Thursday, March 31, 2011

What's This? Markets Lower? Metals Gain

Not much to say about today's action except that most of the moving was done in the final half hour of the session, probably due to some not wanting to be out in front of Friday's non-farm payroll data (expectations: +210,000).

Those running scared at the end of day can be excused for their skittishness as the markets posted their best first quarter gains since 1998, near the height of the tech boom.

Uncanny as that may seem, stocks are pretty much in a very overbought condition, by any standard, though it light of global conditions, it's extreme. That makes Friday a key date, not only because its the first day of the month, but also the first trading day of a new quarter. Recent history provides that first days of months over the past 18 months have been powerful uptrend days, though very few have also had jobs data tied to them as well.

That sets up interesting cross-currents for tomorrow, so rather than speculate, it may be wise to just let the chips fly - and fall - where they may.

However, with quarterly gains now locked in place, the wise guys might feel compelled to go short through tax day, as the markets still have not regained their February 18 highs. The truncated correction may begin to assert itself again, as might normal economic forces, though these can always be offset by the Fed handing fresh greenbacks to the Primary Dealers, sending stocks ever higher.

All that market noise might just render Friday a good day to start a three-day weekend.

Dow 12,319.73, -30.88 (0.25%)
NASDAQ 2,781.07, +4.28 (0.15%)
S&P 500 1,325.83, +2.43 (0.18%)
NYSE Composite 8,404.98, +11.71 (0.14%)

Advancing issues finished ahead of decliners again, 3779-2732. New highs on the NASDAQ totaled 195, with 33 new lows. On the NYSE, there were 236 new highs, 15 new lows. Again, selective, but nonetheless, extreme. Volume put in another decent day, but still was nothing to get excited about.

NASDAQ Volume 1,920,940,625
NYSE Volume 4,253,768,000

West Texas Intermediate on the NYMEX posted a massive gain of $2.45, closing at $106.72, a 30-month high. Precious metals had a solid day, with gold up $15.10, to $1,438.90 and silver up 38 cents, to $37.89. Both are within a whisker of multi-year or all-time highs. April could be the month that gold finally rockets through resistance and goes ballistic, though the betting is that silver will outpace it. By the end of the month we could be seeing gold at $1520 and silver over $44 per ounce.

...and then, there's this brilliant opinion from an Irishman abroad:

Wednesday, March 30, 2011

Markets Continue to Rally in Spite of World Tensions

Honestly, I've never - in more than 40 years of market-watching - seen anything quite as obnoxious, illogical, repugnant and obscene as the current market dynamics.

Japan is reeling from the tsunami of nearly three weeks ago, their nuclear disaster continues to worsen, and all the Wall Street mob can do is push stocks higher and higher.

Housing is still in a major depression, real unemployment is at 17%, states and cities are struggling to balance their budgets, Northern Africa and the Middle East are in flames and revolution. Somehow, Wall Street imagines this to be bullish.

I consider it a trap, designed to entice small investors to plunge into stocks just when they are approaching the most overbought condition in the past two years, spurred on by free money being pumped in by the Federal Reserve and just before the release of first quarter earnings statements.

It's difficult to believe anything put out for inspection by the financial media, as controlled as it is by the Wall Street elite and how piously they - CNBC, Reuters, Bloomberg and the Wall Street Journal - pray at the font of greed and lasciviousness.

Someone said the other day that we have become George Orwell's 1984 - forever at war with Eastasia or Eurasia, where doublespeak is the norm, and where love is hate, evil is good, and thoughtcrime is prosecutable.

We've passed into an era of extreme income disparity, and the elitists are, as usual, winning. Ever so slowly, the entire population of the planet is being lied to, poisoned, swindled and debased. Something has to change. But, there is so much cognitive dissonance within the general population, I fear nothing will change. We will - with the exception of a few - accept our fate willingly and go about our dreary days without purpose, without cause and without a future.

Dow 12,350.61, +71.60 (0.58%)
NASDAQ 2,776.79, +19.90 (0.72%)
S&P 500 1,328.26, +8.82 (0.67%)
NYSE Composite 8,416.69, +71.31 (0.85%)

Once again, advancing issues led decliners, 4709-1835. The NASDAQ showed 192 new highs and 23 new lows. On the NYSE, there were 262 new highs and 12 new lows. Absurd. Volume was a little better than the previous two days, but only marginally so.

NASDAQ Volume 1,829,250,875
NYSE Volume 4,167,294,000

Oil eased off a bit today, down 52 cents, to $104.27, though still stubbornly clinging to the new, semi-permanent $105 area. Gold gained $7.50, to 1,423.80, and silver was up 52 cents, to $37.51.

Prior to the market open, the ADP private payroll data was announced for March, showing a gain of 201,000 new jobs. Usually disregarded as a flawed survey, today it was warmly embraced by the financial media elite, in advance of Friday's March non farm payroll numbers.

Does it matter? Even if the government announces that unemployment is 8.5% (laughable, though they might), the new jobs are paying 60-80% of what the lost jobs did. The middle class continues to be squeezed to death by income stagnation and inflation in prices for everyday living goods, gas, food, utilities, clothing.

Where will it end? When will it end?

Tuesday, March 29, 2011

While Japan Melts Down, US Stocks Melt Up

Though many doubted the thrust and wisdom of the Federal Reserve's QE2 and ZIRP efforts, the Fed can now claim some success.

That success, however, is limited to one's perception. If higher commodity, food and energy prices, a completely collapsed housing market and a stock market rally in which almost nobody participates is one's idea of success, then a big hand for Chairman Bernanke and his merry band of idiots otherwise known as the Board of Governors of the Fed.

It was reported yesterday in this space that trading volume had sunk to its lowest level of the year. Today's numbers were a mirror image, marking the two slowest trading days of the year, for sure, and possibly the lowest two-day total volume since sometime in 2009.

So much for the so-called wealth effect we hear so much about. The only investors actually trading are the Primary Dealers with their virtually-free POMO money. It's almost as though the markets have lost the confidence of the individual investor forever. Surely, those with pension funds tied to the market must be seeing better returns, but how long they will last is anyone's guess, though it's fair to say that as long as the Fed continues to throw $100 billion or more into the fray, stocks will keep rising. It's been about the easiest trade ever.

There isn't much more to say about today's gains other than they completely disregarded the situation at the Fukushima Daiichi nuclear plant in Japan, which is now almost completely out of control, as one reactor appears to have melted through its containment vessel.

The wild-eyed buyers of today also paid no heed to the S&P/Case-Shiller 20-city index, which confirmed that housing has entered the double-dip phase, falling for the sixth consecutive month. Of course, that would assume that one believes the first dip ever ended.

And everybody simply looked the other way when the Conference Board showed its index of consumer confidence fell to 63.4 this month, from a revised 72.0 in February.

Apparently, we mere mortals simply don't understand the stock market, where news is always bullish, no matter how bad it is. Supposedly, a comet obliterating all of Europe would be cause for a 1000-point rally according to the current metrics.

Whatever is going on down on the trading floors and at the desks of the biggest brokerages, it simply doesn't jibe with reality, but that's what we've got, a rogue market on its very own illogical trajectory.

Dow 12,279.01, +81.13 (0.67%)
NASDAQ 2,756.89, +26.21 (0.96%)
S&P 500 1,319.44, +9.25 (0.71%)
NYSE Composite 8,345.38, +48.86 (0.59%)

Advancers led decliners, 4381-2145. The NASDAQ reported 114 new highs and 27 new lows. On the NYSE, there were 117 new highs and 12 new lows.

NASDAQ Volume 1,610,826,875
NYSE Volume 3,856,315,250

Commodities were mixed, with oil up 81 cents on the front-end WTI contract, to $104.79. Gold slipped $3.70, to $1,416.20 and silver fell 10 cents, to $36.99 per ounce.

This represents one of the more confusing markets in history. Bad news simply will not move stocks to the downside, and any downward move is met with a rally in short order, wiping away any and all losses in a matter or days, or hours.

Hardly mentioned is the upcoming non-farm payroll data courtesy of the BLS on April 1, this Friday, though prior to that, on Wednesday, ADP will report their proprietary survey of private sector employment. That little nugget will be released at 8:15 am, EDT, though it's generally not a market mover, being widely discredited as being unreliable.

This is fun for somebody, but who that might be remains a mystery.

Monday, March 28, 2011

Late Selling Sends Indices to Losses

Make no mistake about it, something was up when all the major indices did an abrupt about-face in the final half hour of trading.

There was no earth-shattering news, no announcements, nothing, except some of the big players pulling their bids to see what would happen on what turned out to be the lowest volume day of the year.

It didn't take long for the results to be seen: immediate capitulation. There is absolutely no faith in stocks, in this market, in the US economy or the global economy. Everything has been gliding along on top of bank bailout, trillions of dollars in liquidity injections and stimulus, and yet, the economy is still weak, possibly about to roll over into the second phase of the depression, without the backstop of global money-printing by central banks.

Today was a test run. The test revealed what everybody with at least half a functioning cerebral cortex already knew: we're screwed. Once the Fed stops its daily injection of liquidity through POMO and other behind-the-scenes operations, the market crashes. It's exactly why the Fed would not allow Bank of America to increase its dividend from the absurd (.01) to the ridiculous (.02) last week. They're a victim, about to be sucked under by bad debt, never written down properly and put-backs by the various parties to whom they sold the toxic MBS in the first place.

The death of Bank of America will not be a pretty sight, but it is overdue by some two years and is eventually unavoidable. The only question remaining is exactly when the plug is finally pulled and that is something nobody can predict with confidence.

What was truly remarkable about today's 30-minute nuke test was the overall number of decliners as compared to advancers. The ratio was far out of the range expected in such a small decline. Losers led gainers, 3843-2674.

