Tuesday, July 22, 2008

Suspicious Surge Sends Stocks Soaring

Stocks on US indices dawdled along through most of the session, with the major indices just barely breaking into positive territory. That tepid mood was shattered in the final 45 minutes, as a trading frenzy sent the Dow - which was up only 30 points at 3:15 pm - up an additional 100 points. The other major indices responded in similar fashion.

Dow 11,602.50 +135.16; NASDAQ 2,303.96 +24.43; S&P 500 1,277.00 +17.00; NYSE Composite 8,566.65 +66.91

As these kinds of surprise surges have become more commonplace of late, this one was a bit more spectacular than most, whether it was the PPT plying their trade, or short sellers in a rush to cover, the result was a parabolic rise that sent waves of euphoria across the financial world.

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Much of those good feelings have been felt in the financial sector, which is up a stunning 25% over the past five sessions. Leading the way are the major commercial, regional and specialized banks.

The entire sector movement is curious... and probably overdone. These are the same characters that caused the current and ongoing crisis, and there's no good evidence that the danger has completely passed. This looks more like organized buying and some degree of speculation that the Fannie Mae and Freddie Mac episode marked the ultimate bottom of the market.

As much as anyone would like to call an end to our economic malaise, it's not like the Fed and Treasury waved a magic wand and made everything and everyone whole. Wachovia Bank (WB), which reported today, posted an $8.9 billion loss for the second quarter, cut its dividend 87% and announced layoffs affecting 10,750 people, mostly in the mortgage departments of their business.

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So, for people working and living in and around Charlotte, NC, where the bank is headquartered, the gains on Wall Street are a real slap in the face. Following those wretched results, Wachovia ended the day higher by 27% (16.79, +3.61). Of course, that's still a far cry from Wachovia's high of 53 last October, but there's little doubt the market today has divorced itself from reality.

Home foreclosures are still running at a record rate. The dollar's decline continues unabated. Oil, while down somewhat of late, is still pricey. Over 100 banks in this country are in danger of failing, and the kicker, layoffs, have just begun to stir. Two months from now, the upward moves of the past week will look silly in retrospect.

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This move is either technical - a condition of an oversold market - or pure fiction put out there by the slimy Wall Street and government manipulators who don't want the American people to know the truth. It's probably a bit of both.

On the day, gaining stocks rolled past losers, 4278-2009. New lows continued to beat down new highs, 211-105.

Oil finished lower by $3.40, to $128.42. Gold was slapped down $15.20, to $948.50 and silver lost 42 cents to $18.01 the ounce. As has been the case recently, commodities are being slammed back to earth by slack demand. Nobody wants to pay high prices and many have sought alternatives. It's the market, and it works.

Stocks are likely to continue on their merry way through next week as earnings pour in with sullen results, but brokers call it the end of the line and good times are just around the corner.

They're mostly liars and con men, people who think the economy is in good shape. It's about to fall over a cliff, and a steep one at that. The rallies of the past five sessions have the fingerprints of Ben Bernanke, Henry Paulson and their agents at Goldman Sachs, Lehman Bros. and Merrill all over them.

NYSE Volume 1,377,470,000
NASDAQ Volume 2,546,640,000

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