A day after one of Wall Street's more impressive downflights, the suits got back on their trains this morning as usual and began buying some stocks.
It wasn't exactly an overwhelming affirmation of the miracle of capitalism, but Wall Street, being the fickle beast that it is, turned the tide and restored some confidence after a severe battering on enormous volume - the largest ever for the NYSE.
Like I said yesterday, nobody should have been in a big hurry to dump their 401k or empty the college fund because yesterday's event was highly staged and will barely be seen as a blip in the long run of events. The fact remains, however, that all of the gains of January and February were wiped out in one day, so we're starting all over again for the year, like some version of an economic do-over.
There were probably more than a few millions made on the short side in options and most of that was likely in the hands of the big brokerages and other uber-traders. Today's mini-rebound notwithstanding, the overall mood is a bit dour and anyone who's anyone knows that stocks were overbought and in need of some kind of reversal. One should also be aware that in this shock-and-awe environment, yesterday's Bear barrage was only the first salvo and more down days are on the horizon.
A 3-4% wallop on one day is certainly a good start for a protracted correction, which is well underway and should see a fair share of up and down days over the next couple of months. Naturally, the down days will be larger and more dynamic that the speculative uppers, and the bottom will eventually be found well below current levels.
For the record, the Dow gained 52.39 points, the NASDAQ plowed ahead 8.29 and the S&P picked up 7.78. Those numbers are dwarfed by yesterday's hammering, but it shows there are still Bulls ready for slaughter.
Make no mistake, the correction has now been well-greased and there are still overvalued stocks aplenty. A couple of my favorites, Yahoo and eBay, are trading at current p/e ratios of nearly 60 and 40, respectively. (I've a mind to buy about a zillion Yahoo April 30 puts but I don't want to disturb the market. I just want to report on it.)
One doesn't have to look far to find stocks to sell. Tuesday's sell-off was rather uniform and orderly - as orderly as a mini-crash can be - and while there were a number of severe casualties, there were no fatalities.
Today's muted reaction was more of a calming session, even though suckers could be found on every issue. Volume was once again abnormally high. There is more downside risk, much more. Keep an eye peeled on oil, silver and gold. Crude has broken above $60 for now, closing today at $61.75, the last day of trading for April futures. Expect a pull-back tomorrow on crude, while gold remains rangebound. Silver is on the verge of a breakout and bears watching if not an outright screaming buy. Considering the carnage from Tuesday, the precious metals certainly displayed some generous giveback today.
Wednesday, February 28, 2007
Tuesday, February 27, 2007
Sensational! Spectacular! WOW!
Finally, something to get excited about.
In case you missed it, US stock markets nearly collapsed wholesale on Tuesday.
Check out these figures:
Dow: 12,216.24, -416.02; NASDAQ: 2,407.86, -96.66; S&P 500: 1,399.04, -50.33
Like I said in the headline, WOW! But it wasn't as though we weren't warned. Just yesterday, right here, my headline read The Correction Has Begun. If my word wasn't enough of a warning to start taking those profits and paring losses, then maybe former Fed Chairman Alan Greenspan's remarks to an economic conference in Hong Kong yesterday might have given us a clue that something was in the works.
And boy was it. This was telegraphed like a club boxer's left hook.
The fact of the matter is that today's response from, first, the Chinese stock market, then Europe's markets, and finally the US markets, was entirely well-organized and a classic prototype of blatant manipulation.
In the long run, it means little. The biggest hit in the US, on a percentage basis, was taken by the NASDAQ, which lost nearly 4% on the day. We'll survive. That stunner was, however, dwarfed by China's 9% decline, which, according to the so-called experts, was the real reason for US stocks to take a beating.
What utter hooey! If the Chinese economy stutters and stumbles, we should, as a nation, applaud long and loud. Maybe we can get a better deal on plasma TVs if they feel a little pain for a change. We're all in it together, though the US trade deficit and government overspending does play into the whole mess.
Our loose fiscal policies are the prime factors behind the whole worldwide bubble economy and we're mortgaged to the hilt. But if China takes a hit, should we worry? Maybe a little, since they hold our debt and could start calling it in or floating their currency - the yuan - a little higher, or both. But it certainly isn't the end of the world and nothing's really changed since yesterday, right?
Oh, no. That's where you would be wrong. This story by Seymour Hersh in the New Yorker makes some very poignant and troubling claims about the state and nature and inner doings of our political leadership. I won't tip it off here, but leave it to you to read it for yourself.
Well, here's a clue. Hersh is the preeminent investigative reporter of our day. He broke the Iran-Contra story and he's been on to the shenanigans of the Bush administration from the start of the Iraq War. So, would the hoi poloi in the White House and on Wall Street and in London's City get a little bit twitchy if the leaders of the world's superpower were about to get a serious spanking by the media and maybe the Congress?
Here's the timeline:
Hersh's article hits the newsstands and the web on 2/25.
Greenspan warns of a US recession on 2/26.
China's markets implode, Europe and US markets follow on 2/27.
Welcome to the winter of our discontent. My advice: Watch for falling stocks... and politicians. Yesterday, I said the Dow should settle out in the 10,350 to 11,100 range. We've still got at least another 1100 points to go.
In case you missed it, US stock markets nearly collapsed wholesale on Tuesday.
Check out these figures:
Dow: 12,216.24, -416.02; NASDAQ: 2,407.86, -96.66; S&P 500: 1,399.04, -50.33
Like I said in the headline, WOW! But it wasn't as though we weren't warned. Just yesterday, right here, my headline read The Correction Has Begun. If my word wasn't enough of a warning to start taking those profits and paring losses, then maybe former Fed Chairman Alan Greenspan's remarks to an economic conference in Hong Kong yesterday might have given us a clue that something was in the works.
And boy was it. This was telegraphed like a club boxer's left hook.
The fact of the matter is that today's response from, first, the Chinese stock market, then Europe's markets, and finally the US markets, was entirely well-organized and a classic prototype of blatant manipulation.