Dow 12,197.88, -22.71 (0.19%)
NASDAQ 2,730.68, -12.38 (0.45%)
S&P 500 1,310.19, -3.61 (0.27%)
NYSE Composite 8,296.52, -25.26 (0.30%)

On the NASDAQ, there were 109 new highs and 22 new lows. There were 114 new highs and 16 new lows on the NYSE. Be prepared for these numbers to converge again and possibly roll over. The falls from the February 18 highs were truncated when buyers stepped in at support levels over the last two weeks. Capitulation never occurred and the market correction of 10-15% turned out to be only a 4-6% decline. Resumption of the correction could have begun late today, but look for any tell-tale signs in the A-D line (like today) and of course volume and the new high-new low readings.

NASDAQ Volume 1,687,059,000
NYSE Volume 3,583,604,000

Crude oil dipped again today, as the ground conditions in Libya seem to be improving, meaning that NATO air strikes have taken their toll on the rogue government's advances and the rebels are gaining an upper hand. WTI crude fell $1.42, to $103.98. Relief at the gas pump would be welcome, but the Middle east situation is still largely unresolved and volatile. Expect crude to trade around $100 per barrel for the foreseeable future with gas prices in the US hovering in the $3.40-3.80 range through the Spring. Summer could witness a complete reversal due to easing tensions and slack demand.

Gold finished slightly lower, losing $6.30, to $1,419.90. Silver gained 4 cents, holding at $37.09.

There are key releases of economic data this week, beginning with the S&P/Case-Shiller 10 and 20-city indices on Tuesday and the BLS non-farm payroll data on Friday. Of course, Thursday is the end of month and first quarter, so portfolio realignment should cause more volatility and another spike in the VIX is more probable this week than over the past two when it was pounded down by Fed liquidity.

Reality is taking a firm footing here and around the world. The containment of the Fukushima Daiichi nuclear disaster is far from over and needs to be handled much more diligently than it has been to this point. It is not under control still and needs to be handled as a global threat because it is.

The news coming out of Japan on all matters related to the nuclear plant that has become now nothing more than a toxic, nuclear dump site leeching radioactive isotopes into the air, into ground water and the ocean. This should have been completely handled at least a week ago. It is now closing in on three weeks since the quake and the situation is still worsening despite what may be reported by major news sources.

Friday, March 25, 2011

A Great Week for Stocks. Not So Good for People

Stocks were off to a slow start on Friday, but got a boost around 10:20 am EDT which lasted until shortly after noon, at which point profit-takers took over and remained in charge to the closing bell.

Overall, it was a banner week for stocks, based entirely on nothing in particular and mostly ignoring the horrendous news - both financial and international - that kept flowing every day.

For instance, the situation in Libya is nowhere near stabilizing and, given the steadfastness of Muhammar Gadaffi to remain in power, may escalate into a wider conflict. Yemen, Syria and Bahrain are still in the throes of wild civil unrest. Conditions at the nuclear reactor facilities in Japan have worsened by the day, and are nowhere near being resolved.

Portugal's government is all but dissolved and the Irish bailout is falling apart. Most of Europe is facing much the same situation as prevails in the US, no recovery and no signs of improvement. Additionally, leading political figures either don't seem to know what to do or simply don't want to do anything to better the lot of their citizenry.

Investors apparently are taking this all in stride, were it not for the fact that said investors are actually computer algorithms running at warp speed for the various banks and hedge funds who are clipping retail investors every chance they get.

The major indices were up four out of five days, the only down day being Tuesday, and it was a minor decline. The Dow finished ahead 262 points, or about 2.2%. The NASDAQ tacked on a cool 100 points, or nearly 4%. The S&P was up by 37 points, almost 3%, and the NYSE gained 205 points, or 2.5%.

Life was less good for residents of Libya, who are under military siege, and Japan, many of whom are homeless, while Tokyo residents are concerned about irradiated drinking water, already told by their authorities that the levels of iodine in some of that water is unsafe for infants and babies (and probably not too good for adults). Th remainder of the civilized world only had to put up with rising prices for gas or petrol, although life in South America and Central America remains relatively peaceful compared to the rest.

Dow 12,220.59, +50.03 (0.41%)
NASDAQ 2,743.06, +6.64 (0.24%)
S&P 500 1,313.80, +4.14 (0.32%)
NYSE Composite 8,321.78, +10.17 (0.12%)

Advancing issues bettered decliners by a score of 3980-2536. New highs on the NASDAQ totaled 143, to 21 new lows. On the NYSE, there were 243 new highs and just 8 new lows, which was not surprising, since volume was at levels not worth even watching, a sign that participation levels are a fraction of what they used to be, before the 2008 crash and the onset of completely rigged, centrally-planned, manipulated markets designed to keep the global Ponzi scheme of central bankers looking like it cannot fail.

NASDAQ Volume 1,771,109,000.00
NYSE Volume 3,934,565,000

WTI crude oil was flat, losing 20 cents, to $105.40. Gold and silver received their customary Friday smack-down, with gold losing $8.70, to $1,426.20 and silver down 33 cents, to $37.05.

Considering events, it was a banner week for the New World Order (NWO), in which everything you see or hear in the mainstream media is fake, phony and otherwise watered-down to prevent people from understanding just how dire global finances really are.

Have a great weekend and if body parts begin to glow in the dark, you can thank our leaders for keeping us safe from runaway, uncontrolled nuclear accidents.

Thursday, March 24, 2011

Extra Radiation Must Be Bullish For Stocks

All manner of radioactive isotopes continue to leak out of all six nuclear reactors at the Fukushima Daiichi plant on the Eastern coast of Japan. Radiation has been detected in sea water, fresh water, in the air and on land. Here's a nice summary of the effects a few of these "heavy" elements on human health.

Half a world away, Libya is being bombed to smithereens.

The coalition doing the bombing is falling apart.

New and existing homes sales are at 30 year lows.

New unemployment claims came in at 382,000, which is 5,000 fewer than the week before. Funny thing about those new unemployment claims, other than the fact that they're fairly benign numbers, is that when the economy isn't creating jobs and we're still stuck in a depression, people just hang on to the jobs they have. Businesses can only let go of so many people, so the natural tendency is for fewer and fewer people to quit, be fired or laid off. Thus, numbers like we've been getting the past few weeks only indicate that there are fewer people collecting benefits, not that new jobs are actually being created.

New jobs! You're such a kidder.

Durable orders for February were down 0.9%. The expectation was for a gain of 1.1%. Ooopsie!

All good, according to Wall Street. Party on.

I am the walrus.


Dow 12,170.56, +84.54 (0.70%)
NASDAQ 2,736.42, +38.12 (1.41%)
S&P 500 1,309.66, +12.12 (0.93%)
NYSE Composite 8,311.61, +62.78 (0.76%)

As expected advancing issues exceeded decliners, 4273-2196. Global economic conditions are so good, in fact, that there were 110 new highs on the NASDAQ and just 22 new lows. On the NYSE, 135 companies set new highs while only 13 hit new lows. Volume actually picked up a bit after two days of sleep-walking. Don't want to miss the rally, for Pete's sake.

NASDAQ Volume 1,901,250,250
NYSE Volume 4,358,651,500

Meanwhile, oil traded on the NYMEX, that light, sweet stuff called West Texas Intermediate, backed off a whole 15 cents a barrel, to $105.60. The new normal for a gallon of gas in the USA is now $3.55, according to AAA.

According to our sources at Kitco, gold is currently down $8.10, at $1430.50 per ounce, but that price does not reflect that the yellow money made a new all-time high today of $1449.10. Silver is being quoted at $37.19, down 23 cents. But silver also made a move to a fresh 31-year-high, slightly above $38 per ounce.

So, who's right? Normally, gold and silver only gain in times of undue global stress, as a store of value and a hedge against collapsing currencies and/or inflation risk.

Stocks go up in times of robust economic activity, normally, or whenever the Fed pumps enormous amounts of fresh capital into markets, as they've been doing for the better part of the past 2 1/2 years.

The dollar index fell .183, to 75.69, a horrifically low figure, indicating the US is not the safe haven it used to be in which to park money.

There's your answer. If the dollar index continues to fall, reaching unprecedented lows, which it is currently approaching, US stocks, denominated in dollars, have to gain just to keep up. Commodities may swing either way, but the precious metals and oil should rise as the dollar weakens, so both stock players and gold bugs are right to keep pushing prices higher. Only one of them will be the eventual winner, however, and, while we are pretty sure which that will be, we're not telling.

Wednesday, March 23, 2011


Not to sound alarmist, but anybody who believes the mainstream media is giving us the truth about what's really happening on the ground, in the air and in the water around the Fukushima plant in Japan, might just as well stick one's head in the sand and hope for the best.

Conditions at the the plant continue to worsen, despite the best efforts of brave individuals trying to keep the entire Eastern coast of Japan from turning into a nuclear wasteland and the media isn't even trying to cover it.

But why listen to me. Here are a few choice links of interest to anyone who doesn't want to grow a third ear or die from thyroid cancer when it could be avoided:

For starters, here' a story about of Australia about how 128 elderly patients were left to die in a hospital six miles from the nuclear plant.

Oh, well, too bad for them, huh? We're here in America, so none of this is affecting any of us, right?

Well, take a look at this map of the dispersion from the disabled plant:

Did that get your attention? Sure, maybe the radiation levels aren't anything to get excited about, but do you trust our dysfunctional media to actually deliver the truth? And why did FOX get their main reporter, Sheppard Smith, out of Japan and CNN do the same with Anderson Cooper, LAST WEEK?

Just ask yourself, how long will it take the "authorities" to put this nuclear disaster to rest? Well, it's been ten days, boys and girls, and we're nowhere close to fixing what's going to become known - I have no doubt about this at all - as the worst disaster - man-made or otherwise - of all time.

Now, maybe the fact that food imports from Japan have been banned, do you feel safer? Oh, and there's more, like black smoke and how Tokyo drinking water now contains iodine-131 at levels unsafe for infants. In case you're wondering how much is too much for adults, the recommended safe level is below 300 becquerels per liter. The water tested in Toyko recorded levels of 190-210 becquerel per liter.

