Pre-Market Alert: “Black Sunday”

Lehman, Merrill Spark Bloodbath

By Bryan Bottarelli
Monday, September 15, 2008 8:57 AM EDT
Mon, 15 Sep 2008 12:57:00 GMT

Dear Bottarelli Research Member,

It’s already being called “Black Sunday”

Over the weekend, a handful of events occurred that’ll shape the financial landscape forever. And this morning, the pre-market futures are reacting with a devastating drop to the downside.

Since we last spoke on Friday, Lehman Brothers have officially gone belly up, Bank of America has agreed to buy Merrill Lynch for $50 billion, and the Feds have balked about putting up more taxpayer money to save more troubled institutions.

Cash-rich Abu Dhabi isn’t interested in extending a lifeline, saying they’d rather “wait and see” what happens next. Republican Presidential candidate John McCain is already calling for more regulations. And it’s all summed up from comments from former Fed chief Alan Greenspan, who said that the USA in now in a “once-in-a-century’ financial crisis.”

As I write, the pre-market futures are pointing to a 351-point fall on the Dow — and monetary officials from Washington to London to Brussels to Beijing have all stepped in to add liquidity to the credit markets.

In short, today could be one of the most volatile days we’ve seen all year. And it could also be the “capitulation sell-off” day that officially marks the bottom of the financial crisis.

In terms of a trading strategy, today is not the day to be a hero. In other words, when major market volatility takes hold of the directional moves, there is no rhyme or reason to the intra-day movements. Therefore, we’ll play things safe today.

Of course, if a trade does present itself, I’ll certainly make a play. But its best if we let today’s events settle in before jumping into anything new.

I’ll be out later in the session with further updates — but I just wanted to get this pre-market alert out before the open.

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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