Friday, February 29, 2008

Stocks Back in the Tank; Investors Throwing in the Towels

Investors didn't need any more news to tell them to sell. They should have been selling all along. Some just got the memo today that, a) the economy is faltering, b) the US dollar continues to lose value in comparison to other currencies, c) gas prices are through the roof, d) food prices are following gas prices, e) the economy is headed for a deep recession, f) the Fed rate cuts don't matter, g) corporate profits have been slowing for the past six months, etc., etc.

Why go on? The news has been nothing but bad. In fact, it's worse. The news has been horrible with mentions of worst since 1981, largest drop in two decades, and the like.

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So it should come as no surprise to anyone that stocks dropped like rocks over the past two days. We have thieves running Wall Street and imbeciles running the government.

Dow 12,266.39 -315.79; NASDAQ 2,271.48 -60.09; S&P 500 1,330.63 -37.05; NYSE Composite 8,962.46 -259.42

The decline today was not limited to any particular niche. All kinds of stocks were hit across all sectors. Declining issues beat advancers, 5206-1103, that's nearly a 5-to-1 ratio. New lows continued their dominance over new highs, 420-77, completing four straight months with new lows winning every day (except for two days in November).

There has not been a single day in 2008 in which there were more new highs than new lows. Get used to it, because things aren't going to get any better any time soon.

Oil priced a bit lower today, down a whole 71 cents to close the week at $101.84. Gold and silver hit new record highs again, at $975.00 and $19.92, respectively.

With the markets having taken another downturn, the next move should be to plumb the depths of January 22-23. The Dow closed today less than 300 points above the most recent closing low, though it is still 800 points above the intraday lows. Both could, and probably will, be tested within the next two weeks.

And by the way, did anyone see the rescue plan for Ambac Financial, the announcement of which sparked a 225-point rally on Friday? No? Really! I said previously that the announcement was bogus as is the supposed plan, along with S&P continuing to rate the company's debt at AAA. It was nothing but a sleazy, insider trick and the jig is up. The phony rally is over.

Wise words to follow: Gambling is the act of creating risk where there is none; investing is managing risk that exists. There's certainly plenty of downside risk to go around. Anybody buying now is engaging in gambling.

NYSE Volume 4,354,759,000
NASDAQ Volume 2,516,537,500

Thursday, February 28, 2008

Bernanke Mentions Bank Failures, Market Swoons

Ben Bernanke, in his second day of testimony to the House Financial Services Committee, finally let the cat out of the bag, saying, "I expect there will be some failures," referring to smaller, regional banks which got in over their heads in mortgage financing.

Pointing out that the larger, money center banks had sufficient capital ratios, Bernanke made it clear that he didn't anticipate "any serious problems of that sort," with larger banking interests.

The only problem with the Chairman's statement is that the bigger banks are the ones with the serious problems, a few of which, including Citigroup, Merrill Lynch, JP Morgan (Chase), have had to scurry to raise funds from foreign governments in so-called "sovereign Funds" from countries such as Abu Dhabi, Kuwait, Singapore, and Dubai.

Smaller, regional banks are generally more circumspect and conservative in their financing and investing operations.

Bernanke's words stunned the markets, but he used a velvet hammer to deliver them, knowing full well that the larger banks are teetering on the brink of insolvency and, so serious are their liquidity and confidence problems, that they are loathe to lend to anyone but those customers with perfect credit portfolios.

Stocks were down across the board, with some of the hardest hit in the banking and financial sector. The Dow ended its streak of four straight positive gains with a pullback from resistance above the 12,725 area.

Dow 12,582.18 -112.10; NASDAQ 2,331.57 -22.21; S&P 500 1,367.68 -12.34; NYSE Composite 9,221.88 -71.01

Those calling for a bottom or resumption of the bull market (HA!) should likely take this as a warning that the January 22-23 lows are there to be retested and likely broken to the downside.

Corporate earnings have by and largely been uninspiring, new unemployment claims were up sharply this week (+19,000) and the banking crisis is hiding behind the housing slump, which only seems to worsen with each passing day.

A couple of notes about housing are worth mentioning. Some estimates put the value of all US households at around $20 million. Thus, if prices dropped 9%, as recently reported, that's a $1.8 TRILLION loss in perceived value. That has a sting.

Secondly, realtors mention that the slump has hut most in large cities, and especially in Florida and California. 2nd and 3rd tier metropolitan areas (cities under 300,000) and many rural communities never experienced the dramatic rise in real estate values and thus are not witnessing severe discounting in prices.

Overall, the action on Thursday was decidedly negative. Losing issues beat gainers by a hearty 5-2 margin, 4323-1944. New lows continued to hold the upper hand on new highs, 233-135, a condition which has now persisted for some four months.

Oil priced at a new record of $102.60, up a whopping $2.95 on the day. Gold gained $6.50 to close at another record high of $967.50. Silver continued to skyrocket, up another 38 cents to $19.71.

Those guys who were telling you to buy gold last year, the year before and the year before that? They were right. And, judging from the looks of things, it's still not too late. Many experts are expecting the precious shiny stuff to easily reach $1500 over the next 18-24 months.

NYSE Volume 3,814,476,250
NASDAQ Volume 2,017,081,000

Wednesday, February 27, 2008

Bears Bite Back: Two O'clock Dump

The technical, oversold rally of the past three weeks may be coming to an end. As the Dow met resistance in the 12,750 range (as mentioned here yesterday) for the second time on Wednesday, stocks trailed off during testimony before the Senate Banking Committee by Fed Chairman Ben Bernanke.

On Tuesday, the value of the US dollar vs. the Euro fell to its lowest level ever and continued to decline Wednesday, with the Euro pushing above $1.51 after Bernanke's comments failed to reassure that fighting inflation was a priority.

Essentially, Bernanke's approach is to keep the US economy from faltering into recession, regardless of the macro-economic implications. In simpler terms, US stocks will benefit more from exports as the value of the dollar falls. That's the game plan.

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All indices opened lower following more down-beat economic news. First, durable goods orders fell by 5.3% in January, and then the Institute of Supply Management's January manufacturing index offered a reading of 50.7, just above the break-even point, after posting a 48.4 number in December. Anything below 50 signals a contraction in manufacturing.

Reaching intra-day highs around the noon hour, stocks began a grinding descent until 2:00, when the S&P index slipped into the red. Like pebbles cascading down a woodland waterfall, the other indices followed. The NYSE Composite was next, followed by the Dow and the NASDAQ. By 2:03 all of the majors had turned negative but a tug-of-war between bulls and bears was just getting underway.

By day's end, buyers and sellers had battled to a draw, with the Dow and NASDAQ up, the S&P and Composite down. But clearly, much of the momentum created by last Friday's bogus announcement that a consortium of banks and financiers were working to rescue troubled monoline insurer Ambac Financial, has vaporized.

Dow 12,694.28 +9.36; NASDAQ 2,353.78 +8.79; S&P 500 1,380.03 -1.26; NYSE Composite 9,292.90 -9.90

Traders are eying the resistance levels and meteoric rise of the indices which have gained in the neighborhood of 8% over the past six weeks off the intraday lows of January 22-23.

Perhaps an even more emphatic argument for the bears can be made from the fact that advancing issues failed to push by decliners on Wednesday, with losers holding the edge, 3321-2910. New lows remained ahead of new highs, which, if the market was really showing resolve, should have flipped today, but failed to do so. There were 164 new lows to 130 new highs. The lows have held sway every day for four months straight, except for two days in December.

Sales of new homes dropped 2.8% from December, to an annual rate of 588,000, the third consecutive monthly decline. According to the Commerce Department report, the median price of a new home fell to $216,000 in January, down 15% from a year ago.