In the long run, it means little. The biggest hit in the US, on a percentage basis, was taken by the NASDAQ, which lost nearly 4% on the day. We'll survive. That stunner was, however, dwarfed by China's 9% decline, which, according to the so-called experts, was the real reason for US stocks to take a beating.
What utter hooey! If the Chinese economy stutters and stumbles, we should, as a nation, applaud long and loud. Maybe we can get a better deal on plasma TVs if they feel a little pain for a change. We're all in it together, though the US trade deficit and government overspending does play into the whole mess.
Our loose fiscal policies are the prime factors behind the whole worldwide bubble economy and we're mortgaged to the hilt. But if China takes a hit, should we worry? Maybe a little, since they hold our debt and could start calling it in or floating their currency - the yuan - a little higher, or both. But it certainly isn't the end of the world and nothing's really changed since yesterday, right?
Oh, no. That's where you would be wrong. This story by Seymour Hersh in the New Yorker makes some very poignant and troubling claims about the state and nature and inner doings of our political leadership. I won't tip it off here, but leave it to you to read it for yourself.
Well, here's a clue. Hersh is the preeminent investigative reporter of our day. He broke the Iran-Contra story and he's been on to the shenanigans of the Bush administration from the start of the Iraq War. So, would the hoi poloi in the White House and on Wall Street and in London's City get a little bit twitchy if the leaders of the world's superpower were about to get a serious spanking by the media and maybe the Congress?
Here's the timeline:
Hersh's article hits the newsstands and the web on 2/25.
Greenspan warns of a US recession on 2/26.
China's markets implode, Europe and US markets follow on 2/27.
Welcome to the winter of our discontent. My advice: Watch for falling stocks... and politicians. Yesterday, I said the Dow should settle out in the 10,350 to 11,100 range. We've still got at least another 1100 points to go.
Monday, February 26, 2007
The Correction Has Begun
On Monday, the Dow drooped for the 4th straight session. The correction has begun.
Since closing at 12,786.64 (an all-time high) on Feb. 20, the Dow has lost 154 points to its resting place today at the close of 12,632.26. Four straight losing days: a trend? Maybe, and at this point in time, likely.
There does not need to be any reason for a decline in the price of stocks as investors will make up any assortment of reasons to buy or sell, but when it comes to substantial increases or declines in the value of the blue chips of the Dow it's worth a second look.
On Monday, there were 16 Dow components in the losing column, one unchanged and 14 posting gains. The disparity was not large and neither was the point loss, a mere -15.22 for the session. Since the Dow is not a weighted average, a closer look at the components reveals that four of the five heaviest-traded issues were actually up.
Intel, the leader with 72 million shares traded, gained .09. Microsoft (63 mil.) was up .17. Citigroup (35 mil.) lost 1.09. Pfizer (32 mil.) gained .22 and General Electric (25 mil.) was up .24.
If the Dow was weighted, it would likely have shown a gain. But, it is not. The points are added and subtracted after being calculated by the Dow divisor, currently 0.14452124. So, that Citigroup loss of -1.09 ÷ 0.14452124 = -7.54. Citigroup's loss outweighed the gains of the other 4 stocks, even though those four stocks traded nearly 5 1/2 times the shares.
Adding a weighted average of the Dow might skew results to which investors have, over the years, grown accustomed, thus, it has not been changed in many years, though the divisor is routinely adjusted for splits.
So, we have the Dow in drop mode, while the other, weighted, indices march to their own beat. The finishes today were, however, similar. The NASDAQ lost 10.58 and the S&P was down 1.82. The reliably honest NYSE Composite showed a gain of just 1.24.
What we're witnessing and will be witness to over the next 5-7 weeks prior to the next round of earnings, is a bit of divergence between the indices. While the Dow and S&P should follow a similar path, I expect the NASDAQ, with its preponderance of tech and mid-cap issues, to outperform both of those.
Remember that in the dotcom implosion of 2000-2002, the NASDAQ took the most severe beating and has only recovered to less than half of its all-time high while the Dow has set new highs and the S&P is close to record territory. 1527.46 was the all-time high for the S&P. It's currently less than 80 points from that mark.
A 10% loss on the Dow would barely be noticeable. From its high of last week, a 10% decline would only put it at 11, 508. I believe a 15-20% loss on the Dow is now in the cards. It would signal to investors that the market is and has been overbought and that the colossal returns of the past 4 years cannot be sustained indefinitely.
I won't bore you with the details of my calculations, but note that Fibonaci numbers will be in play. Expect the Dow to bottom out around the 10,350 to 11,100 range. We're not in a position for a full-blown recession, but indications are that the economy is growing at a slow, sustainable rate. Dollars will be taken off the table in a combination of profit-taking and over-indulgent fears.
The entire episode should shake out by the end May, when the markets will likely go sideways for a while before setting sail for new highs in 2008. It's going to be a rough ride for a while, but nothing earth-shaking unless political machinations derail into some unlikely chaos.
The NASDAQ will fare much better, with an 8-10% decline being the absolute worst of this round.
Since closing at 12,786.64 (an all-time high) on Feb. 20, the Dow has lost 154 points to its resting place today at the close of 12,632.26. Four straight losing days: a trend? Maybe, and at this point in time, likely.
There does not need to be any reason for a decline in the price of stocks as investors will make up any assortment of reasons to buy or sell, but when it comes to substantial increases or declines in the value of the blue chips of the Dow it's worth a second look.
On Monday, there were 16 Dow components in the losing column, one unchanged and 14 posting gains. The disparity was not large and neither was the point loss, a mere -15.22 for the session. Since the Dow is not a weighted average, a closer look at the components reveals that four of the five heaviest-traded issues were actually up.
Intel, the leader with 72 million shares traded, gained .09. Microsoft (63 mil.) was up .17. Citigroup (35 mil.) lost 1.09. Pfizer (32 mil.) gained .22 and General Electric (25 mil.) was up .24.
If the Dow was weighted, it would likely have shown a gain. But, it is not. The points are added and subtracted after being calculated by the Dow divisor, currently 0.14452124. So, that Citigroup loss of -1.09 ÷ 0.14452124 = -7.54. Citigroup's loss outweighed the gains of the other 4 stocks, even though those four stocks traded nearly 5 1/2 times the shares.