So, why do I bother? The national media gives much more coverage to the stupidity of our
engagement in Libya. Wonder why? The old adage in TV news reporting is, "if it bleeds, it leads," meaning that guys getting shot and killed and bombs blowing up buildings is far more engaging to the dumbed-down populace of the United States (and a lot of the rest of the world) than pictures of steam coming out of blown up nuclear facilities.

Well, maybe that's enough for today. Wouldn't want anyone to get upset or panic. After all, our media and our government have proven, since 9-11, to be worthless, so why should it be any different in Japan? Just go along in your haze of cognitive dissonance, and maybe buy some stocks.

Oh, the Portugese parliament is likely going to dissolve soon, either due to radiation or votes, whichever comes first, I suppose.

So, yes, we should be buying stocks on all this bullish news, some of which is actually being reported.

Dow 12,086.02, +67.39 (0.56%)
NASDAQ 2,698.30, +14.43 (0.54%)
S&P 500 1,297.54, +3.77 (0.29%)
NYSE Composite 8,248.83, +20.42 (0.25%)

Stocks started out negative but ground higher all day. Thank the computers and the algos that do the majority of the trading these days. Advancers slithered by decliners, 3540-2917. On the NASDAQ there were 72 new highs and 42 new lows; the NYSE showed 91 new highs and 18 new lows. Volume was only marginally better than yesterday's which was worse than pathetic. Get ready for a wicked decline some time soon. It may look like a crash, because it just could be one.

NASDAQ Volume 1,715,377,875
NYSE Volume 4,313,727,000

At least those trading in commodities knew what they were doing. Oil was up 78 cents, to $105.75. Gold gained $10.40, to $1,438.00, and silver shot up 93 cents, to $37.20, another new 31-year high. The gold and silver bugs know what's up. If things get any worse, they'll become overnight million-and-billionaires.

Good luck to you still holding any paper assets. They're about to be burned, along with the rest of the fuel rods at Fuk - U - Shima.

Edit: Just had to add that ABC and CBS each began their nightly news broadcasts with nearly 10 minutes of breathless coverage on the death of Elizabeth Taylor. NBC led with Libya, but did report on the drinking water supplies being tainted in Tokyo. Priorities, people, priorities.

Tuesday, March 22, 2011

A Day Without Disaster

Thankfully, Tuesday is almost over with and there haven't been any grave disasters, though the ones that have been hovering over the globe for the past few weeks are still far from resolved.

It seems to make some sense that markets would just wallow around until the damaged nuclear reactors in Japan are finally shut down, whenever that may happen, Colonel Qadaffi is defeated or found dead in Libya and the level of unrest settles down in various countries in Northern Africa and the Middle East.

That's exactly what went on today. There seemed to be no reason to either buy or sell equities and the major indices traded in narrow ranges all session long.

Naturally, conditions in the hot spots around the world could get better or worse, and nobody is really sure of anything at this juncture, especially when officials in Japan continue to stage a weird kind of kabuki theater in the way they report the situation at the damaged Fukushima nuclear plant, where four reactors have experienced some kind of explosion, accident, fire or other condition as an indirect result of the 9.0 earthquake that rattled the island nation on March 11.

That the reactors are spewing radioactive gasses and material is not disputed, but how much of which particular isotopes are going where and when has not been even remotely reported. All we know is that the radiation levels are higher than they were a week ago in various areas around the site and that the spread has become nearly global in nature, though slight in terms of actual threats to human health.

That's not really very reassuring since the problems persist and any increased exposure to any kind of radiation is potentially a health hazard.

Meanwhile, the US response, in conjunction with a bevy of nations, to the blood-letting in Libya has been met with considerable criticism and even our own representatives are speaking in tongues, with the president, congress and the military all putting out their own spin, none of it making a whole lot of sense.

More than likely, these issues will remain in some kind of focus for the coming weeks, if not months, and there will be other unexpected events in the interim. The best advice would be to expect the unexpected at this juncture, because nothing is for certain and situations are still, as they say, fluid.

Dow 12,018.63, -17.90 (0.15%)
NASDAQ 2,683.87, -8.22 (0.31%)
S&P 500 1,293.77, -4.61 (0.36%)
NYSE Composite 8,228.41, -27.95 (0.34%)

Declining issues dominated winners, 3743-2718. There were 72 new highs and 33 new lows on the NASDAQ; on the NYSE 109 new highs and just 8 new lows. Volume was miserably low. This was, if not the slowest trading day of the year, among the three or four worst. There's simply too much event risk associated to equities in the current cycle.

NASDAQ Volume 1,671,905,000
NYSE Volume 3,995,960,500

Oil finished at an even $104.00, up another $1.67 due to unresolved Middle East issues. Gold managed a squeeze out a gain of $2.30, closing at $1,427.60 in New York, within 1% of its all-time high. Silver gained nicely, adding 27 cents per ounce, to $36.27, the third-highest point in the last 31 years and just pennies away from the nominal high of $36.60, reached just two weeks ago, on March 7.

The longer it takes for Japan's nuclear reactor problems to be resolved, the longer stocks will remain bogged down, stuck in a range between the highs of February 18 and recent lows. Radiation leaks and potential melt-downs are nothing to joke about, and the condition of those plants is such that it could easily become a much more severe problem before it is eventually resolved.

There's already a panic quietly building world-wide, even though the reported radiation levels have been in an "acceptable" range. However, the longer the reactors leak radiation, the lower the tolerance of acceptance becomes. That situation remains highly volatile and potentially upsetting on a global basis, not only to investors but to the health of people.

Monday, March 21, 2011

Meltdown in Japan, Melt-up in US Stocks

Absurdity has found a new home: the US equity markets.

Somebody wake me up when the nightmare is over, because I cannot find any good reason to buy stocks right now, so, I must be dreaming.

War planes fly over Libya and Israeli jets take out a Hammas stronghold in Gaza. So, that's the good news, right? R-r-r-r-i-g-h-t. The Japanese government is lying to its people about radioactivity levels. That must be the bad news. And AT&T is going to gobble up T-Mobile, so we'll have one fewer cell phone provider. Does anyone recall the day that AT&T was broken up because its business constituted a monopoly?

Don't worry, the hologram of Eric Holder will do nothing. Anti-trust? In trust we trust, I guess.

The following numbers mean nothing. It's all just a paper moon.

Dow 12,036.53, +178.01 (1.50%)
NASDAQ 2,692.09, +48.42 (1.83%)
S&P 500 1,298.38, +19.18 (1.50%)
NYSE Composite 8,256.36, +139.96 (1.72%)

Advancing issues absolutely slaughtered decliners, 5182-1379. Stocks shot up at the open and stayed afloat all day. NASDAQ registered 90 new highs and 30 new lows. The NYSE had 129 new highs and just 9 new lows. Pathetic. Volume was in an abyss, especially on the NASDAQ.

NASDAQ Volume 1,766,817,250
NYSE Volume 5,027,389,500

WTI hit $102.33 a barrel on the NYMEX, up $1.26 on the day. Gold soared $10.30, to $1,426.40. Silver was up 94 cents to an even $36.00. Both are approaching recent multi-year or record highs. But everything is just fine. Notice how the news media shifted focus away from Japan and towards Libya. Well, guns and rockets and missiles launched from warships is much more entertaining than those invisible radioactive isotopes being spewed continuously into the air and the sea in Japan. So, bang, bang, bang. It's good TV.

We have entered an age in our culture in which nothing really makes much sense any more. Spend $200,000 for your kid's education so he or she can get a $35,000 a year job and have to pay back a mountain of debt. Blow up a country for its oil. Don't report on uncontrolled radioactivity that will kill thousands, maybe hundreds of thousands, maybe more. Buy stocks because some broker who knows less about economics and money than you do told you it was a good deal. Sit back and relax, watch TV. This is March Madness, after all, and we're not talking basketball.

BTW: According to the Supreme Court, the Fed will have to release documents relating to loans taken out by banks from the discount window in April and May, 2008, before the stock market crash.

They knew. But they wouldn't tell you.

Friday, March 18, 2011

Rally Fades Into Close; Wall Street is Full of Bull

A momentous gap up open - all part of the arbitrage plan for scraping money on quadruple options expiration - finished the rally which began on Thursday, as usual, based upon nothing but "sentiment" and, of course, those computer algos which buy, buy, buy.

As stated here the past two days, any rallies under the current climate will be sharp and short-lived. Consider this one over, as the rally faded by half into the close.

Cheerleading CNBC was flashing a "best two-day Dow rally since December" headline, which is somewhat sad in a journalistic sense, since the NASDAQ was down nearly 4% for the week and the Dow and S&P finished the week with losses in the 1.5% area.

Dow 11,858.52, +83.93 (0.71%)
NASDAQ 2,643.67, +7.62 (0.29%)
S&P 500 1,279.20, +5.48 (0.43%)
NYSE Composite 8,116.40, +51.54 (0.64%)

Advancing issues defeated decliners, 4575-1915. NASDAQ new highs: 49; new lows: 42. That snaps a six day winning streak for new lows. On the NYSE, new highs beat new lows, 49-17. That means new highs have been better than new lows 4 of the past 7 days. Volume was particularly high today, due in large part to options expiration.

NASDAQ Volume 2,652,983,000
NYSE Volume 5,778,696,000

Crude oil fell 35 cents on the NYMEX, to $101.07, now that the UN has offered to stop the indiscriminate killing of his own people by forces loyal to president and lunatic-in-chief, Khadaffi.

Gold got back on track, gaining $11.90, to $1,416.10. Silver caught a bid as well, up 80 cents, to $35.06.

Expect more volatility until the conditions on the ground at Japan's disabled nuclear facility is either better explained by Japanese authorities or the situation somehow settled. It is still a very dangerous overhang to all risk assets, which is why gold, silver and goods are still safe bets.

