Friday, November 30, 2007

Stocks Finish Week Higher on Bernanke Blather

Wall Street has become Disneyland.

Despite economic reports that generally signal a continued downturn through the 4th quarter and into 2008 - Personal Income was up just 0.2% while consumer spending increased by the same amount, but the core PCE deflator was also up 0.2%, with the year-over-year increase at 1.9%, within the Fed's "comfort zone."

Despite numbers begging to be interpreted as benign, the words "alert" and "flexible", when uttered yesterday by Fed Chairman Ben Bernanke, somehow signaled to investors that the Fed would cut rates again at their December 11 meeting.

Like I said, Disneyland. When you wish upon a star...

Dow 13,371.72 +59.99; NASDAQ 2,660.96 -7.17; S&P 500 1,481.14 +11.42; NYSE Composite 9,856.84 +83.27

Additionally, Construction Spending fell 0.8% in October, adding more impetus to the already dismal housing picture and indicating that economic woes are spreading into the commercial sector.

Advancing issues led decliners, 4054-2373, but new lows continued to hold sway over new highs, 239-172, though the gap has narrowed considerably over the past four sessions.

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Crude fell below the $90 mark, dropping $2.30 to $88.31. Precious metals continued to retreat from recent highs. Gold was down $13.20 to $789.10, while silver declined 28 cents to end the week at $14.17. The drops in commodities are beginning to make sense against the backdrop of a inadequately-growing US economy.

Slower growth, or even recession, here, is going to crimp demand for all raw materials. Forget inflation. We're staring straight at Japan-style deflation.

So, that makes stocks go up? The Dow registered a gain of 628 points over the past four sessions, mostly on speculation that the Fed would lower interest rates to avert a recession. And that, dear reader, is why they call trading equities "speculative." Sometimes, everybody's wrong. And this time, it sure looks like they are.

Pass the fairy dust, Tinkerbell. I'm ready for another ride on the Magic Mountain.

NYSE Volume 4,335,490,000
NASDAQ Volume 2,571,377,500

Thursday, November 29, 2007

Consolidation Day

After two days of unprecedented gains, the markets were a bit worn out, and by Thursday, they traded in a more narrow range, ending mostly to the upside, with the notable exception of the NYSE Comp.

Overnight, the Fed released guidance that the US economy would slow in 2008, than during the day made overtures to the public that they would stand vigilant and flexible to confront a variety of concerns. With most of the economic news being mostly credit and mortgage-related and negative, investors mostly sat back, took some profits and continued to worry-waiting game.

News that mortgage delinquencies were actually on the rise calmed the pace of trade and that was magnified by a major fire at a vital oil pipeline serving the Midwest which prompted a five dollar spike in the price of crude early in the day. By the end of the day, however, oil only added 39 cents on the NY Merc, finishing the day at a more reasonable $91.01.

Dow 13,311.73 +22.28; NASDAQ 2,668.13 +5.22; S&P 500 1,469.72 +0.70; NYSE Composite 9,773.57 -17.48

Internally, decliners took back the advantage over advancing issues, 3466-2903, but new lows remained in control, 286-133. While the new lows have been declining over the past three days, few stocks are making new highs. This indicator is currently at even, with a slight bias to the downside. Unless markets improve even more in the next few trading days, the trend to the negative will remain in place.

It doesn't take a genius to understand the movement of the markets over the past few days. Stocks were oversold on a purely technical basis. November was a brutal month for stocks until the nearly 600-point recovery of Tuesday through Thursday. The chances for a continuation of the rally into the weekend remain slim.

Volume moderated, indicating the widely held wait-and-see attitude. With traders expectant of nothing but moderately bad to outright horrible economic news, it wouldn't take much to stoke the flames and ignite another rally, though the strength and breadth would be largely constrained.

Since we're in the midst of the holiday season, more attention will be focused on retailers. Considering the uphill fight they have ahead of them, prospects are mixed at best.

NYSE Volume 3,539,243,500
NASDAQ Volume 2,180,081,000

Wall Street Rallies Back

In the face of a continuing credit crisis, a woeful housing market and whispers of recession in the air, US investors drove stocks forward for the second straight day.

Dow 13,289.45 +331.01; NASDAQ 2,662.91 +82.11; S&P 500 1,469.02 +40.79; NYSE Composite 9,791.05 +269.29

Early news to the markets was less-than-jovial, with the National Association of Realtors announcing the 8th consecutive month of lower existing home sales, news that the market had expected. Unexpected was the pronouncement by Fed Governor Donald Kohn, who told the Council on Foreign Relations in New York, "should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses."

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Additionally, Kohn mentioned that the Fed would remain "nimble" in the face of any setbacks. Fed watchers took this as a clear signal that the Federal Reserve would vote to reduce the federal funds rate another 1/4 point at its next meeting, December 11.

While that can hardly account for the massive run-up in stocks over the past two days - the best two day performance in five years - most of the financial press was heralding more rate cuts (and the coincident weakening of the dollar) as the savior for the sickening US economy.

The financial news is nearly as insipid and useless as what passes for mainstream media these days. They swallow even the most blatant lies from corporate types and it seems as if the scripts for the never-ending rally have been penned by out-of-work Hollywood screenwriters.

Everybody's a pitch man and the news is always upbeat and jovial. With Rupert Murdoch taking over the Wall Street Journal and launching his own Fox Financial Network, it's likely to get worse before it gets better.

There's little in the way of honest analysis, as every word is spun to the positive, led all the way by the drooling cheerleader Jim Cramer on CNBC.

So, today's rally can be seen as a victory of sorts of media over material reality. Nothing really changed in the overall economic scheme other than the minds of the investing horde.

In any case, advancing issues got the nod over decliners, 5343-1095. New lows retained their long-standing advantage over new highs, however, 325-131.

More upbeat news came the way of the oil trade, where crude slid another $3.80 on the day, closing at $90.62. Gold lost $14.00 to $807.20, and silver fell 15 cents to $14.53.

