Monday, June 30, 2008

Stocks Silent on Last Day of Quarter

Last week's major sell-off could have, and likely should have, been forecast by most intelligent financial pundits, however, we could find nary a one. It seems the only formula for success in the financial media is to be forever bullish, in spite of facts, sentiment, charts, history and anecdotal wisdom to the contrary.

After watching the markets dwindle away the hours today, the idea that many investors - and many of them large ones - were getting out from in front of the oncoming rush of second quarter earnings reports, makes perfect sense, so anyone with any interest in the market or money or the future should pay attention to what happens in July.

Unlike Las Vegas, what happens on Wall Street does not stay on Wall Street. Profits and losses have a remarkable way of entering the mainstream in manifest ways. The abundance, or lack of, jobs, credit, affordable housing and stability in prices will be largely a result of the perceptions from the market in July.

While most Americans will be blissfully off on vacations or completely out of the market, the time will be ripe for plucking new investment ideas and direction for future trades.

The second quarter is expected to be one of the worst, cumulatively, in the past five or six years, and may actually be worse than the depths of the last mini-recession in 2000-2001. A fair share of companies will post underperforming quarters and even more will issue negative guidance. We are at the crossroads of inflation and recession, and something's got to give.

While the quarter ended with a whimper today, it should serve as notice that many quarterly reports will turn out to be wimpy in themselves, resulting in even further declines in the indices, on the order of another 15-25%.

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While the world is not about to end and the financial system will not entirely implode, there certainly will be more than enough financial pain to spread around. Everyone from from the wealthy billionaire to the hourly worker is going to feel a pinch, at the least, over the next 12 months. It's a question of how long the pain will persist that's not known, though another year seems to be a reasonable time frame.

That's because, until now, corporate profits have been generally unaffected, so comparisons to the third and fourth quarter of '07 and the 1st quarter of '08 are going to be tough to match this go 'round. There has to be a trough in corporate profits, and we're not quite there yet, though this quarter should be the beginning of a new trend of companies missing estimates.

Dow 11,350.01 +3.50; NASDAQ 2,292.98 -22.65; S&P 500 1,280.00 +1.62: NYSE Composite 8,660.48 +36.97

Despite the split decision on the majors today, the internals told the same sad story. Losers beat gainers, 3940-2926. New lows are nearing a peak, at 894, as compared to just 133 new highs. These numbers continue to indicate general weakness in the markets and until there is a complete flushing out, there's no chance at reversal, except in very short term, oversold conditions.

Actually, there could be a little buying before earnings begin to flow around the 14th of July, so some sideways to slightly higher trade is expected.

Commodities continue to show the inability to sustain rallies. Oil fell off 21 cents today, closing at an even $140.00. That should be close to the absolute top. Gold dipped $3.00 to $928.30, while silver lost 20 cents, closing at $17.51.

There is likely to be some degree of buying activity the rest of the week as funds reposition themselves for the second half of the year. Some of their picks will be good ones, most will be lemons and losers. It's too bad for them that their charters only allow them to buy stocks and not hedge or go short.

They'd be better off.

NYSE Volume 1,609,389,000
NASDAQ Volume 2,101,667,000

Friday, June 27, 2008

Dow Takes Another Tumble

In the aftermath of Thursday's meltdown, traders were likely happy to see the week come to an end. However, instead of a "dead cat bounce" or bottom fishing, which would likely occur in a normally-healthy market, stocks took another hit on Friday. In the absence of a late-day short-covering rally, the damage would have been far more severe.

Dow 11,346.51 -106.91; NASDAQ 2,315.63 -5.74; S&P 500 1,278.38 -4.77; NYSE Composite 8,623.51 -17.23

As it was, though the NASDAQ, S&P and NYSE Composite took only minor losses, the Dow was battered once again, led lower by a variety of consumer and banking stocks, including JP Morgan Chase (JPM, -1.27, 35.05), Home Depot (HD, -0.64, 24.02), Proctor Gamble (PG, -1.76, 60.49) Citigroup (C, -0.42, 17.25) and Coca-Cola (KO, -1.38, 51.84).

In general terms, the pillars of American consumerism are crumbling.

What's disturbing is that prices are at record highs for just about anything and everything, be it edible, reusable, financial or energy-related. The only thing not going higher in price, it seems, is real estate. The good news is that high prices are unsustainable without a solid consumer paying good money.

This is all the likely end of globalization. Wages and prices for Americans had to come down, while those of other less-developed nations had to rise. The final piece of the puzzle is a recession in the United States which drops prices to a level commensurate with already-lowered wages.

And it will happen. It has to. Average working people in America cannot continue to exist without savings, spending every last dollar on just food and energy, living paycheck to paycheck without any hope for the future. A seismic shift in the world economic system is about to take place. Many corporations, many of them standards in the worldwide consumer market, are going to stumble. Some will actually crumble and be pushed out of existence within the next two to five years. Profit will be squeezed for the simple reason that there simply is not as much money around to spend on various goods. Necessities come first. Then there are video games, vacations and the comforts of life.

Declining issues once again led advancers, 3862-2455. New lows soared over new highs, 895-89. There is every indication that the bear market is only now picking up steam and another 15-25% will be shaved from prices over the coming 6-18 months.

The recession, which many are denying out of warped statistical data, is inescapable and now upon us. All that's left to complete the cycle is a full shakeout in equity markets and a decline in commodity prices due to slack demand. Only then will economies and investments make sense.

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While all of this makes perfect economic sense, those trading oil and precious metals are not currently on the same page, but they are due for a very rude awakening as those asset bubbles collapse in coming months.

Crude oil was up another 57 cents to a new record of $140.21 a barrel. Gold tacked on $16.20, to $931.30. Silver gained 49 cents to $17.71. Like everything else that's traded on this planet. These prices have gone up and they will come down.

Volume the past two days was very heavy, reflecting a general exodus out of stocks of all kinds.

All in all, this was probably the best week the market has had in many years. Investors finally are being forced to face reality, and while it is harsh, it does have a certain cleansing effect.

NYSE Volume 2,204,843,000
NASDAQ Volume 3,167,387,000

Thursday, June 26, 2008

Wall Street's Grand Collapse

All of the factors that have been beating down the US economy finally came into full focus on Thursday.

From another huge spike in the price of oil, to continuing credit market woes, all the bad news has finally begun to become expressed in terms of market losses.

The Dow crashed below the closing lows of March (12,750) by a wide margin. The S&P 500 closed just 10 points ahead of the March bottom, while the NASDAQ, despite a gargantuan loss, still is well ahead of the March 10 closing low of 1169.

What's driving down stocks today are all the things that drove them to staggering heights from 2003-2007. Massive government budget deficits and a lopsided foreign trade balance have contributed to a weakened US dollar. Easy credit turned the housing and credit markets on their ears. Political waste and corporate corruption that led the way up are now killing the US equity market.

As I have been saying for many months, and especially since August of last year, the profligate spending of the Bush administration coupled with an all-too-compliant congress have led the United States to the brink of economic catastrophe.

We may have reached a point at which there is no bottom to the market. People rich and poor, pension funds, investment trusts and mutual funds have all been battered and the worst may yet be to come.

