Monday, August 31, 2009

Is This The Correction We've Been Hearing About?

Unless you've been asleep for the past three weeks, or simply not paying much attention (probably not a bad idea), you know all the financial talk has been about the eventuality of a correction in the US stock markets. The major indices have flown too far, too fast, say the pundits and CNBC-geniuses, and a 10-15% pullback is not only necessary and healthy, but, get this, inevitable.

News flash: Nothing, and I do mean nothing, is ever inevitable when it comes to stocks. Not even the most mundane exercise as paying out a quarterly dividend is a sure thing until the deed itself is done. Jail cells, rooming houses and cheap bungalows are full of the leftover souls who bet on a sure thing... and lost. There is no such creature ever made, I tell you. Certainty is the stuff of wide-eyed speculators, little children, kings and tyrants. It has never been the province of the investor class, and never shall it be. Because just as certain as one is certain, there is certain to be destruction in one's path. As soon as investors get too complacent, giddy or confident, there is almost surely going to be a set of circumstances which kicks the platform right out from under their feet.

And that's why I'm convinced the market is going higher: because so many people are saying it's got to go down.

Let's face the facts, or, rather, the facts as they were presented to us. A year ago, we all thought the world was coming to an end, at least on Wall Street. Bear Stearns went belly up. Then Lehman Bros. dove into the dustbin of history, then Merrill Lynch followed. Stocks swooned. It was, actually, the second leg of the bear market which had begun almost a year earlier, in October, 2007. The third leg was January through March of 2009, and that, my friends, was probably the most brutal, excruciatingly painful period for most investors because it was not so sudden, like the fall of 2008, but rather akin to Chinese water torture: a slow drip, drip, drip that left wallets empty, portfolios drained and fund managers whimpering for mercy.

And then, just like somebody flipped a switch, it stopped. Stocks started going higher. A little bit at first, then more momentum carried a second wave and folks began to pile into stocks again. Even though unemployment spiked, there seemed to be plenty of money out there in America, thanks largely to the Fed and the Treasury and the stimulus and the trillions of dollars pumped into the economy through a variety of means. We survived. And now we shall prosper, shall we not?

If you haven't got enough nerve to hold onto winners through the next six to eight weeks - putting us firmly into 3rd quarter earnings season - then maybe you shouldn't be trading stocks, gambling with your retirement money. Those who follow the crowd and cash out - little piggies - will get slaughtered by missing the next wave. Sure, there is going to be some sideways action, but there's a magic number out there, there always is and it's 9625 on the Dow. Once that level - which is the interim peak after the major September-October 2008 decline, reached on November 4, 2008 - is breached, and the index closes above that level, we will have re-entered bull market territory.

The Dow has already crossed that particular rubicon twice: on August 24, 25, 27 and 28, and each time it met that resistance, the index pulled back. Like an impatient lover, it keeps probing and prodding, but the object of its affection - higher prices - remains just out of reach and pushing back. Today, Monday, was nothing more than a sign of frustration on the part of many, many investors, who feel that penetrating resistance has become futile just because we're entering the month of September, a traditionally poor month for stocks.

Rubbish! The time of year has about as much to do with trading stocks as the moon phases, floral patterns or the zodiac. Trading is about fundamentals, not tea leaves, Tarot cards or Ouija boards, and the core fundamentals won't be fully understood until after companies release 3rd quarter, or even 4th quarter, earnings reports, and by then, good buddies, it will be TOO LATE. TOO LATE. TOO LATE. The profit train will have left the station. So, if you're not already on board, get on board and if you're already on board, hold on for a bumpy ride. The US economy is still the most powerful engine of growth in the world and it hasn't quite run out of steam, or gas, or coal, just yet.

Getting back to stocks, just take a look at the prior six closes on the Dow: 9505.96, 9509.28, 9539.29, 9543.52, 9580.63, 9544.20. And today's close, 9496.28, well, that's almost 10 whole points lower than where we started on Friday, August 21. In seven sessions, the closing prices for the Dow have been within a 1% range. That's called consolidation, not breakdown. The people saying there's a correction coming just don't know how to read charts. Besides, there is still money sitting on the sidelines, waiting for an opportunity to get into the market. This money is mostly in the hands of the most nit-picking and skittish investors with no appetite for risk, probably baby boomers within three years of retirement who have seen their plans upended over the past two years. Now, they won't be water skiing in the Bahamas in 2013, but backyard barbecuing in Bangor, more likely, BECAUSE THEY, TOOK THEIR LUMPS LIKE LOSERS AND MISSED THE PROFIT TRAIN AS IT LEFT THE STATION.

Don't be like them. Stay invested. Sure, take some profits, but plow them back in. The last four months of 2009 are going to be nice. There'll be a pullback here and there, but nothing dramatic. At some point in either October or November, the CNBC talking heads can celebrate breaking 10,000 again! How often does that happen? Answer: Seven times in 10 1/2 years: March 1999; March 2000, April 2001, February 2002, May 2002, January 2004 and of course, here in late 2009. It's actually overdue. Don't be a party pooper.

Dow 9,496.28, -47.92 (0.50%)
NASDAQ 2,009.06, -19.71 (0.97%)
S&P 500 1,020.62, -8.31 (0.81%)
NYSE Composite 6,643.24, -65.80 (0.98%)

On the day, advancers took a serious beating by declining issues, 4673-1772, but new highs maintained the bias over new lows, 104-51, though the numbers on both sides of that ledger have been shrinking of late, indicating some kind of pressure mounting for a movement one way or the other. Volume was on the sluggish side, when it should actually be improving. It could, of course, be a semi-permanent feature of the markets. Hedge funds and little guys have gotten kicked so often and so squarely in the teeth that they may have made their way off the island and into permanent retirement. Maybe they're saving coins and stamps or clipping bond coupons. In any case, volume has been depressed for months, so maybe that's good.

NYSE Volume 1,513,536,000
NASDAQ Volume 2,268,241,000

Commodities took a more serious turn to the downside on this last day of August, with a few notable exceptions. Oil for October delivery fell $2.78, to $69.96. Hooray! Drivers need a little break and now, with all those clunkers off the road, there should be more supply, right?

Gold dipped $5.30, to $953.50, but silver gained 11 cents, bucking the trend by ending higher, at $14.92. Silver is going higher from here; oil lower. Gold will remain stuck in a range between $845 and $985. It will NOT break $1000 this year.

Friday, August 28, 2009

On the Cusp of a New Bull Market?

While many investors have focused on the fall of 2008 as the critical juncture for markets, stocks had in fact been falling since the fall of 2007. In August of 2007, the subprime crisis first appeared and was quickly talked down by then-Secretary of the Treasury Hank Paulson and Fed Chairman Ben Bernanke. The two brids famously chirped that the crisis had been "contained," though many market insiders were unconvinced.