Adding a weighted average of the Dow might skew results to which investors have, over the years, grown accustomed, thus, it has not been changed in many years, though the divisor is routinely adjusted for splits.
So, we have the Dow in drop mode, while the other, weighted, indices march to their own beat. The finishes today were, however, similar. The NASDAQ lost 10.58 and the S&P was down 1.82. The reliably honest NYSE Composite showed a gain of just 1.24.
What we're witnessing and will be witness to over the next 5-7 weeks prior to the next round of earnings, is a bit of divergence between the indices. While the Dow and S&P should follow a similar path, I expect the NASDAQ, with its preponderance of tech and mid-cap issues, to outperform both of those.
Remember that in the dotcom implosion of 2000-2002, the NASDAQ took the most severe beating and has only recovered to less than half of its all-time high while the Dow has set new highs and the S&P is close to record territory. 1527.46 was the all-time high for the S&P. It's currently less than 80 points from that mark.
A 10% loss on the Dow would barely be noticeable. From its high of last week, a 10% decline would only put it at 11, 508. I believe a 15-20% loss on the Dow is now in the cards. It would signal to investors that the market is and has been overbought and that the colossal returns of the past 4 years cannot be sustained indefinitely.
I won't bore you with the details of my calculations, but note that Fibonaci numbers will be in play. Expect the Dow to bottom out around the 10,350 to 11,100 range. We're not in a position for a full-blown recession, but indications are that the economy is growing at a slow, sustainable rate. Dollars will be taken off the table in a combination of profit-taking and over-indulgent fears.
The entire episode should shake out by the end May, when the markets will likely go sideways for a while before setting sail for new highs in 2008. It's going to be a rough ride for a while, but nothing earth-shaking unless political machinations derail into some unlikely chaos.
The NASDAQ will fare much better, with an 8-10% decline being the absolute worst of this round.
Thursday, February 22, 2007
Dow Dives Again
The markets today: Dow: 12686.02, -52.39; NASDAQ: 2524.94, +6.52; S&P 500: 1456.38, -1.25. More to follow...
Wednesday, February 21, 2007
Oil, Inflation End Dow Streak
After setting all-time closing records for 3 consecutive sessions, the Dow Jones industrial Average closed lower on Wednesday amid reports of heightened inflation risks and higher crude oil prices.
The Labor Dept. reported that core CPI rose an unexpected 0.3% in January, raising fears that inflation, and with it, higher interest rates, are on the horizon. Higher interest rates from the Fed are about the last thing this market wants, and if the Fed governors decide that inflation is running a little too hot (which it probably is), a quarter point increase will be in the cards come the next meeting.
The price of crude certainly was no help for the Dow. Oil closed at $60.07, crashing the ceiling that's been in place for more than 2 months. If rising oil prices persist, it's the end of this long, long rally, but that could be exactly what this overextended market is seeking - a reason for a pullback.
The Dow closed at 12,738.41, down 48.23; the Nasdaq finished the day at 2,518.42, up 5.38; while the S&P 500 lost 2.05 to finish at 1,457.63.
The Dow is severely overextended and it's now become just a matter of time as to when the downturn will occur. While a retreat on the blue chips seems inevitable, it's not likely to be long-lasting or particularly severe.
The Labor Dept. reported that core CPI rose an unexpected 0.3% in January, raising fears that inflation, and with it, higher interest rates, are on the horizon. Higher interest rates from the Fed are about the last thing this market wants, and if the Fed governors decide that inflation is running a little too hot (which it probably is), a quarter point increase will be in the cards come the next meeting.
The price of crude certainly was no help for the Dow. Oil closed at $60.07, crashing the ceiling that's been in place for more than 2 months. If rising oil prices persist, it's the end of this long, long rally, but that could be exactly what this overextended market is seeking - a reason for a pullback.
The Dow closed at 12,738.41, down 48.23; the Nasdaq finished the day at 2,518.42, up 5.38; while the S&P 500 lost 2.05 to finish at 1,457.63.
The Dow is severely overextended and it's now become just a matter of time as to when the downturn will occur. While a retreat on the blue chips seems inevitable, it's not likely to be long-lasting or particularly severe.
Tuesday, February 20, 2007
Oil Helps Dow to New High
If you want higher equity prices, there's one sure way to get there: Cut the price of oil. While you're at it, take a bite out of the precious metals as well.
That's what happened today as the Dow popped another 19.07, setting another record close at 12,786.64. The price of crude had much to do with the Dow's rise, as news from the corporate landscape was none too cheery. Besides the proposed merger of the two paid satellite radio providers - Sirius and XM (both going broke) - Home Depot had a rough quarter and Wal-Mart missed sales numbers for the 4th quarter of 2006.
That's Ugly, with a capital UGH.
Leave it to the oil barons to come to the rescue of the pinstripers on Wall Street by dropping the price of a barrel of crude as low as 57.35 during the day, before closing at 58.07. That little dip was enough good news to set off a little buying of overinflated stocks. At the same time, gold and silver took broadsides and remain rangebound.
While the Dow managed only a .15% gain, the other indices did better. the Nasdaq added 16.73 and finally closed above 2,500, finishing at 2,513.04, while the S&P 500 gained 4.14 to 1459.68.
Nasdaq's feat was far more impressive than that of the Dow's, breaking through a number that hasn't been seen around these parts in 6 years. It's a very positive sign for techs and the economy as a whole, plus, the emotional value is not to be understated. While the bull market rages into uncharted territory, the markets are signaling an even bigger burst higher is ahead.
As for the market "cheering" the proposed Sirius and XM merger as the Wall Street Journal is reporting on their radio broadcasts, both services have hit the wall and are soon to be hemorrhaging money, so the merger is a way out. The regulatory hurdles are high for this one, however, as merging the only two national satellite radio broadcasters would be the definition of a monopoly. It shouldn't happen and probably won't unless antitrust rules are no longer valid.
