Another day, another new high for the Dow Jones Industrials.
Ho, hum, bumble-dee-dum.
It's going to be this way for a while. Don't expect a major correction any time soon, no matter what happens in the real world, because we haven't had one since the fall of 2011, when the government was about to go over the artificial debt ceiling.
Did somebody say artificial? How crass. But, it should be noted that most of what occurs on computer screens and TVs these days is nothing but bunk, a self-sustaining Wall Street fantasy designed to keep the economy from deflating.
And, you know, a little deflation - in things like gas prices, food prices and maybe, god forbid, event ticket prices - might not be such a bad thing.
But that is what the fed fears most... runaway deflation, where prices actually match up with the costs of living. For those of you under the age of 50, there was a time in this country - not so long ago - that a man could support a family with his own wages and still have money left over to save.
Those days are long gone, unless you're making over $85K a year, are an expert budgeter and have an understanding wife. (Please, hold your laughter.)
That would apply to maybe 10% of the population. The rest are waiting in line at Wal-Mart at midnight waiting for the food stamp deposit to clear the bank so as to proceed to checkout. The disparities between rich and poor in America have not compressed, but, look on the bright side, they're worse in Europe and France is forcing most of their million-and-billionaires to move because of confiscatory tax rates.
So, Hugo Chavez, president of Venezuela, is dead, so ExxonMobil, Royal Dutch Shell, BP and Chevron now have a free pass to plunder the resources of another South American nation. It's all good. Plundering in the Middle east or Africa is such a tiring trip, so far from the homeland.
This morning's ADP employment report showed a gain of 198,000 jobs in February, spurred mostly by - hold on now - small businesses. And you though the days of any job over 30 hours were over thanks to Obamacare. Well, wait until next year. We're in a recovery, dontcha know.
Today's market action was about as muted as a golf clap for a double bogey. The S&P struggled to close positive; the NASDAQ couldn't muster into the green.
When the music stops, make sure your chair has four legs.
Dow 14,296.24, +42.47 (0.30%)
NASDAQ 3,222.37, -1.76 (0.05%)
S&P 500 1,541.46, +1.67 (0.11%)
NYSE Composite 8,996.97, +18.88 (0.21%)
NASDAQ Volume 1,716,934,500
NYSE Volume 3,951,567,000
Combined NYSE & NASDAQ Advance - Decline: 3548-2878
Combined NYSE & NASDAQ New highs - New lows: 520-54
WTI crude oil: 90.43, -0.39
Gold: 1,574.90, 0.00
Silver: 28.80, +0.199
Showing posts with label BP. Show all posts
Showing posts with label BP. Show all posts
Wednesday, March 6, 2013
Tuesday, July 20, 2010
Everybody Up for Fund Manager Monday
Dow 10,154.43. +56.53 (0.56%)
NASDAQ 2,198.23, +19.18 (0.88%)
S&P 500 1,071.25, +6.37 (0.60%)
NYSE Composite 6,739.64. +30.13 (0.45%)
Volume was absurdly low. Advancer beat decliners, 3971-2424. New highs surpassed new lows by a count of 163-133, which, due to the skewed NASDAQ readings (78 new lows, 16 new highs) bears more consideration. In wide, absurd, general terms, NASDAQ companies are younger, more intuitive and more likely to be managed by entrepreneurial types with less business knowledge and experience than their peers in, say, the Fortune 500.
If the case is that these companies are unable to meet obligations because of the horrid and deplorable banking situation in the US, thus scaring off investors and fomenting failure, then it should come as no surprise that the banking, credit and financing system in the United States of America is a miserable failure, and that the only companies receiving funding of any kind are the largest and most-deeply-entrenched in the hopelessly-corrupted and dysfunctional political system.
It is an untenable condition that cannot continue without severe repercussions, to business and polity alike. Innovation and enterprise cannot be constrained by either governmental will not banking constriction. As necessary as mother's milk to newborn creatures, capital remains essential, and without it, no enterprise can prosper, much less survive.
The ridiculous situation into which the Federal Reserve Bank has painted itself - free money and no lending - can, and actually has, maintained itself for much longer than most financially-minded individuals would have thought possible. How much further the Fed and its other friendly central banks can sustain the pantomime performance is a matter of pure conjecture. It could end tomorrow as easily as sometime in the next year, but it will end, as do all performances, good, bad or otherwise unremarkable. And when it does, there will be chaos, and all assets will lose value, some more than others.
US stock markets, and by inference, global markets, are headed for a spectacular crash within the next two days to six months, almost with 100% certainty. The imbalances in the global economic diaspora are too great for anyone rational to come to any other conclusion. By November, equities should be flattened to levels heretofore unthinkable. If there's any need for proof, simply follow the travails of Bank of America (BAC), a company too big to fail, which has failed.
There is no amount of money (it being all of the fiat variety and based upon nothing other than the good word of a given government, almost all of which have been proven to be utterly craven, corrupt and transitory throughout history) that can save Bank of America. The company owns enormous amounts of non-performing loans and continues to operate with a balance sheet in which most of the "bad" assets are not accounted for, those being on off-balance instruments and subject to laughable "mark-to-market" accounting rules.
Bank of America should have been liquidated last year or the year before, surely as soon as it acquired Countywide, the absolute root of the financial collapse, but, by government fiat, it was allowed to continue along with a good number of its large banking brethren, "for the good of the country" or some other brackish backwash as that.
It is a dead entity, a zombie, and of no further use to the general welfare of either its investors or its creditors. It should be broken up, dismantled and sold for parts. I believe Dr. Nouriel Roubini stated this very same argument, possibly as long ago as early 2009, maybe even sooner.
Wipe Bank of America and Citigroup off the landscape of corporations and the rebuilding of the global economy can begin... after a few thousand other banks go down in a heap with them.
Oh, and by the way, if our weenie Attorney General Holder doesn't put the screws to BP for the life of their company, then the American people should simply stop paying taxes. The damages to our sovereign lands and waters done by this company are already in excess of $100 billion, to say nothing of the harm to commerce. If AG Holder isn't up to the task of holding this rogue company responsible, then he has no place in his position.
NASDAQ Volume 1,759,521,250
NYSE Volume 4,697,778,000
Oil was higher by 53 cents, to $76.54. Gold lost $6,30, to $1,181.70. Silver fell 24 cents, to $17.53. Check with me later, but by October, oil should be below $65 a barrel, gold should be around $1045 or lower and silver should be hovering around the $14 level.
That's all I've got for now. See you tomorrow.
