Friday, May 30, 2008

Stocks Finish Week Mostly Higher

The Dow flirted with the flat line all day and finally succumbed to selling pressure in the final half hour of the session to post its first loss - though marginal - in the past four days. All other major indices finished the week on a positive note, though gains were well-confined..

Volume was pedestrian, as it had been all week, giving rise to concerns that the markets once again are poised to fall.

Dow 12,638.32 -7.90; NASDAQ 2,522.66 +14.34; S&P 500 1,400.38 +2.12; NYSE Composite 9,401.08 +29.21

Advancing issues finished ahead of decliners once more, 3425-2850. There were more new lows than new highs (155-145). As has been the case all week, the indicators gave few clues to market direction, and with little impetus from economic news or government data, the markets continue to drift.

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As this week was mostly the result of a small snap-back rally following last week's 600+ point decline (Dow Jones Industrials), the see-saw should shift back to the bears in the first week of June.

Oil rebounded slightly, gaining 73 cents to settle at $127.35. Precious metals also recovered from yesterday's bloodbath, with gold gaining $9.80 to $891.50 and silver up 35 cents to $16.87. Both are well off their recent highs.

As noted above, volume is telling. Friday's volume was in line with the limited trade of the entire week.

NYSE Volume 1,327,792,000
NASDAQ Volume 2,135,954,000

Thursday, May 29, 2008

Three In a Row for US Stocks

Investors received a rare double dose of good news today as the government announced a revision of first quarter GDP - from +0.6% to +0.9% - and oil prices skidded on supply-demand issues and the report of a wide=ranging investigation by the Commodity Futures Trading Commission.

While the Energy Department explained that the drop in oil supply was due merely to delays in unloading tankers in the Gulf of Mexico, the CFTC revealed that an investigation into trading practices had been underway since December. The Commission also announced some initiatives which would make commodity trading more transparent.

All of that contributed to a better-than $4 decline in the price of light, sweet crude on the NY Merc. It was the largest one-day drop in more than a month.

Responding to the positive news, Wall Street extended its rally into a third straight day, though once again, gains were not impressive.

Dow 12,646.22 +52.19; NASDAQ 2,508.32 +21.62; S&P 500 1,398.26 +7.42; NYSE Composite 9,371.87 +7.53

Advancing issues overwhelmed decliners for the third straight session, 3791-2414, though new lows narrowly edged new highs, 159-157.

As mentioned above, oil slipped $4.41 to $126.62. The metals were decimated, owing to new-found stability in the dollar. Gold lost $23.30, to $881.70, while silver fell 90 cents to $16.52.

Even with the good news, trading was still rather light, probably a semi-permanent feature now that warmer weather has found its way to the Northeast.

Despite the three straight days of rising prices, the Dow has only regained 166 points of the more than 500 it lost in the previous week and is dangerously close to a key resistance level at 12,700.

While the ebullience could easily spill over into tomorrow's session, it's by no means certain that this current rally has any legs whatsoever. Expect more drifting and dodging over the near term, until there is a final washout, which could occur any time between next week and the first part of July.

NYSE Volume 1,229,452,000
NASDAQ Volume 1,948,316,000

Wednesday, May 28, 2008

Stocks Drift, End Higher

The trading today was akin to watching paint dry. All of the indices traded in a narrow range, hovering above and below the flat line. Volume, as it has the last three days, remained on the low side.

Dow 12,594.03 +45.68; NASDAQ 2,486.70 +5.46; S&P 500 1,390.84 +5.49; NYSE Composite 9,364.34 +50.32

The advances of the past two days are highly illusory. In the absence of any concrete economic news, traders are forced into a condition of buying despite their best instincts. It's really a herd mentality at work. Once the market is up for a while, investors get the idea that everything is OK and it's safe to buy stocks.

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And they're buying up anything that has been beaten down over the past 9 months, which is just about everything. Stocks are still risky, despite what any analyst or market wonk may tell you, me, their neighbors or friends. The government continues to sound the "all clear" horns, though behind the scenes, inflation, foreclosures, tight credit and the employment condition have them scared to death.

So, the indices will gain smallish amounts for days, but then, just like last week, there will be a sudden realization that the market stinks and the US economic ship is still sinking. Low volume tells us that the smart money is still sitting on the deck, sipping mai tais, waiting for the eventual storm to capsize the whole ship, crew and all. The correction in stocks may not be swift, but slow and deadly, but one thing is certain, it will be deep, just like the recession the government seeks to avoid/obfuscate/ignore.

On the day, advancers beat decliners, 3481-2811. New lows continue to hold sway over new highs, 196-112. The highs-lows metric continues to suggest lower days ahead, in the near term.

Oil rebounded again, gaining $2.18 to $131.03. Gold dipped, losing $7.80, to $905.00. Silver also lost ground, declining 5 cents to $17.42.

With two days past and two to go in the short week, expect a little bit of turnaround on either Thursday or Friday. Of course, whatever happens will not be extraordinary, unless some outside force is felt on Wall Street, or unless the smart money goes completely to the sidelines, which would likely result in a 3-400 point drop on the Dow.

The more probable condition is the slow-drip torture method we've witnessed over the past months. A few days up, then down. Rinse, repeat. Lose.

NYSE Volume 1,205,546,000
NASDAQ Volume 1,862,700,000

Tuesday, May 27, 2008

Week Begins with Low-level Markup

There was nothing startling about today's market gains. One can read absolutely nothing into the low volume rally following a three-day weekend except that it is unlikely to last through tomorrow's midday trading.

In fact, today's trade was more evidence of the PPT (Plunge Protection Team a/k/a the President's Working Group on Financial Markets) remaining active in the markets as the upward trajectory was largely the result of two separate, abrupt 50-point moves on the Dow - both between 12,500 and 12,550 - which occurred at 10:00 am and again at 2:30 pm.

