Stocks Soar, So Does Oil

While the NASDAQ spent most of the day in the red, the Dow maintained a positive posture throughout the session, then sprinted to the finish, with the major indices closing at their highs of the day for the second session in a row.

There was little in the way of news except from the oil fields, where an unexpected drop in US gasoline supply sent oil rocketing upwards nearly $5 per barrel.

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With the focus on oil prices and the financial sector, earnings from Hess Corporation (HES) set the tone with a 62% rise in 2nd quarter profits from a year ago. The gains were attributed mostly to the extraordinary hike in the price of oil and gas and investors piled into the equity, boosting shares by more than 13% (106.97, +12.72).

With roughly 350 companies disclosing earnings, it was difficult to keep track of winners and losers, though most of those reporting early in the day were uninspiring.

On the whole, investors seemed relieved that there was no more discouraging news on housing or credit with which to weigh their fears, and the last hour of trading was spent pushing stocks higher, though without any real impetus.

Dow 11,583.69 +186.13; NASDAQ 2,329.72 +10.10; S&P 500 1,284.26 +21.07; NYSE Composite 8,565.31 +146.11

Advancers led declines, 3840-2397, and new lows remained ahead of new highs, 220-119.

Volume was moderate.

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Crude oil for September delivery closed up $4.58, at $126.77, though the metals continued their recent decline. Gold lost $14.10, closing at $910.30, while silver fell 9 cents to $17.47. The continuing decline in the precious metals is presaging a recession of magnificent proportions.

While the Fed and central bankers work to keep the latches on the credit windows from becoming completely detached, money is flowing out of nearly everything, from real estate to metals to stocks. Recent gains on Wall Street have been fleeting, as there has been no resolution to ongoing credit problems or the implosion of the US banking system.

Things are so broken, every day seems to bring forth a new financial device or instrument to stem the tide of defaults and capital erosion. Sadly, there is little anyone can do at this point. The damage has been wrought and a cataclysmic event could occur at any time, though the Fed and government officials - hell-bent on re-election in November - seem to prefer a slow, but steady Chinese torture approach to the unwinding of the financial system.

Drip, drip, drip....

NYSE Volume 1,472,582,000
NASDAQ Volume 2,270,902,000

Markets Up Sharply As Financials Power Ahead

Investors were treated to a rare turnaround Tuesday as stocks shot up, erasing the declines from Monday in suspicious trade.

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While oil dropped once more, financial stocks were the main focus, racking up outsize gains, despite continuing economic woes. Volume was incredibly light, suggesting organized pumping by the Fed and their Wall Street proxies to keep the indices from falling back to mid-July levels.

Dow 11,397.56 +266.48; NASDAQ 2,319.62 +55.40: S&P 500 1,263.19 +28.82; NYSE Composite 8,419.20 +159.01

Think the market isn't subject to special situations and insider trading? Think again. Here's what briefing.com had to say about the past two days of trading in Merrill Lynch (MER) and the financial sector:

In an effort to reduce its risk exposure and shore up its balance sheet, Merrill Lynch (MER 26.32, +1.99) is selling $30.6 billion worth of U.S. ABS CDOs for only $0.22 on the dollar, or $6.7 billion. The assets were valued at $11.1 billion at the end of the second quarter, meaning the sale will result in a $4.4 billion pretax write-down. Merrill has taken $51.8 billion in write-downs and credit losses since the credit market turmoil began last year -- second only to Citigroup's (C 18.46, +1.03) $54.6 billion.

Merrill also raised $8.55 billion in a common stock offering at $22.50 per share, making the sale dilutive to existing shareholders. Merrill's stock fell 9.5% to a 10-year low shortly after the open, only to rebound and finish the day 8.2% higher. Merrill's stock dropped nearly 12% during the previous session on no specific news item, so the market may have already been pricing in some of the latest write-down and capital raising news.

The financial sector ended the session with a massive 7.5% gain, as traders speculated that the Merrill news indicated better times are ahead for financial firms.

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That final paragraph is nothing more than a guess about how Wall Street reversed Monday's losses. The truth more likely is that of a combined effort by Wall Street's favored banks and brokerages to save their souls.

The US economy remains in tatters. Tuesday's gains were made mostly by the bankers and brokers themselves.

Advancers led decliners, 4660-1651. New lows remained ahead of new highs, 233-80.

Gold 926.40 -11.40
Silver 17.38 -0.09
Light Sweet Crude Oil 122.19 -2.54


NYSE Volume 1,405,967,000
NASDAQ Volume 2,318,781,000

Bank Failures Spook Wall Street

Monday was another in a series of bad days for investors as a pair of bank failures over the weekend rocked the stock market once again, sending the major indices down 2% on average.

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Amidst one of the most serious economic crises in US history, investors of all stripes are losing faith in not only the financial sector, but government leaders and institutions that were supposed to be a safeguard against the kind of wholesale collapse which seems to have overtaken the US economy.

Over the weekend, the FDIC closed two undercapitalized regional banks - First National Bank of Nevada and First Heritage Bank - the sixth and seventh bank failures of 2008. The news was not widely spread until Monday's market open and it hit investors like a ton of bricks.

While the Dow was up briefly in early morning trading, the other indices fell quickly into the red and spent the rest of the day under the flat line and losing ground. Stocks ended at their lows of the day.

Dow 11,131.08 -239.61; NASDAQ 2,264.22 -46.31; S&P 500 1,234.37 -23.39; NYSE Composite 8,260.19 -135.39

Selling was broad-based, with all 10 sectors posting losses. Decliners buried advancing issues by a nearly 3-1 margin, 4611-1660. New lows continued to dominate new highs, 240-71.

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Today's close on the Dow was just 168 points above the recent mid-July bottom of 10,962.54. The other averages are also nearing their recent lows. Volume was very light, but the selling pressure was relentless.

Oil rose $1.47, to $124.73. The metals continued to demonstrate weakness, with gold up a mere 90 cents, to $937.80 and silver off 9 cents, to $17.47 the ounce.

As second quarter earnings continue to roll out, investors are not pleased nor in a mood for any kind of speculation going forward until there is some cataclysmic event or resolution to the housing/credit mess.