Thursday, March 17, 2011

The Expected Snap-Back Rally Occurs Right on Time

As mentioned in this space yesterday,
A decline in US stock markets will only trigger more printing, more inflation and an even more unbalanced global economy, one that was already teetering on the brink of disaster, even before the Japan debacle. However, such an inordinate infusion of capital may cause a snapback rally at any time. If such occurs, it will be easy to spot, as it will be sharp and large. The other characteristic of such an event is that it will have a relatively short duration - an afternoon, a day, a session and part of another, at most.

Well, today was it. If there's one thing the self-appointed Masters of the Universe on Wall Street and in Washington absolutely cannot tolerate, it is human events spinning beyond their ability to control them, because their power declines under such circumstances, and their sole response is to turn up the algos on their stock-buying computers and send equity prices ever further into the stratosphere of the absurd.

Today's mammoth run-up was well conceived and not derailed by any further bad news coming out of Japan, though what to do about those rebellious peasants in the Middle East still remains a problem for our sweet, elite masters. For a microcosmic view of it all, note how stocks and oil advanced smartly, with gold lagging and silver falling even more.

The elitist snobs will tolerate gold, even hoard it in times of panic, but they hate silver, because if gold is the metal of kings and monarchs, silver is the coin of gentlemen and lower rabble. The great wazoos and muckety-mucks will have nothing to do with it, which is why it continues to be supressed at every opportunity, by now, an open secret.

We'll maintain that silver is still the best investment for the current condition, despite its wild swings. Eventually, as we saw in the latter half of 2010, it will stay with and surpass gold in percentage gain.

In the meantime, the Bank of Japan (BOJ) will meet with their effete counterparts in the G7 to receive approval for intervention in their rapidly-appreciating currency. In other words, with money inflows to Japan, the Yen is becoming stronger, making more capital available for eventual reconstruction efforts, while at the same time boosting the price of its exports, which is considered a negative for the globalist agenda. The Bank of Japan will seek to buy up Yen, squeezing some of the liquidity out of it and stabilizing it against other floating currencies.

It's a bit of a complex condition, causing money flow disruptions and imbalances. In the meantime, the US dollar continues to depreciate, falling to a 4-month low, dipping just below the 76 mark at 75.995 on the dollar index.

Dow 11,774.59, +161.29 (1.39%)
NASDAQ 2,636.05, +19.23 (0.73%)
S&P 500 1,273.72, +16.84 (1.34%)
NYSE Composite 8,064.86, +134.99 (1.70%)

Despite the big headline numbers, the internals were less convincing that today's rally was anything more than money-tossing, as advancing issues beat decliners, 4438-2072, though new lows retained their edge over new highs on the NASDAQ, 56-35, for the sixth consecutive session. On the NYSE, it was nearly a dead heat, with 30 new highs and 28 new lows. Over the past six session, the advantage has gone to either side an equal three times apiece.

Volume was once-again telling. Though it was slightly elevated, it by no means was in a range indicative of an all-in rally. As mentioned previously, these kinds of things are normally sharp and short, especially in the light of tomorrow's quadruple witching day for options. There was plenty of arbitrage to go around for the sharpies.

NASDAQ Volume 2,011,827,250.00
NYSE Volume 4,743,120,500

Renewed tensions in the Middle East (and, no doubt, the insatiable urge to screw motorists with high gas prices) caused a run-up in crude, which elevated $3.42, to $101.42, on the NYMEX.

Gold gathered some momentum, gaining $8.10, to $1,404.20, but silver shed 21 cents, to $34.26, a price still close to recent 31-year highs.

With all the focus on the nuclear crisis in Japan, some revealing economic figures were released over the past two days. The PPI was up a whopping 1.6% in February, with the CPI chiming in with a gain of 0.5%. Inflation, that thing Ben Bernanke says is under control, temporary and not a problem (well, maybe not for him), isn't on its way here, it has arrived.

New housing starts were at some horrible four-decade low, with building proceeding at an annualized rate of 479,000 units. Industrial production fell 0.1% in February and capacity utilization dropped to 76.3% These kinds of numbers really gives one confidence that the liars in Washington have once again dropped the ball on the economy, all along telling us that we're "recovering."

In the wild new world normal, "recovery" is tantamount to Charlie Sheen's "winning" - an innocuous word, significant of absolutely nothing.

Wednesday, March 16, 2011

Fear Trumps Greed for a Day

As has been reported here over the past couple of days especially and for the better part of the past month, US stocks are heading lower.

Today's action was in stark contrast to the dip and rally from Tuesday, as news coming out of Japan just continues to worsen, as most thinking people assumed it would. Without going into the gory details, it appears that the nuclear plant that has been a problem since Friday's earthquake/tsunami is headed toward at least partial meltdown and at worst total meltdown.

Making matters even more horrifying is that there are six reactors at the site. Up until now, only four of the six reactors at the Fukushima Daiichi site have been affected, with all four of them spewing radioactive material at some time or another over the past five days, though it now appears that reactors #5 and #6 are at risk as well.

Information from the site has been sketchy at times, contradictory at others, but confusing and increasingly worse all along. It appears that the Japanese people are in for a long period of pain and suffering, and the implications are likely to be felt worldwide.

On Wall Street, where bulls ignore the obvious and bears hope against the worst, but bet on it, stocks were down in the early going until just before 11:00 am EDT, when news came, via a government official, that the situation at the plant had worsened considerably. That sent stocks into an absolute tailspin, with a full 1% decline within minutes of the news.

A rally was attempted when stocks hit their lows of the day at 2:00 pm, but it sputtered badly and the markets stared grimly at one of the largest one-day losses of the past two years.

Dow 11,613.30, -242.12 (2.04%)
NASDAQ 2,616.82, -50.51 (1.89%)
S&P 500 1,256.88, -24.99 (1.95%)
NYSE Composite 7,929.87, -162.24 (2.00%)

Confirming the carnage suggested by the headline numbers, declining issues battered advancers, 4889-1704. It's amazing it wasn't even more lopsided. Our leading current indicator has finally offered confirmation of a directional trend. New highs on the NASDAQ numbered 31, new lows, 74. On the NYSE, 31 new highs and 38 new lows. That makes five straight days on the NASDAQ that new lows have outnumbered new highs and three out of five on the NYSE.

If anyone's been waiting for indicators to flash red with sirens blaring, today was it. Japan's woes will continue to dominate the news for the foreseeable future and the associated supply chain issues of a globalized economy are beginning to come to light. Shipments of crucial parts are going to be delayed or stopped, trade will suffer and a large chunk of the world's third largest economy is going off-line for a while. Whether that is going to be weeks or months or years is still unknown, but the betting is that disruptions will extend through at least the end of the summer.

Another tell-tale sign that today was a day of capitulation by the bulls in US stocks was told by the off-the-charts volume in today's trading. It was the largest volume day of 2011 and may still be dwarfed by the eventual follow-on decline. One caveat is that the Fed continues its abuse of the US dollar by printing more of them at every opportunity. A decline in US stock markets will only trigger more printing, more inflation and an even more unbalanced global economy, one that was already teetering on the brink of disaster, even before the Japan debacle. However, such an inordinate infusion of capital may cause a snapback rally at any time. If such occurs, it will be easy to spot, as it will be sharp and large. The other characteristic of such an event is that it will have a relatively short duration - an afternoon, a day, a session and part of another, at most.

NASDAQ Volume 2,596,625,000
NYSE Volume 6,569,946,500

Commodities caught some bids, as sellers of equities rushed to less-risky assets. Oil was up 80 cents, to $97.98 as conditions in the Middle East continue to rage on, unsettled. Gold gained $3.30, to $1,396.10, and silver was up 36 cents, to $34.47. The move in precious metals is particularly interesting as it is a break-away from equities. Tuesday, all assets fell in a rush to liquidity. Today, the players were placing bets: for precious metals and other valuable commodities and against stocks and currencies.

Since there is no quick fix to nuclear accidents, especially those being mentioned alongside Chernobyl - the worst ever - don't expect the plant in question in Japan to be repaired for some time, if ever. Officials are only now poring over whether to entomb the reactors with heavy doses of cement or continue containment efforts, which are not working very well at present.

At this point, any intelligent human should take advantage of the short-term decline in the precious metals, but also maintain a large sum of cash, outside of any investments. In a declining, deflationary event, which may be occurring at this very moment, cash will be king. In a complete rout of economy, society and civility, gold and silver will reign supreme. Both situations have great potential at the current time.

Tuesday, March 15, 2011

Optimism Can Be Good or Bad

Americans are an optimistic lot. Nothing wrong with that, as long as some of the optimistic sentiment is grounded in reality. There's a big difference between wishing and hoping for some desired result that may not have a good chance of happening and confidence based on experience and factual data.

Overnight, conditions in Japan took a turn for the worse as another reactor at the damaged Fukushima Daiichi nuclear facility about 100 miles North of Tokyo suffered an explosion. Japanese officials tried to appear calm, but the fear and panic on their faces was not easy to hide. Reactor #2 at the plant incurred a violent explosion that reportedly damaged part of the containment vessel which holds the unstable rods of highly-charged uranium.

Shortly after that blast, a fire in reactor #4 was reported to have occurred in the pools holding spent fuel rods, also highly toxic and radioactive. Reactors #2 and #3 had already been damaged by xplosions in the aftermath of the 9.0 earthquake and tsunami which hit the island nation on Friday.

The Japanese stock market, the NIKKEI 225, suffered a substantial loss of nearly 11% before trading was halted. Other Asian markets took losses as well, and European markets were down more than 2% when stocks opened in New York.

The drop on the open was a stark and panic-stricken response to what appeared to be possible meltdown in the #2 reactor and spreading risk of contamination to a large area of Japan. A radius of 20 kilometers (12 miles) was evacuated and another in another area further out - to 30 kilometers - residents were told to stay inside due to increased risk of exposure to radioactive elements in the air.

