish to single out Wachovia. Note too that even with California's large oil presence, its housing market does not seem to be benefiting from it.

Before I get into this further I would say that most banks' lending practices played a large role here as well. Had the banks never issued no money down loans and instead stuck with the tried and try standard mortgages in which a down payment of about 20% is taken it is unlikely that the home owner would walk away from a house she could afford to make payments on as the prospect of losing the down payment is not very appealing. How in the world does a bank not take collateral when issuing a loan? Let me switch my attention back to the home owner. If you can pay your mortgage payment, even if the price of the home dropped, you have an obligation to make that payment.

At some point house values will stop dropping and people will stop walking away from their homes. Unfortunately until that time as long as house prices keep dropping those with little or no equity in their homes will continue to walk away from their homes, even the ones who can afford to make the payments. It is hard for me to believe that this is actually going on and it saddens me. At least Texas is booming so that is the bright spot I leave on.

* Disclosure: I have no position in Wachovia nor am I aware of one that the firm I advise holds.

What Does Bill Poole Know?

Bill Poole heads the St. Louis Fed and formally dissented when the Fed cut rates last week. It was reported that he preferred to wait until this week's scheduled meeting to cut rates. I am not sure if there were other reasons behind Dr. Poole's decision. If there were I would like to know what they were. For a Fed president to dissent at an inter-meeting cut seems a bit odd. It would seem that the evidence to support an inter-meeting action by the Fed would be so overwhelming that everyone who was voting would support the move. That Dr. Poole voted against the move is very curious.

Lack of Risk Management Led To A $7 Billion Loss

Jerome Kerviel, now there is a name you don't hear every day. Well get used to hearing it because that name will be spoken repeatedly during the next month or so. Mr. Kerviel is the 31 year Frenchman who worked as a trader for Societe General and who reportedly lost $7 billion for the bank on unauthorized trades.

How does this happen? Who is minding the store at SG? How can Societe Generale allow an employee to lose $7 billion? The question is about risk management, and where was it? Losses happen and even at times large losses take place. What is mind boggling is that the scope of this employee's trading activity was unknown. How on earth can the amount that this guy was trading go unnoticed? Where was management? Again I stress - losses happen, yes even $7 billion worth, but to have unauthorized trades occur in such size is startling. What would have happened if the losses continued to go unnoticed and the losses became larger?

Lets suppose for a second the opposite happened. Let's say no one caught these trades but that eventually the trades turned profitable. Actually quite feasible since the world's equity market did rally sharply from Tuesday's bottom. Also it was only after weeks of trading that a compliance officer at the bank found out what was going on. So if a compliance officer had not stumbled onto these trades then what could have happened? Might the trader actually have made tons of money? He reportedly was long equity futures which had been going his way until the start of 2008. But the start of 2008 pretty much turned gains into massive losses as the world equity markets collapsed. But ever since the Fed rate cut the equity markets made up tremendous ground. Makes you wonder had this trader had more time would his trades eventually have turned profitable? Maybe he would have made SG billions instead of losing $7 billion.

Risk management, risk management risk management. I can not stress these words enough. Unless an individual has the skills of a Warren Buffett or a Peter Lynch a trader should not make a habit of averaging down. Actually in almost all cases averaging down should be avoided. A trader that makes a habit out of averaging down on a bad trade will eventually get carried out. Mr. Kerviel was carried out today if only figuratively as he is currently missing.

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Update on Saturday. I stand corrected. Mr. Kerviel is not on the run but has been with his lawyer all week.

The Line Held, Barely

The US equity indexes bounced viciously today off of levels touched the day before. The Dow after being down around 300 points or so, rose by about 300 points for a 5% swing from bottom to top. Important technical levels held yesterday as well. The Dow held the 11,600 area which it hit the day before, the Nasdaq held the 2200 area also from the day before and the S&P held the 1270 area. Interesting about the S&P though is that it actually went through Tuesday's low but only by a few points.

The relative strength in the home builders and the brokers during the day stood out. Bear Stearns (BSC) at the market's worst was down less than 2 points which was exceptional and then led the markets higher late in the day. Goldman and Morgan were top performers for the day as well. The relative strength of the builders stood out. Toll Brothers (TOL) is another stock I follow and early in the day it barely dropped as other stocks cratered and then it rallied sharply jumping around 10% going into the bell, pulling everything else up with it. It is very notable that the home builders and the Investment Banks showed such relative strength when they have been notable for their weakness. One day's strength does not make a trend though.