The sad part of the manipulation plan for the markets is that both moves failed to create or sustain momentum.

Following the 10:00 am move, the Dow backed off 100 points by noon. The 2:30 pump resulted in the highs of the day an hour later, though by the close, the 12,550 target was not realized.

Dow 12,548.35 +68.72; NASDAQ 2,481.24 +36.57; S&P 500 1,385.35 +9.42; NYSE Composite 9,314.02 -1.76

News was largely inconsequential, as the Conference Board reported that their Consumer Confidence Index dropped to 57.2, from a revised 62.8 in April, it's lowest level since 1992.

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And while new home sales increased 3.3% in April, home prices fell by 14.1% in the first quarter of 2008.

Oil fell on the NY Mercantile Exchange, losing $3.34 on new concerns over - get this - demand - to 128.85. This is not unexpected and it would be no surprise if oil prices stabilized over the summer and subsequently fell in autumn, just in time for energy prices not to be an issue in the November elections.

Since Republicans have been so accommodating to Big Oil, a concerted trading and talking effort will coordinate to keep gas prices below $4.00 in the fall of 2008, and likely under $3.50. Republicans don't want to give Democrats an issue, and this is surely one over which they have control. It's a scandal, a sham and a shame. If a new administration is brought to bear in November, investigations should begin early in 2009.

The average price of a gallon of gas hit an all-time high of $3.93 over the just-concluded Memorial Day weekend. The price is as artificial as an office-lobby fern and should vacillate between $3.60 and $4.00 for the balance of summer, or, as oil execs and politicians on their payroll are fond of calling it, the peak driving season.

Gold lost $19.20 to $906.60. Silver finished 83 cents lower at $17.47.

Market internals were on opposite axes, as advancing issues outpaced decliners, 3976-2289, but new lows continued to dominate new highs, 182-103.

With little corporate news and a dearth of economic releases this week, expect stocks to vacillate with a slim bias to the upside. Investors are still very much in the dark as to the true strength or weakness of the economy and are desperate for gains. Anyone on the buy side over the next few weeks is likely to find eventual disappointment as the indices will retest March lows at some point in the near term.

NYSE Volume 1,129,459,000
NASDAQ Volume 1,720,927,000

Friday, May 23, 2008

Stocks Finish Week Badly

The only catalyst needed to send stocks into a pre-holiday funk was word that existing home sales fell for the 8th time in the last nine months. Right from the opening bell, investors were selling and getting out of town.

Market lows came early on - prior to noon - and stocks drifted in a negative range all session long. And while the housing news was widely expected, it served as just another reminder that the US economy has a long way to go towards recovery.

e Dow 12,479.63 -145.99; NASDAQ 2,444.67 -19.91; S&P 500 1,375.93 -18.42; NYSE Composite 9,315.78 -117.57

Declining issues outpaced advancers by the widest margin of the week, 4335-1742. New lows opened a huge gap over new highs, 212-65, the widest in weeks.

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Even though volume was very light - typical of a pre-holiday get-away - the hangover effects of a horrible end to the week will certainly spill over into the final week of May and into June, a period normally highlighted by sluggish trade and nitpicking over corporate details.

Many investors find that May-August are best spent on the beach or the vacation home and a rally this summer would certainly be something of a lark.

Crude oil regained $1.38 to close out the week at $132.19, while gold advanced $7.50 to $925.80 and silver edged 27 cents higher to $18.29.

All told, the Dow lost 3.5% for the week with other major indices following suit.

Remember our fallen heroes this weekend. It is because of them that we enjoy our freedoms.

NYSE Volume 1,105,550,000
NASDAQ Volume 1,727,578,000

Thursday, May 22, 2008

Wall St.: Going Nowhere, Slowly

The markets traded in a tight, positive range on Thursday, on extremely low volume characterized by choppiness all session long.

Little more can be said about one of the most lackluster sessions in recent memory.

There was no shocking news on the housing front (wait until tomorrow for that, when Existing Home Sales data is released), few analyst advisories of note, no big Fed speeches or astounding earnings figures.

It was a relief, of sorts, after two consecutive days of deep declines. Investors have to weigh the relative merits of buying into new positions or taking profits as we head into a long and very uncertain summer.

Dow 12,625.62 +24.43; NASDAQ 2,464.58 +16.31; S&P 500 1,394.35 +3.64; NYSE Composite 9,433.35 +36.32

The price of oil on the futures market actually took a breather for a change, dropping $2.36, to $130.81. It's almost as though the schemers in the futures pits realize that the entire world's attention is now focused on them and it was time to take a little froth off the top.

As I've mentioned here previously, oil and energy prices hold the potential for worldwide economic maladies, forcing all manner of inequities in prices for food, especially, and just about any other aspect of human life. Speculation in oil futures has been largely overblown, and, like any orderly market, some kind of correction should be on the horizon.

The oil markets, however, are obviously not orderly. In fact, they are one among the most misunderstood and unregulated of any commodities. There simply are too many sources of data and conflicting readings for anyone to actually have a handle on the true value of a barrel of crude.

Thus, the futures take the path of least resistance, and possibly that of outright manipulation, heading up. Bringing down prices will almost certainly take something approaching an act of God, since there is no hard-and-fast pricing mechanism. Only one thing is certain. We all pay more for heating homes and driving autos.

Advancing issues took a slight edge over decliners, 3476-2548, though new lows once again trumped new highs, 180-91. The recent see-sawing between the new highs-lows and advance-decline metrics continues to suggest more sideways trading with a bearish bent.

It is worth noting that today's spread between the new lows-highs (89) is among the largest in recent vintages.

Gold lost $10.80 to $918.30, while silver dropped just 3 cents to close at $18.03.

With tomorrow the final session before a three-day weekend, another 100+ point loss on the Dow would not be surprising in the least, though another day just like today is probably more likely.

