Monday, June 9, 2008

PPT Rallies Market

Since there's no other salient explanation for today's rise on the Dow, I will be the first to indict the President's Working Group on Financial Markets (a/k/a The Plunge Protection Team or PPT) for boosting stocks after Friday's shock waves sent investors scurrying for cover.

The Bush administration has a vested interest in keeping the illusion of a healthy economy alive. Their buddy, John McCain, is going to have to have something upon which to hang his hat, and most Americans respond well to positive economic conditions.

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Of course, anybody with at least half a brain knows that the US economy is in dire straits. Today's laggards - as they have been through much of the past 10 months of declines - were the financials, and, we have a new leader. JP Morgan Chase (JPM), on no discernible news, took a major dive this afternoon, dipping as much as 3 1/2 points (9%) before recovering about a point into the close (-2.58, 37.51).

I would be reticent if I did not mention that this was one of the three strong sells (via puts) I recommended on June 4 to subscribers to the Fearless Stocks & Options Advisory Newsletter. The other two recommendations are also doing just fine, but you'll have to pony up $49.95 for that information (a steal if you're serious about options).

Were I an investor in JPM, I would be bailing right now, if not sooner. Of course, since I'm not so stupid as to invest in the work of bankers - a clueless lot of overstuffed shirts if ever there was one - I own no shares of any bank, brokerage or financial institution, and probably never will.

But JPM is worth watching over the next few months. Something is definitely not right there, and considering the recent performance of banking interests, there could be another round of imploding assets involving financial issues. Morgan has not been hard hit until today, and they may be next in line with their hands out to the various sovereign funds like those in Saudi Arabia, the UAE, Kuwait and Taiwan.

On the question of whether the PPT was actively pumping futures and indices today, I would say the evidence is clearly there. The Dow was up sharply at the open, as a stabilizing influence, but stumbled to break-even by 3:00 pm. All of today's gain was made within the final hour of trade. I rest my case.

Dow 12,280.32 +70.51; NASDAQ 2,459.46 -15.10; S&P 500 1,361.76 +1.08; NYSE Composite 9,149.09 -3.42

To get an idea of just how misleading the headline number (Dow up 70!) is, take a look at the internals. Declining issues hammered advancers by a nearly 2-1 margin, 4121-2114. New lows expanded their edge over new highs, 371-114. That's the widest margin in about a month, if not more.

The markets could rally for the next few days or the balance of the week, though I don't think that's in the cards. This market is marked for declines, and steep ones, with the Dow currently hovering less than 500 points above the January and March lows and off nearly 2000 points from the October '07 highs.

Only the concerted will of market insiders and the PPT can save the stock market from incessant mark-downs over the next 2-4 months. They will do everything they can, short of imposing price controls on gasoline, to keep markets from melting down prior to November. Naturally, a summertime collapse with a snap-back weeks-long rally leading up to the elections would suit the slimy Republican propaganda machine just fine, and that's what is staring us dead in the face.

Oil actually eased a bit on Monday, losing $4.19, to $134.35. Gold eased 90 cents to $898.10. Silver lost 22 cents to close at $17.21 the ounce.

Volume on the equity markets was moderate.

NYSE Volume 1,349,556,000
NASDAQ Volume 2,116,800,000

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