There is no doubt in my mind that the equity markets were helped substantially by the Fed rate cut on Tuesday. There are many questions left unanswered though. Two of the largest are: Will the rate cut and the stimulus plan stave off recession? Have the equity markets bottomed or are they eventually headed lower any way?

* Stats from Yahoo Finance

** Disclosure: I have no positions in the names mentioned here. The firm I advise may or may not have positions in the names mentioned here.

Here We Go

Morning preview - Let's see what happens.

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Early evening update - The equity markets called the Fed's bluff and the Fed heeded the call but the US equity markets still dropped. The Fed jumped in with a 75 basis points inter meeting cut of the Fed Funds rate this morning before the stock markets opened. Equity futures which had been getting killed rallied but then fell hard. On the open equities plunged with the Dow losing around 450 but a rally ensued pushing the averages near break even. The rest of the day the US equity averages marked time going between minus 50 points to minus 180 points. By the end of the day the US equity indexes dropped about 1% - 2% across the board.

- Did US equities fail to rally because: a) The Fed cut will not stop a recession? b) The equity market selling momentum is too powerful to halt? c)The Fed is confused as can be seen by William Poole's dissenting vote? d) all of the above.

The correct answer is d) all of the above.

Here are some other questions to think about:

- Did the Fed do the right thing?

- What would have happened to the equity markets if the Fed did not act today?

- Does the rate cut help the housing market in the short term?

- Should the Fed respond to equity market declines? rapid descents?

- Why did William Poole who is one of the Fed voters dissent?

- Is inflation no longer a problem or does this Fed rate cut stoke inflation?

Equity Futures Update

Since the US markets are closed I have been checking the US equity futures throughout the day (so much for a relaxing 3 day weekend) and now have the latest update. These numbers are about 15 minutes behind but at least they give an idea of where things are headed. At the moment they are getting worse. I have not seen percentage drops in the equity futures like this since 2002. The stats are from the Bloomberg web site at:

http://www.bloomberg.com/index.html?Intro=intro3

Dow Futures = -514 or -4.25%

S & P 500 Futures = -60.20 or -4.54%

Nasdaq Futures = -76.00 or -4.11%

Equity Markets Deep Freeze; The NY Giants Won!

The temperature is 15 F here in the Northeast but that seems rather balmy compared to the arctic temperatures the world equity markets are ushering in this Monday morning. Overnight world equity markets are down 3% - 7%. Since the US markets are closed due to the Martin Luther King Jr. holiday there is no 'cash' trading but the US equity futures are mirroring the sharp declines with losses of around 3%.

My plan for today was to continue writing on the topic of counterparty risk. Counterparty problems popped up out of the wood work last week in so many directions it was hard to catch them all. Investment Bank Merrill Lynch wrote off $3.1 billion from their counterparty exposure, and insurers' problems mounted as ACA faced capital problems and ABK and MBIA faced credit ratings down grades. However the steep overnight decline in equity prices world wide will be my focus for today. Thanks to Yahoo Finance I was able to gather the data pretty quickly. Since declines like this don't happen every day I thought it worth while to document them in this space here.

Overnight Changes in Worldwide Markets (From Yahoo Finance):

Argentina Merval = -4.87%

Australia All Ordinaries = -2.91%

Brazil Bovespa = -5.07%

Shanghai = -5.10% (From article "Chinese Bank Shares Fall Sharply" - Yahoo Finance)

Hong Kong = -5.50% (From article "Chinese Bank Shares Fall Sharply" - Yahoo finance)

France Cac 40 = -5.09%

German Dax = -5.83%

India BSE Sensex = -7.41%

Italy = -3.59%

Japan = -3.86%

Singapore = -6.03%

Spain = -5.00%

UK FTSE = -3.61%

Ireland = -3.54%

* Disclosure: At the time of this report I hold no positions in the names mentioned here, the firm I advise may or may not have positions in the names mentioned here.

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On a lighter note the NY Giants (American football for you international viewers) won a classic NFC championship game last night in overtime. The game was played in -4 Degrees F with a windchill of - 30 F. A field goal won it in overtime and the Giants will now play in the Superbowl against the New England Patriots in 2 weeks.