NYSE Volume 1,187,776,000
NASDAQ Volume 1,964,569,000

Wednesday, May 21, 2008

Markets Mashed Again

Taking its cue from yesterday's day-long sell-a-thon, investors took some time Wednesday morning determining the direction of the market. The major indices hugged the flatline or traded slightly negative all morning, but, by 2 PM, the selling had accelerated into another rout of the bulls.

Dow 12,601.19 -227.49; NASDAQ 2,448.27 -43.99; S&P 500 1,390.71 -22.69 NYSE Composite 9,397.03 -138.98

The precipitous drop in stocks coincided with the release of minutes from the Fed's April meeting. The Fed governors apparently were very close to not cutting rates at all (they cut federal funds .25%) and indicated that the economy was very weak, with stresses from the high price of oil, gas and food; credit issues; and continued weakness in the housing market were paramount concerns.

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Once again, oil exploded to another record high price, settling at $133.17, up a dramatic $4.19 in just one day. This also contributed to the selling of stocks, with oil markets reacting to a large, unexpected drop in US crude inventories.

Normally, Fed minutes and oil inventory figures would not prompt such a strong reaction, but, given the market's jittery current composition, sentiment sent stocks to shocking new lows.

Speaking of new lows, there were 216 of them, compared to 204 new highs, somewhat of a surprise considering the breadth and depth of the sell-off. With trading characterized best as "one-sided," decliners outnumbered advancing issues, 4201-1820. These internal figures are still rather modest. More concerted selling and borderline panic would show the gap between new lows and highs much more pronounced, while the decline-advance ratio would be more like 4-1 or 5-1, rather than today's 2-1 ratio.

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With only two sessions remaining before a three-day holiday weekend, it's difficult to see investors staking out significant positions in stocks on Thursday and Friday. More likely, the markets will mark time, squaring up solid positions while dumping weak sisters.

Now that the markets have broken out of their tight 4-week trading range (see yesterday's posting), the stage is set for a retest of the March lows. This could occur rapidly, as sentiment has turned decidedly negative of late, but a gradual drift back to 12,000 seems to be in the cards over the coming two weeks.

The metals continued their sustained rally, with gold advancing $8.40 to $928.60 and silver gaining 33 cents to $18.05.

NYSE Volume 1,389,451,000
NASDAQ Volume 2,192,166,000

Tuesday, May 20, 2008

Stocks in Full Retreat Mode

Stocks continued their 23-session-long see-sawing as indeterminate investors pushed the major indices back down throughout the day on Tuesday.

Using the Dow as a guide, the markets have traded in roughly the same range since April 18. During that span, the blue-chip index has seen a maximum closing low and high of 12,745 and 13,058, a stretch of just over 300 points, or, just a bit more than 3%.

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The sideways trade is frustrating for both longs and shorts. Direction must be determined at some point, and one likely scenario (bearish) is for a full-blown shakeout back to retest the March lows. Bulls will say the market is consolidating at a new level for a burst higher. Either condition could prevail. In the absence of corporate earnings until mid-July, news, economic reports and consensus opinion will determine direction over the near term.

Dow 12,828.68 -199.48; NASDAQ 2,492.26 -23.83; S&P 500 1,413.40 -13.23; NYSE Composite 9,536.01 -66.77

Not unexpectedly, advancing issues took a back seat to a deluge of decliners, 3795-2264. New lows regained the edge over new highs as well, 182-143.

The major catalysts on the day were more bleak news from the financial center, as Oppenheimer analyst Meredith Whitney predicted the credit crisis would continue into 2009. First quarter results from Home Depot (HD, 27.37, -1.50) beat lowered estimates, but still were disappointing. The PPI shot up 0.2%, with core PPI up more than expected, 0.4%. Naturally, the price of oil continued to another record close. The superfecta of bad news just was too much to overcome.

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Oil shot up another $2.26, to close at $128.98. Gold gained $14.40 to $920.20. Silver improved 70 cents to $17.73 per ounce.

Essentially, it was a bad day to hold anything you couldn't touch or feel.

The balance of the week doesn't hold much promise with few economic reports due. Only April existing home sales on Friday at 10:00 am offers a blockbuster number, and that could be very bad, as has been the case since August of last year.

I remain somewhat bearish, though mindful that the market could take off without any kind of impetus. However, we've witnessed a triple top in the 13,020-13,058 range and the market just can't seem to break through that level.

NYSE Volume 1,236,900,000
NASDAQ Volume 2,018,207,000

Monday, May 19, 2008

Reversal of Fortune

The kind of action seen today on the indices is usually reserved for a Turbulent Tuesday or a Turnaround Thursday, but today being Monday, we'll just have to call it an Afternoon About-face.

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When the Conference Board released their Index of Leading Economic Indicators for April, investors bought up stocks based on the second straight monthly gain of 0.1%.

By mid-afternoon, with all the indices up smartly (the Dow hit an intraday high of 13,136.39), the reality of such a smallish gain just hit traders over the head like a bag of hammers and brisk, widespread selling began in earnest, taking the Dow down to nearly break-even and sinking the other indices into the red, especially the NASDAQ, which suffered the worst decline of the day.

Dow 13,028.16 +41.36; NASDAQ 2,516.09 -12.76; S&P 500 1,426.63 +1.28; NYSE Composite 9,602.78 -0.23

Outside of the Conference Board's report, there was little else upon which to hang a rally as stocks lost value late in the day even more quickly than they gained in the AM. Again, the catalyst may have been oil or just sentiment that the market is basically outrunning itself ahead of expectations that sent stocks sliding, but, whatever it was, it certainly looked serious, with the drops coming all of a sudden or in waves of high volume.

Internals were expectedly mixed, with declining issues beating advancers, 3336-2708. New highs continued to lead new lows, 248-154, suggesting that there's more from where this rally has come.