NASDAQ 2,198.23, +19.18 (0.88%)
S&P 500 1,071.25, +6.37 (0.60%)
NYSE Composite 6,739.64. +30.13 (0.45%)
Volume was absurdly low. Advancer beat decliners, 3971-2424. New highs surpassed new lows by a count of 163-133, which, due to the skewed NASDAQ readings (78 new lows, 16 new highs) bears more consideration. In wide, absurd, general terms, NASDAQ companies are younger, more intuitive and more likely to be managed by entrepreneurial types with less business knowledge and experience than their peers in, say, the Fortune 500.
If the case is that these companies are unable to meet obligations because of the horrid and deplorable banking situation in the US, thus scaring off investors and fomenting failure, then it should come as no surprise that the banking, credit and financing system in the United States of America is a miserable failure, and that the only companies receiving funding of any kind are the largest and most-deeply-entrenched in the hopelessly-corrupted and dysfunctional political system.
It is an untenable condition that cannot continue without severe repercussions, to business and polity alike. Innovation and enterprise cannot be constrained by either governmental will not banking constriction. As necessary as mother's milk to newborn creatures, capital remains essential, and without it, no enterprise can prosper, much less survive.
The ridiculous situation into which the Federal Reserve Bank has painted itself - free money and no lending - can, and actually has, maintained itself for much longer than most financially-minded individuals would have thought possible. How much further the Fed and its other friendly central banks can sustain the pantomime performance is a matter of pure conjecture. It could end tomorrow as easily as sometime in the next year, but it will end, as do all performances, good, bad or otherwise unremarkable. And when it does, there will be chaos, and all assets will lose value, some more than others.
US stock markets, and by inference, global markets, are headed for a spectacular crash within the next two days to six months, almost with 100% certainty. The imbalances in the global economic diaspora are too great for anyone rational to come to any other conclusion. By November, equities should be flattened to levels heretofore unthinkable. If there's any need for proof, simply follow the travails of Bank of America (BAC), a company too big to fail, which has failed.
There is no amount of money (it being all of the fiat variety and based upon nothing other than the good word of a given government, almost all of which have been proven to be utterly craven, corrupt and transitory throughout history) that can save Bank of America. The company owns enormous amounts of non-performing loans and continues to operate with a balance sheet in which most of the "bad" assets are not accounted for, those being on off-balance instruments and subject to laughable "mark-to-market" accounting rules.
Bank of America should have been liquidated last year or the year before, surely as soon as it acquired Countywide, the absolute root of the financial collapse, but, by government fiat, it was allowed to continue along with a good number of its large banking brethren, "for the good of the country" or some other brackish backwash as that.
It is a dead entity, a zombie, and of no further use to the general welfare of either its investors or its creditors. It should be broken up, dismantled and sold for parts. I believe Dr. Nouriel Roubini stated this very same argument, possibly as long ago as early 2009, maybe even sooner.
Wipe Bank of America and Citigroup off the landscape of corporations and the rebuilding of the global economy can begin... after a few thousand other banks go down in a heap with them.
Oh, and by the way, if our weenie Attorney General Holder doesn't put the screws to BP for the life of their company, then the American people should simply stop paying taxes. The damages to our sovereign lands and waters done by this company are already in excess of $100 billion, to say nothing of the harm to commerce. If AG Holder isn't up to the task of holding this rogue company responsible, then he has no place in his position.
NASDAQ Volume 1,759,521,250
NYSE Volume 4,697,778,000
Oil was higher by 53 cents, to $76.54. Gold lost $6,30, to $1,181.70. Silver fell 24 cents, to $17.53. Check with me later, but by October, oil should be below $65 a barrel, gold should be around $1045 or lower and silver should be hovering around the $14 level.
That's all I've got for now. See you tomorrow.
Wednesday, July 7, 2010
... And Now, the Rally That Was... a Real Phony
Viewing the market over the past two trading sessions, a comparison to an olympic athlete might be apropos, say, that of a high-jumper, like Dwight Stones back in the day, sailing over the bar at 7'1", but then failing at the next height, and again, until finally getting his steps and takeoff and velocity all right on the third attempt, at which point he flies into Olympic history.
That's what the market appears to have done, after failing badly on Tuesday, finally getting the commitment and the volume and the lack of bad economic data points and the short sellers all lined up in the proper order to propel the Dow back over the 10,000 bar, taking the antecedent indices along for the joyful ride.
With the level of short interest in the marketplace, there's no doubt that the push higher in the final minutes of trading on Monday continued into Tuesday on the backs of the shorts, who, like it or not, have been having their way for the past two months running. Anybody getting squeezed here was either in too late or was already well in the money and made profits when they covered their bets. Worse yet, many of the same players who profited today on the upticks were the same people making hay on the way down. It's just the way Wall Street works these days, now that the buy and hold investment strategy (the one which our fathers and grandfathers used to make money slowly and honorably) have been relegated to the dustbin of market history in favor of "quant" trading and electronic push-button charting and graphing which the investment houses are now all shoving down our throats.
Sure, you can trade right from your iphone, computer or other electronic instrument, as though it's a race to see who squeeze the last few pennies on execution, but is that any way to treat your money? Not really, though the masters of the universe running the funds and brokerages are generally using OPM (other people's money), so who cares? And that's why today's rally pushed higher and higher. The money masters flicked the switch at the open in the US, abruptly turning around all of the European markets - which were suffering severe declines until late in their respective trading days - and sending US stocks soaring.
One can only be amused by the cheerleading nature of the financial press, despite mountains of data that not only suggest, but verify, that the "recovery" was something of a chimera, and that global markets are still fundamentally unsound. Reading a headline like, "European bank stress tests and U.S. retail sales lift the Dow" gives one reason to probe deeper, as we come to find out that the stress tests to be performed on European banks haven't actually been started, but that a few details about what they may entail were released. Also, we find out that the esteemed group known as the International Council of Shopping Centers reported same store sales in the ICSC-Goldman Sachs (hmm, those guys again) weekly index, which is "constructed using sales-weighted geometric average growth rates to preserve long-term consistency and is statistically benchmarked to a broad-based monthly retail industry sales aggregate" (in other words, it's bull-$^%#), was up 3.9% year-over-year, the best level since May.
Well, that being only two months ago, why did the market go straight down then? Also, one may recall that retail sakes a year ago were pretty dismal, so, being up nearly 4% is not even back to what anyone would consider "good," though it apparently works for the fraudsters and con men who populate the equity trading markets.
And, by the way, that ICSC-Goldman Sachs index excludes restaurants and vehicle sales, which, unless you have consumers who neither eat nor drive, seems to be an important element in tracking retail sales performance. They have plenty of other modifiers with which they can interpret the data seemingly any way they like, such as the "Piser Method, which was popular in the early 1930s." I guess they tried lying to people back in the Great Depression, too, and we all know how well that worked out.
