Tuesday, March 31, 2009

April Fool's a Day Early?

Essentially, anyone who bought stocks after 10:30 this morning and held them into the close ended up with a loss. The Dow shot up up over 100 points to the positive at that point, tacked on 100 more by quarter to three, and then fell apart in the final 30 minutes, finishing with a gain, but less of one than had the markets closed 5 1/2 hours earlier.

For those foolish enough to believe portfolio managers were loading up throughout the day, their fate will be told in days ahead. The wisest of the wise bought stocks in the first half hour of trading, before the fools rushed in a day early. Everything that occurred during the session after 10:00 am was fluff and puffery, running in opposition to the economic reports of the day and the news, which was uniformly bad.

The S&P/Case Shiller Home Price Index [PDF] reported the worst month in the history of the series with a record 19% decline year-over-year for the February 2009 20 City Composite. Those numbers came out at 9:00 am, though the market chose to ignore them, opening the trading session with broad gains.

At 9:45 am, the Chicago Purchasing Manager's Index noted a decline for the month of March from 34.2 to 31.4 , its lowest level since 1980.

Finally, at 10:00 am, The Conference Board's consumer confidence reading edged slightly higher, to 26.0 in March, from 25.3 in February. The original February reading of 25 was an all-time low, though the revised reading still registered as the worst ever.

Meanwhile, GM and Ford announced plans to cover car payments for people who buy a new vehicle but lose their jobs, and Fritz Henderson, the new GM CEO, in his first full day on the job, said that more plant closings would be necessary and that bankruptcy would be "more probable" to a government workout. Stocks, in deference to reality, continued to soar through midday.

The Chicago Sun-Times filed for bankruptcy and President Obama flew off to London for a meeting of the G20, which, by most accounts, will accomplish nothing, as the parties are far apart on major issues such as taxation, regulation and stimulus. The conference begins tomorrow, though the demonstrations began in earnest today.

All of this led to a very fractured market at the close of one of the most volatile quarters in market history. Though March will be remembered as one of the best in market history, all major indices are down for the year by anywhere from 7-12%. and even though stocks finished the session with gains, there was a widespread feeling that the bears had actually carried the day.

Dow 7,608.92, +86.90 (1.16%)
NASDAQ 1,528.59, +26.79 (1.78%)
S&P 500 797.87, +10.34 (1.31%)
NYSE Composite 4,978.98, +79.93 (1.63%)

Nevertheless, advancing issues finished well ahead of decliners, 4720-1798, and new lows outnumbered new highs, 75-18, a string of daily wins for new lows which stretches all the way back to October, 2007, with the exception of 5 to 8 sessions with more new highs than lows. This has been the most accurate metric for measuring the market, since the bear market began in August of 2007, now stretching to 18 months, making this one of the longest bears in market history. Volume was off just a touch and seemed especially sluggish though the middle of the session, though very strong in the final 30 minutes.

NYSE Volume 1,638,661,000
NASDAQ Volume 2,145,532,000

Commodities were volatile as well though almost all ended with gains. Crude oil for May delivery ended the day higher by $1.49, at $49.90. Gold gained $7.30, to $925.00, while silver, the only loser of the major commodities, was down a nickel, to $12.99.

Market participants will be greeted early, at 8:15 am, by the ADP Employment survey for March, a precursor to Friday's government non-farm payroll report.

April Fool's Day starts a new quarter and a new month. March was the first month in six in which the Dow Jones Industrials registered a gain.

Monday, March 30, 2009

GM, Chrysler Kaput. Is This News to Anybody?

Remarkably, the monstrous sell-off to begin what surely will be a testy week for investors, had as its catalyst an announcement by the federal government that the plans submitted by GM and Chrysler were inadequate in terms of qualifying for further federal assistance.

Remarkable in that the two companies have shown limited ability to comprehend the depth of their own problems, let alone the issues facing the entire global economy or the dictates which have been nothing if not clear from the Obama administration. Both companies have already received government assistance in the billions of dollars, have had ample time to devise realistic plans for their futures, and, even then, are asking for billions more.

Anyone with half a brain still functioning who had seen snippets of their plans - especially that of GM - could have seen with one eye closed that their projections were completely out of line with reality. GM, for instance, based many of its assumptions on selling 14 million vehicles in 2010, when they didn't even crack the 9 million mark in 2008. As far as Chrysler is concerned, their problems should not be an issue of national importance. They certainly are not too big to failnor are they worthy of any kind of public assistance, since they are a private company 80% owned by equity investors, Cerberus Capital, which has at its head, former Treasury Secretary John Snow and long ago decided to put Bob Nardelli in charge of Chrysler, the same Bob Nardelli who oversaw, as CEO, the near-destruction of Home Depot (HD) . Cerberus has already shed itself of Daimler, the profitable German subsidiary, and plans to partner with Italian automaker Fiat, a company in the throes of its own meltdown.

If the managers at Fiat have any sense, they'll steer themselves away from this private group of corporate bunglers, as should the government and taxpayers. And if anyone thinks that CEO Rick Waggoner, who submitted his resignation Monday at the behest of the White House, should be the beneficiary of any sympathy, bear in mind that under Waggoner's leadership, GM lost nearly $100 billion dollars and continued to build cars, trucks, vans and SUVs that guzzle gas and have limited appeal as its market share shrank and its stock price cratered.

These two bankrupt automakers, like the corrupt, insolvent, worthless national banks, should be allowed to do what all companies which have ceased to be competitive do: fail, file bankruptcy and either liquidate or reorganize. There's no good cause to keep them functioning any longer even though the damage to the economy would be paramount. The UAW would see 180,000 workers furloughed, pensioners could lose most of their future benefits and bondholders would be forced to take 10% or less on their dollars.

Life gets very tough when you don't have a backstop to bail you out, but this fiasco is just a furtherance of the insane, contradictory polices emanating from the Capitol and White House. The government has become such a major intermediary into business and Wall Street that their refusal to dole out more corporate welfare to companies that don't get it, causes a stock market rout and a resumption of the fear factor which has gripped the country for months, but took a few weeks in abeyance during the recent bear market rally.

Today's losses sent every index and sector into a tailspin which actually started on Friday of last week and probably won't end until the market is back below 7000 and looking to retest the March 9 multi-year lows.

Looking at the markets realistically, the bounce off the lows was so rapid and mostly unwarranted that an equally-severe snapback should have been expected. Despite the closing numbers, stocks were down even more in late afternoon trading before a mini-rally and short-covering brought all of the indices off their lows of the day.

Bulls can take some heart in the idea that the markets didn't completely fall off a cliff, and that volume was not nearly as high as last week's, though it points up the conclusion of more savvy investors that there are still a good number of players out there waiting to be skinned by the bears in coming days and weeks.

According to Investors Intelligence's Weekly Sentiment Poll bearish sentiment at the market lows earlier in the month were not even 50%, checking in at 47.2% at the bottom, hardly an indication of a market bottom. Sentiment would have to be closer to 80%, signaling capitulation, a condition to which today may have put us closer. It now seems almost certain that before the end of summer the market will finally roll over and die, though a few more trillion of investor dollars will have to be vaporized before the message finally becomes clear to the massive numbers of ill-informed investors which populate all income levels, from novice to wizened veteran.

The US economy is wrecked beyond simple recession-like repair, our banking system at the top is dysfunctional (though many smaller local and regional banks are healthy and poised to grow), unemployment will continue to rise well past 10%, states and municipalities are broke, consumers tapped out, homeowners hunkered down against high taxes and utility bills and the federal government running out of excuses as fast as they concoct rescues.

We are in a world of hurt and if you don't recognize all of the patterns, you deserve to lose everything. It's that stark and simple.

Dow 7,522.02, -254.16 (3.27%)
NASDAQ 1,501.80, -43.40 (2.81%)
S&P 500 787.53, -28.41 (3.48%)
NYSE Composite 4,899.05, -197.59 (3.88%)

On the day, market internals were miserable and pointing towards even worse conditions. Declining issues overwhelmed advancers, 5373-1163, and while that's nearly a 5-1 ratio, it was closer to 8-1 midday, and will almost certainly approach those levels at least a couple of times in coming days and weeks. Stocks reaching new 52-week lows - moderated by the huge number of companies which had already collapsed by this time last year - numbered 109, as compared to the feeble 14 new highs. As stated above, volume was off a bit from last week's strong levels.

NYSE Volume 1,511,506,000
NASDAQ Volume 2,028,632,000

Commodities witnessed a resumption of the deflation trade, with crude oil taking a big hit, down $3.97, to $48.41. Gold lost $7.60, closing at $917.70. Silver shed 23 cents, to $13.03. Almost every other major commodity was traded lower, except natural gas, which finished unchanged at the depressed price of $3.80/mmbtu.

Other financial news was similarly dire. Washington Mutual (WaMu) and its key executives are the subject of a massive class action lawsuit, home foreclosures were sharply higher in February and JP Morgan Chase will refund over $4 million to credit card holders who began paying $10/per month in additional fees in January. The deal was struck under pressure from NY Attorney General Andrew Cuomo.

As the week progresses, more economic reports will be revealed, including home prices, consumer confidence, auto and truck sales, private sector employment, all leading up to Friday's non-farm payroll report for March and new unemployment statistics.

Hold onto your hats, but sell your stocks if you played and have any gains over the past few weeks.

Friday, March 27, 2009

Reality, Resistance Force Profit-Taking at Week's End

After becoming absurdly overbought, US equity markets finally produced an intelligent about-face on Friday, though there remain a large number of holdouts who believe that the current condition is something other than an abnormally-large bear market rally.

