Stocks Fail to Maintain QE Momentum; Dow Down Four Straight Sessions

After kicking up 148 points following the Fed's "no taper" announcement last Wednesday, it's been straight downhill for the venerable Dow Jones Industrials, even the addition of Goldman Sachs (GS), Visa (V) and Nike (NKE) to the mix unable to stem the outflow from the blue chip index.

The Dow has given back all of those gains and then some, falling for the fourth straight session on Tuesday with a 66.79-point loss after dropping 49 and change on Monday. The S&P followed the Dow to the downside, though not registering such a large percentage loss, while the NASDAQ continued to defy gravity - thanks largely to Apple (AAPL), up marginally on the day, though losing ground into the close.

What's troubling traders and the indices isn't by any means certain, though the about-face and duplicitous moves by the Fed certainly aren't helping. While chairman Ben Bernanke continually espouses openness and transparency, last week's decision to keep asset purchases at current levels was viewed by the street as opaque and insensitive to markets. A lot of people were short going into the FOMC meeting and came out losing their shirts, their covering of positions adding to the upward movement right after the announcement.

Also weighing heavily is the federal government's intransigence on doing anything constructive. Democrats and Republicans are at loggerheads over the budget (or, continuing resolution, as the case may be), Obamacare and the debt ceiling, issues which need to be urgently resolved lest the government become permanently the laughing stock of the world community.

With the Dow off by some 342 points over the last four days, one might suspect that smart money has already headed for safer ground, witness the rally in treasuries, especially the 10-year note, which has fallen precipitously from close to a 3% yield to stand at the end of today at a relatively tame and aesthetically-pleasing, 2.65%.

The government isn't about to work out its problems soon, with an October 1 deadline looming for a government shutdown, which looks more and more likely to occur. The politicians have used up whatever patience the American people have had, and now risk being completely distrusted by the populace as the gang of thugs and ignoramuses they are.

Wall Street may be beginning to awaken to the facts on the ground that the US economy is still in dire straits which are about to get progressively worse and the run on blue chip stocks is telling.

There are just four trading days left in the quarter and traders are, by nature, an impatient bunch, prone to distrust uncertainty. The rest of this week could be a real bloodbath because the politicians can't agree on anything at all.

Dow 15,334.59, -66.79 (0.43%)
Nasdaq 3,768.25, +2.97 (0.08%)
S&P 500 1,697.42, -4.42 (0.26%)
10-Yr Bond 2.65%, -0.06
NYSE Volume 3,480,190,750
Nasdaq Volume 1,731,125,375
Combined NYSE & NASDAQ Advance - Decline: 3563-2953
Combined NYSE & NASDAQ New highs - New lows: 309-44
WTI crude oil: 103.13, -0.46
Gold: 1,316.30, -10.70
Silver: 21.59, -0.271

Stocks Clipped; Maybe Bad News isn't So Good After All

This was a bit of a shakeout. There was no late rally to save the day, nor was there - oddly enough - any talk of tapering by Fed officials.

No, today was just one of those days that the market had a good look in the mirror and didn't like what it was seeing. Smart money is already out of the equity markets, but the dumb money will probably be looking to buy the dip, as has been the modus operandi for the past four-years.

It was mentioned here yesterday that this appeared to be an opportune time to go to cash or go short. That call could not have been more prescient as stocks fell out of bed and continued to roll on the floor, writhing in pain the rest of the session, having the worst two days since mid-April, which, considering where the market has traversed since then, could be only the beginning of a long, deep decline.

Marketeers will blame today's selloff on poor ADP numbers and maybe the ISM Services index, both coming in with disappointing reports, but data has been trending poorly for the past two months (some say four years) and the market is just now beginning to wake up to the reality of the depression being felt across the country and around the world. Business activity has slowed in almost every sector or has not grown at any kind of solid, sustained pace for most of the past six months, all the while equities were going through the roof.

If this is the beginning of a serious correction or the end of the bull and the beginning of a bear market, today and yesterday's action was just a warm-up.

Wall Street may be blind to poor economic data for a long time, but when the selling starts and there's real money to be lost, the traders all act like herd animals, rushing for the quickest way out.

Even though volume was not magnificent, the declines speak for themselves. The Dow Jones Industrials took a 1 1/2 percent hit today and are now three percent from the top, made on May 28.

The A-D line continues to deteriorate, with today's coming in a 4-1 for the losers; new lows exceeded new highs for the first time in months. Keep an eye on that metric for more clues to where this is going.

A June swoon or a hungry bear?

Dow 14,960.59, -216.95 (1.43%)
NASDAQ 3,401.48, -43.78 (1.27%)
S&P 500 1,608.90, -22.48 (1.38%)
NYSE Composite 9,189.21, -130.88 (1.40%)
NASDAQ Volume 1,728,689,625
NYSE Volume 3,620,423,750
Combined NYSE & NASDAQ Advance - Decline: 1369-5151
Combined NYSE & NASDAQ New highs - New lows: 69-108
WTI crude oil: 93.74, +0.43
Gold: 1,398.50, +1.30
Silver: 22.47, +0.063

Stocks Ramp Higher, But Gold and Silver Outshine

This is one crazy market.

Considering that there are nearly 50 million Americans on food stamps, earnings reports are showing a slowdown in top and bottom-line growth and recent economic indicators suggest the economy is shrinking rather than improving, stocks continue go up regardless of any and all warning signs, today approaching all-time highs on the S&P and the Dow Jones Industrials.

It's obviously all about the Bernanke bucks, risk-free money inserted into the market via the primary dealers with nowhere to go - since the banks haven't increased lending since 2007 - except into speculative investments, or, in a word: stocks.

The data de jure came from the Dallas Fed, which posted a sickening -15.6 on it's monthly manufacturing index, on expectations of a 5.0 reading, down sharply from last month's 7.40 number. Additionally, personal spending and personal income matched up gains of 0.2% each for March, both down sharply from February.