Despite the two days of gains in the markets, there are still storm clouds on the horizon, if not directly overhead. Bear in mind that Wall Street's gains were predicated on the notion that the economy would continue to lose steam, prompting Fed cuts. It's simply pretzel logic at it's very best.

Please, don't swallow the whole thing at once.

NYSE Volume 4,610,242,500
NASDAQ Volume 2,543,293,000

Tuesday, November 27, 2007

Volatility and Violation

Stocks surged today on all major exchanges, despite generally dour economic news, including another poor reading on consumer confidence and a report on existing home sales which was also market-deflating.

Consumer confidence fell to 87.3, from 95.6 in October. Analysts were expecting a reading of 92.0. The S&P/Case-Shiller Home Price Index showed a 4.5% year-over-year decline for the 3rd quarter, adding more fuel to the sub-prime/housing/credit fire.

Stocks, which were buoyed at the open by news that CitiGroup (C) would receive a $7.5 billion injection of cash from the Abu Dhabi Investment Authority for a 4.9% stake in the troubled financial firm, fell quickly at 10:00 am when both the consumer confidence and home sales figures were released.

Dow 12,958.44 +215.00; NASDAQ 2,580.80 +39.81; S&P 500 1,428.23 +21.01; NYSE Composite 9,521.76 +132.26

But, in a day full of volatility and violation of key support and resistance levels at various times, stocks soared to intra-day highs before and after the noon hour, with the Dow leading the way - at one point up more than 240 points.

The afternoon witnessed a series of rapid sell-offs and rebounds, culminating in a mammoth 100-point spike with half an hour left in the trading day.

Despite the rise, stocks continue to be mired in a negative funk, though recently the markets have become extremely volatile. Stocks were up sharply on Friday, down hugely on Monday, only to be followed by Tuesday's massive upswing.

Inside the markets, advancers beat decliners, 3978-1421, though new highs were trounced again by new lows, 666-80. The bias continues explicitly to the downside.

Commodities contributed to some of the upside in stocks. Oil for January delivery lost $3.28 to $94.42 on the NY Merc. Gold lost $12.50 to close at $814.00, while silver fell 35 cents to 14.49.

While buyers were dancing through most of the day, Wednesday could bear witness to another dramatic turn around. The National Association of Realtors (NAR) announce their own reading on existing home sales at 10:00 am and crude inventories - which have been next-to-impossible to predict recently - come out at 10:30 am.

While the news from the NAR is somewhat predictable, an unexpected decline in oil and gas reserves could trigger more price gains in crude and derail any chance of a continuation of today's rally.

Of course, considering today's wicked trading patterns, there's also the possibility of insiders working the markets to the upside, in their ongoing effort to prevent the inevitable meltdown.

The Abu Dhabi investment in CitiGroup serves as clear evidence that America is losing ground in the war on terror. While we have yet to suffer another attack, the original main target - financial companies - are now being bought by Arab nations, along with plenty of other American companies.

In the long run, it may be best to just sell out to foreigners - for now. When the investments go bust, American taxpayers and investors will be able to pick them up on the cheap.

NYSE Volume 4,273,844,000
NASDAQ Volume 2,220,407,250

Monday, November 26, 2007

Stocks Trampled Into Correction

Remember that little 180-point Black Friday rally on the Dow?

Well, forget about it. On Monday, the Dow wiped out all of that half-session gain and then some, pushing the Dow into negative territory for the year and the blue chip index officially into a correction - down 10% from the highs.

Dow 12,743.44 -237.44; NASDAQ 2,540.99 -55.61; S&P 500 1,407.22 -33.48; NYSE Composite 9,389.50 -193.48

Additionally, Monday - the first full day of trading during the "holiday season" - saw the S&P 500 fall into negative territory for the year.

The NASDAQ fell into "correction" territory as well, off its October 31 high of 2859.12. It has shed more than 11% of its value in less than a month - 17 trading sessions.

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As usual, the main culprit for the fall in US equities was the continuing credit/mortgage/housing crisis. Two stories were front and center on the topic. CitiGroup (C) announced that another round of cost-cutting might include layoffs, and financial network CNBC commented that the layoffs could number 45,000.

Embattled lender Countrywide Financial (CFC) was the subject of a letter from NY Senator Charles Schumer, who sought a probe of more than $50 billion Countrywide borrowed from the Federal Home Loan Bank system.

Countrywide fell $1.01, or 10 percent to $8.64, while CitiGroup slumped 1.00 (3.15%) to $30.70.

In the overall market, declining issues led advancers, 4843 to 1603, a ratio of better than 3 to 1. New lows surged to 627, as opposed to 99 new highs. While housing and credit are getting most of the headlines, the declines are being seen in all market segments.

Oil dropped 48 cents to settle at $97.70 per barrel on the New York Mercantile Exchange. Gold and silver posted modest gains, though commodities were barely the focus of Monday's trading.

The 200-point decline on the Dow was the 6th of that magnitude this month, making November easily the worst month for the markets this year. In all, the Dow has lost 1187 points during the penultimate month of 2007.

NYSE Volume 3,706,467,250
NASDAQ Volume 2,019,342,250

Wednesday, November 21, 2007

Dow Pounded to 7-Month Low

In a wild, pre-holiday session on Wednesday, the Dow Jones Industrials, with all other major indices in tow, crashed through near-term support levels and closed at a 7-month low.

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The April 17 close of 12,773.04 was the last time the Dow closed below 13,000, leaving the blue-chip average up just 336 points for the year, or just over 3%.

The NASDAQ and S&P 500 closed at a 3-month low, the NASDAQ just 20 points above the lows registered in August, while the S&P ended 10 points higher than the August 16 low. While the NASDAQ is still trading up 4% for the year, the S&P fell into negative territory for 2007. The widely-watched average closed at 1418.30 on December 31 of 2006.