NYSE Volume 1,173,196,000
NASDAQ Volume 1,967,769,000

Durable Goods Bump Helps Stocks

Of late, economic news has been more or less discouraging to investors, but the week ended with some upbeat data on durable goods orders, which increased by 0.8% when analysts were expecting a downturn of -0.3.

That bit of positive news was enough to boost the averages into a higher close at week's end.

Dow 11,370.69 +21.41; NASDAQ 2,310.53 +30.42; S&P 500 1,257.76 +5.22; NYSE Composite 8,395.58 +25.67

Volume on the exchanges was typically light for a mid-summer session and somewhat of a relief after Thursday's deep drubbing.

Advancing issues finished ahead of decliners, 3654-2561, though new lows retained their edge over new highs, 236-99.

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The price of crude oil continued its descent, dropping another $2.23, to $123.26. The metals rebounded slightly after days of losses. Gold was up $4.60, to $936.90; silver gained 8 cents to close at $17.38.

Corporate earnings were also generally pleasing, with no downward surprises or 3rd quarter warnings from companies reporting, but, despite the spate of good news, the markets were choppy and directionless.

Investors are still uneasy and uncertain. Housing, banking and credit continue to be the main sources of concern and those are simply not going to improve readily. Additionally, layoffs and unemployment are seen as rising over the next few months. A weak labor market may emerge as the greatest threat to economic expansion. These conditions will likely continue until at least the November elections.

NYSE Volume 1,287,772,000
NASDAQ Volume 2,016,542,000

Stocks Routed on Housing, Labor Fears

If the stock market and economy wasn't so dreadful, one might say it's a "funny" market, though there doesn't seem to be much news lately that would engender smiles or even a modicum of happiness or contentment.

On Thursday, the National Association of Realtors (NAR) announced that existing home sales in June fell by 2.6% from the prior month and were off 15.5% from a year ago.

The market had already been spooked prior to the open by unemployment data, which showed initial claims rising to 406,000 in the most recent week. When the NAR release hit the streets, the rout was on, as investors began unwinding positions, many of which were just begun a week earlier.

So much for the 650 point rally the Dow staged over the prior six sessions. In one day, nearly half of the gains were eviscerated.

Once again, the troublesome part of all this is that Wall Street - the geniuses who got us all into this mess to begin with - should have been anticipating more bad news and failed to do so. There has been absolutely no talk of a bottom being put in and investors who thought it was safe to venture into the market again were handed their hats and walking papers.

Dow 11,349.28 -283.10; NASDAQ 2,280.11 -45.77; S&P 500 1,252.54 -29.65; NYSE Composite 8,369.91 -210.66

The declines were broad-based, as decliners led advancers by a wide margin - more than 3-1 - 4739-1559. The moderation in new highs-lows was evident once more, however. There were 239 new lows to just 86 new highs, not a very large spread.

Crude oil gained $1.05, to $125.49. Gold lost another 50 cents, to $922.30, while silver gave back 16 cents, at $17.30.

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Corporate earnings continue to come in as a mixed bag, though firms showing exceptional second quarter results are few and far between.

This is a very dangerous market, one that is best avoided by buy-and-hold types at the present time. Wild swings have become the norm, a wonderland for astute and wily day-traders.

The bias is still to the downside long-term, while predicting short-term trends has become a task not even psychics wish to undertake. It's like trying to figure out when a manic depressive's mood will change.

Keeping in touch with trends is more important than ever. These are both exciting and depressing times for traders.

What fun!

NYSE Volume 1,534,348,000
NASDAQ Volume 2,545,402,000

Oil, Gold Signaling Recession

While the stock exchanges all recorded another positive session, the sudden, explosive price drops in oil, fold and silver are sending unmistakable signals of an upcoming recession.

High prices for food and energy may have been the tipping point for the US economy and certainly, those prices have already led to riots and disturbances in a handful of emerging nations.

When oil hit $145 per barrel and gas prices spiked above $4.00 per gallon in the US, even the ordinary citizen knew that level of gouging was unsustainable and the inevitable occurred - people began changing habits, buying less, conserving more and generally putting the brakes on the demand side. American consumers were already exceptionally strapped as it was, high prices just exacerbated the pain and suffering.

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What we're currently witnessing is one of the marvels of the modern free market system. Prices are coming down post haste. The market is making the adjustment without intervention.

The problem is that the forces which pushed prices higher - mostly speculation and fear - are now out of the picture, having been replaced by conservation and prudence and that's really being manifested in the metals and oil markets.

Oil dropped another $3.98, ending the day at $124.44. Gold fell by a stunning $25.70, to $922.80, and silver lost 55 cents to $17.46. The systematic unwinding of futures and hard positions has been underway for the better part of three weeks and is accelerating.

Recessions are widely defined as negative growth, but two elements that are usually in play are job losses and negative pricing pressure. In the absence of a stable, growing labor force, companies have trouble raising prices, which, in turn, puts pressure on profits and cyclically engenders even more layoffs. The cycle is beginning to churn more swiftly of late, and there's little the Fed or any governmental agency can do to slow it or stop it.

Dow 11,632.38 +29.88; NASDAQ 2,325.88 +21.92; S&P 500 1,282.18 +5.18; NYSE Composite 8,580.57 +13.92

As for stocks, advancers beat decliners, 3791-2515. New lows remained ahead of new highs, 187-133, much closer to parity than at any time over the past 2+ months. Once this reading breaks in favor of the new highs, expect it to last for some time - maybe two to three weeks - before markets begin heading lower again.

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That particular metric is going to become a more difficult read in coming weeks. Remember that the first wave of the bear market began in August of 2007, so it has been nearly a year of declining fortunes on Wall Street. Making more new lows is going to be difficult and we may see some days when the markets are sharply lower but there are more new highs than new lows.

With over 100 companies reporting earnings on the day, the major news was that $25 decline in gold. If gold price cracks, expect everything else to come tumbling down as well. All goods and services will be less expensive, but, how many people will have jobs - and money - to buy the newly-lower-priced items?

Something to ponder over the next 6-9 months.

NYSE Volume 1,725,843,000
NASDAQ Volume 2,726,705,000

Suspicious Surge Sends Stocks Soaring

Stocks on US indices dawdled along through most of the session, with the major indices just barely breaking into positive territory. That tepid mood was shattered in the final 45 minutes, as a trading frenzy sent the Dow - which was up only 30 points at 3:15 pm - up an additional 100 points. The other major indices responded in similar fashion.

