The Joke's On US... and You

I am laughing so hard my sides are about to split after watching the market's silly Fed-watch ritual for the past two-and-a-half days only to see the bottom basically fall out as today's session drew to a close.

What the Fed did was lower the federal funds rate another 25 basis points - essentially a do-nothing gambit - but signal that the cuts were over. What smart investors did was cash in their chips right at the highs. A nice play, if you're big, rich and not stupid.

Anyone not cashing out as early as possible tomorrow is going to be stuck with declining issues. As noted yesterday, today's most important announcement came not from the Fed, but from Commerce, which told us today that we are unofficially in recession.

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The word from Commerce was that "real" GDP was measured at an annualized growth rate of 0.6% in the first quarter of 2008, matching that of the 4th quarter of 2007. Since the term "real" isn't as confident a measure as it used to be, one necessarily has to include some of the inflation over the last six months to offset the gains. Inflation ran at a 3.7% annually in the 4th quarter of last year and 3.5% in the first quarter.

Now, the government will tell you that inflation, or, "prices paid" as they put it, are factored into the GDP question. I'll tell you that inflation is largely: 1) understated, and 2) not factored in correctly.

Without doing all the math and using their "estimates", here's my conclusion. If we "grew" at 0.6% over the past six months, but inflation averaged 3.6%, we're down 3% in "real" terms. In other words, that 0.6% gain didn't even keep pace with inflation. I am assuming that there's very little "reality" in the government's numbers.

It's more smoke and mirrors than anyone can possibly see through without losing one's mind, so you can take my word on it or the government's. Since I'm the one not $9.6 trillion in debt, I'd wager that I'm closer than the truth than the bean counters in Washington.

Plus, if you don't like my analysis, just look around. The Dow dropped almost 200 points off its intraday high once the excitement of a 0.25% interest rate cut ended (insert one hand clapping here). Gas is $3.60 a gallon, bread, milk and most vegetable prices are up at least 20% from where they were a year ago, and your wages simply are not keeping pace.

If you measure a growth rate of 0.6% in terms of a 5-foot-tall 12-year-old, it would amount to .36 inches in a year. By the time the poor kid reaches 18, he or she would still only be a shade over 5' 2" and likely be accused of smoking or engaging in some other kind of growth-stunting activity.

In any case, 0.6% growth is laughably sad. It doesn't even register, so if we're not in a recession, we're at best going nowhere fast.

Dow 12,820.13 -11.81; NASDAQ 2,412.80 -13.30; S&P 500 1,385.59 -5.35; NYSE Composite 9,299.60 +13.69

One other point of emphasis. The Dow (at one time I nearly disregarded it as a solid measure of American industrial and financial strength; today, I believe it is one of the best overall gauges) had gained 1,260 points from the March 10 low to today's intraday high just over 13,000 and it immediately backed off. Technical matters aside, every trader worth his or her salt knew that level was simply unsustainable and the market was severely overbought. Profits were taken and more will come off the table in weeks ahead. There is no bottom in place and won't be for at least another 3-5 months.

Advancing issues actually did better than decliners, though not by much, 3198-3046. New lows superseded new highs, 178-114. This has been the norm for every session except four since October 31, 2007, a span of now six full months. If you don't have some real dogs in your portfolio, count yourself among the lucky few.

Oil traders were obviously paying attention to developments outside their particular realm, sending crude down another $2.17, to $114.69, as were metals bettors, with gold losing another $11.70, to $865.10 and silver down 5 cents to $16.59.

With the world fully focused on higher prices, it would pay to keep an eye on global demand for commodities, which has been under pressure of late, along with credit markets, at a standstill since August. Deflation, not inflation, may turn out to be the more dangerous of those evil siblings.

NYSE Volume 4,508,902,000
NASDAQ Volume 2,219,310,000

Plenty of Bad News Ahead of Fed

The markets spent another day running in place as traders await Wednesday afternoon's rate policy announcement. As the Fed is largely expected to cut the federal funds rate another 25 basis points, there doesn't seem to be much to get excited about even after the announcement.

Tuesday was a good day for hand-ringing, with economic news very much on the negative side.

The Conference Board reported their measure of Consumer Confidence hit a 5-year low, falling to 62.3 in April, down from the revised 65.9 in March.

The housing situation in the US continues to deteriorate. Median home prices fell by 12.7% in February, at the same time the number of homes heading towards foreclosure leapt 112% in the first quarter of '08 as compared to the same period in '07, and up 23 percent from the 4th quarter of '07.

Perhaps the only good news was in the price of oil, which fell sharply on - believe it or not - supply and demand concerns. It seems as though the high prices at the pump are finally coming home to roost. People are changing their driving and buying habits, albeit slowly, and word is spreading that there's actually an oversupply of oil available.

It's inevitable that such a hyperventilated market as is oil would have to bust sooner than later. Here's hoping the price of crude is under $75 this time next year.

All of this did little to buoy the fears of collected investors. Stocks were off, though marginally, and seem to have stalled at key resistance levels. With the earnings season winding down, it's back to the grind of daily economic reports detailing a widening, deepening recession, such as was suggested by Warren Buffett on Monday.

Dow 12,831.94 -39.81; NASDAQ 2,426.10 +1.70; S&P 500 1,390.94 -5.43; NYSE Composite 9,285.91 -63.70

Of companies reporting on Tuesday, Corning (GLW), Visa (V), Mastercard (MA) and British Petroleum (BP) all topped estimates handily, while Deutsche Bank (DB) and US Steel (X) slipped below expectations. Merck (MRK) fell sharply when the US Food and Drug Administration rejected Cordaptive, a cholesterol-lowering drug.

Amid thin trading, declining issues outperformed advancers by 3663-2539. Once more, there were more new lows (170) than new highs (82), an ongoing trend. In fact, the gap between the new highs and new lows continues to widen, indicating the possibility that the market is ready to do an about face after six weeks of gains regardless of what the Fed decides on Wednesday. When all is said and done, the market may just move on its own weight back into the mid-March levels.

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As mentioned above, oil fell markedly, off $3.12, to $115.63. The metals also felt some pain, as gold fell $18.70 to $876.80 and silver lost 48 cents to $16.64. More evidence of a widespread deflationary spiral developing if worldwide growth sputters.

Two of the three main events for the week begin tomorrow, with the Fed rate announcement tomorrow afternoon and conclude on Friday after the Labor Dept. releases Non-farm payroll data for March. Maybe most importantly, the Commerce Department issues a preliminary reading on GDP for the first quarter prior to the market's open tomorrow, a key reading at what may turn out to be a critical moment. Following the 4th quarter reading of 0.6% growth, expectations are for anywhere from 0.4-0.7% growth, though much of that may be attributed to higher food and energy prices. In real terms, a reading under 0.5% may indicate that real growth has stalled and recession has already arrived, as some economists are already saying.

NYSE Volume 3,753,163,250
NASDAQ Volume 1,763,981,000

All the World Awaits the Fed

The Fed dance has begun once again. Stocks traded in an impossibly narrow range on Monday (80 points on the Dow, 8 points on the S&P) as investors sat back in anticipation of the Federal Open Market Committee (FOMC) of the Federal Reserve to issue a policy statement on interest rates on Wednesday at 2:15 ET in the afternoon.

By most accounts, the Committee will likely cut rates another 25 basis points, from 2.25% to 2%. And then all out problems will be over, ostensibly, until the next meeting, on June 24/25.

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This entire predilection of making investment decisions based upon minuscule, incremental increases or decreases in interest rates has taken on the air of a Samuel Becket staging, absurd and discernible to only the most hypothetical.