One should not overlook - though everybody trading stocks apparently did today - that vacancies at large malls in the top 80 U.S. markets rose to 9 percent in the second quarter and open-air center is now at 10.9%, that data coming from the same web site as the cheery same-store sales index.
So, the market cleared the bar of 10,000, but only until maybe tomorrow, when initial unemployment claims for the most recent week are released. Maybe the government can fudge those numbers a bit, as they've been downright depressing lately. Of course, this rally could go on for another few weeks, especially since earnings begin flowing to the street in short order, and, of course, options expire on Friday of next week. Getting the picture yet?
The real kicker to the whole "rally" story is what happened to Family Dollar (FDO) after it released its earning report. Quarterly profit jumped 19%, but earnings guidance disappointed as the CEO said consumers remained wary. No surprise there, but the stock lost 8% on the day, down 3.18 to 36.26. And you thought retailers were doing well.
Dow 10,018.28, +274.66 (2.82%)
NASDAQ 2,159.47, +65.59 (3.13%)
S&P 500 1,060.27, +32.21 (3.13%)
NYSE Composite 6,685.78, +199.66 (3.08%)
Internals told a mixed story. Advancers eviscerated decliners, 5351-1212, but new lows led new highs, 205-121. Volume was at average levels for the second straight session, another indication that this was more a relief rally or a knee-jerk reaction to oversold conditions, or a combination with short-covering mixed in for good measure.
NASDAQ Volume 2,190,606,000
NYSE Volume 5,861,473,500
Crude oil for August delivery rose $2.06, after falling for six consecutive sessions, to $74.07. Gold snapped back to life, gaining $3.80, to $1,198.60, with silver adding 15 cents, to close at $17.98.
Considering that financial and energy stocks (including, notoriously, BP) - the two most beaten down groups over the past few weeks were the rally leaders, one shouldn't put too much trust in this one-day wonder rally, as it appears to be contain more bark than bite, more reflection than reality, and no fundamentally good reason to have happened at all except for a one-day dearth of economic reporting.
That's what the market appears to have done, after failing badly on Tuesday, finally getting the commitment and the volume and the lack of bad economic data points and the short sellers all lined up in the proper order to propel the Dow back over the 10,000 bar, taking the antecedent indices along for the joyful ride.
With the level of short interest in the marketplace, there's no doubt that the push higher in the final minutes of trading on Monday continued into Tuesday on the backs of the shorts, who, like it or not, have been having their way for the past two months running. Anybody getting squeezed here was either in too late or was already well in the money and made profits when they covered their bets. Worse yet, many of the same players who profited today on the upticks were the same people making hay on the way down. It's just the way Wall Street works these days, now that the buy and hold investment strategy (the one which our fathers and grandfathers used to make money slowly and honorably) have been relegated to the dustbin of market history in favor of "quant" trading and electronic push-button charting and graphing which the investment houses are now all shoving down our throats.
Sure, you can trade right from your iphone, computer or other electronic instrument, as though it's a race to see who squeeze the last few pennies on execution, but is that any way to treat your money? Not really, though the masters of the universe running the funds and brokerages are generally using OPM (other people's money), so who cares? And that's why today's rally pushed higher and higher. The money masters flicked the switch at the open in the US, abruptly turning around all of the European markets - which were suffering severe declines until late in their respective trading days - and sending US stocks soaring.
One can only be amused by the cheerleading nature of the financial press, despite mountains of data that not only suggest, but verify, that the "recovery" was something of a chimera, and that global markets are still fundamentally unsound. Reading a headline like, "European bank stress tests and U.S. retail sales lift the Dow" gives one reason to probe deeper, as we come to find out that the stress tests to be performed on European banks haven't actually been started, but that a few details about what they may entail were released. Also, we find out that the esteemed group known as the International Council of Shopping Centers reported same store sales in the ICSC-Goldman Sachs (hmm, those guys again) weekly index, which is "constructed using sales-weighted geometric average growth rates to preserve long-term consistency and is statistically benchmarked to a broad-based monthly retail industry sales aggregate" (in other words, it's bull-$^%#), was up 3.9% year-over-year, the best level since May.
Well, that being only two months ago, why did the market go straight down then? Also, one may recall that retail sakes a year ago were pretty dismal, so, being up nearly 4% is not even back to what anyone would consider "good," though it apparently works for the fraudsters and con men who populate the equity trading markets.
And, by the way, that ICSC-Goldman Sachs index excludes restaurants and vehicle sales, which, unless you have consumers who neither eat nor drive, seems to be an important element in tracking retail sales performance. They have plenty of other modifiers with which they can interpret the data seemingly any way they like, such as the "Piser Method, which was popular in the early 1930s." I guess they tried lying to people back in the Great Depression, too, and we all know how well that worked out.
One should not overlook - though everybody trading stocks apparently did today - that vacancies at large malls in the top 80 U.S. markets rose to 9 percent in the second quarter and open-air center is now at 10.9%, that data coming from the same web site as the cheery same-store sales index.
So, the market cleared the bar of 10,000, but only until maybe tomorrow, when initial unemployment claims for the most recent week are released. Maybe the government can fudge those numbers a bit, as they've been downright depressing lately. Of course, this rally could go on for another few weeks, especially since earnings begin flowing to the street in short order, and, of course, options expire on Friday of next week. Getting the picture yet?
The real kicker to the whole "rally" story is what happened to Family Dollar (FDO) after it released its earning report. Quarterly profit jumped 19%, but earnings guidance disappointed as the CEO said consumers remained wary. No surprise there, but the stock lost 8% on the day, down 3.18 to 36.26. And you thought retailers were doing well.
Dow 10,018.28, +274.66 (2.82%)
NASDAQ 2,159.47, +65.59 (3.13%)
S&P 500 1,060.27, +32.21 (3.13%)
NYSE Composite 6,685.78, +199.66 (3.08%)
Internals told a mixed story. Advancers eviscerated decliners, 5351-1212, but new lows led new highs, 205-121. Volume was at average levels for the second straight session, another indication that this was more a relief rally or a knee-jerk reaction to oversold conditions, or a combination with short-covering mixed in for good measure.
NASDAQ Volume 2,190,606,000
NYSE Volume 5,861,473,500
Crude oil for August delivery rose $2.06, after falling for six consecutive sessions, to $74.07. Gold snapped back to life, gaining $3.80, to $1,198.60, with silver adding 15 cents, to close at $17.98.