That's what happened today as the Dow popped another 19.07, setting another record close at 12,786.64. The price of crude had much to do with the Dow's rise, as news from the corporate landscape was none too cheery. Besides the proposed merger of the two paid satellite radio providers - Sirius and XM (both going broke) - Home Depot had a rough quarter and Wal-Mart missed sales numbers for the 4th quarter of 2006.
That's Ugly, with a capital UGH.
Leave it to the oil barons to come to the rescue of the pinstripers on Wall Street by dropping the price of a barrel of crude as low as 57.35 during the day, before closing at 58.07. That little dip was enough good news to set off a little buying of overinflated stocks. At the same time, gold and silver took broadsides and remain rangebound.
While the Dow managed only a .15% gain, the other indices did better. the Nasdaq added 16.73 and finally closed above 2,500, finishing at 2,513.04, while the S&P 500 gained 4.14 to 1459.68.
Nasdaq's feat was far more impressive than that of the Dow's, breaking through a number that hasn't been seen around these parts in 6 years. It's a very positive sign for techs and the economy as a whole, plus, the emotional value is not to be understated. While the bull market rages into uncharted territory, the markets are signaling an even bigger burst higher is ahead.
As for the market "cheering" the proposed Sirius and XM merger as the Wall Street Journal is reporting on their radio broadcasts, both services have hit the wall and are soon to be hemorrhaging money, so the merger is a way out. The regulatory hurdles are high for this one, however, as merging the only two national satellite radio broadcasters would be the definition of a monopoly. It shouldn't happen and probably won't unless antitrust rules are no longer valid.
Friday, February 16, 2007
Markets Rally Late, Dow Sets Another New High
US indices spent most of Friday trading in the negative, but the Dow got just enough of late activity to boost it to another closing high - the third in a row.
DJIA: 12,767.57 Up 2.56; Nasdaq: 2,496.31 Down 0.79; S&P 500 1,455.54 Down 1.27.
On a day that was altogether lethargic, the averages managed to just barely hold their own. News from the housing market was the only notable piece, with a 14.1% decline in January housing the headline.
Despite what some experts may be saying, the long, slow decline in housing starts, median prices and overall prices and the antecedent rise in mortgage delinquencies is only gathering momentum. Housing prices over the last 10 years had grown out of the reach of most Americans and a readjustment is necessary. There's going to be much more pain down the road to suburbia in coming months and years, with massive failure of a lender or two the culmination.
An environment wherein a two-earner family with a gross income of $90,000 thinks seriously about trading up to a $500,000 home simply cannot sustain itself. Sooner or later, prices cool, speculators back out, deals are undersubscribed and the whole thing goes bust. That's exactly what's occurring in South Florida especially and elsewhere to a lesser extent. Markets in Las Vegas, parts of California and the Northeast corridor have already been cooling down for the last six months to a year. The trend will spread, the herd will thin and all of a sudden - over a period of 2-3 years - you've got a buyer's market. That's where we're headed.
A bust in the housing market isn't going to affect the investor class much, however, unless people begin cashing in 401k's to make the mortgage payments. A more likely occurrence is that municipalities will face the untidy prospect of seeing tax revenues truncated under the auspices of the highly-popular-but-fiscally-unsupportable market value assessments. It's a nightmare for tax districts large and small, and it's coming fast.
Another good week for stocks ends with this cheery note: crude oil rose $1.40 on Friday to close at $59.39. $60/bbl. still looks like a short term top. Pitchers and catchers reported for Spring training this week. Spring is just around the corner.
DJIA: 12,767.57 Up 2.56; Nasdaq: 2,496.31 Down 0.79; S&P 500 1,455.54 Down 1.27.
On a day that was altogether lethargic, the averages managed to just barely hold their own. News from the housing market was the only notable piece, with a 14.1% decline in January housing the headline.
Despite what some experts may be saying, the long, slow decline in housing starts, median prices and overall prices and the antecedent rise in mortgage delinquencies is only gathering momentum. Housing prices over the last 10 years had grown out of the reach of most Americans and a readjustment is necessary. There's going to be much more pain down the road to suburbia in coming months and years, with massive failure of a lender or two the culmination.
An environment wherein a two-earner family with a gross income of $90,000 thinks seriously about trading up to a $500,000 home simply cannot sustain itself. Sooner or later, prices cool, speculators back out, deals are undersubscribed and the whole thing goes bust. That's exactly what's occurring in South Florida especially and elsewhere to a lesser extent. Markets in Las Vegas, parts of California and the Northeast corridor have already been cooling down for the last six months to a year. The trend will spread, the herd will thin and all of a sudden - over a period of 2-3 years - you've got a buyer's market. That's where we're headed.
A bust in the housing market isn't going to affect the investor class much, however, unless people begin cashing in 401k's to make the mortgage payments. A more likely occurrence is that municipalities will face the untidy prospect of seeing tax revenues truncated under the auspices of the highly-popular-but-fiscally-unsupportable market value assessments. It's a nightmare for tax districts large and small, and it's coming fast.
Another good week for stocks ends with this cheery note: crude oil rose $1.40 on Friday to close at $59.39. $60/bbl. still looks like a short term top. Pitchers and catchers reported for Spring training this week. Spring is just around the corner.
Thursday, February 15, 2007
Dow Rockets 100+ in 2 days; Nasdaq Flirts with 2500
After gaining 87 points on Wednesday and reaching another all-time high, the Dow Jones Industrial Average tacked on 23 more Thursday to close at 12, 765.01. Fueled by positive comments from Fed Chairman Ben Bernanke, stabilizing oil prices and benign economic news, investors poured into blue chips, techs and small caps, extending the bull run begun in October 2002.
The Nasdaq flirted with 2,500 once again on Thursday, closing on the upside by 8.72 at 2,497.10. The junior exchange has not closed above 2,500 in six years and the number it is approaching is an important psychological level.
The National Association of Realtors announced today that overall home prices fell 2.7% in the 4th quarter - a record - while median home prices lost 3.4%. Vacation markets in Florida, Sarasota-Bradenton-Venice and Palm Bay-Melbourne-Titusville, were especially hard hit.
