U.S Market weeky review

The bears were unable to offset the upward momentum that was sparked by the recent drop in interest rates. The break beyond the neckline of the identified inverse head-and-shoulders pattern coincided with a move toward July highs. Most technical traders will keep a bullish outlook on the markets until they close below their long-term moving averages, which are approximately 3% below current prices. The index of particular interest this week is of the Nasdaq because it has been leading the move higher. Watch to see how the major indexes respond to the upcoming earnings releases over the next couple of weeks because these announcements may act as the next barrier to further moves higher.

Yet another round of FOMC meeting at the end of this month. Doubt they will cut Fed rates as they did in the last round. Bear in mind, that was the 1st cut in 4 years. Going to happen again? Don't bet on it. My guesstimate is they will keep things as it is, else inflation might set in.

Subprime Meltdown

Following the tech bubble and the events of September 11, the Federal Reserve stimulated a struggling economy by cutting interest rates to historically low levels. As a result, a housing bull market was created. People with poor credit got in on the action when mortgage lenders created non-traditional mortgages: interest-only loans, payment-option ARMs and mortgageswith extended amortization periods. Eventually, interest rates climbed back up and many subprime borrowers defaulted when their mortgages were reset to much higher monthly payments. This left mortgage lenders with property that was worth less than the loan value due to a weakening housing market. Defaults increased; the problem snowballed, and several lenders went bankrupt.

Investors and hedge funds also suffered because lenders sold mortgages they originated into the secondary market. Here the mortgages were bundled together and sold to investors as collateralized debt obligations (CDOs) and other mortgage-backed securities (MBSs). When the higher risk underlying mortgages started to default, investors were left with properties that were quickly losing value. In the wake of the meltdown, central banks released liquidity into the market place, which allowed struggling lenders and hedge funds to continue operations and make the necessary payments on their obligations.

Possible Market direction this week: Positive

Fed Interest Rate Cut Seen This Week
Sunday September 16, 7:27 pm ET By Jeannine Aversa, AP Economics Writer
Fed Ready to Lower Rates This Week for First Time in More Than 4 Years

WASHINGTON (AP) -- For the first time in more than four years, the Federal Reserve appears ready to lower interest rates to prevent a housing meltdown and a painful credit crunch from driving the economy into a recession.

A rate cut would affect millions of borrowers, with the intention of getting them to spend and invest more, which would revitalize the economy.

In one of their most important and anxiously awaited decisions, Fed Chairman Ben Bernanke and his central bank colleagues meet Tuesday to determine their next move on interest rates. Those policymakers are widely expected to cut an important rate, now at 5.25 percent, by at least one-quarter of percentage point. Some analysts predict a bolder step, a half-point reduction.

The Fed drops the rate, then the prime lending rate that commercial banks charge many individuals and businesses would fall by a corresponding amount. It now is at 8.25 percent.
"It's no longer a debate over whether they will ease but by how much," said Mark Zandi, chief economist at Moody's Economy.com. "The economy is soft and getting softer," and the Fed has come under economic and political pressure to act.

Should the Fed go with a quarter-point cut, analysts expect policymakers will lower the rate again in October and in December, their final meeting of the year.

Alternative Energy

Today the world's original oil reservoir of 2 trillion barrels of oil is more than half used up. And most geologists believe as I do that the world hit peak oil production two years ago. That means that even as demand for energy skyrockets - India and China are gorging themselves on hydrocarbons - output is falling in startling degrees. In fact by 2030 we will only harvest as much oil as the world produced in 1980.

We're decades away from utilizing solar energy in any meaningful way, and faced with critical shortages in petroleum, there is only one immediate solution - nuclear energy. And the guts to this solution is uranium.

Uranium is enjoying its greatest bull-market ever. As oil reserves dwindle and energy demands grow, the entire world, but China in particular, is starting to make the move to nuclear power.

Campbell Soup 2

Recently announced that its Q4 profit jumped 38.6% to 16 cents per share from 11 cents one year ago. The market, however, was expecting more. After the announcement there were more jeers than cheers, and shares of the company were sent down about 3.5%. While there were some concerns from the company, I think that, upon closer inspection, Campbell is on solid ground.

Lennar Corp

Lennar Corp broke below the neckline of a well-formed head & shoulder pattern. Homebuilder companies are struggling due to the housing slum and the bearish price pattern is an obstable preventing it from moving here. However, this stock is currently testing the influential $25 support level. Strong inclination of not moving south as a close below would signal a prolonged move towards the next major support level of $17.

U.S Market sentiment

Friday’s decline came on the back of weak August non-farm payrolls whichshowed a decline of 4000 jobs versus expectations of gain of 110,000 jobs. Theweak numbers led to a steep rise in both the 2yr and 5 yr US Treasury bonds,with yields declining towards the lowest level in recent weeks. Expect at leastanother decline towards prior low of 12525 or towards the 12,000 level.

Campbell Soup

Recently bounced off the support of a long-term trendline. Trendline has propped up the price in the past but a bearish M.A is giving mixed signals. 50 DMA cut below 200 DMA, indicating a possible trend reversal.

GM

Price is near influential level of support. $29 level has propped up the price in the past and today's 4.83% gain is suggesting that this may happen again. The bulls may prevent a drop below the nearby support and might push the stock back toward the ascending trendline. Be ready to change their outlook on the stock in the event that the price slips below $29.

Market today

The worst of the credit-marketdebacle may be over and stocks will likely rise as the globaleconomy expands. Quite evident for the fact that the Fed lowered interest rate earlier this month to contain the sub-prime crisis.

Market should rally into positive territory today. Watch out!