Monday, November 30, 2009

Cyber Monday Overshadowed by Dubai Issues

The continuing worldwide real estate debt saga was revived last week when developer Dubai World announced to anyone interested that it might like to rework the terms on some of its loans. In particular, the developer of some of the most expensive and outlandish buildings and communities in the world wanted a six-month moratorium on its outstanding debt.

That message roiled markets worldwide as bankers around the globe rolled their eyes. It was as though the entire financial community was to revisit the financial crisis of 2008 that nearly crumbled the entire global structure. That was last week.

On Monday, markets worldwide recovered, on consideration that the Dubai issue would be contained. In the US, stocks spent the majority of the session in the red, but leapt into positive territory after 3:00 pm on word that Dubai World would seek to restructure $26 billion of its debt.

Crisis averted? For now, that seems to be the case, though there are still billions of dollars worth of commercial and residential real estate worldwide that is similarly upside-down, with what's owed being more than current valuations, so, debt, blow-ups similar to what's occurring in Dubai may become more and more commonplace rather than an outlier event.

Such a backdrop makes investing of any kind somewhat more risky than normal. Imagine that all assets are under scrutiny, that the valuations of everything - right down to the currency in which the assets are denominated - are of skeptical nature. That's at the crux of not only the decline in residential real estate values, but also in the rise of gold, the decline of the US dollar and the upward swing in stocks.

Wherever investors feel less risk, or more opportunity for arbitrage, that is where money will flow. Whenever there's a crisis, such as over the past five days with the Dubai issues, money flows into the US dollar, seen by many as the absolute last safe haven. On mellower days, stocks are the choice, and the dollar is sold off. Through it all, however, two constants have remained: gold is moving steadily higher; residential (and now commercial) real estate is devaluing. There's more safety, supposedly, in bricks of ore than in houses.

Realistically, neither the gold bugs or real estate speculators have all the answers. Some areas of the world are in better shape than others, obviously, but so extreme is the fear that gold is seen as a better bet than houses. In other words, the market is telling us, shouting at us, to become more liquid. Cash, gold and stocks, which can be converted readily and without much fuss, are currently preferred to hard assets like buildings, homes, and land, which cannot be moved and are not easily liquidated.

What the ongoing Dubai issue says is that the world is facing a very uncertain future, one in which value may be placed more upon the liquidity of assets rather than some intrinsic value. After all, you can live in a house. You can't do that with bars of gold, cash money or stock certificates. Thus, all trading is risky, though, bottom line, cash remains king (until that is devalued, too).

Dow 10,344.84, +34.92 (0.34%)
NASDAQ 2,144.60, +6.16 (0.29%)
S&P 500 1,095.63, +4.14 (0.38%)
NYSE Composite 7,092.36, +22.27 (0.31%)

Simple indicators confirmed the small gains of the day. Advancing issues, which had been lagging all day, turned around and beat decliners, 3463-3031. There were 145 new highs to 96 new lows. Volume, like it or not, continues to moderate around 2 billion on the NASDAQ and 5 billion on the NYSE, in what has to be recognized as a kind of "new normal." Obviously, there are more than just a few investors - of all sizes and stripes - who have not re-entered the market after last fall's collapse. Those types can hardly be blamed. Surely some of them were completely wiped out. Many others simply prefer now to preserve cash rather than invest it. This could become all the rage as the baby boomer generation - badly burned in last year's financial conflagration - pulls back from riskier behavior as they approach retirement age.

NYSE Volume 4,935,098,500
NASDAQ Volume 1,926,715,500

Commodities snapped back as the dollar fell late in the day. The price of crude oil was also affected by news that a British yacht had been captured by Iranian sailors on November 25 and the crew are still being held. This brings into play not only international relations, but trust of the news media, as the world is just now hearing about an event 5 days old.

In any case, when the news broke late today, the price of crude catapulted higher, closing at $77.28, up $1.23. Gold advanced $7.50, to $1,183.00, with silver gaining 21 cents, to $18.54 at the close.

Anecdotal evidence from Black Friday seems to be confirming that shoppers spent slightly less than last year, though results have been mixed. Not surprisingly, nearly every report states that consumers are shopping for "value."

During times when the value of everything is in question, that ordinary people would be careful of their spending confirms the global, macro-economic outlook.

Saturday, November 28, 2009

Short Session, Big Losses on Dubai Debt

Friday's abbreviated session answered the question of why stocks did not advance much in Wednesday's pre-holiday trading, when all of the economic news was positive. Overhanging the market was word from Dubai - on Wednesday - that the government was requesting a six-month moratorium on interest payments, mostly from its major real estate developer, Dubai World.

While the news did not noticeably affect markets in the US, the news shook Asian and European markets violently on Thursday. US stock exchanges were closed for Thanksgiving.

Quoting the NY Times:
According to data from the Bank for International Settlements, foreign banks have $130 billion of exposure to the United Arab Emirates, with Britain having the largest exposure, $51 billion. Banks in the United States have debts of $13 billion.

At the open on Friday, stock futures were indicating a massive sell-off, with Dow futures down more than 200 points. After an initial selling spree which sent the Dow down more than 230 points, cooler heads prevailed for a time, bringing the indices back to some level of respectability and calm. By the close, however, fears of another round of banking crises had investors scurrying for the exits, not wanting to hold positions over a weekend in which many of these issues would be pondered.

Dow 10,309.92, -154.48 (1.48%)
NASDAQ 2,138.44, -37.61 (1.73%)
S&P 500 1,091.49, -19.14 (1.72%)
NYSE Composite 7,070.09, -162.03 (2.24%)

On the day, declining issues far outpaced advancers, 5211-1086. New highs held a slim edge over new lows, 98-85. Volume was only average, indicating a hope that markets would return to a more normal tone in days ahead. There was little panic to speak of, though every sector finished in the red.

NYSE Volume 2,846,343,000
NASDAQ Volume 972,038,750

Commodities took the bigger hit. Oil tumbled $3.06, to $74.90, its lowest close in months. Gold fell $12.60, to $1,176.00, though the price had fallen by as much as $30 during the day. Silver slipped 47 cents, holding at $18.34.

What Dubai means to US banking interests is a relatively small matter, as only Bank of America (BAC) and Citigroup (C) hold anything approaching what would be considered large obligations. The general fear - a holdover from last year's major meltdown - is a more severe liquidity issue, cascading across the financial landscape in unpaid loans and the roll-over of resultant guarantees (Credit Default Swaps) which would put more banks at risk.

While it is possible that another severe shock could ensue, it's more likely that central banks will intervene in the interest of the banks, propping them up with more guarantees and looser credit facilities, much like last year's rescue. Still, there are palpable fears out there, that the entire system is prone to disruptions like this as more emerging markets face similar issues.

Paper money rolling off printing presses at high speed can only delay the inevitable. Eventually, losses must be taken or parties made whole. The most probable outcome is continuation of the deflationary spiral, which the central bankers of the world wish to avoid.

The simplest way to understand the issue is in terms of mortgages. As more money is pumped into the system, chasing the bad, assets - everything from stocks to houses - become less valuable. The home purchased for $200,000 a year ago is only worth $160,000, an so on. Devaluing currencies to reflect lower asset values, a hard, painful choice, seems the proper medicine, but one which world banking and political leaders have yet refused to consider.

Wednesday, November 25, 2009

Wading Through Data, Stocks Up in Light Trading

For the second straight session, investors were met with a slew of economic reports prior to, and then, during the trading session which influenced decisions on stocks. However, with the Thanksgiving holiday on the horizon, volume was so light that no reasonable conclusions can be drawn from the day's results.

As it was, stocks returned modest gains which more than offset Tuesday's slim losses, though given the positive tone of the news, one would normally have expected much better.

Dow 10,464.40, +30.69 (0.29%)
NASDAQ 2,176.05, +6.87 (0.32%)
S&P 500 1,110.63, +4.98 (0.45%)
NYSE Composite 7,232.12, +61.86 (0.86%)

Advancing issues led decliners, 3849-2576, and new highs beat new lows by an impressive 332-66. Despite the horrendously low volume, sentiment, driven by some key numbers, was quite positive.