Surely, the Fed has impact on the macro side of the equation, but how many of us consider the ramifications of interest rates when ordering dinner at a restaurant, shopping at the mall or filling our automobiles with gas?

Maybe we should, because we'd then see the stupidity and insanity of it all. But, then again, without something as arcane as setting the rate of interest on what banks charge each other to ponder, what would these otherwise unemployable Fed governors have to do?

Maybe we should check official government statistics the next time we clock in for work, pay our taxes, buy a donut. We might, despite our rational and often necessary effort, be contributing to economic doomsday for all we know.

Let's resolve to let the Fed and the government do what they do best - impede progress with rules, regulations, statistics and taxes - and let the markets sort out the rest. If anything has been learned from the past nine months of a grueling credit crunch is that life goes on, stocks go up and down and there's more to the market than interest rates.

That's why whatever the Fed does should be viewed as a feather in the wind. Just like the tax rebates which began reaching individual bank accounts on Monday.

Dow 12,871.75 -20.11; NASDAQ 2,424.40 +1.47; S&P 500 1,396.37 -1.47; NYSE Composite 9,349.61 +5.30

If there's any more proof needed that banks, especially big ones like the Fed, don't really matter in modern markets, one need only look so far as the Mars-Wrigley merger, financed by Warren Buffett's Berkshire-Hathaway. Mars is family-owned, while Wrigley, which is being acquired, is public, as is Berkshire-Hathaway, the world's most expensive stock. No banks and no investment brokers were named nor needed. The deal is the perfect function of free-market economics, thank you very much.

Meanwhile, back on Wall Street, in very thin trade, advancing issues held sway over decliners, 3620-2703. New lows remained slightly ahead of new highs, 159-146.

Oil, after pricing near $120/barrel, settled with a gain of just 23 cents, at $118.75. Gold gained $5.80 to $895.50. Silver added 17 cents to $17.12 the ounce.

Tomorrow will likely look very much like today, though the real action will come not on Wednesday, when the Fed announces their decision, but on Friday, when the Labor Dept. releases the Non-farm payroll report prior to Friday's open.

Until then, buy fresh produce and gas. Both are cheaper now than they will be soon.

NYSE Volume 3,557,361,000
NASDAQ Volume 1,783,155,000

Another Pleasant Valley Friday

All's well on Wall Street... or so it would seem from the euphoric kind of trading we've witnessed in recent weeks. Since March 12 - a span of 32 sessions - the Dow has tacked on 1250 points and is looking for a blow-off top, once it breaks through a double-barrel of resistance at 12,900 and the psychological level at 13,000.

There's little doubt that investors will continue to spend on equities despite cloudy economic circumstances, determined, as they are, to prove that the economy isn't as bad as the endless stream of headlines and economic reports seem to suggest.

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On the bright side, higher energy and food prices, stagnant labor costs (non-rising wages), a dead housing market and soaring raw material costs seem not to have fazed the titan of Wall Street one whit. Earnings continue to come out from corporate America in good fashion, with more than 2/3rds of the companies reporting having met or exceeded expectations.

That those expectations have been lowered for some doesn't matter either, as long as companies remain profitable. By and large, most companies are surviving quite well. The average middle-and-lower-class American, however, is spending every last weaker dollar on groceries and gas, and little else, though the stories of real suffering have been few and far between. We're getting along, or, as the erudite John Maudlin might say, muddling through.

Dow 12,891.86 +42.91; NASDAQ 2,422.93 -5.99; S&P 500 1,397.84 +9.02; NYSE Composite 9,344.31 +94.09

The University of Michigan reported on Friday that consumer sentiment has fallen to its lowest level in more than two decades with a reading of 62.6, just a touch lower than last month's 63.2.

Advancing issues overcame decliners on the last day of the week, 3693-2489, but new lows maintained their edge over new highs, 164-127. For all the gains over the past six weeks, there are still some real dogs out there and they are still getting beaten down.

The coming week should prove fascinating and provide the impetus for the blow off top for which this market so sorely is wishing. On Wednesday, the FOMC will likely cut the federal funds rate another 1/4 point, keeping traders and Keynesians happy, but by Friday, the Labor Department will once again spoil the party with its Non-farm payroll report and the unemployment rate, expected to remain at 5.1% or maybe tick up to 5.2%, still historically low.

Oil perked up another $2.46 to $118.52. This just a day after Wall Street was cheering a temporary pullback in price. Temporary was true. It lasted less than one day. Gold gained just 30 cents, closing at 889.70, while silver added 19 cents to $16.96.

High prices don't matter. The world is adjusting to the global economy. Besides, President Bush assures us that tax rebate checks (Isn't the government lovely, giving back our own money? Bread and circuses, people.) will be in the mail on Monday.

Truth of the matter is that the world is awash in currency. Most central banks have added to their money supplies by 10% or more in the last year. While credit may not be so easy on the surface, the reality is that the best way to garner additional funding is to be large and claim near-insolvency, a la Bear Stearns, Citigroup, home mortgage defaulters, Freddie Mac, Fannie Mae, et. al.

The government (uh, huh, taxpayer dollars financed by more debt) will bail out anyone. There's no pain, no risk, no responsibility. It's a wonderful, faultless fiat system. Look for a blow-off top on Wednesday, followed by a retracement following Friday's Labor Dept. report.

NYSE Volume 3,831,665,000
NASDAQ Volume 1,988,770,250

Stocks Gain on Uneven News

Foreclosures are up 57%. In March, new home sales fell to their lowest levels in 16 1/2 years. Durable goods orders were off 0.3% in March. Stocks were up, though the gains were not spread equally across the indices. While the Dow, NASDAQ and S&P were up healthy percentages, the NYSE Composite, the broadest of the indices, was up a mere 0.14%.

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The main drivers for the hefty gains on the Dow came from sizable gains in five stocks - American International Group (AIG), Merck (MRK), Citigroup (C), JP Morgan Chase (JPM) and General Motors (GM) - all up by more 3.5% or more. Much of the rise was attributed to a stronger dollar and also to incidental news from rivals. Such was the case with GM, which benefited from Ford (F) posting a profit of $100 million for the quarter ended March 31.

The financials - JPM and Citigroup - were boosted on a combination of bottom-fishing, short covering and an odd sensation that the worst of the mortgage and credit crisis is behind these firms. The betting is for improved earnings in the financial sector, though there have been no definitive statements from the companies themselves.

Dow 12,848.95 +85.73; NASDAQ 2,428.92 +23.71; S&P 500 1,388.82 +8.89; NYSE Composite 9,250.22 +12.93

Advancing issues finished well ahead of decliners, by a 3953-2284 margin. New lows, however, retained their edge over new highs, 217-99. The inescapable fact is that recent rallies have not been all-inclusive, though sufficient enough to push the major indices to levels not seen since January.

The price of crude added to the rally in equities, falling $2.24 to $116.06, a sizable drop, but by no means indicative of anything other than orderly trading. The price could easily be up $2.00 or more in upcoming days. Somehow, investors believe a one-day drop, following an unprecedented rise to new highs, is a positive sign.

Gold dropped again by a large number, losing $19.60 to $889.40 and silver fell 51 cents to $16.77. Most of the movement in the metals and some of the stock gains can be attributed to strength in the dollar, which is generally accepted as overdue good news. Whether it will last is another question, though equity investors seem to have taken the approach lately of cherry-picking their news. While they may ignore the dollar (and they have) while it's going down, new that it's gaining is good. The same logic applies to oil, housing, inflation, the economy, etc.