Crude oil closed with a gain of 77 cents to $127.06 -another record. The metals crossed key thresholds as gold advanced $5.90 to $905.80 and silver gained 7 cents to close at $17.03 per ounce.

The market is continuing to send mixed signals, though the bias is beginning to tilt towards the positive. Many in the market remain unconvinced, however, as today's sell-off surely showed.

NYSE Volume 1,149,216,000
NASDAQ Volume 2,263,051,000

Friday, May 16, 2008

Markets Finish Week Mixed

We are still in the midst of very turbulent times. Over the past nine months, since the blowup of the subprime mortgage market, the major indices have lost somewhere in the range of 8-12% of their value. Not bad, considering the difficulties faced by lenders, homeowners, small businesses and municipal governments, which have faced a plethora of unhealthy conditions including tight credit, general inflation, falling home values, high energy prices and not much in the way of assistance or direction from government.

Fed Chairman Ben Bernanke tells us that conditions in credit markets have improved, though that's not much solace for consumers who have had to trade off some stability in the credit markets via lower interest rates for a weaker dollar. The result has been higher prices for basic necessities - food and fuel - though these matters haven't seemed to have any noticeable affect on corporate profits.

Treasury Secretary Henry Paulsen said the economy would rebound in the second half of 2008. We've been hearing that refrain for the last six months, though without a good explanation as to why. (Personally, I have no confidence in Paulsen and consider him somewhat of a hollow suit.) Today, in prepared remarks, Paulsen again repeated that the stimulus checks to American taxpayers, plus breaks for business would produce 500,000 new jobs in the last six months of the year. Wishful thinking, for sure, but remember, he's using very slanted government statistics, so the odds that the figures will ring true by November (election time) are good.

Dow 12,986.80 -5.86; NASDAQ 2,528.85 -4.88; S&P 500 1,425.35 +1.78; NYSE Composite 9,603.01 +49.49

Friday's trade could best be described as subdued, as there were few newsy items upon which to trade. The good news from the construction sector - an 8.2% jump in residential housing - was tempered when the Commerce Department reported most of the gain was due to apartment building, not new single-family homes.

Consumer confidence hit a 28-year low while oil gained $2.17 to close at $126.29, another record high. Gold gained $19.90 to $899.90, while silver moved up 28 cents to $16.96.

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Declining issues edged advancers on Friday, 3010-2859. New highs surged past new lows, 252-162, reversing yesterday's decision, another sign of turbulence or volatility.

While the markets were up this week, they are basically unchanged over the past two. Until there is some upside thrust, direction and bias remains sideways to lower.

NYSE Volume 1,314,786,000
NASDAQ Volume 2,276,973,000

Thursday, May 15, 2008

Stocks Blast Higher on Options, Optimism

With Wednesday's rally truncated late in the day, investors - apparently not content to sit back and wait - sent stocks higher on Thursday in brisk trading. The S&P, NASDAQ and NYSE Composite all were up more than 1% on the day, breaking through key levels while the Dow Jones Industrials struggled just below the key 13,000 mark.

Dow 12,992.66 +94.28; NASDAQ 2,533.73 +37.03; S&P 500 1,423.57 +14.91; NYSE Composite 9,553.52 +116.07

Spurring investors were a recent spate of corporate mergers and maneuvers, including Hewlett Packad's (HPQ) $13.9 billion purchase of Electronic Data Systems (EDS) and General Electric's (GE) decision to sell off its appliance division.

Also helping investors make stock buying decisions were a number of economic reports, including figures from the NY and Philadelphia Fed, which both saw declines in economic activity, though Philly's was not as severe as expected. Still, the Empire State Index unexpectedly fell to -3.23, while the Philadelphia Fed's General Economic Index improved to -15.6, from -24.9 in April. Manufacturing in the region, however, continued a precipitous decline.

New unemployment claims increased only 6,000 for the week, to 371,000. National industrial production slumped 0.7%, and capacity utilization fell a negligible 0.1% to 79.9%.

Somehow, all of this is viewed on Wall Street as good news. Naturally, one has to view today's gains in the context of options expiration, which occurs tomorrow.

Oil moderated again, losing 26 cents, to close at $123.85 per barrel. Gold, +13.50 finished at $880.00, with silver tacking on 7 cents per ounce to $16.69.

Advancing issues outdid decliners, 3960-2033. Somewhat against the grain, new lows recaptured the lead from new highs, 173-169, suggesting that options activity actually had more to do with today's trading than some optimistic sentiment or market fundamentals, as investors may have been bottom fishing on puts and out of money calls about to expire.

Trading volume was solid, though unspectacular. The markets appear to be doing little more than treading water, however, as the major indices are at roughly the same levels as two weeks ago, except the NASDAQ, which has continued to move forward, but is still down roughly 4% on the year.

NYSE Volume 1,194,660,000
NASDAQ Volume 2,242,104,000

Wednesday, May 14, 2008

Rally Fades in Final Hour

Maybe investors got a little ahead of themselves on Wednesday, or the realities of gas at $4.00 per gallon began to take hold, but whatever it was, the powerful day-long rally ended abruptly at 3:00 pm ET.

The major indices hit their highs somewhere between 2 and 3 o'clock, but once the selling started in the final hour, it accelerated on higher volume into the close.

The Dow, which was up more than 160 points, ended with a gain of just 61, but the most unkind cut was on the NASDAQ, as the tech-heavy index closed up only 1 1/2 points after trading 33 points higher earlier in the day.

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Shares of Apple were a major drag on the index, though it alone could not account for the spate of late selling. The NASDAQ crossed the key 2500 threshold early in the day, but could not sustain it, as it had reached that level previously and failed. Likewise, the Dow Jones Industrials peeked at 13,000 and fell back.