Life may be rosy on Wall Street but not everyone is sharing the joy.
The Nasdaq flirted with 2,500 once again on Thursday, closing on the upside by 8.72 at 2,497.10. The junior exchange has not closed above 2,500 in six years and the number it is approaching is an important psychological level.
The National Association of Realtors announced today that overall home prices fell 2.7% in the 4th quarter - a record - while median home prices lost 3.4%. Vacation markets in Florida, Sarasota-Bradenton-Venice and Palm Bay-Melbourne-Titusville, were especially hard hit.
Life may be rosy on Wall Street but not everyone is sharing the joy.
Tuesday, February 13, 2007
Alcoa Rumors Propels Dow 102 Higher
There are days that bring one to wonder where investors get their ideas and then there are days like this.
Amid speculation that a pair of Australian mining companies - BHP Billiton Ltd. and Rio Tinto PLC - each plan to offer as much as $40 billion to purchase American aluminum giant Alcoa (AA), the Dow Jones Industrials leapt out of the gate at the opening bell and never looked back.
The story, attributed to the London Times, citing unnamed sources, set the Dow ablaze in New York.
By the end of the day (after the market closed), the Washington Post was reporting that "few analysts believed the U.S. aluminum giant was about to be gobbled up."
My theory: These kinds of things are dreamt up and ginned up by sharpies inside the brokerages to make a quick killing in an overnight options trade and have little, if any, basis in reality. They're especially attractive during slow news periods.
Alcoa closed just a shade under 33 on Monday, but opened above 35 on Tuesday, peaking at 36.05 within the first hour of trading. It ended at the day at 35. February options expire on Friday.
While there's nothing ostensibly illegal about planting a story (though it's a thin line), it does create an uneven playing field for those in the know. Getting Alcoa to move 2 points on the open is no mean feat. The stock has ranged between 23 and 38 for nearly the past 4 years. It's not one of the more volatile stocks in the game. In fact, it's rather a dull trading vehicle.
The moral of this particular story is that market manipulation comes in all shapes and sizes. And, while no one is immune, a fraud can usually be spotted relatively easily.
If traders are this desperate to make a buck, we could be witness to the final snorts of this 52-month long bull market. Only the most hopeful would count on a continuation of this surge through the rest of the week.
Others will view today with a healthy dose of skepticism.
The Dow gained 102.30, the S&P added 10.89, but the Nasdaq lagged, gaining only 9.50, roughly half the gain, in percentage terms, of the other indices.
Oil changed course on Tuesday, gaining $1.25 to close at $59.06 though the price is largely being held aloft by continuing cold weather in the US Northeast. With Spring's warming just around the corner, and oil prices failing to overtop $60, the good news for drivers and homeowners is due shortly.
Amid speculation that a pair of Australian mining companies - BHP Billiton Ltd. and Rio Tinto PLC - each plan to offer as much as $40 billion to purchase American aluminum giant Alcoa (AA), the Dow Jones Industrials leapt out of the gate at the opening bell and never looked back.
The story, attributed to the London Times, citing unnamed sources, set the Dow ablaze in New York.
By the end of the day (after the market closed), the Washington Post was reporting that "few analysts believed the U.S. aluminum giant was about to be gobbled up."
My theory: These kinds of things are dreamt up and ginned up by sharpies inside the brokerages to make a quick killing in an overnight options trade and have little, if any, basis in reality. They're especially attractive during slow news periods.
Alcoa closed just a shade under 33 on Monday, but opened above 35 on Tuesday, peaking at 36.05 within the first hour of trading. It ended at the day at 35. February options expire on Friday.
While there's nothing ostensibly illegal about planting a story (though it's a thin line), it does create an uneven playing field for those in the know. Getting Alcoa to move 2 points on the open is no mean feat. The stock has ranged between 23 and 38 for nearly the past 4 years. It's not one of the more volatile stocks in the game. In fact, it's rather a dull trading vehicle.
The moral of this particular story is that market manipulation comes in all shapes and sizes. And, while no one is immune, a fraud can usually be spotted relatively easily.
If traders are this desperate to make a buck, we could be witness to the final snorts of this 52-month long bull market. Only the most hopeful would count on a continuation of this surge through the rest of the week.
Others will view today with a healthy dose of skepticism.
The Dow gained 102.30, the S&P added 10.89, but the Nasdaq lagged, gaining only 9.50, roughly half the gain, in percentage terms, of the other indices.
Oil changed course on Tuesday, gaining $1.25 to close at $59.06 though the price is largely being held aloft by continuing cold weather in the US Northeast. With Spring's warming just around the corner, and oil prices failing to overtop $60, the good news for drivers and homeowners is due shortly.
Monday, February 12, 2007
Stocks off again; Nasdaq loses bid for London Exchange
The downward trend begun late last week spilled over into Monday's market. Once again, there was nary a rationale for either buying or selling, stocks drifted gradually lower, ending down on the three major indices in sluggish trading.
The Dow lost 28.28, the NASDAQ -9.44, S&P 500 -4.69.
Most notable on the day was the Nasdaq failing to get shareholder approval for its hostile takeover of the London Stock Exchange. The on-again, off-again attempts have been jarring to investors and speculators on both sides of the Atlantic. Nasdaq owns a 28.75% stake in the LSE, which has been involved in takeover attempts by Deutsche Boerse, Paris-based exchange Euronext and Australian bank Macquarie over the past two years. Nasdaq will be unable to launch another hostile takeover for the next 12 months.
The LSE will look for protection by strengthening alliances with friendlier exchanges such as the Tokyo Stock Exchange while the Nasdaq investors decide whether to pursue the takeover further or sell off their interests.
Oil dropped to $57.81 at the close, partially retracing recent gains while the precious metals remained rangebound.
The Dow lost 28.28, the NASDAQ -9.44, S&P 500 -4.69.