Considering that financial and energy stocks (including, notoriously, BP) - the two most beaten down groups over the past few weeks were the rally leaders, one shouldn't put too much trust in this one-day wonder rally, as it appears to be contain more bark than bite, more reflection than reality, and no fundamentally good reason to have happened at all except for a one-day dearth of economic reporting.
Friday, June 25, 2010
Stocks Flat to End Rough Week; BP Crushed
US stocks could not rebound well from a week of fairly persistent selling pressure, finishing with a mixed session on Friday. Only the Dow closed lower on the day, but the other major indices were barely changed.
For the week, the Dow Jones Industrials lost 301 points, or about 3%. The NASDAQ shed 86 points and the S&P 500 was the worst hit, giving back 40 points, close to a 4% decline.
Persistent worries about the heath of the general economy, credit conditions and the overall global economy pushed all three indices, plus the NYSE Composite, back under their respective 200-day moving averages.
Dow 10,143.81, -8.99 (0.09%)
NASDAQ 2,223.48, +6.06 (0.27%)
S&P 500 1,076.76, +3.07 (0.29%)
NYSE Composite 6,763.93, +33.69 (0.50%)
Like stocks, internals were also mixed. Winners beat losers by a tally of 4593-1870, but new lows maintained their edge over new highs, 170-119. Volume was extraordinarily high, due to annual rebalancing of the Russell 2000.
NYSE Volume 7,031,487,500
NASDAQ Volume 3,283,513,000
Continuing to feel pressure, British Petroleum (BP) lost more value, closing at 27.02, a price not seen in the stock since 1993. Claims continue to mount, and there are concerns that the company will be forced to pay dearly for financing going forward, with credit default swaps inverted - costs to insure BPs financing for one year now costs more than insuring five years' debt on an annualized basis.
Commodities were worthwhile investments once more, with oil leading the way, thanks to fears of a tropical storm reaching the Gulf of Mexico within the next three to five days. Crude for August delivery rose $2.35, to $78.86.
Gold continued its ascent, gaining $10.30, to $1,255.80. Silver added 37 cents, to close the week at $19.10.
Stocks remained under pressure as the government third and final estimate of GDP growth came in lower than expected, at 2.7% (down from 3.0%), fueling renewed fears of either weak economic conditions going forward or the threat of a double dip, back into recession in 2011.
With the July 4th holiday beginning at the end of next week, traders will be focused on Friday's June non-farm payroll report, which is expected to show gains of 100,000 jobs, though just where those jobs might have been created remains a mystery. It's more likely that job growth will remain anemic through the summer and that stock market losses will accelerate.
For the week, the Dow Jones Industrials lost 301 points, or about 3%. The NASDAQ shed 86 points and the S&P 500 was the worst hit, giving back 40 points, close to a 4% decline.
Persistent worries about the heath of the general economy, credit conditions and the overall global economy pushed all three indices, plus the NYSE Composite, back under their respective 200-day moving averages.
Dow 10,143.81, -8.99 (0.09%)
NASDAQ 2,223.48, +6.06 (0.27%)
S&P 500 1,076.76, +3.07 (0.29%)
NYSE Composite 6,763.93, +33.69 (0.50%)
Like stocks, internals were also mixed. Winners beat losers by a tally of 4593-1870, but new lows maintained their edge over new highs, 170-119. Volume was extraordinarily high, due to annual rebalancing of the Russell 2000.
NYSE Volume 7,031,487,500
NASDAQ Volume 3,283,513,000
Continuing to feel pressure, British Petroleum (BP) lost more value, closing at 27.02, a price not seen in the stock since 1993. Claims continue to mount, and there are concerns that the company will be forced to pay dearly for financing going forward, with credit default swaps inverted - costs to insure BPs financing for one year now costs more than insuring five years' debt on an annualized basis.
Commodities were worthwhile investments once more, with oil leading the way, thanks to fears of a tropical storm reaching the Gulf of Mexico within the next three to five days. Crude for August delivery rose $2.35, to $78.86.
Gold continued its ascent, gaining $10.30, to $1,255.80. Silver added 37 cents, to close the week at $19.10.
Stocks remained under pressure as the government third and final estimate of GDP growth came in lower than expected, at 2.7% (down from 3.0%), fueling renewed fears of either weak economic conditions going forward or the threat of a double dip, back into recession in 2011.
With the July 4th holiday beginning at the end of next week, traders will be focused on Friday's June non-farm payroll report, which is expected to show gains of 100,000 jobs, though just where those jobs might have been created remains a mystery. It's more likely that job growth will remain anemic through the summer and that stock market losses will accelerate.
Thursday, June 24, 2010
One More Ugly Day for Stocks Following Fed Statement
On the heels of the FOMC rate policy announcement - one which possibly reached new levels of double-talk and misleading innuendo - stocks sold off rapidly at the open and again into the close.
The simple fact of the matter is that heavy trading is normally done in two specific time periods - in the first half hour and in the final hour of trading. On Thursday, the Dow lost roughly 100 points by 10:00 am, and another 45 from 3:00 to 4:00 pm. That pretty much summed up how investors were feeling a day after the Fed threw itself on it own sword of interest rate policy and effectively left US markets to fend for themselves.
While the losses today were substantial, it is worth noting that volume wasn't particularly strong; however, that should be put into the perspective of an overall weak market - the case since the financial implosion of 2008. Trading volume may never recover to the glory days of the great bull run from 2003-2007 as many individuals and a spate of investment firms have permanently soured on US stocks.
Wild gyrations, uncertain times and volatile conditions do not a stable market make, and these times could hardly be described as stable. Government intervention into all areas of public and private finances also have made many shy away from investing in equities. Nonetheless, there are still those who will try to quantify risk - such as the friend who told me that he made a considerable investment in BP on Tuesday (I do not know what he deems "considerable," but in any case I felt impelled to tell him I thought it was a mistake, and he is already on the wrong side of the trade.) - in search of ever-elusive gains.
There are also pension funds, mutual funds, hedge funds and any manner of investment vehicles which are chartered to invest in stocks, like it or not, so there will likely always be ample supply of buyers and sellers no matter the level of greed, fear and risk tolerance.
Considering the current climate, stocks are not favorable investments for anybody except those with excess cash on hand (wealthy), and even then, investing today may be more akin to gambling or just plain flushing money down the nearest toilet.
Let's take a look:
Dow 10,152.80, -145.64 (1.41%)
NASDAQ 2,217.42, -36.81 (1.63%)
S&P 500 1,073.69, -18.35 (1.68%)
NYSE Composite 6,730.24, -119.81 (1.75%)
Not a very pretty picture, there. Declining issues beat down advancers once more, today by a wide margin, 4914-1535 (3:1). New lows screamed past new highs, 159-92. Volume was light, but not exceedingly so. There was some serious dumping of losers going on and the number of bulls in attendance were not nearly sufficient to scare off the short-siders.