NYSE Volume 3,479,942,250
NASDAQ Volume 1,414,185,375

Among the data received in the morning was an unexpected drop in initial unemployment claims, down to 466,000, when expectations were for around 500,000. Also positive were the readings on personal income (up 0.2%) and personal spending (up 0.7%). The lone negative result was in durable orders, which showed a 0.6% decline for October, though most of the loss was based on lower defense spending, which, in the long term, is likely a positive. Having the government spending less on arms for war would likely rank high on the list wishes of most Americans.

After the session began, bew home sales also showed an unexpected uptick, to a seasonally-adjusted 430,000 units in October. Even with those solid numbers in place, stocks showed barely any upward interest, meandering along in a very narrow range throughout the day.

The US dollar show weakness once again, boosting gold prices to new records. Gold closed up $20.60, to $1,188.00. Silver gained 31 cents, to finish at $18.80. Oil, after a sluggish morning, was up $1.94, to $77.96.

Overall, there simply was not enough money going into stocks to create much of a stir. Despite the slow trade, however, the Dow and S&P managed to finish at 13-month highs.

Markets are closed on Thursday for Thanksgiving, and re-open for a short session, from 9:30 am until 1:00 pm ET on Friday.

Tuesday, November 24, 2009

Stocks Slightly in Red Amidst Heavy Economic Data

With investors digesting an avalanche of economic data, stocks spent the entire session in the red, even though the major indices finished with modest losses by day's end.

The overall tone was set early on, when the government reported its first revision to 3rd quarter GDP, which came in exactly at the estimates, showing the economy grew at a 2.8% annualized pace. That seemingly wasn't good enough, as futures fell immediately after the reading.

At 9:00 am, the S&P/Case Shiller 20-City Home Price Index showed a decline of 9.4% for September, slightly more than estimates. That reading didn't help matters, nor did a positive reading on consumer confidence - 49.5, up from 48.7 in October - at 10:00 am.

The negative tone was exacerbated by a stronger US Dollar, discouraging the normal risk trade. At 2:00 pm, minutes from the latest FOMC meeting of the Fed (Nov. 3-4) were released, and that seemed to calm some nerves into the close. What was revealed in the minutes was unsurprising, as the Fed saw industrial production improvements, slight increases in personal expenditures, low inflation risk and continuing high unemployment.

There was some actual discussion amongst the participants concerning the ever-decreasing value of the US Dollar, though overall the committee was unfazed by what they say as a natural, orderly unwinding of "safe-haven demand" as the economic conditions stabilized around the world. With that kind of language coming straight from the Fed, investors should be quite a bit less concerned that the dollar is going "off the deep end" in relation to other currencies, and about to lose its favored reserve status.

Dow 10,433.71, -17.24 (0.16%)
NASDAQ 2,169.18, -6.83 (0.31%)
S&P 500 1,105.65, -0.59 (0.05%)
NYSE Composite 7,170.26, -16.07 (0.22%)

On the day, simple indicators were in line with the headline numbers, with declining issues beating back advancers, 3658-2799. New highs exceeded new lows, 186-65, and volume continued to poke along at the new-normal pace.

NYSE Volume 4,345,491,000
NASDAQ Volume 1,873,632,375

Commodities were mixed, as they have been in recent days. Crude oil futures continued to slip, down $1.54, to $76.02, the lowest level in more than two months. Gold gained $1.90, to $1,166.60, though silver dropped 16 cents, to $18.49.

Tomorrow's trading will again be influenced by economic data, including readings on personal income, weekly unemployment claims, durable goods orders, another consumer sentiment reading from the University of Michigan, new home sales and crude inventories. With all that to consider throughout the day, traders will likely be giving thanks just to get away from the flurry of facts, numbers and statistics being thrown about.

After the one-day holiday on Thursday, markets will be open for a half-session, with everything shutting down at 1:00 pm on Black Friday. With retail's biggest one-day event as a backdrop, the focus will be turning from drab economic data to how robust or dull the holiday shopping season will be. Estimates have been somewhat tempered, with most calling for only slight improvement from last year, which was one of the worst on record.

Any anecdotal evidence from Black Friday will make for another spurt in the indices, which are close to a high point, even though the usual talk of the market being "tired" has not surfaced of late. There could be another 5-10% or more left to run before the year is out, as stocks do not seem to want to stay down for long, as has been the case since the beginning of the rally back in March.

Monday, November 23, 2009

Higher Finish for Stocks to Open Holiday Week

Encouraged by an impressive 10.1% monthly gain in existing home sales for October, to a seasonally-adjusted annual rate of 6.10 million units, investors piled into stocks with reckless abandon Monday morning. Once again, the risk trade provided additional lift, as the US Dollar fell against most major foreign currencies. Shortly after 10:00 am ET, the Dow Jones Industrials reached their highs of the day, up more than 175 points, with dead aim at 10,500.

Though stocks meandered throughout the remainder of the session and finished off their highs, it was still a robust trading day in New York, with renewed buying interest during the final half-hour. Stocks finished much closer to their high than the open, countering three straight days of losses and leaving the Dow at a closing high for the year.

The NASDAQ and S&P finished with healthy gains, retracing toward the highs set early last week. With markets closed Thursday for the Thanksgiving holiday and a half-day session on Friday, stocks are poised to finish November on a high note. The last day of trading for the month is a week away, on the 30th.

Dow 10,450.95, +132.79 (1.29%)
NASDAQ 2,176.01, +29.97 (1.40%)
S&P 500 1,106.24, +14.86 (1.36%)
NYSE Compos 7,186.33, +101.86 (1.44%)

Advancing issues outperformed decliners handily, 4845-1644, or roughly 3:1. New highs totaled 429, to just 69 new lows. Volume continued to be disappointing to many market observers, though by now the lower volume figures have to be accepted as the "new normal" as the recovery for stocks continues to stretch its gains. Those in the bearish camp cannot honestly espouse the thinking that this rally, devoid of heavy volume for the most part, is not the real deal. A nearly 4000 point rise in the Dow Jones Industrials has to be considered an exceptional rally, no matter the level of trading. Those who have missed one of the largest moves in the history of the market are only trying to salve the wounds received from non-participation.

NYSE Volume 4,468,339,000
NASDAQ Volume 1,859,754,500

Gold continued to be the story of the year, gaining another $18.00, to $1,164.80, another record close. Silver did its best to keep pace, picking up 18 cents, to $18.59. Oil was hardly affected, up just 9 cents, to $77.56.

Today's rather euphoric sentiment may not be long-lived, however, as more economic data will flow to the market prior to the opening bell on Tuesday. The second reading on GDP is expected to come in well short of the initial measure from last month of 3.5% growth. Experts are looking for a more temperate 2.8% read. At 9:00 am, the Case Shiller 20 City Index is released. Fed minutes from their November meeting are due out at 2:00 pm. The minutes are highly-anticipated. After keeping interest rates at the same level last month, analysts did not get any clue as to future Fed moves. There is hope in some camps that the central bank will offer more clarity about when it plans to tighten (raise) rates.

On the bullish side, the outlook is for the Fed to reveal little more than the normal shadowy wording that normally accompanies the initial release. Besides the US dollar trade set-up being currently positive for stocks, investors aren't really keen on the Fed making any premature moves, and, if history is any guide, they'll be in no hurry to take away the punch bowl, tightening only when inflation already has a firm grip. With Ben Bernanke - an inflation dove - at the helm, expect this Fed to keep rates low for much longer than necessary.

Those seeking some guidance from the wording of the minutes are those same bearish types who still have cash in money market funds, earning less than one percent. For them, the market gains are painful. For those in the game, it's been a delight.

Sunday, November 22, 2009

Customizable Visa Gift Cards the Ideal Holiday Treat

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Friday, November 20, 2009

Stronger US Dollar Drags Down Stocks

This is an unusually strong market, even if volume indications do not verify such.

After a week of US Dollar jawboning and actual intervention, driving it off its lows against most of the raw material currencies - Brazil, Canada, Australia - and especially against the Euro, the US Dollar seems to have stabilized, taking US stock markets in the opposite direction.

There seems to be a concerted effort to eliminate the "risk trade" associated with the weak dollar, more than likely initiated by the Fed and US Treasury, under some darker moniker, no doubt, in advance of actual tightening by the Fed come this Spring or Summer at the latest. The risks associated with a weaker dollar are too great for the Fed and the rest of the developed nations to tolerate for long, so an unwinding of the carry trade has to be in the works, or so it seems.