The major indices gave back most of Thursday's ridiculous gains but still finished the week very much on the positive side. There was little in the way of economic reports or company earnings filings, so investors were mostly on their own, playing the momentum trade, and the momentum had clearly run its course to the upside, as the NASDAQ ended in positive territory for the year on Thursday, but came back to earth on Friday and the Dow broke dangerously close to upside resistance at 8000 before backing well away today.

The week was the third straight that stocks had finished with gains, and, in case you're keeping score, was the 4th time this year that stocks ended a week higher, against 8 which closed on a negative note. For some perspective, the Dow is down exactly 1000 points for the year, while the NASDAQ is off only 34 and the S&P down 88, more in line with the Dow.

Obviously, the NASDAQ contains far fewer financial stocks and is overweighted with tech stocks and smaller corporations, so we may be about to witness the stock market equivalent of Revenge of the Nerds as new-age technology companies outperform older, more established (and with heavier debt burdens and legacy costs) companies on the Dow and NYSE. Speaking of the NYSE Composite, it has performed the on line with the Dow, down 660 points for the year.

Dow 7,776.18, -148.38 (1.87%)
NASDAQ 1,545.20, -41.80 (2.63%)
S&P 500 815.94, -16.92 (2.03%)
NYSE Composite 5,096.64, -133.89 (2.56%)

Internals were decidedly negative, with advancing issues being outnumbered by declining ones, 4896-1612, a 3-1 ratio. New lows continued to pour in ahead of new highs, though at a moderate pace, 110-25. That metric, despite the huge recent rally, has yet to roll over. When it does, it is likely to be short-lived, as stocks should return to some more normal range (between 6900 and 7500 on the Dow). After that, it's anybody's guess where they will go, though a retest of the low (Dow 6550) is more than likely in the offing, though the exact timing of that move is as yet unclear. It could be merely weeks away or many months. Consult your own crystal ball if you desire a more accurate reading.

Volume was down slightly from levels seen during the run-up, indicating that there are still stubborn types holding recent gains. Those should be eviscerated over the coming 5 weeks, as the next round of corporate earnings takes center stage.

NYSE Volume 1,443,266,000
NASDAQ Volume 2,102,247,000

Over in the commodity pits, life was equally downbeat as oil slipped another $1.98, to $52.38, a bit of a relief for drivers as gas prices have recently edged back above the $2 mark. Gold fell $16.90, to $925.30. Silver was down 36 cents to $13.26. The precious metals continue to languish in a trading range, with gold hanging between $880 and $990 and silver trading iroughly between $12 and $13.75. Investors seem to be torn between buying the assets as inflation hedges and selling them on upticks in price during a deflationary trend. Both have been right at different times.

Just after the market closed (one can only wonder in amazement at the timing of these things) the FDIC took over Georgia's Omni National Bank, and it's nearly $1 billion in assets - pocket change in today's environment.

The coming week should be highly entertaining and instructional. On Tuesday, the S&P/Case Shiller Home Price Index numbers and Consumer Confidence for March are released prior to the market's open. Wednesday offers a bonanza of economic reports, including the ADP employment report for March, Construction Spending and Pending Home Sales for February, Crude Inventories and March Auto and Truck Sales. If the market can absorb that, Friday comes the government's official figures for March Non-farm Payrolls.

Traders will likely be hard-pressed to hold onto recent gains. Enjoy some great college hoops this weekend and get ready for a wild ride next week.

Thursday, March 26, 2009

Unchecked Greed Reigns Free

If you thought the 2 1/2-week-long rally had run out of gas - like yours truly - you were proven wrong on Thursday. The Masters of the Universe were at their level best once again, goosing stock positions throughout the day, but particularly in the final hour (just like yesterday, and many days before), when stocks added mightily to their already solid gains.

The Dow jumped nearly 100 points in the last hour, while the NASDAQ, which outperformed all other indices by a huge margin, added 28 additional points as the session drew to a close. It is apparent to any outside observer that greed has trumped fear over the short term. The Dow Jones Industrials have now climbed 1377 points since March 9, a span of 13 sessions.

The economic news of the day was pretty much in line with expectations. Unemployment roles hit a new record high, with another 652,000 Americans adding their names to the roles of the jobless. Final GDP figures for the 4th quarter of 2008 came in at -6.3%, better than the -6.6% some had expected. A number of companies reported better-than-expected earnings, Best Buy and Texas Instruments among them, though investors were snatching up shares of just abut anything that had a price attached to it, in a mad scramble to jump on the equity bandwagon.

If ever there was a textbook case for an overbought bear market rally, this surely is it, and while there may be no perceptible end in sight, the 8000 level, at which there is substantial resistance, is already within shouting distance. It should be pointed out, however, that this market knows nothing of support and resistance, commonly disregarding any resistance on the way up. The path back down ought to be particularly brutal, now that 90% of the public is convinced the worst is behind us, since there are there have been numerous gap-ups at various opens, and, as any chartist well knows, gaps always get filled.

But that's a lesson for another day. For now, any hint of the financial crisis, liquidity squeeze, deflationary spiral or housing crunch has given way to chants of "go, baby, go."

Dow 7,924.56, +174.75 (2.25%)
NASDAQ 1,587.00, +58.05 (3.80%)
S&P 500 832.86, +18.98 (2.33%)
NYSE Composite 5,230.53, +103.53 (2.02%)

Market internals were as unsurprising as the headline numbers. Advancing issues outnumbered decliners, 5180-1675, though new lows continued ahead of new highs, 117-36, though the numbers are closing ranks. Volume was very high once more, especially on the NASDAQ, which recorded one of the highest volume days of the year.

NYSE Volume 1,792,579,000
NASDAQ Volume 2,594,485,000

Crude oil continued to rise, up $1.57, to $54.34. Gold gained $4.20, to $942.20, while silver tagged along with a gain of 18 cents, to $13.62.

Noting the gains in stocks, as well as most commodities, it seems that throwing trillions of dollars at the markets in all manner of bailout, breakout, cram-down and stimuli, seems to be working. The economy is reflating at an incredible rate, so much so that the Fed should consider raising interest rates off their absurdly low emergency levels. Of course, they won't, until the American landscape is littered with currency.

The precious metals now appear to be even better investments than ever. With all asset classes rising in price, rather than an orderly deflation which would have occurred naturally, we will now have even more mal-valued investments in equities especially, backed by a currency that is losing value faster than a prostitute sheds her chastity.

People's 401k's ought to look much better by the end of the month. The S&P 500 has gained nearly 25% in the past 2 1/2 weeks, though all that extra loot in one's pension is surely going to be eaten up by the ravishes of taxation and inflation. Welcome to the new normal. You earn, you pay, you remain under the thumb. Enjoy it while you can.

Wednesday, March 25, 2009

Market Searches for Direction, Extends Gains

The major indices all finished the day on a positive note, but that was only half the story. Up by 2% (the Dow up 200 points) in early trading on unexpected gains in durable goods orders and new home sales.

But the real story was in the Treasury auction, which reportedly drew less demand than expected and induced the Federal Reserve to snatch up $7.5 billion in Treasuries maturing in the next seven to 10 years. That triggered a severe response on Wall Street, which commenced on a downward trajectory, with the Dow dropping from 7800 at 1:00 pm to the day's low at 7550 at 3:00 pm.

Concerned that the market would continue to sell-off and wipe out gains from Monday's historic 497-point rise, traders got busy in the final hour, boosting stocks back into positive territory. From 3:00 to 4:00 pm the Dow tacked on nearly 200 points, with some serious tape-painting in the final seven minutes, in which the Dow went from unchanged to the final close, up 89.84 points.

Dow 7,749.81, +89.84 (1.17%)
NASDAQ 1,528.95, +12.43 (0.82%)
S&P 500 813.88, +7.63 (0.95%)
NYSE Composite 5,127.00, +62.67 (1.24%)

The level of participation is particularly worrisome to the Treasury and the Obama administration, which is seeking to sell a record $94 billion in Treasuries this week. A similar auction in Great Britain received such poor participation that the auction was widely considered a failure. Nations worldwide need to finance large amounts of debt, but all are dwarfed by the quantity the US government plans to sell this year, roughly triple the amount auctioned in 2008.

Additionally, the figures for February new home sales (337,000) were tempered by lower prices and the fact that the number is still 41% below last year's already depressed levels. Ditto the durable goods report, which showed a gain of 3.9%, as more than half of the purchases were made by the Department of Defense. Thus, the markets were rather confused: at first euphoric, then sullen, and finally, covering short positions and reinforcing the bid in the final hour.

At the end of the day, only one thing was for sure: that the market is in serious need of new direction. An underlying element of fear is prevalent, even though stocks - from March 11 to March 24 - put on their best 10-day showing since 1938, according to Addison Wiggins at the dailyreckoning.com.

Advancing issues eventually held sway over decliners, 4417-2112. New lows beat out new highs once again, 123-30. Volume was spectacular, near the highest of this current three-week period.

NYSE Volume 1,773,648,000
NASDAQ Volume 2,494,052,000

Commodities were mixed. Crude oil futures for May delivery fell $1.21, to $52.77 on a report that US supplies were at 16-year highs. Gold gained $12.00, to $938.00. Silver added 8 cents to finish at $13.44.

With so much confusion, it seems difficult for stocks to continue their gains much longer. Today's initial thrust resulted in an evident topping pattern and the subsequent decline broke through various support levels before the manipulated rally nearing the close. Much of the late-day gains were led by JP Morgan Chase (JPM) and other financial stocks which have fueled the rally of late.

Prior to the opening bell tomorrow, traders will digest two important pieces of economic data, both releases scheduled for 8:30 am: initial unemployment claims and the final 4th quarter 2008 GDP, which is expected to be recorded as worse than previous estimates. The last GDP estimate was a decline of 6.5%. Tomorrow's number figures to be closer to 6.8%.