With $85 billion a month coming directly from the central bank, should one expect anything else? Probably not. Data simply doesn't matter any more. The issue is that the Fed's stimulative activity is only helping the top 10%, particularly those invested in stocks. Savers have been beaten nearly to death due to the record-low yields in fixed investments, so the middle class has been effectively short-changed and turned into nothing but debt slaves.

There are alternative, as has been pointed out expressly on this blog for many years. Land, gold, silver, art, and other tangible assets (especially machinery which is capable of producing products which produce income) may not show daily, weekly or quarterly gains like stocks, but neither are they taxed if held closely.

In the cases of gold, silver and real estate - if owned outright without a mortgage - these hard assets can also be used as loan collateral, to purchase even more assets, or, if one is accustomed to a bit of risk, produce leverage. Bottom line, they are preservers of wealth, as has clearly been the case over the last 10-12 years in which the precious metals have tripled, quadrupled or more, depending upon one's entry point.

Today's stock market gains, though solid, were not as good as those in the precious metals. While the major averages were up between 0.72 and 0.85%, gold gained 0.95 and silver outpaced them all with a solid 1.53% gain, not bad for one day.

But, one needs to appreciate gold and silver not for gains or falls in the market. Even with the smash-down two weeks ago, holders of physical metal haven't lost a thing. They still have the same amount of American silver eagles (ASE) or Kruggerrands, bars, coins or jewelry. And they will have them when markets implode, when the currency crisis comes full circle or when paper investments go up in flames, as they always do.

Besides the obvious notion that all of the stock indices are down sharply against gold or silver over the past 12 years, the precious metals remain the ultimate store of value. Why else would central banks - especially China, Russia and other Asian countries - and their citizens be buying in record amounts?

Hold 'em and don't fold 'em.

Dow 14,818.75, +106.20 (0.72%)
NASDAQ 3,307.02, +27.76 (0.85%)
S&P 500 1,593.61, +11.37 (0.72%)
NYSE Composite 9,237.90, +68.00 (0.74%)
NASDAQ Volume 1,458,762,250
NYSE Volume 2,954,210,000
Combined NYSE & NASDAQ Advance - Decline: 4645-1800
Combined NYSE & NASDAQ New highs - New lows: 399-25 (extreme, again)
WTI crude oil: 94.26, +1.26
Gold: 1,467.40, +13.80
Silver: 24.12, +0.364

Ides of March Kills Dow Streak; S&P Still Short of Record

2057 years ago (44 BC, to be exact), Julius Caesar was murdered by a knife in the back from a supposed ally - Brutus - who was acting at the behest of other members of the Roman Senate.

While today's failure of the Dow Jones Industrial average to make it eleven days in a row of gains fails by comparison in an historical context, the Ides of March (March 15) struck again, this time - unlike in caesar's final days - without warning.

The final tally for stocks was not so - pardon the pun - brutish as a knife in the back; today's silly downfall more resembled a paper cut, but, the rally has paused on what was one of the busier days Wall Street has seen in some time.

Combining a quadruple options witching day with a rebalancing of indices, volume was significantly pumped up beyond the normal dullness that has persevered over the past, what, four years?.

In any case, the selling pressure was enough to take stocks down in the early part of the session, only to see all the major indices rally to cut the extent of the losses by roughly two-thirds.

The key numbers to watch going into next week are 1565 on the S&P, which is the all-time closing high, set in October, 2007, a number in and of itself which was largely the result of excessive risk-taking and a monstrous credit bubble which has reappeared over the past 18 months.

On the Dow, the number would be 14,470.50, today's intraday low, a significant enough digit to mark the first line of support should the rally fail to metastasize next week.

The other streaks which came to an end today, beyond the Dow's 10-straight positive closes, were the string of Fridays in which the Dow closed positively and the all-up closes for the month of March. Today was the first day of March in which the Dow finished without a gain and also was the first Friday of 2013 to see a negative finish.

Not that today's smallish decline was anything for anybody to get excited about - it wasn't - but the end of a ten-day string of gains was monumental, being only the eighth time the Dow had ever strung together psotive closes in ten or more consecutive sessions.

With options expiry out of the way for the month (regardless of the weekly options now in vogue), there exists some probability that the markets could turn down in the near term, though analysts are still split on that particular notion.

All that can be said for now is that March - which in market terms came in like a lion - got a little of the lamb treatment today, stabbed and readied for roasting.

Dow 14,514.11, -25.03 (0.17%)
NASDAQ 3,249.07, -9.86 (0.30%)
S&P 500 1,560.70, -2.53 (0.16%)
NYSE Composite 9,116.50, -11.47 (0.13%)
NASDAQ Volume 2,156,822,000
NYSE Volume 5,242,731,500
Combined NYSE & NASDAQ Advance - Decline: 2970-3455
Combined NYSE & NASDAQ New highs - New lows: 527-46
WTI crude oil: 93.45, +0.42
Gold: 1,592.60, +1.90
Silver: 28.85, +0.044

Dow, S&P 500 Gain for Seventh Straight Session; Gold, Silver Compared to Stocks OK

In this liquidity-driven environment, there's almost no risk of downside, and traders have recently taken advantage, boosting the Dow to all-time record highs and the S&P to within 10 points of its best close ever.

In 2013 alone, the Dow is up an astounding 11%, the S&P is higher by 9%. At hose rates of returns, anyone with more than $50,000 in stocks might as well just sit back and watch the money roll in because annual returns would be something on the order of 40-50%.

Nothing lasts forever, however, and there's a 100% certainty that this bull market, now entering its 49th month, will end and a major selloff - of 20-35% - will occur within the next 15 months. Market wisdom puts the long tooth of bull markets at around 63 months, so, by this time next year, the indices offer a very good chance of being lower than they are today. Such is the nature of risk assets, especially in an environment of artificial price supports, low volume, questionable valuations and the lack of a reliable price discovery process.

Granted, stocks - in terms of the Dow Jones and S&P indices - have more than doubled since the '08-09 collapse, but what about gold and silver, the two most widely-held precious metals?