The major indices reached peaks just two months later, in October, but then began a steady decline until Bear Stearns finally imploded in March of 2009. The point is that the current bear market is not nearly a year old, but closer to two years of age, and that's a long time for bear markets in general. Granted, this one was different and we may not have seen the worst of it - though it's difficult to imagine conditions worse than those which prevailed in the fall of 2008 or late winter of 2009 - but bears of 22, 23, 24 months or longer are not the norm.

As August 2009 comes to a conclusion Monday, we find the indices at the cusp of a potential new bull market and the conditions are present or emerging which could send stocks much higher in the near term. Noting that today's close was the first negative in 9 sessions for the Dow and and the second in nine for the other majors (except for the NASDAQ, which ended the day positive), the indices have pushed and prodded up against considerable resistance, mostly the marks set at the interim tops on November 4, 2009 of 9625 on the Dow and 1005 on the S&P 500. While the NASDAQ has clearly recovered to a far better condition than the other indices, topping the November 4, 2009 top of 1780 by more than 200 points, the others are lagging the younger, more spirited index by a large margin.

Because the NASDAQ is so obviously overbought and the other two indices just above (S&P) or just below (Dow) resistance, investors have been calling for a pullback for the better part of three weeks, though no meaningful breakdown has occurred, precisely because most traders are positioned long at this juncture, in expectation of a short, shallow reversal before taking off to new, higher levels.

Should the Dow surpass the 9625 mark and the transports confirm, Dow Theory tells us that is a signal for a new, bullish trend. It's likely that stocks will outperform all other asset classes for the remainder of the year, once this soft patch of resistance and investor indecision abates. A pullback of 5-15% is probably the best medicine for the markets in order to supply upward impetus, nut this market has demonstrated firm resistance to any sustained downward trend, so it's by no means a sure thing that stocks will go down before they go up. This week was notable in that as soon as the Dow retreated to the 9500 level - on Monday, Wednesday, Thursday and Friday - or thereabouts, speculators jumped in and stocks rallied.

This has put stocks in a pretty tight trading range, but once either 9500 or 9625 on the Dow is breached, the stage will be set for another push higher.

How high?

Figure another 12-15% before the money managers are exhausted and begin taking serious profits. One should not expect a dramatic increase on par with what markets have done between March 9 and today, but rather a sideways trade with an upside bias through the end of the year. It may be dull, but at least it won't be going down.

Dow 9,544.20, -36.43 (0.38%)
NASDAQ 2,028.77, +1.04 (0.05%)
S&P 500 1,028.93, -2.05 (0.20%)
NYSE Composite 6,709.04, -13.27 (0.20%)

On the day, declining issues outweighed advancers, 3581-2814, and new highs trumped new lows, 183-77. Volume was above average, though still in that subdued summertime range.

NYSE Volume 1,391,884,000
NASDAQ Volume 2,396,156,000

Commodities were generally higher for the second straight day. Oil gained 24 cents, to $72.74. Gold was up $11.50, to $958.80, while silver sported a healthy 56 cent gain to close at $14.82.

After Monday's big rally, the remainder of the week was rather inconsequential owing to the factors addressed earlier in this post. Next week will be something of an oddity, with August ending on Monday and Friday likely to be the major swing day as the Labor Department releases non-farm payroll data for August. That bumps up against the very late labor Day three-day holiday weekend, so there will be plenty to think about both during and after the trading.

Thursday, August 27, 2009

Eight Straight for Dow; Is Resistance Futile?

The Dow Jones Industrial Average bounced back from morning setbacks to finish with its eighth consecutive session on the upside. Other indices followed suit, most of them now have been up 7 of the past eight trading days.

A fair showing in new unemployment claims - down about 10,000 from the prior week - and reiteration of 2nd quarter GDP estimates of -1% were not enough to compel investors into more buying in the initial going. But after settling down about 60 points, the Dow and other indices eventually made their ways back to the positive by early afternoon and ended the day with modest gains.

Dow 9,580.63, +37.11 (0.39%)
NASDAQ 2,027.73, +3.30 (0.16%)
S&P 500 1,030.98, +2.86 (0.28%)
NYSE Composite 6,722.31, +34.37 (0.51%)

Winners and losers ended the session in a virtual dead heat, with 3171 up and 3175 stocks down. New highs beat new lows again, 147-43, maintaining the kind of advantage that has been typical during the recent run-up. Volume was slightly better than previous sessions this week, though barely noticeable.

NYSE Volume 1,285,654,000
NASDAQ Volume 2,157,144,000

Commodities mostly reverse their two-day losing trend, with oil up $1.06, to $72.49 and gold ahead by $1.50, to $947.30. Silver, however, was set back 4 cents, closing at $14.25.

With a paucity of news upon which to trade, many brokers were mailing it in this week, so as seems to be the current custom, adios, until tomorrow.

Wednesday, August 26, 2009

Bulls Take a Break; Stocks Up Marginally

With the Dow up seven straight days - though narrowly - reports on Durable Goods and New Home Sales boosted stocks, but the mood was cautious at midweek.

Thanks to the Cash for Clunkers government rebate program, durable goods orders registered their largest monthly gain in two years, up 4.9%, though the gain ex-autos was more in-line with expectations, though still solid at +0.8%.

The Commerce Department reported that sales of new homes rose for the 4th consecutive month in July, up 9.6% to a seasonally-adjusted annual rate of 433,000. Stocks were trading lower prior to to 10:00 am release of that number, but quickly shot into positive territory.

However, as has been the case in each of the last three days, gains were short-lived and all of the major indices spent the rest of the day zig-zagging the break-even line in a listless session. There still exists a good amount of commentary calling for a correction, though market participants are loath to give up gains or miss out on another potential leg up. All of the indices are at or very near resistance points dating back to last November 4, when stocks rebounded sharply after falling in September and October amidst uncertainty over the future of the entire financial system.

That ugly scenario seems to have been averted, but investors remain cooly cautious with summer quickly coming to an end. September is one of the rougher months for stocks and could be even harder considering the outsize gains made during the warm months of July and August.

Dow 9,543.52, +4.23 (0.04%)
NASDAQ 2,024.43, +0.20 (0.01%)
S&P 500 1,028.12, +0.12 (0.01%)
NYSE Composite 6,687.94, -9.28 (0.14%)

Declining issues narrowly beat back advancers, 3261-3111, but new highs finished ahead of new lows again, 174-45. If one was to take a cue from the indications supply by the new high-lows metric, it would appear that the market is not ready to relinquish its bullish posture. The number of new lows has continued to shrink in the face of growing investor optimism. Even bad stocks are getting bids.

Volume was its usual slow self, with nothing much in the way of volatility even whispered at this point. Stocks have barely budged all week and volume has been sluggish.