The NYSE Composite Index, the broadest measure of stocks, remained well above the August 16 low of 9,087.10 and remains in positive territory for the year.

Dow 12,799.04 -211.10; NASDAQ 2,562.15 -4.66; S&P 500 1,416.77 -22.93; NYSE Composite 9,405.22 -170.07

The decline on the Dow was the 5th session registering a loss of 200 or more points and is perilously close to being technically in a correction (down 10%). From it's high, the Dow would have to close below 12,748. Unless Wall Street investors are capable of pulling multiple rabbits from their hats, the Dow will be in a correction by next week.

Credit fears continue to dog the markets and soon the consumer will take center stage, as the holiday shopping season commences on Black Friday, the day after Thanksgiving. Prospects for a buoyant Christmas season are dim for many retailers, who see consumers as tapped out and spending less due to high gas prices, fears of an economic downturn and housing woes. Credit card debt is at an all-time high and more consumers are using credit cards for everyday purchases, an ominous sign.

Measuring market internals, declining issues outpaced advancers, 4578-1788. New lows rang in at 876, with only 67 stocks marking new highs. Both the gap between the new highs/lows and the minuscule number of new highs are alarming and sending strong sell signals.

The price of a gallon of oil remained persistently high, although crude lost 74 cents to $97.29. Gold was up $7.20 to close at $798.60, while silver slipped 8 cents to $14.42.

With all the turmoil and volatility in US markets, the final five weeks of the year should pose significant problems for investors. Adding to the woes of an already troubled - and increasingly skittish - market are concerns about year-end tax selling in addition to what appears to be an uphill climb for retailers this holiday season.

With Thanksgiving tomorrow, investors are probably thankful they still have the opportunity to trim losses, though finding stable stocks to purchase may be a challenge.

NYSE Volume 4,141,169,750
NASDAQ Volume 2,079,205,875

Tuesday, November 20, 2007

Wild Wall Street Ride

Stocks zigzagged their way to positive closes on the major indices Tuesday, thanks to a late day "miracle" rally, largely credited to a spike in the price of oil and subsequent gains by ExxonMobil (XOM), which finished higher by 3.71 points at 87.82.

What's interesting and almost laughable about that explanation is that higher oil prices are not good for most stocks, only oil stocks, so why did the NASDAQ erase a 34-point decline and close up 3.43? Surely the tech-laden NASDAQ is largely insensitive to oil prices.

The absolute, no-doubt-about-it truth of the matter is that the Plunge Protection Team (PPT) was busy keeping the markets from collapsing again. As it was, the Dow, which was up as much as 150 points early on, lost all of that and was down over 100 points between 2:00 and 3:00 pm. When the PPT got to work on pumping the various market futures, the Dow rose from -80 to +80 in a matter of roughly 20 minutes. All other indices saw similar gains.

Supposedly, these infusions of buying by the Fed, Treasury, and their agents - the brokerages - are good for the market. That might be true if you are ignorant and holding stocks currently, but anyone with a working brain has long since left the market or is short the market. Short-sellers need honest markets, too, and these markets are anything but honest.

Dow 13,010.14 +51.70; NASDAQ 2,596.81 +3.43; S&P 500 1,439.70 +6.43; NYSE Composite 9,575.29 Up 77.96

As usual, proof that the "rally" was a phony as our president lies in the advance/decline line.Declining issues outpaced advancers 3471-2946. New lows cracked the century mark at 1028, as compared to a paltry 92 new highs. Sure the market was up. Inflation, $100/barrel oil, a corrupt federal administration and a credit crisis as severe as any one since the Great Depression naturally sends investors out seeking overpriced stocks with buy orders in both hands. Sure.

The whole rigged racket is droll, so obvious, so blatant and so ignorant that it is often difficult to write about it. I personally want to throw up my hands in disgust whenever I see these absurd price gains across the entire market. Veterans of the exchanges must have gotten used to the abuse by now though mostly they remain silent. After all, their jobs are at stake.

Oil was up $3.39 to close at $98.03. Gold was higher by $13.40 to $791.40. Silver gained 35 cents to close at $14.51.

Thank God Wednesday is a short session. The trading action is highly suspect and I need a break.

NYSE Volume 4,806,186,000
NASDAQ Volume 2,641,784,250

Monday, November 19, 2007

Credit Concerns Sink Stocks... Again

The pre-holiday festivities were none too festive as investors got back to work selling stocks on Monday. All major indices were sharply lower, with the Dow dropping more than 200 points for the 4th time this month - a span of only 13 trading days. The Dow has slipped into negative territory in 7 of the last 9 sessions and today's decline was in the red right from the start as traders weighed in with concerns over the banking and financial sector once again.

Goldman Sach's downgraded CitiGroup to a sell, saying that the firm would have to take writedowns on $15 billion worth of sub-prime related debt. That news set a pallor over the entire market and especially affected the larger banking firms, Merrill Lynch, Morgan Stanley, Wells Fargo and CitiGroup.

Dow 12,958.44 -218.35; NASDAQ 2,593.38 -43.86; S&P 500 1,433.27 -25.47; NYSE Composite 9,497.33 -204.05

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Market breadth was decidedly negative. Declining issues slaughtered gainers by a 5-1 margin, while new lows expanded to 907 (nearly 20% of all stocks traded). There were only 87 new highs.

Oil advanced 80 cents to $94.64. Gold lost $9.00 to $778.00. Silver lost 35 cents to $14.16.

With a short week, scant economic news forthcoming, and continued pressure on the financials, prospects for a holiday rebound are fading fast. The Dow and S&P 500 are within shouting distance from the August lows. If the Dow cracks below 12,800, the next support level is roughly in the area of 12,150-12,300. That much slippage would qualify this market as unabashedly in a corrective mode.