Holders of physical metals have not done too badly, even considering the recent turn of fortune to the downside.

During the latter months of 2008 and the first three months of 2009, according to data from kitco.com, gold could be had for anywhere between $712 and $989 per ounce. Silver traded in a range of $8.80 to $14.39 per ounce during the same time frame.

So, to those who deride stocks over precious metals and ridicule the so-called gold - and silver - bugs, they've gotten it all wrong, as both of the most-popular metals have done exceedingly well, especially silver, which has more than tripled in value form its low point in 2008. Gold, if scaled in on a dollar cost average basis (one of the best ways to buy either stocks or bonds) could easily have produced 100% or better returns during the "financial crisis," which, by the way, is still not finished.

Dow 14,447.29, +50.22 (0.35%)
NASDAQ 3,252.87, +8.50 (0.26%)
S&P 500 1,556.22, +5.04 (0.32%)
NYSE Composite 9,075.76, +21.31 (0.24%)
NASDAQ Volume 1,594,585,125
NYSE Volume 3,091,224,000
Combined NYSE & NASDAQ Advance - Decline: 3384-2006
Combined NYSE & NASDAQ New highs - New lows: 518-27
WTI crude oil: 92.06, +0.11
Gold: 1,578.00, +1.10
Silver: 28.85, -0.095

INEVITABLE: Dow Sets New All-Time Closing High

Without a doubt, this headline news story is about the least anticipated - because it was such a sure thing - of this or any recent year.

With unemployment at 7.9%, 47 million Americans on food stamps and after millions of foreclosures, bank bailouts, company bailouts (GM, Chrysler, AIG, others), a downgrade of the US from AAA to AA+, Wall Street has its new record high.

Big whoop.

That's the good news.

Keeping a level head and household, as prices rise and wages stagnate, that's the tough part. Not everyone in America has participated in this miraculous four year rally off the March, 2009 lows. The main beneficiaries have been the big Wall Street brokerages, which, thanks to the magnanimity of the Federal Reserve - whose balance sheet has more than triple in that time period - were able to at least partially repair their broken balance sheets and claim victory over the evil financial crash.

At this level the Dow Jones Industrials are up a stunning 117% off the lows, as good a period for stocks as ever has been, though one might argue that it was bought on the backs of homeowners, many of whom are still trapped in their domiciles, with prices well below what they owe or what they paid back in the heady days of the early to mid-2000s.

It would be a different story were the US economy growing at a pace of better than two percent - where it's been stuck for these past four to five years, but, realistically, there aren't many Americans who can camly state that they've doubled their net investment value over the past four years. Most of the gains were made on Wall Street or close to it, by the traders, players and hedge funds who expressed their blind faith that the system would not - could not - fail, and dove headlong into stocks.

Bully for them, and may they enjoy their profits. There's absolutely nothing wrong with making money. But, the evidence that the majority of Americans are not participating is clear. Average daily volumes are less than half what they were in 2007, the last time the Dow posted a record close.

There's also the fear that keeps people out of markets. It's no coincidence that after making new highs, stocks have lately had the nasty habit of recoiling and falling back, as was the case in both 2000 and 2007.

So, this may be short-lived if recent history is a guide, or, are we on the path to a new and glorious epoc of American exceptionalism?

One would be hard-pressed to find anyone of that undiluted opinion... except maybe on CNBC or Bloomberg TV, where "guests" are paid handsomely to talk their book.

Buy, buy, buy at the new all-time high?

You're kidding, right?

And, not to rain on anybody's parade, here are the changes to the makeup of the Dow Industrials since 2007.

On February 19, 2008, Chevron (CV) and Bank of America (BAC) replaced Altria Group (MO) and Honeywell (HON).

On September 22, 2008, Kraft Foods (KRFT) replaced American International Group (AIG).

On June 8, 2009, General Motors (GM) and Citigroup (C) were replaced by The Travelers Companies (TRV) and Cisco Systems (CSCO).

On September 24, 2012, UnitedHealth Group (UNH) replaced Kraft Foods (KRFT).

It seems, especially in that September 22, 2008 swap, that some bad was replaced with good. GM was restructured and salvaged by the US government. Citigroup went through a 1:10 reverse split in 2010. Where would the Dow be today, without these changes? Travelers alone is up over 100% since joining the Dow.

And, lest we forget that little thing called inflation, which, experts tell us, has been running at about 2.5% for the past five years, today's record for the Dow is a nominal one, not a real one, and, just to throw some more fuel on the fire, measured in gold instead of dollars, it's not even close. In fact, measured against gold, the Dow has barely budged off the bottom.

It's all a matter of which metrics you want to use.

No matter what, though, let's see how high it goes from here. With the Fed backing it at the rate of $85 billion a month, it should rip right through 15,000 before even breaking a sweat.

Dow 14,253.77, +125.95 (0.89%)
NASDAQ 3,224.13, +42.10 (1.32%)
S&P 500 1,539.79, +14.59 (0.96%)
NYSE Composite 8,978.12, +77.07 (0.87%)
NASDAQ Volume 1,849,814,250
NYSE Volume 3,686,912,250
Combined NYSE & NASDAQ Advance - Decline: 4532-1728
Combined NYSE & NASDAQ New highs - New lows: 688-50
WTI crude oil: 90.82, +0.70
Gold: 1,574.90, +2.50
Silver: 28.60, +0.108

Dow Comes Close to All-Time High, Turns Back

Stocks keep grinding higher, but the all-time high on the Dow Industrials - 14,164.53, set October 7, 2007 - continues to be an elusive target, maybe attainable, but hardly one which anybody believes will hold for long.

The general consensus over the past four weeks or so has been that the market was in need of a pullback, to re-test support, before moving to higher levels.

Today's midday action seemed promising, especially when the Dow shot up more than thirty points in a matter of minutes, breaking out of a dull, smallish range and eventually getting to within just 16 points of the record.

