Zeev's Turnips Patch-No Politics (ZEEV)

[marketmaven]

FNM, Dollar soften on Feb. UMich survey decline

By Leslie Wines
NEW YORK (MarketWatch) - The dollar lost strength in morning trade Friday after news that the University of Michigan's consumer sentiment survey fell to 94.2 in early February from 95.5 in January. The number was below the consensus forecast of Wall Street economists for a slight slip to 95.4. The euro was quoted at $1.3070, up from $1.3055 before the news, while the dollar stood at 105.54 yen, down from 105.67. yen.

FNM Breaches $60- A Fannie Mae Follow-Up
Bernie Schaeffer
2/10/2005 8:10 AM ET
http://www.schaeffersresearch.com/commentary/bernie_observations.aspx?click=home&cat=soc&pag....

http://stockcharts.com/def/servlet/SC.web?c=FNM,uu[h,a]dacanyay[de][pc13!c50][vc60][iLb14]&pref=....

I thought I would check back on beleaguered Fannie Mae (FNM: sentiment, chart, options) . Since the start of the year, the security has slid lower by more than 11 percent. One interesting tidbit is the contrast between the heavy stock volume that coincided with the equity's September low and the current light stock volume, which I see as a concern, since it indicates a "slow bleed" rather than a "V-bottom" environment.

Light put volume is additionally problematic, as it indicates that those long big put open interest are in no hurry to liquidate on stock weakness as they might have been in the past. Not only does this eliminate a source of short covering from those short these puts, but it also adds pressure for them to add to their short-stock hedges.

This does not preclude the cavalry from rescuing FNM yet another time, but I'd say the chances of a major (and scary) break of support are much higher now than they've ever been. One more caveat: FNM is a big component of the heavily shorted Select Financial Sector SPDR Fund (XLF: sentiment, chart, options) . In January, short interest soared 10 percent to 29.6 million shares, giving XLF an impressive short-interest ratio of 10.37.

Furthermore, XLF is fast approaching 88,000 February 30 puts, which could serve as a layer of options-related support.