NYSE Volume 5,595,221,000
NASDAQ Volume 2,049,015,500
About the only place to make money was in the precious metals, though it wasn't much. Gold finished at $1,245.50, a gain of $11.40. Silver pushed ahead 28 cents, to $18.73. Crude oil fared less well, with futures for August delivery up a scrawny 16 cents, to $76.51.
The only economic news of any importance was prior to the open. Durable goods orders for May declined 1.1%. The weekly initial jobless claims stayed at about the same level they've been at for months, with 457,000 new unemployment applications.
With poor data setting the tone, stocks slumped. On Friday, the government releases its third and final estimate of 1st quarter GDP, expected to remain stable at 3%. With the release at 8:30 am, that should have little impact on the week's last day of trading.
The simple fact of the matter is that heavy trading is normally done in two specific time periods - in the first half hour and in the final hour of trading. On Thursday, the Dow lost roughly 100 points by 10:00 am, and another 45 from 3:00 to 4:00 pm. That pretty much summed up how investors were feeling a day after the Fed threw itself on it own sword of interest rate policy and effectively left US markets to fend for themselves.
While the losses today were substantial, it is worth noting that volume wasn't particularly strong; however, that should be put into the perspective of an overall weak market - the case since the financial implosion of 2008. Trading volume may never recover to the glory days of the great bull run from 2003-2007 as many individuals and a spate of investment firms have permanently soured on US stocks.
Wild gyrations, uncertain times and volatile conditions do not a stable market make, and these times could hardly be described as stable. Government intervention into all areas of public and private finances also have made many shy away from investing in equities. Nonetheless, there are still those who will try to quantify risk - such as the friend who told me that he made a considerable investment in BP on Tuesday (I do not know what he deems "considerable," but in any case I felt impelled to tell him I thought it was a mistake, and he is already on the wrong side of the trade.) - in search of ever-elusive gains.
There are also pension funds, mutual funds, hedge funds and any manner of investment vehicles which are chartered to invest in stocks, like it or not, so there will likely always be ample supply of buyers and sellers no matter the level of greed, fear and risk tolerance.
Considering the current climate, stocks are not favorable investments for anybody except those with excess cash on hand (wealthy), and even then, investing today may be more akin to gambling or just plain flushing money down the nearest toilet.
Let's take a look:
Dow 10,152.80, -145.64 (1.41%)
NASDAQ 2,217.42, -36.81 (1.63%)
S&P 500 1,073.69, -18.35 (1.68%)
NYSE Composite 6,730.24, -119.81 (1.75%)
Not a very pretty picture, there. Declining issues beat down advancers once more, today by a wide margin, 4914-1535 (3:1). New lows screamed past new highs, 159-92. Volume was light, but not exceedingly so. There was some serious dumping of losers going on and the number of bulls in attendance were not nearly sufficient to scare off the short-siders.
NYSE Volume 5,595,221,000
NASDAQ Volume 2,049,015,500
About the only place to make money was in the precious metals, though it wasn't much. Gold finished at $1,245.50, a gain of $11.40. Silver pushed ahead 28 cents, to $18.73. Crude oil fared less well, with futures for August delivery up a scrawny 16 cents, to $76.51.
The only economic news of any importance was prior to the open. Durable goods orders for May declined 1.1%. The weekly initial jobless claims stayed at about the same level they've been at for months, with 457,000 new unemployment applications.
With poor data setting the tone, stocks slumped. On Friday, the government releases its third and final estimate of 1st quarter GDP, expected to remain stable at 3%. With the release at 8:30 am, that should have little impact on the week's last day of trading.
Thursday, June 17, 2010
Late Rally Lifts Stocks; Volume Pathetic
There were any number of good reasons for stocks to take a breather on Thursday, but, a vicious late-day rally sent all of the indices into positive territory, a place none of them had been since the opening minutes of trading. The Dow itself gained 84 points in the final 35 minutes, after having been down all day. The major indices closed right at their highs of the day.
While the markets have been buoyant of late, pressures continue to build as measures of the strength of the US economy increasingly show that any recovery is going to a slow, bumpy and uneven process. More and more economists are lowering forecasts for the remainder of 2010 and trimming projections for 2011 in the face of increased taxation and regulation on a wide swath of industries.
New unemployment claims totaled 472,000, well above consensus estimates of 450,000 and an increase of 12,000 from the prior week, confirming that labor markets remain soft.
Another deflationary signal was flashed by the May Consumer Price Index (CPI), which declined 0.2% month-over-month while core prices improved 0.1% month-over-month.
There's also a very basic measurement known as valuation, something most stocks are now testing the upper ranges of. With earnings season still three to four weeks in the distance, the Wall Street insider swindlers are making as much of a quick buck before reports begin to flow from the board rooms to the street.
One can be relatively assured that stocks will begin another leg to the downside no later than Tuesday of next week, barring any unforeseen, spectacularly-positive events.
Stock investing is quickly becoming more a process of timing and luck than fundamental analysis. Traders are in and out of stocks with blinding speed as compared to the old buy-and-hold days, which now seem just a quaint memory of a time when financial markets were heavily regulated, and wealth accumulation was a slow and relatively safe process.
Today's traders face more challenges than at any time in memory. Between insider knowledge, pre-and-post-market maneuvers and the advent of push-button trading via computer or cell phone, investors have to be quick on their feet and use tight stops just to stay even.
Thinking along these lines, it may be time for pension fund managers to reassess their strategies and convert more assets out of stocks - at least US and European ones - and into more stable investments as these traders are unable to move the huge blocks they hold with any kind of price assurances.
Dow 10,434.17, +24.71 (0.24%)
NASDAQ 2,307.16, +1.23 (0.05%)
S&P 500 1,116.03, +1.42 (0.13%)
NYSE Composite 6,982.02, +5.94 (0.09%)
Advancing issues narrowly beat back decliners, 3220-3183; new highs continued their recent string of wins over new lows, 141-60, but volume on the day was absolutely pathetic - the lowest in well over a month's time - especially considering that Friday is an options expiration quadruple-witching day. Normally, volume is very high leading into these events, so something is not right about this entire set-up.
NYSE Volume 4,973,262,000.00
NASDAQ Volume 1,654,591,250.00
Oil slipped 88 cents, to $76.79, but the precious metals showed strength, which only amplifies the discordance in equities. Gold gained $18.20, to $1,247.50. Silver added 34 cents, to $18.77.
