Wednesday, September 2, 2009

No Follow-Through to Downside

There really wasn't much to trade upon on Wednesday, unless one is prone to picking up bargains the day after a substantial decline. The major indices traded in very narrow ranges and finished with marginal losses across the board. While a fourth straight losing session for the S&P may be significant in a chartist's world, today's close brings that average down to whare it was two weeks ago, hardly a cause for concern.

Oddly enough, there seemed to be more fright toward the close, as all the averages were at break even with about 1/2 hour left in the trading day and then drooped. Volume, which was the big story yesterday (read: planned liquidation of some positions mostly accomplished within a two hour period), was back to its usual somber self. There just wasn't anything for anybody to get excited about, not even the ADP private sector jobs data, which revealed that another 298,000 Americans got pink slips in August. The number was worse than expected, but, then again, expectations for a swift recovery are going to be off the mark. That the number was better than the prior month, which was revised lower (fewer job losses) seemed to be good enough to keep markets stable, at least.

Though the ADP number seems to usually upstage the government non-farm payroll data, which always is delivered two days later, investors may still be watchful for that figure, due out on Friday morning prior to the market open. Suffice it to say that it should not be all that dramatic.

Dow 9,280.67, -29.93 (0.32%)
NASDAQ 1,967.07, -1.82 (0.09%)
S&P 500 994.75, -3.29 (0.33%)
NYSE Composite 6,474.79, -13.02 (0.20%)

Decliners held a slight advantage over advancing issues: 3580-2780. but new highs maintained their edge over new lows, 74-51, though the margin narrowed significantly. The risk of the high-low numbers flopping over is pretty good presently, though I'm personally not buying into the "correction" argument until I see actual carnage of 6-8% declines off the top and heavy volume on a consistent basis. Those two conditions have not been met presently.

NYSE Volume 1,565,960,000
NASDAQ Volume 1,989,856,000

Commodities are behaving as one would like them. Oil finished dead flat at $68.05, while gold zoomed up $22.00, to $978.50, and silver appreciated another 31 cents, to $15.37.

We still have deflation, low interest rates and a sluggish, though recovering economy. Conditions could not be much better for business fundamentals. The correction that is supposed to happen is going to be forgotten soon. Economic data has been just good enough to keep the economy chugging along and there's more than enough investment money sloshing about to keep stocks on a high for some time. The alternatives - real estate and fixed income - don't offer much appeal. The former is too risky and the latter offers no profit.

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