Despite this effort, stocks barely stumbled in the week-long effort. There have been a number of casualties, but everybody with any experience in the markets knows that the liquidity-driven trade must be eventually replaced by a return to the normalcy of trading on fundamentals. The trick is to get it to happen somewhat seamlessly, without a huge downdraft in the already-heated markets.

The action this week kept the lid on stocks while giving quiet notice that the Fed and Treasury is not going to allow the US dollar to fall much further, if any.

Dow 10,318.16, -14.28 (0.14%)
NASDAQ 2,146.04, -10.78 (0.50%)
S&P 500 1,091.38, -3.52 (0.32%)
NYSE Composite 7,084.47, -33.17 (0.47%)

Stocks finished lower for the third straight session. Advancing issues were overshadowed by decliners, 3719-2713. It was the slightest margin of losers to winners of the past three days. New highs remained ahead of new lows, 127-64, which should be the case, as last year's ranges should not be difficult to beat. Highs should exceed lows all the way through March of next year and likely well beyond.

Volume was moderate, or, as the case may be, normal.

NYSE Volume 4,301,791,000
NASDAQ Volume 1,934,215,250

Once again, oil was caught up in the dollar trade, losing 74 cents, to $76.72. Gold continued on its own special track, now completely untethered from the dollar, up another $6.60, to $1,148.50, another closing high. Silver failed to keep pace, losing a penny, to $18.45.

The week was rather uneventful, though Dell's missing of targets and poor guidance was a highlight for the latter part of the week. The company seems to be in a very tight spot, with competition apparently eating into market share and margins, especially by HP, Acer and Toshiba.

Even after the small drop this week - between 1.25 and 2% on the major exchanges - the US stock rally that began in March of this year still appears to have some life remaining. Though stocks broke below the key 1100 mark on the S&P, that level should no longer provide strong resistance, since it was exceeded last week. While the skeptics will be weighing whether or not the rally has run out of steam, there's a pretty good bet that money managers will be diving right back in again on Monday, with money that needs to go to work. Unless the interventionists on the Dollar front overstep their mandate, stocks should continue apace until the end of the year.

Thursday, November 19, 2009

Perverse Dollar Trade Sends Stocks South

The US Dollar was stronger against most world currencies on Thursday. Stocks fell.

If that sounds odd to you, it should. The normal relationship of a strong dollar to strong stocks has been undercut in recent days as the new carry trade of borrowing cheap dollars and investing in risky equities has produced one of the more remarkable rallies of the past 100 years.

Sadly, it cannot continue. Eventually, days like today, when the dollar strengthens and stocks are obliterated as traders are forced to liquidate out of positions, will proliferate, killing the stock market rally. Either that, or, stocks continue to climb while we kill the dollar. Today's trading may have been illustrative in just how perverse and destructive the inverse relationship has become. One way or another, somebody's got to lose, when the truth is that a stronger dollar should encourage more investment in stocks and US companies, rather than the reverse.

There's a bit of illogic to this trade, so excuse me for thinking out loud here. If it's true that many of the hedge funds are already out of this market, then today's trade would not have occurred. There would have been honest bets on stocks, not liquidity-driven hedge-type activity. So, that argument is probably full of large holes.

Then there's the idea of trillions on the sidelines - some say as much as $3 trillion invested in money market funds, some more in bond funds and plenty in cash. Just because those people don't want to engage in the high risk of equities, it does not necessarily follow that they'll want to jump in when stocks are cheaper. Were that the case, they had ample opportunity back in the Winter of 2009-10. So, toss that rationale.

What makes sense is that the dollar will continue to weaken until the Fed signals that they're going to begin raising interest rates. Estimates of when that might happen range from June 2010 to some time in 2011. What's certain is that the Fed cannot keep rates at "near-zero" for much longer. Other nations have already begun raising interest rates - Australia and Norway to name two - while more are hinting at doing the same. When the Fed decides to begin raising rates the dollar will stop sliding against other currencies. It will actually begin gaining when our blessed federal government decides to start acting like adults and do something about the enormous deficits they are running.

Both of those events - Fed tightening and government responsibility - are inevitably tied to politics, and, with mid-term elections upcoming in less than a year, there's a good bet that there will be action by then, in fact, 4-6 months before the elections. So, June sounds like the right time for the Fed to boost 25 basis points, maybe even 50. It's also likely that the federal budgeting process will begin sounding more Republican, even though it will be dominated by Democrats.

So, where does that leave stocks? Little changed until then. The bull market remains intact, the carry trade goes on for a few more months, because, as the market is the ultimate discounting mechanism, the Fed moves will be baked in long before they actually occur. The rally should run nicely through January, and even into Spring, with a small respite during the summer and glorioski! another rally just in time for the election!

That's one way to play it. Ignore all the talk and chatter about the carry trade, weaker dollar, etc. and focus on good companies making money. Sooner or later, fundamentals will be your friend, and, by all indications, they're not too bad right now. A year from now, the crash of 2008 will be a fast-fading memory.

Dow 10,332.44, -93.87 (0.90%)
NASDAQ 2,156.82, -36.32 (1.66%)
S&P 500 1,094.90, -14.90 (1.34%)
NYSE Composite 7,117.64, -109.07 (1.51%)

Today's final numbers could have been much worse. The dollar actually weakened throughout the session, and stocks pared their losses after 10:30 am. The Dow was down 170 in the early going and gained much of that back by the closing bell. At the end, declining issues outnumbered advancing ones, 5210-1381, or nearly 4:1. It was one of the more lopsided days in recent memory, though hardly a rally-killer. It should be noted that options expire tomorrow, so much of the trading had to do with gains and losses on option trades. There were only 108 new highs, as compared to 67 new lows. The indication is that stocks are weak, though this measure cannot be trusted on a one-day move. We'll need more evidence that the bears have control before changing strategy, which remains bullish with a target of 10700 on the Dow by year end.

NYSE Volume 4,909,767,500
NASDAQ Volume 2,148,559,000

Commodities would be expected to take a hit, especially oil, which fell by $2.12, to $77.46, but gold actually rose $1.00, to $1,142.20. Silver gained 5 cents, to $18.46 per ounce. The precious metals markets have shown a recent trend away from the dollar trade. They can now be considered almost anti-currency, as they act as a hedge against all fiat (paper-based) currencies, which just happens to be everywhere in the world.

Other then the dollar movement, there was a little bit of news that might have moved markets so severely. Tim Geithner testified to the committee looking into financial reform, and any time Timmy opens his mouth in congress, it's usually a bad thing. A couple of members actually think he should resign. Not surprisingly, most of those requests for Mr.Geithner to step aside came from Republicans.

Early in the day, the entire world was reminded that bureaucracies seldom function perfectly, as air traffic across the nation was grounded due to an FAA "glitch."

Unemployment claims data was benign, and the week come to an end with no important economic data due out on Friday, and just 35 days until Christmas.

Leading Indicators for October were down slightly, while the Philadelphia Fed index was up. We have reached what is known as an inflection point.

After the bell, Dell (DELL) announced 3rd quarter results below expectations. The stock was trading down about a point, or 6.5% in after-hours activity. Gap Stores (GPS) reported a 25% improvement in profits, but the stock was being sold off after-hours, down about 1/2 a point, or 2.5%. Shares of the retailer, which includes GAP stores and Old Navy, have more thn doubled since their lows in March.

Wednesday, November 18, 2009

Some Relief for Small Business

After the near-collapse of the entire global banking system last fall (yes, it really was that close to the edge), many changes have occurred in the realm of finance, especially in the area of small business lines of credit. It's now tougher than ever for small businesses to get start-up loans, much less maintain adequate lines of credit with which to operate going concerns.

The big banks don't want to know about risky loans, since they almost went belly-up themselves just months ago because they took on more risk than they should have. Now, Citibank, JP Morgan Chase, Bank of America and Wells Fargo are still standing thanks to taxpayer-funded bailouts, but there are thousands of small businesses littered across the vast tapestry of the American financial landscape that are close to the edge or already insolvent due to the carnage from the economic tsunami.

Now that CIT, one of the large "factoring" lenders has fallen into bankruptcy, there is a need for more emergency loan lenders to handle the ongoing needs of American small business.

