It looks like the long weekend ahead won out over options expiration on Friday as the net result was very little change in the stock market. The lower high made last week confirms my opinion that that the stock market will eventually test January’s lows. The S&P 500, for example, appears more likely to test 1300 than break through 1400. In the mean time, we will be waiting for a move out of this trading range before taking much action in either direction.

- JD

The credit crunch just doesn’t stop. I had never heard of an SIV until 6 months ago. I had never heard of Auction Rate Securities or Tender Option Bonds until today. What is next? What kind of poison can these PhD’s and Quant’s come up with next? As a treasury trader, I am on the front line of this credit crunch. For months, the bond market has been in total chaos. Eventually, this has to spread into the stock market. It is only a matter of time. The FED can keep lowering rates but its not going to fix this. Look at the seizure in these new instruments over the past few days even after the fed has lowered the fed funds by 1 1/4%. This is not over. Stay defensive.

- BA

The market caught a solid bid and treasuries sold off today after Warren Buffett appeared on CNBC and offered to help the bond re-insurers, but by the end of the day, enthusiasm waned. The market came off its best levels of the day and treasuries cut their losses in half by the close. Bond re-insurer stocks finished much lower on the “rescue plan” as investors realized that Uncle Buffett was trying to pick the best assets and leave investors with the bad ones. ABK and MBI both finished down 15%. - BA

You knew those traders had spent too much time in Margaritaville if they thought their uncle Jimmy (Warren) Buffet was actually going to rescue the markets.  Have another drink boys. - JD

Everybody is looking for a loan these days. From strapped consumers to capital depleted banks, money is scarce. AIG is down big today on increased losses on CDO’s. SocGen is raising capital by having a rights offering at a discount of 39% to the market! What will happen when the banks and brokers try to raise more capital when their losses keep mounting? Will the sovereign funds still have an appetite? How much of a discount will they have to offer next time? In the meantime, we are setting records in declines. The S&P is off to its worst start ever. Last week’s 4.4% decline in the Dow was the worst weekly performance in 6-7 years. Stay defensive,

- BA

It would have been a good day to make it a long weekend. Not a lot happened today. Good news in the Technology sector did not help the broader markets move up today, but it probably slowed down the markets recent decent. The Nasdaq was up 1% while the Dow and S&P were down 1/2%.

With all the negative action lately, the market appears to be waiting on some good news. It may be a while.

- JD

The stock market was all over the place today, but in the end did not really get anywhere. Stocks were up a little, the VIX was down a little. Bonds, on the other hand took a big hit from a lousy auction of 30 year treasuries.

Overall it looks like its time for the markets to take a breather.

- JD

The market tried to work higher today and spent most of the day in the green. But by the bell, the Dow managed to lose 65. The Nasdaq fared much worse, losing 30 over 1%. Cisco disappointed after-hours so the futures are already pointing down for tomorrow. Overall, it was a stealthy move lower. The bond market was fairly quiet today. The curve did manage to steepen as the equities sold off.

This is starting to sound like a recording isn’t it?

- BA

Stocks plunged more than 3% today, the biggest drop in nearly a year, after the ISM Non-Manufacturing Index fell well below expectations, possibly signaling that the US economy is already in recession. Just to keep the snowball rolling downhill a FED official said today that the economy faces the risk of a recession.

We are headed for a test of last month’s lows in the stock market. I would not hold my breath in hopes that the market passes that exam.

You should be making some profits on those bearish option plays you made a few weeks, or even months ago.

- JD

“Don’t fight the FED” has been the mantra forever in the investment community. The huge rally that transpired over the past few weeks was the trained herd piling into equities. We were also do for a bounce. Now its over. This next leg down is going to be massive. The fed can lower rates but they can’t make banks lend. The Dow finished down 370 points and the VIX tacked on another 8% rally. The bond market had a flight to quality rally with the front end leading the way. The curve steepened again.

- BA