Dow 12,898.38 +66.20; NASDAQ 2,496.70 +1.58; S&P 500 1,408.66 +5.62; NYSE Volume 3,946,686,250 NASDAQ Volume 2,084,606,500 NYSE Composite 9,437.45 +26.99

As expected, advancing issues finished ahead of decliners, 3386-2852. New highs posted their second straight day of outdoing new lows, 225-159.

Crude oil ended the session lower by $1.56 to $124.24 Gold also closed down $3.50, to $866.10, silver ended down 21 cents to $16.61 per ounce.

Consumer prices continued to increase, though only by 0.2% in April after the government statisticians "seasonally adjusted" gasoline prices from a gain of 5.6% to a figure of -2.0% in the April CPI. This "adjustment" was widely reported by major financial news providers, and may have had an effect on stock trading later in the day.

After witnessing the suspect first quarter GDP and April non-farms payroll reports, this latest CPI reading is likely to be seen as statistically flawed. Seasonal adjustments aside, the average US consumer is being squeezed by high gas prices and just about everything else that needs to be purchased has an alignment to fuel prices.

Word from the hosing market was equally discouraging. Foreclosures advanced again - up 65% year over year - in April according to RealtyTrac, the leading authority on real estate activity in the USA.

One has to wonder how long the market and its various participants can remain in denial about rising prices and the lower value of home ownership. Between these two forces, the American middle class is being squeezed without mercy while our leadership in Washington is focusing only on the November elections.

Supposedly, Americans are to muddle through somehow through the Summer and Fall before gleefully going to the polls to re-elect the same players in congress and elect a fresh, new president who will magically relieve us from the morass created largely by government mismanagement.

Don't count on it. The mood on the street is growing increasingly annoyed though the pinstripers on Wall Street seem not to notice. Profits are still healthy for most companies, but people are beginning to change their ways, economizing and looking for real change.

NYSE Volume 1,188,539,000
NASDAQ Volume 2,117,316,000

Tuesday, May 13, 2008

Stocks Mostly Down, But Internals Point Positive

While the Dow shaved a little off yesterday's gains, the NASDAQ gained again while the S&P was virtually unchanged.

With the indices hanging in limbo, somewhere short of their recent highs, but far from the lows of January and March, investors are searching once again for direction.

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Some of that came from Fed Chairman Ben Bernanke, who said that recent turmoil in credit and financial markets has subsided of late. However, beyond that and Hewlett-Packard's planned acquisition of EDS for $12.6 billion, there was little in the way of positive news.

First quarter home sales, according to the National Association of Realtors (NAR), fell by the steepest percentage (-7.7%) since such figures began to be recorded... in 1982.

April retail sales fell 0.2% - the second straight monthly decline - though most of the loss was attributed to weakness in auto sales. Of course, the price of crude oil and gas contributed to the distress, with oil hitting another new high on the NY Mercantile Exchange, ending up $1.57 at $125.80. Gas hit another record as well, with the average US price at the pump rising to $3.73 per gallon.

Dow 12,832.18 -44.13; NASDAQ 2,495.12 +6.63; S&P 500 1,403.04 -0.54; NYSE Composite 9,410.46 -7.51

The metals lost ground, with gold off $15.30, to $869.60, while silver shed 40 cents to close at $16.83 per ounce.

Advancing issues squeaked out a win over decliners, 3166-2819. New highs took the lead over new lows, by a surprisingly healthy amount, 200-170. Once again, these indicators are signaling little more than a market in distress about which way to go next. There is some overhead resistance, though it could hardly be called strong. On the downside, there is little support in the indices immediate trading ranges.

NYSE Volume 1,207,764,00
NASDAQ Volume 1,878,101,000

Monday, May 12, 2008

Following Last Week's Losses, Stocks Rise

Last week, the indices took their worst hits in the past two months, so gains, in the absence of any meaningful resistance, were in the cards today on Wall Street.

Despite a profit warning from FedEx (FDX), based on costs related to (what else?) high fuel prices and a major meltdown in earnings reported by bond insurer MBIA (MBI), which reported a first quarter loss of $2.4 billion (-14.03 per share), investors took it upon themselves to get out and buy stocks, based largely on false hopes that the US economy is rebounding and inflation will be tame heading into the summer.

Nothing could be further from the truth. Oil and gas will both continue to march higher without concerted efforts from the US government and/or conservation measures by the average American driver. That's the main catalyst for inflation. Further, some analysts are suggesting that the recession may be just beginning, citing the government's own figures which showed identical 0.6% GDP growth for the 4th quarter of 2007 and the 1st of 2008.

If that's the case, the economy is only now beginning to compress. That scenario, though difficult to believe, may be spot on, meaning that conditions will worsen through the summer and into the fall. Actions by the Fed, including seven consecutive cuts in the federal funds rate and various other machinations designed to keep the economy from imploding, should have had some effect on keeping the GDP in positive territory these past six months, and maybe they did.

However, nothing is going to keep the US economy from falling into recession, though it's hoped that it will be short and shallow rather than long and deep. As it stands, our growth rate is ludicrously low, and changes in budgeting and spending patterns by the biggest spender of all, the federal government, are needed more than ever.

Once again, investors are still in some vague state of denial about the overall need for a strong US economy and the real impact of the subprime debt blow-up.

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Dow 12,876.31 +130.43; NASDAQ 2,488.49 +42.97; S&P 500 1,403.58 +15.30; NYSE Volume 3,326,991,250 NASDAQ Volume 1,731,311,000 NYSE Composite 9,417.97 +90.00

Advancing issues soared ahead of decliners, 4381-1839. New lows, however, were once again ahead of new highs, 167-134.

Oil rose to new highs in early trading, but backed down, to close off $1.90, at $124.10. Gold closed at $884.90, down 90 cents. Silver finished the session at 17.23, a gain of 32 cents.

