Likely market action today, October 24, 2008

Here is the likely scenario of what will happen after 09:30 on the NY Stock Exchange and in Chicago at the Globex exchange (where the SP 500 ES mini contract futures are electronically traded):

The ES futures already have a backlog of short positions of over 10,700 contracts that represent about a $500 Million (that's half a billion USD) in short selling pressure that has to be resolved when the markets attempt to reopen. Let me tell what is probably going to happen at 0930:

1. The markets will attempt to open, but there will not be any buyers at the current levels due to the backlog of sell positions, so how do buyers buy? They lower their bidding prices to very low levels to where they think they can find support and make money. Right now that's somewhere near the LOY [837] on the SP 500 futures.

2. If they can't find enough buyers to handle all the sell offers, the price keeps falling (free-fall as we say in the futures markets) until the next circuit breaker comes into play around, well here is a description of what is happening right now:

DJIA futures are down 550 points, S&P Futures are halted at -60 points at 855.20, and NASDAQ at -85 points at 1168.50.  These levels can extend to -10% after the open before circuit breakers come back into play.  The way this works is that the futures can reopen if the bids magically come back and the markets would rise, but otherwise futures are halted until the stock market open.  after -10% is reached in futures there is a 2 minute halt, then the limit is extended to allow for -20% with a halt for 2 minutes, and then the limit is extended to 30% down. (Courtesy of 24/7 Wall Street website)

3. The complete lack of buyers to move the markets back up due to the meltdown in the Asian and European markets overnight, the US markets are going to follow suit. No one wants to commit capital when it might disappear in a few minutes. Remember the Arabs that bought into the financial institutions of the US way back in Feb/Mar of this year? Well, they need better financial advisors since they have all seen their positions cut by as much as 2/3's!! See having money doesn't make you smart. Warren Buffets recent acquisitions and all those that got in with him are now totally in the red and heading down.

4. If the market's find support near their Lows of the Year (837 on the SP 500), then it will bounce and head back up for a sideways move until the 15:00 (3:00 pm hours). Be back then.

As we use to say in the Navy: "Stand by for heavy rolls..."