Dow 11,453.42 -358.41; NASDAQ 2,321.37 -79.89; S&P 500 1,283.15 -38.82; NYSE Composite 8,640.74 -225.06

No sector was safe from the onslaught of selling. Declining issues outnumbered advancers by nearly a 5-1 margin, 5232-1134. There were 756 new lows to just 63 new highs.

Oil reached another record high of $139.64, up $5.09. Gold shot up $22.80 to $915.10. Silver gained 61 cents to $17.22. Despite the outsize gains, the metals are still well off their 52-week highs.

With earnings season just 2 1/2 weeks ahead, markets will not be able to shore themselves up before exceeding even lower lows.

The US economy is dead on its feet and our leaders in government sit idly in stunned silence. It is indeed time for major changes, and nothing could be better for this country than a complete investigation into all of the abuses of the Bush administration, with impeachment as an ultimate goal.

This is what happens when government runs out of control. First, financial markets are shattered. Next, the social fabric will begin to be shredded.

NYSE Volume 1,535,342,000
NASDAQ Volume 2,278,595,000

Wednesday, June 25, 2008

The Folly of Fed Policy

Today, the Federal Open Market Committee (FOMC) of the Federal Reserve determined to leave federal funds rates without change, at 2%.

If the previous statement sounds like a lot of words to say essentially nothing, then count yourself among the lucky few who have learned not to pay too much attention to the moves, machinations and pronouncements of the Federal Reserve.

Essentially, the Fed took two days this week to decide to do... nothing. It's nice work if you can get it, but some of us who have to endure the anticipation of and reporting upon the 8 scheduled meetings a year wish they would do nothing more often, because nothing is usually what they - in the long run - accomplish.

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Consider today's decision to be the end of a sometimes dramatic cascade of interest rate reductions, which took the federal funds rate from 5.25 to the current 2.00% from September, 2007 through the present in a series of 10 statements, four of which were unscheduled.

Since September, 2007, the stock markets have done nothing more than deteriorate, prices have gone up (oil and gas have doubled in price) and the US economy is in no better shape than 9 months ago. By many accounts, we are worse off, and the value of the US dollar, measured against almost any other currency, has weakened.

So, excuse me for thinking that the Fed is full of nothing more than a lot of hot air.

Still, they have many followers and believers that they can accomplish much, when, in fact, the complexity and nuances of the global economy are far beyond their control.

They really ought to just set a rate and leave it relatively unchanged for long, long periods of time. 5% ought to be about right for what member banks charge other institutions. It shouldn't waver too far from that point, providing stability and security to markets. A policy along those lines would be far more improved and safer than the up-and-down we've come to know and loathe since the Volker years.

Dow 11,811.83 +4.40; NASDAQ 2,401.26 +32.98; S&P 500 1,321.98 +7.69; NYSE Composite 8,865.80 +62.46

Stocks were mostly higher prior to the announcement at 2:15 pm, and lost ground thereafter, which was somewhat expected, considering that the Fed is essentially saying, "We're done cutting rates for now, as that didn't work, so we're going to sit back and wait and watch." Actually, the markets should have exploded upward as the Fed admits powerlessness. It was, after all, pretty good news.

Markets responded in a fairly positive manner overall, or maybe they were just in a technically oversold condition, short term. Advancing issues finally took command over decliners, 4225-2059, while new lows continued to track ahead of new highs, but not by as large a margin, 376-69.

Commodities were lower, with oil down $2.45, at $134.55. Gold fell $9.30, to $882.30, while silver lost 13 cents, at $16.61 the ounce.

The decline in commodities continues unabated, with the notable exception of oil, but even that may have topped out already. A further slowdown in commodities markets may be signs that the recession is real and growing globally.

CNBC analyst Jim Goldman opined today about the Yahoo-Microsoft merger rumors which resurfaced, rather suspiciously, yesterday. Yahoo finished at 22.00 today, but it should be noted, especially by federal investigators and regulators, that it was trading at 20.70 before the latest rumor surfaced. Neither Yahoo nor Microsoft has confirmed that talks are back on, making this episode mighty questionable.

The markets are still highly unstable. The Dow lost 112 points in just the final hour, once all the gyrations following the Fed decision had played out.

NYSE Volume 1,261,685,000
NASDAQ Volume 2,135,660,000

Tuesday, June 24, 2008

The Most Corrupted Markets in History

There are always shenanigans and manipulations involved in any kind of market, be it a food store, commodities exchange or those with which we are most familiar, equities.

The equity markets in the United States have to be some of the most corrupted places on the planet, far worse than those in so-called less-developed nations, mostly because both the regulation and the corruption is done by the very same entity - the government.

Not that the crude oil futures markets aren't any less subject to manipulation and distortion by a consortium of big-money players, but the trading today on the major US indices gives a small window into which we can see the depths and depravity of government-inspired and controlled manipulation.

Tuesday's markets opened with a spate of bad news.

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First a pre-earnings announcement by UPS that the high cost of gas had soured their second quarter expectations, then the Conference Board reported Consumer Confidence hitting another low, down to a June reading of 50.4, from 58.1, in May. It was the fifth-lowest reading ever.

Shortly after the announcement, stocks on the Dow Jones Industrials fell off by more than 100 points.

But, at 10:40, stocks began a miraculous recovery, and, by 11:20, the Dow had reached positive territory, with the other indices tagging along.

This was, without a doubt, the handiwork of the Plunge Protection Team (PPT), a/k/a, the President's Working Group on Financial Markets, by far the most powerful market intermediaries ever invented, blessed with the unbridled power of the presidency, the US Treasury, the Federal Reserve and heads of various other official and regulatory commissions, with its stated sole purpose to provide stability to financial markets.

The function of the PWGOFM is primarily to shore up flagging stock markets, to prevent panic, or, as is usually the case, to solidify the administration's case that the economy is sound - thus, the nickname, Plunge Protection Team.

What made today's activity so obvious was that the PPT swing into action as soon as the Dow reached 11,750, exactly the low point from March's swoon. It was evident that the powers-that-be (in this case the most corrupt politicians on earth) could not stomach a decline below that level, for that would have indeed confirmed the bear market with all its attendant consequences. Bouncing off it, as it did so obediently, makes the case for a re-test of the lows and a confirmation that we are "out of the woods," when, in fact, investors are totally lost in them.

Stocks have been heading lower for weeks and the sudden turn-about at precisely the closing low which every chartist worth his/her salt is watching, smacks of outright fraud at the highest levels of government.

As it is, even the powerful Plunge Protection Team, backed with monies from the Federal Reserve, cannot prevent the eventual bottoming out of US financial markets. They can only delay the process somewhat, in hopes that their fraud candidate - the flip-flopping John McCain - can make some phony case that all is well in America.

What a total and complete scam!

Dow 11,807.43 -34.93; NASDAQ 2,368.28 -17.46; S&P 500 1,314.29 -3.71; NYSE Composite 8,803.34 -38.55

Despite the best efforts of the PPT, stocks still took it on the chin again, though not quite as badly as they should have. That will come another day, as sure as the sun rises in the East.

Along the same lines, a series of unconfirmed reports from anonymous sources sent shares of Yahoo back up, after hitting multi-month lows. The so-called "rumors" that the company is back in talks with Microsoft, turned a 3/4-point loss into a more than 1/2-point gain. It was nothing more than continued manipulation by people with big money to lose or gain, notably "wildcat investor" Carl Icahn, who is heavily invested in Yahoo and faces a potential no-win situation without Microsoft.