The double whammy for real estate - lower prices and slower sales - expresses just how deep the slump in housing really is. While some stock-picking pundits were saying the bottom in stocks was already in (Jan. 22-23) this week, the message from home buyers and sellers was clear: housing woes are far from over and may be getting even worse.

Crude prices settled $1.31 lower at $99.57 per barrel after hitting an all-time intraday high of $102.08. Gold rocketed to another all-time record close, finishing up $12.10, to $960.00. Silver added 49 cents to $19.33, slicing completely through the $18 level in just three days total.

Lest we forget, today is the one-year anniversary of the Chinese stock market contagion and Alan Greenspan's "recession" comment, which was the precursor and early warning sign of the market's August reversal.

NYSE Volume 3,773,681,750
NASDAQ Volume 2,165,846,500

An indication of the relative strength of stocks, here are the top ten Dow stocks for 2008 (after close of trading 2/26):

01) Up 8.1%. WMT
02) Up 7.3%. DD
03) Up 7.0%. HD
04) Up 5.8%. IBM
05) Up 5.5%. AA
06) Up 3.5%. BAC
07) Up 1.9%. DIS
08) Up 1.0%. CAT
09) Up 0.5%. PFE
10) Up 0.2%. JPM

Tuesday, February 26, 2008

Fully Detached Markets Ignore News, Post New Gains

The January Producer Price Index (PPI) rose 1.0% month-over-month, compared to the expected rise of 0.4%. That leaves PPI up 7.4% y/y, the highest level since October 1981 and PPI ex-food and energy up 2.3%.

In response to the alarming PPI figures, Federal Reserve Vice Chairman Donald Kohn said the danger the U.S. economy will weaken is a bigger worry than higher inflation and the Fed is ready to do what it needs to respond.

The Fed governors have reached new levels of financial hilarity. Let's keep the money flowing, even if a raw chicken costs $15 and a gallon of gas is $4.25. It's OK for people to (take your pick) freeze or starve, so long as the GDP continues to grow.

With interest rates at 3% and promised to go lower, maybe by this time next year, the Fed will pay us to borrow their worthless greenbacks.

In other economic news, The Conference Board said February consumer confidence fell to 75.0 from the prior reading of 87.3. Economists expected a reading of 82.0. The market tends to overreact to these readings, as they are only surveys. puts more weight into the personal consumption data that comprise 72% of the GDP, which will be released later this week.

Standard and Poor's reported existing home prices fell at a record pace of 8.9% in 2007. in the S&P/Case-Shiller U.S. National Home Price Index.

On the other side of home-ownership ledger, total foreclosure filings in January, which include default and auction notices as well as bank seizures, increased 57%, tracking firm RealtyTrac said.

Minyanville posted an excellent article by Mike Shedlock, a registered investment advisor representative for SitkaPacific Capital Management on the corrupted debt ratings issued by Moody's and S&P.

Mr. Shedlock makes comparisons between MBIA, which had its AAA rating confirmed and Pfizer (PFE), which had its rating cut from AAA to aa1.

Maybe the most obvious discrepancy was in the return on equity. MBIA's was a head-turning -35.54%, compared to Pfizer's +12.13%. The debt-to-equity ratios are equally out of whack, and Mr. Shedlock makes no bones about calling the puzzling ratings discrepancies either "incompetence or corruption."

Amid the toilet-like swirl of depressing economic news, mention that oil priced at over $101 a barrel in mid-day trading and finished at a record close of $100.88, up $1.65, was hardly worth mentioning.

Whew! That's quite a load of bad news.

One would have expected - considering that all of the news was not only negative, but extremely negative - stocks to lose value. But in this bizarro-world stock market, they went up. And not just a little. They went up a lot. Shortly after 1:00 pm, the Dow was 150 points higher, the NASDAQ up 31 points and the S&P had tacked on a gain of more than 13 points.

The rally settled out into the close, with all indices posting healthy (?) gains.

Dow 12,684.92 +114.70; NASDAQ 2,344.99 +17.51; S&P 500 1,381.29 +9.49; NYSE Composite 9,302.80 +92.72

Maybe some good news will deflate the market. It couldn't hurt. Seeing the fabulous rises in the indices, I figured it was time to fire up the bong, crack open a bottle of aged whiskey and join the party. Whooopie! Talk about irrational exuberance. I expected to see Joe Cocker appear on the trading floor, singing, "Let's Go Get Stoned."

The Dow should be just about petered out, as there's a significant area of resistance in the 12,724-12,783 range. Considering the prevailing attitude, however, a breakout is now more likely than not.

As expected, advancers crushed decliners, 4420-2084. By the narrowest of margins, new lows maintained their edge over new lows, 159-158. Look for that measure to flip to the new highs for at least a couple days before the market heads back down. The last time there were more new highs than lows was a two-day stretch in December. This one could last a few weeks unless some kind of sanity is returned to trading desks.

Gold was up $8.40, to $948.90. Silver continued to shine, adding 64 cents to $18.72.

Only one question remains: When will the markets crash?

NYSE Volume 4,014,953,250
NASDAQ Volume 2,317,563,500

Monday, February 25, 2008

PPT Chart Violations

I am going to say something that I have never said before. Being a guy, and being that this particular phrase is usually reserved for utterage by women, it's not something I say lightly.

Well, here goes... "I feel violated."

I have seldom, if ever felt this way. I usually have my wits about me and, as such, have seldom, if ever, been a victim. However, what the Plunge Protection Team, or whomever it is mauling the markets of late, did on Friday and did again today, has me feeling that somebody has taken advantage of me.

Seeing things in plain light, I am not fooled by missteps, mistakes or false moves in the market, as I've been studying stocks and markets for nearly 50 years (started when I was 6 years old, just so you know). The gains of the past two days are nearly perfect examples of transparent manipulation of the markets, and while they are by no means anything new (the PPT has been doing this earnestly since 2000), they have shaken my confidence in the veracity of US markets to the point at which I believe almost nothing coming out of the mouths of government officials, company CEOs, talking heads on CNBC or even some of the oft-quoted analysts.

Many of us in the business of market analysis take news and reports with a healthy grain of salt, but so thick and redolent is the smell of fishiness in everything these days, I find myself carrying around a 50-pound bag of the stuff just to tamper down the odor.

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It will come as no surprise to regular readers that I presently have a very negative view on the overall investment potential for stocks, but one might as well throw in the towel and become a buyer here, as the PPT seems relentless in their pursuit of an ever-higher Dow, S&P and NASDAQ.

Following Friday's ridiculously-rigged 225-point gain off the lows of the day, Monday saw no less of a malignant buying bug in the index futures. It wasn't so obvious until the Dow leapt 100 points in a five minute span just before 2:30. The volume spike was also quite obvious and nobody can claim that short sellers all acted at once. It was just another in a long series of excessive pumping maneuvers by the government, large brokerages (proxies) and the Federal Reserve acting in concert.

As such, stocks look really healthy at the close of trading today.

Dow 12,570.22 +189.20; NASDAQ 2,327.48 +24.13; S&P 500 1,371.80 +18.69; NYSE Composite 9,210.08 +145.25

They're not.

The current stock market is so chock full of companies which will report, in about six weeks, earnings short of expectations, or at least below last year's same quarter comparisons, that I can blithely state that I have never been more bearish.

Of course, there's the matter of overt government intervention in the markets, to say nothing of the blatant abuse of the news media in reportage of all things relative to the economy, which is just a fancy way of saying that stocks should go down but probably won't.

My best guess on how this plays out is tied to the political climate in ways which are neither healthy, advisable nor sustainable. Everything has become politicized to a point that the price of stuffed bears at Wal-Mart is even subject to further review.