NYSE Volume 1,169,384,000
NASDAQ Volume 2,054,796,000

Crude oil future, now in the October delivery contract, tumbled another 62 cents, to $71.43. Gold dropped 20 cents, to $945.80. Silver shed 6 cents, to $14.29. While it was a slow day everywhere, that didn't prevent futures traders to send most commodities lower for the second straight day. Today it was the food category hardest hit after yesterday's assault on the energy sector.

Tomorrow morning all eyes will be trained on the 8:30 am release of new unemployment and continuing claims. That number should set the tone for the market, though there are more than enough other forces at work to swing consensus one way or the other. With resistance just overhead, it's becoming increasingly difficult for stocks to continue their heady climb.

Tuesday, August 25, 2009

Rally Continues, Though Pace is Sluggish; Bernanke Gets Obama Nod

After the Dow took a day off from recording gains on Monday, it was back to business as usual, as the Blue Chips joined the other major indices with gains on Tuesday, marking the 6th straight day of positive returns for the S&P, NASDAQ and NY Composite. Signs that the rally is running out of gas, or already is on empty, were evident in afternoon trading, not only today, but on monday as well, as stocks gave back earlier winnings.

The news flow was almost all positive on the day that President Barack Obama announced his intention to reappoint Ben Bernanke as Chairman of the Federal Reserve. Bernanke faces scrutiny by the Senate, which must confirm him for a second four-year term. That news, along with an upbeat report from the housing sector, got stocks off to a flying start, but enthusiasm waned as the day wore on, though all of the indices remained in positive territory for the entire session, ending - for the second straight day - with less-than-impressive moves.

The slow pace of advance is probably a good sign for traders, as investors are now aware that the market may have gotten ahead of itself last week and that the potential for a pullback - though not a substantial one - is great. With confidence building in most sectors, the fear is not that stocks will suffer a severe setback, but that precious profits will erode. many investors were hit hard by the bear market of 2008 and earlier this year and are still very cautious, thus booking gains at almost any opportunity. Riding this long rally has taken nerves of steel, and while some kind of correction seems inevitable, there's a solid chance that stocks may continue to ride high.

Judging by Tuesday's news - consumer confidence up from 48.1 in July to 54.0 in August and another monthly improvement in the S&P/Case-Shiller Home Price Index [PDF, with charts] - doubts for a successful recovery continue to be shredded. The widely-accepted housing index showed another decline year-over-year, but fared better than in the first quarter. While not much to go on, the hope is that housing woes have diminished and the sector will continue to improve, though there's debate on that front as well as others.

The S&P/Case-Shiller U.S. National Home Price Index – which covers all nine U.S. census divisions – recorded a 14.9% decline in the 2nd quarter of 2009 versus the 2nd quarter of 2008. While still a substantial negative annual rate of return, this is an improvement over the record decline of 19.1% reported in the 1st quarter of the year.

Dow 9,539.29, +30.01 (0.32%)
Nasdaq 2,024.23, +6.25 (0.31%)
S&P 500 1,028.00, +2.43 (0.24%)
NYSE Composite 6,697.22, +26.08 (0.39%)

Since the news flow was somewhat choppy and unconvincing, though still is more positive than negative, investors showed considerably more resolve than on Monday, with advancing issues trumping decliners, 3731-2686, and 220 stocks making new highs compared to just 73 new lows. Volume was disappointing once again, though the indices are now at or near highs for the year.

NYSE Volume 1,303,106,000
Nasdaq Volume 1,952,415,000

Part of the reason for the flaccid returns in equties were due in some part to the nearly across-the-board declines in commodities. Crude oil led the energy sector lower, losing $2.32, to $72.05. The metals were about the only winners, with gold up $2.30, to $946.00 and silver ahead marginally as well, gaining 12 cents, to $14.35. Almost all of the consumable commodities - from live cattle to coffee - trended lower. There's still no real pricing power at the low end of the supply chain, making margins tight and profits for finished goods and businesses difficult to attain.

Wednesday's Durable Goods Orders kicks off the morning session, with anticipation high over the success of the "Cash for Clunkers" program and how it will skew the figures in the automotive sector. It's a wall of worry, to be sure, but the market continues to climb. Any pullback here would more than likely be short-lived and narrow.

Monday, August 24, 2009

Rally Stalls After Four Straight Up Days

Even though the Dow Jones Industrials finished with a gain, the other major indices suffered marginal losses to begin the last week of August and the unofficial end of summer. Compared to the drop last Monday, today's action was little more than profit-taking posturing and a pause prior to Tuesday's reading of durable goods orders.

There is still a good deal of trepidation in traders' hearts, and following such an impressive run last week, a break was surely in order. Along with the durable goods report for July, there's the Conference Board's consumer confidence index and the S&P/Case-Shiller Home Price Index with which to deal on Tuesday morning. That home price index has been a rally-killer in the past, though last month's data suggested that the housing market was beginning to turn around as the 10-City and 20-City Composites improved for the fourth consecutive month.

Investors, keenly aware that jobs and home-buying are two of the biggest factors in recession and recovery, will be keeping a close eye on that index as well.

Otherwise, Monday was moribund and listless, with traders going through the motions instead of staking out new positions. After a brief upsurge in the morning, stocks lost ground, tracing out the break-even line into the close. Some may have said it was hardly worth getting out of bed, though from the volume slant, most stock jockeys were at their desks bright and early.

Dow 9,509.28, +3.32 (0.03%)
NASDAQ 2,017.98, -2.92 (0.14%)
S&P 500 1,025.56, -0.57 (0.06%)
NYSE Composite 6,671.14, -5.12 (0.08%)

Declining issues held a narrow lead over advancing ones, 3276-3187, but new highs held a large edge over new lows, 227-88. Volume was solid, but uninspiring.

NYSE Volume 1,389,159,000
NASDAQ Volume 2,072,289,000

Oil continued to price higher in futures markets, up another 48 cents per barrel, to $74.37 on the NY Merc. Meanwhile, gold was taking another beating, losing $11, to close at $943.70. Silver responded positively, however slightly, up 3 cents, to $14.23 per ounce. Natural gas, trading at 7-year lows, caught a bit of a bid, though a gain to just $2.92 is still well below levels seen in recent years. The disparity between crude oil and natural gas prices is beginning to cause a stir, especially in US markets. Gas discovery and extraction has been aided by technology recently and the word is that the US is probably sitting on at least a 20 year supply - some estimates are as high as 100 years - of natural gas, causing the price to plummet.

If there is such an abundance of natural gas and crude prices remain high, it won't be long before those natural gas conversion kits for cars become all the rage. Of course, there still aren't many places where one could fill up on nat. gas., but with prices so low, don't be surprised if a number of new businesses aren't started up based on the assumption that oil will stay high and natural gas low. Maybe we should have listened to T. Boone Pickens last summer when he was saying that natural gas was the bridge between oil and renewable energy.