Dow 11,602.50 +135.16; NASDAQ 2,303.96 +24.43; S&P 500 1,277.00 +17.00; NYSE Composite 8,566.65 +66.91

As these kinds of surprise surges have become more commonplace of late, this one was a bit more spectacular than most, whether it was the PPT plying their trade, or short sellers in a rush to cover, the result was a parabolic rise that sent waves of euphoria across the financial world.

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Much of those good feelings have been felt in the financial sector, which is up a stunning 25% over the past five sessions. Leading the way are the major commercial, regional and specialized banks.

The entire sector movement is curious... and probably overdone. These are the same characters that caused the current and ongoing crisis, and there's no good evidence that the danger has completely passed. This looks more like organized buying and some degree of speculation that the Fannie Mae and Freddie Mac episode marked the ultimate bottom of the market.

As much as anyone would like to call an end to our economic malaise, it's not like the Fed and Treasury waved a magic wand and made everything and everyone whole. Wachovia Bank (WB), which reported today, posted an $8.9 billion loss for the second quarter, cut its dividend 87% and announced layoffs affecting 10,750 people, mostly in the mortgage departments of their business.

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So, for people working and living in and around Charlotte, NC, where the bank is headquartered, the gains on Wall Street are a real slap in the face. Following those wretched results, Wachovia ended the day higher by 27% (16.79, +3.61). Of course, that's still a far cry from Wachovia's high of 53 last October, but there's little doubt the market today has divorced itself from reality.

Home foreclosures are still running at a record rate. The dollar's decline continues unabated. Oil, while down somewhat of late, is still pricey. Over 100 banks in this country are in danger of failing, and the kicker, layoffs, have just begun to stir. Two months from now, the upward moves of the past week will look silly in retrospect.

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This move is either technical - a condition of an oversold market - or pure fiction put out there by the slimy Wall Street and government manipulators who don't want the American people to know the truth. It's probably a bit of both.

On the day, gaining stocks rolled past losers, 4278-2009. New lows continued to beat down new highs, 211-105.

Oil finished lower by $3.40, to $128.42. Gold was slapped down $15.20, to $948.50 and silver lost 42 cents to $18.01 the ounce. As has been the case recently, commodities are being slammed back to earth by slack demand. Nobody wants to pay high prices and many have sought alternatives. It's the market, and it works.

Stocks are likely to continue on their merry way through next week as earnings pour in with sullen results, but brokers call it the end of the line and good times are just around the corner.

They're mostly liars and con men, people who think the economy is in good shape. It's about to fall over a cliff, and a steep one at that. The rallies of the past five sessions have the fingerprints of Ben Bernanke, Henry Paulson and their agents at Goldman Sachs, Lehman Bros. and Merrill all over them.

NYSE Volume 1,377,470,000
NASDAQ Volume 2,546,640,000

Oil Up, Stocks Retreat

A couple of pharmaceuticals, one a blue chip - Merck (MRK 35.33, -2.35) - and Schering-Plough (SGP 18.95, -2.49) helped drive down the Dow on unsatisfactory news concerning cholesterol drug Vytorin. Bank of America (BAC, 28.56, +1.07), another Dow component, helped stabilize the market by reporting earnings that were not as bleak as analysts had expected.

It was a pretty dull day considering the number of companies reporting earnings on the day (85+). Of course, heavyweights Apple (AAPL) and American Express (AXP) report after the closing bell.

Volume was dishearteningly light. We're still in a major bear trend, despite recent gains. Look for more sideways trading over the next few weeks and days. We're back to a directionless market for the time being.

Dow 11,467.34 -29.23; NASDAQ 2,279.53 -3.25; S&P 500 1,260.00 -0.68; NYSE Composite 8,499.74 +45.89

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Advancers: 3760
Decliners: 2509

New Highs: 68
New Lows: 187

Oil: 131.82, +2.35
Gold: 963.70, +5.70
Silver: 18.43, +0.23

NYSE Volume 1,037,603,000
NASDAQ Volume 1,760,719,000

Rally Petering Out?

For the week, stocks staged a fairly healthy rally, with Wednesday and Thursday each producing 200+ point gains on the Dow as positive earnings - especially from companies in the finance sector - and a big drop in the price of oil helped stocks regain some of their lost ground.

Friday was more of an up-and-down affair. While techs slumped, a late-day mini-rally pushed the Dow, S&P and NYSE Composite into positive territory for good.

Dow 11,496.57 +49.91; NASDAQ 2,282.78 -29.52; S&P 500 1,260.68 +0.36; NYSE Composite 8,453.85 Up 38.80

Volume on the exchanges was light compared to the last two days, a sure sign that investors have established their positions and will wait for cues from the market. Next week is the height of earnings season, with much of the S&P 500 and many Dow stocks reporting.

For the week, the Dow ended 396 points higher, the S&P tacked on gains of 21 points, the NYSE added 106 and the NASDAQ pushed ahead 43.

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Internals were a close call on the advance-decline line, with losers narrowly beating gainers, 3193-3072. New lows continued to outpace new highs, 235-90, a reading nearly identical to yesterday's.

Oil dipped 71 cents, to close at $129.47, the lowest close in months. The metals confirmed once again, with gold down $12.70, to $958.00, and silver off 54 cents to $18.20.

The continued sluggishness in the commodities suggest the coming of a new threat, that of slack demand, which can only push prices lower. Considering the heights that prices have reached in recent months, this should come as no surprise. In the case of oil, especially, the need to purchase fuel of all kinds has caused a backlash in the markets, and they are rapidly unwinding.

A sharp decline in commodity prices is going to cause assorted problems across the supply spectrum. No sooner have companies adjusted upwards, prices will have to reverse course. Naturally, some will respond sooner than others, but the entire world's commercial system is now in a state of flux and expectation. Without price stability - a stated goal of the Federal Reserve and other central banks - markets will gyrate wildly, with no established reference points.

All of this is troublesome, and a precursor to global recession. The handwriting is clearly on the commodity exchange wall. The coming storm is likely to be neither short in duration nor easily constrained. The best one can hope for is a modicum of sanity in markets, though even that may be a stretch.