Today's Wall Street Journal - Counterparty Risk

Today's Wall street Journal has a great cover story titled "Emerging Risks In Bond Insurance Add To Turmoil." The article covers the topic of Insurance Counterparties and their capital problems as well as the down grades they might be facing from credit agencies. I covered these issues in my previous essay titled "Counterparty Risk" and will write more on this over the weekend.

One important takeaway from the article is the problems that Berkshire Hathaway's Warren Buffett faced after Berkshire bought the insurer General Re. General Re evidently had thousands of derivative contracts it had written but after Buffett took control he decided to unwind that business. However because of the complex nature of the contracts the process took years. I quote Buffett from the article, " "We lost over $400 million on contracts that were supposedly" safe and properly priced, " and we did it in a leisurely way in a benign market," Mr. Buffett says. "If we had to unwind it in one month, who knows what would have happened?""

*Disclosure: I have no positions in the names mentioned here; the firm I advise may or may not have positions in these names.

The Barron's Roundtable

Barron's, the weekly financial magazine, began its 3 part Roundtable series covering the financial markets this week. The Roundtable's participants include the business world's elite. Bill Gross, Art Samberg, and Mario Gabelli are a few of the names. It is held at Barron's headquarters on a semi-annual basis and is a forum at which all things pertinent to the financial markets are discussed and debated. Years ago Samberg pounded the table on Citrix. I think it was the winter of 1998. Citrix turned into a 10 bagger, so these guys definitely have some keen foresight. The paper is well worth the $5 price tag.

The roundtable took place at Barron's headquarters where Alan Abelson writes his weekly column. While there he he may have run into Fred Hickey the prominent tech expert. The two have been staunch bears on the markets for quite some time and at the moment the market seems to be going their way. It makes you wonder when they ran into each other if they danced the jig since the markets were tumbling that day. As a friend of mine put it "maybe the two were dancing around like two bears in the woods who just stumbled on a picnic basket." I said to my friend that it was possible but without a photo I would find it hard to believe. So if anyone has a photo of Hickey and Abelson dancing to REM's "Its The End Of The World" please send it in.

Three Cheers, The Credit Markets Are Open Again!

Information here is from a Reuters article titled, "Dollar LIBOR Continues To Fall As Market Expects Rate Cut" dated January 15th.

Few are talking about it, but the Credit Markets are open again for business. LIBOR has come in substantially over the past month and the outstanding amount of Asset Backed Commercial Paper has stabilized.

LIBOR has fallen for 27 consecutive (business) days as the credit markets have considerably eased. The 3 month US Dollar LIBOR is now slightly below 4% and it was above 5% in mid December. This is very good news because LIBOR was well over 1% above the Fed Funds rate or the target set by the Federal Reserve and now it is in line or even slightly below the target Fed Funds rate. LIBOR is important as most credit card rates, adjustable rate mortgages and car loan interest rates are based off of it. A drop in LIBOR rates will flow directly into the consumer's pocket. The Asset Backed Commercial Paper is a bit more precarious. The amount of outstanding loans has steadied during the past 2 weeks. Not a trend but at least a potentially hopeful sign. On a day when the equity markets were doom and gloom I thought some good news may help cheer people up.

The Recession Started in Q4 2007

The US is likely in recession and it most likely started in December 2007. The December retail sales numbers from the chain stores last week (except for Wal Mart) were extraordinarily weak. The weakest percentage declines from these reports were on a similar trajectory to the percentage retail declines from the 1982 recession. The December monthly employment figures were recession-like. Sears Holdings numbers today were weak as well. Also surprisingly the Manhattan rental real estate market took a nose dive in the 4th quarter. (See the post on the Manhattan Residential Rental Market).

There are positives that I see too. If the US goes into a recession it is likely that commodity prices will fall and the dollar would strengthen. A drop in commodity prices, especially energy prices, would be welcome by the US consumer and a strengthening dollar would also benefit inflation indexes. The dollar would strengthen in a recession because as asset prices decline (think housing, equities) the amount of dollars in circulation would decrease. This cycle would create a scarcity of dollars which would lead to its increase in value. Commodity prices would likely get hit as the consumer would hold onto his dollars and search for replacements to high priced goods and services. In this cycle competition becomes even fiercer. An example of this can be seen from the company Harman today. Harman said "pricing pressures" have affected its business drastically. Hard to believe how quickly things are rolling over.