On the stock market, naturally, there was the usual chorus of caution from the punditry, with more than a few analysts saying the rally had run its course and it was time to take profits, take a break and get back in at lower levels in the fall. However, the camps between the naysayers and optimists were about evenly split, for varying reasons. Below, one of the more positive calls:

Friday, August 21, 2009

Existing Home Sales Gain Pushes Stocks Higher

Rising for the 4th day in a row, major US stock indices broke through resistance and above previous highs of a week ago, thanks to cheery news from the National Association of Realtors (NAR), who released their July existing homes sales data, showing the largest one month gain in the history of the series, dating back to 1999.

The 7.2% gain over June's figures was the 4th straight monthly gain for the measure. The NAR reported that distressed sales made up 31% of all sales and first time buyers were responsible for 30%. The 5.24 million units in July were well ahead of the 4.89 million in June, and are 5%t above the 4.99 million-unit pace in July 2008.

This is capitalism at work. The oversupply of homes on the market has lowered prices to a median of 178,000, though many of the distressed, foreclosed properties are going for well below that number. There are speculators, new buyers and even people upgrading within the context of historically-low interest rates and oversupply on the market forcing prices down.

Today's data was another in a lengthening string of positive economic reports and investors took action right upon the news. At 10:00 am, when the report was released, all of the major indices shot straight up, to near the closing levels. The Dow, which was already up 50 points at the open, immediately tacked on another 100, taking the average above 9500 for the first time since November 4, 2008, when the index closed at 9625.28.

The NASDAQ and S&P blew through their respective highs as well, with confidence in the US economy continuing to grow.

Dow 9,505.96, +155.91 (1.67%)
NASDAQ 2,020.90, +31.68 (1.59%)
S&P 500 1,026.13, +18.76 (1.86%)
NYSE Composite 6,676.26, +122.86 (1.87%)

Market internals confirmed that the rally was broad and deep, as 5027 stocks showed gains, to just 1467 on the losing side. There were 208 new highs to 93 new lows. Volume was solid, the best in weeks, indicating that this rally still has legs. Some analysts are calling for 1050 on the S&P and 10,000 on the Dow by the end of the year, and, while those estimates may seem trivial, there is a growing chorus of capitalist cheer-leading from corners as diverse as rural farming interests to chic fashion retailers. Even if there is another pullback, which will occur when everyone least expects it, as is the usual case, there's sufficient evidence to posit that even though various government entities (cities, states and federal) are running enormous deficits, it is that deficit spending money that kept people working and money flowing through the economy.

There will certainly come a time in which these debts must be dealt with, but nobody seems interested in dealing with those thorny issues at present. That day will come all too soon for investors and speculators, the wisest and craftiest of which have remade fortunes or made new ones during this six-month-long rally.

It was the seventh week out of the past eight that markets finished a week higher than the previous one, and gains have been substantial.

NYSE Volume 6,724,499,500
NASDAQ Volume 2,279,040,750

Oil was up again, but again only marginally, as on Thursday, gaining 12 cents, to $72.54. The metals were among the winners of the asset classes, with gold higher by $13.00, to close at $954.70. Silver had a nice reversal as well, picking up 28 cents, to $14.16 per ounce.

The day, and the week, were among the best seen for US business interests in more then 10 months. While the US may not be fully out of recession - though there are obvious signs that it is - the pathway of recovery is becoming more and more well-defined by the day.

Thursday, August 20, 2009

Three Time's A Charm for US Stock Markets

Stocks rose for the third consecutive day, nearly erasing the declines from the previous Friday and this Monday, as investors shrugged off persistently high unemployment numbers and focused instead on economic data that showed a slow but steady pattern of recovery for US businesses.

The markets were somewhat blind-sided by new unemployment claims prior to the opening. At 576,000 for the most recent week, new claims were higher than expected and worse than the 561,000 reported the week earlier. That did not spoil the mood on Wall St., however, as stocks raced to early gains and added to them as a report on leading economic indicators registered a fourth straight monthly increase of 0.7% for July. As that report was passing the wires, the Philadelphia Fed Index came in above expectations, with an increase to 4.2, up sharply from -7.5 in July and well ahead of mostly dour expectations.

Without earnings driving the market currently, it has been a steady stream of economic data that has buoyed markets of late. Though the news hasn't been earth-shattering or jaw-dropping, it's about as good as it can get, considering the dire circumstances which investors faced in months prior.

Options expiration, which occurs on Friday, had some impact, as surely some of those with gains converted into actual shares as the strike date neared. Often the culprit for volatility, the options trade has been somewhat tame over the past six to eight months. Shying from the outright risk of losing everything, many options players have scaled back their efforts or employed straddles or other methodologies to ameliorate risk and eliminate losses.

Should there be nothing in the way of outright "bad" news on the morrow, all of the major indices are set to record another positive week. The key number to watch for on Friday is the July Existing Home Sales report, due out at 10:00 am. Expectations are for 5 million homes to have been sold in the month, which would be a modest, but sustained, increase from June's 4.89 million.

Dow 9,350.05, +70.89 (0.76%)
Nasdaq 1,989.22, +19.98 (1.01%)
S&P 500 1,007.37, +10.91 (1.09%)
NYSE Composite 6,553.40, +74.12 (1.14%)

Advancing issues once again led decliners, 4471-1937, while new highs registered an edge over new lows, 142-49. Volume was once more on the pathetic side, though it's been that way all spring and summer. Most of the pundits and analysts following money at work or at rest have reported that there is still much on the sidelines, but there are signs that more is flowing into stocks on each successive dip.

The markets have largely gathered back everything lost on Friday and Monday. The Dow is just 48 points short of where it closed on Thursday, August 13. The NASDAQ is 20 points below the close from the same date and the S&P is just 5 points below the magic number at 1012.

NYSE Volume 1,119,247,000
Nasdaq Volume 1,988,868,000

Crude oil was up again, though only by 12 cents, to $72.54. Gold continued to trade in a range, losing $3.10 to $941.70. Silver also seems stuck, up a penny, to $13.88. Commodity prices, especially oil, are eventually going to lose investor interest and take on water as stocks have been consistently solid performers for the past 6 months running, since the bottom of March 9. While many portend that the trend cannot continue without a meaningful correction, the economic forces of globalization and deflation are playing important and, as yet misunderstood, roles in business cycles.

Pricing power being non-existent, the push of late has been for market share and product diversification. Companies which pared their labor and other costs early on have thrived under the new regimen and should continue to do so as the economies of the world gradually improve.

Wednesday, August 19, 2009

Markets In Day-Long Rebound After Lower Open

The resiliency of this market cannot be overstated. The loser lines are crowded with traders - self included - who have called tops recently, and calls for a pullback can be heard from Wall Street to San Diego. The market, however, will have none of it. After falling on Friday and Monday, stocks have staged a remarkable turnaround, erasing most of the losses from the prior two sessions, when the Dow reached a 10-month high at 9398.

