Friday, May 28, 2010

Nose-Diving into the Weekend

At least stocks didn't gap up or down radically at the open today. Instead, they automatically reversed course against Thursday's gains, sending the major averages into a week-ending tailspin under pressure from foreign as well as domestic turbulence.

Prior to the open, personal income was shown to have grown 0.4% in April, most of the gain due to increases in government payrolls. Just before 10:00 am, the markets were dealt another blow of reality when both the Chicago PMI and University of Michigan comsumer sentiment index came in below expectations. Added to the 460,000 initial unemployment claims and lowered GDP estimate for the first quarter (to 3.0% from 3.2%) from Thursday, stocks were indeed lucky to receive any bids as the month of May for 2010 went down in the record books as the worst for stocks since 1940 - 70 whole years!

Those who insist that the US is on the road to recovery, or, already well down that road, are either not telling the truth or just too damn stupid to see the all-too-obvious signs on the road to ruin, the one the US has actually embarked upon.

The current and future fate of these United States was summed up brilliantly by casino-operator and real estate mogul, Steve Wynn, who, along with other gems of insight invoked Alexis de Touqueville, who predicted in 1909 that "the American system of democracy will prevail until that moment when the politicians discover that they can bribe the electorate with their own money." More of Wynn's caustic, cutting remarks can be viewed in the video below.

Dow 10,136.63, -122.36 (1.19%)
NASDAQ 2,257.04, -20.64 (0.91%)
S&P 500 1,089.41, -13.65 (1.24%)
NYSE Composite 6,791.57, -101.72 (1.48%)

Decliners laid over advancers largely, 4332-2135, or better than 2:1. New highs edged new lows, 107-73, but the margin being so close that it favors a negative outlook short term. So too, Friday's volume, which partly could be blamed on complacency and early departures, though it has been heading lower all week long.

NYSE Volume 5,757,302,000.00
NASDAQ Volume 2,185,725,000.00

The commodity complex was little changed, perhaps offering a glimpse at a more sober understanding of supply-demand dynamics for the coming months. Crude fell 58 cents, to a goosed-up $73.97. Gold gained 40 cents, to $1,212.20. Silver fell a nickel, to $18.41.

Remember, this weekend, those who served to make America great and gave their lives in defense of liberty, especially when driving through a police check-point or being harassed by some pompous low-level government official who wants to ruin your outing with nonsensical regulations. Remember that liberty is gained, not given. Earned, not handed out.

Thursday, May 27, 2010

Ups! They Did It Again; Stocks Streak at Open, Stay High

Stocks gapped up again at the open, this time to the tune of 140 points on the Dow Jones Industrials, shutting out the small players to - no doubt - the grand delight of the insiders weaving this month of May madness.

The big upside opening move was not unprecedented, as most of May trading has witnessed wild swings at the open, all predicated on overseas news flows, markets or even nothing at all.

Today, stocks held their gains and tacked on even more in an impressive performance of the "greater fool" theory - that being the kind of market action in which one sells, seeking a greater fool to buy at a new, higher price level. In a microcosm, Thursday's action was reminiscent of late 1999 or early 2000, where there seemed to be an absolute absence of sellers (that actually was the case, then), though the timing and duration are almost completely different.

Dow 10,258.99, +284.54 (2.85%)
NASDAQ 2,277.68, +81.80 (3.73%)
S&P 500 1,103.06, +35.11 (3.29%)
NYSE Composite 6,893.29, +261.93 (3.95%)

The trade was decidedly one-sided, with advancing issues absolutely pummeling losers, 5885-754. The margin of new highs to new lows was not as dramatic, with highs taking the lead, 108-64. What was different was the volume, quite a bit lower than recent days and notable that it slowed on the market's biggest advance in months. Conventional wisdom would assume that participation was low due to the surprise nature and overall point gain of the move, both of which were well out of ordinary ranges.

NYSE Volume 6,289,912,500
NASDAQ Volume 2,392,074,250

Commodities also were unsurprising, especially the highly-manipulated crude oil futures, which soared again, up $3.04, to $74.55, just in the nick of time to gouge motorists traveling on the first long holiday weekend of Summer. Anybody who believes that the oil companies are run by the greediest bastards ever to walk the earth (excepting maybe our current crop of bankers), gets a gold star for good judgement. Bear in mind that oil was selling for under $68/barrel less than a week ago.

Gold lost $1.50, to $1,211.90, while silver added 16 cents, to $18.46.

The roller coaster of May continues, fortunately ending tomorrow. There's no guarantee that June will be any better, but one can only hope that the extremely unfair gap-up and gap-lower openings and wild intra-day swings will soon diminish.

Wednesday, May 26, 2010

Down, then Up; Up, then Down; Market is a Total Scam

Anybody who hasn't kept up with my daily diatribe ought to read yesterday's post, or any of the last three hundred or so, many of which described how completely rigged and corrupted US equity trading markets have become.

Today was no different than any of the usual scam trading days which favor the Wall Street professionals over the average investor, who, naturally, holds no chance of success in such a manipulated and under-regulated environment.

Stocks gapped up at the open, just like they gapped lower at the open yesterday, freezing out everybody but insiders and forcing up bids. By 10:45, the Dow and other indices had generally reached their peaks, with the Dow up 135 points, but from there it was Chinese water torture in a slow, steady decline which finally put stocks in the red about fifteen minutes after three o'clock, eventually closing at the lows of the day.

Closing for the first time under the magic 10,000 mark since February 8, the major indices are in treacherous territory, which, again, I've been spouting off about for the past three weeks. Our nascent recovery isn't going all that well, despite some very strong numbers released today on new home sales and a steady report on durable goods.

The April new homes sales data were skewed by the April 30 deadline for the federal $8000 tax credit for new home buyers. Many buyers rushed in to take advantage, just as they did last year when the first stimulus credit expired in November. May figures, therefore, are almost certain to be disappointing, so today's release was severely discounted.

Durable goods are still at a run rate well below those of anything resembling a robust economy, so comparisons to last year are just whistling in the wind. If they were not improved, that would be a story. As it is, the manufacturing sector is mainly holding its own and not expanding.

Dow 9,974.45, -69.30 (0.69%)
NASDAQ 2,195.88, -15.07 (0.68%)
S&P 500 1,067.95, -6.08 (0.57%)
NYSE Composite 6,631.36, -34.47 (0.52%)

Surprisingly, advancers beat decliners by a healthy margin, 3827-2713, so some truly organized selling of specific issues has been undertaken by the insider syndicate currently in control of the world's money. New lows maintained their edge over new highs, 109-96, with elevated volume once again.

NYSE Volume 7,941,076,500
NASDAQ Volume 3,047,107,250

Oil popped back to life, just in time to keep fuel prices high over the upcoming Memorial Day weekend in America. July crude surged $2.76, to $71.51. Gold gained $15.50, to $1,213.30, while silver pushed 53 cents higher, to $18.29.

Investors need not bother watching markets for the remainder of the week as it's a good bet that they'll maintain a somewhat neutral stance heading into a long weekend. On the other hand, as well-oiled as is the machinery of manipulation, anything could happen, but chances of a global meltdown just prior to the kick-off of summer is a long shot. Chances of some major event that would roil markets when they re-open on Tuesday, however, is a strong possibility.

Tuesday, May 25, 2010

Money At Risk: Dow Plunges 290, Recovers, Gives Investors False Hope

Just like the "flash crash" of May 6, there will be no explanation given for the reversal of fortunes today in stocks. When all of the other major global markets - Japan, China, Hong Kong, Korea, France, Great Britain, Germany, Brazil - were down anywhere from two to four per cent, and US markets initially crash, but then recover to walk away barely bruised, what does that tell you?

That we're special, somehow? That the US is in so much better shape than the rest of the world that if their economies all imploded, ours would receive hardly a scratch? Anyone who buys into such cockeyed logic should have "MORON" stamped upon their forehead.

No, what that tells anybody with any knowledge of how deeply corrupted our stock exchanges have become, is that they are a massively rigged game, and the winners are mostly insiders at banks and brokerages pushing the market in whichever ways delights their fancies and fattens their bottom lines.

Stocks fell to levels below both the 1000-point flash crash and below all preceding 2010 lows. That happened right out of the gate, within 15 minutes of the open. Stock futures had been forewarning a brutal open, with Dow futures down as much as 250 points prior to the bell-ringing. These kinds of gap opens serve only to benefit inside traders, to the detriment of individual investors and fund managers who cannot move massive amounts of stock without really rattling markets.

The average Jane or Joe who doesn't keep an eye peeled on CNBC all day long may only notice the Dow was down 20 points and be happy with that, never knowing that it was lower by 290 just 15 minutes into the session. The S&P 500 actually finished with a fractional gain, after being down by as many as 32 points.

Possibly the most egregious display of manipulation was in the NASDAQ, which was down by as many as 73 points but recovered to finish down only two points.

Did the issues which hammered all other markets simply go away by the time US markets were trading? No. Those issues were belligerent behavior by North Korea toward their neighbors to the South, a slowdown of economic activity and a potential real estate bubble in China and the continuing fiscal woes of the entire continent of Europe, though more specifically, the potential default of the governments of Greece and Spain.