On the day, declining issues held sway over advancers, 4412-1863, and new lows once again finished ahead of new highs, 768-90, a trend dating back to October 31, 2007. Since then, there have been more new highs than new lows on only a handful (less than 8) of days.

Crude oil for August delivery finished 26 cents higher, at $137.00. Gold was up $4.40, to $891.60 and silver declined 16 cents to $16.74. Once more, signs that the commodities boom is over are being telegraphed by the sluggish trade in precious metals.

Additionally, congress moved today to regulate oil futures trading more stringently than ever before, a move that many say could lead to prices of less than $89 per barrel and gas at $2.00 to $2.50 per gallon. Wishful thinking, indeed, but also well-timed, politically.

Tomorrow, the Fed issues a policy statement at 2:15. investors will collectively hold their breath in anticipation of the Fed leaving the federal funds rate unchanged at 2%.

How horribly stupid, and how easily fooled, investors are!

NYSE Volume 1,328,610,000
NASDAQ Volume 2,191,484,000

Monday, June 23, 2008

Sleepy Trade Ahead of Fed Meeting

Equity markets hugged the flatline for the better part of the trading day as investors awaited word on the direction of interest rates from the Federal Reserve.

Due to make a policy statement on Wednesday, the FOMC of the Federal Reserve is widely expected to leave rates unchanged after a series of cuts which began last August and have dropped the key federal funds rate to a multi-year low of 2%.

However, even the absolute lack of any economic news didn't help the indices from taking a negative turn during the last hour of the session, but recovering in the final ten minutes, thanks to some creative buying by the PPT.

Dow 11,842.36 -0.33; NASDAQ 2,385.74 -20.35; S&P 500 1,318.00 +0.07; NYSE Composite 8,841.89 +12.64

The NASDAQ took the brunt of the selling, as it has lagged the other indices on the way back down lately, but is catching up quickly. Tech stocks, of which many are on the NASDAQ, have been more immune to the housing and finance mini-panics which characterized trade in August of '07 and January and March of this year.

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After the massive downturn last week, Monday served as a bit of relief for harried traders, though there's little doubt that the US economy is in a very tough spot. Once again, political powers in control (Republicans) are doing all they can to deny the recessionary environment prior to the important November elections, though there's not much they can do about it except contain losses or pump prices into the close, like today.

Oil dipped just a little, losing 34 cents, to $136.40, following a weekend conference of oil-producers and users which failed to accomplish anything of substance. More hearings were held on Capitol Hill surrounding the issue of oil and gas prices, though there too will likely not have any impact. Laughably, congress is trying to blame oil speculators (partially correct) instead of placing the blame where it belongs, on the worldwide cartel of major oil companies which have conspired effectively to raise prices beyond any reasonable level.

Gold dipped 20 cents to $887.00 and silver lost a penny, to $16.78. It was a slow day everywhere.

Despite the somewhat ambivalent headline numbers, internals told a distinctly different - and negative - story. Decliners led advancers by a healthy 5-2 margin, 4326-2012, while new lows expanded their margin over new highs, 639-132.

Volume, however, was dismal - lower even than last week's pitiful efforts.

NYSE Volume 1,040,348,000
NASDAQ Volume 1,907,013,000

Friday, June 20, 2008

Bottom Falling Out of Market

In a fitting finale to a truly horrible week for US equity investors, all major indices bottomed out the week with their largest losses. The Dow, S&P and NYSE all closed more than 1.75% lower on the day. The NASDAQ was down more than 2.25%.

The final print on the Dow today was within 100 points of the March 10 low of 11,750. The NASDAQ and NYSE still have cushion from the March 10 bottoms. For the NASDAQ, that mark is 2169. On the same day, the NYSE Composite Index closed at 8534. The S&P 500 is much closer to its low of 1273.

Dow 11,842.69 -220.40; NASDAQ 2,406.09 -55.97; S&P 500 1,317.93 -24.90; NYSE Composite 8,829.25 -159.59

To make matters worse, volume was unusually high, owing partly to the phenomena known as a "triple witching day", in which stock index futures, stock index options and equity options all expire on the same day. With the prevailing sentiment decidedly negative, there was nothing to halt the all-day selling spree that occurred on Friday.

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Declining issues, as expected, far outnumbered advancers, by a better-than 3-1 margin, 4864-1424. New lows soared past new highs, widening the margin to 554-97.

Not unexpectedly, oil rose another $2.76, to $135.36. Gold lost 50 cents to close at $903.70. Silver fell 7 cents to $17.40. While the rally in oil continues, it seems to be over for the metals.

The headline numbers were confirmed by the breadth shown in the internals. The bottom is truly falling out of the market.

This should come as no surprise to anyone trading stocks, holding down a job or putting gas into an automobile. Life in the USA has been heading downhill for average Americans for years and the ineptitude, cowardice and corruption of politicians in Washington, corporate executives and market insiders has only exacerbated the condition.

If we are not nearing a complete collapse of the financial system, then the reaction on Wall Street would be a complete canard. Sadly, it is not. The US, and to a large extent, the world economy is being brought to its knees by absolute corrupted power at the very top of the heap. The rich are squeezing every last drop of blood and money from the middle and lower class and there seems to be no end to their rapacious appetites.

The problem with so much wealth being held by such a small minority - roughly the top 1 or 2 per cent of the population - does hold a certain level of risk for all parties. In a complete rendering of the economic and social fabric, the elites must worry for their very lives. History is replete with examples, from the fall of Rome to the French Revolution. We are approaching a time in which only those with money and/or weapons will be able to survive.

It's a stark statement on the human condition, but a close inspection of the mega-state environment reveals that we are no further away from feudalism than were inhabitants of Europe in the 15th century. The world is being shaped and defined by a contrived and often patently false mass media while huge governments with uncontested power lord over the classes and force their taxes and dictums upon all of the citizenry.

Freedom and liberty are fleeting ideals, even in these once-proud United States. Civil liberties are being challenged daily and the rights of the individual pales in comparison to the absolute power and overwhelming force of the government apparatus.

Stocks will continue to decline for the time being. There is a bottom, somewhere, though the depths plumbed already are merely prologue.

Our politicians preen and strut, presenting images of well-being while doing nothing. Corporatists continue their theft and exploitation of the public, with a focus on home, food and fuel, the basics of human existence. Meanwhile, an ignorant, misinformed public carries on as best it can without a champion or a clue.

We are hurtling headlong into a cataclysmic future and it is closer than most wish to believe.

NYSE Volume 2,018,469,000
NASDAQ Volume 2,601,664,000

Thursday, June 19, 2008

Fizzled Rally Syndrome

Stocks traded in lazy fashion on Thursday, buoyed by news that China's government would cut some of its subsidy on gasoline, thus raising prices at the pump in the People's Republic.

This was generally viewed as good news while the US media focused on the phony issue of off-shore drilling and exploration. The truth is that a rise in the price of gas in China is better news than any off-shore drilling would supply over the next 5 years.