As far as the charts are concerned, the indices are still rangebound, though they've managed to pull within shouting distance of last Friday's highs. In fact, the Dow's close today was just 0.41 short of the close on the 18th.

NYSE Volume 4,462,621,500
NASDAQ Volume 2,351,706,000

Earnings OK, But Troubles Persist

As traders make their ways through the morass of earnings reports now crowding the markets, the general trend is that companies, for the most part, are beating or equaling estimates, with about 30% failing to make the grade.

With each passing day, more and more companies are releasing earnings, and by Friday, we'll have pretty much reached the midpoint of earnings season.

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There were some prominent companies reporting on Tuesday, with Yahoo (YHOO), Yum Brands (YUM) and Boeing (BA) exceeding estimates, while Ambac (ABK), the monoline insurer of municipal bonds and much of the subprime debt shocked traders with an enormous $5.42 per share loss on $1.7 billion in write-downs, while analysts were seeking a loss of only $1.51 per share.

Shares of the troubled bond insurer traded 42% lower on the news, down 2.57 to 3.46 per share. Ambac had traded as high as 96.10 just last summer but has lost nearly all of its value due to the overwhelming number of defaults and writedowns in mortgage-backed securities and the general overhang from the credit crunch.

With one eye on Ambac and the faltering credit structure and the other on relatively strong reports from mainline stocks, investors were vexed over which direction they should turn, thus, the somewhat uninspired trade on the session.

Dow 12,763.22 +42.99; NASDAQ 2,405.21 +28.27; S&P 500 1,379.93 +3.99; NYSE Composite 9,237.29 +9.32

Declining issues edged out advancers once again, 3499-2765. New lows took the prize from new highs, 264-90.

Trading was led by some big name companies on heavy volume while many smaller stocks - especially on the NASDAQ - were selling off. Since the massive gains this past Friday the markets have been unable to confirm the highs and have since wallowed in a range, seeking direction.

It's difficult to grasp market movements, especially at the height of an earnings season, but this market continues to exhibit signs of weakness rather than strength, but only marginally. Sideways would be the most likely direction for the near term, though a major event or spate of either positive or negative earnings could turn the tide in one direction or the other.

The market's indecision actually may be a boon for traders looking to lock in or get out of positions as we're in a somewhat stable environment for the time being. Of course, that's likely not to last long.

Oil made another new high on the day, gaining 23 cents to $118.30. Gold was slashed $16.20 to $909.00, while silver also lost ground, off 55 cents to $17.28.

There is a good deal of gyration in all markets presently, though the overall movement is a bit like riding around in circles. If anything, the equity and commodity markets are both overbought and a correction to the downside may be in the cards.

NYSE Volume 4,017,958,250
NASDAQ Volume 2,145,000,000

Stocks Give Back On Oil, Outlooks

With a slew of companies reporting earnings on Tuesday, investors took a look at some of the more recognizable names, noted last week's outsize gains as well as another record high for oil and took the cautionary route, selling throughout the session.

The big movers were Texas Instruments, which reported solid earnings gains, but issued guidance that was skeptical about the near term. Airline stocks took another beating as UAL Corp., the operator of United Airlines (UAUA 13.55, -7.88) reported a quarterly loss of $4.45 per share, which was worse than the loss analysts were expecting.

Dow 12,720.23 -104.79; NASDAQ 2,376.94 -31.10; S&P 500 1,375.94 -12.23; NYSE Composite 9,227.97 -84.32

The earnings news was far from all bad. While most companies were in line with expectations or close, Dow components McDonald's (MCD 58.35, -0.32) and DuPont (DD 50.16, -2.09) bested their earnings estimates yet still faced selling pressure.

Internals showed the real story, with declining issues dealing defeat to gainers by a wide margin, 4605-1666. New lows took back the lead from new highs, 269-151.

As noted above, oil made another new top at $119.50, gaining $1.89 on the day. Oil futures are completely out of control and would be subject to a significant fall-off were it not for the inelasticity of the commodity. The inescapable need for oil and gas by business and consumers alike are making conditions for reasonable, sustainable prices impossible.

Likewise, the futures are being led by a devious group of speculators intent on driving prices as far as they can. It should be noted that the speculation in oil fuels rampant profits for the big suppliers who are not buying on spot markets. Their gains will continue to be enormous until some regulation of the futures markets rein in the runaway speculation.

Another part of the equation is the weakening dollar, but it alone cannot account for the spectacular rise in oil prices. As mentioned in yesterday's post (an a good number of posts over the past 12 months), the higher prices of oil and gas are economy killers and they're doing a bang-up job at the present time.

Gold priced higher by $7.60, to $925.20 and silver rose 35 cents to $17.71.

Overall, the markets seem to be distracted daily by the price of oil even in the face of consistently good earnings reports. Unless and until oil finds a top, the markets will find it difficult to post further gains.

NYSE Volume 3,893,264,250
NASDAQ Volume 1,991,252,375

Oil and Gas Killing Economy

Regardless of the causes, the recent spike in the prices of crude oil and gasoline are killing the US and other economies. Middle and lower class consumers are the hardest hit and also the least likely to continue spending on other goods and services, since the cost of transportation has risen more than 35% over the past year and has also caused the price of another basic element of life - food - to skyrocket in the past 3 months.

Higher energy prices overall are great for oil and utility companies, but they come at the expense of curtailed retail spending in nearly all other areas and also contribute to a vicious price spiral since almost all goods are transported. Similarly, most services have energy expenses they cannot absorb, and these are passed along to the consumer in the guide of higher prices.

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The entire world is feeling the pain from the seemingly unending rise in the price of basic fuel, and with gas nationwide at $3.50 per gallon in the US, average people and businesses are having a hard time keeping pace, much less enjoying the fruits of their labors.

Thus far, the stock markets and big business have been able to maintain profitability in the face of spiraling fuel costs, but a significant pullback by consumers will damage (and already have) some segments of the business community. It's difficult to cut back on fuel expenses for most individuals, so in this case, the Exxons and Chevrons of the world win, at the expense of everything else.

Dow 12,825.02 -24.34; NASDAQ 2,408.04 +5.07 (0.21%) S&P 500 1,388.17 -2.16; NYSE Composite 9,312.29 +2.05

The major indices finished mixed, with the Dow and S&P lower, while the NASDAQ and NYSE Composite posted marginal gains. Actually, all of the indices were lower for the better part of the day, but regained much of what they lost thanks to a late-day surge.

After all was said and done, declining issues outpaced advancers, 3521-2749. New highs outdid new lows for the second straight session, though only marginally, 183-177. All indications are that the market is searching for direction in the aftermath of 4-5% gains last week.

Oil closed at a new record of $117.48, up 79 cents on the day. Gold gained $2.40 to $917.60, while silver lost 46 cents to close at $17.36.

Companies reporting earnings were mostly in line with expectations, though Bank of America (BAC) experienced a 77% decline in earnings for the first quarter on a year-over-year basis.

Bank of America's shares dropped 95 cents, to $37.61.

NYSE Volume 3,379,862,250
NASDAQ Volume 1,636,458,250

Resistance Is Futile

...and also nonexistent. With solid corporate earnings in hand, investors broke through the Dow Jones' 12,700-12,750 resistance right at the open, gapping nearly higher than the previous close. Within 5 minutes, the Dow was soaring past 12,800 and into the voided area between, 12,800 and 13,500.

If corporate earnings continue as strong as they've been - and there's no reason to suggest they shouldn't - stocks should continue their march higher. The Dow and other indices have exploded through two separate resistance levels in the past week with no real end in sight.