What most casual observers and investors may not realize is that the markets will return to those lows. Whether they do that tomorrow, Thursday, Friday, next week or next month is immaterial. The major indices all fell below their 200-day moving averages last week and continue to mostly reside there. One day's action will not change the fact that new lows were set in place and such lows will almost always be retested. The Dow and S&P were in the throes of a triple bottom breakdown, falling below the lows of February and early May. That kind of violation of support just doesn't go away, stocks have to be handled to erase losses and fresh bottoms.

Call it whatever you like, but today set up a new bottom and one of the more severe head fakes ever seen. Downside risk is still predominant and there's a high likelihood that the final push - after 3:00 - was caused mostly by short covering. US markets should not be considered a safe haven for any investor, simply because they are so obviously rigged. They may move strongly in one direction or the other - or both, like today - without reason.

Dow 10,043.75, -22.82 (0.23%)
NASDAQ 2,210.95, -2.60 (0.12%)
S&P 500 1,074.03, +0.38 (0.04%)
NYSE Composite 6,665.83, -0.91 (0.01%)

Market internals offer much better perspective. Declining issues were dominant over advancers, 4334-2242. New lows maintained their advantage over new highs and actually expanded their edge, 369-88. Volume was heavy, owing to the fact that a lot of stock had to be moved around to erase those early losses.

NYSE Volume 8,458,538,000.00
NASDAQ Volume 2,893,359,500.00

Another indication of what really happened today in markets comes from the commodity pits, where July Crude was down $1.68, to $68.75, a fresh closing contract low. Gold finished up $4.00, to $1,197.80, though silver closed down 22 cents, at $17.76.

The deflation trade is still on, meaning one should be either in cash or equivalents, short, living in another country, or all of the above. Money at risk stays at risk, especially in markets so obviously flawed.

Please pay particular attention to anyone who tells you that 1140 on the S&P is a "bottom." You are advised to run - as quickly as possible - as far away as possible from anyone holding that point of view.

Monday, May 24, 2010

Still Sliding: Stocks Clobbered Once Again

Stocks continued to trade in very choppy manner, apparently awaiting the next shoe to drop for the global economy. The shock could come from Greece, Spain, Goldman Sachs, the Gulf of Mexico or any sector of any market, or from some completely unrelated area of commerce, politics or society.

Lindsay Lohan could give up drinking for a week and it might be enough for stocks to chalk down significant losses, that's how fragile world equity markets have become.

A canary in the proverbial coal mine might have been Spain's CajaSur bank, which was seized by Spain's central bank. The small savings bank signaled that the debt crisis in Europe may be expanding into the private sector and well beyond the borders of the "PIIGS" nations - Portugal, Italy, Ireland, Greece and Spain.

After an initial slow start, stocks gained momentum, with the Dow Jones Industrials briefly going positive around the noon hour and again at 1:00 pm. After that, however, it was mostly selling, as no market participants appear to have any conviction whatsoever. Even a solid report from the National Assn. of Realtors on April existing home sales - up 7.6% from a month ago and 22.8% from April 2009 - was tempered by an 11.5% increase in existing homes available for sale, to 4.04 million, roughly an 8 1/2-month supply.

Stocks gathered downside momentum in the final fifteen minutes of trade, with all major indices trading within earshot of their lows for the day. The Dow stumbled to its lowest close since February 10 (10,038.38), along with the S&P. Showing strength and trading in positive territory most of the session, even the NASDAQ finished well into the red.

Either a significant upside catalyst must emerge over the next two weeks - which could be in the form or improved jobs numbers next Friday (though that's a risky bet) - or stocks will either churn sideways to lower or fall completely over the cliff. The markets are in a mid-quarter correction of a cyclical bull inside a secular bear market. In other words, upside is severely limited near term and probably out the window, longer term. The 13-month-long rally of 2009-10 is already over, and a significant retracing is underway. Since stocks have barely breached the 10% level, downside risk is exaggerated at this juncture.

Looking at current global conditions, all the earmarks of severe deflation are present. Capital formation has been at a standstill for months, the real estate market in the US and Europe are still depressed, corporations have no pricing power, thus fueling long-lasting high unemployment. Debt overhang on state and national budgets is still severe. The losses by the banks from 2007-2008 are still sitting in the Fed's balance sheet and Europe is quickly becoming a basket case. A dissolution of the EU - even the expulsion of a few member countries - or debasement of the Euro could cause massive disruptions in global commerce and a worsening of global deflation.

To the surprise of nobody, financial stocks led the market lower. Technology was the best-performing sector, though only because others were so badly harmed. Unnerving was the fact that the Dow broke a string of ten consecutive Mondays with positive finishes, a signal that the individual investor has been nearly completely spooked out of the market and mutual fund managers may be moving more into cash.

Dow 10,066.57, -126.82 (1.24%)
NASDAQ 2,213.55, -15.49 (0.69%)
S&P 500 1,073.65, -14.04 (1.29%)
NYSE Composite 6,666.74, -108.71 (1.60%)

Losing issues beat winners, 4077-2405. New lows maintained their advantage over new highs, 112-69. Volume was subdued.

NYSE Volume 5,918,380,000
NASDAQ Volume 2,075,873,625

The winners were the metals, with gold ahead by a whopping $18.10, to $1,193.80. Silver followed with a gain of 35 cents, to $17.98. July crude finished at $70.21, up a mere 17 cents. Oil is poised to fall to even lower levels, despite the usual buying into summer months. The price was overbought during the winter, an a correction back to more reasonable levels around $60/barrel would not be out of the question.

Friday, May 21, 2010

Pausing to Catch a Breath; Markets Bounce to End Dismal Week

Like the punch line to the old joke, "What are 500 lawyers lying dead at the bottom of the ocean?", gaining 125 points the day after the Dow Jones Industrials had just lost nearly 400, is... well, a good start.

However, the internals don't quite match the enthusiasm some may hold for the headline numbers, and, when the indices tumbled out of bed this morning into a ditch, they set new intra-day lows. Further, the whole thrust of today's gallop higher seemed a little out of place and probably had more to do with options expiration and covering short positions than anyone wants to admit.

It was a nice end to a really bad week for equity investors. All of the major averages ended up well below where they began the year, hugging their respective 200-day moving averages, or, in the case of the S&P 500, nestled comfortably below it. Obviously, whatever market worries caused the collapse of the past four weeks, those conditions are still present, and possibly getting worse.

For instance, Europe's $1 Trillion bailout is being called TARP a la EU, likened to the US version unveiled at their height of our own crisis back in the Fall of 2008, and many are saying it isn't enough. The US economy, hailed as the best of a bad bunch, isn't doing very well with real estate markets stuck in a funk and unemployment remaining stubbornly high; China is purposely slowing their own growth (they may not have to; slack global demand may do them in), fearing inflation; oil continues to spew from the floor of the Gulf of Mexico, fouling the Southern coastline and threatening to destroy one of the great ecosystems of the fragile planet; state governments are just beginning to come to grips with austerity measures to combat their own fiscal deficits.

Is there anything good? Well, the price of gas is coming down gradually, but other than that, no, there's nothing good about a financial system teetering on the brink of implosion, the governments of nations nearing collapse, ecological disasters, politicians more focused on being re-elected than actually fixing things and the most corrupt insider game of high finance being played out on Wall Street.

Maybe the entire system needs to be flushed. Maybe an upheaval of the old guard might just lead to better days ahead. Maybe it's time for the rich and greedy to come to understand that impoverishing the entire planet isn't going to necessarily result in their own enrichment.

Today's little bump higher is, as usual, suspect, in that the rally came off an early, deep decline. Within minutes of the opening bell, the Dow was down 145 points, the other indices in a similar fix. The turnabout had all the earmarks of our old friends at the PPT, rushing to the rescue of financial markets which had apparently taken all they could handle. No matter the cause or underhandedness surrounding the Friday push to higher ground, stocks tumbled back into negative territory in the final hour. Technically, the indices made all of the day's gains in the last twenty minutes of trading, so, no, we're not buying it, nor should anybody.

Dow 10,193.39, +125.38 (1.25%)
NASDAQ 2,229.04, +25.03 (1.14%)
S&P 500 1,087.69, +16.10 (1.50%)
NYSE Composite 6,775.45, +122.45 (1.84%)

While advancing issues beat up decliners pretty handily, 4622-1938, new lows overwhelmed new highs for the third consecutive trading session, 295-87, and once that indicator flips in one direction or another, it's usually in it for a long haul, which can last anywhere from 4 to 20 months. Volume was abnormally high, owing to the idea that many shares were being parceled out of options and many short positions covered. Beisdes, it may have taken the insiders boosting stocks a bit more heft than they originally planned. Selling pressure didn't subside. It was just temporarily replaced by coordinated buying.

NYSE Volume 9,276,994,000.00
NASDAQ Volume 3,366,007,500.00

The first day of trading in the July futures contract for crude oil resulted in some price spillage, down 76 cents to the adjusted level of $70.04. Gold continued to retreat, losing $13.10, to $1,175.70, as did silver, down a relatively benign 6 cents, to $17.63.

The final week of May and all of June will be interesting to observe (meaning: do not trade this market) as investors will continue to focus on the issues in Europe, financial regulation and some potential pre-warnings from companies whose fates have turned from rosy to thorny. But, call me a tree-hugger or whatever you like, I have a feeling that the oil spill in the Gulf will dominate the news in a very ugly manner.