We are witnessing a massive shift in sentiment today with the number of advancers and decliners. Gainers outnumbered losers on Monday by a massive amount, 4552-1770. New lows held onto their edge over new highs, 207-140, but the gap is shrinking rapidly.

Oil gained 42 cents to close at $99.23. Gold dipped $7.30 to $940.50 and silver was up a nickel to $18.09.

So, what's next?

Expect the mindless gains on the stock markets to continue unabated over the next three to five weeks. There's nary an earnings report or bit of economic data that cannot be hidden, altered or otherwise obscured if it's bad news. The markets have violated (there's that word again) major downtrend lines and if any logic applies, they will extend gains beyond the most recent high of 12,841.88 on the Dow, which is the next serious data point.

If that's the case, the Fed and the government and the supine news media can declare the subprime crisis (which really isn't the core problem, after all) over, the Fed victorious and we can all go back to watching Hillary Clinton, Barack Obama and John McCain sling buckets of mud at each other.

Of course, there will be a major market crash (it will be called "an adjustment") in April, if not sooner. That's how it works. Perfectly illogical and inscrutable is how the big boys like it.

NYSE Volume 3,772,699,500
NASDAQ Volume 2,152,884,500

Saturday, February 23, 2008

Market Manipulation at Its Finest

Friday, February 22, 3:15 pm ET: The Dow Jones Industrials were down 129 points. Suddenly, CNBC, the most shamelessly, repugnantly, and overtly deficient purveyors of financial news. announces that some mystical, mythical plan to rescue troubled monoline insurer Ambac Financial Group (ABK) is in the works and should be announced some time next week. Notably, nothing specific was mentioned on the air.

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All of a sudden, every stock that was down, began to rise and the entire Dow Industrials - taking the other indices along with it - went from being down 129 points to gaining 96. A full course ride upwards of 225 point in 40 minutes flat. Remarkable... or pitiful, if you crave free, open, honest markets.

No doubt the Ambac story was only a cover to prevent yet another crashing down of the horrible US equity markets and to keep the American public fat, happy, fully invested and dumber than rocks. Sadly, it appears to be working.

Post of the day comes courtesy of Theroxylandr In Flames, which led off with:
"Today was what I think could be counted as a pretty good confirmation of the existence of PPT (plunge protection team) and they (sic) way it works."

The people in charge of such blatant market meddling is, of course, none other than the President's Working Group on Financial Markets, the legendary Plunge Protection Team, or PPT.

The current members of the President's Working Group (PWG) or PPT, as designated by the original executive order by President Reagan on March 18, 1988, are (links are to their bios):

(1) Henry Paulson, the Secretary of the Treasury, or his designee.

(2) Ben Bernanke, Chairman of the Board of Governors of the Federal Reserve System .

(3) Christopher Cox, the Chairman of the Securities and Exchange Commission.

(4) Walter Lukken, (acting) Chairman of the Commodity Futures Trading Commission.

All of them were appointed to their current positions by President George W. Bush. That alone should dispel any notion that these people are fully above board.

So, there you have it. Your pension plan, college fund, retirement account or 401k is in their hands. They won't let you down. Well, at least not all at once. Surely, if a Democrat wins the presidency, then the market will crash. Got it? OK.

Dow 12,381.02 +96.72; NASDAQ 2,303.35 +3.57; S&P 500 1,353.11 +10.58; NYSE Composite 9,064.83 +87.10

On the day, advancing issues held a narrow edge over decliners, 3288-2949, though winners were ahead on the NYSE, and losers had the advantage on the NASDAQ. Guess what? New lows beat new highs for the 30 millionth day in a row, 360-65. That is the largest gap in over a month.

Oil was up another 58 cents to close at $98.81 per barrel; gold dipped $1.40 to $947.80 and silver gained nine cents to $18.04.

The price of silver has nearly tripled in just over two years. Gold is closing in on $1000/ounce. Soon enough, the government surely will attempt to confiscate it from individuals' hands.

Now, take a deep breath, contemplate all this news and figures and ask yourself, do you really want to trust the stock markets and your financial future to people like those who populate the PWG or PPT, call it what you will?

If you do, well, good luck. If you don't, tough. There's nothing you or I can do about it. That's America. Love it or leave it.

NYSE Volume 3,574,533,500
NASDAQ Volume 2,340,831,500

Thursday, February 21, 2008

Staring Down the Abyss at Economic Hell

Investors took some rather sobering economic news in stride on Thursday and did what most sensible equity managers would do: they sold stocks in earnest.

All of the major indices fell at least 1% on the day, and of the 30 Dow stocks, only three - AT&T (T), Wal-Mart (WMT) and Verizon (VZ) showed gains. Verizon was the most profitable, though up a mere 0.12 points.

Dow 12,284.30 -142.96; NASDAQ 2,299.78 -27.32; S&P 500 1,342.53 -17.50; NYSE Composite 8,977.73 -96.23

What sent traders scurrying for the sell button were two reports which confirmed that US economic growth continues to slow. The Conference Board's Index of Leading Economic Indicators fell a meager 0.1% in January, but the significance was that it was the fourth straight monthly decline.

What also roiled markets was the reading from the Federal Reserve Bank of Philadelphia's general economic index, which declined to -24 in February from -20.9 in January.

Particularly troubling was that the Fed's regional report followed a similarly dour outlook from the NY Fed last week, which fell into decline for the first time in over three years.

Selling was as broad-based as any of the numerous fire sale days this winter, with decliners overwhelming advancing issues, 4479-1788. New lows pounded new highs, 249-115.

The major stock gauges continue to slide back toward their January 22 lows. The close on the Dow is just 311 points that point, or roughly one or two good sell-offs away from retesting that critical point.

Bear market deniers abound especially at places like financial news network CNBC and the popular website, though indications are fairly clear that lows will soon be retested and another round of selling will commence, taking stocks even lower.

Of course, government officials are reluctant to make claims which might alarm the general public or even the investor class, though they've been heard lately to begrudgingly grumble over generally souring conditions.

It's never fashionable to predict gloom and doom, though staring into the abyss at economic hell can have a sobering effect. One begins to pay attention to things far afield from stock prices, like traffic at malls, the price of cream cheese or how often the neighbors go out to dinner.

Pinching pennies and foregoing some level of self-pampering does have a satisfactory outcome at week's end. One's bank account may be a bit fuller, bills not so pressing and the change in the jar takes on a new, eerie glitter.

Americans haven't completely forgotten how to save, they just haven't had to recently. It's likely a trend that will gain considerable traction as time and the economy continue to grind slower.

Light, sweet crude for April delivery dropped $1.47 to settle at $98.23, somewhat of a relief after two days over the century mark. Gold set another record high, gaining $11.40 to $949.20. Silver rose 19 cents to a multi-year high of $17.95.

Volume on the exchanges remained moderate.

NYSE Volume 3,707,656,500
NASDAQ Volume 2,285,995,250

Wednesday, February 20, 2008

CPI Shows Inflation, Fed Lowers Growth Forecast, PPT Pumps Stocks

A somewhat expected rise in the Consumer Price Index (CPI) roiled investors prior to the opening bell and stocks drifted in negative ranges in early trading. The reading of a rise of 0.4% in January (4.8% annualized) spooked even the most ardent supporters of Fed and administration policies.

By noon, the Plunge Protection Team had seen enough selling to convince them to pump stocks higher and in a 20 minute span, the Dow Jones Industrials gained 120 points and the other indices followed into positive territory.

As the day wore on, the market meddlers of the PPT goosed stocks even more, pushing them to the highs of the day, up more than 125 points, shortly before 3:00 pm.

