Monday, April 27, 2009

Nowhere to Go But Sideways... or Down

Since April 3, the first time the Dow closed above 8000 since February 9, the Dow has traded in a range - using closing prices - of 342, from a low of 7789 (April 9) to 8131 (April 17). This is a span of 15 trading sessions, most of which occurred during the height of earnings season.

More than 3/5ths of companies having already reported, the decision is out on the first quarter. It wasn't horrible, but it wasn't very good either. Later this week - Wednesday, to be exact - the government will issue forth their proclamation of how much the economy downsized in the first quarter of 2009 with the release of an initial GDP estimate. Estimates run mostly in the 4.2 to 4.8% range, following a 6.3% decline in the 4th quarter of 2008.

If these guesses are accurate, some will call the first quarter the bottoming of the recession, while others, like yours truly, will point out that the second consecutive quarterly decline in GDP merely affirms that we are in a real recession, and it's a deep one with no real end in sight.

Unemployment figures are still extraordinarily high, housing prices continue to fall and the credit contraction is as bad, if not worse, than it was in the September-November period of last year. The banking stress tests, like most of what else the government has mismanaged, are a complete fraud for estimating economic conditions much rosier than what may actually occur. The US and global economies face more strong headwinds in the months and years ahead.

There are, however, some bargains in the stock market. You just have to know where to look. And you have to have some faith in the system and hope that there are others out there like you. It's a lot for which to hope.

On the other hand, now might not be the best time to be seeking bargain stocks. Many of today's cheapies were even cheaper a month or two ago. Stocks are stuck in a range; further upside may be - will be - difficult to accomplish.

Dow 8,025.00, -51.29 (0.64%)
NASDAQ 1,679.41, -14.88 (0.88%)
S&P 500 857.50, -8.73 (1.01%)
NYSE Composite 5,389.82, -78.59 (1.44%)

On the day, the mood was negative, with advancing issues beaten down by decliners, 4339-2145. New lows led new highs, 68-29. Volume, which was lower by a wide margin from last week, is sending mixed signals, but mostly that there is a lack of buying interest at this time. All of this leaves stocks with little to do except wait and wallow, or head lower. Were stocks to go any higher, they would only become even more overbought that they have been for at least three weeks. It is a condition which cannot persist.

NYSE Volume 1,402,328,000
NASDAQ Volume 2,225,050,000

Commodities were all lower, returning to the deflation scenario, which hasn't actually been played out and has years in which to run, instead of months, as the government and financial pundits would have you believe. Some people are actually talking about inflation's quick return in the form of higher prices. That's an appearance I would not count on for at least another 9-12 months, but more properly, prices will be under pressure for at least the next two years and probably longer.

Oil for June delivery was down $1.41, to $50.13. Gold dipped $5.90, to $908.20. Silver notched a 4 cent gain to close at $12.99 in New York. The rest of the popularly-traded commodities were down, including foodstuffs.

As for the swine flu hysteria, that's strictly a sideshow to the real story. It's all about your money, and how the government and/or banking/insurance/investment complex screws you out of yours.

There are other options, like physical gold, silver, other commodities, actual saving, smart budgeting, and owning your own business, just for openers.

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