With that, my apologies for yesterday's truncated post, though the interface issues have now been resolved. Be on your toes early. This market could run either way, or, like today, cascade in both directions.

Tuesday, March 24, 2009

Bears Aren't Finished Yet.. Neither Are Bulls

A fascinating day a trading, which began in the red, finished there, lending support to the idea that the market had become overbought in the near term. All of the major indices gave back, led by the broadest measures, the NASDAQ and NYSE Composite.

I am having trouble with the interface. I cannot format properly, so I am going to try to keep this brief.

Dow 7,660.37, -115.49 (1.49%)
Nasdaq 1,518.63, -37.14 (2.39%)
S&P 500 806.36, -16.56 (2.01%)
NYSE Composite 5,064.33, -121.53 (2.34%)

Declining issues beat back advancers, 4466-2048. New lows continued their dominance over new highs, 122-30. Volume was lower than the past five to six sessions; not surprising considering the long run of gains over the past two weeks. While this rally may be essentially over for the time being, it could gain traction again at any time€.

NYSE Volume 1,645,186,000
Nasdaq Volume 2,033,304,000

Crude oil finished with a gain of 18 cents, at another high for the year of $53.98. Gold fell again, though it seems overdone, down $28.70, to $923.80. Silver slipped 50 cents, to $13.38.

There was little in the way of economic news, and all the indices finished near their session lows.

My apologies again for the brevity of today's post, but the interface has gone wacky. Hopefully, these matters will be cleared up before long and I'll be able to get back to more poignant posting.

Monday, March 23, 2009

Now THAT Was a Rally! Dow Up 497 Points

If there was any doubt that the biggest rallies occur during bear markets, today's stunning straight-up market move should certainly expunge those wayward thoughts.

The biggest problem (there are many) with this outsize Monday Melt-up is that it absolutely will not last. This was all about debasing the currency to pay off the criminals on Wall Street to keep the party going. If you were smart, you jumped in and grabbed your share of the loot. If you are dumb, like most investors, you sat back and watched. Maybe your 401k looks a little fatter today. Maybe you are thinking about investing a little more tomorrow, or next week, or next month. Maybe you've just given up and have doing the really smart thing and buying gold and silver, or just silver.

According to CNNMoney.com, whom I have no reason to doubt, today's gain on the Dow was the largest since November 21, 2008, meaning it was the best run of this year, and probably one of the top three or four days ever. Congratulations!

What CNNMoney is not reporting is that the November 21, 2008 move of 494.13 is that today's move was bigger (by 3 whole points) and certainly larger by percentage (the Dow was running between 7500 and 8000 then) and that November day followed two days in which the Dow dropped a cumulative 872 points. So, that was a snap-back rally (and a dumb one too), whereas today's was based on two specific news items: the administration's unveiling of their latest ploy to sop up bad bank assets - the Public Private Investment Partnership, or PPIP for short - and the number of existing home sales reported for February.

The new home sales showed a 5.1% increase over January sales, according to the National Association of Realtors (NAR), but noted that the figure (4.72 million units) is still 4.6% below February last year and that the median value of homes sold was 15.5% lower than last year. One actual bright sign was in California, of all places, where the median home price actually rose for the first time in three years.

As for the PPIP, I bow to Nobel Economist Paul Krugman, who sort of peed all over Geithner's plan in the New York Times Saturday morning, saying:
This plan will produce big gains for banks that didn’t actually need any help; it will, however, do little to reassure the public about banks that are seriously undercapitalized.

OUCH! I agree. Once one looks inside the details of the "partnership" one can only conclude that lending taxpayer money to investors (some of whom will probably be the original investors or toxic asset holders themselves) to buy up bad debt is not a productive idea. In fact, it's just a continuance of the same things that got us into this mess to begin with: paying too much for things nobody wants or understands.

The administration's answer to the banking crisis has always been short on substance and this is no different. It's a lot of smoke and mirrors, and won't do anything substantive to alleviate the financial conditions which prevail: high unemployment, lack of confidence, slack demand, deflation. It's just more taxpayer money down a rat hole, with Bank of America, JP Morgan Chase, Citigroup and AIG at the bottom, glomming up all the free money they can.

Somebody asked me today why the Dow was up almost 500 points. My answer was the same one I have been using for just about every huge market move: "If somebody hands you a trillion dollars, you're probably going to have a party. Wall Street partied today like it was 1999, or 2003, 2005, 2006. The greedy bastards just can't get enough, and, even then, with the most accommodative policies ever in which to operate, they lose their shirts, our shirts and the shirts, shorts and pants of the next three generations. Screw them. Jump in and out of this stupid market, which is telegraphing moves like a punch drunk boxer on wobbly legs, and take some of the money yourself.

Making today's huge gains look somewhat more absurd, the World Trade Organization (WTO) reported - around 3:00 pm - that global trade would decline by 9% in 2009. That's just fine, as Wall Street was too busy to notice, as they tacked on the last 125 points leading up to the historic close.

Dow 7,775.86, +497.48 (6.84%)
NASDAQ 1,555.77, +98.50 (6.76%)
S&P 500 822.92, +54.38 (7.08%)
NYSE Composite 5,185.86, +353.73 (7.32%)

Market internals were strong, with advances favored over declines, 5747-896, a ratio of more than 8-1. There were gains in the number of new highs reported today, but they still did not eclipse the new lows, which remained higher, 102-26. Volume was as good as any day of the past two weeks, still on the high side.

NYSE Volume 1,916,566,000
NASDAQ Volume 2,255,664,000

With Wall Street going bonkers, commodity traders were less impressed. Crude oil gained $1.73, to $53.80. another new high for the year. Gold lost $3.70, to $952.50, but silver tacked on 4 cents, to close in New York at $13.88.

The Dow is now up 1230 points in just two weeks, a nearly 19% gain. With little - if any - resistance up to 8000, odds are good that this rally will have legs, though taking economic news seriously, something Wall Street seldom does, could produce different outcomes.

In any case, that was one hall of a rally.

Friday, March 20, 2009

An Object Lesson in Options

Today being a triple (or, by some standards, a quadruple) witching day, in which stock options, futures and index options all expire, it was amusing and insightful to watch the activity of the markets and the money flows as the week progressed. Triple witching happens every quarter, in the final month of the quarter on the third Friday of the month. Usually markets are quite volatile leading up to the date, and when the expiration of options occurs in the middle of a rally or sell-off, the action can be wicked.

This week had a couple of added bonuses in the form of the AIG flap amid the continuing economic crisis and the regular FOMC meeting and their release on Wednesday. The overhang of AIG bonuses and revelations of just how much money the Fed funneled through the conduit to counterparties was fodder for Monday and Tuesday, a little early for the options players to make serious moves. In fact, most were holding or still buying, staking out positions for the kill later in the week.

On Wednesday, at 2:15 in the afternoon, the Fed announced that they would be buying up to $300 billion in Treasury Bills, in essence creating money out of thin air to buy bonds. It's a desperate strategy which has never resulted in anything other than rampant inflation. But the Fed and the government isn't worried about that now, they just want to prevent complete collapse (they don't know that they, by their very actions, are going to cause it) of the financial system.

Mind you, the financial system in this country is so horribly broken by decades of intrusion, intervention and manipulation, one can scarcely believe stock prices at any point. As they are chimeras by nature, stock prices can be moved around by people with lots and lots of money. People like the Federal Reserve, the government and major banking and trading operations on Wall Street.

So, when the Fed made their dramatic announcement on Wednesday, the traders (crooks or thieves, if you like) were at the ready, pushing the Dow Jones Industrials up 150 points in just 5 minutes time, added more after that and then sold off a bit into the close. I said, in that day's entry, that the smart money was already out and the trading rhythm of Thursday and Friday bore me out (I also made a few bucks on the moves).

On Thursday, the Dow gapped up at the open near the previous day's high, but immediately retreated and soon was touching down in negative territory, repeatedly bouncing off 7400, which developed into a serious support level for the full afternoon and into the next day. That it was plucked out by traders as a line to defend was plausible, since the high on Monday was 7428 and the close on Tuesday was 7395.

Perfectly and somewhat hauntingly, the average bounced off this level repeatedly from around 11:30 am on Thursday to just before 1:00 pm on Friday. Every time the market began to pull below that level, there was a wall of support to push prices back up. That was until just before 1:00 pm Friday, when people holding options contracts began worrying, because holding until expiration either means you get nothing or you have to buy or sell a specific equity at your strike price, so the action was just about done unwinding.

It was at that point that 7400 was breached completely in one death-dive. The Dow fell over 100 point in the next hour and change, and, after 2:00 began heading for 7250, at which point bottom fishers came in and short covering began in earnest. Eventually, however, the die had been cast. The options traders had made their money, trapped their counterparties and escaped, apparently off to enjoy the first weekend of Spring out at the Hamptons or up in Connecticut. The Dow closed, as did the other indices, close to its low of the day.

Dow 7,278.38, -122.42 (1.65%)
NASDAQ 1,457.27, -26.21 (1.77%)
S&P 500 768.54, -15.50 (1.98%)
NYSE Composite 4,832.13, -105.09 (2.13%)

For the session, internals were indicative of the general direction. Declining issues outpaced advancers, 4582-1821. New lows opened a bit more space between themselves and the paltry number of new highs, 79-10. The highs-lows are still in a range from which they can roll over, but as has been the case in the previous six or seven times its happened since October 2007, it will only be for a day or two before the bull reverts to a scared calf as ravenous bears threaten its life.