The obvious manipulation by the PPT (aka President's Working Group on Financial Markets) were in response to more somber news via the January FOMC meeting minutes in which the Fed lowered its 2008 growth forecast from a range of 1.8-2.5% in November to 1.3-2% in January.

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The Fed and their agents in the PPT are fooling nobody. The economy is clearly headed for - if not already in - a recession, and stocks remain grossly overvalued relative to aggregate earnings. But, it is an important election year, and the purveyors of power simply cannot stomach the idea that their reign of terror over the American public is at an end.

Nothing short of miracles (Mike Huckabee, anyone?) will salvage the US economy and the Fed is in desperate straits. The pure futility of lowering interest rates to an unsustainable 3% or lower is beginning to manifest itself in higher prices for everything from gas to bread to appliances.

Under its current framework, the Fed is on a path of destruction of the US dollar and with it will go any last vestige of respect and confidence in equity markets. Of course, the Fed continues a tradition of hampering real growth by denying that excesses need to be liquidated, instead relying on market massages and wrong-headed rate cuts.

The real culprit is the absolute seizure of credit markets, especially at money center banks. Merger and acquisition activity is going in reverse, with many deals having been canceled, and until the Fed and the banks take responsibility for their follies over the past seven years by liquidating themselves, the economy will slowly and surely continue to deteriorate.

Dow 12,427.26 +90.04; NASDAQ 2,327.10 +20.90; S&P 500 1,360.03 +11.25; NYSE Composite 9,073.96 +50.92

Advancing issues outpaced decliners, 3752-2614, though new lows continued to overwhelm new highs, 257-99. With the exception of two days in December 2007, new lows have had the edge over new highs since October 31, approaching four months.

If there is any indicator that the economy is in trouble, it is the continuing readings of new lows over new highs. The stock market is clearly struggling for every gain, and most of them have been helped along by the PPT. Sooner or later, these phony gains will be eviscerated and stocks will plunge to more sensible, sustainable, reasonable levels. It's widely assumed that without meddling from the PPT, the Dow would already have touched down at the 11,000 mark or lower.

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The more nudging by the Fed and the PPT, the more disastrous will be the inevitable crash. It's coming, and it won't be pretty, though anyone who has been paying attention won't be at all surprised.

As for the rest of the clueless sheeple out there... keep watching and listening to the perma-bulls like Larry Kudlow and flag-wavers like Rush Limbaugh and Sean Hannity and see what good that does you.

The price of crude oil closed at another record high on Wednesday, gaining 73 cents to $100.74. Yes, my friends, George Bush and his Republican administration has succeeded in making $100/barrel oil a reality. (sick bastards)

Gold was up $8.00 to a new record, $937.80. Silver was higher by 25 cents, to $17.76.

NYSE Volume 3,835,300,000
NASDAQ Volume 2,293,634,250

Tuesday, February 19, 2008

Bear Market Norm: Stocks Give Up Early Gains

Any stock trader or analyst worth his/her salt will tell you that a tell-tale sign of a bear market is for markets to rise in the morning, only to give back all of those gains later in the day.

As traders got back to work on Tuesday following the long weekend, their senses returned about 2:15 as stocks took a serious nose dive from the high platform set earlier. By the time the session ended, it was more of the usual misery, except for the NYSE Composite, which closed with a modest gain.

The indices took their usual gyrations in the final hour with all the grace of a drunken albatross, zig-zagging to the close, which, for the main, was much closer to the bottom than the top of the day's trading range.

Finding a culprit for today's demise is difficult. Financials were battered once again, as were techs, especially Google (GOOG), possibly being viewed as an overpriced luxury in this market. Or, it could have been the price of oil, which approached $100 on the day, though that mostly boosted the energy sector, which actually does profit from the pain of consumers in the form of higher prices on everything from heating fuel to gasoline.

Dow 12,337.22 -10.99; NASDAQ 2,306.20 -15.60; S&P 500 1,348.78 -1.21; NYSE Composite 9,023.04 +52.28

While the overall losses were unsubstantial, the drop from the early highs were somewhat dramatic. The Dow lost over 200 points from the day's highs and the NASDAQ shed 46 from the day's top.

Advancers and decliners were nearly even, with 3325 up and 2992 down. New lows continued to dominate new highs, 234-99.

As mentioned earlier, crude oil shot up again, adding $4.41 to close at a record $100.01. Seems all those commentators suggesting a drop in demand missed the memo from the sheiks and thieves. Oil isn't going down. As a last-gasp, the price of oil will go kicking and screaming into the stratosphere unless people take action and simply stop using the stuff (or stealing lots of it).

The precious metals went ballistic, with gold gaining $23.70 to $929.80 and silver up 39 cents to $17.51. The underlying story with gold is that there must have been another mad dash for cash today, which would also explain the turnaround in the markets. Obviously, the credit crunch is still alive and grinding down banks and financiers with alarming efficiency.

CPI numbers are due to be released tomorrow morning. Get ready for more inflation noise and more selling of US equities. Volume remains at suppressed levels. That may change soon.

NYSE Volume 3,472,779,000
NASDAQ Volume 1,918,283,000

Friday, February 15, 2008

Tired Markets End Week Mixed; Economy Remains Top Concern

The floor traders weren't the only ones tuckered out as another volatile week came to an end. Economists and financial news journalists tired themselves out dissecting Thursday's remarks to Congress by Fed Chairman Ben Bernanke.

There was more substance than style to the Chairman's message. He basically held nothing back, telling anyone within earshot (read: the entire civilized world) that the American economy was in a very rough patch.

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Most of the action in stocks took place during and immediately after his testimony, leaving little to the imaginative traders who might have been looking for a bounce on Friday.

Sadly for those on the bullish side of the trade, Friday began in the red and remained there all day. There was some indication of PPT activity near the close, though it could just as easily have been short-covering that boosted the markets in the final hour.

The overall tone of trade was as dull as a old spoon, as the day's volume tapered off to merely a trickle, and with nearly no resistance, the insiders saw an easy path to offering some small glimmer of hope and goosed the indices up in the final fifteen minutes of the session.

The S&P popped over to positive with just ten minutes left to trade. With the markets closed on Monday in observance of President's Day, there weren't many traders left to compete with whomever was driving the mini-rally.

The overall effort was half-hearted and meant nothing in the larger scheme, still biased to the downside.

Dow 12,348.21 -28.77; NASDAQ 2,321.80 -10.74; S&P 500 1,349.99 +1.13; NYSE Composite 8,970.76 +2.35

Friday's main driver was industrial production, a figure released prior to the market opening, which showed an economy flat lining, with growth of 0.1%, essentially nothing. Capacity utilization remained flat at 81.5%, and that's a number that bears watching. If production tails off, that will be a prime indicator with layoffs following quickly behind.

Adding to the Street's bad mood, the Reuters/University of Michigan index of consumer sentiment fell to 69.6 in February from 78.4 in January, the lowest level since 1992.

The shocker from the New York Empire State Index, which fell to a level not seen since March of 2003 (the end of the last bear market and recession), at -11.7, was just more grist for the recession mill and certainly aided in the pervasively dour mood that clouded markets as the week ended.

Declining issues actually registered somewhat of an outsize edge over gainers, 3765-2456, and new lows trumped new highs once more, 275-56. The highs vs. lows reading implied that more stocks were being dumped on Friday and some sector adjustments were being made in larger portfolios. Difficult to tell with any degree of accuracy, but the shift seemed to be away from small cap techs (especially those in need of capital) toward larger caps with positive balance sheets.

Money on hand is going to be all the rage as economic forces push lenders closer to illiquid levels and insolvency in coming months. Cash will indeed be king, which also goes to explain the low volume of late. Smart money is sitting this dance out.