Since the price of oil - and gas - is largely out of the control of supply-demand economics and more the function of speculation, the only likely beneficiaries of new drilling or lowering subsidies are oil companies, and we're stuck with them for the foreseeable future.

Dow 12,063.09 +34.03; NASDAQ 2,462.07 +32.36; S&P 500 1,342.83 +5.02; NYSE Composite 8,988.86 -10.72

On the whole, trading was somewhat suspect, with the major indices trading in a tight range tilted only slightly to the positive. In fact, all of Thursday's gains on the Dow could have been made between 2:00 and 3:00 pm. Before and after that was more or less noise and stocks fell noticeably after 3:00 pm.

On the day, advancing and declining issues played a tug-of-war, resulting in a meager victory for the gainers, which ended ahead, 3304-2914. New lows beat new highs again, 444-151.

The tone of investing over the past four sessions indicates a general lack of enthusiasm which almost always results in either outright declines or what I like to call fizzled rally syndrome.

In the latter instance, stocks rise on some - any - kind of positive news, then topple over like an unstable pile of bricks, leaving marginal gains for some, and losses for many. That was today. Tomorrow may be different, but probably, it will be more of the same, low-volume, disinterested kind of trade.

Oil ended happily lower by $4.57, a rather large loss, settling at $132.60. Gold broke over a key psychological barrier, finishing the day $10.70 higher, at $904.20. Silver rose in sympathy, up 13 cents to $17.47.

Following today's scant economic news (Philly Fed -17.1, -15.6 prior month; leading indicators up 0.1%; initial claims -5K), there's nothing on the calendar for Friday, so investors should expect the week to end with the same dull thud with which it began.

In the immortal word of the Mogambo Guru, "ugh."

NYSE Volume 1,199,263,000
NASDAQ Volume 2,274,517,000

Wednesday, June 18, 2008

Stocks Taken Down Again

For the second straight day, US equities were hammered down as investors continue to express negative sentiment by selling en masse.

Following the release of poor quarterly results by FedEx (FDX, 82.60, -1.73) and Morgan Stanley (MS, 40.69, -0.10) traders quickly sent stocks into negative territory where they spent the remainder of the session.

Dow 12,029.06 -131.24; NASDAQ 2,429.71 -28.02; S&P 500 1,337.81 -13.12; NYSE Composite 8,999.56 -74.85

The Dow closed less than 300 points above the March 10 lows (11,740) which marked a 16-month bottom. Other indices are heading in the same direction.

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Declining issues ran well ahead of advancers, 4294-1690. New lows outdid new highs, 469-129.

Once again, financial issues were the main drag on stocks, though 11 of 12 sectors were lower. Only Basic Materials showed a gain over the course of the session.

Despite the obvious impetus to sell, volume overall was again sluggish.

Crude oil for August delivery gained $2.37 to $136.90. Gold finished $6.60 higher, at $893.50. Silver gained as well, up 27 cents to $17.34.

NYSE Volume 1,282,983,000
NASDAQ Volume 2,060,739,000

Tuesday, June 17, 2008

Stocks Drop on Low Volume

The inevitable has occurred on Wall Street. Investors, like many other hip, urbane global citizens have figured out that US equities are not the only game on Wall Street, or Fleet Street or in Shanghai, Tokyo, Stockholm, Bombay or any other financial center.

Thus, when the US economy appears shaky, investors look elsewhere. There are stock markets and exchanges everywhere. It's one of the effects of globalization. One of the unintended consequences, to be sure, for Americans, but it is there, and it could be devastating.

On a level playing field, American companies compete with those from China, India, Europe, the Middle East, South America, Australia and everywhere else capital and public companies can be found, which, these days, is just about anywhere on the planet.

Dow 12,160.30 -108.78; NASDAQ 2,457.73 -17.05; S&P 500 1,350.93 -9.21; NYSE Composite 9,074.41 -13.47

With summer on the rise, volume on the US exchanges is usually lower, though this season seems even less vigorous than usual. It's been weeks of sub-par volume on the NYSE and NASDAQ with no end in sight. Today, investors were selling, and it didn't take much to push stocks back to their lowest levels since March.

Adding to investor concerns were today's PPI results from May, which showed producer prices increasing at a 1.4% clip, though this marked jump was almost all attributable to gains in fuel and food, as the core rate increased only 0.2% for the month.

Housing starts fell to their lowest level since 1991, at 975,000 units, which, though more of the same old news, was still an unwelcome reminder that one of the great asset classes was still skidding downhill.

Even more important, though sparsely reported by the bulk of the established economic press, were capacity utilization which fell to 79.4% in May, from 79.6% in the prior month, and industrial production, which notched a -0.2% figure over the same period, adding to the -0.7 drop in April.

Both of these numbers border on dismal. Optimally, capacity utilization should be above 94% and industrial production should be rising, not falling. These are both ominous signs of the considerable risk of recession, or, further proof that the US economy is already receding.

Advancing issues were overwhelmed by decliners, 3647-2327. New lows once again scored past new highs, 189-153, though the majority of the new lows came from the NASDAQ.

Oil fell by 81 cents, to $134.53. Gold was up marginally as well, gaining 60 cents to $886.90. Silver advanced 16 cents to $17.08 the ounce.

For the second consecutive session, the lack of volume was the leading story.

NYSE Volume 1,093,504,000
NASDAQ Volume 1,830,339,000

Monday, June 16, 2008

Stocks Mostly Gain; Dow Lower

US equities took divergent paths on Monday, as the NASDAQ finished higher, the Dow lower, and the S&P 500 mostly unchanged.

Dow 12,269.08 -38.27; NASDAQ 2,474.78 +20.28; S&P 500 1,360.14 +0.11; NYSE Composite 9,087.88 +24.65

Once again, there was little in the way of real economic news to move markets and that was reflected in the sparse volume and slow pace of trade.

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Advancing issues outdid decliners by a healthy margin, 3743-2468. New lows continued to dominate new highs, however, 244-150.

This rather sluggish trading should continue through the end of the month at least, in advance of 2nd quarter earnings reports in the middle and latter part of July. There certainly aren't many bargain stocks - at least on a marginal valuation scale - prompting investors to sit and wait until some kind of catalyst offers some kind of direction to the market.

The Fed, which meets next week, is widely speculated to hold interest rates right where they are, with federal funds at 2%. That leaves Bernanke and Co. very little wiggle room to cut, though there's plenty of room to raise rates should inflation become more of a worry.

The good news is that inflation seems to be quite well contained for a change, but economic expansion is being put on hold, due mostly to high oil and gas prices.

Speaking of crude, it was up early, but actually finished 13 cents lower, at $135.34. Reports are circulating far and wide that Saudi Arabia, the world's largest producer of crude oil, intends to increase output by 200,000 barrels a day, in a move that ostensibly would do away with runaway, rampant price hikes seen of late.

Gold finished sharply higher, at $886.30, up $13.20. Silver also followed suit, gaining 67 cents to $17.23. Both metals are still in a trading range well off their highs, set earlier this year. Should oil prices become more contained, a strengthened dollar and renewed economic expansion in the US could defuse the long-run metals and wider commodity rallies. Some relief from high commodity prices would be a welcome relief for both goods producers and consumers alike.