As the continued credit crisis unfolds, it gets more and more interesting, but also vexing and potentially deadly to commerce everywhere.

As a medium to long-term strategy, keep focused on prices for all goods, materials and services to decline, including stocks, but especially commodities. It will take time and a healthy dose of skill for companies to adjust to rapid price changes in the marketplace. Some will crack under the burden, while a select few will benefit handsomely.

NYSE Volume 1,587,686,000
NASDAQ Volume 2,259,207,000

Earnings, Oil Boost Stocks Second Straight Day

Folks, we have a serious sucker's rally going. Or, more to the point. We had a sucker's rally going. Two day's of jubilation ended with a thud after the bell.

Some of the more unusual moves noted are:

eBay, which posted a 22% better profit than a year ago and beat analyst expectations by 0.02 cents, was slammed by investors, down 3.90, to 24.20, a nearly 14% haircut, when the company forecast was lower than expectations for the 3rd quarter.

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JP Morgan Chase (JPM) beat lowered street estimates by 0.10, but posted earnings 53% lower than a year ago. The stock soared 4.86, to 40.80, a gain of 13.5%.

After the bell, Google's (GOOG) profit rose 35% from the same period a year ago, but missed analyst expectations of $4.74 per share by 11 cents, returning $4.63 after one-time items. Shares ended down 40 points in after-hours trading, a drop of 7.63%.

Merrill Lynch, which was up 2.73 during the ordinary session, fell by 2.08, to 28.65, in after-hours trading when the company reported its 4th consecutive quarterly loss after the bell. The company lost a blistering $4.89 billion in the second quarter and is selling its equity stake in Bloomberg and its Financial Data Services subsidiary for a combined $7.9 billion.

The brokerage wrote down another $9.8 billion. The loss per share was a whopper: $4.97.

Expect the markets to get back to selling on Friday as the late-day news was none-too-encouraging.

Still, stocks soared again on Thursday as investor sought out bargains across the spectrum and boosted shares of beaten down companies. The Dow gained nearly 500 points over the past two session, but the good times seem to be a fleeting memory.

Dow 11,446.66 +207.38; Nasdaq 2,312.30 +27.45; S&P 500 1,260.32 +14.96; NYSE Composite 8,415.05 +82.23

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On the day, advancers pushed by decliners, 4503-1851. The gap between new lows and new highs was narrowed again, with new lows ahead, 272-90. Trading voluem was brisk.

Oil sold off for the third straight day, down $5.14 to $130.18. Gold gained $8.00, to $970.70, but silver lost 7 cents per ounce, to $18.74.

Should be an interesting get-away day on Friday.

NYSE Volume 1,970,761,000
Nasdaq Volume 2,707,973,000

Big Sucker Rally on Oil Price Drop, Wells Fargo Earnings

Well, since Fannie Mae and Freddie Mac didn't fall over and die - though they will need much help from the Federal Reserve and the US Treasury to stay afloat - and the price of oil dropped for the second straight day, US equity investors got the relief rally many of us were looking for last week.

Also contributing to the general euphoria was second quarter earnings from Wells Fargo bank, which actually beat estimates and was rewarded with a 32% gain. The rest of the financial sector followed the lead and the market followed and piled on the gains.

Naturally, while stocks were soaring from legitimate investment purchases, there had to be more than a fair share of short covering which boosted stocks even more. Sentiment, which has been decidedly negative in recent days and weeks, does not change overnight.

There are still many unanswered questions and hurdles for the US economy to clear.

The horrific credit conditions in the USA have not simply vanished because the Fed and Treasury averted a collapse of two major institutions. In case anyone cares, interest rates - especially those covering residential mortgages - have been rising and banks are still loathe to lend to anyone but the most stable, less risky companies and buyers.

Meanwhile, home prices are still falling, and, as the CPI figures released prior to the market's opening this morning showed, inflation is still raging right along. CPI for June jumped 1.1%, with core CPI up 0.3%. Those are hardly encouraging figures, though they mask the real problem, which is, oddly enough, deflation.

If the US economy continues to sputter and stall and credit conditions do not improve, very simply, there is going to be less spending, and according to the most rudimentary economics rules, less money chasing the same amount of goods equals lower prices.

Now, the rest of the world may not be in the same dire straits as the USA, but they certainly are feeling a bit pinched in most parts of the planet. Since lower prices usually result in companies' turning lower profits, this scenario is not at all good for stocks.

That's the next position we'll be in. First, housing falls, then stocks fall (where we are now), then, as the fundamental security of and confidence in the currency and the financial institutions begins to erode (also current), consumers pull back. What's prevented this from happening were those billions of dollars in checks sent to millions of Americans. They've been sent, and spent, and now comes the real test, as the US economy tries to muddle through without artificial stimulus.

I'm betting that conditions will worsen before they improve, regardless of what will likely be a follow-through rally the remainder of this week on any positive earnings news.

Dow 11,239.28 +276.74; NASDAQ 2,284.85 +69.14; S&P 500 1,245.36 +30.45; NYSE Composite 8,332.82 +175.02

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Don't get me wrong. It's nice to see plus signs in front of numbers for a change. I just don't think we're anywhere close to being out of the woods. We are getting closer to a bottom, however, and while I may not paint the rosiest of pictures, mine is at least realistic and based upon some experience from the past 30+ years.

I do believe that the final capitulative move to the bottom will occur this year, and that the US will be in recovery while other nations will be just beginning their downturns.

On the day, internals were a far cry from the dismal figures of the past month. Advancing issues outperformed decliners handily, 4877-1529, though new lows were still well ahead of new highs, 615-73. It's important to note that there were about 1000 fewer new lows today than yesterday. Bottom fishing, anyone?

Oil played a pivotal role in the market's one-day success, pricing lower by $4.05, closing at $135.32. As expected, the metals confirmed, with gold losing $16.00, to $962.70, and silver falling 21 cents to $18.81.

The good news is that everything, stocks, gold, gas, food, clothes, video games, rents and homes is going to be less expensive. The bad news is that it will be that way because there are so many people unemployed with no money to buy anything.

The fallout from the recession we're in (and we are in a recession, despite all the "official" measurements out there) haven't been fully manifested throughout the economy. Those include lowered corporate earnings and layoffs, which are certain to follow.