Commodities, even oil, languished. Oil was up just 4 cents to close at 95.50. Gold dipped $4.70 to $906.10 and silver fell 14 cents to $17.12.

Economic issues will take center stage again for the next four to six weeks, now that most companies have reported earnings. The outlook, including, somewhat amazingly, appears more dire than ever as America tilts closer the low end of the business cycle.

NYSE Volume 3,485,640,750
NASDAQ Volume 1,999,531,625

Thursday, February 14, 2008

Bernanke, Paulson Speak, Markets Sink

One would suppose, with three-quarters of the Plunge Protection Team (PPT) busy testifying before congress, that there would be nobody at the controls to prevent a market sell-off.

That's precisely what happened - be it coincidence or otherwise - on Thursday, as Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson and SEC Chairman Christopher Cox delivered testimony on the economy to Senate Banking Committee members.

In their remarks, both Bernanke and Paulson both indicated they felt the economy was in a somewhat delicate condition, owing mostly to a continuing credit crisis in which bankers have had difficulty lending to any but the most credit-worthy applicants.

What their remarks did not reveal, though hinted at, was that the bankers themselves were the cause of the precarious credit conditions, by participating in the massive fraud and deception that is now the subprime mortgage and related derivative investment mess.

And what a mess it is. Bank of America report released today suggested that the losses related to subprime mortgages was more than $7.7 trillion globally.

Another money center was hit with unfortunate fallout on Thursday, adding to the market's woes. Swiss financial giant UBS revealed a net loss of 4.4 billion Swiss francs ($4.0 billion dollars, $2.7 billion euros) in 2007, including an $18 billion writedown in damaged securities.

Dow 12,376.98 -175.26; NASDAQ 2,332.54 -41.39; S&P 500 1,348.86 -18.35; NYSE Composite 8,968.41 -105.07

Today's losses nearly matched yesterday's outsized gains, and even though the markets are higher for the week, momentum has clearly swung back to the bears. Declining issues outpaced advancers, 4720-1530, while new lows expanded the gap over new highs, 203-97.

Friday's economic reports include the NY Empire State Index and capacity utilization, though neither will likely weigh more on investors than today's dire and apprehensive assertions by Paulson, Cox and Bernanke.

Volume continues to be on the tepid side, as money largely sits, awaiting a safe entry point or going elsewhere.

Oil gained another $2.19 today, closing at $95.46. For the second day in a row, precious metals barely budged. Gold was up 80 cents to $911.00; silver lost 10 cents to $17,26.

Here's a tip. Buy sugar futures and sell corn futures. It's seven times more efficient to produce ethanol from sugar than from corn. On top of that, Tata Motors (TTM) is financing in a company which has tested and is producing a car that runs on air. That should serve as quite a blow to the oil barons.

NYSE Volume 3,630,146,750
NASDAQ Volume 2,270,238,000

Wednesday, February 13, 2008

Tech Drives Stocks Higher

While Tuesday's rally may have been all about perception over reality, Wednesday's massive move had everything to do with tech stocks.

Led by volume leaders Microsoft (MSFT), Cisco (CSCO) and Applied Materials (AMAT), the NASDAQ outperformed the other indices by a wide margin. The NASDAQ was up 2.32% at the close, followed by the Dow (+1.45%) and the S&P (+1.36). The broad-based NYSE Composite gained 1.21%.

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Stocks across the board were aided by consumer spending figures for January which were up 0.3% after losing ground in December, and while the gain is a plus, it's significance is minimal in the overall economic picture.

So too the current rally, which has put this week in stark contrast to the dismal performance of the prior one. Stocks bumped up against formidable resistance in the Dow 12,550 area and backed off going into the close.

Dow 12,552.24 +178.83; NASDAQ 2,373.93 +53.89; S&P 500 1,367.21 +18.35; NYSE Composite 9,073.48 +108.13

All of this sets up an interesting couple of days to close out the week. On Thursday, the only important economic news will be new unemployment claims, which will be released at 8:30 am. Friday, investors will be mulling over capacity utilization figures, net imports and exports, the NY Empire State Index and the University of Michigan's Consumer Sentiment reading.

Thursday could go either way, though breaking through the congestion and resistance could prove difficult. If stocks manage gains, the next level to overcome is in the 12,740 range, at the closing high of Feb 1st.

Advancing issues pounded decliners, 4419-1926, though new lows persisted in their long-standing (back to Oct. 31, 2007) advantage over new highs, 176-85. Expect that gap to decline if stocks stage another strong effort.

Oil gained 49 cents to $93.27 per barrel. Gold and silver were down and up marginally, respectively.

NYSE Volume 3,728,637,500
NASDAQ Volume 2,246,132,000

Tuesday, February 12, 2008

The Warren Buffet Rally

In typical fashion, the pre-market futures were pumped higher to avoid a massive sell-off at the open. Prior to the opening bell, General Motors (GM), Schering-Plough (SGP) and Credit Suisse Group (CS) all announced 4th quarter earnings that were... well, horrible.

General Motors posted the largest one-year loss in US automaker history, a staggering $38.7 billion for 2007. The company also announced buyouts to some 74,000 employees.

At Schering-Plough, the losses were explained away as charges related to the buyout of Organon Biosciences, but nevertheless were massive. The drugmaker said it lost $3.4 billion in the fourth quarter, or $2.08 per share, compared with a year-earlier profit of $182 million, or 12 cents per share.

Credit Suisse reported profits off 72% from the year ago period due to writedowns in subprime and other bad investments.

So, with that news in tow, the indices rocketed skyward, with the Dow up more than 100 points just twenty minutes into the trading day. This broke a string of six consecutive sessions in which the Dow had not surpassed the previous day's high and, for all intents, it appeared as though a massive short squeeze was underway. In fact, by 10:45, the Dow had surpassed the highs of the previous four days.

Having had their way via juicing the futures, the Fed saw fit to only accept $6.25 billion in repos. With $8.25 billion maturing, it left the investment banks to do the Fed's bidding with $2 billion less than yesterday. This cash shortage would come into play later in the session.

Within the first hour of trading, the Dow was up a whopping 190 points, a 1.5% gain, with the other indices following its lead.

By 11:30, it was clear that the battle lines were drawn at Dow 12,400. The bears kept trying to break it down, but the bulls defended it fiercely until just after 3:00.

Dow 12,373.41 +133.40; NASDAQ 2,320.04 -0.02; S&P 500 1,348.86 +9.73; NYSE Composite 8,965.35 +97.07

The bears finally drove the Dow down to 12,310 before giving way late and allowing the market to float back up to where it closed. It was an odd day, but indicative of a market that is being day-traded by professionals and a very dangerous place for the novice or buy-and-hold investor.

Bias remains to the sell side, and after today's questionable trade, Wednesday will almost surely spend much of the day in the red. Tuesday's rally was built on false promise and only a slight oversold condition, so a resumption of selling is expected.

On the day, advancers topped decliners again, 3838-2529. New lows exceeded new highs, 201-104. Volume was improved over the previous three sessions.

Tuesday's rally was largely tied to investor Warren Buffet who told CNBC that Berkshire Hathaway has offered to assume $800 billion in municipal bond liabilities from MBIA (MBI), Ambac Financial (ABK) and FGIC Corp., the three main insurers of muni bonds and also the companies which insured much of the toxic subprime debt held by the largest banks in the world.

The idea is nice in theory, but Buffet's bold offer neatly avoids the subprime slime, so the market shouldn't really have pinned much hope on it as a rescue measure. Besides, at least one of the insurers has rebuffed Buffet already.

Mr. Buffet is not a savior. He is a skilled financier and investor. The market is obviously full of fools who think that somehow he'll single-handedly fix a world-wide credit dilemma. Buffet made his offer because he thinks he can make money at it, not because he's a beneficent saint.