One caveat is that some stocks are looking at 52-week highs that aren't that high. The decline had already begun by this time last year, though not in great earnest. The bear market rally (whether we are still having one is now very much in doubt) could run for months, though I personally doubt that it will last even a couple more days and definitely not past mid-April. In any case, the daily new highs and new lows is a metric which has provided incredibly strong insight into market movement, at times even predicting major moves and always true.

Volume on Friday was very high, higher than even Wednesday and Thursday. Expect the trading activity to fall off somewhat over the next two weeks as traders will be listening for early signs from companies considering 1st quarter results. Of course, the severe crisis of confidence, credit and money will continue to reverberate through the canyons of Wall Street and beyond.

One note on today's volume. There were more trades on the NYSE than the NASDAQ, the first time that's happened in a very long time (2002 to the best of my recollection).

NYSE Volume 2,465,968,000
NASDAQ Volume 2,421,536,000

Commodities were subdued, relative to equities. Crude oil lost 55 cents, closing at 51.06. Gold was off $2.60, to $956.20. Silver tacked on another 30 cents to finish the week at $13.82. Long term holders of precious metals are sitting pretty.

As for whether the rally will resume on Monday, there's quite a bit of evidence that it will not. Stocks were boosted largely for traders to rack up profits in options, as expressed above, and the last two days of trading have both ended up losers. Since the indices had been pumped quite a bit higher in a relatively short period of time, there may be a lull in the action for the next 2-3 weeks, but then earnings and guidance will begin to dictate the direction and it's not likely to be very good. Also, there's surely going to be more money being thrown around, scandal, and other disruptions, so the mini-bull we've experienced over the past two weeks may fade fast.

Thursday, March 19, 2009

Rally Takes a Breather; Congress Claws Back at AIG

Talk about choppy trading!

Today's action was a back-and-forth between the bulls and the bears, just one day removed from options expiration on a triple witching day. Stocks opened higher, but quickly fell into the red and stayed down the rest of the session, trading in tight ranges, with neither buyers not sellers gaining much of an upper hand.

With the Dow being defended at support right around the 7400 mark, the day finally belonged to the bears, which clawed the indices back near their lows of the day at the close. Considering that the close was right at the Maginot line of support, tomorrow could easily be a day for another bull run as investors take profits and stake out new positions.

The big news of the day was once again down in the Capitol, where the house voted overwhelmingly to tax the bonuses paid out to AIG employees - about $145 million of such - at a 90% tax rate, clearly crossing a constitutional line (which hasn't seemed to matter much in Washington for about 10 years now) which expressly forbids retroactive laws. In other words, with the passage of this tax, what's to prevent congress from saying anyone or everyone owes more in taxes from last year? Or the past three years?

Washington's shamefully inept management of the financial crisis is equalled only by the hubris of Wall Street executives and their business practices. In a separate hearing, it was discovered that 13 of 23 firms which received bailout money owed back taxes. Whether it matters or not, the point is that Washington seems perfectly at home with the concept of awarding not only failure at every turn, but outright tax avoidance. That's not surprising, since Treasury Secretary Tim Geithner was confirmed by the Senate with full knowledge that he had tax issues over multiple years.

Dow 7,400.80, -85.78 (1.15%)
NASDAQ 1,483.48, -7.74 (0.52%)
S&P 500 784.04, -10.31 (1.30%)
NYSE Composite 4,937.22, -38.08 (0.77%)

For the session, declining issues took back the momentum from advancers, 3281-3084. New lows remained ahead of new highs, though the margin has shrunk to a point at which it could roll over any day. There were 67 new lows and just 16 new highs.

Volume was very strong once again, with trading at a hectic pace throughout the session.

NYSE Volume 1,951,789,000
NASDAQ Volume 2,354,656,000

While investors were dithering over nickels and dimes in stocks, commodities staged a bull run of their own. Crude oil reached another high for the year, gaining $3.47, to $51.61. The precious metals had a memorable day (actually begun yesterday afternoon, following the Fed announcement that it would be buying Treasuries) with gold ahead an outlandish $69.70, to close at $958.80, and silver ahead by $1.59, to $13.52, a 13% gain. Obviously, gold bugs view all of the bailout money being thrown around as highly inflationary, and, of course, they are correct. It could take two years for the effects of the mountains of credit and cash created in the past six months - with more to come - but surely there will be an aftereffect which will send the cost of goods to the moon.

It hardly seems worthwhile to make investments at this juncture. The stock markets are stuck in a bear-edged range for the short term and have nowhere to go but down in the long run. It's a trader's market, which apparently pleases Wall Streeters and the Washington enablers just fine.

Wednesday, March 18, 2009

Banner Day for Wall Street Crooks

One would think that with the Fed having lowered interest rates to ZERO and keeping them there, that today's Federal Open Market Committee rate policy meeting would be pretty much a non-event, and you would be right.

The committee released a terse three paragraph statement today, did not raise rates, reiterated that the economy was in the dumper and then quietly mentioned that the Federal Reserve would purchase "up to $300 billion of longer-term Treasury securities over the next six months."

Wall Street was wowed! The Dow shot up 150 points in the ten minutes after the statement was released. And why not? The Fed already has the power to create money out of thin air, so why not help out the bankrupt US Treasury (currently $11.5 Trillion in debt and growing) by buying up their bonds with their worthless paper (or, in this case, worthless electrons on a computer spreadsheet somewhere in the bowels of the Federal Reserve bank).

Glorioski! These people are out of their minds! After the worst financial meltdown in global history, the Fed and he government intend to fix it by going further and further and further into debt. This is going to bankrupt the entire nation, which, of course, is already bankrupt. Well, I guess they'll just make it worse and have it happen sooner this way. Now, not only is your 401K taking a huge hit, but the money it is denominated in (US $$) will be worth less because they are flooding the system with cash. Hallelujah! The double whammy!

The committee also said that the Fed and Treasury will soon be doling out another $2 Trillion of risk-free securities to their favorite deadbeat bankers, Goldman Sachs, Morgan Stanley, Bank of America, et. al. - the usual crowd of corrupt failures. The government is guaranteeing these securities against default with taxpayer money. Now, not only does the US populace own 85% of AIG, but they now ARE AIG. Mike Whitney's article, Bernanke's Witness Protection Program, puts the TALF scam in perfect perspective.

Remember, the Fed is a private bank. (For more on why this is of vital importance read James Quinn's Grand Illusion - The Federal Reserve)They will be selling these new collateralized debt obligations (CDOs) to their members. This, in the parlance of old-school honest-to-goodness economics, is known as self-dealing. All of this $2 Trillion of ADDITIONAL stimulus will accomplish nothing except to put the entire financial system of government and ├╝ber-banks at further risk.

And, to make matters even better - for the inside traders, no doubt - the rally was extended another day. The Dow is up more than 900 points since last Monday. Will the madness ever end? Probably tomorrow or Friday, as soon as the cheats clean up on their options bets, which expire on Friday. The really smart money is already out. The rest will be pulled tomorrow.

Dow 7,486.58, +90.88 (1.23%)
NASDAQ 1,491.22, +29.11 (1.99%)
S&P 500 794.34, +16.22 (2.08%)
NYSE Composite 4,975.33, +107.19 (2.20%)

So, with stocks soaring, the internals showed just how unbalanced the trading was (remember, stocks were down until the Fed announcement). Advancers led decliners, 4883-1639. New lows continued to lead over new highs, but the margin is shrinking, at 116-24 on the day.

Volume was absolutely off the charts, probably the heaviest trading day of 2009. This indicates the massive nature of the fraudulent bear rally. With options expiring Friday, the money was moving with great velocity today as insiders scrambled in and out of positions in the final hour and 45 minutes.

NYSE Volume 2,077,359,000
NASDAQ Volume 2,813,044,000

There was a little island of sanity in the commodities trading pits. Oil lost $1.12, to $48.14 and has further to fall. Gold sold off in a very dramatic way, losing $27.70, to $889.10. Silver was hammered lower, losing 74 cents, to $11.94, a super buying opportunity.

There is no way the American financial system will survive more than another year of the fraud, corruption, self-dealing, inflationary money-pumping we have seen since last September. The genie is out of the bottle and it will not be put back in. Gold and silver are being held down by central bank cartels, but sooner or later, that game will end, and, as so many respected authorities on the topic of economics have said, the US dollar will be trashed, inflation will reign and gold and silver will double or triple in value. That day may be a year, two years away, though it could occur within six months or six days. Nobody knows the future, but the only way to protect yourself is to own gold and your own home.

Tuesday, March 17, 2009

Rally Gets Back on Track

After taking a hiatus Monday - genuflecting to congress and Andrew Cuomo - investors continued their spirited bear market rally on Tuesday, racking up huge gains on all indices. The NASDAQ, yesterday's big loser, was the day's top performer.

Stocks took a little while to get going in the morning, though as soon as it became clear that the politicians were blowing a lot of hot air over the AIG bonuses, and that AIG would not budge from its position that its employees earned and deserved those bonuses, stocks resumed their inexorable rise.

I have to admit to naivety and a total misread on the AIG issue. Neither Wall Street nor Washington is in reality the least bit concerned over revelations of the insurance giant's counterparties to the $170 billion of government largesse and the bonuses are nothing more than a side show. This bull run will continue at least until options are played out this Friday. After that, where it goes is anybody's guess, but one thing's for sure, the American public is being taken to the cleaners by the main protagonists in this economic drama: the politicians and Wall Street's masters of the universe.

Using their media shills to maximum effectiveness, the public has been sufficiently pacified to believe that all is well in the American and world economy. Never mind those trillions of dollars of derivatives overhanging everything like the Sword of Damacles or the fact that AIG paid off on credit default insurance to the very same companies which were receiving government assistance (and now claim they no longer need any help).