Most of the news occurred during the night for Americans, so there was a bit of unease at the open. The Dow fell 310 points in the opening minutes of the session, with the other major indices taking similar falls.

But, as it turns out, that was the worst of it for US stocks, which rallied in a diagonal path all day as no new news came from Japan. While traders put their most optimistic attitude front and center, the conditions in Japan are still very much in a state of flux. For now, most of the damage has been contained, but the risk of complete meltdown of any one of the three badly-damaged reactors is still prevalent, which is why the attitude of the American traders and investors may be a bit premature.

Besides the nuclear plant situation, conditions on about a third of the main island remain challenging and desperate. Aid is only now reaching some of the victims, the death toll continues to mount and reconstruction is still weeks and months from even beginning. The scope of the devastation is being underplayed by American media. This is a disaster that will play out over months and years, not days and weeks.

The major indices still suffered substantial losses, though they easily could have been worse. The intra-day drops of the past two days have broken through support areas - areas that will be retested before any hint of a rally occurs.

Dow 11,855.42, -137.74 (1.15%)
NASDAQ 2,667.33, -33.64 (1.25%)
S&P 500 1,281.87, -14.52 (1.12%)
NYSE Composite 8,092.11, -101.85 (1.24%)

Declining issues slaughtered advancers, 5101-1536. There were 23 new highs on the NASDAQ, but those were overshadowed by 134 new lows. On the NYSE, only 29 stocks hit new highs, while 77 made new lows. This was the 4th consecutive day of new lows beating new highs on the NASDAQ and the second in the last four for the NYSE.

From a technical perspective, the high/low readings are beginning to develop into a trend, which, if confirmed by further continuation, will produce one of the strongest directional indicators to be found. The divergence of new highs and new lows normally becomes a long trm trend, lasting anywhere from six months to more than two years as it is a primary trend indicator. While there are no hard and fast rules surrounding that particular metric, any change lasting more than a week in duration should be confirmation of the new direction of the markets, in this case, down.

What is occurring inside the US markets is very much the result of too much money in the system. Today's action in global markets was a liquidity-driven event, as assets of all nature were liquidated in favor of the relative safety of cash. Since the Federal Reserve has been pumping money out at an unprecedented rate, today's sudden drop and subsequent rally has all the characteristics of a flooded market with an unstable or unreliable base.

It's very much the same as an old car that has trouble starting and running. A jump may get the batteries to deliver enough juice to get it rolling, but problems inside the engine cause it to stall out again. Fixes are short-term, before a mechanic says the engine needs a complete overhaul.

That is precisely the situation in US markets. The issues coming from Japan are masking real, structural problems below and the daily new highs vs. new lows on the NASDAQ are flashing warning lights that many are ignoring at the peril of their capital.

Volume was extremely high today as well, another bearish indication.

NASDAQ Volume 2,371,639,000
NYSE Volume 5,944,351,500

What made matters even more convincing that the drops in global markets were driven by a rush for liquidity were evident in commodities. WTI crude oil futures were absolutely hammered, losing $4.01, to $97.18. We can only hope that the world-wide community can see the oil market for what it really is - bloated with excessive supply and wildly overpriced as compared to real economic conditions - and continue selling it off until balance is restored at around the $75-85 per barrel level.

Gold was hit hard as investors raced into cash positions, losing $32.10 on the day, to 1,392.80, but down much more in earlier trading. Silver also took a substantial hit, off $1.72, to $34.12.

Once there is some clarity to Japan's situation, the precious metals should continue their interrupted rally, or, at the worst, outperform stocks in a big way.

There's still far too much uncertainty in the world to be fooling with paper assets unless you're a skilled day-trader who can afford to take occasional large losses. For the rest of us, the safety and security of gold and/or silver are second to none.

Monday, March 14, 2011

Japan Disaster Dominates Markets

The general perception of the disaster in Japan - caused by a massive 9.0 earthquake and the resultant tsunami - is, as it should be, one that measures the human tragedy above the resultant damage to property and goods. Surely the people whose homes have been either crumpled by the force of the quake or simply washed away by the flooding sea waters face unknown futures.

It is still too early to tell how the government in Japan will deal with the now-homeless residents of the region most-affected, but the initial response has been less-than-heartening. The most glaring examples of ineptitude and unpreparedness have come in the form of communications surrounding the still-unfolding nuclear disaster, the third leg of the crisis and possibly the most severe.

Whether it is unwilling or simply unable to assess the situation at the various reactors that have been damaged, the government's response has been self-contradictory and incorrect at worst or unreliable and confusing at best. What is known is that two reactors at the Fukushima facility have suffered irreparable damage, suffered explosions and possibly begun to partially melt down. Radioactive gasses have been released both on purpose and by accident, though the danger of a full-blown nuclear nightmare still exists, despite many reports to the contrary.

Barring complete and concise factual information, a commodity in quite short supply in the island nation, there is simply no way of knowing exactly the conditions on the ground. As nuclear power events go, this one is still closer to the beginning than the end, though many experts are hopeful that the unstable rods can be quieted with a combination of sea water and boric acid. In any case, reactors #1 and #3 at the facility are kaput, with #2 also reportedly damaged.

An evacuation zone of some 20 kilometers suggests the release of radiation into the atmosphere has already gone well beyond a dangerous level to making the area in a 12-mile radius of the plant temporarily uninhabitable, as is the situation along miles of coastal land subsumed by the tsunami.

Capital and financial markets have done their level best to downplay the short and long term effects of the total disaster, though they too are fishing in a deep and muddied stream of information. There are still too many unknowns to make critical assessments and business decisions. One thing is for certain, that the costs will run much higher than initial estimates of $180 billion. Close to 10% of Japan's population has been directly affected, while the rest of the population has, and will, suffer tangential effects.

To a country as small - geographically - as Japan, this disaster is a game-changer. Even in well-protected Tokyo, there's incidental damage to personal property in addition to a high emotional toll, which would be a mistake to underestimate.

Being one of the largest economies in the world, though one of the least stable, Japan will recover and rebuild, but the effort will take years, not months, after the effects have long since dropped off the top of the news. That's why the markets probably will be unsettled to lower for the near term. The issues facing the Japanese people have the potential to have long-reaching effects into the global economy.

As such, stocks were off world-wide with a few exceptions; the Nikkei was down more than 6%.

In New York, the major indices reversed Friday's gains with a gap-down open, plunged through the morning, settled at resistance and gained into the close, though the effort was more day-trading than anything else. Volume was lower even than Friday, bordering on being one of the slowest trading days of the year.

Dow 11,993.16, -51.24 (0.43%)
NASDAQ 2,700.97, -14.64 (0.54%)
S&P 500 1,296.39, -7.89 (0.60%)
NYSE Composite 8,193.96, -54.57 (0.66%)

Losers backed down winners by a pretty healthy degree, 4416-2088. On the NASDAQ, new lows topped new highs for the third straight session, 75-33. Over on the NYSE, new highs narrowly nipped new lows, 37-30. It is advised to keep a close eye on the daily new highs/lows, because the markets are in flux and seeking direction. It's still looking like a 65-70% probability that the markets have already made a turn and the dominant direction for the next six to eighteen months will be lower.

NASDAQ Volume 1,810,942,250
NYSE Volume 4,571,130,500

Commodities were affected by the Japan disaster, though to a much smaller degree. Front end crude oil on the NYMEX spent most of the day under pressure, but ended up with a marginal gain of just 3 cents, at $101.19. Between the reduced demand in Japan and the still-unsettled situation in the Middle East, prices could go either way, but the trend seems to be following global trends lower.

Gold was up $3.10, to $1,424.90, but silver shed 10 cents, to $35.84. Both of the dominant precious metals are trading near record highs, consolidating for another leap forward. Any major global event of consequence will send both gold and silver off like bottle rockets, though with the momentum already built in, no further catalyst is really needed, as the continual, non-stop printing of fiat dollars, yen, yuan and euros is providing more than enough fuel for the PM fire.

Markets don't get much more distorted and unpredictable than when a major natural disaster unfolds. Putting that on top of an already shaky foundation and wasteful stimulus is a witches brew of unknowable mystical monetary force.

Friday, March 11, 2011

World Down, Americas Up, Why?; What BTFDYFI Means

The devastation form the largest ever recorded earthquake in Japan is pretty severe. Markets worldwide sold off, all of them, in uniform fashion, except for those in the Western Hemisphere.


Good question, and the only plausible response available is that the US and Western Hemisphere gains comparative advantage for any other global setbacks that aren't in our immediate physical hemisphere, though it's probably not quite that simple.

The US, Canada, Mexico and South America surely aren't isolated in any manner from Japan. Devastation there will have a negative effect to some degree on global trade. The real difference here is that US markets are not free, not liquid and prone to machinations of madmen like the one who sits as Chairman of the Federal Reserve Corporation (a Delaware corporation). The other markets - in particular the Canadian and Brazilian markets; Mexico was down sharply - are actually in our global proximity and economic sphere of influence, so it is likely that once events in Japan had been digested and recognized as not a huge problem for the US, the marketeers went to work with the zero-interest rate free money on hand and BTFD.

(Those not well-versed in the acronym world of high finance, BTFD stands for Buy The F---ing Dip. BTFDYFI stands for Buy The F---ing Dip You F---ing Idiot.)

And so it is. Stocks ended the week with nice gains on a day that millions of Japanese people have suffered tremendous personal and financial losses. It takes a really cold indifference to human suffering to buy stocks in the face of devastating circumstances. Fortunately, there were not many people doing that; volume on the major exchanges was severely thin. Only the worst of Wall Street - meaning insiders from major banks, brokerages and hedge funds - were in on the dip-buying today. Hopefully, they will be richly rewarded with losses in coming days.