What had investors concerned at the open was a serious downdraft in the Shanghai (China) index, which has lost 20% of its value over recent days. The Dow was down 87 points in the opening minutes, but continued to climb from there, eventually turning positive just before noon and making the day's highs just after 1:00 pm. While the plight of Chinese stocks is usually not a market mover, that was the official line, until traders took a breath and reconsidered, especially in light of the fact that the Shanghai index was up more than 100% from recent lows prior to the pullback.

A little give-back was probably baked into the Chinese prices in the first place and profit-taking accounted for much of the selling.

Dow 9,279.16, +61.22 (0.66%)
NASDAQ 1,969.24, +13.32 (0.68%)
S&P 500 996.46, +6.79 (0.69%)
NYSE Composite 6,479.28, +42.21 (0.66%)

Today's internals were decidedly bullish, with advancing issues besting decliners, 3923-2456. New highs beat out new lows once again, notching a 77-51 advantage. Volume was actually a bit more agitated than the past few days.

NYSE Volume 1,026,465,000
NASDAQ Volume 1,995,397,000

Oil was a big winner, as energy stocks led the market after release of government data showed a shrinkage in supplies of some 8.40 million barrels in US stockpiles. Crude for September delivery rose a whopping $3.45, to $72.42, while the price of an ouce of gold gained $5.60, to $944.80. Silver continued to close lower, losing 9 cents to $13.88.

There will be some poorer people in the US after the IRS struck a deal with UBS to disclose the identities of more than 4400 people for whom the bank had managed private Swiss bank accounts.

Now, there's some news even the most stoic actuary can appreciate.

Tuesday, August 18, 2009

Monday's Fall Ushers in Tuesday's Rebound

My apologies for not posting the past couple of market days. I have been dealing with issues concerning my main site, Mostly, these issues, from not having email or FTP access and various other problems were caused by the hosting company, and their complete incompetence in migrating my site - and many others - from one set of servers to another. It is my intention to sue for four days of lost revenue, aggravation and unnecessary interruption of my business. But that is another matter...

Over the past few days, US indices have taken a bit of a hit. Both Friday and Monday were down days, but Tuesday's mild recovery bodes well for the future of the stock markets. Tuesday's gain began to fill in the gap between Friday's close and Monday's open, and, if there's anything about markets for certain, it is that they always fill in gaps.

So, it is fairly safe to assume that the indices will bounce around current levels for at least the rest of this week. Another huge move to the downside seems unlikely, though a continuance of Tuesday's rally would be unsurprising.

Here are Tuesday's closing numbers:

Dow 9,217.94,+82.60 (0.90%)
NASDAQ 1,955.92, +25.08 (1.30%)
S&P 500 989.67, +9.94 (1.01%)
NYSE Composite 6,437.07, +84.96 (1.34%)

Advancing issues finished well ahead of decliners, 4879-1550. New highs outnumbered new lows, 78-48, a margin that has been narrowing recently, though it would not be a cause for alarm if the new lows took back the lead in coming days. The most significant issue facing the markets right now is how to read the abysmally low volume, though in light of the fact that volume has been off for most of the summer, it's best to attribute that to ongoing summer doldrums and some general investor trepidation about jumping back in at this time.

NYSE Volume 1,045,306,000
NASDAQ Volume 1,760,437,000

Commodities showed generalized strength on the day, with oil up $2.44, to $69.19; gold ahead by $3.40, to $939.20, though silver slipped 2 cents to $13.96 per ounce. Foodstuffs, grains and meats were mostly higher.

The biggest news of the day came prior to the opening bell, as July PPI was released, showing a massive 0.9% decline month-over-month, which has to come as a rejection for the inflationist camp and was met with so many "told you so's" by deflationists that the rancor was deafening.

Lower producer prices are usually the forecaster of tough times for retailers, who have thus far weathered the recession with particular aplomb and grace. Lower prices for all goods and services is in the cards for the next 6-18 months, regardless of the amount of money pumped into the nascent economy by the Fed and Treasury.

While the recession may be slowing, it is still far from over. Germany and Japan may have announced that they were recovering, but it's likely to be another 3-6 months before the US economy gets back on firm footing. Foreclosures are still running very high, as is unemployment. This recession - a surly and deep one that it is - wasn't created in a manner of a few months and it won't go away quickly either.

Look for more sideways trading in coming months and more than enough signs for both bulls and bears to be right occasionally. The US will bounce back, but it's going to take a while.

Thursday, August 13, 2009

Equities Maintain Positive Bias

For all the recent talk about the current rally being overextended, there doesn't seem to be much of a rush to sell stocks, which is probably why so many analysts are urging caution. Their hypothesis is that it would be better to take money off the table now, while stocks are still relatively overpriced, than later, when they will probably have fallen 5-10%.

However, with the panic of '08 a fast-fading memory, there is always the possibility that many investors, small and large alike, have taken positions in stocks when they were very cheap just a few months ago, and are probably not in any hurry to sell. After all, that's what the professionals tell us to do: buy, hold and prosper.

That strategy may be a sound one at this juncture. The heyday of day-trading is long past and your average 401k type is not going to be moving money around willy-nilly. Neither are heady fund managers, many of whom were burned badly in the last debacle. The slaughter that began in September 2008 (actually, the slide started in August of 2007) and ended abruptly on March 9, 2009, may have lodged itself firmly in the craniums of the top fund managers. And while they may be quicker on the trigger if things start slipping again, they're seasoned enough to recognize a fundamentally strong market when they see one. A 5-10% correction is not going to move them much, if at all.

The day began with some very ugly retail sales figures for the month of July, with an overall number of -0.1%, and -0.6% ex-autos. The "cash for clunkers" promotion by the government was such a hit that it had to be re-funded by congress, but while people were busy, out buying new cars, they apparently forgot to purchase clothes, batteries, food and other consumables. The numbers reflected the thinking of many who believe that the economy is still not on solid recovery ground, and they may be right, though there's enough activity to believe that the worst is behind us.

The retail sales figures knocked the starch out of stocks at the open, but they quickly rebounded and stayed mostly positive for the remainder of the session, adding another leg to yesterday's rally.

Dow 9,398.19, +36.58 (0.39%)
NASDAQ 2,009.35, +10.63 (0.53%)
S&P 500 1,012.73, +6.92 (0.69%)
NYSE Composite 6,604.10, +65.23 (1.00%)

Advancers were solidly ahead of declining issues, 3987-2444. New highs outpaced new lows, 157-54, and volume was moderate, though the NYSE was very quiet. The day's trading was not very volatile, but the positive tone bodes well for the future, though a slight correction, which everybody under the sun seems to be calling for, would not be a surprise. There still could be more upside before any major bout of profit-taking occurs, since the news flow has been generally good and earnings season is well past.

NYSE Volume 913,417,000
NASDAQ Volume 2,117,709,000

Commodities were mixed, though oil gained 36 cents, to finish the day at $70.52. Gold was up $4.00, to $956.50, while silver was the big winner, gaining 40 cents to $14.99.

