Tuesday, February 15, 2011

What's This? Stocks Down! Say It Ain't So!

Believe it or not, all of the major US indices actually finished in the red today.

This is, of course, anathema to the mendacious crowd which fixes prices on all equities, all the time, so an examination of the carcass may reveal a hidden message.

Peering inside the dumped stocks, we find that today's Tuesday decline was led by basic materials (hmmm... commodities) and technology. Four sectors finished positive: financial (no surprise there), health care, utilities and transportation. The only sense to be made from this is that the big money is doing its rotation dance and taking profits. Markets should be back to their normal ascent by tomorrow's opening bell.

Wall Street continues to be in serious denial over the health of the economy and the value of stocks, which are largely over-priced and carrying general valuations of 14-17X earnings. This morning's retail sales figures may have tripped up the algos in the stock-buying computers, because they missed by a mile - coming in at 0.3% gain when the call was for between .05 and .07.

Not surprising that many of the self-proclaimed experts had this analyzed all wrong, especially considering that much of the retail number is based on same-store sales and omits stores closed within the past 12 months, of which there are many. The real number is actually much worse, but we're all supposed to believe that the US economy is improving, so the data must be fudged to meet the "reality."

Dow 12,226.64, -41.55 (0.34%)
NASDAQ 2,804.35, -12.83 (0.46%)
S&P 500 1,328.01, -4.31 (0.32%)
NYSE Composite 8,383.67, -21.48 (0.26%)

Decliners led advancing issues by a wide margin, 3996-2479. On the NASDAQ, there were still 144 new highs and just 23 new lows. On the NYSE, there were 213 new highs and just 13 new lows. Volume was slack, and that's saying quite a bit, since yesterday was the slowest trading day of the year. The bulls may be getting a little winded after a nearly six-month run.

NASDAQ Volume 2,034,250,500
NYSE Volume 4,396,449,000

What was even more interesting that the minor downturn in stocks was the continued action in crude oil futures, which fell again, down 49 cents, to $84.32, the lowest price in twwo and a half months. Gold moved in the opposite direction, up $9.00, to $1,374.10, along with silver, which gained 16 cents, to $30.70, nearing the pinnacle of the recent range.

Look for another leg up in the precious metals, especially on any economic disruptions or blasphemy to the recovery theme, either from the Middle East or economic data that isn't sufficiently massaged. This bull run has gotten pretty long in the tooth and a major correction could lie dead ahead. In fact, it's long overdue.

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