Today should be interesting. The S&P 500 index on Wednesday broke through a layer of rather tough support it had tried breaking through multiple times before without success. That is now an overhead layer of resistance, tho' less formidable a resistance layer than it was on the way down. As I write in overnights, the S&P 500 closed hanging on a layer of support which could be likened to that antenna Luke Skywalker grabbed ahold of underneath Cloud City. The Millenium Falcon may, by the way, be around the 780 level - but that's as much technical support (50% retrace from peak) as anything, and I wouldn't want to bank on that. If you're curious, click here for a graph I saw on Ticker Forum showing where we are in comparison to other famous bear markets. Dr. Roubini at RGE Monitor says the latest sucker rally in the market is over, which I might roughly translate in technicals terms to wave 4 of 5 being exhausted. He mentions 600 as a severe-recession target for the S&P500; that number is picking up a lot of currency as of late.
CNBC has engaged in actual fact collection and now estimates the current actual total cost of the bailout so far at US$4.28 trillion, or more than the cost of World War II, even adjusted for inflation. (They have the numbers at their site.) This is extremely bad, because if you can't inflate with all this, how can you inflate? (Answer: you can't. Deflation is very real; losses must be taken. Some media people are starting to realise it and calling for outright money printing - c.f. my previous commentary on watching the M1.) Monetary deflation has now proceeded far enough that price deflation is becoming apparent.
Calculated Risk reports that planned holiday spending is half of last year's actual spending. Half. If true, the holiday season will be spectacularly brutal. The Baltic Dry Index hasn't really picked up meaningfully, but has reached the mid-800s, up from the low-800s of last week.
Demand for any kind of US debt whatsoever other than treasuries has vanished overnight. Corporate bonds: dead. Other agencies: dead. Brad Setzer calls this a trigger for a currency crisis of the first order, but so far, the dollar continues to be held up by demand - particularly government demand - for treasuries.
Marketwatch has noticed what's happening in the commercial-property credit markets, which have only gotten worse - dramatically worse - since I last updated on Thursday. BBB-rated bonds now fetch a 40 point premium. Not 40 basis points - 40 points. That means take the loan value - say, 8% - and add 40 to it. Essentially, investors have figured out that commercial property credit wasn't any better run than ordinary residential, and spreads are reacting accordingly. And yes, the ABX tranches are in freefall, with most tranches now single-digit, and AAA fetching less than 35¢ on the dollar.
Minyanville discusses five possible end-of-year surprises, such as the dollar finally reaching the end of its recent bull run, mass invalidating of CDS agreements, and/or a massive Yuan revaluation. They also have two different articles on signs of social shift and the feedback loops these create. Well, okay, only one talks about the feedback loops. The other mostly talks about pants. The New York Times, on the other hand, talks about the social impact of a new class made up of the former middle class.
The headline news, of course, is all about the automotive bailout effort. Canada has already told Chrysler no. Mish has been running an anti-bailout political effort, noting how well the last several bailouts worked. It'd also be nice if the CEOs coming to Congress with hat in hand could manage not to stir up outrage by spending a couple of million on private jets instead of flying business class.
Finally, the Fed effective funds rate is holding at a little over a third of a percent, as opposed to the official 1%. The TED spread continues to climb in response to lower T-bill interest and despite a slowly still falling LIBOR. The Nikkei and Hang Seng were down sharply overnight, but the yen gained against the US dollar despite said dollar continuing to climb against the overall index. Stock futures for tomorrow suggest that the S&P 500 will open below 800. It certainly doesn't look very good.