So, the lesson for today is simple: Chew before you swallow.

NYSE Volume 1,731,048,000
NASDAQ Volume 2,466,144,000

Market Turmoil Abounds

With Fed Chairman Ben Bernanke pleading with Congress for unlimited powers to fund failing mortgage lenders/underwriters Fannie Mae and Freddie Mac, US equity markets are nearly in panic mode.

After early steep declines on Tuesday, markets advanced in unison until the final hour of trade, then sold off rapidly.

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Bernanke, testifying before the Senate Banking Committee along with Treasury Secretary Henry Paulson, disclosed and discussed a plan that would allow the United States Treasury to purchase an equity stake in both Fannie and Freddie and give the Fed wide-ranging ability to make loans to the troubled GSEs (Government Sponsored Enterprises).

Prior to the Senate dog-and-pony show, the market was treated to another in a series of troubling PPI reports, this one showing PPI up by a staggering 1.8% and core PPI (which excluded energy and food) up by 0.2% in June.

That sent the indices reeling into the red, as more and more bad news comes over the wires in a seemingly-unending stream. And second quarter earnings are just beginning to hit the Street.

Dow 10,962.54 -92.65; NASDAQ 2,215.71 +2.84; S&P 500 1,214.91 -13.39; NYSE Composite 8,157.80 -129.96

Market internals were severely tilted to the negative. Losers crunched gainers by 4330-2091. New lows hit an extreme high of 1720, to just 68 new lows. Once again, the persistence of a high level of new lows (now nearly 1 of every 4 stocks) is indicating the possibility of a cataclysmic event at any time and the news continues to confirm that the US economy is in its worst state since the Great Depression of the 1930s.

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Oil fell $6.31, to $137.39, while the metals were mixed. Gold gained $5.00 to $978.70, while silver fell 24 cents to $19.01. Sooner or later, these prices are all going to plummet. The US - and to a large extent the world - economy is in dire straits.

A massive one-day decline in now in the cards, probably within the next two weeks.

Warning! The US is a Falling Stock Zone.

NYSE Volume 1,747,139,000
NASDAQ Volume 2,774,362,000

United States: Too Big to Fail?

We are a nation of inattentive spendthrifts, overseen by morons, liars and crooks, all driven by greed, envy and fear.

There is little doubt that today's action to salvage what little credibility is left of Fannie Mae and Freddie Mac, spelled out in some detail by Treasury Secretary Henry Paulson, are nothing more than parlor games designed to dupe the masses into the false belief that our nation's financial condition is not imperiled.

We're screwed, we're heavily in debt and our future prospects are about as bright as a high school dropout's chances of getting hired to an executive position.

Both Freddie and Fannie were fractionally lower on the day.

The simple formula is that both entities, which package and resell mortgages as bonds to investors, will now be able to borrow at the Federal Reserve's discount window at the low, low rate of 2.25%.

Isn't that lovely? Shouldn't we all simply spend at will, run up debts larger than we can repay and then allow the federal government (in other words, taxpayers) to bail us out? Is this the new path to the American dream?

Dow 11,055.19 -45.35; NASDAQ 2,212.87 -26.21; S&P 500 1,228.30 -11.19; NYSE Composite 8,287.76 -59.48

As for the markets themselves, investors were hardly amused. Stocks took their usual path to a lower close: higher at the open, then much lower, with the usual post-3:00 pm short-covering bounce back to break even, before ending down a bit.

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This sluggish behavior in the markets will persist until the manipulating brokerages and government interlopers feel they have squandered more than enough paper money than they can reasonably afford, and then stocks will really sink, like back to 1998 levels, or lower.

The plain truth is that, as a nation, we have gone from being the world's greatest creditor - replete with industrial, financial and military might - to being the world's largest debtor. Sadly, all we have left in the might department is the military, and we use that to bully and bludgeon lesser nations for their resources.

We are a deteriorating nation, and it is happening much faster than anyone ever assumed it would.

On the day, declining issues outpaced advancers by a wide margin, 4623-1769. There were 1053 new lows to just 77 new highs. Volume was on a scale of 4-1, favoring the down side.

Oil was up 12 cents to finish at $145.78, while the metals made a strong showing. Gold gained $13.10 to $973.70 and silver added 43 cents to $19.25. Both are approaching recent highs.

Buying stocks now, as it has been most of the last 12 months, is a fool's game. If you're not out of the market completely, the only place to be is on the short side.

NYSE Volume 1,419,180,000
NASDAQ Volume 2,037,816,000

The Fannie and Freddie Show

Anyone who still believes that US equity markets are either safe, fair or honest, needs to take a look at today's charts. All of the major indices were down massively at 2:30 pm. The Dow was down 250, the NASDAQ, down 55, the S&P down 32. Just before 3:00 pm all of them turned positive.

Somehow, that kind of move does not make any sense. There are nefarious forces at work, and they are likely those of the government, in the form of the Plunge Protection Team (PPT), or the President's Working Group on Financial Markets.

Only they have the power to make markets move massive in one direction over very short periods of time. And by the way, they're the same group of people who are likely behind the current mess we're in, having stolen most of Freddie Mac and Fannie Mae's assets years ago.

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Speaking of those two near-insolvent GSEs (Government Sponsored Entities), stocks were lower largely because most of the people who know a little about this stuff think they're going to go under, meaning that $5 Trillion worth of real estate loans will no longer be guaranteed by our wise and beneficent federal government. (It's probably for the best. They can't pay their bills as it is, so why not just default on everything?)

What will happen is a sharp rise in interest rates and a further deterioration of already seized up credit markets. The US economy is on the verge of complete catastrophic collapse, and those at the top of the heap - politicians, CEOs and mainstream news media - don't want us to panic. That's why the stock indices were only don their piddling amounts today, and not double or triple that.

But those losses are coming.

Sooner or later all manipulation schemes fail, and this one has run its course. Look for 10,000 on the Dow within 60 days and 8,500 or lower by year's end. There isn't enough good news around to save us. Even capturing Osama bin Laden (a good bet by November if the markets are down and the Republicans are down in the polls) will only boost stocks a little bit. Maybe 1000 points on the Dow, and even that won't last long.