NYSE Volume 4,171,323,000
NASDAQ Volume 2,199,688,500

Friday, November 16, 2007

Plunge Protection Team at Work

There is evidence of the Federal Reserve, in conjunction with the Treasury and major brokerages, rigging the market to the upside. Friday's activity was more evidence of the President's Working Group on Financial Markets (otherwise known as the Plunge Protection Team or PPT) helping US equity markets from slipping into the red.

There were, in fact, two separate events. On the Dow, this was manifested as one 100-point move from 11:30 to 12:15, and another roughly 90-point move from 3:40 pm into the close. It's a safe bet to assume that the Dow and other indices would have finished lower yet again without the pumping from our benefactors inside the shadowy world of high finance.

Dow 13,176.79 +66.74; NASDAQ 2,637.24 +18.73; S&P 500 1,458.74 +7.59; NYSE Composite 9,701.38 +48.86

What did these chump-change gains look like from inside the market? Declining issues checked in ahead of advancers, 3416-2899 and new lows slaughtered new highs, 628-89. In other words, much of the market is sick and minuscule gains like today are akin to spitting from the beach into the Pacific. There has been fundamental damage done to stocks, and generally speaking,
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what fixes markets like this is exactly what is happening. Stocks need to fall to reasonable valuations before investors can feel comfortable throwing money at them.

With earnings hitting the skids and the general economy on a rocky road, now is not the time to dive into equities. I have reiterated this sentiment over and over the past three months. Technical factors aside, the markets are in a corrective phase and may be entering an outright bear market. We'll know more over the remainder of the year as the holiday season and tax-selling ensues.

The price of crude oil continues to be a thorny issue as the per barrel price jumped another $1.67 to close at $95.10 on Friday. Gold was down marginally and silver gained 2 cents.

Volume was particularly strong on the NYSE and has been for over a week. Technology stocks are still somewhat of a safe bet and defensive plays would include consumer staples, mining and energy.

The coming week will be short with Thanksgiving on Thursday. Traditionally, the Wednesday and half-day Friday sessions are usually not volatile. It may serve as the calm before the storm.

NYSE Volume 4,129,085,250
NASDAQ Volume 2,515,753,750

More Pounding for Stocks

Every day it just seems to claim another victim. Today, it was Wells Fargo, which announced a $495 million writedown due to mortgage loans. The continuing crisis still centers around banks and major financial institutions, though Countrywide Financial (CFC), which today lost another 1.16 points to close at a multi-year low of 12.21, could be said to be the poster child of the housing collapse in America.

Countrywide was the largest loan originator in the USA through most of the boom years from 2003-2006, and they also were the most aggressive in originating exotic loans and repackaging them for sale to investors as SIVs (Structured Investment Vehicles). Hedge funds ate them up, though now, most of these investments have gone totally sour, many worth fractions of their original values, and many may be worth just pennies on the dollar when the truth of their toxicity is made known.

Through 2005-2006, Countrywide wrote one out of every 7 mortgages in America, so if there's any one company responsible for the continuing crisis, it is Countrywide, and their over-tanned leader, Angelo Mozilo, who as recently a two weeks ago was still selling his shares as the stock price cratered.

Mozilo also masterminded the stock buyback program when Countrywide was at its peak this past summer, at upwards of $40 per share. In less than six months, the stock has lost 70% of its value and there's no bottom in sight.

Countrywide continues to borrow at short rates higher than what they lend long term, in hopes that they can make up for the massive weight of defaults with new originations, though the mortgage business has shown a steady decline in volume over the past year and especially over the past two months.

Dow 13,110.05 -120.96; NASDAQ 2,618.51 -25.81; S&P 500 1,451.15 -19.43; NYSE Composite 9,652.52 -156.63

As far as today's trading was concerned, it was another day of disappointment for the bulls, as the markets sold off broadly in afternoon action. Advancers were overwhelmed by declining issues, by a ratio of better than 3-1. New lows expanded their advantage over new highs, 530-92. All told, it was another rout. Any vestiges of the bull market have been eviscerated and there's concern over the upcoming holiday shopping season as retailers brace for what figures to be a competitive race to the bottom, with margin-eroding sales events the key for many.

In commodities, oil fell another 66 cents to $93.43, while gold was routed, down $27.40 to $787.30 and silver lost 58 cents to $14.48. Once again, the gold trade may have been the result of institutional selling in a scramble for cash.

As I close out here very late in the evening (12:10 am), the Nikkei and Hang Seng indices are sharply lower. The Hang Seng is being particularly brutalized, down more than 1100 points, nearly 4%. Trading in New York resumes in just over 9 hours. Better get some shuteye, because tomorrow promises to be another rambling ride down.

NYSE Volume 3,982,506,500
NASDAQ Volume 2,351,474,250

Wednesday, November 14, 2007

Stocks Slapped Down Again

Following yesterday's whoopee, one would have hoped for a little better follow-through than what occurred on Wednesday. Stocks vacillated above the break-even line for most of the day, but sold off dramatically in the final half hour as investors got cold feet in advance of Thursday's CPI and crude inventory numbers. It is probably the latter of those two economic indicators that spooked traders, as oil has been consistently a drag on the market and inventories have been lower than expected more often than not.

Dow 13,231.01 -76.08; NASDAQ 2,644.32 -29.33; S&P 500 1,470.58 -10.47; NYSE Composite 9,809.15 Down 51.83

The overhang of ridiculously-high oil prices and the crunch at the gas pump heading into the holiday season (Thanksgiving is only a week away) has retail and institutional investors alike running scared. Buying gas at 3.35 and up is not sitting well with the American consumer, and there's likely to be bad news come Christmas. Holiday shopping will likely fall below any optimistic estimates, though the high gas prices may bode well for internet retailers, which have racked up impressive numbers over the past five holiday seasons.

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For the remainder of the market, however, the picture is fairly bleak. Mainstream retailers are already talking about big markdowns as early as Black Friday to lock in whatever revenue and profit gains they can early on. This holiday shopping season is going to be particularly long, with Thanksgiving coming somewhat early and three full weeks in December with a final weekend push on the 22nd and 23rd. That gives people more time to shop, but also more time to look and linger and think about what's left in their wallet.

