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, dtmagazine.com. Mostly, these issues, from not having email or FTP access and various other problems were caused by the hosting company, x7hosting.com and their complete incompetence in migrating my site - and many others - from one set of servers to another. It is my intention to sue x7hosting.com 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.

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