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Rather than facing the desperation of an extended recession, Wall Street may be right that one of the features of globalization is a real disconnect between corporations and the US economy. While those at the very bottom are struggling to find jobs, pay rising utility, fuel and food costs, corporations have gleefully passed those costs on to the consumer without missing a beat.

While there are a couple of sectors that have been harder hit than the general market - financials, home builders, retailers and some discretionary goods and services (notably alcoholic beverages and gambling) - the rest of the market seems poised to get past this period and move to higher ground.

Dow 12,849.36 +228.87; NASDAQ 2,402.97 +61.14; S&P 500 1,390.33 +24.77; NYSE Composite 9,310.24 Up 136.43

The open questions are whether the US (and to a larger extent, the world) economy can cope with higher prices for just about everything without some substantive changes. Gas at $3.00 - and soon $3.50 - a gallon, food costs spiraling out of control and credit strains have put Americans to the test, but they've neither stopped driving nor eating. Defaults on everything from mortgages to credit cards are dramatically higher, however, so the costs of everyday life cannot be sustained much longer, especially if jobs become scarce, which they haven't, yet.

With all the distortions caused by the subprime mortgage implosion and the related global credit crunch, it's difficult to predict direction over the long term, but for the past month, that direction has largely been straight up. There doesn't seem to be much more ground to gain before the markets become severely overbought and correct themselves through profit-taking.

Having the profit on trades in mind (and noting that today was an options expiration day) a cooling off period could come shortly, though we've just barely touched down into earnings season.

Of companies reporting better-than-expected first quarter results, Google (GOOG), Honeywell (HON) and Caterpillar (CAT) and Schlumberger (SLB) were notable standouts. Citigroup (C) posted a 1.02 per share loss and wrote down another $12 billion in bad loans, but was boosted by investors with a 4.5% gain. Other banks and financial services were also ridden higher. They really do take care of their own.

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For the week, the major indices posted their best gains of they year, up anywhere from 4 to 5%. On the day, advancers outnumbered decliners, 4764-1552, and new highs finally supplanted new lows, 216-152.

Of course, the oil barons couldn't resist the euphoria and closed at another all-time high of $117.00, up $1.83. The metals, however, were decimated, with gold down $27.70 to $915.20 and silver off 49 cents to $17.82.

Earnings will be a huge factor to next week's trading, and if the companies reporting come through with reports as robust as this week's early batch, the rally could be monumental. Shorts and puts players should keep abreast of developments and especially note how their individual positions compare to the general market.

I'm still not convinced that the economy won't eventually drag stocks down, but the corporate results appear to have overcome the worst-case scenarios.

NYSE Volume 4,193,403,000
NASDAQ Volume 2,221,355,750

No Follow-Through on Rally

Chartists will understand that most of the trade after 2:30 (the last 100 points on the Dow) on Wednesday was options-related and short covering, thus, follow-through needed some form of impetus. After the close on Wednesday, IBM released first quarter earnings data ahead of expectations, which looked as though it could be that fuel for a second leg of the massive Wednesday rally.

By Thursday morning, IBMs results were already old news.

Prior to the markets' opening, investors digested two bits of news. Initial claims for unemployment insurance shot up to 372,000. Merrill Lynch (MER) lost money for the third consecutive quarter, losing $2.14 billion, or $2.19 per share in the first quarter of 2008.

Rally over.

By the end of the day, stocks ended mixed, but mostly down.

Dow 12,620.49 +1.22; NASDAQ 2,341.83 -8.28; S&P 500 1,365.56 +0.85; NYSE Composite 9,173.81 -29.95

Declining issues took back the initiative from gainers, though by a slim margin, 3453-2782. New highs once more approached, but did not surpass, new lows. There were 189 new lows to 174 new highs.

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After gyrating around the flat-line all day, stocks spent most of the day going nowhere, though after-hours, Google announced higher 1st quarter earnings, providing a possible boost for techs on Friday.

Another major setback was Pfizer (PFE) posting earnings for the quarter of 0.61 cents, five cents below analyst estimates. Overall, earnings are coming in mostly mixed, though hardly terrible. Most of the damage seems to be in financials, retailers and companies with a dominant US-only presence. More globally-based operations are posting better earnings than expected, or are in-line with expectations.

On the commodities front, where everything from corn to used tires seems to be going up in price, the majors took a little bit off the top. Oil was off 7 cents, closing at $114.86, a number that is sending shock waves throughout the world economic community and forcing prices for automotive fuel (gas, diesel), home heating oil and any oil-related products higher.

Gold lost $5.40 to $942.90, while silver fell two cents to $18.31.

Volume was muted, as has been the case for most of the past 45 days. The possible explanations are that investors are sitting back, awaiting more data, though more likely is that hedge funds have been shut down or have substantially slowed the velocity of trade.

The latter explanation is preferable, if only to stem some of the volatility that was evident from last August through this January. Overall, markets seemed to have settled down somewhat, with the mortgage morass under some kind of management - though likely insufficient - and consumers dealing with higher food and fuel prices in whatever ways they can.

What's troubling is how this scenario eventually ends. Prospects of eventually surpassing the all-time highs from 2007 are dim, though the major indices are still only 8-12% off their highs. With the residential housing market still falling and credit markets still close to seizure status, from where is future investment to come?

NYSE Volume 3,682,688,500
NASDAQ Volume 1,838,124,125

It's All About Earnings

Wall Street shrugged aside more defeating economic news and focused instead on upbeat earnings reports from a number of key companies on Wednesday, boosting stocks on a day-long buying binge.

Results from JP Morgan (JPM), Intel (INTC) and Coca-Cola (KO) all beat analyst expectations handily as the bulk of quarterly earnings reports begin to flow from corporations to Wall Street.

Dow 12,619.27 +256.80; NASDAQ 2,350.11 +64.07; S&P 500 1,364.71 +30.28; NYSE Composite 9,203.76 +225.57

The rally was widespread, with 4976 advancing issues to just 1335 losers. The more startling development may be the shift in positions for new highs and lows. On the day, there were 197 new highs and 201 new lows, a very narrow, and generally insignificant, margin.

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What this may indicate is that Wednesday's rally could be the start of a broad move to higher ground, though there still is overhead resistance in the 12,700-12,750 area on the Dow. On the other hand, there is a voided area between 12,700 and 13,700, which could find itself occupied soon if the rally continues.

What will make the entire market move forward are improved earnings, like those seen today. While the price of oil continues to skyrocket, firms seem to be taking the unusual economic conditions in stride, largely unaffected by either slack US consumer demand or unbearably tight credit conditions.

Light, sweet crude oil gained $1.14, to another new record of $114.93 a barrel on the Nymex. In keeping with the tone of the day, gold added another $16.30 to close at $948.30, while silver gained 48 cents to $18.33.

The disconnect between the US economy and the stock market bears some inspection. How American companies can continue turning in solid profits in the face of a stagnant or slowing economy is just one of the implications of globalization. Many stocks listed on the major exchanges are global in scope and benefit from a weakened dollar in foreign markets, so it should not surprise anyone that these companies retain their competitive edge.

Companies that are more nationalistic, such as retailers, are seeing a harder time overall.

NYSE Volume 4,260,363,000
NASDAQ Volume 2,148,321,000

Bad News Spreads but Market Remains in Denial

There was enough discouraging news spreading around Wall Street for even the most intrepid investors to take note, but the major indices shrugged off soaring food and energy prices, more ugly housing statistics and uneven earnings reports to close marginally higher on Tuesday.