Dow 11,100.54 -128.48; NASDAQ 2,239.08 -18.77; S&P 500 1,239.49 -13.90; NYSE Composite 8,347.24 -88.70

This is all about debt. Our banks are deeply in debt, to the point at which they have been selling off assets to raise capital. So are brokerages, investment banks, the Federal Reserve and the US government, and nobody has figured out a way out of debt.

Try reducing military spending by $500 billion a year, ending the war in Iraq and getting out of Afghanistan for starters. Too tough? Too bad, then. You lose all your assets.

Declining issues overwhelmed advancers again, 3793-2514. New lows beat new highs, 1210-77. Nearly 1 in 5 stocks on the NASDAQ and NYSE hit new lows today. No two ways about it, that's just plain ugly.

Oil finished up $3.33 at $145.66. Gold was up $18.60, to $960.60. Silver added 50 cents to $18.82. All of those prices are close to record - and unsustainable - highs.

Soon enough, everything is going to crash in price. Houses already have, and commercial real estate is beginning to crack. Stocks are down more than 20% from their year-ago highs. Commodities will be the last to go, but when they do, the losses on Wall Street will be enormous.

Remember Gordon Gecko, from the film Wall Street? He said, greed is good.. Well, allow me to paraphrase, as our so-called leaders try to avoid you and I panicking over our economic conditions. Panic is good.

Have a nice weekend. Enjoy it as best you can, because next week earnings reports begin flowing to market in earnest and they're going to be bad, very, very bad.

NYSE Volume 1,734,346,000
NASDAQ Volume 2,386,000,000

Wall Street Getting, Sending Mixed Signals

In yet another volatile session for stocks, the major indices ended slightly higher, amid worries over the solvency of mortgage underwriters Fannie Mae and Freddie Mac, and continuing focus on the price of oil.

While Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson spent the better part of the day testifying to Congress on the state of the economy, equity, bond and currency markets gyrated wildly, seemingly hanging on every word and nuance from the pair.

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In the end, the dollar was higher, then lower, against the Euro and Pound, but higher against the Yen and Swiss Franc. Dow stocks took an up-and-down round trip of 180 points, eventually ending higher by less then 1%.

Bonds rallied then sold off, as the final word from Bernanke was that the credit crisis - which has gripped financial markets since last August - appeared to be easing, with banks borrowing less and investment firms not borrowing at all in the most recent week.

That news came to the markets at the very end of the day, but managed to move the equity indices off break-even or negative to reasonably solid gains.

Dow 11,229.02 +81.58; NASDAQ 2,257.85 +22.96; S&P 500 1,253.39 +8.71; NYSE Composite 8,435.94 +64.31

Signals being sent by the Fed and Treasury were mixed, as were movements on the stock markets. On the one hand, Bernanke wanted broader powers with which to handle financial crises, like the Bear Stearns blow-up in March, while his counterpart at Treasury, Paulson, urged a plan that gave the Fed less control.

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Stocks, difficult to read even in the best of times, were simply impossible today, spending equal parts of the day both over and under the flatline.

Looking at the internals, gainers outnumbered losers by a small margin, 3387-2885. The spread between new lows and new highs, however, was still startlingly high, with 811 new lows to just 55 new highs. This elevated spread between the new low and new highs has been a persistent factor for more than a week now, though it should be pointed out that, with the exception of a handful of days, there have been more new lows than new highs every day since October 31 of last year.

In the way of good news, there simply wasn't much today. Warnings that the nation's mortgage underwriters - Freddie and Fannie - were in danger of default acted as an anchor on the financial sector and the entire market, as did concern over the continued viability of investment banking house, Lehman Brothers.

Fannie Mae (FNM) finished the session down 2.11 at 13.20, while Freddie Mac (FRE) closed 2.26 lower, at 8.00. Stock prices for both firms were at their lowest levels in 17 years.

Recession fears resurfaced in a number of widely circulated opinion pieces and most notably in Great Britain, where expectations of an economic downturn are beginning to look a lot like those in the US, where we are already in a recession, even though official government statistics belie the fact.

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Meanwhile, commodity markets marched higher. Oil reversed the losses of the past few days by adding another $5.61 to the price of a barrel of crude, closing at $142.33. Gold shot up $13.40 to $942.00, while silver gained 15 cents to finish at $18.32.

Finally, RealtyTrac, Inc. reported that foreclosure filings skyrocketed 53% in June while bank seizures were up a whopping 171%.

For what was supposed to be a slow news day prior to the start of earnings season next week, there certainly was a load of data and information for the markets to absorb.

If the United States is going to avoid a complete financial collapse, it won't be by much, and there seems to be more evidence that the rest of the world will suffer a slowdown as well. Some Far East nations may escape the clutches of full-blown recession, but they are few and far between.

NYSE Volume 1,534,140,000
NASDAQ Volume 2,300,481,000

Bears Exact Their Revenge

Following Tuesday's suspicious late-day, short-covering rally (yes, now we know for sure, that it was more short-covering than actual buying interest), bears mauled the market in a merciless attack at stocks of all kinds.

Regardless of the cause - be it the price of crude, fires in California, rotten tomatoes or worsening credit conditions worldwide - nobody was very interested in buying stocks, nor will they be for some time. Today's close on the Dow was a 23-month low, the lowest point since August of 2006.

Dow 11,147.44 -236.77; NASDAQ 2,234.89 -59.55; S&P 500 1,244.68 -29.02; NYSE Composite 8,371.63 -144.16

With second quarter earnings due out over the next three weeks, July promises to be as ugly, or even moreso, than June, a month in which the blue chip index lost nearly 1300 points. Thus far - over the span of just 6 trading days, the Dow has given back more than 200 points. The other major indices fared equally as poorly, though, somewhat amazingly, the NASDAQ still has not fallen below its March 10 closing low, of 2169.

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The S&P 500, however, today closed well below the March 10 close of 1273. The NYSE Composite is well beyond the March 10 close of 8534. These are historic bear market finishes and it's obviously far from over.

Declining issues roared past advancers, 4266-2035, while the gap between new lows and new highs was somewhat muted, with 440 new lows to just 60 new highs. Volume was moderate, though most of it (over 80%) was to the downside.

