Free Newsletter: Stalking Stocks with the Shark - Market Ends Mixed Ahead of Uncertain Weekend - 9/14/08

Free Newsletter: Stalking Stocks with the Shark - Market Ends Mixed Ahead of Uncertain Weekend - 9/14/08

Greetings Shark Investors:

The market finished out a tumultuous week on Friday in a lackluster but choppy fashion as investors bided their time ahead of Hurricane Ike’s landfall and news of a possible buyout of LEH. Indications were for a somewhat flat to lower start to the day early in the morning as various reports floated around regarding possible scenarios to put LEH out of its misery. However, sentiment soured considerably following the August retail sales report. Although expectations were for a headline increase of 0.3% and an ex-auto decline of 0.2%, the actual numbers were worse than expected, with both readings showing a decline of 0.3% and 0.7%, respectively.

As such the market opened the day sharply lower, but as was the case after the previous day’s poor start, buyers stepped up to the plate shortly after the bell, providing underlying support to the broader market. The trading, however, underneath the surface was quite mixed. Given the fact that the resource sectors have taken an absolute beating recently and that Hurricane Ike in currently threatening energy assets in the Gulf of Mexico, both the energy and materials sectors began the day trading sharply higher. Separately, even though financials, industrials, tech and consumer discretionary weighed on the indices, each of those sectors moved quickly off their opening lows.

The net result was major indices that were able to steadily make their way back towards the unchanged mark, finally peeking their heads into positive territory just as the morning came to a close. Unfortunately for the bulls, however, that foray into the green proved to be short-lived, as those areas which had improved so markedly in the morning were sold once again throughout the New York lunch hour. Still, the market was able to stay off its early lows as the resource and defensive sectors stubbornly held on to their gains.

Despite that lunchtime dip, investors once again began to push the broader market back to the flat-line through the afternoon. By the time the final bell rang, the major indices were essentially unchanged and in mixed territory. Without a doubt, it was a very haphazard session, and investors’ confusion over what to make of an uncertain acquisition on LEH, talk of a possible government bailout of the U.S. auto industry, severe pullbacks in GE, AIG and MER, and the imminent landfall of Hurricane Ike was apparent in the number of wild swings throughout the day.

Despite all of the recent drama and hopes that some closure in regards to the mess that has become Lehman Brothers will give this market some tidy resolution to the obvious problems the financials continue to face, the bigger picture really hasn’t changed. There continues to be absolutely no leadership to the upside, and the only trades that have been working have been in the worst looking charts. We’ve been saying for quite a while now that the action remains consistent with exactly what we would expect to see in the midst of a bear market.

In the short-term, meanwhile, one thing that individual investors need to keep in mind is the possibility that any news over the weekend, while it could be met with raucous approval Monday morning, may be followed by the same sort of “sell the news” reaction we saw immediately after the FNM/FRE news. Market participants may seem optimistic right now, but the real test will come after a deal is done.

Regardless, the biggest thing individual investors should be focusing on is not worrying about trying to fully invested right at the bottom – wherever that may be. There will be tremendous opportunities once all of this market turmoil is over, and those who wait patiently for conditions to improve before building substantial positions will be in a much stronger position than those who try to peg an exact turning point.