Insights

Market Wrap – AIG rips in the final trading Minutes

American International Group (NYSE: AIG) ripped higher from $34 a share to close at $37.81 in the last 20 minutes of the trading day on very high volume.  With no recent news on AIG, and this kind of trading activity, I am expecting some type of announcement from the firm before tomorrows open.  I have seen this movie before folks, someone, somewhere, knows something.

Otherwise, from the Dollar to The Dow, the Market had no direction today.  The market indexes passed from negative to positive and back, as the Dow reversed polarity, no less than seven times today.  The U.S. Open does not start until August 31st but today’s market action was like watching a tennis match with the numbers changing from green to red and going back and forth across the net.

Morning news was headlined by the death of Senator Edward Kennedy (D-Mass), age 77, who had been battling brain cancer for a year.  The impact the death of Sen. Kennedy has on the market is that he has been a proponent of a public health care option for decades.  Ironically, his death may make passage of any socialized health care more difficult, as the senate now is only 59-40 in favor of the Democrats, as opposed to 60-40.  When Senator John Kerry (D-Mass) was the Democratic nominee for the 2004 Presidential election, Kennedy was instrumental in changing how Kerry’s vacated seat would be filled if he won.  At the time Mitch Romney was the Governor of Massachusetts, and picking Kerry’s successor would have been Romney, a Republicans, decision.  The process was changed, and now a special election needs to be held which could take up to 5 months, leaving one less Democrat voting on anything in the interim.

Does this make health care stocks a buy?  Looking at the HMO companies showed most all of them down on the day Kennedy passed away, so no correlation was seen immediately evident there.  The medical device makers were mostly up and the hospital companies were down.  The market, being split on health care in this way, might be saying that the death of even one of Washington’s longest tenured and most powerful senators in today’s health care debate, is not having a significant impact on stock prices.

We had two housing numbers released today with the MBA Purchase Applications showing a 1% increase week-over-week.  Durable Goods Orders were released next with the headline number up 4.9%, easily beating the expected 2.5%.  This better than expected number should have given the market a boost, but when you looked at the number ex-transportation, what you found was airplane and cash-for-clunker sales juiced the headline with the core up only 0.8% vs an expected 0.9%.  New Home Sales came in 11% higher than expected (433K vs. 390K) and increased 9.6% month-over-month.  This release at 10 a.m. ripped the Dow from its lows of the day (9485) to its highs (9582) in under 30 minutes.  That rip up was the best move of the day for intra-day traders as the 100 point move might have looked like a golf drive as opposed to a tennis match.  The rest of the trading day was back and forth, red and green, with the close being green and the Dow up a measly 4.23 points.

All the major indexes finished flat with the Dow up 4.23 (9543), the S&P 500 up 0.12 points (1028) and the Nasdaq 100 down 2.9 points (1637).

Gold opened the day trading lower then bounced back and finished, like most everything else, flat at $945/ounce.  Oil opened the day and quickly traded lower, but recovered as the day went on.  Oil was last seen trading at $71.41 a barrel, down 62 cents at 4:29 p.m.

UPDATE:  AIG is trading even higher in the after market last seen around $39 a share at 5:04 p.m. after trading as high as $40.24 at 4:41:27 p.m.  This kind of activity often is a footprint of professional momentum and day traders getting in on after-market action.

Two news stories found concerning AIG in Asia is most likely the source of this activity;  AIG is buying into a Philippine based insurance company, which could be a strategic acquisition alongside of their Asian based insurance business subsidiary, American International Insurance Co.  Another recent news story concerning AIG I found was about the IPO of AIG’s Asian life insurance unit, and that China Life might invest in it.  Possibly a decision has been made by China Life but there has been no news release yet.

Looking at AIG’s daily chart shows a Pennant pattern formed from August 5th to August 17th.  A Pennant pattern is a continuation measuring pattern, and this one predicts an eventual move to the $45 area.  After the stock broke out from this Pennant, a Flag pattern was formed (very similar to a Pennant pattern) between August 19th and the break out from this pattern happened today.  This smaller pattern also indicates an eventual move to the same $45 area.