Many small business-people are looking forward to passage of the Business Emergency Loan Relief Act, recently introduced in the Senate by Ohio's Sherrod Brown, which would temporarily raise the SBA 7(a) loan size from $2 million to $5 million, the 504 loan size from $1.5 million to $4 million, and the ARC loan size from $35,000 to $50,000. The bill also temporarily allows customers to use the 504 loan guarantees to refinance existing business debt, which would help small businesses address cash flow issues.

The bill was introduced by the Ohio Senator in an effort to ease some of the financial pain currently plaguing American small business.

Markets Lower, But Not By Much

Once again, US equity markets showed incredible resiliency, closing with tiny losses in the face of dour economic news and a sputtering trading regimen.

With options expiration just two days away, stocks skidded close to support levels, but by the end of the day had recovered most of the lost ground and finished with modest losses.

The biggest news of the day was threefold: Warren Buffett and Goldman Sachs announced a $500 million initiative for lending to small businesses; American Express (AXP) Announced the purchase of AOL founder Ted Case's Revolution Money, a PayPal competitor; and October housing starts fell 10.6% from September and 30.6% from a year ago.

All of that news hit the street before the opening bell, the slack housing data contributing to an overall slide right out of the gate.

Dow 10,426.31, -11.11 (0.11%)
NASDAQ 2,193.14, -10.64 (0.48%)
S&P 500 1,109.80, -0.52 (0.05%)
NYSE Composite 7,226.71, -7.35 (0.10%)

By the end of the day, however, stocks stood just below where they had at the end of Monday. For the full session, declining issues beat advancers, 3716-2726. New highs beat new lows, 324-67. Volume was, as has been the case since Spring, weak.

NYSE Volume 4,902,849,500
NASDAQ Volume 1,951,870,250

Oil finished higher, up 44 cents, at $79.58. Gold rose $1.90, to $1,141.30, but was up over $1,151.00, a new record. Silver continued to ascend, up just 3 cents, to $18.42.

Trades will continue to be pushed along by the usual suspects: the US Dollar and options expiration, though the latter may not have much impact after mid-day tomorrow.

Tuesday, November 17, 2009

Logic-Defying Market Clambers Over Dollar, Data, Higher

The dollar was stronger against the Euro and the Pound.

Didn't matter.

Capacity Utilization was flat. Retailers warned of softer holiday season. The Fed was out jawboning about the dollar, bubbles and overpriced markets. More stocks closed lower than higher.

Didn't matter.

Industrial production was lower than expected and the PPI was also up less than anticipated.

None of this mattered to a market that only knows one direction presently. Up. Up. And up some more.

All of the major indices, except the NYSE Composite, closed at new 13-month highs on the day. The moves were made despite Home Depot (HD) and retailer Target (TGT) reporting earnings, warning about a slow holiday season and finishing lower. It's a market right out of a bad horror flick, that refuses to obey, refuses to die. It's the Energizer Bunny in disguise. It keeps going and going and going. There's hardly any reason to report on it, except to tell that it's up once again, or to analyze it, because any technical or fundamental analysis will be proven wrong within a session of two. It's not that one should be upset that stocks are going up, rather, to the contrary. It's just that one would like to see some rationale for the movement.

Dow 10,437.42, +30.46 (0.29%)
NASDAQ 2,203.78, +5.93 (0.27%)
S&P 500 1,110.31, +1.01 (0.09%)
NYSE Composite 7,234.06, -3.04 (0.04%)

Losers beat winners, 3502-2921. New highs were ahead of new lows, 378-72. There was no volume of which to speak. It was the weakest day, volume-wise, in the last two weeks.

NYSE Volume 4,423,809,500
NASDAQ Volume 1,837,747,125

Commodities, despite the dollar stronger against most foreign currencies, mostly finished with gains. Oil closed up 24 cents, to $79.14. Gold finished unchanged at $1,139.20, while silver slid 3 cents to $18.37.

Most of the trade today, as it likely will tomorrow, had more to do with options expiration than anything else. Anything that could have moved the market would have moved it lower. Obviously, nobody was paying any attention to the normal forces at play. This market is about as tricky to play as any ever seen. Many, who have made their money in the earlier run-up, are already out, which may be the best idea of all.

Monday, November 16, 2009

All Major Indices At YTD Highs

Each of the major indices - the Dow Jones Industrials, Dow Jones Transports, S&P 500, NASDAQ and NYSE Composite closed today at highs for the year. For all of the indices, these are new 52-week highs as well, as the markets continue to recover from the financial meltdown of last fall.

Of particular interest to traders were the gains on the S&P and Dow Jones Transports - especially the latter, which confirmed new highs on the Industrials, to the delight of the Dow theorists. The S&P closed above the magical 1100 mark, which for many has been viewed as an impenetrable line of resistance. The S&P had failed in three prior attempts to close above that figure.

Stocks were once again buoyed by what's become known as the "risk trade", playing the weak dollar, which works in inverse relationship to stocks. The buck was bashed again; stocks flew. It's that simple.

There were a couple of hiccups which were worth noting. Around 12:00 noon, when Fed Chairman Ben Bernanke's remarks to the Economic Club of New York were released, stocks took a bit of a nosedive on the chairman's comment that the Fed had tools available to promote the US dollar, and again, right after 3:00 pm, when Meredith Whitney announced on CNBC hat she hasn't been "this bearish in a year," and viewed stocks as overvalued, with prices unrelated to fundamentals. Both times the markets dipped, then quickly recovered, but it may be notable that the indices did close off their highs for the day, with some serious tape-painting occurring at right before the final bell. In the case of the DJ Transports, the index finished the day at 1046.50, just a point above the previous high (October 20, 4055.11), hardly a ringing endorsement.

While nobody can deny anything the Fed chairman said, nor, for that matter, Whitney's views on the market, the trade is still based on a fundamentally flawed equation: that of a cheaper dollar making stocks worth more. The disconnect between a cheaper dollar and rising stocks is alarming because, while the lower dollar makes US exports more affordable overseas, it also has the relative effect of higher import prices which will no doubt negatively affect a working population that continues to see its standard of living in decline - again, one of the effects of the drooping dollar.

So, it's entirely possible that the Fed can be right, meredith Whitney can be right, but stocks will continue to go higher regardless, all due to the inverse US dollar - US equities trade.

With a number of key economic reports due out tomorrow before the opening bell, including PPI, TIC outflows and capacity utilization, trader's hope is that the numbers are overall negative toward the US economy, because that would once again slam the greenback and make stocks move higher. It's one of the most perverse trades ever seen, though after the financial implosion of 2008 and the Madoff rip-off, anything that works is simply tolerated and played until it no longer works.

Dow 10,406.96, +136.49 (1.33%)
NASDAQ 2,197.85, +29.97 (1.38%)
S&P 500 1,109.30, +15.82 (1.45%)
NYSE Composite 7,237.10, +117.21 (1.65%

Advancing issues, as expected, far outdistanced decliners, 5156-1410. New highs pounded new lows, 688-96. Volume, however, was again on the anemic side.

NYSE Volume 5,300,401,500
NASDAQ Volume 2,050,422,375

Commodities also took advantage of the weaker greenback. Oil gained $2.55, to $78.90. Gold shot to new records, up $22.70, to $1,139.40, and silver finally took off, adding $1.03, to $18.41, a record close for 2009.

Friday, November 13, 2009

Inverse US Dollar, US Stocks Relationship Continues to Boost Stocks

Once again, the inverse relationship between the US Dollar and US equity markets trumped all other trading strategies and boosted stocks on the final day fo trading for the week.

To get an understanding of how perverse and destructive this relationship has become, consider the trading action this morning, when the university of Michigan released consumer sentiment data for October. The reading, released at 9:55 am ET, fell from 70.6 in October to 66.0 in November. As the numbers hit the street the Dow Jones Industrials fell from a gain of 40 points to slightly into the negative, which would be considered a rational market reaction. However, when the forex traders got hold of the data, viewed as negative for the US economy, they immediately began to sell US Dollars into other currencies, sending the Dollar Index lower.

Faced with the prospect of virtually free money, traders poured into US stocks, turning the indices completely around in a matter of minutes. Within the hour, the Dow was up more than 80 points, with the other indices following suit. As the US Dollar continued to weaken throughout the day against other currencies, stocks held or improved gains overall in a liquidity-driven advance that had nothing at all to do with fundamentals, economic conditions or technical indications.