According to the monthly Producer Price Index (PPI) issued by the Labor Dept., wholesale prices rose by 1.1% in March and are up a stunning 6.9% over the past 12 months.

Also in March, there were 234,685 foreclosure filings against US homeowners, a 57% increase over last year. Nevada, California and Florida were the hardest hit states in the survey released by Realty-Trac, Inc.

Dow 12,362.47 +60.41; NASDAQ 2,286.04 +10.22; S&P 500 1,334.43 +6.11; NYSE Composite 8,978.19 +55.35

In earnings news, broker Charles Schwab, Inc. (SCHW) reported income from continuing operations rose to $305 million, or 26 cents per share, from $236 million, or 19 cents per share, a year earlier.

Johnson & Johnson (JNJ) bested estimates with $1.26 per share reported for the 1st quarter, though those numbers were tempered by slowing sales in several categories and the overall numbers boosted by the weak US dollar.

U.S. Bancorp (USB) saw a 4 percent drop in its first-quarter earnings while drug maker Forest Labs (FRX) posted improved earnings, but investors punished shares on a disappointing forecast for the remainder of 2008, sending the stock down 9%, losing 3.67 to 36.13.

Advancing issues edged decliners, 3431-2627. There were 277 new lows to just 96 new highs.

The price of oil added to the gloomy overhang, reaching a new high of $113.79, up $2.03. Gold gained $3.30 to $932.00. Silver was up 6 cents to $17.85.

Intel (INTC), Washington Mutual (WM), Coca-Cola (KO), JP Morgan Chase (JPM) and Wells Fargo (WFC) highlight the companies releasing earnings on Wednesday. The March CPI reading will also hit the markets prior to the open, and considering today's PPI numbers, they're likely to send another shock.

How long the markets can continue to ignore the steady flow of bad news is anyone's guess, but, considering the low volume of trading the past couple of weeks, the guessing game may soon be at an end as investors protect whatever profits they have left by selling.

NYSE Volume 3,540,240,250
NASDAQ Volume 1,843,419,375

Quiet Day Keeps Stocks in Range

Stocks zigged and zagged in a tight range on Monday (85 points in all on the Dow), but eventually ended the day on an unpleasant note as investors line up for earnings reports from major companies.

The most salient news was from Wachovia (WB), the latest victim in the ongoing banking/finance/credit crisis, posting a first quarter loss of $393 million or 20 cents per share. The nation's 4th largest banking outfit announced a cut to its dividend from 64 cents to 37.5 cents and is actively pursuing a $7 billion cash infusion through the sale of common and preferred stock, a highly dilutive - and desperate - plan.

Shares of Wachovia were hammered, losing more than 8% on the day.

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Overall, the news was pretty ugly, though largely expected, thus, the market's tepid reaction. Oddly enough, while the US equity market barely budged from the break-even line, indices around the world were roiled even before the Wachovia news, though especially the far-Eastern markets. The Nikkei and Hang Seng both lost more than 3%. European markets sustained losses of roughly 1% overall, while the US markets were essentially flat.

Whatever there is to the correlation between world markets, it seems that the US generally fares better, even though it is the bearer of most of the bad news. How far risk has been spread comes into play, as does the relative strength/weakness of currencies and economies. The confounding issue is that with all the weakness in the US economy, stocks still have not responded in a cascade of losses. Maybe the upcoming spate of earnings reports is about to change that dynamic.

Dow 12,302.06 -23.36; NASDAQ 2,275.82 -14.42; S&P 500 1,328.32 -4.51; NYSE Composite 8,922.84 -13.27

Stock sellers didn't miss any opportunities on Monday. Losing issues outnumbered gainers, 3827-2396. New lows ramped up to 277, to just 84 new highs. That gap continues to expand, signaling another downturn dead ahead for the major indices and stocks in general.

Crude oil gained $1.62 to $111.76. Gold advanced $1.70 to $928.79; silver added 10 cents to $17.79.

The lull in the markets is surely a temporary phenomenon as investors await all-important earnings reports. But, more shocks to the system like that which Wachovia delivered today will not be taken lightly much longer. We're close to a turning point and unless some major companies defied the markets and sentiment in the first quarter, life on Wall Street is going to get a heck of a lot cheaper very soon.

NYSE Volume 3,565,027,000
NASDAQ Volume 1,640,094,875

GE, Consumer Sentiment Savage Stocks

The forecast for Friday was fair, but it turned gloomy as General Electric reported 1st quarter earnings well below analyst estimates and the University of Michigan Consumer Sentiment Survey recorded its lowest reading in 26 years, plunging to 63.2 after checking in at 69.5 in March.

Investors did what anyone would rightly expect, they sold as fast and as much as they could. Shortly after the 10:00 release of the Michigan survey, the Dow was off more than 175 points. It never got much better than that as the Dow recorded its first loss of more than 200 points (a common occurrence in January) since March 18, a span of 17 sessions.

Dow 12,325.42 -256.56; NASDAQ 2,290.24 -61.46; S&P 500 1,332.83 -27.72; NYSE Composite 8,936.11 -160.75

The double dosage of damming economic news was exactly what the market needed to shed its overbought position, leaving the Dow less than 600 points from it's near-term closing low from March 10. With new lows being put in place just about every two months, the markets are in a condition of flux and should remain so unless quarterly reports begin to come in worse than expected. Even if that's the case, a few headline stocks meeting or exceeding expectations will surely fuel big rallies.

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The market in equities continues to be highly volatile, which is a trader's dream or nightmare, depending on how well one reads the tea leaves in the news, economic reports and earnings releases.

As expected declining issues trounced advancers, 4893-1334, or nearly 3-1. New lows expanded their edge over new highs, 201-56. This particular indicator is pointed intensely towards the negative, flashing a bright neon sell sign which should not be missed. After relinquishing the lead to new highs for two days this week, the new lows are beginning to expand once again.

Oil barely moved, gaining only 3 cents to close the week at $110.14. Gold lost $4.80 to $927.00. Silver continues to take larger losses, relative to cousin gold, dropping 35 cents to $17.69 the ounce.

For the week, all of the major indices were lower by roughly 2%. The bear remains in a growling, angry, ravenous mood and with earnings due in force next week, the grizzly one may whet his appetite aplenty.

NYSE Volume 3,693,357,500
NASDAQ Volume 1,918,384,125

Faux Rally Sputters in Final Hour

Veteran market watchers can say they've seen this before, and they probably have, but there is little reasonable explanation for today's rally other than short covering. Seldom, if ever, is there a pre-earnings rally, as investors usually wait until companies actually release their earnings reports, not before them.

Equally unusual are stocks gaining on prospects of lower earnings expectations, especially after the company releases a pre-earnings warning. Various retailers released dismal same-store sales figures for March on Thursday, the worst, by some accounts, in 13 years. The actual figures were somewhat sobering:

• Dillard's Inc. -10%


• J.C. Penney Co. -12.3%


• Kohl's Corp. -15.5%


• Nordstrom Inc. -9.1%

But, amazingly, all of these stocks were up on the day!

• Dillard's (DDS) 21.14 +0.64


• J.C. Penny (JCP) 40.07 +1.15


• Kohl's (KSS) 43.72 +1.32


• Nordstrom (JWN) 34.39 +1.10

If anyone reading this has a plausible explanation for the phenomenon, please post a comment below. Surely, the brightest of the bright (CNBC analysts and Jim Cramer, in that order) will attest that the results were widely expected and already baked into the share prices. The result: massive short covering on a "buy the rumor, sell the news" upside-down trade.

