We seem to be in a very predictable pattern as it pertains to news stories. See if this sounds anywhere close to familiar. We get positive news and have a couple of nice up days followed by more reports that seem designed to scare investors even more.
The market is now trading up and down on emotions and it may get worse before it gets better. We have just had the biggest two day ralley in the last twenty years and now we are looking at whats sure to be some bad news before the open on Tuesday.

Here is a taste of whats in store.

Reports to detail economic fallout in 3rd quarter
Tuesday November 25, 12:03 am ET
By Alan Zibel, AP Business Writer
Reports to detail contracting economy, sinking home prices, falling consumer confidence

WASHINGTON (AP) -- Investors on Tuesday braced for several reports expected to show the U.S. economy contracted even more than originally thought in the third quarter as home prices shrank, more banks fell into trouble and consumer confidence sagged.


The reports come on the heels of a Wall Street rally that drove up major indexes more than 4.5 percent Monday on news of the government's plan to bail out Citigroup Inc., a move investors hope will help quiet some of the uncertainty hounding the financial sector and the overall economy.

The Dow Jones industrials soared nearly 400 points, and the 891-point rise since Friday gave the Dow its biggest two-day percentage gain since October 1987.

Asian markets built on the rally overnight. In Japan, the Nikkei 225 stock average was up 3.4 percent, while Hong Kong's Hang Seng index advanced 3.3 percent by midday. South Korea's Kospi rose 1.5 percent.

Before U.S. markets open Tuesday, the Commerce Department is due to release its new reading on gross domestic product -- the value of goods and services produced within the U.S.

The report is expected to show that economic activity contracted at a 0.5 percent annual rate in the July-September quarter, according to the consensus estimate of Wall Street economists surveyed by Thomson Reuters. If that proves correct, it would be a tad worse than the government's initial estimate of a 0.3 percent rate of decline.

The third-quarter reading of the Standard & Poors/Case-Shiller index, a widely tracked measurement of home prices, is also due out before the Wall Street opens. The Case-Shiller 20-city housing index dropped a record 16.6 percent in August from a year ago, the largest drop since its inception in 2000.

Meanwhile, a preliminary report by The Conference Board on consumer sentiment in November, is expected to show more erosion in confidence from already battered levels, as consumers grapple with the continued fallout from the financial meltdown -- layoffs, plunging home prices and dwindling retirement funds.

Economists surveyed by Thomson Reuters expect the Consumer Confidence index to slip to 37.9 in November from September's reading of 38, which was the lowest since the New York-based research group started tracking the index in 1967. The projected level would be less than half of the 87.8 reading a year ago.

Wall Street closely monitors sentiment as consumer spending represents about two-thirds of all economic activity.

"The disruptions in the financial markets are really weighing on people's minds," said Mark Vitner, a senior economist at Wachovia Corp., who predicts that confidence will fall to 30 in November.

Also Tuesday, the Federal Deposit Insurance Corp., is scheduled to give an update on how many banks were on the agency's list of troubled institutions and detail how weak the banking industry's results were in the third quarter.

Meanwhile, Treasury Secretary Henry Paulson is scheduled to brief reporters on the government's financial bailout program Tuesday.

Consumers around the country are reeling from job losses, tanking investment portfolios and sinking home values. They are expected to hunker down further in the coming months, making it likely the economy will continue to shrink through the rest of this year and into 2009, more than fulfilling a classic definition of a recession: two straight quarters of economic contraction.

On Monday, the National Association of Realtors reported that sales of existing homes fell by a greater-than-expected 3.1 percent to a seasonally adjusted annual rate of 4.98 million units in October, from a downwardly revised pace of 5.14 million in September.

The median sales price plunged 11.3 percent from a year ago to $183,000. That was the largest year-over-year drop on records going back to 1968, and the lowest median sales price since March 2004.

There were 4.23 million unsold homes on the market in October, down slightly from a month earlier. At the current sales pace, it would take 10.2 months to sell all the properties.

Soaring foreclosures are a driving force behind the credit crisis that has upended Wall Street and caused the government to spend billions rescuing numerous major banking institutions, most recently Citigroup Inc.

President George W. Bush argued Monday that the government's rescue of Citigroup was necessary to protect the financial system and help the economy recover. There could be more such moves if other institutions need help, he said.

Meanwhile, President-elect Barack Obama unveiled the top members of his economic team, beginning with New York Federal Reserve President Timothy Geithner as treasury secretary and Lawrence Summers as director of his National Economic Council. Summers led the Treasury Department under former President Bill Clinton.

Obama urged the new Congress to pass an economic stimulus bill, pledged help for the troubled auto industry and blessed the Bush administration's bailout of the financial industry. Even so, he conceded, "The economy is likely to get worse before it gets better."

AP Business Writers Jeannine Aversa and Anne D'Innocenzio contributed to this report.

This should lift our spirits Tonight it seems every negative is being brought out.


Big Three’s Troubles May Touch Financial Sector
Topics:Automobile Industry | Earnings | Economy (U.S.)
Companies:General Motors Corp | Ford Motor Company | Bank of America Corp | Goldman Sachs Group Inc | Citigroup Inc | Morgan Stanley | JPMorgan Chase and CoZachery Kouwe and Louise Story | 24 Nov 2008 | 10:40 AM ET

To the long list of troubles plaguing the financial industry, add three big ones — make that Big Three ones.