NYSE Volume 1,050,167,000
NASDAQ Volume 1,758,287,000

Friday, May 9, 2008

Stocks Continue Descent

No reason was really needed, but the high price of oil and disturbing news from two financial titans - AIG and Citigroup - sent investors scurrying out of positions on Friday and seeking safer havens for their money.

As I've been saying here for the past week, stocks were overbought, the markets had reached levels at which a change in direction was warranted and the bull market still is the prevailing sentiment on the street.

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Insurer and Dow component American International Group (AIG) reported a $7.81 billion loss for the first quarter - their second massive quarterly loss in a row - and was beaten down by investors as fears of another round of the continuing credit crunch appeared to spook traders. AIG lost 3.87, to close at 40.28 on nearly four times its usual volume.

Citigroup, another Dow component, announced plans to shed between $400 and $500 billion worth of assets, including mortgages and various real estate holdings, the company describes as "legacy assets."

The story behind the Citigroup move shed some light on just how close to insolvency the financial giant has come in recent months. The stock traded just 67 cents lower, to 23.63, just points above its 52-week and 10-year split-adjusted low of 17.99. The company has been forced to write down billions in worthless loans, scramble to raise cash from sovereign funds, and now reorganize and sell assets.

Dow 12,745.88 -120.90; NASDAQ 2,445.52 -5.72; S&P 500 1,388.28 -9.40; NYSE Composite 9,327.97 -60.57

Despite the size of the losses, advancing issues surrendered grudgingly to decliners, with 3306 stocks losing value and 2838 gaining. New lows beat back new highs, 236-130.

As mentioned, oil's relentless rise continued, adding $2.27, to close the week at another all-time high of $126.97. In just the past week, oil has shot up $10 per barrel. Gold gained $3.70, to $885.80, while silver added a mere 2 cents to $16.89.

For the week, the Dow lost 312 points, or just more than 2%. The other major indices suffered similarly. The week turned out to be the ultimate topping point for markets as earnings season fades to black and news of the financial condition of economies takes center stage.

The US economy in particular is not in a pretty state, though survivable. The tax rebate checks, while hardly a complete solution, will provide enough of a boost to the sputtering economy to avoid a very deep, very long recession. Watch for revisions of key economic data in coming weeks, especially 1st quarter GDP, which may end up showing the economy already in recession. If that's the case, or, rather, as some suggest, that we've been receding since September of '07, a bottom in the markets is dead ahead.

Be kind to mother. Buy some puts for her.

NYSE Volume 3,518,610,250
NASDAQ Volume 1,714,386,000

Thursday, May 8, 2008

No Biggie: Market Up, But Bearish Trend in Place

Thursday, the major indices regained some of the losses incurred on Wednesday, but not nearly enough to reverse the trend begun this final true week of earnings releases.

On Friday of last week, the Dow closed at 13,058.20. Believe it or not, that was the high point close of the year - all of 2008 - for that index. Still it was 206 points below the close on December 31, 2007. The Dow is down roughly 200 points this week and all of the indices are looking... well, dicey.

At the moment, there isn't enough good news to move forward and there's somewhat of a lull in the bad news cycle, so stocks are somewhat stuck in neutral on a bit of a downslope. Thus, it's beginning to roll backwards.

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Chartwise, the bearish turn which began in August of last year, but ultimately defined itself with October and December tops and November, January and March bottoms, is still intact.

Today was really a dead cat bounce off yesterday's collapse. The cat bounced, but not very high, and was quickly devoured by a large, hungry bear. The upside is limited, for now, while the downside appears to be the path of least resistance with plenty of reasonable support points, but nothing solid all the way back to 11,700.

The Dow, S&P, NASDAQ and NYSE Comp. all touched the top of their downside trendlines last week and have pulled back into the channel.

Dow 12,866.78 +52.43; NASDAQ 2,451.24 +12.75; S&P 500 1,397.68 +5.11; NYSE Composite 9,388.54 +49.07

Gainers eked out a minor victory over losing issues, 3428-2730. New lows expanded their advantage over new highs, 219-126. Once again, the new lows - new highs differential is emerging as a leading indicator, suggesting a new wave of selling.

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Oil cooled off just a bit, but not enough to make another record high. Crude closed up 16 cents, at $123.69 per barrel on the NY Mercantile Exchange. The metals gained, with gold up $10.90, to $882.10. Silver was up 18 cents to close at $16.87 per ounce.

Looking ahead to Friday, unless the Dow rallies 200 points, it will close the week lower, breaking a string of 3 straight gaining weeks, and gains in 6 of the last 8. Momentum has clearly swung to the bearish outlook.

NYSE Volume 3,769,296,750
NASDAQ Volume 2,092,502,125

Wednesday, May 7, 2008

Bears Bite Back

Wednesday was quite satisfying for those of the bearish - or, realistic - persuasion. Stocks have begun their summer swoon, as earnings season winds down and investors are forced to make guesses using government-supplied statistics as to the welfare of the general economy.

It's a discouraging time for the perma-bulls, who will buy, buy, buy, no matter the season or the sentiment. The tide truly turned today after seven weeks of a relentless march higher by the indices.

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As noted here a few days ago, the key levels - Dow 13,000, S&P 1400, NASDAQ 2500 and NYSE Comp. 9500 have all been approached and breached to the downside. While retesting the resistance may still occur, it should be noted that the Dow average crossed the 13,000 mark at least 24 times in the past five sessions. By any measure, that area has been tested, retested, probed, dissected, groped, molested and finally worn out.

The indices took one last hard charge to the upside this morning, didn't like what they saw and backed away like scared rodent. With the preponderance of negatives facing the market, a pull-back was not only necessary, but healthy. Investors need to be taking short-term profits, stocks need to be resettled, distributed and a base needs to be formed. If there is a bottom to the so-called "recession market" it will be during this summer. If there is no bottom, it will just continue to go lower until the proper adjustments are made.