The Manhattan Residential Rental Market

Today's NY Times Real Estate section cover story was titled, " What's Next?" It covered the Manhattan residential real estate market and focused mainly on the residential sales market but also made a reference to the current residential rental market. I took an interest in one paragraph that mentioned that the "December rental market (actually) fell." The article referred to the December report released by The Real Estate Group of New York that showed rental prices decreased month over month. Some anecdotal information the article mentioned included landlords offering incentives to renters. These incentives ranged from paying broker's fees to one month free rent. What is interesting is that I have not seen this behavior from landlords since 2002 - 2003. Since 2004 the Manhattan residential rental market has grown tighter each year. Now it seems to be pausing. The down turn in 2003 was caused by renters leaving rental apartments to become home owners as they purchased apartments. This took place as the purchase price for apartments became less expensive than renting due to the obscenely low interest rates orchestrated the grand maestro himself, Greenspan. Today's weakening Manhattan residential rental market seems to reflect the sudden drop off that the economy is going through. Very interesting that Manhattan is feeling it so soon and we are not even officially in recession yet.

No Bail Out For Countrywide Executives

Why is Bank of America even thinking of buying Countrywide? It is like throwing good money after bad. Late in the summer BAC bought the CFC preferred that had a conversion price in the upper teens and then as the CFC common lost around 70% of its value, the BAC preferred was taken with it. Better to write off this loss and move on. CFC is a box of unknowns. Their credit losses could wipe away a large portion of BAC equity. I certainly don't want to see CFC go under, as they service around $1 trillion of outstanding mortgages. But what would be worse - CFC going under, or CFC going under and taking BAC under with it? Even if CFC were to go under, the CFC equity holder would be wiped out but then somebody else could buy the loans and the servicing part of their business. The $1 trillion in outstanding loans would be in tact.

Fri morning thoughts:

As the deal is official at least shareholders who have already taken a beating are going to get something out of this. But the executives should not be rewarded. There should be no golden parachute or bonuses for executives in this deal. Shareholders should unite and strongly squash the idea of any executive bonuses in this deal. Shareholders have the power as they own the company. Time for CFC management to take their medicine as shareholders have already received a dose. Bank of America should not save Countrywide management and shareholders should not approve bonuses to CFC executives. After all those executives are the ones who mismanaged the company to the brink of extinction.

Disclosure: I have no position in CFC but did trade it on the long side during the day (Thursday). I have no BAC disclosure. The firm I advise may take positions in any of these stocks at any time on the long or short side.

The Fed Confusion and The Volatile Markets

There was a bounce today. When the indexes rolled over in the early afternoon my screen was completely red and most of the names I was looking at were down any where from 5% to 10%. Then the screen started flickering only negative 2% to 3% and things started to brighten as the recovery took place. By late in the day my entire screen was green and even the financials were rallying.

What caused this turn? Hard to say. Bernanke is supposed to speak tomorrow maybe he will hint at lower interest rates or maybe he won't. This Fed seems really confused. Two members who recently spoke about the economy gave very different biases - one was saying that rates should go lower and the other was saying that rates should not be changed. How can this be? The Fed is supposed to be this brilliant group of individuals with up to the minute detailed information about everything going on in the economy in the regions they cover. If the Fed is confused then the trader is definitely confused and when the trader gets confused he buys and sells stocks at a whim. Hence the volatility.

When looking at the SF Fed rep and the Texas Fed rep it does make sense that they have opposing views. The Texas rep is in the midst of a booming economy due to the energy boon caused from almost $100 / barrel. The SF rep is feeling the credit crunch as SF financial firms get hammered and the Real Estate downturn continues to worsen. Wouldn't it be great if the Fed could lower interest rates in one geographic part of the country and leave it unchanged in another part. To send the money where it is needed. Maybe that is what they are trying to do with those special discounted auctions that the Fed just added to its tool box. An interesting thought.

The Melt

The markets melted away my good thoughts from yesterday as the financials are getting destroyed today. So much for the bounce.

Some Good Thoughts

Saw that Bear (BSC) was up in after hours on the news that Jimmy Cayne was going to resign as CEO. He may stay on the board though. I liked Cayne as he worked his way through the ranks and was a trader at one point (if my memory serves me correctly). Maybe this creates the psychology for a bounce in the financials as the group has really been slammed. Not a bottom, but a sharp bounce. Would be nice to see.

