Market Touch

by Dan August 23, 2011 9:30 am • Commentary

As I write at 9:15am, it is feeling a bit like yesterday morning with an opening gap and what feels like and impending failure.  The S&P futures are barely holding onto gains and are 1.5% off of their overnight highs, while the DAX is down 2.5% from the session highs, on the lows of the day only up 40 bps. Feels like we are taking one step forward and ultimately two steps back.

I will be keeping a close eye on GS this morning after the late day rout in the stock as a result of Reuters reporting that CEO Blankfein hired a high-profile defense attorney…..it appears that the company adequately explained the hiring, but the stock is below yesterday’s close in the pre-market and credit default swaps on the company are bid up 20 bps to levels not seen since April 2009. Traders like round numbers and I would assume some shorts will be gunning for $100 in this name.

Unfortunately it feels as if we are going to get our little puke in the bank stocks this week, and I am not sure you have to step in from the long side, and maybe if you do consider buying just 1/4 of a position as any turnaround in the sector will likely take some time.  I would not sell puts to get long these names even with implied vols where they are now and where they are likely to go in a panic.  The fact that we are starting to see Cds quoted on bank names is starting to feel a bit like a self fulfilling prophecy…..

Yesterday the SPX did not make a new closing low, but it very well may today and at that point it appears that the next line of support is about 1080 and then 1050.