Friday, August 12, 2011

Stocks Close Green, but Well Off Highs of Day, Down for Week

One of the wildest weeks in US stock market history came to a rather anti-climactic close on Friday, with modest gains on all of the major indices, though the close was well off the highs of the session.

The Dow was the biggest winner of the day in percentage terms, suggesting that money is being plowed into the global behemoths for their international reach and dividend yields, but the week-ending rally was well short of spectacular and the Dow ended the day close to the middle of the range after it had been up 203 points at the high.

The S&P 500 had been as high as 1189 before losing more than half its gains through the afternoon. So too, the NASDAQ, which was up as much as 32 points before surrendering much of those gains as the day wore on.

For the week, all the major averages were lower. The Dow gave up 175 points over the roller coaster week; the NASDAQ lost 25 points, or about one percent, and the S&P shed 20 points, closer to 2%.

It was the third straight week of losses for the major averages, though hardly as bad as it could have been, measured by the lows set in place on Wednesday. The troubling characteristics of the week's trading were extreme volatility, high volume and the uncanny ability - in the near future - for indices to retest lows before making decisive moves.

With Europe still unresolved and US problems probably put away for a while with the start of preseason football, Friday turned out to be a day of celebration, not for the gains of the session, but for the fact that markets did not continue to slide as the week wore on and out.

Another troubling aspect was the 10:00 am reading from the University of Michigan's survey of consumer sentiment, which plunged to an 31-year low of 54.9, after a reading of 63.7 in July.

On the other hand, retail sales posted positive gains for July according to the Department of Commerce, though their readings and estimates have proven in the past to be more hot air than fact.

Not to hose down anyone's equity parade, but the global economy is still rather shaky, and unless long-term, structural problems with debt and the global currencies themselves are addressed, we are sure to repeat this kind of market behavior and sluggish economic growth. As it is, it's been nearly three years since the collapse of Lehman Brothers and the world is hardly a better place. Investments have become short term holdings, while real money has gravitated to bonds, gold or hard assets.

Dow 11,269.02, +125.71 (1.13%)
NASDAQ 2,507.98, +15.30 (0.61%)
S&P 500 1,178.81, +6.17 (0.53%)
NYSE Composite 7,303.88, +46.30 (0.64%)

Advancing issues topped decliners, though the margin was slight, 3965-2678. New highs on the NASDAQ numbered just four (4), with 60 new lows. On the NYSE, there were only seven (7) new highs and 24 new lows. The combined total of 11 new highs and 84 new lows - low numbers on both sides - suggests exactly what the market shows, that we are in a mid-range between a rally and collapse, with a bias to the negative.

Volume dropped off substantially, as traders were worn out and some caution and reason was applied to today's trading.

NASDAQ Volume 2,222,537,500
NYSE Volume 5,581,791,000

Commodities were sluggish. Oil fell 34 cents, to $85.38. Gold dipped $8.90, ending the week at $1,742.60, while silver speculators snapped back at onerous margin requirements, gaining 45 cents, to $39.11.

At the end, it was a smooth finish, but hardly inspiring to the bulls. After all, this is a three-week skid and the major markets are still bound between correction (-10%) and a bear market (-20%). It will likely take more than a few good days of trading to come to some understanding of future direction.

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