With the credit markets still in a state of near-siezure, stable to lower prices would be a very good sign that the "recession" or slowdown would be nearing a bottom. The truth is that we may have entered a real recession in December of '07, and the end could easily be marked about the time of the presidential elections at the start of November.

Wishful thinking for a better tomorrow.

NYSE Volume 1,163,712,000
NASDAQ Volume 1,862,187,000

Friday, June 13, 2008

Stocks End Rough Week With Mixed Results

With volatility firmly back in place, on Friday, investors felt safe establishing positions to hold over the weekend. Stocks had been buffeted about by alternating winds of change during a somewhat tumultuous week, but ended higher on the day, but mixed for the week.

This, after a near-400-point drubbing of the Dow just one week ago.

Dow 12,307.35 +165.77; NASDAQ 2,454.50 +50.15; S&P 500 1,360.03 +20.16; NYSE Composite 9,063.23 +115.50

The Dow Jones Industrials finished the week higher by 97 points, but it was the only major index to record gains. For the week, the NASDAQ was down 20 points, the S&P lost 0.65 and the NYSE Composite ended 89 points lower.

Obviously, there was more work for stocks to do before anyone would say this is a true sustainable rally or that any progress had been made vis-a-vis the economy.

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Investors were encouraged by news that the CPI was up only 0.6% in May, with core inflation - excluding food and energy - only 0.2% higher. While those figures may be of some relief to traders, they still indicate an economy dealing with 7.2% annual inflation, though somewhat tempered in that most of it is coming from the obscene rise in the price of crude oil and motor fuel.

On the session, advancing issues finished well ahead of decliners, 4474-1786, though new lows continued to outperform new highs, 330-96, a persistent, troubling trend.

Oil actually lost some ground heading into the weekend, losing $1.91, to $135.47. Gold finished ahead marginally, up $1.10, at $873.10. Silver also posted minor gains, up 8 cents, to $16.56.

Consumer sentiment was markedly lower, with the University of Michigan June survey checking in at 56.7, from 59.8 in May, the lowest level since 1980.

The mixed results on Wall Street are indicative of contentious times for investors. There still needs to be a complete flushing of weak hands before any substantive move forward is warranted.

On the inflation front, the Fed may be convinced that it's time to tighten the credit spigot a bit to keep prices from spiraling out of control. By merely standing pat, or even raising rates 25 basis points, the markets would surely get the message. Such a move at the June 24-25 meeting would be a very stabilizing influence on markets and a strengthening motivation for the US dollar.

Volume on US equity exchanges was moderately lower than the 4-week average.

NYSE Volume 1,224,933,000
NASDAQ Volume 2,113,058,000

Thursday, June 12, 2008

Early Rally Fizzles, PPT Steps in to Save Markets

We knew (didn't we?) that after the deep declines Wednesday and last Friday, there would be plenty of bottom-fishing, and this morning, stocks were up sharply. The Dow was higher by nearly 200 points between 11:00 am and noon, but the realities of the market brought fresh waves of selling throughout the afternoon.

Shortly after 3:00 pm, the Dow had sunk back to break-even, with all other indices showing in the red. It was at that point, with markets apparently breaking down badly, that stocks began moving forward again, a sure sign that the Plunge Protection Team (PPT) was back at work, salvaging what little is left of the formerly free and fair equity markets.

Dow 12,141.58 +57.81; NASDAQ 2,404.35 +10.34; S&P 500 1,339.87 +4.38; NYSE Composite 8,947.72 +6.45

As usual, on days such as this, the internals offer a better view of what's really going on. Advancing issues actually fared better than decliners on the day, though by a very slim margin, 3208-2833. New lows continued to dominate new highs, 367-73. These numbers continue to confirm that stocks are stuck in a near-term down trend that isn't likely to end until recent lows (March) are retested.

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That the PPT (correctly known as the President's Working Group on Financial Markets) would enter into the fray is completely expected. As a matter of conjecture, they've probably been plying their trade with due diligence over the past few months, attempting to stabilize some truly upsetting conditions which persist in US markets.

Markets received a bit of good news in terms of retail sales figures this morning, but those were quickly dismissed as a natural outgrowth of the millions of government stimulus checks which were finding taxpayers. The fundamentals of a weak economy, with inflation, low job creation and a crumbling currency, are still in place and have not improved.

Oil was up again, gaining 40 cents, after being lower most of the day, settling at the unsettling price of $137.38. Metals were once more under pressure, with gold losing $10.90, to $872.00, and silver dropping 37 cents to $16.49 an ounce.

Traders are largely running scared at this juncture and until there is clear evidence of some positive changes in the economy, or a new president with the full backing of congress, or both, markets should remain under selling pressure.

NYSE Volume 1,332,073,000
NASDAQ Volume 2,246,544,000

Wednesday, June 11, 2008

Slaughter on Wall Street

Stocks were once more sliced, diced and dissected by nervous investors as the Dow Jones Industrials dipped to their lowest levels since mid-March.

The NASDAQ and S&P 500 indices also were off sharply, also approaching recent lows. The NASDAQ reached a short-term low of 2,177 on March 17. The S&P bottomed out on March 10, at 1273.37.

We are witnessing the beginning of another downward thrust in the markets as the high price of oil and slumping economies begin to impact stocks in real, tangible ways.

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Also in front of investors is the possibility that the Fed is through cutting interest rates for the time being. Following a series of cuts which began in August of last year, the Fed continues - through speeches by members - to express serious inflation concerns, which are normally fought through higher, not lower, interest rates.

Dow 12,083.77 -205.99; NASDAQ 2,394.01 -54.93; S&P 500 1,335.49 -22.95; NYSE Composite 8,941.27 -125.83

As for market internals, today was one of the worst this year, which is saying quite a bit. Declining issues outpaced advancers by a nearly 4-1 margin, 4974-1332. New lows swamped new highs, 495-72. Once more, the margin between the new highs and lows is elevated and had signaled this decline.

It doesn't take as stock market genius to see where this is headed. Anyone with any experience in markets knows that the March and January lows will be retested before any advance can occur. I've been saying this since late April (maybe even sooner) and it appears to be happening as predicted.

How low the markets actually descend depends largely upon second quarter earnings reports which will be hitting analysts' desks beginning about a month from now and carrying the trading bias through the last two weeks of July and most of August.

Two schools of thought apply. Either the bottom is achieved prior to the upcoming earnings season or the corporate reports cause further erosion. It is too early to tell, but, up until now, outside of financial stocks, companies have not been hard hit by the slowing US economy.

Oil was back up again, gaining $5.07, to $136.38. Gold rebounded somewhat, up $11.70, to $882.70. Silver tagged on gains of 22 cents, closing at $16.86.

The temporary rebound for commodities is still no cause for alarm. If the Fed is serious about raising, or at least not cutting, rates, that should serve to strengthen prospects for the dollar against other currencies. The Fed's next meeting is in two weeks, on June 24-25. A strong policy statement could seal the fate of most commodities (even oil, think of that!), fomenting a sell-off in most key traded markets.

NYSE Volume 1,386,098,000
NASDAQ Volume 2,100,234,000

Tuesday, June 10, 2008

Wall Street is Stuck

Despite the marginal gain on the Dow today, all other indices traded lower, with the composites (NASDAQ and NYSE) leading declines.