Commodities all eased. Oil slid 81 cents to $92.78; gold fell $15.60 to $911.10; silver was off 22 cents to $17.25.

NYSE Volume 4,028,390,500
NASDAQ Volume 2,221,637,500

Monday, February 11, 2008

Minimalist Movement

Left to their own devices in a beaten down market, investors generally buy stocks. Such was the case on Monday, a day in which a dearth of news and/or economic reports left traders mostly on their own.

After an early mishap - the Dow was down more than 110 points - traders got just enough urging from the PPT to push stocks into the green and kept them there for the duration of the session.

Volume was once again on the "who cares?" side of the ledger, as all but hard-core day-traders and bullish lemmings are content to sit back and wait for the next economic shoe to fall.

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One feature of the recent market is that today marked the sixth straight day that the Dow failed to reach the previous day's high, an indication that the bears are having their way overall.

The president delivered his annual economic report to congress amid much yawning and little else, restating his opinion that the economy was essentially sound (it's not) but there are short-term concerns (understatement of the year).

With few paying attention, the Financial Times released their version of good news, with this story: A repeat of the Great Depression is unlikely - a commentary that was neither concise nor convincing.

Of the Dow stocks, 11 were down and 19 up, with American International Group (AIG, -5.49, -11.72%) taking down insurers and General Motors (GM +1.32, +5/12%) leading the gainers, mostly on valuation.

AIG, the world's largest insurer, faced renewed calls that their exposure to subprime and other risky credit products had been underreported in filings.

Bargain hunters pumped up General Motors, despite reports of engine fires in Chevy Tahoe and Yukon SUVs.

In the broader market, advancers garnered a slender edge over losing issues, 3305-3009, though new lows continued to dominate new highs, 254-92.

Dow 12,240.01 +57.88; NASDAQ 2,320.06 +15.21; S&P 500 1,339.13 +7.84; NYSE Composite 8,868.28 +45.16

Commodities generally priced higher, with crude oil for March delivery registering a gain of $1.82, to end the day at $93.59. Gold added $4.40 to $926.70 and silver gained 36 cents to $17.47, nearly closing off the bargain window which has only been left open less than two weeks.

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The balance of the week looks to be dominated by Fedspeak, as a number of Fed governors, including Chairman Bernanke himself (slated to testify to the Senate Banking Committee), are scheduled to address a variety of groups.

The guvs should take pains to avoid use of the "R" word so as to not spook the markets. Investors are still clearly on edge and it doesn't take much to trigger an avalanche of selling, as we've seen in recent weeks.

Wednesday's retail sales figures, Thursday's initial unemployment claims and Friday's capacity utilization and NY Empire State Index should provide most of the economic chatter.

Earnings reports continue to flow. On Tuesday, Applied Materials (AMAT), General Motors (GM), Schering-Plough (SGP) and Credit Suisse Group (CS) will give traders plenty to mull over, as all but AMAT report prior to the opening bell. Caveat emptor.

NYSE Volume 3,507,467,750
NASDAQ Volume 2,072,297,125

Friday, February 8, 2008

Not Such a Good Week; Stocks Continue to Tank

Friday capped off another ugly week for stocks, as the late January rally - built on the back of a whopping 1 1/4% in federal funds rate cuts - has proven to be nothing but a mirage. That's not surprising, considering the historical impact of rate cutting in the face of a depressed business cycle, which happens to be little to none.

On the other side of those rate cuts inevitably sits inflation, which will become the next bogey man to confront the balding and bespeckled geniuses at the Fed. The natural reaction to inflation is to raise rates, and since the Fed won't be doing that soon, expect to pay more for just about everything as the value of the US dollar on world markets continued to erode.

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In any case, stocks fell for the 4th day out of 5, with the notable exception of the NASDAQ, which managed to finish marginally positive two days this week.

At the final bell, the Dow lost 551 points for the week; the S&P gave back 64; the NASDAQ dropped 99 and the NYSE Composite fell 454. It certainly wasn't pretty, but investors are beginning to get the idea that the US is already in a recession and the only reasonable thing to do is to sell stocks and get out of the way until some safe bottom forms.

Dow 12,182.13 -64.87; NASDAQ 2,304.85 +11.82; S&P 500 1,331.29 -5.62; NYSE Composite 8,823.12 -35.92

That bottom could be a distance off, as our brilliant leaders in congress decided to pass a stimulus package that will cost roughly $168 billion - money that will produce a deficit - in rebates to a large swath of individuals and families.

The plan is ridiculous. Consider a family I know well. Husband and wife both work, and have three kids in school, ages 10, 11 and 12. The kids go to public schools and both earners are making upwards of $45,000. They're pretty comfortable. This plan gives them $1200, plus another $900 for the kids ($300 per child) for a total of $2100. They don't absolutely need the money and much of it will likely go directly into the bank or to investments for the future (read: retirement or college funds). Nice country. Free money.

How an additional $168 billion of borrowed money is going to save the nation from the ravishes of recession is a good question, one which nobody in congress bothered to ask. After all, it's an election year and the incumbents saw an easy path to more votes for themselves. Hoo-rah!

Market internals were expectedly in-line with the headlines. Declining issues bettered advancers, 3679-2611. New lows topped new highs, 226-75.

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The oil barons apparently grew tired of not making so much money over the past couple of weeks and drove crude for March delivery up $3.66 to $91.77. Traders were so busy selling off stocks, they barely noticed. Gold leapt another $12.30, closing at $922.30. Silver gained 34 cents to $17.11. There's still time to buy before the metals really take off.

The recession is here, and normally, I'd say there's nothing to worry about as it's just part of the normal business cycle. However, this one looks rather ominous and has rough edges to it, especially considering the dearth of leadership in Washington. Whomever inherits the White House in the fall, they'll be getting a very, very raw deal in an economy that's retreating quickly from 8 long years of wild excess.

Be sure to read the story directly below this for a better understanding of why US equity markets were not another 2-4% lower this week, as they should have been.

NYSE Volume 3,768,491,500
NASDAQ Volume 2,275,363,250

Swimming Upstream with the Plunge Protection Team

Editor's Note: I wrote the following piece on the morning of Friday, Feb. 8, watching with considerable frustration a number of usual, obvious, upward spikes of 70, 50 and 40 points on the Dow, which I usually assign as the work of the Plunge Protection Team. Considering that very few investors and even fewer members of the general public even know of the existence of this group (officially, the President's Working Group on Financial Markets), it is my duty as a proponent of free markets and the Austrian school of economics, to expose them and explain how their interference caused more harm than good.

I have written about them before, and readers can check the tags or labels on this blog for PPT or Plunge Protection Team. It is also advisable to search the same and acquaint oneself with the workings of this group. They are not fictional, but sadly, oh, so real and a better understanding of their role and intentions may bring about some needed changes in our financial markets.

Being neither a zealot nor a fool, I understand that my proposal to the heads of the Federal Reserve, Treasury and other members of the PPT may lead nowhere, but I am hopeful that a robust, open discussion of their actions may lead us all to a better tomorrow.

Coincidentally, shortly after writing this piece, the Dow began an earnest descent. Maybe there is power in thought and force in words. In the end, all we have are faith, hopeful dreams, our good natures and desires.

As I watch the US equity markets gyrate in their long, slow-motion decline to some eventual oblivion, I cannot escape the intransigent maneuverings of the Plunge Protection Team (PPT) in their daily attempts to rescue the markets from their certain swoon.

Their actions are more and more transparent every day. As stocks decline in the somewhat orderly, time-honored tradition of bear markets, the PPT is at odds with the natural forces at work. In effect, they are swimming upstream against a logical, sensible tide of selling. Like salmon returning to their roots, the PPT believes the markets should return to glory days of all-time highs.