Any advantage from a slightly longer shopping season will likely be blunted by the pallor of high oil and gas and the lingering effects of the sub-prime problems and related banking writedowns.

The damage on Wall Street wasn't severe, with declining issues beating advancers by a 3-2 margin. New lows totaled 359 to only 121 new highs. The market continues to trend lower, despite the obvious bottom-fishing, short-covering rally of Tuesday. The Dow is still only 400 points ahead of the August lows and is less than 1000 points higher than on January 1, a 7% gain for the entire year thus far.

Oil gained $2.92 to $94.09, while gold rebounded strongly, up $15.70 to $814.70. Silver notched another 46 cents to $15.07. With so much strength in commodities, there's plenty of evidence that inflation is worse than what the Fed is calling "contained."

It's beginning to look a lot like Christmas, and Wall Street doesn't like what it sees.

NYSE Volume 3,932,845,500
NASDAQ Volume 2,463,395,500

Bounce for Bulls

Stocks shot skyward on Tuesday, in a reflexive rebound after two weeks of concerted selling pressure. If this was a relief rally, investors certainly were well-relaxed, though the suspicion is that at least half of the gains were due to short covering.

Dow 13,307.09 +319.54; NASDAQ 2,673.65 +89.52; S&P 500 1,481.05 +41.87; NYSE Composite 9,860.98 +291.01

Advancing Issues held a 7-2 edge over decliners though new lows remained well above new highs in a continuation of a trend.

The oil trade contributed to the spirited rally, as crude futures fell $3.45 to $91.17. Gold dipped $8.70 to $799.00, while silver fell another 15 cents to $14.61.

Monday, November 12, 2007

Oops, They Did It Again

Broken record. Drop. Skip. Drop. Skip. Drop. Skip.

If you haven't bailed out of your long - and likely losing - positions by now, there's still time to limit your losses. The stock markets continue to fall, day by day, lower and lower. It's plain that there are problems with the economy, with stocks, with investments, and you don't want to be stuck holding the bag.

Dow 12,987.30 -55.44; NASDAQ 2,584.13 -43.81; S&P 500 1,439.18 -14.52; NYSE Composite 9,570.04 Down 163.30

The Dow careened through the 13,000 mark late today. Apparently, the PPT has given up attempting to fly the market higher into the close. They now prefer mid-day propping instead, as the Dow was at one point 100 points to the good, but it could not hold gains.

To illustrate the depth and breadth of the selling, declining issues overwhelmed advancers by 3894-1377. New lows trampled new highs, XX-XX. The NYSE Composite, the broadest measure of mainstream stocks and one of the least-watched, has lost 740 points since October 31, a span of just 8 sessions.

What's almost a certainty at this juncture is that the Dow will retest the August lows of 12,800, possibly as early as this week. Tomorrow, pending home sales for September will be released at 10:00 am, and the numbers are not likely to be encouraging. As the week rolls on, PPI, CPI, Industrial Production and Capacity Utilization reports flow into the market. With earnings season pretty much behind this market, though Home Depot (HD) and Wal-Mart (WMT) report Tuesday prior to the open, economic reports will be market-movers.

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Oil slipped $1.70 to close at $94.62. Apparently, there was another round of debts being called or heavy profit-taking as gold dropped an enormous $27.00, ending the day at $807.70. Silver also declined 78 cents to $14.76. I say there was a credit crunch because this is precisely what happened one day in August, when everybody rushed to raised cash - they sold gold. Panic selling of assets is endemic to this environment.

Panic selling of stocks might actually be a virtuous undertaking here since there are better places for money - like in a sock or tucked under a mattress - than sending them down the black hole on Wall Street.

I close today with a tribute to all veterans, and one very special one, my father, Nick Gagliano, who served in the Army in WWII and fought in the Battle of the Bulge. I salute you all and thank you for your service. God Bless America.

NYSE Volume 3,749,867,750
NASDAQ Volume 2,732,693,250

Friday, November 9, 2007

Correction? Close Enough!

Wednesday night on the CBS Evening News, Katie Couric, no financial wunderkind herself, posed the question of whether the market was in a correction to one of her crack business reporters. The answer was, "no, not yet," as though the magic 10% figure would send some all clear signal for investors to resume buying stocks.

While we are not technically in a correction - which is a 10% decline in the market - we are certainly close. From the high of 14,280 (intraday) on the Dow, a correction would necessitate a loss of 1,428 points. At the close today, the Dow has only lost 1,237 points, or roughly 9%. What makes the argument all the more interesting, is that the Dow - and most other major indices - dropped significant amounts at the close and ended near the lows of the day. The Dow itself, in an unusual reversal of fortune, lost over 150 points in the final 40 minutes of trading.

Dow 13,042.74 -223.55; NASDAQ 2,627.94 -68.06; S&P 500 1,453.70 -21.07; NYSE Composite 9,733.34 Down 144.13

In case you haven't gotten the memo, owning stocks this week was not in your best interests.

For points of reference, let's just take this month. Since October 31 the Dow has dropped nearly 900 points. The NASDAQ lost 232 points over the same span. It's not very pretty, and the culprits are the same: sub-prime mortgages, credit disruptions, falling dollar, higher oil.

The US economy is pretty much kaput. We've binged for too long and now it's time to pay the piper. I reiterate my statement that bank failures are a distinct possibility. And not just any bank, banks like Citibank, Bank of America, Chase, and others are on the hook for literally hundreds of billions in bad loans. That is exacerbating the credit crunch. Banks are just not loaning out any money unless your credit is absolutely perfect. They've been burned - by themselves - and they're scared stiff. So should you be.