This info is from Bloomberg article titled, "Asset Backed Paper Grows first Time Since August"

On the 21st week, the amount of outstanding Asset Backed Commercial Paper rose to $774 Billion. "How about that" as the fabulous baseball announcer Mel Allen used to say. The amount of Asset Backed Commercial Paper has substantially dropped from its peak of $1.2 trillion. The question these stats raise is where did those who needed funding go when the ABCP shut them out? That question can be analyzed another day because this article is going to focus on good thoughts.

From Reuters, 3 month Dollar LIBOR dropped to 4.54 and 1 month LIBOR dropped to 4.44. A good sign as the spreads above the Fed Funds rate have narrowed.

The Ugly Employment Numbers

The following December employment numbers and stock futures were taken off of CNBC TV this morning:

Unemployment Rate = 5%
Number of New Jobs created = 18,000
Average Hourly earnings up 0.4%

I found it interesting that Bush said last night that he will be announcing a stimulus plan in the not too distant future.

US Stock futures are taking a hit, as they are down about 1% across the board.

The Nikkei, The Caucuses and the US Employment

The Nikkei is getting crushed tonight, down about 601.13 points or about 4% to 14,706.65. Nissan led the way on lower US auto sales. This is a fairly significant drop but should be kept in perspective as this was the first trading day of the New Year and is likely just playing catchup with the rest of the world. This was according to Bloomberg ( http://www.bloomberg.com/apps/news?pid=20601087&sid=ansRxK4GxwFQ&refer=home) and Reuters, (http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSTFA00293220080104.)

NBC TV News is projecting Barack Obama and Huckabee as the winners in the Iowa caucus. Although I am not one to argue with projections, I would rather wait until it is official before declaring winners.

Tomorrow's US employment report is expected to show about 70,000 - 75,000 new jobs added and and an unemployment rate of around 4.7% - 4.8%. This according to Yahoo Finance.

Another Word On Counterparty Risk

Tonight I read an extraordinary piece on the leverage in the financial system. The counterparty risk I wrote about recently is addressed in the piece. I found the article so important that I am going to highlight it here: http://www.investorsinsight.com/otb_va_print.aspx?EditionID=619. The title is, "The Next Dominos: Junk Bond and Counterparty Risk" . It clearly states the counterparty problem that the US financial system faces, and to be frank is a bit scary. The notional value of the credit derivatives is the most scary part, about $45 trillion. I found the article through the blog: http://mispricing.blogspot.com/2007/12/next-dominos-junk-bond-and-counterparty.html.

Key 2007 Year End Stats and The Pakistan Stock Market

As of Dec 31, 2007 From Yahoo Finance:

Dow = 13,264.82

S & P 500 = 1,468.36

Nasdaq = 2,652.28

From my calculations:

Dow 50 DMA = 13,377.29

Dow 200 DMA = 13,356.77

S & P 500 - 50 DMA = 1,480.58

S & P 500 - 200 DMA = 1,490.66

Nasdaq 50 DMA = 2,685.03

Nasdaq 200 DMA = 2,612.45

The Nasdaq is above its 200 Day Moving Average but below its 50 Day Moving Average. The Dow and the S & P are both below their respective 50 Day Moving Averages and 200 Day Moving Averages. The S & P remains the weakest as its 50 Day Moving Average is below its 200 Day Moving Average. Both the Dow's 50 Day Moving Average and the Nasdaq's 50 Day Moving Average are above their respective 200 Day Moving Averages although the Dow's 50 Day Moving Average is only above the Dow's 200 Day Moving Average by a small amount.

Events in Pakistan are important so I have written about the Pakistani stock market or the Karachi 100 index below.

The following information I picked up from an AP article titled "Pakistan Stocks Tumble Amid Violence" that was hosted by Yahoo Finance. These are my own words but the stats are from the article:

After the events of last week the markets re-opened on the Dec 31st and the Karachi 100 share Index lost 694.92 points or about 5% to 14,077.16.

The following I picked up from The International News article titled "Karachi stock market sheds another 409 points". These are my own words but the stats come from the article:

At the close of trading on January 2nd the Karachi 100 Index lost 409.40 to 13,666.43. That puts the 2 day loss at 1,104.32 or about 7.5%.

Finally, Best Wishes for a Happy and Prosperous New Year!