Thursday, May 20, 2010

Global Markets Under Severe Pressure; Stocks Pounded

The most common term being tossed around Wall Street and other financial capitols the past few days has been "de-risking," (which isn't even a real word), or use of the term, "taking off risk," which implies, correctly, that investing in stocks is generally risky business. That's why the game used to be reserved for wealthy, astute investors with money to spare, though today, the market is comprised of everybody from rich company CEOs to the average cabbie or retail worker, through mutual funds, 401k plans, options, hedges and other schemes that serve to make an already risky proposition even more so.

It doesn't take a Gordon Gecko or even a Warren Buffet to understand that when major investments firms are "taking off risk," i.e., selling stock and/or buying protection via puts or covered calls, that the average Joe or Jane should be doing precisely the same. If the big boys are scared, there's usually a very good reason (of which nobody will speak) to get out of the way, and today was a classic example of just how risky investing in stocks can be.

Days like today, and, incidentally, the past two weeks or trading, are precisely what your broker, financial planner or CNBC doesn't want you to know about. Profits can be gone in a flash - a day, a week - like tossing hard-earned money down a sink-hole. The analysts call these kinds of sell-offs "liquidity plays" or "wealth preservation," when all along anyone with half a brain screwed on properly knows that its just part of the game.

The blog you are reading, Money Daily, has been warning for weeks and months that the recovery in the US was artificial and not long-lasting. The airwaves are full of blame for congress and fear over the intricacies over proposed financial regulation, but the truth of the matter is that the financial collapse which began in August 2007, accelerated into the Fall of 2008 and the Winter of 2009, was never really resolved. Financial firms such as Bank of America, Citigroup and Wells Fargo were not liquidated as they should have been, but bailed out by government fiat, using taxpayer dollars to fund the excesses of a banking system gone wild.

Now, those problems are bubbling up under the surface, and, akin to an actual volcano, are about to spew the flotsam of mal-investment all over the markets. Stocks are wickedly overvalued, the US economy is in immediate danger of re-implosion and many parts of he global system, especially Europe, are in worse shape, so get ready for Financial Armageddon Part II, which was correctly forecast here for months and yesterday identified as the breaking point, when the number of daily new lows shot past the corresponding number of new highs, a trend which accelerated today.

All of the major indices closed the session by crashing through their respective 200-day moving averages, and all are in negative territory for the year. All are also off by more than 10% from their recent highs, the technical definition of a correction, though that small tidbit is the least of what's on people's minds. Where the slide may stop has become an open question.

Adding to the myriad of global problems besetting the markets was today's announcement that 471,000 people filed initial unemployment claims in the most recent week. The number of people seeking unemployment benefits has been growing recently, adding to the "double dip" argument, which now seems to have been the correct call after all.

Dow 10,068.01, -376.36 (3.60%)
NASDAQ 2,204.01, -94.36 (4.11%)
S&P 500 1,071.59, -43.46 (3.90%)
NYSE Composite 6,653.00, -274.21 (3.96%)

Not only was there a dearth of buyers in the marketplace, but all the major indices closed at or near their lows of the day and trading volume was spectacular as well. Advancing issues were completely overwhelmed by decliners, 5162-561; new lows superseded new highs, 312-77. The rout is on, and today's action was only the first or second round. The full force of deflation has yet to be fully comprehended or felt by market participants, though the selling in the oil futures should have provided some indication of what's to come, if the stock moves weren't already enough of an indication.

NYSE Volume 9,629,935,000
NASDAQ Volume 3,258,398,750

Crude oil tumbled to fresh, 10-month lows, as the June futures contracted expired and traders were bolting from it like it was the plague. Crude dropped $1.96, to $68.01, though the contract traded as low as the $65 range. Gold slipped $4.80, to $1,187.80, and silver fell another 40 cents, to $17.69, as investors scrambled into cash positions.

There isn't much more to add to today's monstrosity other than it was entirely expected and astute individuals should be already fully in cash or equivalents, tools of trades or illiquid assets of tangible value because this is only the beginning of what may turn out to be a final reckoning for the likes of zombie banks such as Bank of America, Citigroup and Wells Fargo.

Wednesday, May 19, 2010

Today, the Collapse Began; Cash Reigns Supreme

While the headline numbers for today's trading on the major indices weren't all that startling, but the largely unnoticed event - an indicator which I watch like a hawk and report on daily - occurred today, as the new high - new low metrics completely reversed, with new lows taking the edge over new highs.

Of all the indicators which investment analysts cite in their mountains of research and charts, this simple indicator has proven to be the absolute best and most accurate for determining both bull and bear market direction, long term, and isn't long term what investing is supposed to be about, anyway?

The first time I made note of this simple indicator was when it turned negative in August, 2007, an innocuous time for many, but the actual beginning of the still-ongoing financial crisis. New lows took the edge from the new highs in that month and did not give up the advantage - on a day-by-day basis - until April of 2009, a span of some 20 months, a spectacular indicator, to be sure!

There were a handful of days in which there were more posted new highs than new lows, but through those 20 months, new lows led new highs nearly every trading day. When they turned over last year, with new highs surpassing new lows on a daily basis, I was slow to comprehend its meaning and power, but finally caught on in June as the markets embarked upon a truly breathtaking nine-month rally.

Today marked the second time new lows have surpassed new highs in the past two weeks. The first instance was on the day of the "flash crash" on May 6, nearly two weeks ago. Today, the move was decisive, with 167 new lows compared to only 90 new highs. It would bear to watch this indicator closely for the next ten trading sessions, to see if it continues to trend in this manner, but my gut feeling is that it has flipped and the market is heading for a renewed bout of bearishness, marked by sharp selling and equally sharp rallies off fresh bottoms.

Investors would be well advised to get out of equities as soon as possible, if not already in cash, equivalents or tools of trades as I have been suggesting for some time.

Dow 10,444.37, -66.58 (0.63%)
NASDAQ 2,298.37, -18.89 (0.82%)
S&P 500 1,115.05, -5.75 (0.51%)
NYSE Composite 6,927.21, -32.00 (0.46%)

Losing issues outstripped advancers by a colossal margin, 5030-1549, or better than 3:1, another indication of more pain to come for Bulls. Volume was also strong, indicating that the selling has not yet reached fever pitch.

NYSE Volume 7,827,840,000.00
NASDAQ Volume 2,588,426,750.00

Crude slipped to a seven-month low today before regaining its footing, adding 46 cents, to $69.87 per barrel at the close, though that gain was likely a knee-jerk reaction to the relentless selling the entire month of May which has brought the price down more than 15%.

If there was any indication of deflation, it was not only in the April CPI numbers released prior to the market's opening, which showed a decline of 0.1% (same as yesterday's PPI), but in the price of gold, which sold off considerably. The yellow metal plummeted $21.70, to $1,192.60. Silver suffered an even larger percentage loss, diving 76 cents, to $18.09.

As are all other commodities, they are trading vehicles, and while they may fare better than other asset classes, they are still not immune from the ravishes of deflation, which has been and continues to bombard global markets with price dislocations and a general lack of pricing power.

The race to the bottom is on again. Cash is king once more!

Tuesday, May 18, 2010

Churn, Churn, Churn: Stocks Turning to Mush

Possibly, you may have noticed a pattern developing over the past week or so.

That pattern has the unmistakable earmarks of a major downturn for equities, with all of the major indices falling below their 50-day moving averages, and, as of today, staying below them. Unlike yesterday's miraculous midday turnabout, the trading pattern on Tuesday was emblematic of typical bear market sell-offs, with stocks gaining in the morning, but, without conviction, being sold off soundly into the closing bell.

Rationale for the sustained selling might be one of many. Maybe it was the -0.1% April PPI reading (note to the uninitiated: negative PPI is usually a sound indicator of outright DEFLATION, the one word the Federal Reserve and central bankers worldwide dread). Possibly, some sellers were spooked by the dismally-low number of building permits issued nationwide: 606,000 in April, after 685,000 in March.

Neither of those seemed to weigh on markets at the opening, as both figures were released at 8:30 am, prior to the famous ringing of the bell. So, when Meredith Whitney, who has been elevated to stock goddess status after her correct calls on the 2008 financial collapse, took aim at both the Washington political crowd pondering financial regulation and the banking sector, a cadre of investors may have been taking notice.

Not only was her editorial in the Wall Street Journal a warning shot to current reform efforts and the debased credit climate, but it was after her appearance on CNBC (see below) that stocks really began to extend their slide. Whitney's advice was to avoid financial stocks "at all costs," which must have sounded an alarm, because all the major bank stocks took hits on Tuesday.

Bank of America (BAC) was off 2.45%; Goldman Sachs (GS) fell by more than 5 points, a 3.70% decline; Citigroup (C) finished the session at 3.73, its lowest close since March 8th, a decline of 3.37% on the day.

Dow 10,510.95, -114.88 (1.08%)
NASDAQ 2,317.26, -36.97 (1.57%)
S&P 500 1,120.80, -16.14 (1.42%)
NYSE Composite 6,959.21, -104.62 (1.48%

As expected, declining issues exceeded advancers by a wide margin, 4859-1705, though new highs managed to stay atop new lows for at least one more day, 166-100. Volume was on the low side, though it should pick up as the week progresses toward options expiration.