Most notable on the day was the Nasdaq failing to get shareholder approval for its hostile takeover of the London Stock Exchange. The on-again, off-again attempts have been jarring to investors and speculators on both sides of the Atlantic. Nasdaq owns a 28.75% stake in the LSE, which has been involved in takeover attempts by Deutsche Boerse, Paris-based exchange Euronext and Australian bank Macquarie over the past two years. Nasdaq will be unable to launch another hostile takeover for the next 12 months.
The LSE will look for protection by strengthening alliances with friendlier exchanges such as the Tokyo Stock Exchange while the Nasdaq investors decide whether to pursue the takeover further or sell off their interests.
Oil dropped to $57.81 at the close, partially retracing recent gains while the precious metals remained rangebound.
Saturday, February 10, 2007
Drop in the Bucket
Stocks closed out the week on a decidedly sour note Friday, as buyers made an early exit and profit takers moved in earnestly. Volume on the major indices was on the high side, though not overwhelmingly. The drops on the Dow, S&P and NASDAQ were more of a reality check than indicative of a trend, so there's no need to get out the shovels.
On the day, the Dow lost 56.80 to close at 12.580.83. The NASDAQ failed to breach the 2,500 mark, falling 28.85 to 2,459.82 and the S&P 500 lost 10.25, closing at 1438.06.
What moved the market from inertia was the continued cold weather in the Northeast, prompting crude prices over $60/bbl. during the session. Oil ended the day at $59.89 after hitting a high of $61.00.
Coupled with oil shock fear was the continuing saga of interest rate phobia. A couple of speeches by Fed governors were interpreted as signals for continued tightening and that helped fuel the dour mood after mid-day.
In the final analysis, the market is suffering more from a lack of news than a preponderance of bad news and earnings reports. While the latter - earnings - has been lackluster in most sectors, the economy continues to percolate. It's a double-edged sword at present. Solid growth may induce the Fed to raise rates, so the good must be taken with the bad, and the bad may not be severe.
Today's pullback must be taken in the perspective of an overall long term upward trend. There's going to be a correction - there always is - but it's more likely to be short and not very serious - more along the lines of 7-10% than a 15-25% drop. The best strategy right now is to do what traders did on Friday: take some of the money off the table and see how the following weeks develop.
There's no need to get greedy here. Stocks are still pricey, but many will look a lot more like bargains in months ahead.
On the day, the Dow lost 56.80 to close at 12.580.83. The NASDAQ failed to breach the 2,500 mark, falling 28.85 to 2,459.82 and the S&P 500 lost 10.25, closing at 1438.06.
What moved the market from inertia was the continued cold weather in the Northeast, prompting crude prices over $60/bbl. during the session. Oil ended the day at $59.89 after hitting a high of $61.00.
Coupled with oil shock fear was the continuing saga of interest rate phobia. A couple of speeches by Fed governors were interpreted as signals for continued tightening and that helped fuel the dour mood after mid-day.
In the final analysis, the market is suffering more from a lack of news than a preponderance of bad news and earnings reports. While the latter - earnings - has been lackluster in most sectors, the economy continues to percolate. It's a double-edged sword at present. Solid growth may induce the Fed to raise rates, so the good must be taken with the bad, and the bad may not be severe.
Today's pullback must be taken in the perspective of an overall long term upward trend. There's going to be a correction - there always is - but it's more likely to be short and not very serious - more along the lines of 7-10% than a 15-25% drop. The best strategy right now is to do what traders did on Friday: take some of the money off the table and see how the following weeks develop.
There's no need to get greedy here. Stocks are still pricey, but many will look a lot more like bargains in months ahead.
Friday, February 9, 2007
Blue Chip Two-Step
The Dow backed off again Thursday and was outpaced by the NASDAQ for the second day in a row. While the blue chip index was falling 29.24, the NASDAQ index lost only 1.87 and the S&P 500 dropped 1.71.
What is factoring into the equation for larger drops on the Dow in relation to the other indices is oil. Dow component stocks are generally more energy-dependent than the smaller, nimbler techs which populate the NASDAQ. In a simplified way, they will feel the impact of higher (and lower) energy prices in more profound ways than the techs.
Additionally, Exxon-Mobil (XOM) is a component, so moves in oil price relate directly to that company. It's not complete, nor is it a closed system, but the overriding principle is that higher oil (and to some extent other commodities) prices will have a more pronounced effect on the blue chips of the Dow.
Light sweet crude for March delivery gained $2.00 on Thursday, closing at 59.71.
What is factoring into the equation for larger drops on the Dow in relation to the other indices is oil. Dow component stocks are generally more energy-dependent than the smaller, nimbler techs which populate the NASDAQ. In a simplified way, they will feel the impact of higher (and lower) energy prices in more profound ways than the techs.
Additionally, Exxon-Mobil (XOM) is a component, so moves in oil price relate directly to that company. It's not complete, nor is it a closed system, but the overriding principle is that higher oil (and to some extent other commodities) prices will have a more pronounced effect on the blue chips of the Dow.
Light sweet crude for March delivery gained $2.00 on Thursday, closing at 59.71.
Wednesday, February 7, 2007
Techs get a Boost as Blue Chips Wallow
The NASDAQ index took center stage today, gaining 19.01 in the session to close at 2,490.50 to close within a whisker of a 6 year high reached January 12 of 2,502,82. The last time the NASDAQ had maintained a price of over 2,500 was during February of 2001, at that time in the throes of a major collapse which began in March, 2000.
The 2,500 level is significant because it is nearly half of the all-time closing high on the index - 5,048.62 - of March 10, 2000. Followers of historical prices and Fibonacci numbers will be watching the NASDAQ closely to see if it can surpass the 50% retracement or fail at or around 2,525.
Any positive movement above that level would send a strong signal to investors that tech is fully recovered from the dotcom collapse of 2000 (in reality, it is) and that stocks - especially techs - may be undervalued in this area.
While the NASDAQ was making headlines, the Dow and S&P were flatlining again. The Dow Jones Industrial Average closed up a meager 0.56, with the S&P 500 gaining just 2.02. Once again, the Dow traded in a narrow range of just over 60 points, though the movements were distinct - up in the morning and down in the afternoon - before closing nearly unchanged.