They are wrong. They are foolish. They will fail. Their actions speak of desperation, unlike the glorious salmon, which are guided by instinct and propagation, the PPT is swimming blindly into waters neither friendly nor where they are welcome.

A complete, final flushing of the markets is inevitable and preferable to the constant tinkering of these fondlers, who seek to govern what is known and what will be. While they think it right and good to prevent markets from tumbling - lest they incite an already angry public - they do more harm by the day. Their meddling reduces confidence in the fairness of the markets, to say nothing of the massive distortions created by their utterly false intentions.

No good or honest trader is accepting of sharp vertical ascents in the markets. They know what evil hands are at play, goosing the futures, bidding up the blue chips and pampering the investment community with talk of soft landings, strength in the economy and sustainable growth.

Poppycock. Rubbish. Nonsense.

It is time for the PPT, the Fed and Treasury to step back and cease open market operations. Allow the markets to function as they were intended - free and open, without interference - which, in the current environment more than likely means a crash, or at least a long, sustained recession and diminution of equity assets.

It is time for the Fed and their lackey PPTers to stop trying to fix what they themselves have broken, admit defeat and stabilize the situation. Set the federal funds rate at an acceptable 4 1/2-5%, allow the banks that have gorged on risky investments to pay their dues and liquidate their assets and let the American public breathe the clean air of a bottomed-out business cycle.

It would be a refreshing change from the eternal dithering and blathering to which we have become so accustomed. Let those which should fail, fail. Let the market decide. Let the indices fall to where they may, so that companies once again can be accountable and that investments actually start behaving like the fickle instruments of wealth that they are.

Surely, this would be a painful lesson for all, but no less painful than having to endure the uncertainty and unease associated with contrived markets and the grubby molestation of the PPT.

Thursday, February 7, 2008

Capitulation Day Forestalled

When push came to shove, the bulls proved to have a little more energy at the end of the day, but it wasn't for any lack of trying by determined bears.

The indices see-sawed their ways to positive closes, though the gains were negligible and narrow.

The day began on a sour note when Wal-Mart (WMT) reported disappointing January sales and Cisco Systems (CSCO) warned of slowing orders, adding to recession fears.

Wal-Mart, the world's largest retailer posted January sales from stores open at least a year below Wall Street's estimates.

Adding to the malaise nearing mid-day, the Wall Street Journal reported Ranks of Economists Forecasting Recession Grow - an article highlighting the call from forecasting firm Global Insight, which joined economists from Merrill Lynch, Goldman Sachs, UBS, Morgan Stanley and others, in saying the economy is already in recession.

Citing the National Bureau of Economic Research, the private outfit that dates recessions, “a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

That certainly seems to be the case on Main Street, while Wall Street attempts to figure the best way forward. The Dow is just 276 points above the recent closing low of 11,971.19.

At 3:00, Consumer Credit for December was reported to have contracted sharply, to $4.5 billion, from $17.1 billion in November. This seemed to squelch one of the day's mini-rallies, each of which was met with resistance and spirited selling.

Dow 12,247.00 +46.90; NASDAQ 2,293.03 +14.28; S&P 500 1,336.91 +10.46; NYSE Composite 8,859.04 +40.93

Stocks barely ended a three-day skid, though sentiment remains bearish and gloomy. Even though stocks closed the day on a positive note, the mark is still near the low end of the recent trough and a retest of the lows from two weeks ago seems all but certain.

Advancing issues took the edge over decliners, 3747-2519, though new lows continued to dominate new highs, 282-58.

Commodities also gained on the periphery. Oil rose 87 cents to $88.11, below the key $90 mark. With Winter nearly half over, a spell of early warm weather may mark a turning point for motorists suffering through a season of over-$3-a-gallon gas and are due for a break. We can only hope.

Gold edged up $5.00 to $910.00 and silver added 23 cents to $16.78. The buying opportunity is still available. Six months from now, gold should easily have surpassed the $1000 mark and silver should be $18+.

Friday can't come soon enough for wrangled floor traders. While volume has been somewhat on the light side this week, volatility has everyone on their toes. It may turn out to be one of the tamer sessions of recent vintage as there are no significant economic reports or companies reporting earnings.

Then again, this market doesn't need much to get excited one way or the other. We could see another roller coaster session with no clear direction heading into the weekend.

NYSE Volume 4,279,469,000
NASDAQ Volume 2,952,824,000

Wednesday, February 6, 2008

Early Rally Crumbles on Recession Fear

One thing equity investors cannot escape in this discontented winter of 2008 is the overwhelming fear - bolstered by uniform economic reports and anecdotal examples of doom and gloom - that the US economy is headed for recession and that stocks will take a serious beating later this year.

That is the kind of environment that dominated the emotional trade on Wednesday as stocks struggled in the first half-hour, but eventually found their way to higher ground during the morning session.

By 11:30, the Dow was up 125 points, but that proved to be the high of the day as the hopeful rally fizzled and stocks headed south once more.

Shortly after 2:00 pm, all major indices slipped into negative territory, but it wasn't until an hour later that capitulation became the clear choice and the rout was on. All major indices recorded their third losing session in a row.

The Dow is already down 543 points for the week.

Dow 12,200.10 -65.03; NASDAQ 2,278.75 -30.82; S&P 500 1,326.45 -10.19; NYSE Composite 8,818.11 -56.39

Volume was on the pathetic side once more, which seems to indicate that there is a lot of money on the sidelines, waiting until this current downdraft subsides. That inference may be true, though investors wanting to put capital to work may have already opted for bonds (even though they are currently paying a negative return when measured against inflation), emerging markets or precious metals.

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The last of those is the obvious choice for many as a hedge against inflation, though both gold and silver have met some resistance at their recent highs and have backed off considerably, though many gold bugs view such pull backs as buying opportunities.

Such was the case today, as gold rose $14.70 to $905.00 and silver gained 21 cents to $16.55. Oil, on the other hand, fell another $1.27 to $87.14, as the outlook for demand continues to weigh along with the recessionary calls.

Declining issues beat advancers once more, 4018-2287. New lows ballooned the separation over new highs, 208-57. The number of stocks making new highs remains dismally low, a sign of the times.

After the close, Cisco (CSCO) reported earnings per share before unusual items of 38 cents per share versus 33 cents a year ago. Revenue rose to $9.8 billion from $8.4 billion. Those numbers were in line with analyst expectations.

NYSE Volume 3,861,878,500
NASDAQ Volume 2,362,025,750

Tuesday, February 5, 2008

Dow -370, Worst Loss of 2008; Top Ten Declines of the Year

This is how it goes n bear markets: sharp rallies followed by devastating declines. As New Yorkers toasted the Super Bowl champion Giants with a ticker-tape parade, Tuesday's action on Wall Street was nothing short of a bloodbath.

By the time the closing bell rang, the Dow had registered its worst performance in what's turning out, so far, to be a very difficult year for bullish investors.

On the Dow, stocks opened 100 points below the previous close and slipped 200 points within the first 20 minutes. From there, all the indices drifted lower for the remainder of the session without even a hint of a rally.

What set the markets on their collective ears was the January reading by the Institute for Supply Management's (ISM) Services index, which drooped to 41.9, from a revised 53.2 the previous month. A reading below 50 indicates contraction; the unexpected decline reignited recessionary fears.

The ISM noted that its new non-manufacturing index measured 44.6% using a new methodology. Nevertheless, the number was devastating no matter how it was computed.