Gold and stocks have generally been trading in opposite directions, though in recent months, that relationship has faded. Eventually, the two will collide, though, with the value of the Dow equal to anywhere from one to four ounces of gold. Currently, the ratio stands at 8.36 ounces to one unit of the Dow. Within 18 months, expect two things to occur: Gold will reach $1.500 per ounce and the Dow will smash through to the downside of 6000. It's almost an inevitability. Here's a little story about how to trade the gold and the Dow over the very long term, by Gary North, a guy who knows a thing or two about stocks and gold.
Tony Hayward, BP CEO, was grilled and pilloried on Capitol Hill this afternoon, as he should be. The remains of the Deepwater Horizon continue to spew thousands of barrels of crude into the Gulf of Mexico, the situation growing worse every day. Correcting our story from yesterday, it's being reported that BP will not pay dividends for the remainder of the year, not just the upcoming quarter. That's three quarters of British pensioners going without their dividend checks, but, as is the case with stocks, that risk was always there. While some may call the BP situation a "Black Swan" event, they've literally created any number of black pelicans and other specie of the region and should not survive as a going concern.
While the markets have been buoyant of late, pressures continue to build as measures of the strength of the US economy increasingly show that any recovery is going to a slow, bumpy and uneven process. More and more economists are lowering forecasts for the remainder of 2010 and trimming projections for 2011 in the face of increased taxation and regulation on a wide swath of industries.
New unemployment claims totaled 472,000, well above consensus estimates of 450,000 and an increase of 12,000 from the prior week, confirming that labor markets remain soft.
Another deflationary signal was flashed by the May Consumer Price Index (CPI), which declined 0.2% month-over-month while core prices improved 0.1% month-over-month.
There's also a very basic measurement known as valuation, something most stocks are now testing the upper ranges of. With earnings season still three to four weeks in the distance, the Wall Street insider swindlers are making as much of a quick buck before reports begin to flow from the board rooms to the street.
One can be relatively assured that stocks will begin another leg to the downside no later than Tuesday of next week, barring any unforeseen, spectacularly-positive events.
Stock investing is quickly becoming more a process of timing and luck than fundamental analysis. Traders are in and out of stocks with blinding speed as compared to the old buy-and-hold days, which now seem just a quaint memory of a time when financial markets were heavily regulated, and wealth accumulation was a slow and relatively safe process.
Today's traders face more challenges than at any time in memory. Between insider knowledge, pre-and-post-market maneuvers and the advent of push-button trading via computer or cell phone, investors have to be quick on their feet and use tight stops just to stay even.
Thinking along these lines, it may be time for pension fund managers to reassess their strategies and convert more assets out of stocks - at least US and European ones - and into more stable investments as these traders are unable to move the huge blocks they hold with any kind of price assurances.
Dow 10,434.17, +24.71 (0.24%)
NASDAQ 2,307.16, +1.23 (0.05%)
S&P 500 1,116.03, +1.42 (0.13%)
NYSE Composite 6,982.02, +5.94 (0.09%)
Advancing issues narrowly beat back decliners, 3220-3183; new highs continued their recent string of wins over new lows, 141-60, but volume on the day was absolutely pathetic - the lowest in well over a month's time - especially considering that Friday is an options expiration quadruple-witching day. Normally, volume is very high leading into these events, so something is not right about this entire set-up.
NYSE Volume 4,973,262,000.00
NASDAQ Volume 1,654,591,250.00
Oil slipped 88 cents, to $76.79, but the precious metals showed strength, which only amplifies the discordance in equities. Gold gained $18.20, to $1,247.50. Silver added 34 cents, to $18.77.
Gold and stocks have generally been trading in opposite directions, though in recent months, that relationship has faded. Eventually, the two will collide, though, with the value of the Dow equal to anywhere from one to four ounces of gold. Currently, the ratio stands at 8.36 ounces to one unit of the Dow. Within 18 months, expect two things to occur: Gold will reach $1.500 per ounce and the Dow will smash through to the downside of 6000. It's almost an inevitability. Here's a little story about how to trade the gold and the Dow over the very long term, by Gary North, a guy who knows a thing or two about stocks and gold.
Tony Hayward, BP CEO, was grilled and pilloried on Capitol Hill this afternoon, as he should be. The remains of the Deepwater Horizon continue to spew thousands of barrels of crude into the Gulf of Mexico, the situation growing worse every day. Correcting our story from yesterday, it's being reported that BP will not pay dividends for the remainder of the year, not just the upcoming quarter. That's three quarters of British pensioners going without their dividend checks, but, as is the case with stocks, that risk was always there. While some may call the BP situation a "Black Swan" event, they've literally created any number of black pelicans and other specie of the region and should not survive as a going concern.
Thursday, June 10, 2010
Sucker Rally, Part Two: Rally 'Round BP
Whatever yesterday's steep sell-off was about, today's gap-up rally was about making up lost ground, in a hurry.
The Dow Jones Industrials gapped up at the open - once again shutting out all but the insider firms - 150 points, and by 10:00 am, it was up nearly 250. This kind of quick-start rally doesn't occur in a vacuum, so most of the clueless analysts attributed the rise to explosive numbers coming out of China, saying that exports increased at a rate of 48.5% year-over-year.
Suffice it to say that nobody wanted to mention that a year ago, exports were at an absolute nadir, Chinese officials were doing their best to control riotous laid-off workers and that global trading conditions were abysmal. Some comparisons, especially those which favor the bullish case, are almost always kept out of view, as was the case today.
Concerns over the sudden revitalization of stock-buying fervor were put on the back burner for the day, allowing investors to bask in the glow of at least some temporary relief to what has been a relentless decline since the beginning of May, and that's why bear market rallies are never useful barometers of market health. This one, like all others, will be soon forgotten, for it is only speculative and quite possibly just a trading phenomenon, likely linked to options expiration only a week away.
Besides the obvious rallying around poor, misunderstood British Petroleum (BP), financial stocks also rallies, perhaps on suspicion that congressional debate on financial regulation seems to be going the way the bankers would like, toward a watered-down bill that is nothing more than cosmetic, allowing the political class to find some cover heading into the fall election cycle.
The pols have their hands in the banks' pockets and vice versa, so don't expect anything hard-hitting to come of "FinReg," despite the inclusion of Senator Blanche Lincoln's controversial derivatives proposal, which threatens to drive as much as 30% of large bank profits overseas. The bill is in the hands of the conference committee, chaired by Barney Frank, which will reconcile differences between the Senate and House versions.