Tomorrow morning's CPI report is not likely to cause any consternation in the markets because it will be a rather benign number.

Wednesday, August 12, 2009

Markets Regain Positive Tone on Fed Rate Decision

It may not have been just what the Federal Reserve's Open Market Committee did or said so much as a general mood that they wouldn't do anything to upset the rather delicate balancing act currently underway in world markets.

The Fed, as expected, kept the Federal Funds rate at 0 to .25%, and the discount rate at .50%, said more about improvements in markets than deterioration and slipped in a line or two suggesting that there was no more need for further quantitative easing - they've pledged to buy up to $300 billion in Treasury notes - after the end of October.

For a change, markets were markedly higher prior to the 2:15 pm announcement and changed little afterwards, with stocks more or less drifting at sustained levels into the close. This shows that Fed chairman Ben Bernanke understands the fragility of the situation and is very cautious about how Fed actions are explained to the markets and general public. Nearly a year after the worst financial shock since the Great Depression, Bernanke's Fed has provided leadership and persistence to bring the US and world economies back from the brink of disaster. Whether it's black magic or shrewd understanding of economics, he deserves credit for at least righting a ship that had gone seriously off course.

The next step is to bring back GDP growth, and jobs, no easy tasks, though today's response on the financial markets seem to indicate that the mood of investing professionals has definitely turned the most positive since September of 2008.

Dow 9,361.61, +120.16 (1.30%)
NASDAQ 1,998.72, +28.99 (1.47%)
S&P 500 1,005.81, +11.46 (1.15%)
NYSE Composite 6,538.87, +75.25 (1.16%)

Bolstering the optimistic tone was a return to advancing issues dominating decliners, 4690-1770, More new highs than new lows, 126-53, and a slight uptick in volume.

NYSE Volume 1,306,697,000
NASDAQ Volume 2,154,837,000

Commodities seemed to appreciate the mellow tone of the Fed announcement. Oil gained 71 cents, to $70.16; gold marked $4.90 higher, to $952.50, and silver gained 24 cents, to $14.59.

The Fed decision was crucial for the market to retain confidence. Next up is a broad survey of retail sales on Thursday, with preliminary CPI figures due out Friday, along with Capacity Utilization and Industrial Production reports for July.

Tuesday, August 11, 2009

Was Friday the Top?

If you're prone to watching the financial news networks - warning, doing so may be harmful to your portfolio - Tuesday must have been like living in a giant echo chamber. Everyone on the air was screaming "sell, sell, sell," neatly flowing into the dwnward trend of the market, for the second straight day.

Anyone who pays attention to the talking heads on CNBC or elsewhere probably noticed that the mood had shifted dramatically from the effusive optimism on Friday to the terrified pessimism on Tuesday. The reasons for the sudden change of heart are manifold and diverse, but the overriding themes were that markets had run too far, too fast, and that the banking sector was being mercilessly pounded.

The crazies on TV are probably not so much in tune with the inner workings of the market as say, your average cat or dog. The downturns over the past week have been generally mild, and today's was nothing really different. Investors were taking profits at the end of a particularly solid earnings season came and went. There's nothing obscene or mysterious about taking some money off the table. In fact, it's rather prudent, sound and eventually productive for the markets. Any money coming out of stocks today will likely go back in within weeks. Traders, being driven alternately by fear and greed, won't sit idle for long, especially if stocks rebound quickly, though a prolonged period of sideways movement cannot be ruled out altogether. By the start of football season, in about 3 weeks, stocks won't be much changed from current levels.

Another consideration is that the financials, which have largely led the most recent one-month rally, are more than a little overbought. Remember, it was less than a year ago that the largest banking institutions in the world were about to implode from various malinvestments and poor money management. Faith in these same companies is fickle and thinly-based. A cyclical movement away from financial stocks and into more fundamental companies like industrials, key services or raw materials makes more sense than an abrupt end to the rally.

Dow 9,241.45, -96.50 (1.03%)
Nasdaq 1,969.73, -22.51 (1.13%)
S&P 500 994.35, -12.75 (1.27%)
NYSE Composite 6,463.62, -86.43 (1.32%)

On top of the aforementioned rationales for the rally not really being over, the lack of volume on Tuesday was really the most telling signal that not everyone was on the CNBC selling bandwagon. To say that the pace of trading was slow would be putting it lightly. Stocks were absolutely crawling off the ticker. There was no sign of the usual rush for the exits that would normally accompany a major sell-off. Losers beat gainers, by a substantial margin, 4682-1745. New highs maintained their edge over new lows, 108-47. The gap between the new highs and lows has narrowed, but nothing, not even our most consistent indicator of market strength or the lack thereof, moves in straight lines.

NYSE Volume 1,325,736,000
Nasdaq Volume 1,975,425,000

Crude oil futures finally cracked down below $70/barrel, losing $1.15 on the day, to $69.45. Gold gained 70 cents, to $947.60, while silver lost a penny to $14.35. Oil prices are likely to be further influenced by Wednesday's weekly inventory report. They continue to defy logic, gravity and natural supply-demand constraints. Oil should be selling for about $45/barrel because there's an absolute oversupply, slack demand and no natural disasters disruptive of supply.

One final caveat on the trading of Tuesday. Some of this can surely be attributed to fear of the Fed, which concludes a two-day meeting Wednesday with the release of their rate statement, which undoubtedly will be unchanged at 0-.25%. The kicker is whether the statement will be rife with discouraging commentary or filled with more hopeful - and helpful - statements. It's likely to be a little bit of both, after which the markets can get back to evaluating stocks instead of musing over macroeconomics.

Friday, August 7, 2009

Jobs Data Sends US Equities Rocketing Higher

An hour prior to the opening bell, the first really strong message that the US economy might actually be entering a recovery appeared in the form of the US Labor Department's July Non-farm Payroll Report, which showed the loss of jobs declining to its lowest level since August 2008. The number of jobs gone begging in July was -247,000, well below the estimated 325-350,000 which had been predicted. The unemployment rate actually fell, due to shrinkage in the total labor pool, down to 9.4%, from 9.5% in June.

Investors cheered the news, at one point sending the Dow Jones Industrials up over 150 points. Afternoon trading trimmed some of the gains, but it was the best showing for stocks in two weeks and the 4th straight week of improvement on the major indices.

The NASDAQ surpassed the magic 2000 mark, while the S&P 500 leaped over 1000. The Dow closed at its highest point since November 4, 2008 (9625.28). Nothing more than continued improvement in employment was needed to send stocks on a tear. If payrolls continue to be slashed at ever-smaller rates, month-over-month, that will be absolutely the tonic the US economy needs to begin a growth path and for companies to eventually begin hiring. The creation of American jobs is the #1 issue facing the economy and the news of the day put a positive tint on the entire labor picture.