Headwinds were blowing from Washington and elsewhere, however, and the Dow, S&P, NYSE Composite and NASDAQ all lost steam in the final ninety minutes, leaving all in the red on the day, the fade from record territory a disheartening sign to traders.

In the nation's capitol, the Senate failed to approve a measure that would have staved off the sequestration cuts scheduled to kick in at midnight tonight which might have been just enough negativity to keep the markets honest - for a change. Prior to the open, there was disappointment in the second estimate of 4th quarter 2012 GDP, which improved from -0.1 to +0.1, though the restatement was hardly enough to inspire any kind of confidence. Stocks limped through the morning session without much in the way of direction.

A number of stocks also kept the market in check. Following Wednesday's close, JC Penny (JCP) posted another in a series of horrifying quarterly reports, falling nearly 17% on Thursday. The much-ballyhooed turnaround by Apple wunderkind Ron Johnson has failed to materialize, the CEO admitting that he had made mistakes along the way, surely the understatement of the day, though he should be lauded for his honesty, albeit a bit late.

Wal-Mart (WMT), the nation and the world's largest retailer, continues to show signs of struggling, hovering around 70/share as Bloomberg released a story based on minutes from an officers' meeting that said the giant is having trouble keeping stores' shelves stocked with merchandise.

Somehow, there just seems a certain disconnect between the US economy and the US stock markets. Obviously one does not equate directly to the other, but with unemployment around eight percent, an enormous federal deficit, gridlock in Washington and an all-time high in food stamp recipients there seems to be no good reason for stocks to be at all-time highs except for no other reason than the liquidity-driven rally fomented by the Federal Reserve since 2009.

Stocks may or may not reach new highs in short order, though from the looks of things on the ground, it's certainly not cause for celebration by the masses and surely does not seem a sustainable condition.

Any trader worth his or her chops should probably be shoveling in physical silver and gold by the bucketfuls, as both are hovering near five-month lows.

Dow 14,054.49, -20.88 (0.15%)
NASDAQ 3,160.19, -2.07 (0.07%)
S&P 500 1,514.68, -1.31 (0.09%)
NYSE Composite 8,868.72, -6.61 (0.07%)
NASDAQ Volume 1,909,055,500
NYSE Volume 3,801,066,000
Combined NYSE & NASDAQ Advance - Decline: 3204-3212
Combined NYSE & NASDAQ New highs - New lows: 308-46
WTI crude oil: 92.05, -0.71
Gold: 1,578.10, -17.60
Silver: 28.40, -0.548

DEAD MARKET: Stock Indices Finish Week Nearly Unchanged

As has been repeated here and on other financial sites ad nauseum, this is about as dull a market as has ever been seen.

Even though the Dow Industrials finished positive on the day, it spent most of Friday's session in negative territory, down by as many as 61 points just 90 minutes prior to the close. It actually turned positive just two minutes before the closing bell.

The NASDAQ suffered its first losing week of the year, a laughable 1.84 point decline. The Dow fell - on a weekly basis - for the second straight week, a whopping 11-point loss on top of last week's monumental 17 point decline. A cumulative loss of 28 points in two weeks (10 trading days) is nothing more than a rounding error.

As for the darling S&P, it continued its 2013 winning streak, closing up again for the seventh straight week, though only by a mere 1.86 points. They dynamic S&P 500 went the entire week without moving more than three points on a closing basis. That's dull with a capital D.

With all this excitement, thank goodness the exchanges are closed on Monday for President's Day. The traders and all us weary writers really need a break.

Whew!

Late Breaking: The SEC has filed charges in unusual trading activity in options just prior to Berkshire Hathaway's takeover of H.J. Heinz (HNZ). Geez, Uncle Warren involved in something less than ethical? The horror. The ironic twist is that Business Insider, operated by banned trader/analyst Henry Blodget, was the first on the web with the story, proving that, even on Wall Street, truth is stranger than fiction.

Dow 13,981.76, +8.37 (0.06%)
NASDAQ 3,192.03, -6.63 (0.21%)
S&P 500 1,519.79, -1.59 (0.10%)
NYSE Compos... 8,932.17, -20.91 (0.23%)
NASDAQ Volume 1,831,044,125
NYSE Volume 4,096,131,750
Combined NYSE & NASDAQ Advance - Decline: 2977-3410
Combined NYSE & NASDAQ New highs - New lows: 489-45
WTI crude oil: 95.86, -1.45
Gold: 1,609.50, -26.00
Silver: 29.85, -0.504

Dow Posts First Losing Week of Year

Despite opening and remaining on the upside for the entire session, the Dow Jones Industrial Average still posted its first losing week of 2013, though the losses are quite insignificant.

At the close today, the Dow was down 17 points from the previous Friday, the NASDAQ gained 14 points and the S&P picked up four-and-a-half points, both of the latter on Friday having made up for marginal losses earlier in the week.

Generally speaking, Friday was a fairly dull session in what turned out to be an overall dull week. The one piece of economic data that was positive was the US trade deficit falling to -$38.5B, the lowest in nearly three years.

The fact that stocks have held up so well through the first month of the new year and beyond is rather remarkable, considering the winds of trouble still swirling about. However, there may be reason to take a pause - or profits - as markets seem to have stalled at multi-year highs.

With the Dow and, especially, the S&P nearing all-time highs, a triple-top breakdown could be imminent. Additionally, Sunday marks Chinese New Year with the Year of the Snake designated according to the Chinese astrological calendar. Snake years are usually turbulent. 1941 (Pearl Harbor) and 2001 (September 11) were both Years of the Snake.

Finally, in the video below, Peter Eliades explains how we are on the cusp of a major turning point according to his 9244-day cycle, from his work at Stockmarket Cycles.