The foundering Detroit automakers owe more than $100 billion to their bankers and bondholders, and Wall Street is starting to wonder how much of that will be paid back.

With Congress balking at a rescue for the auto industry, and Chrysler and General Motors [GM 3.59 0.53 (+17.32%) ] warning that they could face bankruptcy without one, investors are worrying about financial companies’ exposure to the Big Three, as well as to automotive suppliers and dealers.

The intertwining troubles of the auto and financial industries were partly behind the sharp sell-off in financial stocks last week, when banking shares fell to their lowest levels since the economic crisis broke out and questions swirled about the future of Citigroup [C 5.95 2.18 (+57.82%) ].

“It’s pretty clear there was a cause and effect,” said Wilbur L. Ross Jr., a prominent financier who specializes in distressed industries and has invested in auto parts companies.

Big banks say that their exposure to the auto industry is relatively small and that in any case most of the loans are secured by vehicles or other assets, which would help minimize any losses.

But the true risks are difficult to ascertain because banks do not disclose much about their exposure. Of particular concern is the fate of billions of dollars of bonds that were used to finance the 2007 acquisition of Chrysler by a large private investment fund, Cerberus Capital Management.



The potential losses do not end with those high-risk loans, however. Over the past three years, as the auto industry’s fortunes darkened, big banks like Bank of America [BAC 14.59 3.12 (+27.2%) ], Citigroup and JPMorgan Chase [JPM 27.58 4.86 (+21.39%) ]helped the automakers sell more than $56 billion of new debt securities, according to Dealogic. Most of those securities were bought by investors like insurance companies, pension funds and hedge funds, many of which have been staggered by losses on other investments. Some hedge funds already have been forced to dump investments into a falling market to meet demands.

That figure does not include $47 billion of risky loans made to various affiliates of Chrysler, Ford [F 1.56 0.13 (+9.09%) ] and G.M. that are backed by auto leases and car loans to individual car buyers, some of whom are now struggling to pay their own bills as the economy craters.

Many of these auto bonds and loans have plummeted in value as things have gone from bad to worse for Detroit’s once-proud carmakers. A $7 billion term loan that Ford issued in 2006, for instance, was trading for 32 cents on the dollar late last week in the secondary, or resale, market. That is particularly worrisome given that this debt would be the first to be repaid in the event that Ford filed for bankruptcy.


More from CNBC.com
Auto Failures Would Shake Markets

But businesses and ordinary people all the way down the automotive food chain are shouldering a lot of debt too. That includes autoworkers, but also everyone from makers of car stereos to dealerships to parts suppliers, as well as the people who work for those companies. Many of these borrowers could run into trouble if the automakers implode, leaving lenders in the lurch.

“The bigger fear is banks’ indirect exposure to suppliers and related companies in the auto industry,” said Ricardo Kleinbaum, an analyst at BNP Paribas in New York. “The real issue is the effect of an automaker bankruptcy on employment, credit card payments and mortgage defaults in the regions that are affected.”

A big worry is whether banks that have extended loans or underwritten bonds for the auto industry have held on to this debt or sold it to other investors. Banks typically retain a small portion of the securities they underwrite, and many banks that had hoped to sell high-risk loans have been unable to find buyers for them since the credit markets froze over.

“The question is, how much of these loans have they retained on their balance sheet?” said Tanya Azarchs, a credit analyst at Standard and Poor’s Ratings Service.


MORE FROM NYTIMES.COM

Current DateTime: 10:22:07 24 Nov 2008
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Few doubt that banks are sitting on billions of dollars of loans to the industry, though. Citigroup, Goldman Sachs, JPMorgan Chase and Morgan Stanley were among the banks that arranged $11.5 billion in financing for Cerberus’s takeover of Chrysler. Analysts say the banks are stuck with much of that debt.

And then there is GMAC, the finance arm of G.M. GMAC, which is half-owned by Cerberus, applied last week to become a bank holding company in hopes of qualifying for the government’s bank rescue.

In 2005, when banking was still strong, Bank of America bought $55 billion in loans from GMAC and then sold most of them to other investors. In June, the bank, which has itself received billions of dollars from the government, helped GMAC refinance $60 billion of debt.

Copyright © 2008 The New York Times

Media follow the markets with their stories. Seriously, they look up whatever moves in an index or the morning futures and run a story on it that day in the same direction it was already moving.

Right now the markets are following forex tick for tick though, and the eur-usd is making a stand.

Either it's consolidating it's MA trendlines, or it's about to break. The markets and commodities do whatever this does. If that red 120ma comes up convincingly through the black 240ma we're in for a long rally. The major rally of the last 2 days was the breaking out from the 120 ma resistance and falling up towards the 240. That fall is nearly over, and now it has to decide if it has the strength to break the downtrend by crossing the MAs. There's a lot of down momentum, it might but it will take several days to get the train turned around.

See the forex threads for previous views, greencat and I have been recording it there.