Dow 12,044.09, +59.48 (0.50%)
NASDAQ 2,715.61, +14.59 (0.54%)
S&P 500 1,304.28, +9.17 (0.71%)
NYSE Composite 8,248.53, +48.46 (0.59%)

Gainers turned the tables on losers, 3861-2613. New lows out-polled new highs on the NASDAQ, 71-31, but the result was just the opposite on the NYSE, with 32 new highs and 19 new lows.

NASDAQ Volume 1,825,802,625
NYSE Volume 4,237,853,500

The day was more eventful for commodities. Crude oil on the NYMEX front futures contract fell $1.54, to $101.16, as the Middle East's "day of rage" turned out to be more a stroll through the city square than full-throated protestations. Maybe the Arabs with government grievances should hire a few of the rent-a-thugs from Wisconsin, since they are no longer needed there.

Gold and silver got a boost on rumors that a furtherance of the Fed's easy money policies were in the bag. Gold, after trading lower through the early portions of the New York session, finished with a gain of $9.30, at $1,421.80. Silver, under similar circumstances, shot up 87 cents, to $35.94. The confidence of precious metals holders and traders is extremely high and rising. while there may be occasional setbacks along the way, the only way for the metals to go is higher, probably much higher, doubling or tripling in value from here over the next three to five years, though especially silver, which underperformed gold in the 2000s, but is quickly making up for lost time.

At last, we arrive at the weekend, with the major indices suffering roughly 1% losses for the week. The trend apparently having reversed over the past few weeks, remember that it is your friend.

Enjoy the NCAA conference tournaments this weekend and get ready for some wild action on the courts and in the markets in weeks ahead.

Thursday, March 10, 2011

It's Not as Good as They're Saying; Lows-Highs Flip

To anyone who follows capital markets and the world of high finance closely, the material deficiencies in the US and global "growth" stories are glaring and have been for many months. While the financial press - CNBC, the Wall Street Journal, Bloomberg - and the spokespeople for the various central governments around the world continue to feed the public the "recovery" fable, the facts, now beginning to see the light of day, contend that the global economy is still, two-and-a-half years after the grand cascading crash of 2008, in precarious straits.

Five separate stories sealed the fate for global markets today, beginning with China's announcement late Wednesday night (in America) that their trade balance was negative for the month of February.

About the same time, RealtyTrac delivered news that foreclosures had come to nearly a halt in the United States, with their numbers for February dropping 14 percent from the previous month and a 27 percent decrease from February 2010. Normally, that would be good news, but in the current environment of illegal and unethical actions by large, foreclosing banks, it meant that the mess that began in October, 2010 with the robo-signing scandal, was keeping banks from courthouses and clogging up the real estate market in a worsening manner.

Prior to the market opening, two more news items spooked the investment community. First, Moody's downgraded Spain's debt (about time for that!) to Aa2 and then, at 8:30 am on the East coast, the double whammy of new unemployment claims (397,000) and the US trade deficit, which expanded to -$46.3 billion in January.

Then, in mid-afternoon, as if the market had not received enough bad news, a story out of Saudi Arabia said that protesters had been fired upon by government troops.

That final bit of news sent the major indices - which had recovered somewhat off the day's lows - down once more, and stocks finished the session breaking into new depths.

The Dow and S&P broke through various levels of support, with the Dow finishing under the 12,000 mark for the first time in two months and the S&P crashing through it's 55-DMA. The NASDAQ and NYSE Composite each suffered similar pain.

It's becoming plain and clear to everybody living in the real world - not the fantasy land of fund managers, politicians and central bankers - that things are not going so well. Housing is an absolute catastrophe, global trade is grinding down due to higher imput costs and soaring energy prices, Europe is a full-blown basket case on the brink of dissolving, and US stocks are so wickedly overvalued that the path of least resistance is to sell them all, hurriedly, on the first sign of negative news, and there certainly was plenty of that to go around today.

Dow 11,984.61, -228.48 (1.87%)
NASDAQ 2,701.02, -50.70 (1.84%)
S&P 500 1,295.11, -24.91 (1.89%)
NYSE Composite 8,200.07, -179.37 (2.14%)

Declining issues led advancers, 5501-1072, a ratio of better than 5:1. New highs on the NASDAQ were just 33, overtaken by 68 new lows. On the NYSE, just 27 new highs and 31 new lows. This is a critical juncture for the markets, because if the number of new lows remain higher than new highs on a daily basis for long, say, six to eight trading days, it would confirm a hard change of direction, which has been in the cards since the double-engulfing session last Tuesday.

Volume was elevated as is the usual case when sellers outnumber buyers.

NASDAQ Volume 2,374,073,000
NYSE Volume 5,320,324,500

Commodities also took it on the chin, though in not such a dramatic fashion as stocks. Crude oil futures on the NYMEX fell $1.68, to $102.70, due to massive oversupply in the US of unrefined crude. Gold slipped $17.10, but remained below the psychologically-important $1400 level, ending the day at $1,412.50. Silver also was sold off, losing $98 cents, to finish at $35.07, though it should be noted that on days of hard reversals, a lot of precious metals are liquidated by speculators to cover margin calls.

A final note should not be ignored. Bill Gross' PIMCO, the world's largest fixed income family of funds, has slashed its holdings of Treasuries to ZERO. This news, first reported by the avant garde financial blog,, holds unknown, but potentially damaging conditions. Gross and PIMCO have more or less registered a vote of "no confidence" on the policies of the US government and the Federal Reserve Corporation.

With stocks hammered down repeatedly over the past two weeks, the highs of February 18 look like specs on the horizon and the truth about the real conditions in the global and US markets is finally coming out. The cataclysm begun by the Wall Street banks in 2003-2006 and accelerated by then-Treasury Secretary's $700 billion holdup of the US mint in October, 2008, has many more acts still to be played out.

The rush for the exits began a week ago and the passageway out is beginning to get quite crowded.

Wednesday, March 9, 2011

No Follow-Through in Sluggish Equity Trading

After Tuesday's excellent ramp-up, traders took a break and squared up (or down) positions as the major indices all finished marginally lower on a day marked by extremely sluggish trading.

Following an early sell-off across the board, stocks regained their footing, hitting highs at midday, but sputtering all afternoon with a squeamish close.

Dow 12,213.09, -1.29 (0.01%)
NASDAQ 2,751.72, -14.05 (0.51%)
S&P 500 1,320.02, -1.80 (0.14%)
NYSE Composite 8,379.44, -14.60 (0.17%)

Declining issues finished ahead of gainers, 3567-2915. There were 92 new highs on the NASDAQ, versus 33 new lows. The NYSE saw 157 stocks hit new highs, with 10 registering new lows. Volume was in the dumpster again, as there seems to be little commitment by traders to take positions or hold them for periods longer than a few days, preferring instead to lock in profits when they appear. With options expiration a little over a week away, a move to the upside would normally be in the cards, but there's a ceiling of resistance about 1-1 1/2% above where the averages sit, so this may be a very quiet period with no major firms reporting quarterly results (that's next month) and scant economic data.

NASDAQ Volume 1,980,708,625
NYSE Volume 4,144,978,250

West Texas Intermediate on the NYMEX traded lower by 64 cents, as conditions in Libya and the Middle East did not change materially, finishing the session at $104.38. Gold gained $2.40, to $1,429.60, while silver was up nicely, gaining 39 cents to $36.05, another new 31-year high.

This kind of choppy trading should continue near-term, or at least until conditions in Libya and elsewhere show signs of stabilizing or going further out of control. In the interim, gold, silver and other hard assets still appear to be the best investments.

Tuesday, March 8, 2011

Don't Fight the Fed

Today's overgrown gains on the US stock indices stand as an object lesson of how Fed monetization of US debt trumps everything.

While oil took a brief respite, thanks, without doubt to pressure on traders to "cool it", the Fed flipped back to the Primary Dealers some $7.657 billion, more than half of it in the form of repurchasing notes just auctioned off two weeks ago.

That money went straight into stocks, which, by the way, were already overpriced.

Dow 12,214.38, +124.35 (1.03%)
NASDAQ 2,765.77, +20.14 (0.73%)
S&P 500 1,321.82, +11.69 (0.89%)
NYSE Composite 8,394.04, +57.02 (0.68%)

Advancers took the high road over declining issues, 4225-1491. There were 95 new highs and 34 new lows on the NASDAQ, while on the NYSE, 149 new highs to a mere 10 new lows. Volume, as expected, was very light. The move was not liquid.

NASDAQ Volume 1,869,438,750
NYSE Volume 4,451,904,000

NYMEX crude oil front-month futures eased 52 cents, to $105.02. Gold shed $7.30, to $1,427.20. Silver lost 21 cents, to close in NY at $35.66. The small downside in the precious metals and oil should be examined more closely, as they are just profit-taking and natural rotation on a "risk on" day for the casino gamblers.

The trend remains in place for commodities over the short, medium and long term along with significant downside risk for equities short term and longer. The major indices are treading water carelessly on seas of free money. With QE2 due to expire by the end of June, expect a pullback in equities unless the Fed announces further quantitative easing and the indices remain below their February 18 highs.

In the meantime, it's a good moment to snatch up precious metals.

Monday, March 7, 2011

Slip Sliding Away

With all due apologies to Paul Simon, the stock markets the past 10 days have been playing the tune that says, in part, "the nearer your destination, the more you're slip sliding away."

With stocks making a new peak on February 18 and attempting a run at all-time highs via the Fed's easy money policy (Here's a couple billion. Don't blow it all at once.), the bump in the road has been met and it seems to have come in the familiar form of high oil and gasoline prices.

Everybody knows that when you spend more on gas to get where you're going, you have less money to spend on what you went there for, despite your original intentions. Gas has run up so high, so fast, some people (like me) are considering not driving at all.

Consider the things you can't do while driving: drinking, talking on a cell phone (in most states), texting, and I've heard that most police officers frown on any sexual activity while behind the wheel. So, since they've taken all the fun out of driving and it's really expensive, why not just give it up altogether?