So, was this the mother of all sucker rallies, or does this mark the end of the month-long decline in equities and the beginning of a new bull run?
The jury's still out, but consider, if you will, the key numbers that will tell the story in coming days. On Friday, June 4, after the non farms payroll report showed little progress in private sector employment, stocks sank to a closing low of 9931.97 on the Dow and 1064.88 on the S&P. The follow-on sell-off Monday, June 7, saw the Dow close below the previous interim low (February 8), finishing at 9816.49. The S&P likewise closed below its previous low, ending the day at 1050.47.
Bottom pierced, any chartist with rudimentary skills would have promoted the idea that further downside risk was being telegraphed. Then came Tuesday's sharp rally, Wednesday's failed rally and today's super rally, on low volume, and on suspect news from - of all places - China. To believe that strength in Chinese markets somehow translates to good news for US firms requires a requisite leap of faith, when the obvious truth was that this rally was really all about saving the prospects of BP, the incomes of one out of seven British pensioners, and keeping the world awash in crude oil (both figuratively and, in the Gulf, literally).
For the bulls, their new targets are 11,205.03 on the Dow and 1217.28 on the S&P, somewhat of a stretch from where stocks have currently settled. Even from today's lofty closing values, a rally of 11% would be needed to return to the previous highs, whereas a decline of just 3.5% would send the two main indices back below their recently-achieved bottoms.
Sideways trading leaves us in a state of suspended animation, though investors will be mulling the news from the BP oil gusher and Europe's deteriorating debt condition over the next four weeks prior to earnings season, which could be a bellwether or a Waterloo, depending on results. Chances still seem to favor the bearish case, with much of this week's trading being perceived as mere "noise."
Dow 10,172.53, +273.28 (2.76%)
NASDAQ 2,218.71, +59.86 (2.77%)
S&P 500 1,086.84, +31.15 (2.95%)
NYSE Composite 6,783.53, +223.82 (3.41%)
As expected on such a huge upside move, advancers dominated decliners, 5550-1011, though new lows maintained their edge over new highs, 120-104. That, and low volume, are very telling signals to where the market is intended.
NYSE Volume 5,718,455,000.00
NASDAQ Volume 2,023,046,625.00
Oil gained again today, picking up $1.07, to $75.45. Gold fell for the second straight day, down $7.70, to $1,220.80, with silver up 18 cents, to $18.34. Confusing variations in the commodity space lends credence to the directionless market theory and to a resumption of the bearish case in short order.
Goldman Sachs (GS) was under pressure again today as the SEC began examining another mortgage investment for potential fraud - Hudson Mezzanine - and was hit with a $1 billion lawsuit from Basis Capital, an Australian hedge fund that invested in Timberwolf, an MBS that Goldman sold in 2007. The troubles just keep mounting on the investment bank everyone loves to hate.
The Dow Jones Industrials gapped up at the open - once again shutting out all but the insider firms - 150 points, and by 10:00 am, it was up nearly 250. This kind of quick-start rally doesn't occur in a vacuum, so most of the clueless analysts attributed the rise to explosive numbers coming out of China, saying that exports increased at a rate of 48.5% year-over-year.
Suffice it to say that nobody wanted to mention that a year ago, exports were at an absolute nadir, Chinese officials were doing their best to control riotous laid-off workers and that global trading conditions were abysmal. Some comparisons, especially those which favor the bullish case, are almost always kept out of view, as was the case today.
Concerns over the sudden revitalization of stock-buying fervor were put on the back burner for the day, allowing investors to bask in the glow of at least some temporary relief to what has been a relentless decline since the beginning of May, and that's why bear market rallies are never useful barometers of market health. This one, like all others, will be soon forgotten, for it is only speculative and quite possibly just a trading phenomenon, likely linked to options expiration only a week away.
Besides the obvious rallying around poor, misunderstood British Petroleum (BP), financial stocks also rallies, perhaps on suspicion that congressional debate on financial regulation seems to be going the way the bankers would like, toward a watered-down bill that is nothing more than cosmetic, allowing the political class to find some cover heading into the fall election cycle.
The pols have their hands in the banks' pockets and vice versa, so don't expect anything hard-hitting to come of "FinReg," despite the inclusion of Senator Blanche Lincoln's controversial derivatives proposal, which threatens to drive as much as 30% of large bank profits overseas. The bill is in the hands of the conference committee, chaired by Barney Frank, which will reconcile differences between the Senate and House versions.
So, was this the mother of all sucker rallies, or does this mark the end of the month-long decline in equities and the beginning of a new bull run?
The jury's still out, but consider, if you will, the key numbers that will tell the story in coming days. On Friday, June 4, after the non farms payroll report showed little progress in private sector employment, stocks sank to a closing low of 9931.97 on the Dow and 1064.88 on the S&P. The follow-on sell-off Monday, June 7, saw the Dow close below the previous interim low (February 8), finishing at 9816.49. The S&P likewise closed below its previous low, ending the day at 1050.47.
Bottom pierced, any chartist with rudimentary skills would have promoted the idea that further downside risk was being telegraphed. Then came Tuesday's sharp rally, Wednesday's failed rally and today's super rally, on low volume, and on suspect news from - of all places - China. To believe that strength in Chinese markets somehow translates to good news for US firms requires a requisite leap of faith, when the obvious truth was that this rally was really all about saving the prospects of BP, the incomes of one out of seven British pensioners, and keeping the world awash in crude oil (both figuratively and, in the Gulf, literally).
For the bulls, their new targets are 11,205.03 on the Dow and 1217.28 on the S&P, somewhat of a stretch from where stocks have currently settled. Even from today's lofty closing values, a rally of 11% would be needed to return to the previous highs, whereas a decline of just 3.5% would send the two main indices back below their recently-achieved bottoms.
Sideways trading leaves us in a state of suspended animation, though investors will be mulling the news from the BP oil gusher and Europe's deteriorating debt condition over the next four weeks prior to earnings season, which could be a bellwether or a Waterloo, depending on results. Chances still seem to favor the bearish case, with much of this week's trading being perceived as mere "noise."
Dow 10,172.53, +273.28 (2.76%)
NASDAQ 2,218.71, +59.86 (2.77%)
S&P 500 1,086.84, +31.15 (2.95%)
NYSE Composite 6,783.53, +223.82 (3.41%)
As expected on such a huge upside move, advancers dominated decliners, 5550-1011, though new lows maintained their edge over new highs, 120-104. That, and low volume, are very telling signals to where the market is intended.