OK, we've got it now, except that Dow Jones News has reported that the retailers blamed an early Easter and unusually cold conditions in the Northeast for the widespread sales declines.

Well, there are two good explanations. My very own perspective, upon witnessing this particular variety of bizarro-world trading, is to issue sell recommendations on those four companies and the one mentioned below, Boeing.

Some companies announce that they are encountering production delays in an anticipated big product. Such was the case yesterday with Boeing (BA), which gained nearly 5% after announcing that production of the 787 Dreamliner aircraft would not be finished on time, though, and we always love these statements, earnings would be unaffected Uh huh, sure, yeah, right. Boeing came back down to earth a bit today, dropping an entire 17 cents. Not to worry, the aerospace king will drift out of orbit and close below 70 in the not-so-distant future.

As for the general markets, with the retailing news in hand at 9:30 am, opened higher, lost ground and then climbed to the best heights of the session by 11:00 am. Drifting between 12,600 and 12,650 for the better part of the day, the day-traders which now overpopulate Wall Street had finally played enough and began to take profits. The Dow, which was up more than 120 points, fell back to show a gain of just 20 points with about 20 minutes left in the session. Those 20 minutes were spent as they usually are, adjusting the numbers to make them look better than they should.

Dow 12,581.98 +54.72; NASDAQ 2,351.70 +29.58; S&P 500 1,360.55 +6.06; NYSE Composite 9,096.86 +22.04

All told, the rally was built with borrowed money (nothing new there), exaggerated by short-covering and decimated by profit-taking near the close. Wall Street continues to play this game, holding the indices at unsustainable levels. Since the massive run-up of April 1, stocks are down, but barely. The Dow, for instance, is off 72 points from the April 1 close. They've absorbed day after day of discouraging words, and while the Street is no home on the range, the skies are anything but not cloudy all day.

Once actual earnings being to flow, one would expect stocks to take somewhat of a beating, unless, of course, we'll be forced to stomach the various vacuous analysis of "cold weather", "already baked in" and other such explanatory nonsense.

These markets are cooked, fried, flambed and roasted to a crisp. It's a waiting game, and there's plenty to be lost or gained. The general consensus by the major holders - mutual funds, brokerages and institutions - is that it's better to hold on than make any panicky moves. So it goes.

Internally, the markets look less than robust. Advancing issues regained a clear lead over decliners, 3793-2410. New lows overwhelmed new highs, 174-75, and my point is that if you're not making new highs, you'll test those lows eventually, and the majority of stocks are in that lower-end range, approaching their bottoms or just off them. Another bout of profit-taking or fear will send the new lows up over 500 within the next 10 trading days.

Corporate earnings are not going to be healthy. The economy continues to flounder, but the fascist news media continues to ignore most of the salient facts about the credit crunch and its implications. If banks aren't lending money, the economy is going to rot.

Oil actually trended a little lower, but not by any significant amount. Crude fell 76 cents to $110.11. Gold's short-term rally stalled, losing $5.70, to $931.80. Silver dropped 16 cents to $18.04.

The retail sales figures came in as ugly as expected and went, with the market closing higher. Eventually, all of the data gets evaluated and stocks respond with reasonable valuations. Today's traders are not interested in actual, true valuation, just how much they can squirrel away in a given day.

NYSE Volume 3,642,058,750
NASDAQ Volume 2,206,656,750

What Are They Thinking: Mark Hulbert & Richard Russell Call Bull

Generally speaking I have great respect for Richard Russell, author of the Dow Theory Letters and a little less respect for analyst and financial newsletter critic Mark Hulbert. Both are probably right more than they are wrong, but I'm wondering what they're thinking after reading Hulbert's recent commentary on MarketWatch in which he spells out Russell's case that despite the recent downturn from August of last year to the present, we are still in a primary bull market.

Let's not forget that Russell called the turn from Primary Bull to Bear back in 2007, judging by the various slips and falls of the Dow from August through December, and he certainly looked correct when stocks slumped badly in January.

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But, in his most recent note, he repudiates that call and says that stocks have been in a primary bull market since the early '80s and that this recent pullback and the dotcom fade of 2000-2002 were "important corrections."

Hulbert, who apparently keeps a bull as a pet, seems to agree with him, though he's shady on the subject, which is why I have less respect for him - he seldom takes positions.

Of course, Russell's been wrong before, and he could be now, but betting against a recovery and new record highs on the Dow and other indices between now and 2010 smacks of good, old-fashioned American optimism. I side more with the Elliott Wave theorists, who keep reminding us of 17-year cycles. If we take the early 80s as the starting point of the bullish cycle, 17 years gets us to roughly 2000, the date of the dotcom implosion, and would put us presently near the middle of a bearish cycle.

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Evidence points in that direction, as even the gains from March 2003 to August 2007 can be viewed as merely an upturned pennant movement when measured in Euros rather than US Dollars. In other words, the Bear remained in place all through the last four years of bullishness.

The dueling theories are enough to make one want to give up trading altogether and take on some action at the race track. It's over quickly and the returns (and losses) are immediate and large.

Richard Russell and my respect for him aside, I still believe he was right on his initial call last November when he said a primary bear market had presented itself. The transports confirmed the fact and the January selloff bolstered the opinion. Recent movement suggests we're in a bit of a fix and resolution will not be quick nor complete.

Stocks remain at relatively high values, the dollar at the opposite, and gold's rise gives credence to the bear case. My own primary indicators tell me that the markets are about to roll over again, and, despite late-day tape-painting by the usual suspects (the Fed, PPT, Goldman Sachs, et. al.), they are rolling over to the negative, today marking the second consecutive down day for all four major indices.

Dow 12,527.26 -49.18; NASDAQ 2,322.12 -26.64; S&P 500 1,354.49 -11.05; NYSE Composite 9,074.82 -75.81

Declining issues took the prize over gainers by a much wider margin than the headline numbers indicate, 4497-1709, and the new highs-new lows indicator has rolled right over, as predicted, after just two days of more new highs than lows. On Wednesday, the new lows came out on top, 140-101. Volume was the best it has been in a week.

The Dow was hard hit on the day. Only 9 of the 30 components registered gains.

Two particular stocks grabbed attention on the day. Boeing (BA) announced further delays in the production of their 787 Dreamliner, though the company said it would not negatively affect 2008 earnings. Investors apparently threw caution to the wind, boosting the stock nearly 5%, up 3.58 to 78.60 at the close. A shorting opportunity if I ever saw one.

United Parcel Service (UPS), the world's largest shipping company, took a 3.74% hit after trimming its first quarter outlook, citing higher fuel costs and slack demand as the major culprits. Shares lost 2.74 to close at 70.57 on nearly triple the average volume.

Oil rose to a new all-time high of $112.20 before pulling back a bit, closing at $110.87, up $2.37. The metals continued their strong rebound, with gold up $20.00 to $938.00 and silver adding 48 cents to close at $18.20. Volatility, it appears, is not confined to just stocks. Prices are jumping around in commodities, bonds, and currencies as well. Nobody seems to have a grip on any market currently.

Once again, we're looking at tomorrow's same-store sales figures for insight into the plight of the consumer. The numbers should be telling and a couple of retailers could warn, possibly one highlighted in my Fearless Stocks and Options Advisory Newsletter.

NYSE Volume 3,475,696,500
NASDAQ Volume 1,922,355,500

Dull and Duller

The markets spent another day rolling over and hitting the snooze button in advance of the deluge of 1st quarter earnings reports due out beginning next week.