Dow 12,814.35 -206.48; NASDAQ 2,438.49 -44.82; S&P 500 1,392.57 -25.69; NYSE Composite 9,339.47 -171.51

The internals tell the real story. Declining issues outpaced advancers, 4494-1757. New lows maintained their edge over new highs, 206-161.

Oil didn't help matters any, hitting another new high of $123.63, up $1.69. The price of a barrel of crude has doubled in just the last 12 months. Interestingly, other commodities did not hitch a ride. Gold slipped $6.50, to $871.20. Silver fell 17 cents, closing at $16.70 the ounce.

With two days remaining in what will be seen as a turning point week for Wall Street, stocks will need to rebound sharply to avoid what looks like the beginning of a long declining trend.

NYSE Volume 4,076,269,750
NASDAQ Volume 2,293,964,000

Tuesday, May 6, 2008

Broad-Based Buying in the Face of High Oil

The markets opened sharply lower Tuesday, then spent the day rallying, finally finishing in positive territory. There was no notable catalyst for the gains, but not much to derail confidence, unless you're one of those ancient thinkers believing that the core of the US economy - the American middle class - is being buffeted by all manner of downdrafts, from high food and fuel prices to tighter credit standards to a tenuous employment situation.

Whatever the US economy does, Wall Street continues to react as if nothing important is occurring. It could be election-year buying, confidence in multi-nationals or just plain old vanilla irrational exuberance. Whatever it is, it kept stocks in positive territory for another day.

Dow 13,020.83 +51.29; NASDAQ 2,483.31 +19.19; S&P 500 1,418.26 +10.77; NYSE Composite 9,510.98 +72.88

The price of oil continued to climb, to another record close of $121.84, up $1.87 on the day. Gold gained $3.60 to 877.70. Silver was higher by 3 cents, to $16.86.

Advancing issues beat back decliners, 3722-2554. There were 177 new lows to 174 new highs.

If it seems as though everybody is waiting for something to give the market direction, it is because everybody is. Either the Yahoo-Microsoft saga must be resolved, the mortgage mess should bring some more news - good or bad - or maybe everyone was watching Cisco (CSCO) and Disney (DIS) to report 1st quarter results after the close.

Cisco came through by beating analyst estimates with returns of 29 cents per share, though lower than last year's 30 cents per share for the comparable period.

Disney reported a 22% gain over the first quarter of 2007, at 58 cents per share.

Reasons to buy, perhaps, but how much?

NYSE Volume 3,844,561,000
NASDAQ Volume 2,097,138,375

Monday, May 5, 2008

Stocks at Important Levels

Sentiment is such a misunderstood factor in markets, but it is now a very large part of the psychology and direction of stocks. On Monday, the Dow quickly dropped below the 13,000 level and stayed there, after an early rise and subsequent fall on Friday.

This, with the other indices moving in in unison is a dead give-away for a significant shift in sentiment from bullish to bearish. It's not difficult to comprehend, as stocks have been on an upswing since March 10, and with earnings reports all but complete for the quarter, there's little on which to hang a resumption of the rally.

The levels important to investors over the near term are: Dow 13,000 (already breached to the downside); S&P 1400 (holding just single digits above); NASDAQ 2500 (failed at 2499 on May 2) and potentially the most overlooked, NYSE Composite 9500 (failed at 9496 on May 2).

Dow 12,969.54 -88.66; NASDAQ 2,464.12 -12.87; S&P 500 1,407.49 -6.41; NYSE Composite 9,438.10 -13.07

Once the S&P drops another 7-12 points, the index superfecta will be complete and investors will begin taking profits in larger quantities. With summer coming, the dominant sentiment will return to negative for four reasons: 1) the market is essentially overbought; 2) high gas and food prices are crimping spending and that is becoming a worldwide phenomenon; 3) the employment situation is, by any standard, deteriorated and possibly worsening; and, 4) housing and credit markets are still in crisis.

The balance of this week will likely determine market direction for the rest of May, June and probably well into July.

As noted, stocks were sent lower just about right out of the gate and stayed in negative territory all session long. Declining issues took command over gainers, 3512-2700. New lows outstripped new highs, 161-116, reversing Friday's decision, which was only the fifth time since October 31, 2007 that there were more new highs registered than new lows.

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After last week's respite, oil continued its relentless ascent, closing at another record, $119.97 per barrel, up $3.65 on the day. Gold caught onto the updraft, gaining $16.10 to $874.10, as did silver, up 37 cents to $16.83.

Tomorrow and Wednesday's should be critical. If the markets cannot move higher, the stage is set for a two-to-three-month low, testing the bottoms made in January and March. If the recession is really already here and the US economy is indeed in a trough, this could mark the bottom. However, there are still critical issues and hurdles to overcome - housing, interest rates, inflation, labor, gas, food, politics - which will all play a role in determining whether the economy can bounce back or continue slumping.

NYSE Volume 3,360,579,250
NASDAQ Volume 2,085,020,750

Friday, May 2, 2008

Why the Markets Lost Friday's Gains

The Commerce Department treated Wall Street to a rare glimpse into the arcane workings of politics and statistics. The Bush administration is hell-bent on preventing a recession and keeping the economic outlook somewhat rosy until November. To that end, it's a near certainty that today's release of April Non-Farm Payroll figures was at worst, manipulated, and at best, simply wrong.

Somehow, US employment was actually shown to be relatively stronger in April than in the previous three months in which more than 240,000 net job losses appeared. The headline number was a loss of only 20,000 jobs in April, but a peek inside the release uncovers some very troubling and difficult-to-rectify numbers.

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First, the report shows that between March and April, the civilian labor force grew by 173,000 and that the number of employed people grew by 362,000. These figures actually produced a drop in unemployment of 0.2%, or 189,000 people.