NYSE Volume 5,718,455,000.00
NASDAQ Volume 2,023,046,625.00
Oil gained again today, picking up $1.07, to $75.45. Gold fell for the second straight day, down $7.70, to $1,220.80, with silver up 18 cents, to $18.34. Confusing variations in the commodity space lends credence to the directionless market theory and to a resumption of the bearish case in short order.
Goldman Sachs (GS) was under pressure again today as the SEC began examining another mortgage investment for potential fraud - Hudson Mezzanine - and was hit with a $1 billion lawsuit from Basis Capital, an Australian hedge fund that invested in Timberwolf, an MBS that Goldman sold in 2007. The troubles just keep mounting on the investment bank everyone loves to hate.
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.
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.
Tuesday, April 24, 2007
Dow Resumes Rally After One Day Hiatus
US equities mostly returned to the plus side after taking a day off on Monday. The Dow nearly erased yesterday's decline and closed within 47 points of 13,000, though the NYSE Composite and S&P 500 experienced marginal declines.
Dow 12,953.94 +34.54; NASDAQ 2,524.54 +0.87; S&P 500 1,480.41 -0.52; NYSE Composite 9,648.50 -12.06
The fuel for the rally (pun intended) was a dip in the price of crude, which slipped $1.31 to close at $64.58. While the relief was welcome, it was hardly enough to move gas prices or the pessimism felt by most drivers in the US who are paying close to - and in some cases, such as on the West coast, more than - $3.00 per gallon for regular unleaded.
In a related story, British Petroleum (BP) reported first quarter profits 17% lower than in the same period a year ago. The British concern saw 1Q profits of $4.66 billion, or 1.35 per share. BP made $5.62 billion or 1.54 per share in the first quarter of 2006. There was nary a tear shed for the still-exceedingly profitable company.
Other commodities were effected as well, with gold and silver taking tumbles. Gold lost $6.50 while silver declined 27 cents. The metals have stymied investors with more than a year of rangebound trading. Both recently closed near benchmarks but failed to sustain the momentum and have pulled back considerably.
Declining issues once again surpassed advancers by a 5-4 margin, and there was a slight shift in the new high - new low ratio. A total of 373 issues recorded new highs while 97 (the most in more than a week) companies set new low marks. While the high-low mantra may be more tail wagging the dog than vice versa, the indicator could be signaling that the recent run-up in stocks has lost momentum and another correction mechanism is about to be put into play.
Stocks are, as it is, near record levels and the sustainability of high share prices is still in doubt in some circles. While the indices may not immediately react, especially in the middle of a pretty good earnings season, but within weeks (and possibly coinciding with the Fed meeting of May 9) there could be a pullback of some consequence.
Most of the movement will be a function of sentiment rather than fundamentals, however, as the market has shown great resiliency in the face of some troubling trends, most notably in the housing sector, which continues to suffer.
According to CNN.com, Sales of existing homes fell 8.4% to an annual rate of 6.12 million in March from February's 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989.
Lower prices for homes may be a problem for sellers, but it has to be good news for buyers, though there aren't many out there. With banks tightening their qualifications, fewer Americans can afford to buy a home today than last year. The other side of the equation is that of forced selling at a price lower than one paid in the previous six boom years.
The entirety of the housing and finance sector may be somewhat of a conundrum for the Fed, alternatively weighing higher energy and food prices (inflation) with lower base housing costs (deflation). There may still be some pressure for the Fed to ease rates in order to spur the housing industry, though that kind of thinking is more wishful than practical.
Bernanke and friends will probably take the easy route of holding the course and keeping rates unchanged at the next meeting as hiking rates could send stocks into a tailspin. Of course, there are many who contend that the Fed is in denial over inflationary pressure and that a short series of rate hikes would be the best medicine.
In the meantime, corporate profits continue to pour in mostly on the positive side providing plenty of rationale for continuation of the rally.
Dow 12,953.94 +34.54; NASDAQ 2,524.54 +0.87; S&P 500 1,480.41 -0.52; NYSE Composite 9,648.50 -12.06
The fuel for the rally (pun intended) was a dip in the price of crude, which slipped $1.31 to close at $64.58. While the relief was welcome, it was hardly enough to move gas prices or the pessimism felt by most drivers in the US who are paying close to - and in some cases, such as on the West coast, more than - $3.00 per gallon for regular unleaded.
In a related story, British Petroleum (BP) reported first quarter profits 17% lower than in the same period a year ago. The British concern saw 1Q profits of $4.66 billion, or 1.35 per share. BP made $5.62 billion or 1.54 per share in the first quarter of 2006. There was nary a tear shed for the still-exceedingly profitable company.
Other commodities were effected as well, with gold and silver taking tumbles. Gold lost $6.50 while silver declined 27 cents. The metals have stymied investors with more than a year of rangebound trading. Both recently closed near benchmarks but failed to sustain the momentum and have pulled back considerably.
Declining issues once again surpassed advancers by a 5-4 margin, and there was a slight shift in the new high - new low ratio. A total of 373 issues recorded new highs while 97 (the most in more than a week) companies set new low marks. While the high-low mantra may be more tail wagging the dog than vice versa, the indicator could be signaling that the recent run-up in stocks has lost momentum and another correction mechanism is about to be put into play.
Stocks are, as it is, near record levels and the sustainability of high share prices is still in doubt in some circles. While the indices may not immediately react, especially in the middle of a pretty good earnings season, but within weeks (and possibly coinciding with the Fed meeting of May 9) there could be a pullback of some consequence.
Most of the movement will be a function of sentiment rather than fundamentals, however, as the market has shown great resiliency in the face of some troubling trends, most notably in the housing sector, which continues to suffer.
According to CNN.com, Sales of existing homes fell 8.4% to an annual rate of 6.12 million in March from February's 6.68 million rate, the National Association of Realtors said. It was the biggest one-month drop since January 1989.
Lower prices for homes may be a problem for sellers, but it has to be good news for buyers, though there aren't many out there. With banks tightening their qualifications, fewer Americans can afford to buy a home today than last year. The other side of the equation is that of forced selling at a price lower than one paid in the previous six boom years.
The entirety of the housing and finance sector may be somewhat of a conundrum for the Fed, alternatively weighing higher energy and food prices (inflation) with lower base housing costs (deflation). There may still be some pressure for the Fed to ease rates in order to spur the housing industry, though that kind of thinking is more wishful than practical.
Bernanke and friends will probably take the easy route of holding the course and keeping rates unchanged at the next meeting as hiking rates could send stocks into a tailspin. Of course, there are many who contend that the Fed is in denial over inflationary pressure and that a short series of rate hikes would be the best medicine.
In the meantime, corporate profits continue to pour in mostly on the positive side providing plenty of rationale for continuation of the rally.
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