This is the trade that has produced the 8-month-long rally, as the Fed cut rates to zero and instituted policies that promote liquidity and risk, the very same elements which caused the near-collapse of worldwide financial systems last fall. In the long run, the inverse relationship is destructive to America's best interests, but in the short term, Wall Street is enjoying one of the greatest rallies of all time.

Dow 10,270.47, +73.00 (0.72%)
NASDAQ 2,167.88, +18.86 (0.88%)
S&P 500 1,093.48, +6.24 (0.57%)
NYSE Composite 7,119.89, +56.84 (0.80%)

On the day, advancing issues beat decliners by a healthy margin, 4005-1804, but new highs did not expand their edge over new lows, with the reading of 215-75. Volume was ridiculously low, about what one would expect from a 1/2 session in a normal market, further impressing the idea that the rally, based almost entirely on liquidity, is at its end, unsustainable.

NYSE Volume 3,936,243,500
NASDAQ Volume 1,840,433,000

Naturally, the weaker US Dollar helped commodities, though oil could not muster anything but to turn a large decline into a smaller one by day's end, dropping 59 cents, to $76.35, mostly on slack demand. Gold ramped up again, adding $10.20, to end the week at $1,116.80. Silver continued to lag behind its shiny cousin, gaining only 13 cents, to $17.39.

Next week will offer more earnings results from a variety of retailers, though economic reports are likely to dominate the financial news, with readings on retail sales, capacity utilization, PPI, CPI, housing starts and leading economic indicators among the data that will flow to investors.

Thursday, November 12, 2009

S&P Confirmation Not Enough; Markets Trumped by Strong Dollar

As much as one would like to believe Tim Geithner's commitment to a strong dollar policy, skepticism will remain high until there's actual action behind his words. In the absence of official US action to strengthen the greenback, finance officials of other nations have apparently taken action over the past few days, boosting the dollar from a low of 74.8 on Wednesday morning to a high of 75.76 just before 4:00 pm ET today.

Continued weakness in the US dollar has been causing all manner of market distortions, especially in commodity and US equity markets. The trade over the past 6 months has been an easy inverse relationship between the dollar and US equities. Cheaper dollars made stocks cheaper to purchase, fueling a powerful rally in stocks. However, the relationship is eventually unsustainable, though breaking the vexing inverse trade will take more of the kind of quiet intervention witnessed today.

Leading the charge was the Euro, which fell sharply against the US dollar. It's almost a European mandate, as the high Euro is making European products more costly, thus, less competitive in world markets. There seems to be a concerted effort to strengthen the dollar - despite the subdued protestations by US officials and stock traders - at the expense of the Euro, the target level appearing to be somewhere above 76 on the dollar index. The target would appear to be somewhere below 1.45 Euros to the US Dollar, which will take some doing, as the Euro currently trades at 1.4842 to 1 US Dollar. The result will be a more competitive environment for European products and a moderation in the prices of US stocks.

Eventually, the weak dollar trade must be unwound because it is entirely wrong for the US. It's akin to selling the same products at lower and lower prices in each business cycle in a fire sale environment. The US standard of living would continue to fall as the currency is debased. As much as the Fed and Treasury are attempting such a debasement - with grand success thus far - our trading partners are not happy with the arrangement. While the eventuality of a debased US currency may be a fait acompli, current movement in the forex markets are forestalling the event as much as possible.

As the dollar gained strength today, stocks fell, cutting short the nascent rally which began last week. Markets once again seem to have topped out temporarily, and it may actually be time for a serious reversal, much of which will have little to do with fundamental valuations and more to do with technical levels driven by the dollar trade.

Confirmation of the new Dow Industrial highs, which were narrowly confirmed by the S&P yesterday, weren't enough to stop stocks from skidding lower. The Dow Transports fell sharply in non-confirmation, setting the stage for more downside in stocks.

Dow 10,197.47, -93.79 (0.91%)
NASDAQ 2,149.02, -17.88 (0.83%)
S&P 500 1,087.24, -11.27 (1.03%)
NYSE Composite 7,063.05, -92.31 (1.29%)

declining issues danced all over advancers on the day, 4558-1285, or about 5:2. There were 273 new highs to 86 new lows, a margin significantly narrower than yesterday's. Volume remained tepid.

NYSE Volume 4,341,626,500
NASDAQ Volume 2,219,716,750

Commodities were slammed by the dollar rise. Crude oil fell $2.34, to $76.94, with more downside indicated, as warm weather in the US Northeast and slack demand helped push down prices for all energy products. Gold was off $8.00, to $1,106.50, with silver falling 28 cents, back to $17.27.

The deflation trade reared its head once again, and it probably won't be the last time.

Wednesday, November 11, 2009

Getting Forex Training from Experts

Becoming successful at anything requires expertise, but when it comes to trading, acquiring such expertise can be time-consuming and expensive, especially if one is using real money starting out trading stocks, bonds, options or futures.

But, it need not be that way, since there are an abundance of resources available, many of them online, and many of them provided for free or at reasonable prices.

One such resource with which I recently became acquainted is Online Trading Academy, a company that's been a leader in the field of trader training since 1997. Not only does the company offer a variety of free and paid courses on its web site, in fields as diverse as short term trading, ETFs, options and investment theory, their 2 day Forex Trading Course is available either online or at one of their many convenient training locations - in places as geographically diverse as Ireland, Singapore, Dubai or any of their 21 US locations.

The Forex Trading course is designed to offer students a complete world view of currency trading, covering all of the basic elements such as the history of Forex and why it makes sense to switch to Forex from currencies, all the way to advanced subjects such as technical analysis, risk management, leverage and remote trading.

With a background in educating traders to make use of the same tools the professionals use, Online Trading Academy is the choice for anyone who desires to make money in the markets and the Forex Trading Course an excellent choice, taught by professionals with experience in the field.

Quiet Trading Day Yields New Highs on S&P, Dow

Yesterday, as reported below, the marketeers sought confirmation for the new closing highs on the Dow Jones Industrials, and today, confirmation is exactly what was provided by the S&P 500, which finished just a fraction above the old closing high of 1097.91, at 1098.50, sufficient to keep rally hopes alive for the near term.

While confirmation by the S&P won't satisfy the purist sensibilities of the Dow Theorists in the crowd, it's a good enough finish on a very slow trading day to keep confidence in the ranks of traders, investors and speculators. Oddly enough, the brain trust at CNBC completely missed the data, not even reporting it, focusing instead on earnings from Applied Materials (AMAT) - which were outlandishly good, by the way - and the aquisition of 3Com (COMS) by tech giant Hewlett Packard (HPQ).

To the technicians among us, AMAT's earnings and the HP news don't even come close to the importance of index confirmation, and it's a testament to the shoddiness of reportage by the financial media. (Last night, I tried to watch Fox's Financial Network and was as revolted by that as I was by their political coverage. Just what does Ann Coulter know about economics? She was one of the panelists on one of their shows. I won't be tuning into that pile of garbage again soon, as I much prefer the wit and wisdom of Bloomberg's Bernie Lo (pictured at right), host of Asia Confidential, for my late-night viewing.)

Getting back to Dow Theory, we anxiously await confirmation of the new highs - and the next leg of this delicious rally - by the Dow Jones Transportation Index (^DJT), which almost turned the trick on Veteran's Day, closing at 3988.00, a mere 57 points away from the magic number. If the Transports repeat today's performance, we'll have double confirmation in hand heading into Friday's trading.

Once again, the paucity of news and/or corporate earnings reports left traders to their own wits, largely battling the ravages of a runaway dollar index, which nearly scuttled the entire affair. One should not be too concerned with a rising dollar longer term, however much the government sock puppets like Tim Geithner tout a strong dollar policy. Our intrepid Treasury Secretary, doing front work for the President, said, "I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar," yesterday when meeting with Japanese officials in Tokyo. If you listen closely, you can actually hear the polite snickering by the Japanese finance ministers.

Dow 10,291.26, +44.29 (0.43%)
NASDAQ 2,166.90, +15.82 (0.74%)
S&P 500 1,098.51, +5.50 (0.50%)
NYSE Composite 7,155.36, +28.94 (0.41%)

Advancing issues beat decliners, 3654-2181, and new highs maintained their distinct advantage over new lows, 405-75. Volume was once again pathetic, the lowest of the month so far, due partially to the holiday and partially to lack of interest from money managers who have already locked in gains of 30-40% or more for the year. Low volume has been a signature of this rally for the entire duration, so it should be no surprise that markets continue higher for the rest of the year without intense participation. It just makes it easier for those who were late to the party to catch up with the real front-runners.