The greatest fraud ever perpetrated has nearly run its course. Nobody has been indicted. None of the major players have even lost their jobs. Only in America can one lose billions of dollars, nearly implode the entire financial system and not only not get fired, but be the beneficiary of enormous bonuses paid for by the very people you are robbing. It's incredible, but true.

Just like Americans muddled through 8 years of the George Bush administration's abuse and shredding of the constitution, so too will they have their livelihoods and retirements yanked away from them without a fight. Washington and Wall Street win. We elected some. Others were merely put in place and pleasured by those elected officials. The money spent by financial firms in lobby activity is proof of government's complicity in the grand fraud.

Americans soldier on in the most over-regulated, overtaxed, slavish parody of democracy that has ever existed. It took nearly forty years of deceit, corruption and apathy, but we finally have arrived at the final destination: the death of the land of the free and the home of the brave. It has been abruptly replaced with land of the fleece and the home of the knave.

Dow 7,395.70, +178.73 (2.48%)
NASDAQ 1,462.11, +58.09 (4.14%)
S&P 500 778.12, +24.23 (3.21%)
NYSE Composite 4,868.14, +139.23 (2.94%)

Advancers bettered decliners by a wide margin, 4997-1506, but new lows did not roll over, still ahead of new highs on the day, 111-13. Volume ramped up mightily in the final half-hour, keeping in line with recent trading activity, though a touch lower overall.

NYSE Volume 1,492,070,000
NASDAQ Volume 2,105,405,000

Oil gained $1.81, to close near the highs, at $49.16. Gold dipped $5.20, to $916.80. Silver followed lower, down 22 cents, to $12.67, At least some markets are making sense, though the price of oil is going far too high, much too quickly, considering the demand destruction caused by conservation, last year's gouging and the current weak economic conditions.

With options expiration approaching, the rally could end abruptly, though the general mood on Wall Street is currently one without fear, determined to run up to resistance, which next appears around 8000 on the Dow.

Monday, March 16, 2009

Fear Factor: AIG, Cuomo, Obama Kill Rally

After jawboning the economy higher last week with announcements from Citigroup, Bank of America and JP Morgan CEOs that their respective banking enterprises were making money, Tim Geithner's appearance on the Charlie Rose show and Sunday's 60 Minutes interview with Fed Chair Ben Bernanke, the greed and avarice that is still alive and well on Wall Street finally put an end to the madness on Monday.

Amid reports that failed insurance black hole AIG had been using government bailout monies to make payments to foreign and American financial institutions - in the form of credit default swaps payouts and other payments - and also planned to pay out over $1.2 billion in bonuses, first the President, and later, NY Attorney General Andrew Cuomo issued stern statements that AIG must come clean and stop paying bonuses with taxpayer money.

Cuomo demanded a list of names of AIG bonus recipients. The AG threatened to issue subpoenas for the names if he was not in receipt of the list by the close of trading (4:00 pm).

President Obama ordered Treasury Secretary Timothy Geithner to use "every single legal avenue" available to block the bonuses.

While all of this was swirling through the news wires and trading desks, stocks (except for the NASDAQ, which was up only briefly) were well on their way to a 5th straight day of gains. The plan, or so it seemed, was to make outsize profits in call options on a wide variety of stocks and indices. With options expiring on Friday, today and Tuesday, appeared to be prime times to cash in on the recent rally.

Case in point on the options front was the trade in JP Morgan, which was up as high as 25.27 today (up 1.52), but finished with a 0.66 loss, at 23.09. Trading in the March 24 and 25 options was a wild ride. Ditto General Electric, which popped up over 10.00, but closed up just 0.04 at 9.66.

All of that changed shortly before 2:00 pm, when the Dow reached its high of the day at 7392, nearly a 750 point rise in less than five days. From there, it was straight down as Wall Street and savvy investors figured that the jig was up on AIG and the major banking scam that makes Bernie Madoff look like a rank amateur.

As I've said countless times on this blog, AIG is a black hole, with no money to pay off TRILLIONS OF DOLLARS WORTH OF CREDIT DEFAULT SWAPS COVERING NEAR-WORTHLESS SECURITIZED DEBT.

Wall Street's unending greed has finally ignited a public backlash to which the politicians are responding. This monumental struggle - between the bandits (Wall St.) and the benefactors (Washington) - is more than likely to get much worse before it gets better, culminating not just in subpoenas, but in trials, convictions and hopefully, jail time for many of the CEOs still running the defaulted banks.

Make no doubt about it, this is the beginning of the end. The final phase of the market meltdown begins today. There has not yet been a final capitulation, but it is sure to come, probably before the end of summer, if not sooner.

By the end of the session, stocks had given up all of their gains, except on the NYSE Composite, which finished marginally higher. As happens so often during bear market rallies, complacent bulls were mauled today by the most ferocious bears the market has ever experienced. Anyone who did not get out today could greet tomorrow's opening with a huge gap down at the open, completely shut out of profits. By Monday of next week - if not sooner - the Dow should almost certainly be trading below 7000 again.

One week of manufactured "happy news" cannot replace months of honestly bad reports. Mostly ignored were today's economic reports: The New York State Empire Manufacturing Index for March fell to its lowest level ever, at -38.2. Capacity utilization continued to decline, from 71.9% in January to 70.9% in February. Industrial production took another hit last month, falling 1.4%.

Dow 7,216.97, -7.01 (0.10%)
Nasdaq 1,404.02, -27.48 (1.92%)
S&P 500 753.89, -2.66 (0.35%)
NYSE Composite 4,728.91, +7.91 (0.17%)

Market internals finished in line with the turmoil. Advancing issues outpaced declining ones, by the slightest of margins, 3476-3073. New lows were again subdued in number, but held their edge over new highs, 101-14.

Volume was roughly the same as last week's levels, indicating that the rally may have more gas in the tank, or that the buying of stocks was replaced by selling late in the day.

NYSE Volume 1,898,380,000
Nasdaq Volume 2,159,946,000

Oil finished up just a nickel, at $46.30. The precious metals were both losers, with gold off $8.10, to $922.00 and silver down 33 cents, to $12.89.

Tomorrow morning should be fascinating, with February PPI announced prior to the open - at 8:30 am - along with February figures for New Home Sales and Building Permits.

Saturday, March 14, 2009

Markets Go 4-for-4

What a difference a week makes.

On Monday, stocks fell to their lowest levels in roughly 12 years as the news flow continued to beat down on investors with a cacophony of flim-flams, trillion dollar deficits, banking black holes and enough assorted global meltdown fear to scare even the hardiest bulls out of the market.

Seemingly overnight, between Monday and Tuesday, a switch in sentiment - begun by something as benign as a banker's leaked memo, in fact, Citigroup's Vikram Pandit's note that his bank had performed well over the prior two months - sparked a rally that extended four days.

Stocks finished the week on the rise again, with everything suddenly seeming not so dire, so terrible, so untenable. Maybe it was that bank memo, or maybe the appearance of robins on the lawn. The winter in the Northeast has been long and unrelentingly cold, and it was time for a break. It could have just been that investors and traders were worm out from selling, or that there were a load of bargains at the bottom of the market.

Whatever it was, it turned into the best week for stocks in many months. The Dow gained an impressive 597 points for the week and 677 from the close on Monday, and while it was welcome relief, almost nobody believes we have seen a final bottom in the markets, but it was a nice change and only the second weekly gain out of 10 for the year.

Dow 7,223.98, +53.92 (0.75%)
Nasdaq 1,431.50, +5.40 (0.38%)
S&P 500 756.55, +5.81 (0.77%)
NYSE Composite 4,721.00, +36.01 (0.77%)

There was little in the way of economic news on Friday, except that consumer confidence improved by a small amount, from 56.3 in February to 56.6 in March. Other than that, investors were more or less left to their own devices and they continued to be in a buying mood for most of the session.

Gainers held sway over decliners, 4011-2509. The difference between new lows and new highs narrowed significantly. There were only 16 new highs, there were only 107 new lows, as compared to over 1000 on a regular, daily basis, just last week. we are rapidly approaching a date when these numbers will roll over, an event which has only occurred - more new highs than lows - only 5 or 6 times over the past 16 months, and not at all since this past summer.

Volume was not as strong as previous session, but still solid.

NYSE Volume 1,611,209,000
Nasdaq Volume 2,073,777,000

Commodities participated in a rather dull session, with oil finishing lower by 78 cents, to $46.25; gold up $6.10, to $930.10; and silver ahead by 22 cents to $13.22.

The rally may continue for some time, so long as news flows don't become frightening again and the negative feedback loop cycles again, though sentiment changes can occur at the drop of a hat, as evidenced by this week's upheaval. The most odd feature of this week's rally is that to a man or woman, not a single person said that Monday was the absolute bottom. Not one commentator was so bold as to call the bottom, and oddly enough, that's usually precisely when they happen, when nobody believes the worst is over.

Monday could very well have been the bottom, but I'm neither brave enough nor smart enough to call it. Time will tell, though I would not be at all surprised if it holds for longer than anyone suspects.

Thursday, March 12, 2009

Mark-to-Market Mark Up

Stocks made it three in a row for the Bulls, with impressive gains on all major indices, thanks to some benign economic data, a downgrade of GE's credit rating (already priced in) and a promise from the Federal Accounting Standards Board (FASB) to review and revise mark-to-market rules within three weeks.

Largely ignored was the rampaging unemployment ravaging US businesses, which saw another 654,000 new unemployment claims and a record of 5.3 million now receiving benefits.

Retail sales for February were down just 0.1%, which was less than expected. January retail sales were revised higher, to a 1.8% gain, from the previous read of +1.0%. Business inventories continue to decline as companies shed excesses, down 1.1% in January, a figure likely to be revised lower next month.