NYSE Volume 6,716,525,500.00
NASDAQ Volume 2,279,330,000.00

Crude oil, after being up nearly $2.00 in early trading, slipped to its first close below the $70 mark in 2010. Oil sold off another 67 cents, to $69.41. Keeping with the deflationary tone of the day, gold fell grandly, off $13.40, to $1,214.30. Silver managed to buck the trend, but only by throwing in 2 cents to its price per ounce, trading at $18.86.

The current conditions are ripe for a continuation of the current selloff or a radical race lower, a circumstance which could arise should the major averages fail on their tests of the 200-day moving averages. Dropping below those levels, which are not far off, could incite an all-out rout in equities as the economy still appears to be on shaky footing and companies may have trouble meeting last year's earnings results heading into the 2nd, 3rd and 4th quarters. While the upcoming spate of earnings reports in July may not be very challenging, the October and January 2011 results will be difficult, as the comparisons are to quarters in which companies had cut staff and expenses to raw bone and most cannot afford to operate in that manner for extended periods of time. The latter half of 2010 appears to be setting up as a very challenging period for the general economy and stocks overall.

Monday, May 17, 2010

Dow Drops 180, Finishes with Gain: Complete Scam

Let's not mince words any more. The stock market is a complete scam, engineered to maximize profits for the banks, brokerages and well-heeled investors. Period.

Individual investors have no place in this magnificently-rigged charade. Second, third and fourth quarter comparisons will be impossible for most traded companies to meet. Expect stocks to fall at least 40 percent over the next 12 months.

Dow 10,625.83, +5.67 (0.05%)
NASDAQ 2,354.23, +7.38 (0.31%)
S&P 500 1,136.94, +1.26 (0.11%)
NYSE Composite 7,063.83, -13.81 (0.20%)

Internal numbers tell the entire story of today's panicked selling and short-cover rebound into the close. Declining issues overwhelmed advancing ones, 3705-2873. New highs and new lows were almost on equal footing, with the highs taking a slim edge, 113-108. The new highs to new lows indicator is screaming for direction, and the most likely aim is down. If this indicator flips - which it almost surely will, considering the absurd gains from 2009 - a complete reversal will be unstoppable. Volume was moderate, though with options expiring this week, any movement to the upside in terms of trading volume will carry the distinct odor of burned investors.

NYSE Volume 6,799,444,500.00
NASDAQ Volume 2,416,696,250.00

Even the mainstream is calling stocks risky and overpriced, as in this Fortune/CNN Money article.

Stocks are almost certain to decline, along with almost all commodity prices, because almost everything is overvalued. Price discovery is the very first and most important aspect of market discipline. For the past 20 years at least, the equity markets have displayed less-than-rigorous pricing models, which has led to one bubble after another, to the point at which not only the global economy is at risk, but the nature of currency is being challenged. Major, catastrophic consequences, bourn out of years of market manipulation, deceit, sloppiness and fraud cannot be discounted in perpetuity. Eventually, some semblance of honest price discovery and balanced economic principles must come to bear upon all markets. For equity markets, that time is overdue.

Commodity prices continue to foretell the fate of nations. Crude oil prices continued to decline on the day, reaching a five-month low by losing another $1.53 per barrel, to $70.08. Oil's decline is symptomatic of the overall deflationary environment which has persisted since mid-2007 and has not abated, despite the massive printing of money by the world's central bankers. Gold could barely muster a bid, rising only 30 cents, to $1,227.70, itself under pressure as a traded commodity, but with the slight argument that it is a store of wealth. Silver also fell victim to both market maneuvering and selling pressure, slipping 37 cents, to $18.84 per ounce.

In an economic downturn as enormous as the one currently underway, there is no safe haven, though the metals may prove more steadfast than almost all other asset classes. Their status as commodities, and their prices being largely unavailable to the average man and woman, make them vulnerable to huge price swings, as has been the case over the past three to five years.

The breaking point is nearly upon the world's economies. Either the Euro's demise or an unanticipated collapse of oil and distillate demand (caused primarily by the swirling deflationary pressures) may prove to be too much for markets to handle.

Nobody who follows economics or markets should be surprised if a massive collapse is equities occurs at any time during the next six to twelve months. Such an event should not be viewed as a possibility, but rather a near-certainty.

Friday, May 14, 2010

So, I Was Right About the Fraud, Right?

OK, I hae stated my case all week. The case of the skeptic, of the cynic, of the personwho believes those who run big firms and those who execute trades for those big firms are among the most dishonest, corrupt, incorrigible people to ever set foot upon the planet, and it is they who are responsible (in cahoots with certain government agents) for the "flash crash" of last Thursday and much of the subsequent market action afterwards.

You can look back over the past six days of posts and my story doesn't vary. Insidious insiders caused the meltdown and bounce last Thursday, May 6, 2010, walked stocks further down on Friday, May 7, and knew full well that the EU would not only bail out Greece, but that they would approve a nearly $1 Trillion rescue package over the weekend.

When the market spiked 400 points at the open on Monday, it was they who benefited and it again is the very same people who have been selling at ridiculous short-term profits all week.

Here, for your reading and dancing pleasure are the numbers:

Thursday, May 6: Right around 2:30 in the afternoon, the Dow plummets suddenly, about 600 points, for a total downdraft of almost 1000 points, finally bouncing off 9,787.17. Just as quickly as the market fell, it rebounded. Traders and individuals are stunned. The Dow closes at 10,520.32.

Friday, May 7: Already confused and afraid, market participants sell out of fear that there are nefarious forces at work and they are correct. Dow closes at 10,380.43, a 10-week low.

Monday, May 10: EU approves monstrous bailout for member nations nearing default. Market gaps up 400 points at the open, benefiting only those who bought in on Thursday or Friday. Dow closes at 10,785.14.

Tuesday, May 11: Stocks moderate as insiders quietly begin selling shares. Dow closes at 10,748.26.

Wednesday, May 12: In what looked very much like a short squeeze, insiders maximize profits by boosting the Dow another nearly-200 points. Dow closes at 10,896.91.

Thursday, May 13: Selling now commences in earnest as insiders ramp up trading. Dow closes down 114 points, at 10,782.95.

Friday, May 14: More vigorous selling, with a bottom intra-day at 10,537.25. Dow closes down another 162 points, at 10,620.16.

There you have it. From Friday's close of 10,380.43, after all the obfuscation and hoopla, the Dow bottoms a week later at 10,537.25, a minuscule 157-point move, with plenty of action (for thieves, crooks and criminals) in between.

I've said it before, but the action of the past week confirms that Wall Street is no place for individual investors. There are far too many sharks in the waters to ensure safe swimming.

Dow 10,620.16. -162.79 (1.51%)
NASDAQ 2,346.85, -47.51 (1.98%)
S&P 500 1,135.68, -21.75 (1.88%)
NYSE Composite 7,077.64, -156.73 (2.17%

Decliners beat advancers, 5600-989. New highs barely edged now lows, 101-87. Volume improved a bit over Thursday's levels, though with the market pointing down, that's an ill-boding omen.

NYSE Volume 6,872,919,000.00
NASDAQ Volume 2,596,956,000.00

Oil was splattered all over the trading pits, losing $2.79 on the session, to $71.61, a 12% decline in a month, though gas prices are still at or above the levels they were two weeks ago, when crude was $86/barrel. Motorists are neither stupid nor amused at this non-conforming development.

Even the metals settled down, with gold losing $1.40, to $1,227.40 and silver off 27 cents, to $19.20.

A wild week, unless you were paying attention at the end of the prior week. Then you saw the raw greed and corruption that is part and parcel of today's trading environment.

It stinks. People should be going to jail. Unfortunately, the government is likely in on the game.

Thursday, May 13, 2010

All About Today's Reversal, And Why It Matters

The downturn in equity markets today should not have come as a surprise to anybody who understands charts and amrket dynamics.

A nice chart of the Dow covering the past six months reveals the condition. The market is sitting right on its 50-day moving average with no clear direction, though lower seems to be the most likely move as days progress.

Recall the events of the past 5 trading days: After the "flash crash" (thanks to the geniuses at CNBC for giving it a nickname) of last Thursday, the Dow sank on Friday, had a sharp opening gap up and maintained that stature on Monday, dipped a bit on Tuesday, rallied above the 50-day moving average on Wednesday, and today closed below that important measuring stick.

Now, there's an easier way to look at these events, especially if you're a cynical observer such as I. After scooping up shares at the bottom on Thursday and Friday, the power players behind the scenes made fast cash on Monday, sold a little more on Tuesday, sucked in more late-comers on Wednesday and now are selling in earnest. The moves are being made in conjunction with various and many stock option plays, the May variety which expire on Friday, the 21st, being the most active.

Depending on how badly these power players - the same group likely behind the flash crash and other recent organized selling - want to hit the little guys on the other end of trades - and how soon - this little episode could take on some very interesting dimensions. They might be over-weighted on the long end, or they could be itching for another downdraft. The latter would make more sense from a chartist's perspective. Once a market breaks through a key level - like the 50-day MA - the corresponding next moves are usually more of the same, and this move was one of significantly violent quality, so the downside appears to be the more obvious choice.

Of course, these insiders are a savvy bunch and they've likely already discounted the idea that the market should behave in patterned ways, so they just might keep stocks chugging along, mirroring the 50-day until options expire. The cynical view is that they bought close to the bottom and are slowly selling at fat profits presently, though, and that patten should continue.