Dow 12,289.76 +9.44; NASDAQ 2,448.94 -10.52; S&P 500 1,358.44 -3.32; NYSE Composite 9,067.10 -81.99

While there was little economic or corporate news upon which to chew, traders were treated to a silly show from the US Senate, where Republicans defeated a bill to impose windfall profits taxes on oil companies.

Actually, the repugnant Republicans in the Senate didn't defeat the bill, they merely kept it from coming to the floor for debate. Democrats, including presidential candidate Barack Obama, promise to revisit the issue again... and again... and again, likely using the lack of debate as an election issue until the Republicans either give in or risk a landslide for Democrats in the fall elections.

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My guess is that they'll cave in to public pressure around Labor Day, after all the damage from $4.50 a gallon gas will have been done. They're like that... evil, uncaring, unrepentant, unscrupulous and in bed with oil money lobbyists.

As for the market internals, they were once again markedly negative. Declining issues led advancers, 3911-2335. New lows once again dominated new highs, 399-71. Along with yesterday, the spread today is signaling - quite loudly - an abrupt directional spike, and it's likely to be to the downside. We should be very close to a complete weak-hands wash-out which could occur at any time.

For a change, commodities took one on the chin. Oil traded $3.03 lower, settling at $131.31. Gold fell by a massive amount, down $26.40, to $871.70, while silver lost 58 cents to $16.64.

Continued weakness in commodity prices, besides being a welcome respite to worldwide inflationary pressures, may also be signaling something more nefarious - a vicious deflationary cycle.

While the Fed presumptively lowered interest rates last year and through the first half of 2008, economic conditions have not improved by any measurable degree. What commodities are telling us is that credit and cash markets are tight, consumers are on the edge of their personal budgetary limits and market dislocations are becoming more and more apparent.

Prices are not rising quickly, if at all, in some areas (and they're actually declining in the most expensive items - homes and autos), and the big boost in all things petrol-based may be more an exception than the norm.

If there are still brains among the various governors at the Federal Reserve, they may see an opening to keep rates steady or actually increase them slightly as a hedge for the battered US dollar. A strengthened dollar, or even the appearance that the US is once more on a reasonable path to growth, would do wonders to the price structures of the oil, gas and energy markets.

It may be simply wishful thinking, but there is some handwriting on the economic wall, even if it's been scrawled in vanishing ink.

As the markets digested a smorgasbord of economics, opinions and theories, volume was anemic.

NYSE Volume 1,387,509,000
NASDAQ Volume 2,067,336,000

Monday, June 9, 2008

PPT Rallies Market

Since there's no other salient explanation for today's rise on the Dow, I will be the first to indict the President's Working Group on Financial Markets (a/k/a The Plunge Protection Team or PPT) for boosting stocks after Friday's shock waves sent investors scurrying for cover.

The Bush administration has a vested interest in keeping the illusion of a healthy economy alive. Their buddy, John McCain, is going to have to have something upon which to hang his hat, and most Americans respond well to positive economic conditions.

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Of course, anybody with at least half a brain knows that the US economy is in dire straits. Today's laggards - as they have been through much of the past 10 months of declines - were the financials, and, we have a new leader. JP Morgan Chase (JPM), on no discernible news, took a major dive this afternoon, dipping as much as 3 1/2 points (9%) before recovering about a point into the close (-2.58, 37.51).

I would be reticent if I did not mention that this was one of the three strong sells (via puts) I recommended on June 4 to subscribers to the Fearless Stocks & Options Advisory Newsletter. The other two recommendations are also doing just fine, but you'll have to pony up $49.95 for that information (a steal if you're serious about options).

Were I an investor in JPM, I would be bailing right now, if not sooner. Of course, since I'm not so stupid as to invest in the work of bankers - a clueless lot of overstuffed shirts if ever there was one - I own no shares of any bank, brokerage or financial institution, and probably never will.

But JPM is worth watching over the next few months. Something is definitely not right there, and considering the recent performance of banking interests, there could be another round of imploding assets involving financial issues. Morgan has not been hard hit until today, and they may be next in line with their hands out to the various sovereign funds like those in Saudi Arabia, the UAE, Kuwait and Taiwan.

On the question of whether the PPT was actively pumping futures and indices today, I would say the evidence is clearly there. The Dow was up sharply at the open, as a stabilizing influence, but stumbled to break-even by 3:00 pm. All of today's gain was made within the final hour of trade. I rest my case.

Dow 12,280.32 +70.51; NASDAQ 2,459.46 -15.10; S&P 500 1,361.76 +1.08; NYSE Composite 9,149.09 -3.42

To get an idea of just how misleading the headline number (Dow up 70!) is, take a look at the internals. Declining issues hammered advancers by a nearly 2-1 margin, 4121-2114. New lows expanded their edge over new highs, 371-114. That's the widest margin in about a month, if not more.

The markets could rally for the next few days or the balance of the week, though I don't think that's in the cards. This market is marked for declines, and steep ones, with the Dow currently hovering less than 500 points above the January and March lows and off nearly 2000 points from the October '07 highs.

Only the concerted will of market insiders and the PPT can save the stock market from incessant mark-downs over the next 2-4 months. They will do everything they can, short of imposing price controls on gasoline, to keep markets from melting down prior to November. Naturally, a summertime collapse with a snap-back weeks-long rally leading up to the elections would suit the slimy Republican propaganda machine just fine, and that's what is staring us dead in the face.

Oil actually eased a bit on Monday, losing $4.19, to $134.35. Gold eased 90 cents to $898.10. Silver lost 22 cents to close at $17.21 the ounce.

Volume on the equity markets was moderate.

NYSE Volume 1,349,556,000
NASDAQ Volume 2,116,800,000

Friday, June 6, 2008

Oil, Unemployment Double Whammy Rocks Wall St.

Before Friday's session even began, there was dire news from the Dept. of Labor. With the release of the Non-Farms Payroll data for May - which showed a loss of 49,000 jobs and an increase in the unemployment rate to a ghastly 5.5% - stock futures tanked and when the market opened, the Dow was immediately down 150 points.

As the day wore on, further declines in the value of the US dollar and a monstrous spike in the price of oil - up $10.75, to a record of $138.54 - drove stocks into a deep nosedive.

Dow 12,209.81 -394.64; NASDAQ 2,474.56 -75.38; S&P 500 1,360.68 -43.37; NYSE Composite 9,152.51 -255.98

After yesterday's rally out of thin air, today was a fitting response for those who have not been heeding the warning signs everywhere. $4.00 a gallon gas, layoffs piling up, 1 in 10 homeowners either in default or behind on mortgage payments, home prices still heading lower, food banks running low due to increased demand.

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If there's any question that the US economy is in a world of hurt - recession or no recession - today's unemployment figures and the spike in oil should answer any doubters.

And to Richard Russell of the Dow Theory Letters, who changed his outlook and his opinion in April from Bear Market to correction, you have lost all credibility. Get into line with the liars from the Bush administration, 90% of congress and the jackal of them all, Treasury Secretary Henry Paulson, who keeps insisting that the worst is behind us and the economy will create 1 million new jobs by Christmas.

Mr. Paulson, besides being an ignorant, overpaid buffoon, may be on to something. If things continue on their current paths, there may be more jobs by Christmas - DIGGING OUR OWN GRAVES.