Dow 12,265.13 -370.03; NASDAQ 2,309.57 -73.28; S&P 500 1,336.64 -44.18; NYSE Composite 8,874.50 -327.61

As the day wound to a close, volume accelerated and the indices closed at, or very close to, their lows of the day. Though the weight of trade was somewhat moderate, there was absolutely no doubt as to the direction.

All 30 of the blue chips closed in the red, an indication of the carnage. Leading the way was beleaguered Cititgroup (C) -2.12 (-7.43), with 8 other Dow stocks down more than 4%. The only standout was McDonald's (MCD), which closed only 0.04 lower.

Here's a list of the ten largest losses on the Dow so far in 2008:

Feb. 5: -370 points
Jan. 17: -307
Jan. 15: -277
Jan. 4: -256
Jan. 10: -247
Jan. 9: -238
Jan. 2: -221
Jan. 25: -171
Jan. 22: -128
Feb. 4: -108

Bear in mind, there have only been 24 trading sessions thus far into the new year.

Losing issues beat back gainers, 5022-1275. New lows expanded the gap over new highs, 180-61.

Commodity traders were equally discouraged. Oil futures slipped $1.61, to $88.41. Gold was hammered down $19.10, to $890.30, while sister silver fell 44 cents to $16.35.

After a 1300+ intra-day point run on the Dow, the index has given back nearly 500 points in the past two sessions. All indicators are lining up in favor of a recession. The only people not yet convinced are the hopelessly clueless and the dead.

In a related issue, Downtown Magazine's (parent publication of Money Daily) new Misery News Index showed gains of between 10 and 20% week over week for most of the referenced terms. The Misery News Index tracks news stories containing one of twelve search words, such as inflation, layoffs, recession and homeless.

NYSE Volume 4,142,740,000
NASDAQ Volume 2,435,409,000

Monday, February 4, 2008

Traders Take Profits; Leery Google Cries Foul

A smattering of good news appeared on Wall Street as the week opened, though the comparative numbers still indicated a slowing economy persisting.

On Monday, the Commerce Department reported that US factory orders rose by 2.3% in December, an improvement from November's 1.7% gain and the largest increase since July.

Orders for big-ticket goods were up 5%, but "nondurable" goods, including clothing, textiles and beverages slipped 0.4%.

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For the year, total orders were up just 1.4%, the worst annual performance since 2002. That was a large fall from 2006, when total factory orders rose by 5.1%.

Taken together, the annual numbers carry more weight than the one-month bump in December and investors responded by taking some profits from the previous week off the table.

By 10:00 am, the Dow Industrials were off 75 points and stocks continued to trade in a narrow, lower range for the balance of the session.

Dow 12,635.16 -108.03; NASDAQ 2,382.85 -30.51; S&P 500 1,380.82 -14.60; NYSE Composite 9,202.11 -75.47

Volume was extremely light, an indication that investors are in a wait-and-see mood, with earnings season winding down and only minor economic news scheduled for release this week.

On Wednesday, preliminary 4th quarter productivity figures and crude oil inventories will be released. On Thursday, traders will be watching the initial unemployment claims after a big jump last week. Pending home sales and consumer credit figures are also due for release on Thursday.

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Topping the news is Microsoft's (MSFT) hostile takeover bid for Yahoo (YHOO) and Google's (GOOG) scathing criticism of the potential union of two of the internet's larger players.

The response, penned by one of Google's lawyers, smacks of hypocrisy and fear. Google owns a domineering position in search that borders on a monopoly, though the combination of their two main rivals could pose a serious threat to that dominance.

Yahoo has yet to respond to the roughly $31 per share offer by Microsoft, but analysts are saying it will be difficult to refuse as it represents a 62% premium over Yahoo's price prior to the offer.

With little to move stocks, decliners took command over advancing issues, 3663-2598, though the gap between new lows and new highs continued eroding. New lows held a slim edge on the day, 121-98.

Crude oil priced $1.06 higher, at $90.02, while gold fell $4.10 to $909.40 and silver dropped 9 cents to $16.78. The reduced prices in the precious metals may indicated a prime buying opportunity in these supercharged markets which should only trend higher over the coming months.

NYSE Volume 3,290,565,000
NASDAQ Volume 2,027,786,875

Friday, February 1, 2008

The Bizarre World of Wall Street

Evidence of market and media manipulation is rampant these days along with counter-trend trading patterns on the exchanges.

After the MBIA fiasco on Thursday (see yesterday's post), Friday morning brought more bad news to investors when the Labor Dept. reported that the US economy shed 17,000 jobs in January.

Mindful of yet another set of painful numbers indicating the decline of the American economy and an all-but-certain descent into recession, traders would have been deemed prudent had they made a timely exit from equities of all kinds.

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But what they did on Friday - alas, most of the past two weeks - defies any reasonable explanation. Once again, traders engaged in another day of incessant buying, exactly the opposite of what one might expect. Believe me, there are more than just a few analysts out there scratching their heads and pulling out what little hair they may have left.

Dow 12,743.19 +92.83; NASDAQ 2,413.36 +23.50; S&P 500 1,395.42 +16.87; NYSE Composite 9,277.58 +151.42

The 1240-point rally off the January 22 intraday low should be hailed as a marvel of modern engineering - of the markets and the media. It's almost as though investors actually believe that a 1.25% emergency cut in the federal funds rate over an 8-day period is some sort of signal that nothing but smooth sailing lies ahead.

In fact, the rate cuts, while possibly stimulative to the wild boys on Wall Street, are nothing short of disastrous for the average American consumer, a persona inconveniently left out of the mix, apparently. The eventual inflationary pressures and continuing weakening of the dollar should prove critical to the continued viability of two standards: that of living in America and the dollar as reserve currency. Both are under severe assault and the Fed has done nothing to prevent further erosion.

What's really occurring on Wall Street and in the offices of the Fed and at Treasury is a concerted, continuing bailout of a failed banking system. Today, the Fed announced two more February auctions for bankers in distress and promises of more to come. Under Ben Bernanke, who earned the moniker "Helicopter Ben" for his metaphoric dropping of dollars from flying machines, the Fed has indicated that loose credit policies - the exact same ones which got us into this banking seizure to begin with - will reign supreme.

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No doubt the government is in compliance with this policy and will commence bombing the capitol of any central bank which attempts to call in any US debt, no matter how worthless it is or how shaky our ability to pay. We're a bankrupt, third world nation now. Get ready for runaway inflation for essentials (food and energy), combined with stagnation and eventual deflation, without any way out.

The recent moves of the Fed and Treasury and Wall Street's response signals something much more sinister at work than a mere "down" portion of the business cycle. America is headed for the worst recessionary period since the Great Depression and maybe even worse than that.

Buy gold and silver, get your passport and get out of the country before the borders are closed. Remember what America was like in the 1950s and 60s, when we were truly a great nation. America, in its current configuration, is a failed state being run by an international criminal cabal. Market prices for US stocks are not rooted in reality. Wall Street has morphed into the most perverse, disrupted Bizarro World imaginable.

Heaven help us.

On the day, advancing issues held sway over decliners by nearly a 3-1 margin, 4650-1688. However, for three months running, with the exception of two days in early December, 52-week new lows have outpaced new highs and they did so again, 149-110.

In response to Wall Street's curious trading, commodities sold off. Oil priced $2.79 lower, closing at $88.96. Gold fell $14.50 to $913.50. Silver dropped 13 cents to $16.87. Could we be witnessing the beginning of a deflationary trend? It's far too early to tell, but readings from the labor market indicate a growing tidal wave of layoffs and workforce reductions on the horizon.

Enjoy the Super Bowl (maybe that was the real message from the market: can't have a crash just before the biggest game of the year). Take the Giants and Vegas' generous 12-point spread.

NYSE Volume 4,609,755,500
NASDAQ Volume 3,094,480,750