Monday, December 22, 2008

Low Volume, Lower Prices

With Christmas just three days off and investors already disgusted with stock performance over the past three months, Monday got off to a bad start and got worse as the day wore on. Only a sharp, short-covering rally in the final minutes kept markets from having a really dismal day.

Since this week will likely be among the slowest of the year, these posts are equally likely to be short, though no less instructive to astute traders.

Dow 8,519.69, -59.42 (0.69%)
Nasdaq 1,532.35, -31.97 (2.04%)
S&P 500 871.63, -16.25 (1.83%)
NYSE Composite 5,520.82, -95.30 (1.70%)

For the session, gainers were beaten badly by losers, 4584-2157, belying the generally tame losses. New lows expanded their edge over new highs, to 234-18, another significant development. Since volume this week will be inconsequential, those numbers are giving off strong sell signals. The markets are on the verge of another rush to the bottom, which could happen at any time over the next three weeks, and, if the November lows are not tested this week or next, January will be a slaughterhouse.

NYSE Volume 1,219,524,000
Nasdaq Volume 1,661,136,000

Commodities continued to display the deflationary bent. Oil futures, which are now in the February contract, fell $2.45, to $39.91. Gold managed to gain $9.80, to $847.20. Silver picked up a penny on the bid, closing at $10.86. None of the prices quoted today seem sustainable in the undeniably deflationary environment.

As the Christmas shopping season winds down to the last two days, numbers from retailers are horrifying. Even with sales of merchandise at 60-70% off, gross receipts are expected to come in as much as 20-30% below last year's results. January will witness the shuttering of huge swaths of retail stores. Many will be forced into bankruptcy, some to reorganize, but many others will simply liquidate. After that, the fallout from a commercial real estate glut will sour the economy even further.

A few weeks ago, President-elect Obama said the economy would get worse before it got better. He is so very right about that.

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