The 30 components were nearly evenly split, with 14 up, 15 down and 1 - Citigroup - unchanged. The biggest move was by Caterpillar (CAT) which gained 1.22 to 65.64.
On the NASDAQ, the big price gains were made by mid-and-small caps like Blue Holdings (BLUE), Wellco Enterprises (WLC), FEI Company (FEIC), Intevac (IVAC), Aspen Technology (AZPN), SWS Group (SWS) and SMC Microsystems (SCMM), all of which gained more than 20% on the day.
In the mania of "irrational exuberance" of the late 1990s, big names such as Yahoo, eBay, Amazon, Cisco and Intel led the way higher. Perhaps today's sampling indicates that smaller, nimbler firms have the keys to growth in the new (post-crash) era of technology.
Volume was on the high side, with advancing stocks outnumbering decliners by a 4-3 margin. The solid gains in tech were influenced by a 3% gain in productivity in the final three months of 2006, while the stagnation in the big caps and blue chips was due in part to oil prices which vacillated from a high of 59.85 to close at 57.71, 1.17 lower.
The pullback in oil can only be seen as a positive and possibly a re-ignition of the downward trend which has persisted since August of last year.
The 2,500 level is significant because it is nearly half of the all-time closing high on the index - 5,048.62 - of March 10, 2000. Followers of historical prices and Fibonacci numbers will be watching the NASDAQ closely to see if it can surpass the 50% retracement or fail at or around 2,525.
Any positive movement above that level would send a strong signal to investors that tech is fully recovered from the dotcom collapse of 2000 (in reality, it is) and that stocks - especially techs - may be undervalued in this area.
While the NASDAQ was making headlines, the Dow and S&P were flatlining again. The Dow Jones Industrial Average closed up a meager 0.56, with the S&P 500 gaining just 2.02. Once again, the Dow traded in a narrow range of just over 60 points, though the movements were distinct - up in the morning and down in the afternoon - before closing nearly unchanged.
The 30 components were nearly evenly split, with 14 up, 15 down and 1 - Citigroup - unchanged. The biggest move was by Caterpillar (CAT) which gained 1.22 to 65.64.
On the NASDAQ, the big price gains were made by mid-and-small caps like Blue Holdings (BLUE), Wellco Enterprises (WLC), FEI Company (FEIC), Intevac (IVAC), Aspen Technology (AZPN), SWS Group (SWS) and SMC Microsystems (SCMM), all of which gained more than 20% on the day.
In the mania of "irrational exuberance" of the late 1990s, big names such as Yahoo, eBay, Amazon, Cisco and Intel led the way higher. Perhaps today's sampling indicates that smaller, nimbler firms have the keys to growth in the new (post-crash) era of technology.
Volume was on the high side, with advancing stocks outnumbering decliners by a 4-3 margin. The solid gains in tech were influenced by a 3% gain in productivity in the final three months of 2006, while the stagnation in the big caps and blue chips was due in part to oil prices which vacillated from a high of 59.85 to close at 57.71, 1.17 lower.
The pullback in oil can only be seen as a positive and possibly a re-ignition of the downward trend which has persisted since August of last year.
Tuesday, February 6, 2007
Dull and Duller but Prepare for Launch to 20,000
If you thought yesterday's market action was about as exciting as ice fishing, then today's minuscule moves must have you itching to watch paint dry. Though volume was moderately better than Monday's, the markets barely budged, though all three major indices managed to post in the positive column.
Here's the exciting news: the Dow jumped a whole 4.57, the NASDAQ erupted 0.89 to the upside and the S&P 500 surged (word of the week) 1.01.
Wow! Don't cash out your 401k just yet.
Investors seem to be somewhat anxious about making any notable moves, even though the market continues to point towards a higher future. And I think that's where it's going, though I'd be remiss to predict just when this move will take place.
Normally, I'm bearish at times of little activity, but the US economy, despite complaints from wage earners and middle managers alike, is about to embark on another hyperbolic swell not seen since... well, 1999.
The 2000 mini-crash is now nearly 7 years in the past. That flop didn't exactly stop people from investing, nor did 9/11, the currency malaise, the inverted bond scare, the housing boom-bust cycle or any other nonsense the Fed or the financial press can dream up.
Truth be told, this market looks very much like the one we had in the early 90s. There's a ton of money itching to be invested and the risks are spread like no other time in our history. Companies populating the NASDAQ, NYSE and S&P 500 include the biggest and best global brands, emerging titans and a bevy of companies spinning off profits quarter after quarter.
The direction of the market is not really in question, but when the market will move is still undecided. This lull is a good indication that many stocks are consolidating and about to make another monster move forward. This quarter will probably be a great time to invest because the big move will be later this year and through 2010.
There's simply too much money with no place to go but into stocks. Whether or not stocks are a safe investment should be a topic for another day. Right now, it's time to enjoy the ride because it's going to be a really good one. Yes, there will be bumps, but the US economy is percolating at a very healthy rate and companies are brimming with cash.
The Dow is headed to 20,000 before the end of 2010. It's going to start slowly, but even a 6-7% increase this year will provide a solid base.
Here's the exciting news: the Dow jumped a whole 4.57, the NASDAQ erupted 0.89 to the upside and the S&P 500 surged (word of the week) 1.01.
Wow! Don't cash out your 401k just yet.
Investors seem to be somewhat anxious about making any notable moves, even though the market continues to point towards a higher future. And I think that's where it's going, though I'd be remiss to predict just when this move will take place.
Normally, I'm bearish at times of little activity, but the US economy, despite complaints from wage earners and middle managers alike, is about to embark on another hyperbolic swell not seen since... well, 1999.
The 2000 mini-crash is now nearly 7 years in the past. That flop didn't exactly stop people from investing, nor did 9/11, the currency malaise, the inverted bond scare, the housing boom-bust cycle or any other nonsense the Fed or the financial press can dream up.
Truth be told, this market looks very much like the one we had in the early 90s. There's a ton of money itching to be invested and the risks are spread like no other time in our history. Companies populating the NASDAQ, NYSE and S&P 500 include the biggest and best global brands, emerging titans and a bevy of companies spinning off profits quarter after quarter.