Dow 13,992.97, +48.92(0.35%)
NASDAQ 3,193.87, +28.74(0.91%)
S&P 500 1,517.93, +8.54(0.57%)
NYSE Composite 8,930.49, +36.74(0.41%)
NASDAQ Volume 1,776,898,880
NYSE Volume 3,008,696,500
Combined NYSE & NASDAQ Advance - Decline: 4251-2137
Combined NYSE & NASDAQ New highs - New lows: 474-20
WTI crude oil: 95.72, -0.11
Gold: 1,666.90, -4.40
Silver: 31.44, +0.038

Dow Clears 14,000; Money is Cheap, Markets on Fire

In the immortal words of The Great One, Jackie Gleason, "...and away we go!"

Stocks leapt out of the gate on a modest January non-farm payroll report, which showed the US economy created 167,000 new jobs in the month, but it was the revisions which really inspired a great deal of confidence going forward and propelled the Dow Jones Industrial Average above 14,000 for the first time since October of 2007.

While the headline number was nothing special, but hardly a disappointment, the revision to November - from from 161,000 to 247,000, and December - from 155,000 to 196,000 - were massive, the November revision of 86,000 alone worth roughly a half-month's worth of payroll gush.

The Dow flirted with the 14,000 mark repeatedly throughout the session, but finally pushed higher in the final thirty minutes of trading, leaving the benchmark average less than 150 points from its all-time high.

Other major indices responded in like manner, most up roughly in the range of one percent on the day.

Skeptics abound, many calling for a correction soon, others deriding the rally as nothing more than the natural outcome of relentless stimulation via zero interest rates and massive bond buying by the Federal Reserve. Still others point to the sluggish real economy, barely doddering along at two percent per annum.

Like it or not, the stock market is not the general economy, which, incidentally, is not faring all that badly. Bankruptcies are not at alarming levels, small business creation is beginning to find legs and consumer spending (much of it on credit and through government transfers) has been remarkably solid.

Though headwinds abound, Wall Street continues to sail forward. January was absolutely boffo - the best since 1997 - and February got off with a bang.

One final note heading into Super Bowl weekend: Fearless Rick says lay the points and go with the 49ers, a win will produce great delight to younger brothers worldwide.

Dow 14,009.79, +149.21(1.08%)
NASDAQ 3,179.10, +36.97(1.18%)
S&P 500 1,513.17, +15.06(1.01%)
NYSE Composite 8,966.79, +83.00(0.93%)
NASDAQ Volume 1,968,694,250
NYSE Volume 4,053,908,500
Combined NYSE & NASDAQ Advance - Decline: 4846-1644
Combined NYSE & NASDAQ New highs - New lows: 668-33 (remarkable!)
WTI crude oil: 97.77, +0.28
Gold: 1,670.60, +8.60
Silver: 31.96, +0.607

Drip... Drip... Drip... Dow Bleeds from Small Wound; NASDAQ at 11 1/2 Year High

It was the best of times, it was the worst of times...
-- Charles Dickens, A Tale of Two Cites

So it goeth... in the best Dickensian sense, the NASDAQ and Dow have diverged of late, forming an odd dichotomy, reprising the 2000-era old/new economies.

As the Dow suffered its sixth loss in the last seven sessions, the NASDAQ returned to the halcyon days of 2000, when, on its way through one of the worst crashes in market history it closed above 3100 for the last time, on November 15, 2000, on its eventual way to a bottom of 1419.23 on September 21, 2001.

So, for the NASDAQ, it is an 11-year, three month high, give or take a few days.

While the Dow is still within hailing distance of its own multi-year closing high (13279.32, May 1, 2012), it is down roughly two percent from there with losses mounting since the 68-point drop on the outside day last Tuesday.

The difference between the two indices is probably is risk assessment, or the mere fact that Apple (AAPL) is not a Dow stock. Had it been for, say, the last two years, the Dow Industrials might today be sporting a 15,000 handle, but, alas, the riggers of the Dow 30 apparently see Apple as unfit for inclusion, despite being the world's largest corporation by market cap.

The makers of the Dow components have a history of not being exactly of the genius character. For instance, Ford Motor Company has never been an elite member of the Dow club, despite a stellar record of accomplishments and great gains through the 20th century.

Whatever the case, the differences in how the averages are structured and weighted makes for interesting interplay as the stodgy Dow companies, what with their dividend-paying stocks and generally long track records, grind slowly in one direction or the other, the NASDAQ offers more high-fliers, jocular IPOs (like Facebook, Groupon and Zynga, to name just a few) and many small niche players, thus being the desired place for the sport of day-trading and point-splitting by the HFTs, hedgies and other mindless market cyborgs.

Once again, as has been the case through almost the entire month of August, there was little in the way of data or news to shake traders out of or into positions. The Case-Shiller 10-and-20-city index of home values showed another smallish year-over-year gain, though the August consumer confidence reading of 60.6 - down sharply from last month's 65.4 - did arouse some traders momentarily from their checker-playing, book-reading or whatever worthless activity keeps them in attendance these days.

After a few moments of excitement, however, they'd had enough and went back to the business of not trading, allowing the computers to do their dirty handiwork behind the scenes and away from the incessant snoring.

It was, again, quite the snooze-fest, and one has to wonder if traders will be back on their toes after the Labor Day recess or whether this kind of low-volume, low volatility regime is all part of a new normal that precludes individual investors.

There is a bit of tension over Friday's speech by Ben Bernanke at the Jackson Hole economic symposium (how anyone, and especially an army of seasoned traders, can get excited about one speech is yet another matter) and the news that ECB president Mario Draghi - citing a "heavy work load" - bowed out from attending.

We're happy that Mr Draghi is working hard at whatever he's doing, purportedly hammering out a deal with the German Bundesbank to save Europe from imminent collapse, though one might also assume attending important economic events such as Jackson Hole has come to be known, should be on his agenda.

At least Mr. Draghi has a job, something roughly 20% of Greeks, Italians and Spaniards do not. It is everyone's hope that he and other Eurocrat leaders concoct a suitable rescue plan for Europe and the rest of civilization before the world ends on December 21, according to wild-eyed gloom-and-doom types eyeing the Mayan calendar, because, if they don't, it will be too late.