One may note that eating is still allowed while driving, and that's obviously due to the huge sums of money the fast food giants give to political campaigns. Seriously, eating a Mac-Double and fries while at the wheel is at least as dangerous as talking on a cell phone, and not quite as healthy. But, it's still allowed. We wouldn't want to close down all those drive-thru windows, now would we?

Getting back to stocks, with today's close, the major indices have been down six of the last ten sessions, and the Dow is off by 300 points, or about 2 1/2%. Apparently, all the money pumped into the markets by the Fed's QE2 program has caused some unintended outcomes, those being, primarily, massive increases in everything people need to live: food and fuel, among other things.

Making matters worse, Fed Chairman Bernanke seems to believe a little inflation is not a bad thing and also doesn't think the Fed is responsible for commodity price increases, food prices spiking and now oil going through the roof.

Well, Mr. Bernanke is either profoundly stupid or a very, very bad liar, and neither of those conditions are very good. It's quite obvious, and economics 101 teaches us that increasing the supply of money will lead to higher prices for the same goods, or, inflation. The Fed has pumped about $400 billion of their promised $600 billion into the markets and this is the result so far. I, for one, can't wait to see what the next $250 billion of free cash for the bankers will do. How bout gas at $4.25 and a permanent 10% increase in your weekly grocery bill.

It's not completely Bernanke's fault for being a stubborn fool, since he was appointed by a president freely elected by the stupid masses (me and you) and the Fed's been doing this kind of thing since 1913. Amazingly, this is only the second Great Depression they've caused, but hopefully, it will be their last.

Movements are afoot in at least 11 states to make gold and silver (it's what the constitution of the United States of America calls money) legal tender, in direct competition to Federal Reserve Notes, which, in reality, are nothing more than debt instruments. Given time, we'll return to a gold standard, though we'll have to lay waste to the Federal Reserve and all of their too big to fail banks like Bank of America, Wells-Fargo, Citigroup, JP Morgan Chase and maybe even Goldman Sachs. It is with hope that the banks and the Fed go quietly, because we really don't want to go through another tumultuous period like the Civil War.

So, all is not lost, and we sincerely hope the Fed keeps making the US dollar worth less and less. Maybe gas prices over $6 or $7 a gallon will rile up enough people to start looking at the Federal Reserve as the real enemy, not the great benefactor of OUR money they like us to believe they are.

Dow 12,090.03, -79.85 (0.66%)
NASDAQ 2,745.63, -39.04 (1.40%)
S&P 500 1,310.13, -11.02 (0.83%)
NYSE Composite 8,337.02, -76.03 (0.90%)

Declining issues outpaced advancers, 4980-1583. On the NASDAQ, there were 107 new highs and 38 new lows. On the NYSE, 159 new highs and 22 new lows. These numbers continue to converge and there's probably less than two weeks left before the new lows begin to overtake new highs on a daily basis. There may be a time of sideways trading, but, as traders always like to look ahead, if the Fed is really going to cease it's QE activities at the end of June, it might be better to get out of the way before the carnage in stocks begins, because once they pull away the artificial stimulus, the economy will head right back into the tank, just as it did briefly last summer.

Mr. Bernanke and his friends at the Fed have painted themselves into a dark and ever-shrinking corner and they have found no way out. Their dual mandate of stable prices and full employment is nothing but a very bad joke. The sooner the American people wake up to the fact that the Fed, with congress and the administration as their willing accomplices, are ruining the country, the sooner we the people can stand up and start fixing it.

NASDAQ Volume 2,203,664,500.00
NYSE Volume 4,595,122,500

It was another thrilling day for commodities. Crude was up another $1.05 at the close, at $105.44, though it traded well over $106 early in the day. Gold tacked on a gain of $5.90, to $1,434.50 at the close, though it too traded much higher, the top being $1445.90. So too silver, which was as high as $36.79, but finished up a mere 54 cents, at $35.86.

As for the mighty US dollar, the daily chart of the Dollar Index shows the dip to 76.12 prior to US markets opening and the day-long ramp up. Buying the dollar (another Fed plaything?) caused oil, gold and silver to lose their early momentum, but it's a losing battle for fiat money and it's coming to a head, soon.

Saturday, March 5, 2011

Price Discovery is Difficult, but Silver is Grossly Undervalued

Very simple. Buy gold and silver.

In 1950, money in circulation (M3) was $135 Billion. In 2012, M3 will be approximately (the government stopped publishing the figure because they don't like pornography) $15 trillion.

That's a ratio of 111.11~ to 1.

In 1950, a dime was a dime, worth roughly what the 90% silver content was worth, 10 cents.

Using our 111.11-1 ratio, we find pre-1965 coins, including dimes, to be grossly undervalued. They are, according to, worth $2.58, nearly 26x their face value.

This is with silver at $35.67 per ounce.

Using our 111.11-1 ratio again, and 2012 M3 at $15 trillion, in 2012, a pre-1965 dime should be worth $11.11, and an ounce of silver should be $153.60.

I don't know that much about gold, but the silver calculations are pure.

Of course, nothing's perfect, but I've been trying to find a reasonable way to calculate the true value of silver, though in this current ponzified regime of constant money printing, manipulation of markets and obfuscation of monetary reality, this is the best formula I've yet to devise.

Silver is grossly undervalued, and most of the people who have been accumulating it are doing so because they know it will almost certainly rise in value in the face of our current debt/finance structure and that the end of the fiat money regime is also near.

Buy silver, as much as you can reasonably afford, quietly, without attracting the attention of too many, and in future years, you'll be happy you read this comment.

Friday, March 4, 2011

Is A Trend Developing?

Despite the ramp job at the close (Dow gained 85 points in the final 40 minutes of trading today, stocks still looked pretty weak this week.

In answer to our headline, we call upon our best sarah Palin voice, for a You Betcha! moment. Thursday's wicked "buy the rumor" advance was followed Friday by a "sell the news" decline, of equally wicked proportions, despite very positive numbers from the BLS regardin February employment.

According to the new Ministry of Truth, the US economy created 192,000 net new jobs in February, with 222,000 of those coming from the private sector, as state and municipal governments shed precisely 30,000 employees. These numbers are difficult to believe, especially when the BLS engages in numerous revisions, approximations and their notorious birth/death modeling, by which we are supposed to believe that new businesses created something on the order of 119,000 of those new jobs.

Were that the case - which I assure you it is not, because nobody is taking risks these days, especially when it comes to hiring new employees or starting new business endeavors - the we should expect similar numbers for the remainder of the year, with the caveat that the vast bulk of these new hires by new businesses will be gone within a year.

Small business failure rates over time suggest that 50% fail within the first year, so we should have a double dip of small business failures and antecedent job losses a year from now and continuing through 2012. Joy, joy, joy!

What was probably more important to investors, traders, scammers, scalpers and thieves were developments in the Middle East, where reports suggesting that troops loyal to Lybian president Muammar Khaddafy had set ablaze a large oil production facility. Also, word has leaked out that all is not well in the kingdom of Saudi Arabia, which is the real McCoy when it comes to big players in the oil business.

Not only does Saudi Arabia export 10 million barrels of the liquid goo a day, they maintain extra production facilities for another two millions should the world require more oil.

Those scary scenarios sent prices for crude skyrocketing on all exchanges, with WTI breaking through resistance at $103/barrel. For otherwise more common concerns, American motorists are becoming quite annoyed at the constant rise in the price of fuel at the pump. Unleaded regular has shot to an average of over $3.50 per gallon nationally. It's cheapest in Montana and Utah, at about $3.18 per gallon, and most expensive in California, where prices under $3.78 cannot be found state-wide.

All of this oil-related shock tended to make traders a bit nervous heading into the weekend, save for those short-covering maniacs who boosted the close and shaved roughly half off the session's losses.

Dow 12,169.88, -88.32 (0.72%)
NASDAQ 2,784.67, -14.07 (0.50%)
S&P 500 1,321.15, -9.82 (0.74%)
NYSE Composite 8,413.05, -52.40 (0.62%)

The late-day rally did little to assuage the internals, however, as decliners trumped advancing issues, 4175-2315. On the NASDAQ, there were 110 new highs and 23 new lows. The NYSE saw 152 stocks make new highs on the day, while only 14 registered new lows. Volume was still rather moderate, considering all the ground covered during the session.

NASDAQ Volume 1,941,966,250
NYSE Volume 4,839,070,500

Commodities had a banner day. Crude oil futures on the front end NYMEX contract were up $2.51, to $104.42, the highest finish since 2008. Gold ramped another $12.20, approaching the fresh highs of earlier this week, closing at $1,428.60. Silver gained an even dollar, closing out the week at $35.33 per ounce in New York.

In the long view, the good-but-not-great jobs number was outflanked by pressure from oil and once again the main beneficiaries were holders of physical gold and silver.

After all the flailing about, the major indices barely budged on a week-to-week basis, but commodities finished strongly higher.

Sometimes, it's better to just sit back and enjoy the show, as that was the case this week for owners of precious metals. A good deal of energy was spent pushing equity prices hither and fro, to little avail, though Tuesday's key reversal looks like it will produce a real correction of 10-15% some time soon.

Taking a Stab at the NFP Number

There's about an hour to go before the release of the BLS Non-Farm Payroll data for February, and, since listening to ex-chairman Greenspan dodder on CNBC is causing severe intellectual pain and suffering, I've decided to take a stab at what the number will be.

With government work contracting generally over the past 3-6 months, we're likely looking at a reduction in public sector jobs of somewhere between 15,000 and 30,000. That implies that to reach the number some have projected, 175-200,000, the private sector would have to had created upwards of 200,000 jobs, and that seems highly unlikely.

My best guess - and it's nothing more than a guess because I'm not taking into account the arcane and muddy BLS birth-death models and other smoothing mechanisms they employ - is that the private sector created no more than a net 160,000 new jobs, and even that might be a stretch.