Adding to the market's slumbering condition is the general observation that it's currently overbought and hovering near recent highs though news flows continue to accentuate the negative.

Dow 12,576.44 -35.99; NASDAQ -16.07; S&P 500 1,365.54 -7.00; NYSE Composite 9,150.63 -4.09

Today's trading was somewhat of a turn, however, as all the major indices ended in the red for the first time since last Tuesday's general punch up. Declining issues held sway for a change over advancers, 3604-2613, and new lows regained the advantage over new highs, 112-75.

As noted here earlier this week, it was expected that new highs would not long outstrip new lows, and today the results point toward further deterioration. Any upward momentum is being met with massive resistance at various levels, and capitulation could occur at any moment, depending upon the severity of the news cycle. With earnings reports on the horizon, investors are showing extreme trepidation.

Alcoa (AA) officially kicked off earnings season, checking in with a quarter of .44 per share, four cents below expectations. The stock was left unpunished, losing only 0.26 to 37.18. More selling is likely as the week progresses and investors decide that there is no safe sector, not even in the relative stability of materials.

Thursday is likely the day of reckoning for the markets as retailers report March same-store sales. Until then, the paucity of news or economic reports is keeping traders on the sidelines and out of harm's way.

NYSE Volume 3,606,652,000
NASDAQ Volume 1,681,638,750

Consumer Credit Reading Stalls Market

Wall Street was giddy this morning after hearing the Washington Mutual, another beleaguered big-name bank, was about to receive a fresh $5 billion in equity funding from outside investors. The greed patrol on the street absolutely loves fresh cash. They seethe over it like wolves drooling over the blood of an exquisite kill.

With that, the Dow was quickly in the green and up by over 100 points before 1:00, taking the rest of the indices along for the ride. Hitting a wall of resistance in the 12,700-12,750 range, the markets cooled in the afternoon and really took a hit around 3:00 when news crossed the wires that February consumer credit fell to $5.2 billion from a prior reading of $10.3 billion. Expert economists expected a reading of $6.0 billion.

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Not only was consumer credit off dramatically, it was lower than even the more bearish forecasts, giving more credence to the argument that tight credit conditions are spilling over from banking and big business, all the way down to the basic consumer level. Banks aren't loaning money and consumers are loathe to borrow. Caught in the middle are businesses which need financing in order to expand, launch new products, and, in the worst of cases, meet payroll.

That last item - borrowing to meet payroll demands - is going to become a major worry over the next few months should the general credit conditions persist. Companies short on cash are going to be hard-pressed to find funding sufficient to meet current obligations. It's barely on the radar now, but watch for small firms laying off employees and some even shutting down, citing lack of capital or access to it as the main cause for failure.

In other business news, Yahoo head Jerry Yang and Microsoft CEO Steve Balmer spent the weekend tossing barbs back and forth about Microsoft's $31/share buyout offer. Yang insists he's open to negotiation, but at a higher price. Balmer believes Yahoo's value continues to deteriorate and says that if their original offer isn't met within three weeks, the company will embark upon a hostile takeover which would last months and could wreck Yahoo whether successful or not.

The general thinking among investors is that Yang is holding out against the odds, calling Balmer's bluff, and seeking somewhere in the range of $38-40 per share. Wishful thinking on Yang's part, likely, as Balmer and Microsoft have a cash hoard that's the envy of the world and with it could swallow Yahoo whole.

Time seems to be running out on Yang and Yahoo's Board of Directors along with Balmer's patience. A hostile bid would sink the stock into the low 20s and possibly lower. Yahoo ended the day down 66 cents at 27.70.

Dow 12,612.43 +3.01; NASDAQ 2,364.83 -6.15; S&P 500 1,372.54 +2.14; NYSE Composite 9,184.72 +27.19

Getting back to macroeconomic issues, volume on the major exchanges was dull for the third straight session due to a number of factors. First, the market has been witness to a remarkable gain of late and is technically overbought. Second and third, there are few economic reports on which to trade and corporate earnings are just around the corner. Investors are taking a wait-and-see approach as first quarter results dribble out this week and then explode over the next two.

Gainers showed a slight edge over losers on the day, with 3306 stocks advancing and 2986 losing value. New highs bettered new lows for the second straight session, 138-95, a two-day trend that's not likely to last through the week.

Oil gained again, adding $2.86 to close at $109.09. (Keep driving, Americans!) The metals seem to have caught lightning in a bottle again, as gold rose $13.60 to $926.80 and silver pushed ahead 37 cents to $18.12 the ounce.

It's been a very sluggish time over the past three sessions and a pervasive sense of foreboding is enveloping parts of the street. While few still doubt that the US is headed for recession if not already in one, investors are still wary of capital and credit markets which have completely seized up over the past six months.

With home equity largely tapped out, consumers turning to credit cards to meet general obligations is not a healthy sign. Slowing demand will kill corporate profits and stop the wheels of industry (what's left of them in the USA) from turning altogether.

The economy is still in a vulnerable position and signs of recovery remain an illusion. Sooner or later, investors will begin tapping out and the great deluge of selling which began last August and gained tempo in January will resume, resulting in a large thud as traders' jaws hit the floor simultaneously. Forewarned is forearmed.


NYSE Volume 3,700,481,750
NASDAQ Volume 1,778,706,250

Stocks in Limbo

With the release of the monthly non-farms payroll report for March on Friday morning, investors were struck with yet another sign of a failing US economy as US employers handed out 80,000 pink slips during the month.

It was the third consecutive monthly decline in the US labor force and solidifies the argument that the economy is already in a recession, the worst aspects of which have yet to be felt.

In response, stocks fell out of the gate, but recovered, and by midday were sporting a healthy gain. Late in the day, however, a reality check sent the Dow back below the break even line, though the other indices managed to carve out modest gains.

Dow 12,609.42 -16.61; NASDAQ 2,370.98 +7.68; S&P 500 1,370.40 +1.09; NYSE Composite 9,157.53 +16.89

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There was more evidence of a change in direction as advancers held a slim edge over declining issues, 3312-2862. And for the first time since early December, new highs edged new lows, 127-89. That is a significant change, but it's not likely to last. The last time there were more new highs than lows, it was for only two days before the markets beat a hasty retreat.

Considering the depth of the banking and housing crises and the unmistakable signs of recession, stocks have barely budged and are floating on rarefied air with unrealistic valuations.

Those seeking a quick turn-around for the US economy are in for a surprise. These job losses are spreading and are likely the tip of an unemployment iceberg that's about to bust a big hole in the titanic US revenue machine. The economy is stagnant at best and the solutions by the government are sorely lacking in scope and vision.

Oil priced another $2.40 higher, to close at $106.23, while gold tacked on $3.60 to $913.20 and silver added 28 cents to $17.76.

Wall Street and most investors are in serious denial. The market is sure to hand them some sad news shortly. Tax time looms, always a down period for the markets.

NYSE Volume 3,703,311,250
NASDAQ Volume 1,981,811,875

Stocks Poised for a Fall

The follow-up to Tuesday's massive rally has been less than impressive. For the past two days, stocks have wallowed around the flatline in anticipation of Friday's March non-farm payrolls report.

That report is due out prior to the opening of the markets and analysts are not very encouraged following Thursday's reading on initial jobless claims for the week ended March 29, which jumped to 407,000 from 369,000, and was the largest number of claims in 2 1/2 years.

Forecasts are for a loss of between anywhere from 50,000 to 70,000 jobs in the domestic workforce, and that comes on the heels of three consecutive months of similarly poor results. With the economy shedding jobs in such an expedient manner, the levitation act that the Fed has orchestrated on Wall Street is unlikely to last.

