With Citi evidently in the grip of lunatics – the stock was down a whopping seven cents yesterday, even as most other banking shares got savaged – we’ll shift our attention to Fannie Mae, a bellwether whose price action is perhaps more in tune with reality. Fannie’s dead-cat bounce looks to have run its course, and the stock should now be presumed bound for a hidden-pivot support at 37.60 that I flagged here ten days ago. If so, that would represent a 10 percent fall from current levels. Given the fact that Fannie is by asset size one of the largest companies in the world, any such weakness could be expected to drag the broad averages down with it.

Is it perhaps merely seasonal factors that are pulling the market down right now? There’s always that chance. But it makes me a little nervous when shares tumble during the usually quiet Rosh Hashanah holiday. We’ll be better able to judge today and tomorrow, when a more normal flow of activity returns to Wall Street. In any event, it behooves us to keep a close eye on Fannie, which will have an opportunity to trampoline from just beneath these levels if weakness continues. That would put the stock just beneath the bottom of last week’s panic-stricken low – a potential false breakdown tailor-made for short-squeeze artistes intent on distributing shares at better prices.