At the end of today's trading, there was a rush for the exits. Stocks closed at their lows of the session, which is one of the more profound daily indicators one can find. It indicates a real reluctance to maintain positions and even less commitment to any new purchases.

Dow 10,782.95, -113.96 (1.05%)
NASDAQ 2,394.36, -30.66 (1.26%)
S&P 500 1,157.43, -14.24 (1.22%)
NYSE Composite 7,234.37, -81.99 (1.12%)

On the day, decliners took the advantage over advancing issues, 4193-2349. There were 192 new highs to a paltry 53 new lows. This is an interesting development. The market is holding judgement in abeyance, perhaps awaiting some catalyst, or just marking time until the next move lower. Volume was down for the third consecutive day, another indication that the markets are poised to head even lower, likely back to test the Friday intra-day low of 10,221.50.

NYSE Volume 5,477,719,500.00
NASDAQ Volume 2,321,865,500.00

Commodity prices continued to cool. Crude oil maintained its relentless slide, losing another $1.25 per barrel, to $74.40. Even gold bugs were either spooked or taking profits, sending the price down by $13.90 per ounce, to $1,228.80. Silver also ran down 16 cents, to $19.48.

Much of today's selling was blamed on some interesting and disturbing comments from mainstream retailer Kohl's, which issued 2nd quarter fiscal 2010 guidance that fell short of expectations and noted that the average amount per transaction was down in the most recent quarter. Macy's also cited the same metric, days ago. With retailers cautious about consumer spending, they are acting as the canaries in the coal mine, warning that the current recovery - if one exists at all - may not be sustained. If they're right, stocks will find no bottom in the near term and the remainder of the year may be a wipeout for many corporations.

It's interesting to note that the January indicator predicted that 2010 would be a down year for stocks and maintains a solid record of correctly predicting the future economy, somewhere in the range of 85% accurate. Since the major indices are right about where they began the year, that long-ago (4 months) indicator overhangs the market like the sword of Damocles.

While Wall Street pondered its own fate, oil continues to surge from beneath the ocean into the Gulf of Mexico. With the disaster now entering its 4th week without resolution, the slick continues to grow and the oil continues to flow. That oil will go somewhere, eventually, but the drama is playing out in what appears to be a slow-motion nightmare on Bourbon Street.

At the end of it all, expect to see the end of the rig company, Transocean, drowned in a sea of lawsuits. The CEO of BP, Tony Hayward, almost certainly will be sacked, if the company even survives. As for Halliburton, the love-child of former US VP, that company seems to be born under a lucky star. The damage to the Gulf waters, the shorelands and the wetlands may be unbearable and unresolved for years to come.

Wednesday, May 12, 2010

Bump and Grind and All is Golden

Monday was the bump higher, Tuesday and Wednesday turned out to be significant grinders as investors regained confidence and continued to scoop up stocks since there's nothing else to buy besides maybe gold and treasuries, and the latter isn't granting much of a return these days.

Speculation is back in vogue, now that the latest crisis has passed from public view, though there will certainly be issues going forward, as always.

Dow 10,896.91, +148.65 (1.38%)
NASDAQ 2,425.02, +49.71 (2.09%)
S&P 500 1,171.67, +15.88 (1.37%)
NYSE Composite 7,316.36, +94.70 (1.31%)

Once again, advancing issues finished far ahead of decliners, 5470-1122; 195 new highs outpaced just 58 new lows. As much as the rally seemed vibrant and flourishing, volume declined for the third straight day, reinforcing the notion that while all the attention was focused on stocks going higher, there were wise guys taking some slivers of profit while the herd pushed to the extremes.

NYSE Volume 5,929,432,500.00
NASDAQ Volume 2,308,404,000.00

Gold continued to dominate the commodity space, breaking through to fresh all-time highs, another sign that global economies aren't quite as fit as their leaders would have you believe. The shiny stuff was up another $22.80, to $1,242.70 on the day. Silver gained 37 cents, to finish at $19.64. The metals have parted ways with oil significantly this week, as crude fell 72 cents to $75.65, while motorists are still anxiously awaiting a similar price reduction at the pump.

Despite the coming arrival of summer, oil, if the price were not so ham-handedly manipulated, could reach even lower levels around the $60/barrel mark by mid-July, though the sheiks and barons probably won't allow that to occur, instead focusing on limiting supply and choking consumers. Gold will continue to rocket higher in coming months unless sovereign economies actually discover fiscal integrity - an unlikely occurrence.

Tuesday, May 11, 2010

Hot Flashes and Mood Swings; Gold Shines

Financial markets continued to behave in disorganized, semi-rational manners.

Prior to the opening bell, stock futures were pointing toward a heavy downdraft, with Dow futures predicting close to a 100-point gap lower at the open and that is roughly where it stood, making what would turn out to be the low point of the day just five minutes into the trading day.

Stocks gained steadily until reaching a peak just before 2:00 pm and then relented, sliding steadily downward into the close. This is the second day in a row which has witnessed large opening gaps - Monday's to the upside and of greater magnitude, today's lower - which benefit only the most adroit professionals and are a bane to the small investor.

Volatility, though subdued when compared to the final two days of the prior week, remains at elevated levels and volume dropped off for the second straight session.

What the markets are attempting to digest is a spate of conflicting events concerning Europe and the bailout of Greece, changing politics in Great Britain, the continuing unnatural disaster from the oil spill in the Gulf of Mexico and a reft of economic data and information that is not easily deciphered.

Housing and unemployment remain as the great contradictory indicators to a general recovery. Without a meaningful rebound in home-buying and employment, any hope for sustained prosperity seem overblown. The nearly $1 trillion thrown at the monetary crisis in Europe is being regarded widely as nothing more than a temporary fix with structural problems as yet not addressed.

The huge bulk of unfunded future liabilities mostly in the form of pensions and health services are keeping a lid on the economies of European nations as well as the United States. Massive government current deficits are already strangling state budgets. In New York, efforts are underway to overturn portions of the state budget which calls for one-day-a-week furloughs for state employees. The budget and the measure was passed on Monday night by the state legislature, at the urging of lame-duck governor David Patterson.

Meanwhile, hearigs were underway in washington, D.C. and New Orleans, concerning Thursday's stock market "flash crash" and the events leading up to an immediately following the oil rig explosion which caused the continuing oil spill of the Louisiana coastline (see video at end of this post).

Dow 10,748.26, -36.88 (0.34%)
NASDAQ 2,375.31, +0.64 (0.03%)
S&P 500 1,155.79, -3.94 (0.34%)
NYSE Composite 7,221.66, -35.96 (0.50%)

Advancing issues outpaced declines on the day, 3719-2812; new highs surpassed new lows, 166-62. Volume was lower for the second straight session.

NYSE Volume 6,583,789,500.00
NASDAQ Volume 2,484,207,000.00

The big winner on the day was gold, which shot up $19.50, to $1,219.90, closing at an all-time high. Silver tagged along, rising 74 cents, to $19.27. Crude oil futures finished the day 43 cents to the downside, at $76.37.

What's moving markets, now that second quarter earnings releases have been pretty much digested, are the markets themselves. Momentum trading is in vogue as equities seek direction. It's a turbulent time not only for stocks, but for stock-watchers as well.

Oil spill video: Times-Picayune Tuesday update

Monday, May 10, 2010

Euro Bailout Revives Markets... and How!

If anyone was thinking the markets couldn't get any more extreme than they did last week, Monday morning's festival of funding, courtesy of the European Union and the IMF, to the tune of nearly $1 Trillion.

According the the Wall Street Journal:
The U.S. market's surging open followed strong gains in the Asian and European markets after the European Union agreed to a EUR750 billion ($955 billion) bailout, including EUR440 billion of loans from euro-zone governments, EUR60 billion from a European Union emergency fund and EUR250 billion from the International Monetary Fund.

Most of the gains came right at the open, which kept individual investors shut out for the most part. The major indices gapped up within 5 minutes of the open by roughly 4%.

Following Thursday's "magic moments," which witnessed a drop and subsequent rebound on the Dow in a matter of less than 15 minutes, market observers have plenty reason for skepticism. After Bob Brinker called the Thursday move, "manipulation," veteran trader Art Cashin, head of floor operations at UBS, said live on CNBC, referring to Friday's non-farm payroll report, "188,000 was a guess by the Bureau of Labor Statistics." Further, he said, "keep your eye on the referee. This game isn't on the up and up," referring to possibly the entire market.

All of this market volatility should come as no surprise to anybody who's been following the financial crisis over the past 2 1/2 - 3 years. Nations, and their political leaders, have a vested interest in keeping their worthless currencies in play, regardless the consequences down the road. Mountains of debt have been piled upon other mountains of debt around the world. The EU bailout was a long time in coming and a hard morsel to chew on for beleaguered leaders. Essentially, they had no choice, though the future seems as uncertain as ever, if not more so.

Stocks bounded higher in Europe and the US, with the average index gaining somewhere between 3 and 5 percent. Asian markets were more subdued, excepting Indonesia and India, which were both highr by 3 1/2 to 4%.

As usual, bank stocks - both in the US and in Europe - led the advance.