General Electric's (GE) credit rating was dropped by Standard & Poors to AA from AAA, though that piece of news was widely expected and already priced into the stock price. GE was one of the best gainers of the day for Dow stocks, up 1.08, to 9.57, a gain of more than 112%. Overall, 28 of 30 Dow components priced higher on the day. The only losses were in Boeing (BA) and Microsoft (MSFT).

A panel of representatives in the House urged the FASB to issue new guidance on mark-to market accounting for financial institutions. The rule is largely regarded as undervaluing bank assets such as mortgage-backed-securities, which have contributed greatly to the economic malaise of the past six months.

Two major resistance points were exceeded by today's upswing: the Dow crossed over the 7000 mark and - perhaps more importantly - the S&P passed 730. As a bonus, the NASDAQ flew by 1400 for the first time in two weeks.

The day's gains - indeed, the gains from Tuesday and Wednesday also - were aided by furious short-covering as investors scramble out of positions predicated on stocks falling rather than rising. All of these elements contributed to an unstoppable rally that sent stocks of all stripes soaring.

Dow 7,170.06, +239.66 (3.46%)
NASDAQ 1,426.10, +54.46 (3.97%)
S&P 500 750.74, +29.38 (4.07%)
NYSE Composite 4,684.99, +179.61 (3.99%

Market internals affirmed the upside move. Gainers beat losers by a huge margin of moer than 5-1, 5550-1015. New highs vs. new lows remained muted, with the lows ahead 220-16. Volume was very strong again as investors made sure not to miss out on the opportunity for short-term gains.

NYSE Volume 1,804,937,000
NASDAQ Volume 2,456,664,000

Commodities participated in the rally as well, especially oil, which gained $4.70, to $47.03. Gold was up $13.10, to $923.80. Silver added 14 cents to $12.94. Most other commodities were higher, including food stocks which continued to gain.

Of the companies showing the best gains were Bank of America (BAC), the big winner on the day, up 0.92, to 5.85, an 18% rise. JP Morgan Chase (JPM) also was up sharply, gaining 2.80, to 23.20. Both Jamie Daimon and Ken Lewis, CEOs of JPM and BofA, respectively, issued memos that their businesses were profitable during January and February. This seemed to be an orchestrated round of PR by the banks, fast on the heels of Vikram Pandit's assertion that Citigroup (C) was making money in the first two months of 2009. Health care and pharmaceuticals were also higher. Pfizer (PFE) and Merck (MRK) both posted gains of more than 9.5%.

The market has responded to its formerly-oversold condition with considerable aplomb. The news flow, especially the interventionary advice offered by the congressional panel on accounting rules, has been decidedly favorable this week and there aren't any caution signs on the road ahead. As previously stated, this bounce could turn into an outright boom, though how long it will last is surely an unknown.

The best bet is to jump in and use tight stops on the downside in the event Wall Street wakes up from this daydream. No true bottom has been put in at this juncture and the market is near overbought conditions. In just three days, the Dow has risen an astonishing 623 points. These sharp moves are always features confined to bear markets and are not at all unusual. Knowing when to get out of the way of the bears is the key to keeping any profits. The swings can be gut-wrenching.

Wednesday, March 11, 2009

Follow Through or Not, Upside Looks Better for Now

Stocks crossed back and forth across the break even line en route to a marginally higher finish, which is good news for those bullish on stocks. The fear was that after Tuesday's outsize gains, profit taking and a resumption of negative attitudes would sink the markets and send investors back into their six-month-long funk.

But, despite a strong sell-off at the close, all indices remained in positive territory, with the NASDAQ, loaded with tech stocks, faring the best of all. A couple of key levels were tested and both were beaten back by vigorous selling: 7000 on the Dow, and 730 on the S&P. The former is more psychological than anything else, the latter considered a key support/resistance area. In both instances, the earlier attempt, right around 10:00 am, was stronger than the final surge in the last hour of trading. It will take more than just positive vibes to exceed these levels. Maybe Ken Lewis can offer encouragement in Bank of America to get the lift needed.

Dow 6,930.40, +3.91 (0.06%)
NASDAQ 1,371.64, +13.36 (0.98%)
S&P 500 721.36, +1.76 (0.24%)
NYSE Composite 4,505.38, +6.00 (0.13%)

Market internals were a bit more positive than the smallish headline numbers would indicate. Advancers were solidly ahead of declining issues, 3876-2886. New lows maintained their advantage over new highs, but the number is shrinking fast. There were 245 new lows to just 9 new highs, but it is conceivable that these numbers could converge and even reverse within the next 5-7 sessions as options expiration approaches on March 20, a triple witching day.

With a two day winning streak under its belt, markets may be a bit bolder as investors snap up bargains and traders view profitable short-term opportunities. In the options markets, there are quite a load of heavy bets on selected stocks and index options far ahead of where stocks now sit. A gambling man - which anyone with any skin in this market no doubt is - would be leaning for more upside at this juncture, with the caveat that all bets are off if the Dow hits 7500-7800 or past March 20, whichever comes first.

Volume was strong once again, keeping with the current tone. There are plenty of trades being made, and unless there's a serious falloff in the next few sessions, another vigorous rally could ensue as shorts would be forced to cover quickly, forcing shares even higher. The market is clearly in the hands of day-traders and short-timers, who will trade relentlessly in search of minor gains. This market is for singles hitters instead of home run bashers, but the cumulative effect could produce a fairly solid bounce. Even some downward motion would be good for traders who have triggers set at lower levels. The area around 6830-6850 on the Dow has emerged as a fairly strong support level which, as yet, remains untouched.

NYSE Volume 1,745,479,000
NASDAQ Volume 2,228,163,000

Commodities were mixed again. Crude oil for April delivery fell $3.38, to $42.33. Gold rebounded off recent selling, picking up $14.80, to finish at $910.70. Silver remained in our target buying range, up 26 cents, to $12.80. The majority of the consumables, including foodstuffs and energy, were lower, reflecting the continuum of demand destruction, which continues on a strong scale. Deflation has become locked into the global economy, and, separate from the banking and housing crises, is contributing to severe price pressure in just about every business activity in the good-producing sectors. This pressure will help keep unemployment high, as companies are loathe to hire when business is slow and prices are down.

A couple of anecdotes which may or may not be of much importance. First, the tent city growing on the outskirts of Sacramento, California is a national disgrace, considering how much money has been thrown at banks as well as at social welfare programs such as food stamps and unemployment insurance. Just about everybody is being propped up except for these people - primarily lower-middle class workers - who have fallen through the cracks. Some of the Billion$ in the TARP program should be made available to help these people.

Second, listening to Treasury Secretary Timothy Geithner speak - without saying anything - is becoming an exercise in frustration. Geithner was the only guest on PBS's Charlie Rose last night. The hour-long interview was pure tedium. Geithner, not as adept as "the Maestro," Alan Greenspan, at complete obfuscation and dithering, clearly has taken some lessons. Listen yourself, the next time he speaks and see whether or not his words actually have substance. The chances are about 99-1 that they will not, and therein lies one of the largest problems facing the world economy today. We are being led by a fellow is too smart for his own good. Eventually, he'll actually be pinned down on an issue and that's when the mask comes off. He doesn't really have any fresh ideas or plans for fixing the banks or the economy. He is reading from a script in his mind which was memorized weeks ago and he's yet to help the condition which with we are faced.

Investors are more sophisticated than the average man or woman on the street and they are not amused by either Geithner, the President or the congress. They will trade this bounce for a while longer, but until there are actual facts to support a real rally, this is nothing but a short term bump in the road. The government is pushing on a string with the economy and the American public (outside the obvious government sector) is not going to take it much longer.

Tuesday, March 10, 2009

Stocks Gallop Ahead to Best Gains of 2009

At long last the market responded to extreme oversold conditions and ramped up for the biggest gains of the year.

Dow 6,926.49, +379.44 (5.80%)
Nasdaq 1,358.28, +89.64 (7.07%)
S&P 500 719.60, +43.07 (6.37%)
NYSE Composite 4,499.38, +273.07 (6.46%)

The impetus was provided by Citigroup CEO Vikram Pandit's comment that his beleaguered bank had performed well enough to be profitable (minus some odious one-time charges and government money) over the first two months of the year.

It was more than likely nothing more than than a well-timed fabrication, but investors were so starved for any kind of good news, they bought it and ran with it. The resultant gains will probably last for some time, as the market is simply worn out from selling. In fact, there's nothing resembling even the slightest resistance in the charts all the way up to 8000 on the Dow, so this could turn into a lengthy, extended bear market rally.

This move is off fresh multi-year lows, so there's no telling where stocks will go from here, though it was pleasant to see such enthusiasm over such a broad base of stocks.

Advancers absolutely trounced declining issues, 5815-863, about a 7-1 ratio. Still, new lows maintained their long-standing edge over new highs, 354-14, so, obviously, there's more work to be done before anyone starts calling a bottom, though another day or two on the upside will bring on the perma-bulls. Volume was also very strong, another factor that will bring out the bellows for a bottom being in place, which is probably more wishful thinking than actual analysis.

NYSE Volume 2,186,757,000
Nasdaq Volume 2,424,305,000

Commodities, for the most part, were the one area that did not participate in Wall Street's celebration. Oil fell $1.31, to $45.71. Gold dropped $22.10, to $895.90, back under the $900 barrier, and silver sold off in sympathy, losing 40 cents, to close at $12.54. a multi-week low.