The report broke out some key areas of gains and losses. There were losses of 61,000 construction jobs, 46,000 manufacturing jobs and 27,000 retail jobs. Gains in health care (37,000), professional and technical services (27,000), and food service (18,000). Taking the gains against the losses (+82,000, -128,000) still leaves us with a net loss of not 20,000 jobs but 46,000.

Noting that small discrepancy, the report delivers two highly dubious statements:
"In April, the number of persons working part time for economic reasons increased by 306,000 to 5.2 million. This level was 849,000 higher than in April 2007. These individuals indicated that they were working part time because their hours had been cut back or because they were unable to find a full-time job. (See table A-5.)

Persons Not in the Labor Force (Household Survey Data)

About 1.4 million persons (not seasonally adjusted) were marginally attached to the labor force in April. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 412,000 discouraged workers in April, about the same as a year earlier. Discouraged workers were not currently looking for work specifically because they believed no jobs were available for them. The other 1.0 million persons classified as marginally attached to the labor force in April cited reasons such as school attendance or family responsibilities."

Well, 306,000 new part-time workers begins to cloud the picture and is hardly believable. And of course, we won't count 1.4 million people "marginally attached" to the labor force in April.

Of these two statements, the addition of 306,000 part-time workers in one month is the most troubling and dubious. In a word, this report was a crock, and anyone who believes these numbers has lost his or her grip on reality.

And that's precisely what happened on Wall Street. The Dow shot up more than 120 points before the analysts began poring over the numbers and coming to their bosses shaking their heads. The numbers simply do not jibe and traders, once wind of the discrepancies hit the street, began unwinding positions, sending the markets back to unchanged and slightly into the negative by early afternoon. Only some spirited tape-painting prevented an all-out rout.

Dow 13,058.20 +48.20; NASDAQ 2,476.99 -3.72; S&P 500 1,413.90 +4.56; NYSE Composite 9,451.17 +56.13

Naturally, most of the civilized world will never take a second glance at the Non-Farms Employment data for April 2008 and simply take the government at its word. Some of us have to be doubters, however, and this writer has no doubt whatsoever that government figures are today more maligned, politicized and unreliable as to be nearly completely useless.

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What the loss of "only" 20,000 jobs in April does is set the stage for job gains in May, June and beyond and more bogus stories about the "recovering" economy. This, of course, will suit the current administration perfectly well, as they will be able to laud praise upon Fed Chairman Bernanke and Treasury Secretary Paulson for wise stewardship in averting recession.

The truth, on the street and in homes across America, will be in stark contrast to these lies, but the media will gobble up the phony story from the government like a pack of hungry guppies because they have just about the same capacity for critical analysis overall.

We're facing a serious dilemma in the country over the next six to eight months. We're not only going to have to elect a new president, but also return or replace hundreds of members of Congress, and do so armed with faulty data, concocted news and outright lies via the government and the media. It's time the American people take back their government or just quit the charade altogether and stop paying taxes, voting and participating in the demise of democracy.

That said, the market data on the day was as mixed as the indices. Advancing issues beat decliners, but it was nearly a deadlock, 3.143-3,035. New highs shot ahead - for only the fifth day in six months time - of new lows, 166-148.

Commodities didn't miss out on the opportunity to tack on gains. Oil rose $3.80, to $116.20. Gold was up $7.10, to $858.00 and silver added 26 cents to $16.47. The gains in basic materials and metals was largely technical, following days of steep declines, though one should assume that oil is poised to price quite a bit higher in coming days.

All told, the bogus labor figures, like the crooked GDP figures earlier in the week, allowed the rally in equities to continue uninterrupted. One might guess that a day of reckoning is coming for all the manipulations, malignancies and mistaken trust. That day may not come until some far off date, sometime in 2009 or beyond, but by then the damage done will have been so severe that fixing it will be neither painless nor quick.

Thursday, May 1, 2008

Massive Gains on Turn-Around Day

After witnessing the huge post-Fed sell-off yesterday and laughing at fooled investors, I found myself on the other side of the aisle today as the indices took off running and hummed to big across-the-board gains on Thursday.

The thrust forward seemed intent on the Dow closing above 13,000, as if to confirm that the worst of the subprime/recession/credit squeeze/inflation debacle is solidly behind us. The Dow made its move, establishing either a double top or just the breakthrough above a significantly emotional trading level.

We'll not know which it is until next week at the earliest. This is either a top or the Dow will proceed to 13,500, which will then be the absolute top, followed by a wicked decline. I don't know which I'd like to see, though I'm about done with the gains of the past six weeks.

Should the Dow push towards 13,500, I will ride the roller-coaster up, and then all the way back down to 12,000 or lower. I'm still not convinced that January-March was the bottom. There are still enough unresolved issues in the economy for the markets to move significantly higher, politics or not.

Meanwhile, I've been putting the finishing touches on my Investment Advisory Newsletter and am splitting hairs between going long and short, though my gut continues to tell me this market is overbought. Earnings will remain the focus through most of next week before economic news and reports should begin to shape the trade.

Dow 13,010.00 +189.87; NASDAQ 2,480.71 +67.91; S&P 500 1,409.34 +23.75; NYSE Composite 9,395.04 +95.44

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Advancing issues whipped decliners, 4347-1925, but new lows retained their long-held advantage over new highs, 164-140. Friday and Monday's trading should determine direction according to the new highs-lows gauge.

With the markets and the dollar showing strength, commodities took it on the chin once again. Oil dipped another 94 cents, closing at $112.52. Gold slipped even further, to a 4-month low, dropping $14.50, to $850.90. Silver shed 39 cents to close at $16.21 per ounce, a 3-month low.

NYSE Volume 4,414,284,000
NASDAQ Volume 2,344,251,000