NYSE Volume 4,509,091,000
NASDAQ Volume 1,873,781,875

Commodities were discounting the unusual rise in the dollar, though hardly. Oil paid the most attention, gaining just 23 cents to finish in NY at $79.28. Gold ramped higher, up $12.00 to a new record high of $1,114.50. Silver finally got some attention, adding 32 cents, to $17.55.

The final word on this newest leg of the rally is that it may be a quick and powerful one, taking the Dow up to possibly the 10,800 level before the year is out. Gone is all the bearish talk of a 10-15% correction, the market just having completed its 5th 5% pull-back a little more than a week ago. All indications point toward higher finishes until Thanksgiving.

Tuesday, November 10, 2009

Desperately Seeking Confirmation

Following the new 52-week and 2009 highs set by the Dow Jones Industrial Average on Monday, investors were put into a quandary on Tuesday, one which will likely be resolved at some time this week. The question on the minds of most traders is whether or not the rally has sufficient energy to first, sustain current levels, and, secondly, to move to even higher ground in the immediate future.

In search of an answer to those questions, technical analysis should provide the most propitious resolution. From two to four separate indices should provide either confirmation or counterweight to the Dow's new closing highs. The most important of these is probably the S&P 500, which, on Monday, closed at less than 5 points off its own closing high of 1097.91, which was the level recorded on October 19. It may be splitting hairs, but a close above that is a vital element, necessary to move the overall indices higher.

Next on the list is the Dow Jones Transportation Average (^DJT) which made its own closing high (4045.11) on October 20, but has since backed well off, finishing today more than 100 points lower than that level (3916.91). A certain paradox comes into play with the relation to the Industrials, as their prior peak was on October 19 (1092.19) and was confirmed by the Transports the following day.

So, the Industrials have moved ahead, alone, and seek a partner for confirmation. One explanation is that the Dow moved in solitary fashion as a brief flight to quality and safety, and the fundamentals for the other parts of the market are not strong enough to keep pace. The Industrials are just 30 stocks, most of which are paying high quality dividends - taken together yielding better than 3.5% - whereas the S&P 500 is much broader (500 stocks). The Transportation index is comprised of just 20 stocks, a good number of them airlines, which have suffered badly through the economic downturn and have yet to recover. Thus, the confirmation may be a bit of a stretch at this juncture.

As a proxy for the airlines, consider (PCLN), the travel discounter, which today announced 3rd quarter operating results and blew away estimates, sending shares up more than 30 points (17%) on the news. This company might be more useful in determining the overall market strength of the Transports, being a much more efficient model than the airlines themselves. Also adding to the no-confirmation-needed argument is FedEx (FDX), which projected today that their busiest day this year - December 14 - would also be their busiest day EVER!

While FedEx is a component of the Dow Jones Transportation Index, is not, though maybe it's time for the Transportation index to "get up to speed" with the evolution of technology in transportation. Given that argument, the Transports would have blown through their previous highs and provided confirmation to the lonely Industrials.

Further down the pecking order are the NASDAQ and NYSE Composite, the two broadest measures of the market, both of which reached closing highs on October 19 of 2176.32 and 7222.21, respectively, and have yet to return to those levels, though they are not far off of them.

All of this sets up a very interesting scenario for Veteran's Day, in which the stock markets are open, but all banks and bond markets are closed, so, if one thought stocks were "going on alone" this week, without the aid of economic or corporate reporting, Wednesday will be a real loner. Maybe some of those bond-trading titans will lend a hand over at the NYSE.

On the day, only the Dow finished in the green, though the losses suffered by the other indices were marginal.

Dow 10,246.97, +20.03 (0.20%)
NASDAQ 2,151.08, -2.98 (0.14%)
S&P 500 1,093.01, -0.07 (0.01%)
NYSE Composite 7,126.42, -8.91 (0.12%)

Declining issues finished ahead of advancers, 3594-2180. New highs finished ahead of new lows, 315-85. Volume was low again, a signature of this week's trading.

NYSE Volume 4,508,971,500
NASDAQ Volume 2,010,213,625

Crude oil lost 38 cents, to $79.05. Gold gained $1.10, to $1,102.50, but silver continued to lag, down 26 cents, at $17.23.

Monday, November 9, 2009

Within News Void, Stocks Gallop Ahead

Opening the trading week with benign news from the G-20, which - through US mouthpiece Tim Geithner - stressed on Sunday that stimulus should remain in place, investors were encouraged enough to ignore the dire unemployment readings from Friday past, boosting equities right at the open and increasing the gains in a slow, steady grind upward throughout the session.

The Dow posted one of its best showings since the bottom in March, closing at its high for the year. Aided by the weakened US dollar, the other indices sported large advances, with the S&P approaching its key top at 1100, which has been hit but never breached this year. The telling part of this advance will come tomorrow, to see if the S&P can close above its previous high. With the Dow providing guidance, it appears to be a solid bet that stocks will continue to advance into the holiday shopping season. There are no meaningful earnings reports or economic data this week, so investors are on their own, so to speak.

Dow 10,226.94, +203.52 (2.03%)
NASDAQ 2,154.06, +41.62 (1.97%)
S&P 500 1,093.07, +23.77 (2.22%)
NYSE Composite 7,135.33, +177.04 (2.54%

The gains were broad-based, with 4465 advancing issues to 1338 decliners. New highs trumped new lows, 340-62, the largest daily margin in weeks. Volume was dismally low, however, as has been the case with much of the advance, even through the summer and fall. While all of Wall Street is abuzz with word of the vast sums of money sitting on the sideline, there is no indication that this money is coming into stocks as yet.

NYSE Volume 4,669,590,000
NASDAQ Volume 2,034,704,500

Commodities followed the inverse of the dollar, with oil ahead by $2.00, to $79.43, gold advancing $5.90, to $1,101.60 and silver gaining 9 cents to $17.46. Look for silver to break out soon, as it has not performed as well as gold recently. There were widespread rumors that the Indian government paid for their recent gold purchase from the IMF with silver, though that story has been widely discredited.

Investors should be buying in here on the rise, as there seems to be no impediment to stock gains. There will, however, be a pullback at some point, though the conditions for such a move may be weeks away and shallow, as has been the case throughout the 8-month-old rally.

Friday, November 6, 2009

Poor Jobs Data Fails to Induce Selling

Prior to the opening bell, the highly-anticipated Non-farm Payroll announcement from the Labor Dept. initially sent futures into near free-fall, but, after a modest decline in the first few minutes of trading, stocks stabilized and spent the rest of the day hugging the flat line.

October saw 190,000 jobs lost in the US and the "official" unemployment rate crank up to 10.2%, the highest since 1982. That the jobless rate was so high just 27 years ago must have served as a salve of sorts to investors, because the markets took it in stride. There is also the growing understanding that many of the US firms listed on the stock exchanges do not rely on the United States as their primary markets, one of the myriad hidden factors of globalization. Thus, US employment is not as large a factor in many businesses, plus, due to the largesse of the federal government, many people who are not employed have fairly sizable disposable incomes, allowing those same US markets to function as though full employment was in force.

Of course, the federal punchbowl of benefits is not any way to grow an economy, but equity investors seem intent on pushing prices higher, so long as the Federal Reserve keeps rates at essentially zero and Uncle Sam continues to dole out the greenbacks. Naturally, the dollar continues to decline in value, a condition not lost on the macro-economic crowd.

Nevertheless, Friday was not the day to be selling stocks as the major indices eked out marginal gains. Monday, however, may be another story.

Dow 10,023.42, +17.46 (0.17%)
NASDAQ 2,112.44, +7.12 (0.34%)
S&P 500 1,069.30, +2.67 (0.25%)
NYSE Composite 6,958.29, +8.15 (0.12%)

As one might expect, winners and losers were nearly evenly split, with declining issues taking a small advantage, 3203-3177. New highs, though, soared well ahead of new lows, 209-61, widening the margin for the third consecutive session.

Volume was negligible, well below normal levels, though Fridays are becoming something of an outlier, with trading sluggish at the end of the week.