On the day, decliners absolutely squashed advancing issues, 5076-1164, nearly a 5-1 margin, one of the worst thrashings we've seen in a long time. New lows surpassed new highs, 307-211, though the number of new highs is likely incorrect, as are many numbers on the Yahoo Finance web site. One wonders why Microsoft would even entertain any notion of buying up Yahoo in the first place. What they offer is largely second-rate and easily duplicated. Second, they've overstayed their welcome on the internet. Other companies do everything they do, and usually better.

Gold gained $23.50, to $899.00. Silver added 26 cents, to $17.43. It bears repeating that a barrel of crude rose $10.75, on top of $5.00 yesterday, to a record close of $138.54. If America isn't ready for $4.00 a gallon gas, how will they like it at $5.00?

I must point out that I scarcely believe the unemployment figures, since last month's were such a disgraceful exercise in fudging numbers. While the number of jobs lost is likely close (and last month was revised downward to -28,000, from 20,000), it is probably short of reality.

US jobs are going away faster than civil manners at a keg party. The snowball effect is beginning to kick in, wherein so many jobs are lost that there simply isn't enough consumerism to go around, and the spiral worsens.

There's also a hint of the Obama effect. Now that he's secured the nomination and Republicans know John McCain has about as much chance of beating him as a candle in the wind does of staying lit, the truth is beginning to seep out from all corners. Yesterday, it was the Senate Intelligence Committee reiterating - in the nicest possible terms - that the Bush administration selectively employed intelligence to sell the Iraq threat, and the war, to the American public. Today, it was the Labor Department coming clean somewhat. More truths about the state of the American experience will be forthcoming as the unnecessary election campaign season drags on. Barack Obama will not only become the first black man to be president of the United States, he will win by an absolute landslide margin.

So, if you think today's action on the markets was bad, be prepared for much, much worse. The Bush administration and a supine congress has created the perfect mess. It will take determination and unity of purpose to heal the nation.

God save us all.

NYSE Volume 1,377,134,000
NASDAQ Volume 2,197,451,000

Thursday, June 5, 2008

Where Have the Bulls Been Hiding?

Well, just when you think the worst is coming, investors get a little bit brave and a lot stupid.

Such was the case today after Wal-Mart and other retailers reported improved same-store sales for May and the unemployment reading came in 18,000 below expectations.

New claims filed were at 357,000, instead of the expected 375,000. Of course, everyone forgets that the four factories to be shut down by General Motors (GM) will result in more job losses and that's not even counting 19,000 UAW members across the country that have already accepted early retirement or buyout offers.

Never mind that gas prices are at their highest levels ever, a national average of $3.99 per gallon as of this morning and surely over $4.00 by now.

Dow 12,604.45 +213.97; NASDAQ 2,549.94 +46.80; S&P 500 1,404.05 +26.85; NYSE Composite 9,408.49 +195.73

Some of us - index options players - are actually giddy that the market could see fit to rise so much in just one day. Loving the volatility, it gives us more opportunity to play puts on all the shoddy corporations out there.

Maybe it's just a state of mind, but I see dark clouds over the US economy, and, unlike the knee-jerk traders on Wall Street, fail to discern any semblance of a silver lining.

Ambac and MBIA both had their credit ratings cut today, but that doesn't matter. Only 357, 000 people applied for unemployment.

On the day, advancers trampled decliners, 4808-1410. Wow! Considering that we're in the heart of a bear market, those numbers are impressive. We haven't seen anything even close to that on the opposite end of the spectrum. It's nearly a 4-1 ratio. Also somewhat surprisingly, new highs topped new lows, 203-171.

Volume was not impressive, holding at the same level as the past two sessions.

However, crude oil gained $5.47, to $127.79, and just when we thought there was some sanity left in the world. Gold fell again, losing $8.30, to $875.50. Silver gained on actual supply concerns, picking up 23 cents to $17.17. Silver has been cheap compared to the price of gold. That is beginning to correct.

Having absolutely no confidence in the integrity of our equity markets, government statistics or the news media, this whole rally thing has me thinking there are a bunch of Republicans pulling all the strings behind the scenes. Now that Barack Obama has officially become the Democratic nominee, they need a stock market rally to "prove" that the economy is in grand shape, so John McCain doesn't have to answer any tough questions about economic stimulus.

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And speaking of stimulus, those same-store sales are more than likely the result of millions of dollars of government checks that went out this past month. So, more than being just what the (Republican) doctor ordered, it should have been expected. The problem is that it's akin to putting a band-aid on a gunshot wound. It won't last long.

But fear not, by October, the powers that be will have some other trickery in store. Who wants to bet that gas will be "only" $3.40 a gallon just weeks before the elections?

Tomorrow, the Commerce Dept. releases its laughable Non-farms payroll report, which is likely what this rally was all about. The shady report will probably say only 10,000 jobs were lost in the month of May, and we'll have another 200-point rally to end the week.

Hey, tomorrow's Friday. Party on!

NYSE Volume 1,314,636,000
NASDAQ Volume 2,243,652,000

Wednesday, June 4, 2008

Small Change Day Yields Interesting Outlook

Stocks saw both sides of the ledger on Wednesday, with the Dow Jones Industrials leading a morning rally and then an afternoon sell-off which left stocks near where they started.

The big differences were in the two composites, with the NASDAQ up nicely and the NYSE markedly lower bringing into play the new-old economy paradigm.

Techs on the NASDAQ fared far better than old-line companies held within the NYSE, suggesting that there's neither clarity of direction or quality when it comes to US equities.

Dow 12,390.48 -12.37; NASDAQ 2,503.14 +22.66; S&P 500 1,377.20 -0.45; NYSE Composite 9,212.76 -49.24

While economic reports were somewhat benign, significant trading patterns emerged from within the indices.

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Advancing and declining issues were nearly even, with winners edging losers, 3149-3039, though most of the winners were on the NASDAQ and the bulk of the losers came from the NYSE. New lows slammed new highs, 224-109, and that's a repeating theme. Since October 31 of 2007, there have been less than 10 days in which more new highs were reported than new lows. It's an inherent factor of the calamitous underpinning of the US economy and hasn't changed one whit over the last 7 months.

Volume was at about the same level as yesterday - a little bit perkier, though still what one would expect from mid-summer. It seems as though the summer doldrums have hit stocks a bit early this year, no doubt having much to do with tight credit and a general consensus to not throw money around willy-nilly.

Commodities continue to sing an unfamiliar tune, heading South, as it were. Oil was down again by $2.01, settling at $122.30, a relief many hope to see continued. Gold dropped $1.70, to $883.80, while silver strengthened by 11 cents, finishing at $16.94. A few more days like this, for oil, in particular, and you're looking at a sharp correction in commodities on a lack of demand basis, spurred by overpricing.

The simultaneous slippage in stocks and commodities does not bode well for economies overall. What once looked like an inflationary spiral might end up - in a few month's time - looking more like a deflationary end-game.

It's not something for which economists nor governments are well-prepared. While the benefits to consumers is obvious - lower prices - it also stalls job creation, an article that has not, until now, rear it's unusually ugly head.