To illustrate the absurdity of today's gigantic move forward, Citigroup was up a whopping 38%, gaining 40 cents to $1.42. Noting that, Pandit's baby will have to double and then almost double again in order for many fund investors to actually be able to trade in the stock under their charters. Citi has been under $5/share for nearly two months, and now that the United States owns roughly 36% of the company - about 6 shares for every person in America - the entire population should be beaming that they own such a hot investment.

Of course, I'm being cynical, because Citi is not a very sound bank. They, along with Bank of America, AIG and JP Morgan Chase have all been the recipients of government largesse, and are largely unsound and quite possibly insolvent. That's why there was an urgent need to "talk up" the market. Just about everybody with a high school education is angry at the banks and the government, so a rally was ordered up and they got it, in spades.

Not like this rally wasn't predictable, markets don't go straight down (as they have been) for long without some kind of snap back. The tricky part will be determining when it all falls apart again and the bears take over. It could be 3 months or 3 days.

The best trades in the world are the short term variety, and this is a perfect spot for experienced hands with steel in their veins.

Monday, March 9, 2009

No News, Stocks Lose

In a very choppy trading session, the major indices fell further to the downside on Monday, as investors were largely left without guideposts. There were no meaningful economic reports nor corporate releases upon which to trade, so the overwhelming overhang of a continuing negative feedback loop sent investors bailing again.

Dow 6,547.05, -79.89 (1.21%)
NASDAQ 1,268.64, -25.21 (1.95%)
S&P 500 676.53, -6.85 (1.00%)
NYSE Composite 4,226.31, -58.18 (1.36%)

Stocks opened lower at the open, but quickly rebounded and traded in positive territory for a while, but by 11:00 am, the bears had taken control again. The only encouraging news was merger-related, though the combinations were deemed dilutive to two companies, one a Dow component: Merck (MRK) and Dow Chemical (DOW). In the pharma sector, Merck signed definitive agreements to purchase Schering-Plough for $41.1 billion in stock and cash. Dow Chemical, meanwhile, convened talks with buyout target Rohm & Haas to resolve thorny issues which have resulted in litigation. Merck lost 1.75, to close at 20.99, the largest percentage decliner on the Dow at a loss of 7.78%. Dow Chemical lost 0.79, to close at 6.32, an 11% loss.

Overall, the Dow finished with 14 stocks up and 16 down, but the severity of the losses was far greater than what amounted to skimpy gains.

In the general market, declining issues outnumbered advancers, 4613-1947, The number of stocks making new lows was again very high, at 1244. There were only 6 new highs. Volume was less than it was last week, reflecting some degree of disinterest or outright exhaustion.

NYSE Volume 1,556,423,000
NASDAQ Volume 2,053,304,000

Commodities were split once again, with oil rising $1.55, to $47.07 on word of more desperate OPEC supply cuts, despite heating oil and natural gas both finishing lower. Natural gas finished at a seasonal low of $3.87, a sign that milder weather through the latter part of February and into March has led to lower consumer demand.

Gold dropped $24.70, to $918.00; silver fell 39 cents, to $12.94.

There is continuing evidence of price destruction in the US and beyond, which will no doubt put pressure on many corporate profits this quarter. Looking out 6 weeks at the next earnings season, prospects continue to dim, and that was reflected in Monday's sluggish trade.

Stocks have now fallen in 14 of the last 18 sessions, resulting in a net loss of 1392 points on the Dow. The DJIA is now off 25% for the year.

Friday, March 6, 2009

Late Rally Saves Dow, S&P; NASDAQ Lower

Bed news for investors continued today, as the BLS released the Non-farms labor report for February, showing the nation lost another 651,000 jobs over the period. The Bureau also revised December and January figures even lower and boosted the official jobless rate to 8.1%, a further blow to confidence.

After gaining initially, the major indices soon feel into the red again, and stayed down most of the session, which was one of the more lackluster of recent vintage. At the end of the day, stocks rallied on a combination of short-covering, staking out of positions and a general oversold condition. It was not enough, however, to prevent the indices from falling for the 8th week out of nine so far in 2009.

Dow 6,626.94, +32.50 (0.49%)
NASDAQ 1,293.85, -5.74 (0.44%)
S&P 500 683.38, +0.83 (0.12%)
NYSE Composite 4,284.49, +16.89 (0.40%)

The Dow ended the session with 16 components up and 14 down, in line with the moderately higher closing figures.

Declining issues outweighed advancers, 3786-2782, so the buying which produced the gains was quite selective. New lows tallied 1684, to a mere 8 new highs. The disparity in the lows-highs this week has been the widest since the collapse back in the September-November wipeout of 2008. Volume was the among the highest of the week, indicating that there are still those who believe the worst is not over, and, alternately, a large share of bargain hunting.

NYSE Volume 1,771,049,000
NASDAQ Volume 2,489,014,000

Commodities were generally up, with oil gaining $1.91, to $45.52. Gold gained $14.90, recovering some of the ground lost over the past week's profit taking, to $942.70. Silver remained strong, adding 21 cents, to $13.33.

The late-day rally in stocks sets up an intriguing scenario for next week. In the absence of earnings reports from companies, the market will continue to focus on economic numbers and outside events.

Surely, employment will still be in focus. Any large-scale layoffs might spook already exhausted sellers, though if the news is more benign (and just about everyone believes the bad news has to take a break at some point), it could spark a fairly sharp rally. The global economy hasn't completely fallen off the cliff, so there are pockets of hope and some very attractive prices in stocks.

If anything, the market is more than overdue for a multi-week bounce to the upside. Of course, by April, the banks may be reporting the results of their government-sponsored "stress tests" and that should put the kibosh on any gains.

Sentiment remains stoic and bearish, but traders being the aggressive beasts they are, 1000 points to the upside in short order is not out of the question at this juncture.

Thursday, March 5, 2009

Stocks Routed Worldwide; NASDAQ Capitulates

Stock indices from Tokyo to Toronto suffered major losses again on Thursday as the global depression deepened and General Motors (GM) contemplated bankruptcy unless it receives additional financial support from the US government.

As the steady pounding continued, following the first gains in a week (yesterday), investors wiped out nearly double the amount of Wednesday's gains.

Dow 6,594.44, -281.40 (4.09%)
NASDAQ 1,299.59, -54.15 (4.00%)
S&P 500 682.55, -30.32 (4.25%)
NYSE Compos 4,267.60, -197.29 (4.42%)

There was no standout sector or industry spared from the widespread carnage, as the NASDAQ finally became the 4th major index to fall below the previous, November 20 lows. On that date, the NASDAQ closed at 1313. Today's close was 1% lower and comparable to October 2002 levels, when the NASDAQ bottomed out following the dotcom bust on October 9, at 1114.11.

As has been the case for months, US banks were at the center of the storm. Citigroup (C) traded below $1.00 for a brief time during the morning, closing down another 0.11, at 1.02. Bank of America (BAC) closed down 0.42, to 3.17, while JP Morgan Chase (JPM) tumbled 2.70, to 16.60. All of those were among the major losers of Dow components, though General Motors took the prize as the day's biggest, losing 0.34, to 1.86, a decline of 15.45%.

On the Dow, only 2 of 30 components gained ground. Pfizer (PFE) added 0.17, to 12.67. Wal-Mart (WMT) was up 1.26, to 49.75, as the nation's largest retailer saw improved same-store sales for February and increased its dividend to shareholders.

Market internals were a shambles, with decliners overwhelming advancing issues, 5823-842, a 7-1 ratio. New lows shot up to levels seen only in the September-November meltdown, with 1527 stocks reaching new 52-week lows versus only 7 new highs. Volume remained elevated, as it has over the past 7 sessions.

NYSE Volume 1,878,339,000
NASDAQ Volume 2,314,223,000

Oil futures were off $1.77, to $43.61. Gold emerged as a safe haven, up $21.10, to $927.80. Silver added 21 cents, to $13.12.

Prior to the opening bell on Friday, the Bureau of labor Statistics releases February Non-farm Payroll numbers. Expectations are for another 630,000 job losses.

Wednesday, March 4, 2009

Bargain Hunters and Bottom Fishers

After a rocky start, US stock indices finally put in a day of solid gains, thanks in large part from the seemingly never-ending supply of optimists seeking bargains after stocks plunge to new lows.

By no means is the recession or the drumbeat of downbeat economic news subsiding. In fact, this latest round of selling - pushing to Dow, S&P and NYSE Comp. to 12-year lows - was possibly the most brutal and merciless yet. Even today, the news was decidedly bad. The ADP Employment Report for February showed that another 697,000 private sector jobs were lost in the month of February. In the good-producing sector, it was the 26th consecutive month of US job losses; manufacturing fell for the 36th straight month, according to the firm.

Inside ADP's numbers was an alarming revelation: that most of the losses were from medium and small firms employing less than 500 individuals. The takeaway was that job-chopping by major firms has peaked, but now the recession is spreading down to smaller firms, even to the very mom-and-pop type small businesses that are the backbone of the economy.

For Wall Street, those figures, coupled with an oversold condition in the market, provided enough of a green light to let the bargain hunters loose, boosting stocks in an overdue, broad rally. At 2:00 pm, the Fed released the Beige Book, an anecdotal accounting which showed economic conditions deteriorating across all 12 regions.

That didn't dampen the mood much, until late in the session, when the Dow shed nearly 100 points in the last 20 minutes of trading.

As the Dow goes, it came just short of the new psychological barrier at 7000, paused and then fell away. That late-day downturn is surely cause for concern going forward, though if the 7000 level is breached, there's not much in the way of resistance until the 8000 level, so the opportunity for a short-term rally exists over the next four to six weeks.

Of course, there are still hurdles to overcome, and the chance that another bank may blow up or some other circumstance contribute to the overall malaise is paramount.

