Wednesday, August 29, 2007

One-day wonder

1:45 pm Eastern, the Dow was up about 75 points. By the end of the day the geniuses who dropped it 280 just yesterday decide to tack on another 170 or so and send it soaring into the close. Naturally, all other indices followed diligently along.

This is textbook volatility in a decidedly bear market. It's not unusual for traders to act like sheep when the market makes bold moves one way or another. Usually the only winners are day-trading experts at brokerages and a few plucky individuals who play the market for a living. These moves to the upside are nothing more than knee-jerk responses to momentum. If one is really nimble and smart, one can make a bundle of cash on these moves. Unfortunately, most investors aren't constantly trading on momentum, and that's probably for the good.

Dow 13,289.29 +247.44; NASDAQ 2,563.16 +62.52; S&P 500 1,463.76 +31.40; NYSE Composite 9,508.92 +219.43

Advancing issues did an about-face from the previous day, with nearly 5 gainers for every loser. However, the rally on Wednesday failed to kill off the one supreme indicator of the bear. New lows buried new highs, 169-65, a measure that's been giving a bearish reading since the first major pullback on July 24, a span of 27 straight sessions. Until there are more new highs than lows, this market is going to be the haven of hucksters and day-traders, and there will be plenty of losing trades. Practically anything bid up will come down.

Volume was also somewhat on the moderate side. There simply is not a lot of serious activity in the markets. More people are afraid to take risks now than ever in the past 4 1/2 years and many are wondering how long they can ride along without selling whatever gains they have and/or paring their losses.

With stocks moving higher, it didn't take long for the oil traders to jump on board, boosting crude futures for October delivery by $1.78, to $73.51, citing supply shortages, which magically appear out of nowhere whenever the greedy bastards want to make more money. It's simply absurd to believe that oil is actually controlled by any kind of supply-demand cycle. The reality is that the entire market is rigged for the benefit of the major oil companies.

Gold was up $1.90 to $675.40 and silver added 8 cents to close at $12.01. The mini-moves in the metals, in relation to oil, were somewhat akin to a curtsy and a bow. In reality they mean little. All commodities are about to get sunk as the fallout from the credit miasma continues to eviscerate businesses around the world.

Little by little, the credit woes are creeping forward, silently. Eventually, they come into public view and everyone is shocked that Americans could not continue to borrow and spend indefinitely. It's just the way the world works.

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