Dow 12,626.03 +20.20; NASDAQ 2,363.30 +1.90; S&P 500 1,369.31 +1.78; NYSE Composite 9,140.64 +36.18

Advancing issues edged decliners, 3348-2875, but new lows beat out new highs once again by a narrow margin, 119-85.

Oil backed off 98 cents to $103.85 per barrel, while gold gained $9.40 to $909.60. Silver tagged along, rising 30 cents to $17.48 per ounce.

There's plenty on the minds of investors right now and some of it will be revealed tomorrow at 8:30 am. The news is unlikely to be positive, but the market's response will be vitally important going forward into 1st quarter earnings season.

Bernanke Spoils the Party

After Tuesday's enormous gains on Wall Street, trading became a bit more realistic on Wednesday, especially after Fed Chairman Ben Bernanke's testimony to a Joint Economic Committee of congress, in which he cautioned about the economy falling into recession and boldly stated that the deal to save Bear Stearns from default was not a "bailout."

Parsing his words carefully, Bernanke said the deal to essentially liquidate the assets of Bear in a forced sale to J.P. Morgan was engineered to ensure the "integrity and viability of the American financial system..."

It sure sounded like a bailout to most of the congressional members and looked like one to even the most casual observer on the street.

Investors took a look at yesterday's prices and took a little bit of a pause, not only because of the Fed Chairman's words, but with March labor figures out on Friday and corporate earnings for the first quarter coming soon, many felt more like watching rather than participating as the indices delivered a split decision.

Dow 12,605.83 -48.53; NASDAQ 2,361.40 -1.35; S&P 500 1,367.53 -2.65; NYSE Composite 9,104.46 +15.97

Volume was moderate, and stocks were generally split, with advancing issues garnering a narrow win over decliners, 3525-2690, though new lows finished ahead of new highs, 117-105.

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Also spooking the markets was another spike in the price of oil, which had been moderating over the past week. Crude was higher by $3.85, to close at $104.83. Gold also regained some of its recent losses, adding $12.40 to close at $900.20. Silver, also beaten down in recent days, gained 29 cents to $17.18.

All the street talk seems to be of the "we've hit the bottom" variety, which is really off the mark. There's been no bottoming, and the banking sector still has billions of dollars worth of bad paper to yet discard. The condition of the real estate market is still deteriorating and we've yet to see unemployment figures in line with general economic conditions.

The "powers that be" game plan continues to pitch the "all clear" signal and will likely attempt to do so until the November elections. It's a tough act, and there's more than just a little skepticism about the overall health of the US economy. Chances are that stocks will have to shed more value before all of the excesses of the past 10 years are fully flushed out of the system.

Consumers continue to be tapped out and higher fuel and food prices are certainly not helping matters. While the weak dollar abroad is helpful to the multi-nationals, business conditions in the USA continue to deteriorate at a moderate pace and the credit markets remain virtually frozen, with no respite on the horizon.

NYSE Volume 4,320,442,000
NASDAQ Volume 2,060,430,875

April's Fools Rush In, Stocks Scream

Today's running of the bulls could better be described as a "running of the fools" as investors plowed money into beaten down stocks in hopes of a dramatic turnaround from a dismal first quarter.

While stocks put on a fantastic show, the outsized gains are likely to be short-lived. There's little doubt that the economy is tanking, the market's a verified bear, and banks are still taking massive writedowns from bad loans, the latest casualties being foreign banks. Swiss-based UBS reported that it would take a $19 billion writedown, and Deutsche Bank of Germany anticipated a smaller, but still significant, writedown of $3.9 billion.

The general understanding on the street is that the banks are nearing a bottom and it's time to buy back in. Oh, how wrong can these fools be? If that were so, the current and continuing credit and banking crisis would qualify as one of the greatest and shortest-lived hoaxes of all time. Stocks are not even down 15% from their August highs, yet all we've heard from the Fed and economists is that this is one of the most troubling periods since the Great Depression.

Dow 12,654.36 +391.47; NASDAQ 2,362.75 +83.65; S&P 500 1,370.18 +47.48; NYSE Composite 9,088.49 +291.20

One would have to assume that Wall Street's euphoria is a bit premature. The bear market is barely 8 months old, while most last 18-32 months, and government figures have not officially confirmed that the economy is in a recession. While 4th quarter GDP checked in with a gain of 0.6%, GDP would have to be negative for two consecutive quarters to meet the classic definition of a recession. We're not there yet.

For chartists, today's move was nightmarish, though the bear case can still be made by virtue of a major voided area between 12,500 and 13,500 on the Dow. That area could be occupied without disturbing the primary trend, though a move beyond 12,750 is still in doubt, today's massive upside rise notwithstanding.

As expected, gainers outnumbered losers by a wide margin, 5020-1264. New lows retained their edge over new highs, though not by much, 120-78.

Commodities were whacked again. Oil slid 68 cents to $100.98, the lowest price in three weeks. Gold tumbled a frightening $33.70, to $887.90. Silver lost another 42 cents to $16.89. Two weeks ago it was over $20 per ounce.

The trouble with the metals, especially gold, is beginning to attract undue attention as it is sending some troubling signs of an overt deflationary trend as the full blown seizure in credit markets has banks and investors scrambling for cash.

Today's rally was a fool's rush. Primary trends remain unchanged and dire. In a week or a month, these gains will be nothing but memories of better days.

NYSE Volume 4,809,849,500
NASDAQ Volume 2,176,482,750

First Quarter Not Good for Stocks

The markets wound their way through the final day of the first quarter on Monday, trying in vain to freshen up an otherwise pig-ugly three months.

For the record, the Dow lost just over 1000 points, the NASDAQ shed 372 points and the S&P dropped 146. Overall, it was not as bad as the worst levels of the quarter, which in general were another 2-3% lower than the March 31 close.

Dow 12,262.89 +46.49: NASDAQ 2,279.10 +17.92; S&P 500 1,322.70 +7.48; NYSE Composite 8,797.29 +35.17

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The indices actually finished higher for the day, mostly in a rejiggering of portfolios and in somewhat of a tepid response to the government's call to overhaul federal regulatory structures. The plan, largely promoted by Treasury Secretary Henry Paulson, calls for more oversight by the Federal Reserve, in the belief that they can somehow cure banks and other financial institutions from acting badly or stupidly or irresponsibly.

We would love to believe that the great and magnificent Federal Reserve Bank can also end poverty, cure cancer and rid people of the shame of psoriasis.

It's a sham, and, thankfully, the congress isn't about to enact sweeping regulatory reform this year, or next, at least.

Stocks mostly meandered in slightly positive territory most of the day, and the internals were similarly dull. Advancing issues outdid decliners, 3806-2453. New lows beat new highs for yet another session, 193-51.

What is remarkable is the abysmally low number of stocks making new highs. Even in the worst of times - like now - there are usually more than just a paltry few dozen every day. Economic conditions are abnormally severe with no real change on the horizon.

Commodities took it on the chin today, with oil down $4.04 to $101.58, gold off an even $15.00 to $921.50 and silver lower by 63 cents at $17.31.

While it may not be exactly the best time to be buying the metals, such a move could prove prudent, if only for the long term value. The temporary setback for gold and silver is not likely to last long, though long-term asset deflation is a looming problem that nobody really wants to notice or discuss.

The markets will adjust as needs. A crucial quarter for the US economy is about to get underway.

NYSE Volume 4,192,029,750
NASDAQ Volume 1,828,315,875