Tuesday December 16, 2008
Navivest

Today will be an interesting one for the stock market. We could possibly see a move to the downside in early trading, followed by a very nice move to the upside in later trading.

The monetary policy setting arm of the Federal Reserve, the Federal Open Market Committee, will be announcing its latest interest rate decision, after meeting yesterday and today. Most analysts and forecasters are expecting that they will cut interest rates further, with some looking for a cut of as much as half a point.

Before we get the decision on interest rates, which does not come out until 2:15, we have some economic news due out today that should dictate the early tone of the markets.

At 8:30 AM, we will be getting Building Permits numbers, CPI numbers and Housing Starts. There is a very good chance that the housing related numbers could come in worse than expected, so unless the stock market decides to trade higher on bad economic news, we may drift lower at the open.

In addition to the interest rate decision news, will be getting news from OPEC, which is expected to cut oil production perhaps by as much as two million barrels a day. That should help send oil and commodity stocks higher.

We are also awaiting word from the Whitehouse, with regards to help for General Motors (GM), Ford (F) and Chrysler. While we don’t know whether that news will come this week, next week or even later, we know news is on the way.

President Bush leaves office on January 20th, so we are looking for that announcement to come in the next two weeks. To the extent that the automakers are operating on fumes with just weeks’ worth of cash on hand, we could possibly get the news this week.

With all the news that’s due out, we are recommending traders take long positions today. Once the market opens, gauge to see if we have decisive trading or if the market is just treading water. If we are definitely heading down on the economic news, then wait until at least 10:30 AM or so, then start buying.

Trading psychology will come into play today. If stocks are moving to the downside early, don’t be scared to get in. If later on we do get the upside move, then buying on a dip enables traders to extract maximum gains.

If stocks are just drifting, you can start entering into positions around 10 AM. Some oil and commodity stocks that we like are Apache (APA), Anadarko (APC), Devon Energy (DVN), Mosaic (MOS), Agrium (AGU) and Bucyrus (BUCY). We also like the Proshares Ultra Dow 30 (DDM), which is a great play if the stock market is heading higher. While we prefer these names, if we do get a move to the upside, it would be a broad based rally.

If we are fortunate enough to have stocks move to the upside in the latter part of the trading day, then exit today and lock in profits.

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Tags: Stock Recommendation  Trading Ideas  GM  Ford  Interest Rates  FOMC

Seeking to stem the recent rapid decline in oil prices, OPEC ministers meeting in Vienna, reached an agreement overnight, to produce 28.8 million barrels of oil a day a day. This represents a shortfall of about 520,000 barrels a day from current production level. As a result, oil prices are rebounding, climbing a dollar to the $104 level in electronic trading.

The Energy Department will be releasing Crude Oil Inventories at 10:35 AM today, and being that this week’s report will reflect the effects of the hurricane Gustav related safety shutdowns, we may see a shortfall that may be bullish for oil, causing a further rise in oil prices.

Tags: OPEC  Oil Prices

At 10:35 AM today, we will be getting the Crude Oil Inventories numbers for the week ending 09/06/08. This will be the first report to reflect the effects of hurricane Gustav and depending on whether or not Wall Street wants to discount this special circumstance, we could see a spike in oil prices. Should oil prices rally, we might see further declines in stocks.

Coincidentally, FEDEX (FDX) after the close of market on Tuesday, upped its earnings guidance for Q1 2009 as a result of falling oil prices and the stock surged over four points in after hours trading.

Lehman Brothers (LEH) will also be front and center as it will be releasing what it terms “Key Strategic Initiatives” and its Q3 2008 results, which it is releasing a week early, at 7:30 AM today. Since Lehman (LEH) is currenty on life support, this news will be dictating direction for the markets today and depending on whether Wall Street deems the key strategic initiatives good enough to help keep Lehman afloat or not, we could see financials stage a rally, taking the rest of the market along for the ride, or further declines for the markets.

Tags: FEDEX  Lehman  OPEC