Dow 10,785.14, + 404.71 (3.90%)
NASDAQ 2,374.67, +109.03 (4.81%)
S&P 500 1,159.73, +48.85 (4.40%)
NYSE Composite 7,257.62, +341.44 (4.94%)

Advancing issues led decliners by an enormous margin, 6036-696. New highs regained their edge over new lows, though not my a meaningful margin, considering the momentous advance. There were 143 new highs to just 37 new lows. The idea that there were any new lows at all was remarkable, and also notable was the volume, at lower levels than on most of last week's down days.

NYSE Volume 7,876,002,500.00
NASDAQ Volume 2,858,059,750.00

Chances are good that throwing a trillion dollars at Europe's problems will stabilize markets for a while, but, like their TARP counterpart in the fall of 2008, the effects could be very short-lived. As with the TARP in the US, the average European citizen will not likely embrace the bailout of banks and government while the populace goes hungry.

Commodities were mixed on the news. Oil regained some of what it lost over the past week, gaining $1.69, to $76.80, but gold was down $9.60, to $1,200.40. Silver slit the difference, gaining 10 cents, to $18.53.

Largely ignored were two items: Ratings agency, Moody's, received a Wells Notice from the SEC, signaling that enforcement action was forthcoming; Fannie Mae posted a $13 billion loss for the first quarter and asked for another $8.4 billion in federal assistance.

One thing that seems certain: The comparisons of Wall Street to Las Vegas are unfair. Las Vegas is a much more friendly place for individuals. The odds stay the same and the rules don't change over the weekend. These comparisons are only giving Las Vegas - a place where anyone and everyone gets a fair shake - a bad name and should cease. We'd like to call Wall Street a den of wolves, but we actually like wolves.

Sunday, May 9, 2010

Bob Brinker Calls Market Turmoil "Manipulation"

Over the weekend, Bob Brinker, host of the nationally-syndicated financial talk show, Money Talk, characterized the market turmoil of this past Thursday, May 6, 2010, as "manipulation," which has been the stance of this blog since the event occurred.

This may be a notable development, though likely it is not, in that whereas, I, a blogger without an enormous following, have mentioned the manipulation of the stock market numerous times over the past few years without fanfare, but when a national radio host with the reputation and longevity of a Bob Brinker says the very same thing about a specific situation, there may be something to it.

Brinker did not elaborate on who might be doing the manipulation, but the mere fact that he used the word, was something of a shock. My gut feeling is that if Bob Brinker thinks the market was manipulated this past Thursday, then there are surely others who believe the same or at least are thinking along the same lines.

Is Brinker spreading fear uncertainty and doubt (FUD) recklessly, or issuing a heartfelt, albeit shrouded, warning to his loyal listeners? Really makes one wonder about what's really going on with the barons of finance and the Wall Street crowd.

Friday, May 7, 2010

Wall Street Whacked Again; Europe Overwhelms Positive Employment and Gulf Oil Spill

Following the worst recession since the Great Depression, the bulk of Americans still suffering through the slow, painful "recovery" process probably is cheering every daily decline in the stock market. Where Main Street to a large extent has plumbed the depths of poverty, Wall Street has had the pleasure of using taxpayer dollars to dig their way out of the mess they themselves caused, so it's not surprising that after Thursday's "fat finger" debacle many Americans are throwing a fat finger right back at the titans of finance and their profligate ways.

News outlets claimed that a mistaken trade, hitting a a "B" instead of an "M" - as in billions vs. millions of shares - caused yesterday's 998 point plummet, thus the "fat finger" excuse, which, by the way, has been largely discredited. The truth of what happened on May 6, 2010 may never be fully known, but the idea that insiders purposely sold huge quantities in a coordinated assault has some merit.

The goal of the traders causing the plunge (probably computer programmed) was to sell enough shares of enough companies to trigger momentum trading by other computers and individuals in addition to triggering stop loss trades that would exacerbate the situation. Then, as the market plunged, notably to almost a 1000-point loss on the Dow, scoop up quantities of the same stocks after their values had been decimated, in effect, reversing the old saw of "buy low, sell high," on its head, selling high and the buying low.

If this was a coordinated, widely-spread-out trading scheme - and there's no evidence indicating that it wasn't - it seemed to have worked to perfection. Two other elements lead one to believe that it could also have been a staged event. First, the near-1000-point drop bottomed just after 2:30. Had it occurred before that time and gone down more than 1000 points, the NYSE would have shut down. Likely not wanting to tempt fate, the schemers plied their scam just after 2:30 and stopped the skid just before the 1000-point-down level was attained.

Second, CNBC and networks worldwide were airing scenes of protesters in Greece being beaten back and dispersed by riot police at precisely the moment the stock market was skidding out of control. If this were labeled a terror attack, it would fit the definition precisely, because it terrorized not only people invested or watching on TV, but the traders on the floor and in brokerages around the world.

Additionally, CNBC had commentators in place in Greece and on the Iberian peninsula, plus they brought Jim Cramer (Mad Money) onto the set for a rare appearance. At the depth of the decline, host Erin Burnett brought up a chart of Proctor Gamble, which had plunged some 20 points in a manner of minutes. Cramer cooly called it a buy and it immediately reversed course and headed back near the unchanged mark.

Commentators on CNBC also started the "fat finger" rumor and produced an additional three hours of coverage later in the evening, complete with "Markets in Turmoil" graphics and coverage from around the financial universe.

So, was the sudden collapse and subsequent, immediate 600-point rally all about finances or all about ratings? The timing seemed to synch perfectly with the anarchist overtones emanating from Athens, and the swiftness of the entire affair (less than 20 minutes) was riveting television. CNBC reported today that their web site traffic shot through the roof during and after the event.

Whatever the cause of Thursday's melt down and up, the message was loud and clear: something is amiss on Wall Street when stocks can go to zero in the space of a couple of heartbeats and nobody knows exactly why. Investors were skittish and tentative on Friday, even after the government produced the best non-farm payroll report in four years.

The employment report for April showed the US economy creating 290,000 jobs in April, with only 66,000 of those coming in the form of temporary census workers. The BLS also upgraded the previous two months, showing even more job growth than had previously been reported. That kind of upbeat news still could not shake off the tremors from Thursday's wild ride nor the unsettled affairs in Greece and across Europe, where LIBOR (London InterBank Overnight Rate) - the rate of interest banks charge each other for overnight loans - shot up dramatically.

As the European overtone kept markets subdued, US bond yields held steady or declined and the dollar gained against most other currencies, expressing the view that the United States was the best of a bad bunch as far as investments were concerned. With all the reporting on Wall Street and Europe overwhelming the news wires, the story of oil continually gushing into the Gulf - with the oil slick making landfall yesterday in Louisiana - was sadly sent to a back burner.

Traders were extremely cautious though not entirely on the sell side. The Dow dropped 279 points early in the day before rallying briefly into positive territory just 45 minutes later. The rally had no momentum, however, and stocks sold off in jumpy fashion through the remainder of the session.

Dow 10,380.43, -139.89 (1.33%)
NASDAQ 2,265.64, -54.00 (2.33%)
S&P 500 1,110.88, -17.27 (1.53%)
NYSE Composite 6,916.18, -95.74 (1.37%)

Market internals confirmed the ugly truth. Advancers were once again beaten severely by decliners, 4838-1775, and new lows exceeded new highs for the second straight day, 184-94, a significant development, signaling, in very certain terms, a continuance of the downturn. Volume was once again at fantastic heights, similar to Thursday's trading. It's obvious that much of the smart money has been heading for the exits en masse over the past two weeks and now the dumb money is following.

NYSE Volume 10,830,781,000.00
NASDAQ Volume 4,174,408,500.00

The unsettled nature of trading and uncertain future for Europe took oil down yet another notch, with crude futures closing down $2.00, to $75.11. The metals have divorced themselves from the energy complex, with gold rallying another $13.40, to $1,210.00, and silver adding 94 cents, to $18.43. Wall Street's high-velocity, highly volatile trading suggests that gold will continue to be a safe haven for wealth.

The week was among the ten worst ever for stocks, with the Dow suffering a 628-point decline. All of the major indices closed today at levels below the start of the year. They are all in negative territory for 2010.

The Dow Jones Industrials are down 7.4% from their April 26 high of 11,205.03. The NASDAQ is already technically in a correction, having fallen 10.5% from its recent high, while the S&P 500 is off 8.8%.

Stop losses? Maybe it's time to stop trading equities for the relative safety of bonds and metals. Unless conditions in various locales improve remarkably over the coming weeks, this slide should eviscerate much of the progress made in 2009. Think Dow 9000 and possibly lower, near-to-medium term.

Thursday, May 6, 2010

Major Market Madness as EU Faces an Abyss

Greece has exploded into near-anarchy. Most of Southern Europe is about to enter similar circumstances, as Italy, Spain and Portugal face the same kind of debt crisis that is sweeping the globe. Ireland and Iceland have already felt the wrath of economic unwinding and the panic doesn't stop at small-country borders.

The unprecedentedly-swift breakdown which occurred today on US stock markets is a symptom of a wider contagion, a currency, central bank, sovereign confidence crisis.

Around 2:00 pm, with stocks already suffering significant losses and live video of protesters being attacked by riot police in Athens airing worldwide, markets turned even more dire, doubling their losses in a matter of minutes. By 2:15, the wheels were off as the Dow fell from 250 points down to a 990-point loss in the blink of an eye. For about 10 minutes, markets were in freefall. Traders reported a near-complete capitulation, with buyers completely absent from the market in almost all stocks.

