Friday, April 17, 2009

Stocks Chalk Up 6th Straight Winning Week

While the current rally may be nothing more than a bear market variety, it sure has packed a punch, registering 6 consecutive weeks of gains since bottoming out on March 9.

For the record, here are the numbers with the close of March 9 as a baseline:

The Dow Jones Industrials is up 1584 points, from 6547 to 8131, a gain of 24.2%.

The NASDAQ is up 405 points, from 1268 to 1673 (32%).

The S&P 500 is up 193 points, from 676 to 869 (28.6%).

The NYSE Composite is up 1254 points, from 4226 to 5480 (29.7%).

The overall gains this week were not spectacular, something on the order of 2%.

There were no important economic reports, and the corporate earnings releases came from Citigroup (C), General Electric (GE) and after-hours yesterday Google (GOOG). All of the companies beat lowered expectations, but while GE and Google showed profits, their stocks registered a gain of about 1% on the day, Citigroup, which posted a narrower loss than estimated, suffered a 9% decline on the day.

One gets the distinct impression that the gains may be coming to an end as volatility was completely wrung out of the market over the past few sessions, and stocks had already been bid up prior to earnings. The expectation is that investors will take flight - and profits - at the first sign of weakness, since, by and large, earnings have beaten lowered expectations, but overall are down anywhere from 20-90% (as was the case with Nokia) from year-ago figures.

Essentially, the stock gains, when compared to actual earnings, may be a bit overdone, though there seems to be a level of risk appetite not usually seen after deep market bottoms. This is suggestive of investors not having fully capitulated, which, if that is the case, the worst is still to come. To believe that 30 years of excessive credit and spending would be cured with some government hokus pokus is pure folly. Mortgage delinquencies are still churning in at a record pace, and now the commercial market is about to roll over. Unemployment has shown no slowdown whatsoever. Real estate and unemployment will continue to be the main drivers of the downward economy and they are nowhere near bottoms.

Dow 8,131.33, +5.90 (0.07%)
NASDAQ 1,673.07, +2.63 (0.16%)
S&P 500 869.60, +4.30 (0.50%)
NYSE Composite 5,480.60, +26.33 (0.48%)

On the day, advancers dominated decliners, 4150-2345, but new lows continued ahead of new highs, 76-37. Volume was very high, owing to options expiration. However, one could assume, with all of the action options-related activity that the tight range of the past three sessions was indicative of a well-played hand by Wall Street insiders. Otherwise, there would have been more of a radical trading pattern.

NYSE Volume 1,953,123,000
NASDAQ Volume 2,416,468,000

Commodities continued along the same pattern that has persisted over the past few weeks. Oil inched higher, up 35 cents, to $50.33. Crude has bounced above and below $50/barrel but has not escaped the range. While some supposed experts in crude keep calling for $65-75/barrel near term, the massive oversupply currently on the market, juxtaposed with continuing slumping demand should produce oil in the range of $35-40. Since the oil market is tiny and prone to manipulation, it is likely that price is being kept constant by some of the larger players. Eventually, their gambit will fail; the most obvious factor being that oil usually moves in reverse ratio to the dollar. As the dollar has strengthened, oil has not declined accordingly. There is a day of reckoning coming as reality meets markets.

The same could be said of the precious metals, which have been in a protracted decline for weeks. Gold tumbled again today, losing $11.90, to $867.90. Silver was also downgraded, dropping 47 cents to $11.79.

Gold and silver are presenting incredibly good buying opportunities. As soon as the markets begin to retrace their recent gains, the metals should reverse course, though the rise may not be rapid, due to deflationary pressures.

As weeks go, this one was one of a duller variety. Next week, when many more companies will be reporting first quarter earnings, should be more exciting.

No comments: