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:

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