US Stocks Slump As Fate Of Lehman, Freddie And Fannie Hang In The Air

It’s another occasion to post Thomas Lorimer’s print that reflects current conditions. Without a firm buyout/bailout of Lehman Brothers (LEH) or any concrete rescue proposals for Freddie Mac (FRE) and Fannie Mae (FNM), despite a successful debt sale, stocks quickly gave back all Friday’s gains and then some. So the financials induced cloud over the market from Thursday’s post dumped rain today on extraordinarily light late summer volume. Breadth was as poor as you might expect.

Last night was a great example of the how markets are affected by different time zones and an evolving news cycle. Last night Asian markets were up significantly but European markets followed weakly. Then US markets were quite weak and ETFs related to Asia for example didn’t match the rally. EWH [Hong Kong ETF] was down 1.40% today while indexes there rose 3%. That’s a big miss but it reflects what becomes stale out of time zone index data. Further, it represents that there is little decoupling taking place.

As expected, low volume allows the few remaining traders the opportunity to push indexes around and possibly exaggerate moves. Barring unexpected news, the real action probably won’t begin in earnest until most traders are back by the middle of next week.

In the meantime, we’ll continue to amuse you until Wednesday.

Have a pleasant day.

Disclaimer: Among other issues the ETF Digest maintains long or short positions in: QLD, IWM, UWM, XLY, XLV, RXL, XLP, UGE, IEF, UUP, DBC, DEE, GLD, DZZ, EFA, EFU, EEM, EEV and FXI.

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