Dow 6,875.84, +149.82 (2.23%)
NASDAQ 1,353.74, +32.73 (2.48%)
S&P 500 712.87, +16.54 (2.38%)
NYSE Composite 4,464.89, +130.19 (3.00%)

Twenty-five of thirty Dow components sported gains, but the five which suffered losses revealed quite a bit about the overall tone of trading. Bank of America (BAC), Citigroup (C), American Express (AXP), General Electric (GE) and JP Morgan Chase (JPM) all have one thing in common. They are either banks or substantially tied to finance in their business operations. JPM took the biggest hit of all, down 8.14%, closing at 19.30, -1.71. The major banks still have unresolved issues and most of them relate back to derivatives and credit default swaps in the black hole of AIG.

Market internals were largely in line with the closing numbers. Advancers clobbered losers for the first time in over a week, 4955-1639. New lows moderated back to 676, though only three (3) stocks reached new highs. Volume remained at the elevated levels of the past week.

NYSE Volume 1,796,873,000
NASDAQ Volume 2,349,450,000

Oil ramped up on news of a surprise drawdown in US supply. Crude futures for April delivery gained $3.73, to $45.38. Gold continued losing, down another $6.90, to $906.70. Gold has lost nearly $100 in just over a week's time. Silver fared better (somebody is obviously taking my advice), gaining 20 cents to $12.92, still bargain territory (under $13 per ounce).

Optimism was abundantly everywhere. All commodity prices were up sharply with the notable exception of gold. This is likely an aberration, as is the stock market move, though there is a technical set-up for a short term bounce.

Stay tuned.

Tuesday, March 3, 2009

Weary Market Stuck on Red

Stocks zig-zagged across the unchanged line on Tuesday, with investors assessing the damage from Monday's drama.

There were equal amounts of bargain-hunting and hand-wringing as the major indices registers small losses, but overall, there was no good new upon which to launch any meaningful rally.

Housing data - which crossed the wires at 10:00 am - sparked more selling, as the numbers were far worse than even the most dismal expectations. New home sales for January fell 7.7%; construction spending dropped 3.3% for the same period.

Following those figures were numbers from the major auto makers, which posted the worst sales declines since the economy began to really sour in September of 2008.

Compared to the same period one year ago, General Motors (GM) said their light-vehicle sales dropped 53% in February, while Ford's declined 48%, with Toyota posting a 40% drop.

Ford's car sales dropped 48%, with sport-utility vehicles off a whopping 71%. Toyota's car sales fell 36%; GM's were off 50%.

Apparently, traders were too worn out from Monday's rout to engage in yet another sell-off session.

Dow 6,726.02, -37.27 (0.55%)
NASDAQ 1,321.01, -1.84 (0.14%)
S&P 500 696.33, -4.49 (0.64%)
NYSE Composite 4,334.70, -26.28 (0.60%)

Declining issues outweighed advancers, 4274-2343. New lows continued to dominate over new highs, as investors continued shedding outright losers, 1512-15. Volume was still very high, despite the minor movement in the market.

NYSE Volume 1,825,373,000
NASDAQ Volume 2,368,833,000

Oil gained $1.50, to $41.65. Gold tumbled $26.40, to 913.60; silver continued to correct, down 36 cents, at $12.72.

In another note on what I have coined the Post-Government Era, Pat Buchanan recently penned an interestingly-titled essay in which he correctly points out just how brutally federal, state and local taxes are bearing down on working, productive Americans. Mr. Buchanan fails to cross the line - in Pitchfork Time - from conjecture to the outright rebellion the title suggests, placing most of the blame on President Obama's budget proposal rather than rightfully on the monstrous policy decisions at every level of government over the course of the past 30 years.

While Buchanan may be stirring up the spirits of rebellion, he's dead on when it comes to the issue of taxation. Americans are being taxed out of their jobs, homes and security, though this condition has been existent for many years.

The current economic climate has only recently awakened the slumbering US middle class, though by many accounts, it's already too late.

Dow components finished with 17 up and 13 down. All the major indices extended their nearly 12-year lows.

Monday, March 2, 2009

Deflation, Depression Drumbeat

Everybody Limbo! How low can she go?
  • On April 28, 1997, the Dow closed at 6783.02

  • November 1, 1996, the S&P closed at 703.77

  • The NYSE Composite closed at 4378.48 on February 11, 1997

  • The NASDAQ is still above its November 20, 2008 close at 1313, so, after that, the next closing low will be May 2, 1997, at 1305.33

Today's closing numbers, seen below, are close to those levels, so the financial news junkies will be saying the stocks fell to their lowest levels since 1997, or the worst in 12 years.

Dow 6,763.29, -299.64 (4.24%)
NASDAQ 1,322.85, -54.99 (3.99%)
S&P 500 700.82, -34.27 (4.66%)
NYSE Composite 4,360.99, -256.04 (5.55%)

These kinds of comparisons serve almost no useful purpose, except to jangle our memories to recall what life was like back then. Here's an idea. Tiger Woods was in his first year as a professional golfer. Since then, Tiger's done well by simply plying his craft and parlaying his popularity into lucrative endorsement deals.

The point is that investing - especially in times like these - is not for everyone, while working hard and seizing the financial opportunities that may present themselves is probably a more fundamentally sound plan. Saving 10% of your income doesn't hurt either.

What is more useful is looking at the relative price/earnings ratios and dividend yields during boom and bust periods. Conventional wisdom dictates that stocks are risky when p/e ratios are above the 12-15 range and good buys when they are 5-10. The bottom comes when these ratios reach a cumulative 5-7. They are currently around 8-10, so the bottom is close at hand, numbers-wise.

As for dividend yields, a 7% compounded return doubles your money in 10 years, but with interest rates running at or close to historic lows, anything over 7% should be viewed with some degree of skepticism. Either the underlying stock is still falling or the dividend may, at some point in the not-so-distant future, be cut.

Either case will dampen your overall return, so stocks which are paying a dividend yield around 3-5% are likely to be good bets. Their price may improve (or not fall much more) and their dividends are likely to remain intact.

While I think it is still too early to call a bottom of any sort or time period, I am on record for calling the bottom at Dow 5267 sometime later this year, probably between August and November. Noting that, I may be completely wrong. We may be only at the beginning of a period of prolonged economic distress, in other words, a Depression-like decline.

Some are calling for the Dow to fall to 4000, others, below that. Remember that during the Great Depression, which lasted anywhere from 8 to 10 years, from 1929 to 1938, stocks lost 90% of their value. The very worst years of the depression, from a day-to-day "life sucks" standpoint, was from 1931 to 1935, when unemployment peaked and remained high and death, disease and rampant poverty was the order of the day.

Back in the 30s, people starved, froze to death, and suffered from a wide assortment of maladies many of which today have been eradicated by modern medicine. Considering the dynamic economy in which we live and the incredible amount of government aid available, it seems unlikely that many today will stave or freeze, though many will die of heat stroke, especially the elderly who try to save on cooling costs by turning their air conditioning off during the summer.

While I continue daily to paint this "doom and gloom" scenario, be reminded that today's calamity was caused by just one more market event - AIG's announced $61 billion loss in the last quarter and the government throwing another $30 billion at the company. Somebody please tell me how any company can lose $61 billion in 3 months time. On one hand, it's ludicrous and without precedent. On the other hand, how much of these "losses" are merely papering over a bottomless pit of credit default swaps and other cross-party derivatives.

AIG was the king of insurance and the leader in CDS, which are essentially insurance against bond defaults. With defaults still at inordinately-high levels (and growing, according to some), AIG doesn't have to funds to cover their own bad paper. AIG is no sideshow to the banking crisis, it is at the heart of the crisis.

Until AIG's problems are solved, or until the government comes up with a better idea than to just continue pumping good money down a sinkhole, nothing will change. Wall Street banks and AIG blew up the world financial system and there needs to be a fundamental shift in how the system works. Investigations of the CEOs and other executives at the tops of the firms are necessary, and they should lead to prosecutions and jail for the perpetrators, many of them household names by now.

The point is that bad news continues, unabated, nearly every day. This week will be no different. Tuesday, auto and truck sales for February; Wednesday, private job loss numbers are released by ADP; Thursday, new unemployment claims; Friday, Labor Department's Non-Farm Payrolls. All of the figures are predicted to be dire, so any hope for a rally needs to be moved back a few weeks, or months, or years.

On the day, one of the most one-sided ever witnessed, declining issues beat advancers by a stunning 9-1 ratio, 6036-675. New lows danced on the graves of new highs, 1479-11. Volume was again very high, as investors scramble to get out of way of the rampaging avalanche of burning paper holdings.

NYSE Volume 1,967,912,000
NASDAQ Volume 2,336,813,000

Not a single Dow component registered a gain. The worst were Citigroup (C) 1.30, -0.20, -20.00%; General Electric (GE) 7.60, -0.91, -10.61%; Alcoa (AA) 5.49, -0.74, -11.88%; General Motors (GM) 2.01, -0.24 -10.67; American Express (AXP) 11.06, -1.00, -8.29; Caterpillar 22.17, -2.44, -9.91% and Bank of America (BAC) 3.63, -0.23, -8.10.

Commodities exhibited all the symptoms of a deflationary spiral. There was no one single commodity higher on the day. From natural gas to coffee to feeder cattle, everything was down. Oil got hammered on persistent demand concerns, down $4.61, to $40.15. The precious metals fared better than most, but still, gold lost $2.50, to $940.00. Silver lost just 2 cents, to $13.07.

Today was one of the most disheartening in a series of such. Nothing, not the government, nor Warren Buffett, nor Barack Obama, nor the Fed can stop the freight train of deflation, wealth destruction and decline.

We might as well accept the facts: We are already in a depression. We are beyond the state of denial. No investment is safe.