Once again, however, the slide was staunched by some heavy-handed trading in futures and the more-than-likely subterfuge of the major investment banks and their allies in crime, the government-approved President's Working Group on Financial Markets (Plunge Protection Team. i.e., the PPT). As quickly as the markets fell, the rebounded. The Dow recovered to a loss of roughly 400 points and seemed to stabilize at that point. After a wild 15 minutes of trading that left everybody stunned and questioning exactly what happened, the markets churned onward toward the close, ending with massive losses, nonetheless.

Dow 10,520.32, -347.80 (3.20%)
NASDAQ 2,319.64, -82.65 (3.44%)
S&P 500 1,128.15, -37.72 (3.24%)
NYSE Composite 7,011.92, -246.10 (3.39%

The substantial declines on the day were more than bourn out by the internal indicators. Declining issues completely overwhelmed advancers, 6015-742, or, by a margin of about 9:1. It was one of the biggest one-day routs in recent years, and there have been a good number of those. The key measure was the number of new highs to new lows, which completely flipped over from a year-long trend. There were 612 new lows to 196 new highs, a complete reversal, which, if history is any kind of guide, is a loud siren that the bears are firmly back in control.

Another screaming indicator was the day's volume, literally off the charts. This is the kind of volume seen only at the extremes, likely one of the 5 or 10 highest-volume days in the history of US stock markets. Since the direction was decidedly to the downside, more selling should be expected in days to come.

NYSE Volume 11,772,131,000.00
NASDAQ Volume 4,292,823,500.00

Concerning the heavy selling that sent stocks into a short-lived abyss, the commentators on CNBC cited such simplistic theories as a computer glitch, false prints and other preposterous theories, all along avoid the obvious truth: the economic crisis did not end in March of 2009, when stocks began a year-long rally. Financial markets are still fragile, one might say, tenuous, and only clandestine moves by insiders kept stocks from recording a record sell-off.

At some point, CNBC or another expert may release a story explaining the sudden downturn on the back of a rogue trade or computer malfunction. Any such story should be viewed with an additional dose of skepticism if only because of the various levels the major indices broke through during the panic. All of them shattered their 50-day moving averages during the session and closed well below them. Markets have been trending lower for the better part of the past two weeks and this kind of momentum-turning-to-panic trading cannot be discounted as a one-off event.

The likelihood of further market declines in the very near term and extending into the longer term is very high. The debt-deflation bomb has not yet run its course. Not until massive amounts of money and companies are liquidated will the disease be purged from the global economy. Expect widespread panic in European markets as countries fall like dominoes with a side-effect around the world. US markets will not be spared, as the US is only the best among peers at this juncture. Major economies will survive, though France, Germany, Great Britain and the USA will be severely crippled by year's end.

Our beloved "recovery" has been a complete fabrication, fueled by the media and the mechanics of commerce in Washington and on Wall Street. Individual investors have largely shunned equities in favor of bonds and tangible assets such as gold, which was an outside winner on the day. Greece and the rest of the Southern European countries are financially on death's door, facing complete default. Soon, one will capitulate and flee the European Union and denounce the Euro. When that occurs, the ten-year experiment at cross-border governance will be essentially over. The EU will disintegrate and the Euro will be completely unwound. The main hope is that troops do not begin excursions into neighboring nations, as has been the centuries-old history of Europe.

Even today, as it has been throughout the life of the EU, the stronger Norther economies have considerable enmity toward their Southern neighbors. The chance of the entire continent devolving into skirmishes over currencies would neither be unexpected nor unprecedented. Wars are usually how nations resolve major financial squeezes and Europe is certainly in one now.

Besides the dire conditions in Europe, the Gulf oil spill remains unchecked and tomorrow's non-farm employment report - to be released to the public at 8:30 am ET - doesn't offer much optimism. Most of the supposed 185,000 jobs created in April will be attributed mostly to government hiring of temporary census workers and the whisper campaign is that not as many were needed due, ironically, of the efficiency of the operation. Should the non-farm number fall significantly below expectations - a real possibility - an immediate continuation of the plunge will probably occur.

The best hope is for the proverbial, "dead cat bounce," which might ease tensions temporarily, until, at best, the next round of crisis selling. So severely strained and wrought with fraud, inter-leveraging and toxicity, financial markets have entered a semi-permanent state of crisis. When this chapter of global finance is finally unwound, the world won't end, but the pain will have spread deeper and wider than anyone could have expected.

For the baby boomer generation, the nightmare may have only begun. Those without high debt may find themselves in better positions than many of their over-leveraged peers.

Some of the numbers emerging from this historic day in finance (and underscoring the idea that this was not a one-off event):

Crude oil futures continued their steady decline, losing another $2.86, to close at $77.11, the lowest print in months. Safe-haven gold improved by $22.30, climbing above the $1200 mark to finally settle at $1,196.90. Silver couldn't keep pace, losing 2 cents, to $17.49.

All of the major indices have suffered huge blows over the past two weeks, and all closed below their 50-day moving averages.

The Dow Jones Industrials are less than 100 points higher for the year. For the year, the NASDAQ is up only 50 points, the S&P ahead by just 13 points, the NYSE Composite - the broadest index - is down 173 points, all of that loss, and more, occurring today.

All of the 30 Dow components closed lower, many of them with 3.5 to 4.5% losses. Citigroup touched a low of 3.90, closing at 4.01, as all financial stocks were pounded lower.

Treasuries and the US dollar were sharply higher. The dollar index hit fresh highs while the Euro broke down to 14-month lows against the greenback. The benchmark 10-year treasury closed at a 3.40% yield, 55 basis points lower than just a month ago.

Wednesday, May 5, 2010

Geithner, Bernanke, and PPT Swing into Action

Let's see if we can get this story right for a change.

When the markets opened at 9:30 am in New York, the flood of news could not have been more distressing. Three bank employees lost their lives in Greece, where government employees and other activists openly clashed with police (see video below). European markets were suffering intense losses, ranging between 1.28% (Great Britain) and 3.16% (Greece).

Here in the US, the precursor to the government's monthly non-farm payroll report (due out Friday morning), the monthly ADP private sector employment report [PDF] showed little progress for the month of April, with a mere 32,000 new jobs being created, hardly the kind of news investors are seeking. Hiring simply has not materialized, no matter how many times President Obama says, "we're making progress," or the news media hoists up another flag for economic recovery.

Stock futures trended deeply lower prior to the opening bell, with bond yields falling fast and the US dollar strengthening against the Euro, in particular. Once the trading was underway, stocks were slammed, with the Dow down 107 points in the opening minutes of trade and the NASDAQ falling 42 points, piercing its 50-day moving average.

Apparently, this kind of rational market reaction to bad news was too much for our intrepid clandestine market riggers - the Plunge Protection Team (PPT) - which swung into action less than 15 minutes after the open. Suddenly, markets around the globe began to turn. All of the major indices headed higher, with the Dow actually registering positive numbers by midday.

Eventually, all of the major indices closed at or below their respective 50-day MAs, but that was after the PPT made certain that small investors were skewered and the major banks and financial firms didn't suffer too badly. The government, the media and the Wall Street elite have a vested interest in glad-handing everybody and spreading as much cheer as possible, no matter how bad the economy is. Not only is there a great deal of money at risk, but for the politicians and financiers, their jobs might be lost if the truth be set loose upon the American public.

The downturn is in full force, whether the undercover lever-pullers like it or not. They've been throwing wads of money - in the billions and trillions of dollars - at the economy, with no discernible results. No new jobs are being created and, despite the glowing reports from Wall Street firms, the American middle class is going down the tubes in a very big hurry.

Residential real estate has experienced a momentary pause in its decline, but foreclosures are only being slowed because the banks have too many properties already in their greedy, little hands. They are taking massive losses on a daily basis, but accounting rules manage to hide most of the sins.

As with the slow grind down from October 2007 to September 2008, this stock market decline will not be sudden, thanks to the internal workings of the government agents. It will be slow, because, according to the powers that be, that's better for the American public. Everything must revolve around the election cycle, another crooked enterprise.

Dow 10,868.12, -58.65 (0.54%)
NASDAQ 2,402.29, -21.96 (0.91%)
S&P 500 1,165.87, -7.73 (0.66%)
NYSE Composite 7,258.02, -79.23 (1.08%)

Declining issues beat down advancers, 5100-1510, better than 3:1. New highs bettered new lows by the slimmest margin in over a year, 151-133. When that indicator rolls over, you will know that the rout is on. With the levels so close, now would be a good time to liquidate large portions of your portfolio, because there may little left if you think you can ride the market down or actually believe that "things are getting better."

Volume was at or near its highest level of the year, due, no doubt, to the incredible amount of shares which had to be bought and sold to bring the market back from its early depths.

NYSE Volume 7,701,488,000.00
NASDAQ Volume 2,980,217,000.00

Commodities also turned higher after an early sell-off, though nothing could save the crude oil futures from slipping another $2.77, to $79.97. Just a few days ago, crude was selling for $86/barrel. It's the one hopeful element from deflation at work - food and fuel should become much more affordable.

