Tuesday, August 4, 2009

Stocks Churn Out Another Gain

Stocks traded lower early, then rebounded quickly, but remained mixed throughout most of the session Tuesday following Monday's big gains. The follow-though was encouraging to the bulls, who now are becoming more confident that the nearly 2-year bear market has relented and the US economy is on a path back to growth.

There are positive signs beginning to blossom everywhere, much more so than in the Spring, when the "green shoots" mentality hit the market. Though stocks stumbled through June, July was the best in 20 years, and August is already sporting gains. How much further the rally can continue and whether or not it is actually a bull market remain on the consciouses of traders, analysts and investors worldwide.

Dow 9,320.19, +33.63 (0.36%)
NASDAQ 2,011.31, +2.70 (0.13%)
S&P 500 1,005.65, +3.02 (0.30%)
NYSE Composite 6,569.14, +3.49 (0.05%)

Among the highlights of the most recent rally has been both the advance-decline line and the major shift in new highs vs. new lows, despite the market making comparison with some very poor 2008 prices. These indicators remain very positive short term and should continue to guide trading. On the day, winners outpaced losers, 3728-2702 and new highs galloped ahead of new lows, 250-88. Volume was expectedly moderate, owing to the mid-summer time frame and general skittishness of many investors who may still be on the sidelines.

The big bet is whether or not the most severe banking crisis since the 1930s has finally been averted and it seems that could be the case. With a good deal of sleight-of-hand by the Fed, Treasury and the easing of accounting standards, the banks have survived, even if only as shells of their former selves. Banks such as Bank of America and Citigroup may be technically bankrupt, but nobody wants to hear that story, so life goes on as though they were pure as driven snow in their balance sheets.

Obviously, there are still bargains aplenty in the US markets and elsewhere around the world. The Far East, including China, Indonesia, Malaysia and parts of the East Asian peninsula may be offering the best investment opportunities on the planet, with South America coming in a strong second. These underdeveloped nations could benefit from perceived low costs for raw materials, making way for a great global infrastructure expansion. Surely , this is the case in China, and other countries are following suit.

While the rest of the world may actually outstrip the USA in terms of growth, America is still seen by many as the most prosperous and developed nation, for good reason. The US is a world leader in many markets, despite having off-shored much of its manufacturing in recent years. The upside is that aging and ancient plants built with 19th or 20th century technology should make way for more efficient building and greater technical opportunities. Its still a mixed bag of blessings hidden within the darker clouds overhanging Wall Street, but the resilience of American enterprise is legendary and must not be viewed as a failure by any means.

NYSE Volume 1,355,576,000
NASDAQ Volume 2,255,762,000

Commodities were mixed as September Light Crude dipped 16 cents to $71.42, while gold gained prodigiously, up $10.90, to $969.70. Silver followed suit with a 44 cent rise, to $14.70.

On tap for Wednesday is the ADP Employment Change for July, a key number which should move the markets. The expectation is that the economy shed only 350,000 jobs during the month. Should that be the case, it would be very positive for the market and the overall sentiment. The report is due to hit the news wires at 8:15 am.

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