Oil finished higher by a mere one penny, at $136.05 on the NYMERC. Gold gained $5.30 to $928.60, while silver added 22 cents to $18.18.

NYSE Volume 1,488,884,000
NASDAQ Volume 2,259,971,000

Short Squeeze Bounce

We all knew it was coming, didn't we?

Surely stocks could not continue to fall precipitously into the financial abyss as they have over the past month. Sooner or later there would be a Bear Trap, and that trap was sprung at 2:25 pm today.

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The Dow was sitting at break-even at that moment. From there to the close, it gained 152 points, as all indices finished solidly in the green.

There was ample reasoning for both the bullish and bearish case, though in the end, the plummeting price of crude oil took the market along for a merry ride upwards.

Dow 11,384.21 +152.25; NASDAQ 2,294.44 +51.12; S&P 500 1,273.69 +21.38; NYSE Composite 8,515.79 +115.58

Earlier in the day, the National Association of Realtors (NAR) produced another horrific report on the housing collapse, showing pending home sales for May down 4.7%, nearly 2% worse than expectations. The news was enough to send all the indices briefly into negative ground before noon.

Wholesale inventories were slightly improved, at 0.8%, better than last month's reading of 1.4%. When inventories are high, which they are now, it is a sure sign of sluggish business conditions. No surprise there or to any investors paying attention.

On the day, the internal numbers were a bit brighter than has been the norm. Advancing issues outperformed decliners, 4336-1995, a ratio of better than 2-1. New lows continued to dominate new highs, 806-52, and though that number is highly out of balance, it is better than yesterday's dismal reading.

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All of that makes sense in light of today's gains. The market had hit a temporary bottom, with new lows burying new highs. It was high time for a relief rally. The Dow actually put in a quadruple bottom in the 11,160-11,200 range. The key question is whether today's rally was more short-covering or speculation and whether it has legs to continue tomorrow. Judging by the strong close, the next few days could be troubling for short-sellers.

By the end of the week, however, the market could easily revert to protracted losses as earnings season gets into full swing. There have been warnings sounded and the high price of crude is likely to drag down profits all around.

Speaking of earnings, what had the market spooked was the traditional first company to report - Alcoa - which did so after the close. Skeptics were disappointed as the company said profits slid 24%, but still met expectations. Alcoa (AA) earned 66 cents as compared with the second quarter of '07, in which it earned 81 cents. The stock, battered during the regular session, beat expectations by .02.

As for commodities, crude oil took a major spill on Tuesday, losing $5.33, to close at $136.04. Oil is off nearly $10 since the high last Thursday, which coincided neatly with the busiest driving weekend of the year in the USA. Gold lost $5.50, to $923.30, while silver added 4 cents to $17.96. More evidence that the commodity boom is coming to a hasty conclusion.

As the balance of the week offers little in the way of either economic reports or corporate earnings releases, there may be some bottom fishing before the weekend. All bets are off after that, however.

NYSE Volume 1,728,487,000
NASDAQ Volume 2,499,119,000

Up, Down and Mostly Nowhere

If today's trading was to be compared to a roller coaster ride, that analogy would be most appropriate. Stocks took a wild ride on Monday, up, then down, then back up and eventually down again.

Dow 11,231.96 -56.58; NASDAQ 2,243.32 -2.06; S&P 500 1,252.31 -10.59; NYSE Composite 8,400.21 -81.33

To the untrained eye, today's charts would seem to show that investors didn't know what they were doing, but, in fact, they did, and they did it quite well. First, they cheered the drop in the price of oil, then the realization that even at $140 per barrel, it still was expensive, and the selling ensued. In the afternoon, an oversold condition brought out bargain hunters and short-covering traders. Late in the day, market realities took hold and all indices ended lower.

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Traders should become accustomed to this kind of market. There's no direction except down, but various false bottoms could be put in place, sparking rallies which could turn on a dime, such as today's.

With the market in such a fragile condition, earnings reports are likely to engender moves in both directions.

The internals, however, are still quite negative. On Monday, losers beat gainers, 4326-2028. New lows overwhelmed new highs by an incredible 1137-43. That is the largest margin since March, when the markets were carving out new lows, as they did today.

As mentioned earlier, oil tumbled $3.92, closing at $141.37. Gold fell $4.80 to $928.80 and silver lost 45 cents to $17.92.

All told, everyone had a grand time, despite the unstable conditions. Most of the bullish crowd is waiting for the inevitable bounce, though they know in their hearts that even a 500-point move on the Dow could be very short-lived.

NYSE Volume 1,522,468,000
NASDAQ Volume 2,351,769,000

Market Looking Past Independence Day

Considering the conditions in the market on July 3 - shortened trading session, busiest driving weekend upcoming - the key impression from today's tone of trade was one of looking ahead. Some brave souls staked out new positions after a couple of key economic reports, but from 10:30 until the market's early close at 1:00 pm, the indices drifted in a narrow range, closing positively, with the exception of the NASDAQ, while the Dow displayed leadership.

Dow 11,288.54 +73.03; NASDAQ 2,245.38 -6.08; S&P 500 1,262.90 +1.38; NYSE Composite 8,481.54 +16.03

It's somewhat fitting that the Dow would show strength the day before we commemorate our independence from England's tyranny. The Dow Jones Industrials are - as a group - representative of American financial might. Closing higher prior to the holiday leaves a pleasant aura over the markets.

The two economic reports were the Labor Dept.'s June Non Farm Payroll data, which showed a loss of 62,000 jobs for the month, and the ISM Services Index, which fell to 48.2 from a May reading of 51.7.

As for the prospects for next week and the rest of the month, first good, then bad. With almost two full weeks of trading available before corporate reports for the second quarter begin to clog the market, there's ample opportunity for a bounce back to 11,700 on the Dow. Excluding today, the Dow has dropped a rock-like 1813 points since May 19 (13,028-11,215), and is in a technically oversold position.

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While future prospects range from dim to dull to bleak, the opportunity for a 300-500 point bounce within the coming two weeks is paramount. After that, all bets are off, because, as I have been saying, and according to no less an ardent voice than Standard & Poor's themselves, second quarter corporate profits are expected to be weak. There's no secret here. The economy is figuratively in the crapper and stocks have not reflected the fact yet.