Advancing issues were overwhelmed by decliners by a 5-2 margin and new lows continued to ratchet up to 742, while new highs sunk to a 3 1/2-month low of 85. There aren't a lot of success stories out there. If your holdings managed only a 5% loss since August, consider yourself either smart or lucky. However, this is only the first leg down. We haven't even sunk to the August lows (12,800 on the Dow) yet, though we're closing in on them quickly.

Commodities were mixed. Oil ended the week at the absurd level of $96.32 per barrel, ahead 86 cents on Friday. Gold lost $2.80 to $834.70, while silver gained 3 cents to $15.55. It wasn't a month ago that I said silver was a buy at under $13.50. Boy, was I right!

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There may be a technical bounce next week, as stocks have taken quite a hit over the past seven sessions and are oversold. Don't be a bargain hunter here, though, as gains will be quickly wiped out before Christmas. There's an equal possibility that the selling will continue, though, without much of a respite. Monday, in particular, could be a bloodbath.

Volume was high once again. Even the not-so-smart money is getting out of US stocks. If you haven't already, it's still not too late.

NYSE Volume 4,587,501,500
NASDAQ Volume 3,004,066,500

Wednesday, November 7, 2007

I See a Bottom

Actually, that's what somebody posted on a message board about 3:15 pm this afternoon. That was before the Dow dropped another 150 points into the close.

I don't see a bottom. Maybe in three to six months my powers of prognostication will be improved, but the next stop is somewhere in the range of 12,800 on the Dow - the August lows. And it probably isn't going to stop there.

Today's US equity markets were roiled by a massive, $39 billion 3rd quarter loss by General Motors, spiking oil prices (why wasn't the market tanking when oil hit $75, or $85?) and continued deterioration in the credit markets.

There's a lot of talk these days about the credit markets. Let's be clear. Banks are in deep, deep trouble and they aren't about to lend money to just anyone. If you're an individual, you need absolutely perfect credit. Companies need AAA ratings, loads of solid repayment history and still they're going to pay through the teeth. It's very tight and scary in financial markets right now. There is talk not only of recession, but depression, though we're still far removed from that possibility at this juncture.

Fortunately, there will be more signs - ominous though they may be - before banks begin to fail. Small businesses will close first because they are the most prone to catastrophe in economic downturns. That would happen on a regional basis, most likely in smaller communities. Of course, the level of personal bankruptcies is already alarming.

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Next, larger firms would go belly up. Mostly, those would be private concerns, which is why the boom to "take private" public companies has been suddenly and irrevocably reversed course. There is no M&A activity to speak of. When public companies go under, then the handwriting is already on the wall, so, if you take a look at some of the mortgage firms and hedge fund operations which have gone under recently, it looks like we're quite a bit closer to economic meltdown than the ordinary, uninformed citizen would assume. And we probably are.

Dow 13,300.02 -360.92; NASDAQ 2,748.76 -76.42; S&P 500 1,475.62 -44.65; NYSE Composite 9,830.15 -272.26

There have been 13 days this year in which the Dow lost 200 or more points. 11 of them have occurred within the last 4 months. Today was the 5th worst decline of the year. Obviously, we are not living in an economic utopia.

If we're headed for a recession, or even a prolonged depression, how do we get out of it? First, it should be understood that some will fare better than others. Some entire communities will barely feel the effects. Others will be devastated. The poor and the lower levels of the middle class will be hardest hit. Some say they have already been hit. How we get out of financial distress depends on the wisdom and actions of our elected officials, which, considering the current crop, means we're pretty much screwed.

Anybody who has money invested in the stock markets, in mutual funds, retirement accounts, IRAs, etc. is going to feel a great deal poorer a year from now. That's almost a certitude. But, we do have a financial infrastructure that is deeply-rooted in government employment. Teachers, postal workers, public works workers will not see any declines in their rates of pay.

But the private sector can only survive if it is itself vibrant and growing. It is not. If you work for anyone other than a government entity, you'd be wise to prepare for the worst because the stock market is telling you, loud and clear, that it's coming. And it's not going to relent. The level of economic destruction about to be unleashed upon the United States of America will be unprecedented unless - again - our elected leaders take action that is sound and correct and broad-based.

The initial actions taken by the Federal Reserve, of lowing interest rates, has been a disastrous beginning. Rates should be raised to reflect the realities of the marketplace. Money should be tight. It should be well-guarded and every dollar respected. The Fed has sent exactly the wrong message so far, but that's what we get from a central bank that fomented the largest credit expansion in the history of the world and a government that cannot restrain itself from overspending.

Back to today's market. The 5,500 declining issues dwarfed the 897 advancers. New lows ravaged new highs, 776-203.

Oil actually took a breather, losing some 33 cents to close at $96.37. That price is artificially high, unsustainable, illusory and about 30-40 dollars too high. It's a price that will bankrupt entire nations.

Gold closed at an all-time high of $833.50 with no end in sight. Silver took a little off the top after a massive run-up, losing 6 cents to $15.33.

We're all in for a world of hurt and the blame can be firmly placed on the elected "leaders" in Washington and the corrupt media and their selective reportage. They - except for a chosen few - are no better than common crooks and they have traded on the nation's wealth to enrich themselves. May they all burn in hell for what they have wrought.

NYSE Volume 4,301,055,000
NASDAQ Volume 2,561,720,500

Tuesday, November 6, 2007

The Quiet Rally

There was no hoopla, no blockbuster story. No, there was little more than a murmur over the outsize gains in US equities today. Strange.

Dow 13,660.94 +117.54; NASDAQ 2,825.18 +30.00; S&P 500 1,520.27 +18.10; NYSE Composite 10,102.41 +143.59

The major averages gained in the range of 1% - usually an occasion for cheering - but the only sound was that of one hand clapping, as the price of oil grabbed headlines once again. Crude was the news, as a barrel of the slippery stuff went for $96.70 at the close of trading at the NY Mercantile Exchange, a gain of $2.72 over the previous day.