Gold got a bit of a boost, for reasons unknown, gaining $6.00, to $1,174.60. Silver was beaten down again, dropping 31 cents, to $17.51.

Markets may take a breather on Thursday, though there is the chance that many traders will opt to get out of the way of Friday's non-farm payroll report. Also, there are major elections in Europe over the weekend, so holding for Monday might not be the most-favored play.

Make no doubt about it. Europe is already in tatters. Great Britain is on the brink along with Portugal, Italy, Ireland, Spain, and, of course, Greece, the poster child for socialism's demise. US policy-makers continue down the European path in many regards, especially in terms of public entitlements, unfunded liabilities and rampant, unpayable debt.

Sooner or later, these issues must be addressed. Spending our way out of the mess we're has been already amply proven to be a failed element of Keynesian economics.

Almost forgot: there's a small problem off the southern US coast. Something about an oil leak...

Tuesday, May 4, 2010

Recovery Fake Out: America Becoming Zombie Nation

Television has a mesmerizing effect on people. It offers the uncanny ability to either engross the viewer or put them to sleep. On that latter point, just ask the hosts of late-night shows, like Jay Leno, who do their audience counts within the first fifteen minutes of the show because after that, Americans are nodding off "en masse."

TV is a kind of drug for the modern masses. Viewers tend to believe just about anything they see or hear on the tube, so when the major networks and their cable outlets keep chirping that the US economy is on the road to recovery, people automatically go along. After all, who wants to believe that the recent economic crisis - that actually had its roots in the late 90s - isn't already over? Nobody wants to be the party-pooper. We all need to get moving toward a brighter future. Right?

Well, some of us aren't convinced, especially since we've seen little evidence that the government or Wall Street has done anything to prevent another global economic meltdown like the one we witnessed in the fall of 2008, and since $8-12 trillion worth of extended benefits to the Wall Street zombie financial firms and another nearly $1 trillion in excess government spending (most of which went to near-bankrupt state treasuries), has produced no new jobs and few tangible results that look even remotely like a growing economy.

No, the troika of Wall Street, Washington and the well-kept, neat-and-tidy media non-investigators have pulled the wool over America's eyes again. And why not? As a nation, gullible Americans keep trusting governments, investment advisors and media pundits who say things are "getting better" even when we see no evidence of such in our personal lives. Have you or your spouse or any of your friends gotten a raise lately? Are firms fighting over the services of you or your buddies? Are you turning down lots of job offers? Are malls and strip centers opening new stores? Are restaurants and small businesses expanding? Are local, state and federal governments concerned more about dealing with tax-receipt surpluses or bone-crushing deficits?

Are prices going up so fast you can't seem to keep up? (Don't answer that yet.) Or are they somewhat stable in most areas? Food and fuel prices have remained fairly constant for over a year now.

Truth of the matter - sorry to keep harping on this, but nobody seems to get it - is that the downturn hasn't ended. In fact, it may be in a debt-induced state of near-term denial. Sure, Wall Street and stocks in general have recovered magnificently, but they did so on the back of billions of dollars worth of government no-interest loans (bailouts) and trillions worth of guarantees. It's what they do. They were given money and told to invest and spend. It wasn't that difficult of a task.

Right now, though, doubt is creeping back into the formula. Stocks may have reached an emotional and intellectual peak, a point at which neither enthusiasm nor analysis would lead an astute investor to buy. Then there's Goldman Sach, Greece and the rest of Europe to worry about, to say nothing of that growing oil slick in the Gulf of Mexico.

Of course, behind the scenes are millions of unsold homes in bank inventories, more foreclosures soon to come down the pike and those 8 million unemployed people on extended, extended benefits who still can't find reasonable work.

We also cannot leave out the Treasury and the Fed...

According to a new missive from Agora Financial (I neither support or decry their positions, and I am in no way affiliated with them), the US Treasury has already borrowed money from these sources:

Little Luxembourg, no bigger than Rhode Island, gave us $104.2 billion. Russia has us on the hook for another $120 billion. Brazil, nearly $140 billion. Secretive banks in the Caribbean, nearly $190 billion...

Those thugs that run Iran, Iraq, Libya, Nigeria, Indonesia, and Venezuela? So far — along with a half-dozen other oil-producing nations — they've got us dangling for another $191 billion in I.O.U.s.

Great Britain just loaned us $214 billion. D.C. borrowed $523 billion from bankrupt state governments. And, as if the bank bailouts weren't bad enough, we're in hock another $630 billion to Wall Street financial firms and other buyers.

Japan owns a $712 billion slice of America. China owns a staggering $776 billion call on our capital. And guess who tops the list? The Fed itself, which uses dollars they print to buy up $4.785 TRILLION of their own debt, just to keep the prosperity illusion alive.

All they're saying is that your pension plans may soon be obliterated by either a massive crash, debt explosion or spiraling inflation. The smart money is on the first two. Inflation is still a decade away. It simply cannot occur within the framework of a struggling economy with high unemployment (the government's own U6 reading is at 17%).

After Monday's wild ride upside, Tuesday was a real bummer, bringing Greece and most of Europe back into focus. Globablly, markets were hammered and the US was not spared by PPT intervention, late-breaking "good" news or any of the usual clandestine tricks. This one looks like the real deal. Unless Friday's April jobs report is a real hummer, stocks and the economy will continue down, probably slumping through the remainder of the second quarter, into the third.

Dow 10,926.77, -225.06 (2.02%)
NASDAQ 2,424.25, -74.49 (2.98%)
S&P 500 1,173.60, -28.66 (2.38%)
NYSE Composite 7,337.25, -205.87 (2.73%

The tone of today's decline was stark. declining issues overwhelmed advancers, 5611-1013. New highs eked out a small advantage over new lows, the smallest margin in many months, 169-98. That's a scary notion: that there may be more daily new lows than new highs some time soon. We had become so accustomed to seeing a huge gap there, but that particular metric, if it turns over, could be forecasting a major downturn. Volume was magnificent, close to the highest levels of the year, another ominous sign.

NYSE Volume 7,379,542,500.00
NASDAQ Volume 2,869,652,750.00

Oil was sent lower by speculators spooked by a weaker Euro, dropping $3.45, to $82.74. Gold trended lower for a second straight day, down $14.10, to $1,168.60, while silver took a spanking, losing $1.00, to $17.82.

This is not a pretty picture. despite $trillions of stimulus worldwide, massive bailouts and extraordinary measures by governments around the planet, nothing has been able to keep the global economy from continuing to contract. The recent upturn in GDP is mostly a chimera, short-lived and over-hyped. Nobody went bust except the bottom of the market: families, individuals and small businesses. All of the big firms were saved and are now operating as zombies. They have no real life of their own. All their numbers are crooked or cooked or both and the mood - not just in America, but globally - is dour.

We're at a critical turning point, and if there's no "sell in may and go away," a "June Swoon" is almost certain.

Finding the Best Free Credit Report Service

If the 2008 financial crisis didn't already do enough damage to people's frazzled nerves, hidden, sometimes undetectable errors on a person's credit score can wreak havoc on one's personal finances and even jeopardize current or future employment opportunities.

The three major credit reporting agencies - TransUnion, Equifax and Experian - are responsible for keeping accurate records on millions of Americans, so there's potential for errors on credit reports; even finding differences between the three are common.

To help consumers sort through the maze of possibly conflicting reports, there are a number of services which will provide a free credit score, but finding which one of these services is best may also prove to be more a guessing game than making an educated choice.

One of the best among a large field of choices is In addition to their 7-day free trial offer, the site also provides a wealth of information on what is important in one's credit history and tips on what separates a strong credit report from a weak one.

Stocks Begin May with a Bang

Investors, at least for the first trading day of May, shunned the sage adage, "sell in May and go away," sending shares on all indices up sharply despite threatening news from the Gulf of Mexico, where an untamed oil leak threatens some of America's most cherished and productive marshlands lining the Louisiana coast.

While the world waits anxiously as the oil slick off the southern US coastline creeps closer to shore, the mood on Wall Street was exceptionally ebullient.

Dow 11,151.83, +143.22 (1.30%)
NASDAQ 2,498.74, +37.55 (1.53%)
S&P 500 1,202.26, +15.57 (1.31%)
NYSE Compos 7,543.15, +68.72 (0.92%

While equities were in sharp focus, commodities, including, somewhat surprisingly, crude oil, finished the day in mixed fashion. Oil futures finished lower by $1.23, closing at $84.93 for the June contract. Gold continued its steady climb, adding $3.40, to $1,186.10, though silver diverged, losing 16 cents, to $18.66.

With the ongoing potential disaster looming in the background and no real movement in the general economy, investors must have seen something other than the growing selling pressure from the previous week, taking the opportunity to snatch up stocks at what actually don't appear to be bargain prices.

Despite the super-sized gains of the day, Monday's - and especially first-of-the-month trading days - seem to be more guided by herding behavior than actual analysis, especially from fund managers who have no good options other than equities in which to park their clients' funds.

With earnings season largely behind them, the markets are seeking a catalyst for the next move, whether that be forward or back. Considering current conditions - the Gulf oil spill notwithstanding - one can hardly make a bullish case in the overall market, though some of the economic data of late, especially the ISM Index, which hit a 4-year high of 60.4 in April.

Still, there are far too many doubts swirling about for a major upside rally to materialize.