NYSE Volume 1,326,811,000
NASDAQ Volume 2,206,862,000

Tuesday, June 3, 2008

Wall Street Suffers Through Another Rough Day

There was little news to fuel the fire today, but stocks sank even further in a carry-on to yesterday's steep declines.

The Dow Jones Industrials cracked through an intraday double bottom at 12,427 and closed off more than 100 points for the second straight session.

It was the lowest close on the Dow since April 15, another indication that the indices will soon test the March lows of 11,740 (3/10/08) on the Dow.

Dow 12,402.85 -100.97; NASDAQ 2,480.48 -11.05; S&P 500 1,377.65 -8.02; NYSE Composite 9,262.00 -54.61

Here's a big surprise: US auto and truck sales fell in May with the biggest losses coming in trucks and SUVs. With gas at $4.00 per gallon, is anyone surprised? Ford's sales were off 16%, Chrysler, 25%, GM, 30%. Toyota was even down 7.9%, while Honda and Nissan, manufacturers of smaller, more fuel efficient vehicles saw sales rise in the month.

More than anything else, those auto and truck sales figures were the big story on Wall Street today, though one has to wonder why anyone would think they would be anything other than ugly.

On April 9, I commented about Richard Russell of the Dow Theory Letter opining that we were not in a bear market. Russell had reversed his earlier call from September of '07, when he said we had turned. That was not surprising, but his about-face on the matter in April was an eye-opener.

I disagreed with him then and reiterate my call that we are facing one of the most pressing and desperate recessions of all time. While most of us (self included) do not recall the Great Depression, some of us are quite convinced that we are rushing head-long into one crushing economic downturn.

The factors driving the demise of the US economy are diverse and not well understood by the majority of Americans, nor has our federal government or Wall Street given ample caution to what lies ahead.

The housing crisis is only getting worse. Subprime loan resets are now peaking, but they will soon be followed by option ARMs and Alt-A loans which will see peak resets from 2008-2012 and 2009-2012, respectively. The option ARMs are the larger of the two groups, and both are as large as the subprime slime. The US housing market will not recover until at least 2012, if at all.

Add to that the high price of not just oil and gasoline, but heating fuel, which will be the real killer this winter. Prices for natural gas haven't exactly set idle while oil soared over $130 per barrel. Many Americans - those with roofs over their heads - will face the quandary of whether to heat their home or fuel their car.

Credit markets have seized up. Some large retailers, which have been squeezed by lower sales and lower margins, will go belly up when they are unable to obtain enough financing to see their way through this summer and fall. By Christmas, a good number of malls will resemble ghost towns.

Hardest hit will be the rural and suburban South and Midwest, where jobs are already scarce and not being replaced. With the number of foreclosures and business failures skyrocketing this fall, municipalities will be laying off and looking for more state aid as they will be unable to maintain services with declining tax roles.

One will be able to see the entire cataclysm reaching a peak when food shortages appear or lower prices for everything becomes the standard. Companies, forced to compete or close up, will have to decrease prices just to stay alive. A recent report noted that 99% of free food kitchens and pantries have seen more activity in the past six months. What's worse is that 72% expect to not be able to meet demand in the next six months.

We are in the thick of it and the news media and our leaders in Washington have been shading the truth for months. Not only will the rest of 2008 be extremely difficult, but 2009, 2010 and 2011 don't look to be picnics either. By official accounts, the recession hasn't even begun, yet people are worried and concerned.

On the day, declining issues outnumbered advancers, 3651-2557, while new lows outnumbered new highs, 204-145.

Oil slipped another $1.06 today, settling at $126.70. Gold fell $11.50, to $885.50, and silver dropped 8 cents to $16.84. With the continued weakness in the metals, it may be time to go short all commodities. We may have reached the maximums on commodities of all kinds as people, businesses and governments are simply out of cash after being squeezed so violently and for so long by rising prices. We are at the tipping point in the world economy and everything could implode at any given time.

The situation is as dire as I've seen it in my 35+ adult years. There is likely no escape from a severe recession and a major downturn in the markets.

You have been warned.

NYSE Volume 1,317,698,000
NASDAQ Volume 2,233,256,000

Monday, June 2, 2008

June Swoon: Stocks Tank on Bank Boos

June began about as badly as any month could with the markets battered on all sides, but mostly in the finance/banking areas, as Standard & Poors downgraded the credit ratings of three giant brokerages - Lehman Brothers (LEH), Merrill Lynch (MER) and Morgan Stanley (MS).

Along the way, the ratings agency made sure to revise its ratings on Bank Of America (BAC) and JP Morgan Chase (JPM) to negative, thereby branding the two banks as damaged goods.

Additionally Washington Mutual (WM) and Wachovia (WB) each had their issues, resulting in changes of top management.

It was not a good day to be in the business of banking. Nor was it one to be holding stocks of almost any kind (something I've been repeating often since October of last year). Only frantic buying in the last half hour of trading saved the markets from a complete meltdown.

Dow 12,503.82 -134.50; NASDAQ 2,491.53 -31.13; S&P 500 1,385.67 -14.71; NYSE Composite 9,316.52 -84.56

The Dow, in particular, tested the lows of May 23 (12,479.63), but essentially put in what can only be seen as a double bottom on an intraday basis, at today's low of 12,427. Since the Dow is still below both its 50 and 200-day moving averages, all that can be said of last week's 4-day rally is that it was mostly a mirage. There's little upside to the market considering all the turbulence in the credit markets.

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On the day, declining issues hammered advancers by a margin of more than 5-2. 4366 stocks were down, while only 1919 ended with gains. New lows finished ahead of new highs, 221-132, but the spread expanded significantly, signaling more losses for the markets ahead.

For a change, the commodities markets didn't have much of an impact on equity trading. Oil gained a marginal 41 cents, to 127.76, while gold added $5.50, to $897.00. Silver ended up 5 cents, to $16.91.

The highlight of economic releases was this morning's reading on April construction spending, which was down only 0.4% due to growth of commercial building and multi-housing units, which offset another horrid month in home building. The residential real estate market is still searching for a bottom which is likely to not be reached until sometime during the winter of '08-'09 - and that is still a long way off.

High gas and food prices, a seized-up credit market and continuing foreclosures and bank writedowns, there's really no catalyst for any upside market moves. Any rallies will be met with suspicion and pessimism as the US economy suffers through a deep and long recession, which, according to official figures, hasn't even begun.

The balance of this week is a little light on the economic news front until Friday's Non-Farm Payrolls data for May. Auto and truck sales for May roll out on Tuesday, as do April Factory Orders. After that, just a revision to first quarter productivity on Wednesday and the usual Thursday Unemployment Claims.

The Non-Farms Payroll figure for May should be interesting following the very suspect -20,000 reported for April. The expectations are for a loss of another 50,000 to 60,000 jobs - not what the market needs at this juncture. Even if the report is highly fudged, any rally caused by it will be short-lived as stocks are sure to retest the January and March bottoms.

Best advice is to take some profits here if you have any, and stay out of the markets this week. On Saturday, place a sizable bet on Big Brown to win the Belmont Stakes and complete racing's Triple Crown. He may be close to even money or even 4-5 by post time, but that's a much better return - with a lot less risk - than anything you'll find in US equity markets for now.

NYSE Volume 1,073,309,000
NASDAQ Volume 1,950,997,000