Oil at nearly $100 a barrel would normally cause markets to reel in terror, but this is no ordinary market here in the good old US of A, this is a market that's been held in abeyance by the dual forces of sub-prime mortgage fallout and a related crippling credit crisis.

So, it was a surprise to many that stocks did so well today. Well, some stocks. As expected, ExxonMobil (XOM) was the big winner on the Dow, gaining 2.72 to 90.38 at the close. 23 of 30 Dow components were in the green.

On the broader exchanges, advancing issues beat decliners by a 13-8 margin, though new lows continued to hold sway over new highs, 536-276. That's not a good sign, for now, though the margin is better than it was yesterday.

But the market gains were not embraced by investors. Rather there was an uneasy skepticism, especially since the markets creaked eerily into the red just after 11:00 am. After that, though, it was all uphill, for the rest of the day, especially in the final hour, when the Dow tacked on 70 points into the close, with heavy buying in the final few minutes. It was an oddly quiet day for such a dramatic rise.

Were it simple to discern the behind-the-scene activities of the Fed, the Treasury, the serendipitous PPT, the brokers, dealers and underwriters, this game would be to easy. But there was no driver today, no mover, no shaker. Just buying for the sake of buying.

Maybe people were just tired of selling. One would expect an urge to sell stocks might appear sooner rather than later, as the markets have been stuck in a range for some time now, and the downside still makes more sense than new highs.

The gains in gold (+13.00, $823.80) and silver (+0.60, $15.38) were also outlandish and indicative of the crumbling status of the dollar.

US stocks are surely struggling, but today served notice that without direction, people still have some degree of faith.

NYSE Volume 3,893,849,000
NASDAQ Volume 2,545,161,000

Monday, November 5, 2007

Wall Street's Ponzi Scheme Blowing Up

What's really going on with Wall Street?

We keep hearing news that the economy is OK, but then, a day later, there's more disturbing data from the housing sector, or some consumer confidence poll. GDP is strong (+3.9% in the 3rd quarter), labor markets are solid, but stocks seem to be dawdling along and November is usually a good month.

The bottom line truth is that nobody really knows, or those who do aren't saying, and matters were made muddier last week when the Fed lowered the federal funds rate, then more sub-prime fallout at CitiGroup, then stocks took a nosedive without warning.

On Monday, it looked like a meltdown in progress right out of the gate, then a slight recovery, another slump and a recovery into the close. Same old broken record with this kicker, Fed Governor Frederic Mishkin spoke extensively on the economy and the Fed, saying that the recent cuts could be reversed.

How about that monkey wrench? How would Wall Street react to a 25 basis point increase after celebrating the last two cuts of a combined 75 basis points. If you want to see turmoil, just wait and see.

Dow 13,543.40 -51.70; NASDAQ 2,795.18 -15.20; S&P 500 1,502.17 -7.48; NYSE Composite 9,958.82 Down 93.44

The internals shed more light. Today's decline was more broad-based than most other run-of-the-mill -50 point declines on the Dow. Declining issues led advancers by a nearly 3-1 margin. New lows continued to dominate new highs, 633-165. That's a pretty large gap and signals again that the market is in for more downside pressure.

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The selling pressure is coming from everywhere because stocks have been so magnificently overvalued while returns from the 3rd quarter were shoddy in most sectors.

Gas prices took another huge rise over the weekend, up nearly 12 cents in most areas. Naturally, this has much to do with politics in the Middle East, especially with Pakistan now under what amounts to martial law. What's interesting is that Western democracies are more concerned than Pakistanis themselves, by and large, probably because most Pakistanis aren't accustomed to real democratic rights, they've only recently experienced some of them.

The price of crude actually eased off a bit on Monday, dropping $1.95 to $93.98, which is really not any kind of relief. Meanwhile, gold gained another $2.30, to $810.80 and silver priced 19 cents higher to $14.79.

So, what's really the matter? I continue to hold to the theory that credit markets are frozen, lots of money is being lost on a daily basis, there are no merger and acquisition deals going forward and companies are paying with their eyeteeth for expansion funding. Private equity deals, all the rage over the past few years, are about to blow up in the faces of the funders and bank failures are not far in the future.

While the day-to-day wheels of industry grind on, wealth is no longer being created, but rather destroyed in a vicious cycle of bad loans, tight credit, a falling dollar and excessive pricing in energy. It's an absolute mess that has no other final resolution but a massive re-valuation of just about everything, including stocks, and that means we're going to be stuck in a bear market for some time to come.

Sentiment is turning from unsure to surely ugly and price gains are going to be few and far between. Tech is still the best bet, but only in companies with solid balance sheets and earnings that are growing and are predicted to continue doing so.

I reiterate, anything exposed to finance, banking or money is going to get crushed over the next six to nine months. And when the fall comes to the banking sector, the layoffs in that sector and everywhere else are going to be mammoth. A recession should be a foregone conclusion as government figures have proven, over and over again, to be unreliable and untrustworthy.

If the sub-prime disease that has crushed the credit markets continues unabated - and it will - the effects to the general economy will be long-lasting and severe. Believe whomever you like, but from this corner, the massive Wall Street Ponzi scheme seems to be headed for a watershed event.

NYSE Volume 3,819,302,500
NASDAQ Volume 2,147,749,000

Friday, November 2, 2007

Stocks Take a Breath

After the battering stocks took on Thursday, Wall Street braced for the worst Friday, and early on, it looked as though the bears were going to have another fun day, and, to a large extent, they did.

Just after 10:00 am, the Dow slumped to its low of the day, 13,446, a 121-point decline. Twice, the index struggled into positive territory, for a brief period after 1:00 pm, and for the final twenty minutes of trading, which is where it closed.

Naturally, a see-saw ride such as Friday's is suspicious, and no doubt the President's Working Group, the Plunge Protection Team, was hard at the wheel, boosting all the averages, and the Dow by 120 points in the final 45 minutes.