Perhaps its for the best that the markets and traders take August off, like their politician friends in Washington almost always do. Wall Streeters can join congress with an approval rating of under 10%. Nearly everyone else - about 9.98% of the population - could care less.

Dow 13,102.99, -21.68 (0.17%)
NASDAQ 3,077.14, +3.95 (0.13%)
S&P 500 1,409.30, -1.14 (0.08%)
NYSE Composite 8,032.72, -3.53 (0.04%)
NASDAQ Volume 1,335,361,880
NYSE Volume 2,499,501,000
Combined NYSE & NASDAQ Advance - Decline: 3147-2303
Combined NYSE & NASDAQ New highs - New lows: 152-51
WTI crude oil: 96.33, +0.86
Gold: 1,669.70, -5.90
Silver: 30.88, -0.17

Market Chart Alert: Dow Double Engulfing Day Signals Start of Turnaround

For as long as just about anyone who charts stocks and indices can remember, the pattern which appeared in today's session should be a primary signal that stocks are ready for an abrupt turn - and this one is decidedly to the downside.

Notwithstanding ongoing market manipulation to the contrary, which has pushed stocks to extreme levels over the past few months when just the opposite appeared more likely on poor data, low volume and other bearish signals, the double engulfing pattern - in which the high and low of today exceeded the highs and lows of the previous two sessions - is a bright red flashing light to chartists everywhere.

The Dow Jones Industrials took a rather abrupt turn late morning. After a slow start, the index reached the high point of the day (13,330.76) just before 11:00 am EDT, hovered in that area, then began a serious decline a short time later, finally dipping into the red around noon.

For the rest of the session, the Dow, carrying the other major indices along with it, continued a slow descent until bottoming out around 3:15 pm EDT at 13,186.60, eventually finishing just 16 points off the low, yet another bearish signal.

The trading range of 144 points exceeded the highs and lows from Friday and Monday's trading, on both sides and was the widest range since August 3rd, when the index ranged 148 points, but finished higher by 111 points.

The headwinds that have been pushing against stocks for a while (could be two months, two quarters or two years, depending on perspective) may finally be taking its toll on the trading community, though there's also sufficient data to determine that stocks have reached the upper limit for the short turn, coming a whisker within the 52-week high of 13,338.66, achieved on May 1st.

While the chart is eliciting a strong double-top formation, the gain from Dow 12035.09 to today's high - a rally of 1,295 points, or, roughly 10%, from June 4, was built on a series of sharp one-or-two-day upside moves with intermittent, short selloffs in between until the baby-step gains typical of the past two weeks.

In simpler terms, the market may just have run out of gas, the problems in Europe and the coming crucial elections and fiscal cliff all creating significant uncertainty in the minds of investors and traders.

A pull-back from these current nose-bleed levels would not be without precedent; indeed, the month of May shook out to the same amount as the gains in June, July and August combined.

What happens next is anyone's guess, and the transportation average is offering a bit of a clue, having finished the day just 0.23 short of the high made on Friday, a one-month high, but well short of the 52-week high set on May 2nd, 5334.52.

The issues plaguing the market and the general economy still are persistent and a shock to the system may be forthcoming, especially since neither the Europeans nor the Federal Reserve seem committed to further monetary easing, something market participants have been lobbying for over the past four to six months.

With November's elections coming fast, the Fed is very reluctant to make any abrupt announcements, while in Europe, the cries from Germany to stop the Ponzi-like bailouts of the southern sovereigns grows louder with each proceeding day.

Despite market breadth being only moderately negative and new highs - new lows reading nearly off the charts positive, we'll await confirmation from these and/or other metrics before making an all-red bear call.

Adding to the market consternation on the day were the continued run-up in safe haven assets, gold and silver, both reliable indicators of general fear in the marketplace.

As for the ongoing rally in crude oil, that is more a function of the time of year, when market insiders annually push prices to their highest levels preceding the Labor Day holiday, just two weeks hence.

Dow 13,203.58, -68.06 (0.51%)
NASDAQ 3,067.26, -8.95 (0.29%)
S&P 500 1,413.17, -4.96 (0.35%)
NYSE Composite 8,082.68, -11.65 (0.14%)
NASDAQ Volume 1,574,080,875
NYSE Volume 3,249,264,250
Combined NYSE & NASDAQ Advance - Decline: 2408-3071
Combined NYSE & NASDAQ New highs - New lows: 264-32
WTI crude oil: 96.68, +0.71
Gold: 1,642.90, +19.90
Silver: 29.43, +0.83

Dow Erases All 2012 Gains; Global Depression Dead Ahead

T.G.I.F., or, more succinctly, thank God this Friday is over.

After the release of some really poor employment numbers in May's non-farm payroll report from the BLS, stocks fell off a cliff right from the open and continued to slide all day in the single worst trading session since last November.

With only 69,000 net new jobs created in May - well below the average estimate of 150,000 - the false "recovery" meme from just a few months ago was completely eviscerated as a rash of poor data which had been flowing to the market all week culminated in the worst employment figures in a year.

In addition to the unemployment rate rising to 8.2% - the first rise in over a year - March and April data were revised lower. March job growth total was reduced from 154,000 to 143,000 and the April number slashed from 115,000 to just 77,000.

While the US had its own woes, the deepening recession in Europe only made matters worse as Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) dropped to 45.1 in May from 45.9 in April, its lowest level since June 2009. The index's latest reading was all the more frightening as data showed manufacturing in France and Germany - supposedly the two strongest members of the EU - slowing at its fastest rate in nearly three years.

Even in developing nations like China, India and Brazil, growth has been slowing and the pace of decline continues to gather momentum. Since the economies of these and other developing nations depend greatly on exports to Europe and the US, the slowdown of the developed economies produces a knock-on effect to the exporters.

The only bright spot of the day came from automakers, which saw double-digit sales gains when compared to a year ago, though all of the US figures were below expectations. GM posted a gain of 11% from May of last year, Ford sales were up 13%, Chrysler, 30%, while Toyota, rebounding from the tsunami and Fukushima nuclear disaster of a year ago, saw a sales increase of 87%.