Dow 9,370.07, +113.81 (1.23%)
NASDAQ 2,000.25, +27.09 (1.37%)
S&P 500 1,010.48, +13.40 (1.34%)
NYSE Composite 6,586.71, +69.04 (1.06%)

Advancing issues finished well ahead of decliners in the broad-based rally, 4749-1729, while new highs continued to sprout up, numbering 210 on the day, as compared to just 79 new lows. The only small negative was volume, which tracked a bit slower than the previous two down sessions, though not considerably. With the amount of fund money still in hiding, there still seems to be a mood of caution, though Monday may prove to be a test of how long investors are willing to watch profits slip by before taking the plunge back into stocks.

NYSE Volume 1,484,737,000
NASDAQ Volume 2,345,724,000

Commodities were almost uniformly priced lower, with September light crude losing $1.01, to $70.93 and gold slipping $3.40, to $959.50. Silver bucked the trend, gaining 2 cents, to $14.67.

The jobs data was about as positive a sign investors have seen since the depths of the financial crisis in the Fall of 2008 and Winter of 2009. Credit for averting a major economic catastrophe must be awarded to Ben Bernanke and the Federal Reserve, for the unorthodox methods used to pump money into the US economy through a variety of means.

While the lasting affects of the Fed's many moves are still unknown, it's nearly certain that their actions helped keep the economy of not only the US, but the entire world, from falling off a cliff.

Thursday, August 6, 2009

Stocks Slip for Second Straight Session

US stock indices finished in the red for the second straight day as another spate of so-so economic news crossed the new wires. It wasn't so much the initial jobless claims figures that shook things up - they were improved over the previous week at 550,000, but the continuing claims were higher, at 6.31 million, due to extensions in unemployment benefits keeping more workers on the government dime for longer than the usual 39 weeks.

With money coming in and no prospects for gainful employment on the horizon, many of those already furloughed are living check to check, those being furnished by government agencies. As long as no new jobs are being created, America will continue to devolve from a nation of entrepreneurs into a de facto welfare state, with government picking up the tab for everything from rent to food to health care to spending money. The hard side of that reality is for the businessman or woman who will face ever higher taxes and costs related to doing business with a sub-prime clientele.

The path of the nation doesn't have to be as stark, though the current crop of clowns in congress certainly seem to be pushing in that direction. Gone is the resolve to work hard, the commitment to family values and self-reliance. They are being rapidly replaced with the mantra of "good-for-the-whole" socialism, with all of its incentives for sloth, laziness, avarice and assorted vices. The malaise which began with a real estate bubble promoted by George W. Bush's "ownership society" - truly the most false and baseless political creed of recent memory - has proceeded along a perceptible, predictable and inescapable path to homelessness and destitution across a wide swath of the country.

Some areas are doing better than others, obviously, but the hardest hit are those which have suffered the double-whammy of rampant unemployment on top of foreclosures, such as Detroit, most of southern Florida, Las Vegas and many parts of exurbia Southern California. The deep South, never a bellwether for enterprise, is still largely backwards, the Northeast and West Coast are still culturally significant and maintaining a facade of social manners, though the biggest states - New York and California - are overburdened by huge government apparatus and absurdly high rates of taxation. The Midwest continues to hold pockets of civility, though many of the larger cities are reeling from the economic downturn.

While most to these realities are overlooked by the financial media and Wall Street's "everybody's an investor" mentality, the general welfare of the bulk of the lower and middle class populations is not of great concern so long as government largely continues to foot the bills. All of this works for smart companies who ignore the larger picture, have cut labor and other costs and continue to profit and take market share. The largess of the government these past five months has been like manna from heaven for many keen companies. They'll keep making money without regard to its source.

That's why the past two days haven't been very dramatic. Investor types know that their recent gains could eventually sour, but current government policies, like cash for clunkers, are greasing the wheels with billions of borrowed dollars. And those polices are going to stay in place and have other, similar, social-programming policies piled atop them. Business could care less, as long as the money continues to roll in.

Dow 9,256.26, -24.71 (0.27%)
NASDAQ 1,973.16, -19.89 (1.00%)
S&P 500 997.08, -5.64 (0.56%)
NYSE Composite 6,517.67, -40.52 (0.62%)

Declining issues grabbed the edge over advancers once again, today by a wider margin, 4185-2223, but new highs were better than new lows, 169-63. Volume continued to run at a less-leisurely pace than in previous weeks for the second straight day.

NYSE Volume 1,389,338,000
NASDAQ Volume 2,447,769,000

Commodity prices stagnated, with oil off 3 cents, to $71.94, gold down $3.40, to $962.90 and silver off 12 cents, at $14.65.

The real troubling news came from the retail sector, which has been taken out to pasture and summarily slaughtered over the past 12 months, as company after company reported dismal same-store sales in comparison to a year ago. Those retail figures are likely to remain bad until they can be matched up against already bad numbers, and that won't begin until November or December at the earliest. While retail wonks are concerned about back-to-school sales (somewhat of a non sequitur - how much beyond a few new items of clothing, notebooks, pens and gadgets do students really need?), the more serious concern is the holiday season, now less than five months out. After a dismal Christmas season for many retailers, the concern is that consumers will still be buying at less-than-robust levels. That may already be a given and currently being priced into many retail stocks, though the consumer tech area could really be hit hardest of all through the fall and winter.

Looking ahead to Friday, market sentiment will largely be in response to the government's non-farm employment report for July, which is expected to show job losses in the neighborhood of 325-375, 000. The number, unless it is completely out of line with the usual government massage, should fall into that range, which should cheer investors. The actual anticipatory knee-knocking trepidation leading up the the big Friday number has been overdone. While nobody expects miracles, any improvement will be billed as a good sign of a slowly recovering economy, whether or not that is actually the case. Espeically on the heels of ADP's private sector jobs number of -371,000 for July, released just yesterday, the government figure is quickly becoming an anachronistic afterthought, month after tiresome month.

Wednesday, August 5, 2009

Stocks Turn Lower on Jobs Report

The middle of the week was a day spent underwater as investors weighed a benign employment report from private firm ADP and a lower ISM services number that sent jitters through the market.

While ADP reported that private employers shed 371,000 jobs in July, the ISM services index dropped unexpectedly from 47 in June to 46.4 in July. That prompted more profit-taking than usual around the 10:00 hour as the major indices slipped to their lowest levels of the session soon afterward. Losses were limited, because the prevailing mood is that the worst of the recession is now behind us, and traders are putting much more faith in the efforts of lawmakers on Capitol Hill and in the administration to keep diligently working on getting the US economy back on a positive growth track.

The ADP report foreshadows the "official" government non-farms payroll data due out on Friday prior to the opening bell. It is expected that jobs losses were less severe in July than in previous months, though unemployment continues to be a thorn in the side of the bulls. Positive growth cannot be expected if employers are still cutting payrolls, and even though unemployment is a lagging indicator, investors remain wary that the economy could take another turn for the worse.