Let's put the number at +135,000, below consensus estimates, but, considering how bad January was, this number could - and maybe should - be considered a vast improvement.

Not that anybody should be happy with this number, since the amount of stimulus by government and the Fed has been enormous and we should, at this point in the "recovery," be creating 300-350,000 net new jobs, anything above 125,000 should be almost satisfactory, or, a "D" for underachievement for the Fed.

So, that's it: +135,000. I can live with that, and, even if I'm wrong, I'll be no further off than the majority of the experts out there.

Thursday, March 3, 2011

Big Rebound for Stocks on Low Volume

Today's jump in equities, led by Industrials, Financials and Health Care, was mostly based upon the usually shaded numbers from the BLS on initial unemployment claims, which came in at a three-year low of 368,000.

A good number, without a doubt, but market bettors were staking into stocks on the probability that those figures would translate into a much-improved non-farm payroll number on Friday. The current estimates are calling for the US economy to have created between 175,000 and 200,000 net new jobs in the month of February.

Taking into account the massive sums of money pumped into the economy through various stimuli, tax credits, bailouts, low tax regime and the Fed's QE, QE2 and ZIRP policies, it's about time for companies to begin hiring, and with gusto. Should the number tomorrow fall short of expectations, it would provide more fodder for those who believe the great Keynesian experiments of Ben Bernanke and the oligarchical banker subsidies have been for naught.

Those on the "recovery" side of that argument better hope that the BLS has massaged the numbers sufficiently to manage the message.

While today's gains were awesome to behold - the best for the S&P since December 1 and the biggest percentage gain for the NASDAQ since February 1 - the major indices are still 1-1 1/2% below the recent (Feb. 18) highs. events are still very much in flux, oil is still abnormally high-priced and we're still guessing that unemployment is beginning to come down, and worse yet, that guess is based upon a very faulty - and often revised - series of numbers supplied by a dodgy government agency, the BLS.

Not to poke holes in the recovery argument, for that's becoming a cause for being labeled un-American, but the stock market is such a wild, wide-open casino these days, that a big upside move is nothing upon which to hang one's investment hat. Additionally, it should be pointed out that the huge two-year rally off the March 9, 2009 lows has been upwards of 95% on the major indices and it is nothing more than a cyclical bull rally inside a secular bear market, one which the Western world entered in August of 2007.

Then there's still the question of what will happen when the Fed pulls the plug on QE, come June, or whether they will have the nerve and economic data to allow them to do so. That's when things get really dicey, as the underpinnings of the market are pulled out and interest rates make a natural rise, causing all that glorious government debt to be ever-more expensive to pay back.

And, if the Fed decides to pull the veritable plug of buying all US Treasury issuance, how soon will be see failed auctions? A scenario like that would make 2008 look like a stroll through the amusement park.

Enjoy it while you have it, perma-bulls. It may not last very long, especially in the face of what's gone on in gold and silver, the two behemoths scaring the living daylights out of central bankers everywhere.

Dow 12,258.20, +191.40 (1.59%)
NASDAQ 2,798.74, +50.67 (1.84%)
S&P 500 1,330.97, +22.53 (1.72%)
NYSE Composite 8,465.45, +126.69 (1.52%)

Matching the headline numbers, advancing issues galloped ahead of decliners, 5126-1431. NASDAQ new highs: 160; new lows: 22. NYSE new highs: 228; new lows: 4. Volume was down in the doldrums again, though not as badly as other, weaker days. With all the profits generated over the past two years, one would expect to see much higher volume on big trading days like this, but the bulk of the gain was done by noon, after which markets just marked time ahead of the key job announcement tomorrow morning.

There's also the small technical matter of the key, double-engulfing day on Tuesday, a symptom and a signal for a course correction, that is still in play. Today's high on the Dow was still 20 points shy of the opening high on Tuesday.

NASDAQ Volume 2,005,997,000
NYSE Volume 4,926,878,500

Oil took a bit of a breather, as events in Lybia and the Middle East were downplayed. NYMEX crude dipped 32 cents, but stabilizing over $100 - today's close was $101.91 - per barrel isn't anything anybody should be bullish about, unless one owns a well or three. Higher oil prices precede recessions, every time, and unless the situation in the Middle East isn't quieted soon, that high price is going to remain in place and possibly go higher. Moods change on the turn f a dime these days, and today's price - as well as today's stock gains - could be ancient history in a matter of hours or days.

Precious metals took a well-deserved day of profit-taking, and are consolidating at elevated levels. The next move higher should commence whenever conditions warrant, that being any time there's a flare-up in the Middle East, or, like Jean Claude Trichet mumbled today, interest rates should rise in Europe in order to stave off inflation.

Gold dropped $21.30, to $1,416.40; silver was down 51 cents, to $34.33. Both of those levels are close to historic, recent (yesterday) highs.

The future of the markets hinge upon tomorrow morning's key employment number, though one should not get too tied to this particular measure. There are more forces at work besides employment figures, though traders seem to want to hang their collective hats on this one.

Wednesday, March 2, 2011

Equities Struggle to Small Gains

Stocks bounced around without much conviction a day after taking substantial losses. For most of the stock trading crowd, today's was a pyrrhic victory - at least stock prices didn't go down, for the most part.

Turmoil in the Middle East continued to top concerns, though the fiasco in the nation's capitol, with Republicans and Democrats playing a lousy game of chicken (or chicken little) to see who can outflank whom on budget issues. On the table is a two-week funding bill, meaning that the drama will be played out again over the following two weeks and possibly again and again as the leaders of neither party are willing to take a tough, reasoned stance and actually make real cuts to the overblown federal budget.

Our federal politicians are so devoid of leadership, nerve or basic common sense, that the way congress and the president are behaving, there's simply no reason to believe that our fiscal policy will be anything but endless spending of borrowed money well past most or our lifetimes.

It's a sad and sordid joke being played on the American public, which deserves better than what it's getting from the elected crowd, squatting and ducking in anticipation of the next election cycle. Better to just ignore them all, lest they actually do something beneficial to the good people of this country.

In the meantime, let's just print more money out of thin air, spend that and more and move along.

Dow 12,066.80, +8.78 (0.07%)
NASDAQ 2,748.07, +10.66 (0.39%)
S&P 500 1,308.44, +2.11 (0.16%)
NYSE Composite 8,338.76, +22.91 (0.28%)

Advancing issues overtook decliners, 3913-2578. There were 62 new highs and 45 new lows on the NASDAQ. On the NYSE, a similar set-up, with 73 new highs and 18 new lows. Volume dropped back down to mundane levels after ramping up for the big sell on Tuesday.

NASDAQ Volume 1,987,339,500
NYSE Volume 4,715,524,000

Oil continued to rocket higher, with NYMEX crude at $102.23, up $2.60 on the day. Gold continued its powerful breakout, adding $6.50, to $1,437.70, another new record close. Silver gained 41 cents, to finish at $34.84, another 30-year high.

Tuesday, March 1, 2011

Stock Suckers Swallow Hard; Silver, Gold Soar

The past two weeks have been good times indeed for holders and hoarders of silver and gold, but today's trade may just have been the best of the bunch.

Not only were the precious metals (you realize there's good reason they call them that) up substantially, but, on the heels of more lying dissembling testimony by Chairman Ben the Monkey Man - who steadfastly believes the economy is recovering and that inflation is "under control" - stocks took another well-deserved beating.

Sure, as famed investor Marc Faber pointed out in a recent interview that holding stock is better than holding corporate bonds because you at least have "something" to show at the end of a calamity, but for holders of those paper (now electronic) stock certificates, the calamity hasn't even begun. There will be casualties, even though the financial press, led by cheerleading morons on CNBC, won't bother to shed light on many details.

It was an enjoyable day for those sitting home in robe and slippers, relaxing as their gold and silver holding appreciated. Gold shot past its previous all time high of $1,421.00 en route to a fresh closing at $1,431.20, up a rock-solid $21.30. Silver, already having made a new 31-year high on Monday, eclipsed that mark with another gain of 61 cents, finishing in New York at $34.42.

The downside was that gold bugs and silver surfers will have to pay more to flee the country with their hoard, since crude also popped to new recent highs, with West Texas Intermediate up $2.66, to $99.63 on the NYMEX.

As for the stock suckers, read 'em and weep:

Dow 12,058.02, -168.32 (1.38%)
NASDAQ 2,737.41, -44.86 (1.61%)
S&P 500 1,306.33, -20.89 (1.57%)
NYSE Composite 8,315.85, -122.70 (1.45%)

Declining issues pounded back advancers, 4950-1638, a ratio of better than 3:1. On the NASDAQ, there were 96 new highs, 33 new lows. The NYSE saw 189 new highs and 17 new lows. Volume, as has been the case on all losing sessions, was elevated.

NASDAQ Volume 2,239,243,250
NYSE Volume 5,358,425,500

What really should be worrying the stock jocks at this juncture are three things: 1. economic data has been strong, but stocks haven't followed, suggesting that "good" news is already priced in; 2. the vix has taken a couple of enormous jumps on recent down days, and, possibly the biggest worry of all, 3. the Dow and S&P each experienced today a double engulfing day, in which the day's highs and lows took out the highs and lows of the previous two sessions. That scenario is a textbook indicator, chart-wise, for a directional reversal. If such is the case, the hints that something is not all right with stocks over the past two weeks is really foreshadowing for a classic 10-15% correction.

These indications are all occurring against the backdrop of insolvent banks, fiat money depreciation, global civil unrest and non-stop monetary stimulus by the Fed, the ECB and the CCB (China Central Bank).

Important data is dead ahead for marketeers. On wednesday morning, the widely discredited ADP Private Employment Survey for February is released, and on Friday, the laughable BLS Non-farm payroll report. Both data sets will be released upon the usual suspects prior to market opening.

Stay tuned. The fun has just begun.