No More Truck Leasing?

Trader Talk

The major stock indexes opened brightly to follow on from yesterday's rally, only to fall hard intra-day, before a late-day recovery bounce helped land another close in the green. Volume was on par with yesterday.

Officially, the NASDAQ advanced 0.4% on 2.3 billion shares, while the Dow Industrials rose 1.6% on NYSE volume of 5.6 billion shares. The leadership profile remains negative, with 120 stocks making new highs versus 225 stocks making new lows.

The short term momentum oscillators remain negative, confirming the bearish stance of the AlphaKing Trading Indicator. We have no new trades at this time.

The overall pattern remains solidly bearish, with the downward stair-step pattern of lower lows and lower highs remaining intact. So too continues the bearish trend of five wave sell-offs followed by three-wave partial recovery bounces. Today's action leaves the S&P500 at the Fibonacci 80% points lost during the prior slide level. The bulls are dead in the water while the stock indexes remain below last week's highs, and even if they were able to engineer a breakout above those keys levels, the down-trending 50 day moving averages are moving fast into position to stall such an advance in its infancy.

We saw interesting snippets of information travel across the financial media today that got surprisingly little commentary. The major car companies and major lending companies anounced they will no longer be offering car leases to consumers or businesses. This is due to vehicles at the end of the lease being worth much less than the car companies and lenders thought they would be worth. That leaves the lenders and car companies in yet another deep hole. The current plan to stop car leases altogether seems to us to radically change the car buying and overall economic landscape. Consumers commonly take on three types of debt. The largest debt being used to buy a home. The next largest to purchase or lease a car. The next largest revolving credit card debt.

The first two of them - houses and now cars - have essentially bankrupted many big time lenders and players involved the business of lending to consumers for those big item purchases that are the cornerstone of the American Dream. One wonders how the car companies will deal with no car leasing business, or even how they can survive taking another hit as leased cars already out on the streets get traded in for less than they are worth as the lease agreement expires. One also wonders when credit card debt - which is the last bastion of consumer credit still standing - also takes a hit.

Hard to imagine that this massive financial instrument can survive unscathed from the credit bubble collapse when the other two big sectors of consumer borrowing have taken such a beating. While the financial media seemed to ignore today's news on car leasing troubles, we believe it is simply a matter of time before the headlines are filled once again with the grim reality that the big players in the debt financing business have taken on more than they can chew. Needless to say, we remain bearish in-line with our trend indicators.

Kevin Wilde, Chief Trading Strategist AlphaKing.com.

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