What's almost a certainty regarding job losses and foreclosures are government deficits as far as the eye can see. With fewer people employed and/or in self-owned properties, government revenues will not keep pace with the outlays already in municipal, state and federal budgets. Most of the states face deficits for the next two fiscal years, with few exceptions. The problems facing cities of all sizes have yet to brought into serious focus.

However, government budgets and how they pay their bills are a sideshow compared to the rest of the private economy. For better or worse, Americans have been bred to spend every last dollar on goods and services whether they need them or not and the spending, especially by those on public assistance, retirement income or other such pension programs, has been keeping the economy from completely collapsing. Those who are still working have reigned in spending somewhat, while the rich are finding bargains galore as luxury goods have been slashed to fire sale prices in some cases. Cash has been for months and is now king, and will remain so until the labor and housing markets improve.

Retailers are taking it hard, along with commercial developers. There is an overhang of commercial space supply nationwide. Most medium to large cities have aging structures dotting the landscape that are now empty and will remain so until either the market complete caves in and forced bankruptcies are the norm, or the general economy improves to a point at which commercial development makes sense. One such area is currently in apartment building, which has seen growth as more and more Americans are forced out of their homes and into more affordable rental units.

It's still a dicey situation, especially since banks are seeing more foreclosures now than they did during the subprime circus. Foreclosures will continue at a high level until the banks gain some sense of market economic (not likely) or more Americans are on the street or in substandard housing. Today's home buyers believe they're getting bargains when the reality of the situation says they're still overpaying by 10 or as much as 25% in some markets.

Eventually, there will either be another major blow to the economy or things will sort themselves out as in normal recessions. This is hardly a normal recession, however, so betting the farm on improvement over the next 12-18 months is probably foolhardy. Stocks have been appreciating at an accelerated rate, but today's equities more resembles a casino than an orderly market discounting future earnings. There's been a radical downsizing across American enterprises - a trend that is notable, frightening, and seemingly unstoppable. If 2008 was remembered as the year the markets went bust and 2009 a further bottoming out with a rapid recovery, 2010 may well be defined as the year reality struck home. Expect some major bankruptcies in the retail and commercial spaces soon and a rebirth of small business and cottage industries as Americans, ever resourceful, find new ways to skin cats and not only bring home the bacon but make it right in their family rooms.

Dow 9,280.97, -39.22 (0.42%)
Nasdaq 1,993.05, -18.26 (0.91%)
S&P 500 1,002.72, -2.93 (0.29%)
NYSE Composite 6,558.19, -10.95 (0.17%)

In general terms, today's pullback was acceptable and probably healthy. Stocks have been on quite a tear for five months and some give back is expected. This by no means that the current rally has run out of steam. After being on the wrong side of the trade for some time, late-comers will eventually set up a blow-off topping pattern after which stocks will take some serious dips and dives. That's for the fall, however. For now, the rally shows no lack of momentum.

On the day, advancing issues were beaten by decliners, 3722-2727. New highs were recorded by 218 companies, as compared to the 67 new lows. The high-low indicator continues to scream "buy" even though stocks are already overpriced in many categories. But, as market participants are sure to point out, there's always someone who will buy if you're selling. The key is to not be the last guy in line, a condition which is quickly approaching. Better buying opportunities will likely avail themselves in months ahead - either later this year or in 2010.

Volume was a little better than what has been the norm, which may mean nothing at all, or that traders are getting more serious as summer winds down.

NYSE Volume 1,921,048,000
Nasdaq Volume 2,392,697,000

Commodities were mixed, but mostly higher. Oil gained 55 cents, to $71.97. Gold was down by $3.40, to $966.30, while silver, the buy of the year, gained 7 cents, to $14.76.

Tuesday, August 4, 2009

Stocks Churn Out Another Gain

Stocks traded lower early, then rebounded quickly, but remained mixed throughout most of the session Tuesday following Monday's big gains. The follow-though was encouraging to the bulls, who now are becoming more confident that the nearly 2-year bear market has relented and the US economy is on a path back to growth.

There are positive signs beginning to blossom everywhere, much more so than in the Spring, when the "green shoots" mentality hit the market. Though stocks stumbled through June, July was the best in 20 years, and August is already sporting gains. How much further the rally can continue and whether or not it is actually a bull market remain on the consciouses of traders, analysts and investors worldwide.

Dow 9,320.19, +33.63 (0.36%)
NASDAQ 2,011.31, +2.70 (0.13%)
S&P 500 1,005.65, +3.02 (0.30%)
NYSE Composite 6,569.14, +3.49 (0.05%)

Among the highlights of the most recent rally has been both the advance-decline line and the major shift in new highs vs. new lows, despite the market making comparison with some very poor 2008 prices. These indicators remain very positive short term and should continue to guide trading. On the day, winners outpaced losers, 3728-2702 and new highs galloped ahead of new lows, 250-88. Volume was expectedly moderate, owing to the mid-summer time frame and general skittishness of many investors who may still be on the sidelines.

The big bet is whether or not the most severe banking crisis since the 1930s has finally been averted and it seems that could be the case. With a good deal of sleight-of-hand by the Fed, Treasury and the easing of accounting standards, the banks have survived, even if only as shells of their former selves. Banks such as Bank of America and Citigroup may be technically bankrupt, but nobody wants to hear that story, so life goes on as though they were pure as driven snow in their balance sheets.

Obviously, there are still bargains aplenty in the US markets and elsewhere around the world. The Far East, including China, Indonesia, Malaysia and parts of the East Asian peninsula may be offering the best investment opportunities on the planet, with South America coming in a strong second. These underdeveloped nations could benefit from perceived low costs for raw materials, making way for a great global infrastructure expansion. Surely , this is the case in China, and other countries are following suit.

While the rest of the world may actually outstrip the USA in terms of growth, America is still seen by many as the most prosperous and developed nation, for good reason. The US is a world leader in many markets, despite having off-shored much of its manufacturing in recent years. The upside is that aging and ancient plants built with 19th or 20th century technology should make way for more efficient building and greater technical opportunities. Its still a mixed bag of blessings hidden within the darker clouds overhanging Wall Street, but the resilience of American enterprise is legendary and must not be viewed as a failure by any means.

NYSE Volume 1,355,576,000
NASDAQ Volume 2,255,762,000

Commodities were mixed as September Light Crude dipped 16 cents to $71.42, while gold gained prodigiously, up $10.90, to $969.70. Silver followed suit with a 44 cent rise, to $14.70.

On tap for Wednesday is the ADP Employment Change for July, a key number which should move the markets. The expectation is that the economy shed only 350,000 jobs during the month. Should that be the case, it would be very positive for the market and the overall sentiment. The report is due to hit the news wires at 8:15 am.