The Dow Jones Industrials and NYSE Composite index each saw all of 2012 advances wiped out as of the close today. The S&P 500 is just 20 points better than the close on December 30, 2011, while the NASDAQ still sports a gain for the year of better than 100 points. All but the NASDAQ closed today below their 200 day moving average, a sure sign that there is more downside to come.

Along with stocks hitting the skids hard on the day, the US 10-year note hit yet another historic low, ending the week at 1.45%. Its counterpart in Germany, the 10-year Bund, has also been chasing yield lower, with a reading of 1.12% seen today.

Gold had a rapid rise on the news, regaining its status as a safe-haven currency, along with silver, which also posted a healthy increase. Precious metals investors should not be fooled, however, by today's moves alone. During the crash of 2008, all asset classes were decimated, though the metals improved earlier and with more ferocity than equities.

All around, even though it was a shortened trading week, it was the worst of 2012 on the major indices. Internals are screaming correction in equities, while the price of oil continues to signal a cold, deflationary environment in the face of a rising dollar, which seems to be a silver lining to a worsening economy. Gas prices will be lower, though many will be unable to afford to go anywhere.

After governments and central banks have thrown trillions in quantitative easing and stimulus for bailouts and bank balance sheet bolstering, the global financial system seems on the verge of another major breakdown, one that may make 2008 look like a picnic by comparison. As all fiat money systems in the history of civilization have eventually failed, our current regime of "money from nothing" appears to be coming to a cataclysmic demise, and it is gaining momentum at a terrifying pace.

Eventually, all the bad debts run up by governments and financial institutions are going to result in ruination of the global system, to be replaced by some forms of gold and/or silver-backed currencies. Only then will the world's economies become honorable and stable once again.

Welcome back to the Greater Depression.

Dow 12,118.57, -274.88 (2.22%)
NASDAQ 2,747.48, -79.86 (2.82%)
S&P 500 1,278.04, -32.29 (2.46%)
NYSE Composite 7,292.25, -171.71 (2.30%)
NASDAQ Volume 1,875,578,750
NYSE Volume 4,605,786,000
Combined NYSE & NASDAQ Advance - Decline: 853-4802
Combined NYSE & NASDAQ New highs - New lows: 34-307
WTI crude oil: 83.23, -3:30
Gold: 1,622.10, +57.90
Silver: 28.51, +0.76

Bifurcated Markets a Sure Sign of Trouble In Fantasy Finance Land

It should be pain as the day that there are many issues and headwinds facing financial markets in the current crisis situation. Today's trading, taking bounces up and down in a directionless trading session is yet another indictment of the power players' control - or lack thereof - during a turbulent period.

When markets react in odd ways, as similar ones diverge, correlations break down and generally things zig when they are expected to zag, one index is up while another is down, it's a sign of malaise and weariness, signifying not only trouble in the current time frame, but of more problems to come.

After Wednesday's hockey stick save off the lows on a temporary reversal of sentiment regarding Europe - which was wholly manufactured and false, by the way - in which all the major indices moved in the same direction at the same time, today's sloppiness could be attributed to speculative bets in different sectors, though the possibility that there are diverging opinions driving indices in different directions is palpable.

Even though the day's range - 120 points on the Dow; 32 points on the NASDAQ, the two did not move in anything even remotely resembling synchronicity. The Dow finished to the positive, the NASDAQ ended in the red.

Some may posit that these moves are by design, though that's a bit of a stretch even in this space, in which all conspiracy theories are given ample credit at least for the fact that somebody's paying attention.

In what was one of the least-inspiring trading days of the past two weeks, the best that can be said of today's performance was that it was at least back to the norm of low volume and moves without conviction. Europe has been quieted for the time being (don't worry, that will change), the Facebook IPO malaise is fading from the news cycle and JP Morgan is still losing money on the "London Whale" non-hedge hedge.

Eventually, all of these items and more either get swept under the Wall Street rug of fraud and collusion or explode in the faces of the criminal cartel that traverses the canyons of lower Manhattan as glad-handing gentlemen.

One would suppose that a break in the action might be a good thing, though if one is circumspect enough to check the recent charts of the major indices, one would have to be blind not to notice that the Dow, S&P and NASDAQ are all trading well below their 50-day moving averages and hovering just above their 200-DMA, a dangerous position. They're also taken off about 50% of the move higher from mid-December to the end of April, a retracement that adherents of Fibonacci will note as an area of support. In that regard, the indices have moved in synchronous fashion, though with their own idiosyncratic tendencies.

Two telling signs from market internals suggest there easily could be more downside in days and weeks to come. The advance-decline line has been negative 12 of the last 17 sessions, while there have been more new lows than new highs for 10 consecutive sessions and on 14 of the last 15 trading days.

This is an interesting time for markets, stuck in no-man's land without the support of earnings, driven by news, events and data flow.

Dow 12,529.75, +33.60 (0.27%)
NASDAQ 2,839.38, -10.74 (0.38%)
S&P 500 1,320.68, -1.82 (0.14%)
NYSE Composite 7,552.35, -11.45 (0.15%)
NASDAQ Volume 1,737,819,375
NYSE Volume 3,776,796,750
Combined NYSE & NASDAQ Advance - Decline: 3082-2527
Combined NYSE & NASDAQ New highs - New lows: 55-111
WTI crude oil: 90.66, +0.76
Gold: 1,557.50, +9.10
Silver: 28.16, +0.64

Playing the Market, Twitter-Mob Style; Mogambo Guru Returns

It was certainly an exciting - if uneventful (depending on perspective) - end to the week, as the pumpers on CNBC breathlessly kept viewers in a strange state of animated suspense and anticipation over whether the Dow would actually close above the "psychologically important" (only to them) 13,000 level and the wrangling over details of the latest Greek bailout continued apace across the pond.

But, a funny thing happened on the way to 13,000 - or rather on the way down away from it - this morning, shortly after 10:00 am ET.