NYSE Volume 4,999,170,500
NASDAQ Volume 1,845,147,875

Commodities finished mixed, with oil down $2.19, at $77.43, gold ahead $6.70, to $1,096.00, and silver lower by 4 cents, to $17.38. After the enormous move by gold over the past three weeks - a 10% gain - it appears that the yellow metal has found its own market, diverging even from its fellow precious metals. Platinum was lower on the day, and copper was flat. Gold has gone its own way and cannot be counted on as anything but a separate asset class, and possibly a proxy against all fiat currencies.

The cross-currents in the markets lately have been extreme, adding to volatility in some cases, but also prviding significant headwinds to any upward movement in stocks. The indices are settled below recent highs, and it does not appear that there's enough of a catalyst anywhere - outside of the easy carry trade on the back of the declining dollar - to propel equities through their recent highs. Within days the focus will be on the holiday shopping season, and, while many Americans may not be able to luxuriate their friends and families with expensive gifts this season, well-heeled foreigners certainly can take advantage of the prices of goods denominated in US dollars, especially Europeans and Chinese shoppers. International centers such as New York, Los Angeles and Miami may very well see increased traffic from outsiders, while Americans do their holiday purchasing at the various discounters, striking something of a balance.

With 3rd quarter earnings season now nearly complete, the next few weeks may indeed be a true test of the fortitude of US markets and equities. One thing's for sure: it's not going to be dull.

Thursday, November 5, 2009

With All Eyes on Jobs, Stocks Power Higher

The markets often find ways to correct their errant ways - like yesterday's late-day, computer-trade-driven sell-off - with immediate and powerful results. Such was the case on Thursday as stocks gained right out of the gate, fueled by better-than-expected results from Cisco (CSCO) and lower-than-expected initial jobless claims. The stunning number, however, was October productivity, which chimed in at +9.5%, well ahead of expectations of 6.5% and the strongest indication to date that companies are on the verge of hiring workers.

Productivity gains of such magnitude suggest that employers are getting every last ounce of effort from trimmed-down staffs and it may be time to begin expanding the labor force in a variety of industries. Tomorrow's Non-farm payroll report for October will fill in the last piece of the puzzle, though by all indications, investors feel comfortable being in the market prior to the 8:30 am release of the data, sending the Dow back up over 10,000 and the S&P past a key 1065 level.

Dow 10,005.96, +203.82 (2.08%)
NASDAQ 2,105.32, +49.80 (2.42%)
S&P 500 1,066.63, +20.13 (1.92%)
NYSE Composite 6,950.14, +119.71 (1.75%)

Once again, simple indicators told the story of a broad-based rally with considerable strength behind the headline numbers. Advancing issues pounded decliners, 5095-1389, and new highs soared ahead of new lows, 161-57.

Volume was less than usual, a somewhat sobering fact, though tracking the markets via volume has not been a particularly solid indicator during this rally. Lower-than-usual has been the case so often that lower volume figures have actually become normalized.

NYSE Volume 5,480,293,000
NASDAQ Volume 2,121,401,500

Commodities were muted as the dollar index remained relatively unchanged throughout the day. That stocks can move forward with such aplomb without the aid of a weaker dollar speaks volumes about the prospects for a robust recovery. On the day, oil lost ground, dropping 78 cents, to $79.62 at the close. Gold added $2.20, to $1,089.50, while silver dipped a penny, to $17.40.

A number of retailers released same-store sales figures for October, with results all over the map due to the recession, odd comparisons to last year because the damage to the economy was just beginning, and various discounting and inventory issues which varied by retailer. With the holiday shopping season just weeks away, investors will be turning their attention to retailers, with an eye toward an improvement over last year's near-disaster.

Tomorrow's jobs data should be market-moving, especially the unemployment figure which continues to hover close to 10%. That is the number many fear, that if the government announces unemployment at that level, it will trigger an all-out selling spree in equities as investors flee from speculative issues back into fixed assets. A reading of 9.8% might be just good enough to keep confidence high.

No matter the case, it seems that there is no ceiling on stocks. The turn-back over the past few weeks has been all but recovered, and the overall drop was another smallish 5-6% decline, instead of the "correction" of 10-15% that many of the so-called "experts" have been calling for since May. There's almost no reason to believe that stocks will pull back 10% any time soon, though tomorrow's jobs data could change that arithmetic.

For now, however, the recovery appears on solid ground. The final key is jobs and when they will come back.

Wednesday, November 4, 2009

Fed Watchers Get what They Want; Disappoint Late

Stocks were up solidly early in the day, an exceptional note of optimism ahead of the 2:15 pm Fed rate policy decision. The Dow gained as much as 140 points in the early going, with the other indices tagging along with similar percentage gains of roughly 1-1.35%.

When the Fed finally released its statement, Bulls got exactly what they wanted, little to no change in the overall verbiage, with no change in rates. After the normal, brief zig-zagging, the indices stabilized roughly where they were before the announcement, though began to descend slightly between 2:45 and 3:15. With just 45 minutes left in the session, however, a vicious sell-off was undertaken, trimming about 100 points off the Dow's gains and sending the NASDAQ into the red.

As such, stocks finished mixed again, though this time the only index below the unchanged line was the unfortunate NASDAQ, which is a bit confounding, since tech and speculative stocks in the NASDAQ have been responsible for much of the rally over the past 8 months. Monday will mark the end of the 8th month of the rally which began in earnest on March 9, 2009.

Dow 9,802.14, +30.23 (0.31%)
NASDAQ 2,055.52, -1.80 (0.09%)
S&P 500 1,046.50, +1.09 (0.10%)
NYSE Composite 6,830.43, +17.73 (0.26%)

Advancing issues were barely beaten by decliners, 3238-3236, with the emphasis on the downside clearly in NASDAQ stocks. However, the subtle change in the high-low indicator augurs better days ahead and a possible end to the market funk of the past two weeks. New highs outpaced new lows, 142-74, the best showing in a week and easily the best so far this month.

Volume was low, another positive, especially considering the late-day sell-off, which, many suspect was nothing more than shrewd tape-painting by insiders seeking an edge for Thursday.

NYSE Volume 6,510,982,000
NASDAQ Volume 2,134,476,250

Commodities were all priced higher as the dollar was weaker throughout the day. Oil was up 80 cents, to $80.40. Gold reached new highs, closing up $2.10, at $1,087.00, though it traded as high as $1095.00. Silver added 22 cents to $17.40.

Prior to the market open, more economic data was released. the ADP Employment Report showed a loss of 203,000 private sector jobs in October, an improvement over September's revised reading of -227,000, but still on the high side. This also bodes well for the October Non-farm payroll report due out prior to Friday's opening bell. First, the ADP report from last month was -254,000 unrevised, and has been revised lower by 27,000. The September non-farm payroll figure was 263,000, just a bit higher than the ADP reading. If the government revises lower, as ADP did, and remains somewhat in line with forecasts, we could see the first reading below 200,000 in over a year on Friday, which would be a real boost to the market.

Some indication of improvement in the jobs picture came on Monday, in the ISM manufacturing index, which showed improvement in the employment outlook segment. The expectation is for a loss of 175-220,000 jobs in the month, though anything below 210,000 would be positive.

Retail sales figures for October will be released prior to the open and they are expected to be solid.

Cisco (CSCO) reported excellent figures for their fiscal 1st quarter after the bell - .36 per share on expectations of .31, and higher revenue than expected - with the stock moving 3-4% higher after hours, hovering around 24.00 per share.

Tuesday, November 3, 2009

Sideways Stagger Ahead of Fed

Markets spent most of the day on Tuesday trading in a narrow range in slightly negative territory, with the Dow Industrials the most pressured stocks of the session. In the end, markets finished in mixed fashion as investors weighed a shift in the dollar-commodity-stocks relationship and a mega-deal by Warren Buffett while awaiting a policy decision from the Fed on the morrow.

Overall, stocks began the session lower and gained strength throughout the day, especially in the case of the NASDAQ, which finished on the uptick. Markets are still very much undecided about direction. Additionally, there was some measure of decoupling of gold from the dollar, as the yellow metal soared in price on a sale of 200 metric tons from the International Monetary Fund (IMF) to India's Central Bank, setting a record price in the process.