The direction of the market is not really in question, but when the market will move is still undecided. This lull is a good indication that many stocks are consolidating and about to make another monster move forward. This quarter will probably be a great time to invest because the big move will be later this year and through 2010.
There's simply too much money with no place to go but into stocks. Whether or not stocks are a safe investment should be a topic for another day. Right now, it's time to enjoy the ride because it's going to be a really good one. Yes, there will be bumps, but the US economy is percolating at a very healthy rate and companies are brimming with cash.
The Dow is headed to 20,000 before the end of 2010. It's going to start slowly, but even a 6-7% increase this year will provide a solid base.
Monday, February 5, 2007
Uninspired Opening to Week
Stocks traded in an extremely narrow range for the second straight day. Friday was similarly sluggish and there was nothing to get traders excited on Monday.
The Dow ranged between 12,629 and 12,661, finishing higher by 8.25. The NASDAQ lost 5.28, the S&P was lower by 1.40. Volume was low to moderate, with gainers outpacing losers by a 4-5 margin.
Investors seemed content to sit on their hands awaiting something noteworthy in the way of economic reports or merger news. Once again, the price of oil exhibited volatility, peaking just a nickel below $60, but closing down 28 cents to $58.74.
Supertrader Carl Icahn made a $2.4 billion bid for Lear Corp. (LEA), boosting shares more than 4 points. There were a few other deals in the works, but none of them noteworthy.
With corporate earnings reports slowing to a trickle by the end of this week, the markets will be looking for some kind of spark.
The period from February through the second week of April is notorious for directionless trade, consolidation or outright selling. The Dow experienced declines in 3 of the past 5 years during that time span, and the last big near-crash occurred in April of 2000, though that was primarily experienced on the NASDAQ.
The Dow ranged between 12,629 and 12,661, finishing higher by 8.25. The NASDAQ lost 5.28, the S&P was lower by 1.40. Volume was low to moderate, with gainers outpacing losers by a 4-5 margin.
Investors seemed content to sit on their hands awaiting something noteworthy in the way of economic reports or merger news. Once again, the price of oil exhibited volatility, peaking just a nickel below $60, but closing down 28 cents to $58.74.
Supertrader Carl Icahn made a $2.4 billion bid for Lear Corp. (LEA), boosting shares more than 4 points. There were a few other deals in the works, but none of them noteworthy.
With corporate earnings reports slowing to a trickle by the end of this week, the markets will be looking for some kind of spark.
The period from February through the second week of April is notorious for directionless trade, consolidation or outright selling. The Dow experienced declines in 3 of the past 5 years during that time span, and the last big near-crash occurred in April of 2000, though that was primarily experienced on the NASDAQ.
Thursday, February 1, 2007
Another Record for the Dow; Exxon, WebEx in the news
Industrial Average Closes at New High of 12,672.96
The US economy seems to be running on high octane. And most of it is coming from Exxon-Mobil. As the Dow Jones Industrials closed at yet another record high, oil giant Exxon-Mobil reported annual profits of $39.5 billion for 2006, the most ever for a US corporation.
For the 4th quarter, the company said it earned $10.2 billion, or $1.76 per share, a slight decrease from year-earlier figures of $10.7 billion and $1.71 a share. Even so, 2006 was a very, very good year to have oil anywhere - in your car, in a portfolio, on your hands, in your blood. Exxon's massive profits translate into more than $75,000 per minute over the course of 2006. They have a good thing going there.
The price of crude, meanwhile, has been dropping and eased off a bit today after a couple days of gains. Futures contracts for March delivery closed at $57.30/bbl. (down .84) on the NY Mercantile Exchange.
Elsewhere, the big tech story was WebEx Communications, the multi-layered internet collaboration service company which returned profits of 42 cents per share - 4 cents beyond estimates - reported after the close on Wednesday.
Additionally, WebEx (WEBX, company home page) laid out guidance for the 1st quarter and the full year in excess of analyst predictions. Shares gapped more than 3 points higher at the open, at 40.55, from a previous close of 37.08 and continued to climb throughout the day. At the close, the stock posted a gain of more than 21%, at 45.03. The company's main product line includes solutions for collaboration, web meetings and teleconferencing via the internet.
The other major indices took their cues from the Dow. The NASDAQ added 4.45, while the S&P 500 ticked another 7.68 points higher. Following a favorable January, February is off to a refreshingly solid start.
The US economy seems to be running on high octane. And most of it is coming from Exxon-Mobil. As the Dow Jones Industrials closed at yet another record high, oil giant Exxon-Mobil reported annual profits of $39.5 billion for 2006, the most ever for a US corporation.
For the 4th quarter, the company said it earned $10.2 billion, or $1.76 per share, a slight decrease from year-earlier figures of $10.7 billion and $1.71 a share. Even so, 2006 was a very, very good year to have oil anywhere - in your car, in a portfolio, on your hands, in your blood. Exxon's massive profits translate into more than $75,000 per minute over the course of 2006. They have a good thing going there.
The price of crude, meanwhile, has been dropping and eased off a bit today after a couple days of gains. Futures contracts for March delivery closed at $57.30/bbl. (down .84) on the NY Mercantile Exchange.
Elsewhere, the big tech story was WebEx Communications, the multi-layered internet collaboration service company which returned profits of 42 cents per share - 4 cents beyond estimates - reported after the close on Wednesday.
Additionally, WebEx (WEBX, company home page) laid out guidance for the 1st quarter and the full year in excess of analyst predictions. Shares gapped more than 3 points higher at the open, at 40.55, from a previous close of 37.08 and continued to climb throughout the day. At the close, the stock posted a gain of more than 21%, at 45.03. The company's main product line includes solutions for collaboration, web meetings and teleconferencing via the internet.
The other major indices took their cues from the Dow. The NASDAQ added 4.45, while the S&P 500 ticked another 7.68 points higher. Following a favorable January, February is off to a refreshingly solid start.
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