Dow 13,595.10 +27.23; NASDAQ 2,810.38 +15.55; S&P 500 1,509.65 +1.21; NYSE Composite 10,052.26 +30.18

The internals tell the real story. Losing issues led advancers by a slim margin, 11-10, while new lows swamped new highs, 552-190. That's the largest number of new lows in at least three weeks and augers ill for the rest of the quarter. Even with the Labor Dept. reporting new job creation at the rate of 166,000 for October, nobody was impressed, and skepticism regarding the veracity of the numbers is abundant.

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Meanwhile, the destruction of the dollar continued apace, highlighted by action in the commodities pits. Oil ballooned another $2.44 a barrel, closing at $95.93. Gold broke through the $800 barrier, gaining $14.80 to $808.50. Silver caught a bid as well, adding 27 cents to close at $14.60.

It was somewhat of a disjointed week in equities and finance. Nobody quite understood why the Fed was cutting rates again if the economy was so good. The two main reports of the week, the aforementioned October labor report and the preliminary 3rd quarter GDP data (+3.9%), were both very positive.

The fallout from the sub-prime mortgage debacle continues to cast a long shadow over everything, however, and credit markets worldwide continue in near-panic mode. There's scant M&A activity, another sign that something's just not right, and some of the heavy bets made over the past three years by private equity firms may be on the verge of blowing up. There are literally billions of dollars to be lost should some of the high-profile leveraged buyouts not work out as expected, and a slowing economy is seen as harmful to breakups, IPOs and turnarounds.

It's going to be an interesting November and December, with, no doubt, more shocks from the housing, banking and finance centers.

NYSE Volume 4,338,039,000
NASDAQ Volume 2,485,408,500

Thursday, November 1, 2007

Banks Under Severe Pressure as Markets Crack

One day after a 25 basis point reduction in the federal funds rate, Wall Street implodes.

This is not supposed to happen in healthy markets, and it's becoming more and more apparent that the US Equity markets are anything but healthy. Conventional wisdom would assert that investors took the Fed's policy statement - accompanying the rate reduction - to mean that there would be no more rate cuts to follow this year, and also doesn't expect the economy to continue growing at a level pace, despite yesterday's report of 3.9% growth in 3rd quarter GDP.

Dow 13,567.87 -362.14; NASDAQ 2,794.83 -64.29; S&P 500 1,508.44 -40.94; NYSE Composite 10,022.08 -289.53

Considering the massive trading volume, it was more like a rush for the exits rather than an orderly retreat. Stocks were hammered as two major Dow components, CitiGroup (C) and ExxonMobil (XOM) were the bearers of bad news.

CitiGroup was downgraded by CIBC from Sector Outperform to Sector Perform, which was actually somewhat kind, considering that the basis for the shift. In a related note, the analyst reported that CitiGroup would have to raise nearly $30 billion in capital to reach par with its peers in terms of their capital-to-equity ratio.

ExxonMobil, meanwhile, missed estimates for 3rd quarter earnings by 4 cents, at $1.70 per share. One can hardly shed a tear for the company that boasted record profits as oil prices rose dramatically over the past 5 years.

Declining issues trounced advancers by a better than 5-1 ratio, while new lows ruled the day over new highs, 444-194. It was a dramatic reversal of market conditions, which just a day ago, looked bullish.

The question on everyone's lips apparently is, "what's the problem?" Fed chairman Bernanke and Treasury head Paulson have jawboned the market for months concerning the housing situation. What they have not been completely open about is the condition on banks and credit markets, which are in serious straits.

The credit conundrum stems from the toxic paper issued by mortgage lenders, packaged as investments and sold at various face values as SIVs (Structured Investment Vehicles). Many of these packaged offerings were loaded with sub-prime and otherwise non-performing loans and today some are worthless or valued at only pennies on the dollar.

The major banks, such as Citibank, Wells Fargo, Bank of America and countless other smaller lenders were both buyers and sellers of these "investments" through their brokerage and hedge fund subsidiaries and these losses simply cannot be written off quickly enough. What's worse is that there are more of these sloshing around everywhere, and as more homeowners default, more of the investments holding the notes blow up. The bulk of these have not yet hit the market and the banks are suffering the impact.

Today's market action is not one which occurred in a vacuum. The condition of credit markets is deteriorating by the day and astute individuals are getting out of banking stocks and most other equities before the stampede engulfs them all.

Making matters worse is the high price of oil, which actually slipped a bit today, down $1.04 to $93.49, though the move higher was largely the result of the Fed's rate reductions in September and October.

Gold and silver followed suit, losing marginally on the day.

Economic conditions in the United States are terrible, to put it lightly. Between the Fed's constant interest rate tinkering and the government's refusal to curb deficit spending, the value of the dollar has shrunk considerably over the past 6 years. we are paying the price for rampant credit expansion under Greenspan, off-budget expenditures for the conflicts and occupations in Iraq and Afghanistan, lack of regulatory control in mortgage and credit markets and a wickedly overpriced stock market.

A return to a strong dollar standard would be the best and most rational approach, but the Fed and Washington politicians aren't interested in the painful truths of serious fiscal and monetary restraint. The Fed's combined 75 basis point reduction in rates has only exacerbated the problem and Wall Street's crying for more isn't helping.

There's going to be a lot of pain to be doled out and the longer officials saddled with the charge of managing the economy wait to act, the worse the downfall will be.

Tomorrow, non-farm payrolls for October will be reported before the open, though it may simply be a sideshow to the ravages inflicted on the markets by investors with better things to do with their money than to see it slowly, inexorably evaporate.

We may see a dead cat bounce or another day like today, where everyone and anyone is selling just about anything and everything.

If the Democrats had moved for impeachment last winter, and the Republicans in congress actually had a conscience, we may have avoided some of this. But now, with the most incompetent president in the history of the nation still sitting for another 15 months, we may be seeing the beginning of the 21st century's reprise of the Great Depression. God save us all.

NYSE Volume 4,328,372,500
NASDAQ Volume 2,626,966,750