The extraordinary rise in the price of gold came in the face of a stronger dollar, which is absolutely counter to the prevailing trend. Though the dollar weakened through the day, oil and silver also gained in price, but the relationship was badly dented, with the commodities working on their own path, unrelated to that of the greenback.

This conundrum had heads spinning in the trading pits, from futures to forex. The implications of such a huge buy by India's Central Bank, without any hint of a discount - and with the understanding that they are prepared to purchase more - leaves dollar traders in the lurch if India's intent is to partially back the rupee with physical gold. It represents a dramatic shift away from fiat currency to hard assets.

Another item buttressing the markets was Berkshire Hathaway's Warren Buffet announcing the purchase of one of the largest railroad operations in the country, Burlington Northern Santa fe (BNI). The $44 billion deal, Berkshire's largest ever, will be paid in stock and cash. Additionally, Berkshire Hathaway announced a 50-for-1 split of its Class B common stock, which will make the pricey shares more attractive to the general public. The ticker symbol BRK-B currently trades in a range around 3,300 per share, putting even ten shares out of reach of the ordinary investor. After the split, the stock will sell initially around a much more reasonable price of 66 per share.

On the news, Burlington Northern (BNI) gained 20.93, to 97.00 at the close.

Dow 9,771.91, -17.53 (0.18%)
Nasdaq 2,057.32, +8.12 (0.40%)
S&P 500 1,045.41. +2.53 (0.24%)
NYSE Composite 6,812.70, +27.76 (0.41%)

On the day, advancing issues beat decliners, 3888-2563. New highs regained the high ground over new lows, though by the narrowest of margins, 98-94. Evidently, investors are standing pat until after the Fed speaks. Oddly enough, the Fed is not expected to say much, if anything, different from policy statements from the past 8 months. Investors are looking for any subtle change in wording of their statement which might indicate a willingness to raise rates in the near term. The outlook is for the Fed to keep rates at their absurdly low levels until Spring. What also is weighing on investors' minds is the unemployment picture. While the govrnment's Non-farms payroll data will be released on Friday, the market will get an early glimpse tomorrow morning when ADP releases it's proprietary private sector employment report for October.

Volumes were muted, without a doubt in anticipation of the FOMC rate decision on Wednesday at 2:00 pm. Instead of outright selling, investors are showing a good deal of resolve, especially in the face of recent market weakness, preferring to hold stocks and simply not stake out new positions presently.

NYSE Volume 6,209,336,000
Nasdaq Volume 2,042,206,500

As mentioned above, commodities took off on their own trajectory today. Oil gained $1.47, to $79.60. Gold soared $31.20 to a new all-time high of $1,085.20. Silver gained in sympathy, up a very healthy 75 cents, to $17.19, close to its highs for the year.

Uncertainty reigns at the moment, though the current tightness should abate with the release of key economic data and the Fed announcement. With stocks off roughly 5% from their recent highs, there should be no lack of demand pent up for stock speculation into the holidays.

Monday, November 2, 2009

Markets Remain Volatile Despite Solid Economic Reports

The extreme volatility which reappeared last week was back again on Monday, as stocks whipsawed though an up-down-up session, with the major indices finally deciding on a positive close at the end of the day.

After a major sell-off last Friday, stocks started out modestly positive, except for the NASDAQ, which has been a laggard recently. Once data on construction spending, pending home sales and the ISM Index came out at 10:00 am, all of the indices moved markedly higher, with the Dow sporting a gain of more than 140 points.

Construction spending for September registered an increase of 0.8%, blasting estimates for a decline of 0.2%. Pending home sales were up 6.1%, following a reading of +6.4% in August, regarded as an impressive string of increases in the pressured real estate market.

The ISM Index was the real popper of the grouping, however, with the October reading coming in at 55.7, after a solid showing of 52.6 in September.

Around noon, rumors that the US government was seeking to get back its money owed through the TARP program from Citigroup (C) rattled the markets, sending all of the indices temporarily into negative territory around 1:00 pm. Through the remainder of the afternoon, stocks vacillated and moved slightly higher, registering shaky, but modest gains at the close.

Dow 9,789.21, +76.48 (0.79%)
NASDAQ 2,049.20, +4.09 (0.20%)
S&P 500 1,042.88, +6.69 (0.65%)
NYSE Composite 6,784.94, +45.49 (0.67%)

Simple indicators displayed the confusion quite adequately. 3309 stocks advanced, while 3190 declined. There were 78 new highs, but 103 new lows. These figures indicate that the market is unable to determine direction, despite strong signs of economic recovery, probably due to many individual issues being overpriced.

Volume was steady, in line with previous sessions. There still has not been a spike in volume on a positive day, though with the increased volatility, it would be difficult to ascertain whether or not the volume was a contributor to overall gains. Taking today, for instance, up and down volume were virtually even, so it would be difficult to say that any of it was influential one way or the other.

NYSE Volume 7,318,034,000
NASDAQ Volume 2,340,403,500

Commodities took advantage of the weaker dollar to advance. Oil advanced $1.13, to $78.13. Gold was up $13.60, to 1,054.00, and silver added 19 cents, closing at $16.44.

As the number of companies reporting 3rd quarter earnings slows - over 80% of the S&P 500 have already reported - investors will have to rely on economic data and events to move markets. On Wednesday the FOMC of the Federal Reserve issues a policy statement, in which the Fed is widely expected to keep key interest rates the same, though some analysts are looking for a change in wording, especially where the Fed says they expect to keep rates low for "an extended period." A change in that wording could signal that the fed sees signs that it is time to tighten, or raise, interest rates, a move which could roil markets.

Before that, auto sales data for October is due out on Tuesday. Also on Wednesday, ADP issues their montly reading on private sector employment for October, a precursor to Friday's Non-farms payroll report.

Marathon Oil (MRO), Polo Ralph Lauren (RL) and European financial giant UBS (UBS) report prior to tomorrow's opening bell. Tech bellwether Cisco Systems (CSCO) reports after the close on Wednesday.

Sunday, November 1, 2009

How Much Gold Should You Own?

With gold recently soaring past the $1000 mark and making a new high over $1050, more than a few formerly-gold-averse investors have become more interested in adding precious metals investments to their portfolios.

Some have opted to buy the exchange-traded fund (ETF), the SPDR Gold Trust (GLD), though there are any number of reasons to avoid that route and invest in gold coins or purchase gold bullion directly, one of which is the pretty well-determined suspicion that the "Trust" doesn't actually hold or own as much actual gold as it would need to handle a rush of redemptions for investors wanting physical gold in their hands. The other reason is that the ETF doesn't match the moves made by the metal itself. Gold futures and spot prices haven't correlated to similar moves in the ETF.

That's why it is advisable to buy gold coin from a reputable dealer, either in person near your home or on the internet. Either choice is preferable to playing either the ETF or buying mining stocks. Physical gold - or silver or platinum - is easy to store, needs almost no care, and can be instantly converted to cash if necessary, without paperwork or tax issues.

How much a capable investor should hold depends on their needs. Younger, more speculative types may want as little as 5% of their portfolio in gold or silver coins or bullion, while older, more safety-oriented investors may want to hold as much as 20% of their portfolio in gold. In any case, it's an investment that should be part of everyone's diversification.

Cable or Satellite, Which is the Better Deal?

Since the change over to Digital signals for all broadcast channels, you may have noticed the difference, even if you are a cable subscriber. The picture often freezes or jumps or melts down into what I call, "Impressionist TV," of which Monet, Chagal and contemporary painter, Leroy Neiman, would be proud to show in their homes. But in your home, a jumpy or frozen picture is annoying and unwanted, and when the cable goes down, it all goes, so is there an alternative?

To a large degree, viewers of satellite or Direct TV report many fewer problems than cable viewers, and there are other advantages, regardless of which satellite service you enjoy. The value proposition from satellite DirectTV is that you receive more channels for a lower price and you can also choose movie or sports programming that suits your lifestyle within a variety of affordable plans.

Cable, for what it's worth, seems only interested in getting the maximum amount of money from subscribers. There are few tiered offerings of any value, because most of them start with the "standard" 100 or so channels for a high price and nothing below it of comparable quality.

Directv via satellite offers more choice, better value, and, in the end, a more reliable picture, without the stalls, freezes and jumpiness that is now becoming pandemic among cable and former analog viewers. If you want to enjoy your home theater or large screen TV, satellite is quickly becoming the choice.