That said, oil prices should ease (where have we heard that before?), following the peak demand holiday weekend. I should include this caveat: that my judgment of the price of oil is based upon a theory that it largely anticipates demand and after July 6, when folks return from weekend trips, there's likely to be a sag. Consumer's pockets will be generally emptied at the filling stations across the nation as prices peak.

So, with oil going lower and the market in a temporarily oversold condition, the timing and rationale for a slight bump upwards is logical.

On the day, internals were the same as always. Declining issues beat advancers by an unhealthy margin, 3886-2217. New lows overwhelmed new highs by an amazing 898-44.

At last glance, oil was already easing, up just 19 cents, at $143.76. The metals, in their continuing gyrations between peak and interim support, were lower. Gold dropped $11.70, to $934.80, while silver shed 15 cents to $18.28. Please note that the commodity markets were still open and trading as of this writing.

Enjoy the 4th, and remember, our freedom is guaranteed by the constitution, not our leaders.

NASDAQ Volume 1,427,788,000

High Oil Killing Economy

Well, hating to sound like a broken record, I'll just toot my own horn instead.

Here's what I said on April 23, 2007, in a post titled, "We Will Drown in Barrels of Oil":

"If anything can derail the economy all by itself, it's high energy costs, which have been a noticeable drag for the past two years at least."

Both before and after that comment, I made the case for why it was such, why it should be avoided and how well-manipulated and controlled the oil markets are.

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After today's completely uncontrolled trade on the NYMEX and elsewhere, there's little doubt about it. High fuel prices are killing the global economy. Oil closed at $143.58, up $2.61 on the day, a new record.

Stocks, which were higher until 11:00 am, fell precipitously as afternoon oil trading pushed higher and killed any buying interest in stocks.

Generally speaking, the price of oil, diesel, gasoline, home heating oil, natural gas (which has doubled in price since last year), propane, jet fuel or anything even remotely related to petroleum is depressing everybody and every thing.

It's a simple matter of economics. As the price of crude rises, everything else becomes less affordable. From food to computer chips, nothing is spared. So, investors are not very much amused and sell their stocks in disgust.

Dow 11,215.51 -166.75; NASDAQ 2,251.46 -53.51; S&P 500 1,261.52 -23.39; NYSE Composite 8,465.51 -175.77

The bad news is that the oil producers and big oil companies are happy, and Congress and/or the President has neither the will nor the desire to do anything about the big squeeze oil is putting on the public. The good news is that the price of oil - at these levels - is unsustainable. If people can't afford to drive to work or heat their homes, people will lose jobs, get sick, die, cause riots and disrupt the normal flow of commerce, which, truth be known, won't be flowing all that well in the first place.

Businesses fail, people stop driving, oil prices will either go down or stay at the same level without as much demand. Eventually, supplies will be available everywhere and the bubble that is the oil futures market will pop like an overinflated helium balloon.

The other good news is that this is the busiest driving weekend of the year, so the price of gas is likely at a peak. Well, at least it may be good news next week, next month, next year.

Market internals were absolutely in tatters. Decliners overwhelmed advancers by a nearly 3-1 margin, 4651-1686. New lows outpaced new highs, 817-108.

By contrast, the metals did not gain as much as cousin oil. Gold advanced $2.00 to $946.50; silver was up just 14 cents to $18.43.

In case anyone thinks we're close to a market bottom, be reminded that tomorrow, prior to the opening of the exchanges, the Labor Dept. will release June Non farms Payroll data. Analysts are looking for losses of 50-60,000 jobs in the month, which, in itself is reason to sell. Job losses beyond those numbers will send markets reeling once again.

Bottom, What Bottom? Not Yet, Say Investors

Watching the Dow drop more than 150 points shortly after noon today, one had to wonder where the bottom feeders, bargain hunters and especially, the short-covering traders had gone.

The answer came as swiftly as a falcon swooping in upon some unsuspecting prey, and with equal ferocity. Just before 2:00, the market made a sudden about-face, and by 2:45, the Dow was sporting a 50-point gain. Market participants had not gone away, they were just awaiting the proper catalyst.

What moved the market - first lower, then higher - were auto sales, which were dismal with the notable exception of General Motors (GM, 11.75, +0.25). The top US auto maker reported a sales decline of 18%, not a stellar number, but still better than expected.

Add to that the Institute of Supply Management's (ISM) June reading of 50.2, following a string of sub-50 readings (which indicate contraction), and the markets were off to the races.

Stocks finished marginally higher, as investors, still weighing inflation, high oil prices, the financial market's generally dour condition and continuing housing woes, are not about ready to spark off a full-blown rally. That could happen as soon as tomorrow, considering that the Dow has fallen nearly 2000 points since mid-May, and is in a technically oversold condition.

Dow 11,382.26 +32.25; NASDAQ 2,304.97 +11.99; S&P 500 1,284.91 +4.91; NYSE Composite 8,641.28 -19.20

On the day, decliners still overwhelmed advancers, 3709-2634. New lows expanded to their largest margin over new highs in some time, 1154-77. A new high-low reading such as today's shows an incredible weakness in sentiment, though it is very possibly a peak for that reading. As markets go, this one is definitely in line for a bounce upward, and it's likely to be soon and even more likely to be strong.

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On the other hand, the window for such a move upward is closing fast. There are only seven trading days before earnings season kicks into full swing on the 14th of July. If the market is going higher, it will be within the next two weeks, but it is very probably going to be short-lived, as second quarter earnings are generally expected to be below expectations.

Oil finished 97 cents higher at $140.97, while gold gained $16.20, to $944.50 and silver ended 78 cents higher at $18.29. Both gold and silver are closing in on near-term highs, but may not be able to sustain that momentum, depending on market conditions and sentiment going forward.

Look for a generally positive mood to overtake Wall Street as we approach the July 4 holiday. Nonfarm payrolls for June are announced prior to the open on Thursday, July 3, with analysts expecting another payroll loss of 50-60,000 jobs. While the figures are generally not reliable and often subject to wild revisions, the market pays rapt attention to them, so anything under a 50,000-job loss is going to be viewed very positively. Anything over 60,000 will not get much attention, as it's already expected, unless the job loss is spectacular, like over 100,000 - not likely.

NYSE Volume 1,642,701,000
NASDAQ Volume 2,643,266,000