With the Dow at what would become the highs of the day, a sudden about-face took place, sending the index screaming for mercy in a 37-point drop over a roughly ten minute span.

Moves like this are not uncommon in the world of fast-paced HTF algos (a subject which has been noted here all too often in the past), but today's event might have had a bit of a different skew. Yesterday afternoon, a group of individuals (no names, please) decided to have a bit of fun, or mischief, possibly at the expense of the well-heeled crowd that convenes on Wall Street regularly.

A plan was concocted to see if a bunch of unrelated, inconspicuous internet users could have an effect on the HTF algos, which, as we know, track headlines from the likes of Bloomberg and the Wall Street Journal, but also follow trends on social websites like Facebook and Twitter.

The idea was that everyone would Tweet, at precisely 10:03 am, "Greece defaults" and see if the dumb algos would fall for the bait. The tweets went out, not all at the same time, and not uniform by any means, though the 10:03 time-stamp was extended, with various mentions of Greece defaulting flowing into the Twitter-verse in earnest for about twenty minutes.

Whether the tweeters actually managed to trip up the HFT traders and their zipity-do-dah algorithms is now and will likely forever be a matter of speculation, but if there were an actual cause and effect, it brings some interesting - and scary - possibilities to the table.

Suppose such crowd-sourced media were actually effective in moving the algos, thus affecting the price of an entire index? What then would be the effect on an individual stock? Were a group of people intent of making some money with this trick, it might be easier than anyone imagines, somewhat akin to elevator whisper campaigns designed to take down candidates in local elections or the old pump-and-dump strategies that were so effective in the early dotcom days of the internet, circa 1998-2001.

A plan could easily be put together to move a stock a few points in one direction or another, with appropriate bets placed by those "in the know." If truly effective, the profits could be staggering. Truth is, that's probably what has been happening in the US markets and elsewhere for quite some time, but especially theses days, as the market seems less than reluctant to trade on rumors and headlines rather than fundamentals.

Whatever the case, today's experiment via Twitter might raise a few eyebrows and give people some ideas. As for 13,000 on the Dow, the CNBC presenters and those with an emotional tie to the number will just have to wait until next week.

The other major development of the day also took place on the internet, and actually happened on Thursday, when the frightful visage of the Mogambo Guru suddenly reappeared sporting his own blog. The majestic Mogambo Guru (MMG) had been a regular typist and word-twister of financial follies on the Daily Reckoning for a long time, though he had taken an absence from penning the occasional witty and irreverent column (OWAIC).

Now that he's back and regularly submitting his thoughts to the public via a blog there should be little doubt that his hordes of faithful followers (HHOFF) will flock to his work like... ummm, bees to honey, or something like that.

Welcome back, oh great, glorious, hallowed, devious and mischievous Guru! Your absence left a hold in the fabric of time and space, but we're sure you'll be promptly attending to mending it.

Just a few quick notes for the weekend:

Today's volume, which has been horribly anemic on a regular basis anyway, was fairly ghastly today, the lowest in a decade, notes ZeroHedge.

There's a meeting of the G20 in Mexico City over the weekend in which the big fight is supposed to be between the IMF's Christine Lagarde and the finance ministers and representatives of Germany. The IMF wants more dough and the Germans are tiring of spending so much. Besides the main event, the undercard features thousands of police in riot gear protecting the one percenters from rock-hurling Mexican hooligans and potentially, armed drug cartel operatives. One has to admit that setting a meeting of world leaders in a place as dangerous as Mexico City offers a bit of intrigue, to say nothing of its inducement to all kinds of mayhem.

Dow 12,982.95, -1.74 (0.01%)
NASDAQ 2,963.75, +6.77 (0.23%)
S&P 500 1,365.74, +2.28 (0.17%)
NYSE Composite 8,151.96, +15.72 (0.19%)
NASDAQ Volume 1,641,587,000
NYSE Volume 3,367,789,000
Combined NYSE & NASDAQ Advance - Decline: 2827-2792
Combined NYSE & NASDAQ New highs - New lows: 281-11 (Really?)
WTI crude oil: 109.77, +1.94 (pain at the pump)
Gold: 1,776.40, -9.90
Silver: 35.34, -0.22

Is the Crisis Deepening?; Meg Whitman, Prototypical CEO Failure

Well, the PPT must have gotten up early today, because no sooner did the Dow dip 50 points off the open than it was boosted to a 50 mark to the positive.

Was there a reason, a rationale? Sure. Stocks must go up to bolster the perception that all is well in the good old US of A.

Naturally, once the market was back on a solid we're-going-to-13,000 footing once again, the HFT momo-chasers went to work, keeping the abhorrent, clumsy, no-volume rally going for the remainder of the lackluster session.

With stocks just screaming higher and higher virtually every day, some elements on the general tenor of the stock market rally vis-a-vis the real world economy need to be scrutinized.

Oil continues to rocket higher, up over $108 per barrel in electronic trading late today. The Euro/Dollar trade continues to be the creepiest, most cynical lie to the world. How does the Euro, with most of Europe already in a recession and the rest of it teetering on one, continue to ramp higher against the US dollar? Aren't we supposed to be in better shape than the various countries making up the Eurozone? Apparently not, because the EUR/USD hit another high today, closing above 1.33. It simply makes no sense, except if you have significant positions (like Goldman Sachs does) long the Euro and the stock market.

Last we checked, GDP was still growing at less than 3% in the US, though in Europe, minus signs and fractions of one percent dot the landscape. America still has more than 14 million unemployed people, wages have been stagnant to lower for more than a decade and the real estate market is officially in depression-like throes.

Something is definitely not right, when the Euro is up while most of the continent is in recession, oil is ramping to record levels for this time of year despite all manner of data showing rampant demand destruction, gold and silver are ripping, yet the stock market continues to rise and rise and rise without so much as a 3% pull-back. The Dow Jones Industrials are up a wicked, unbelievable 2339 points since October 1, an incredible gain of 21.95% in less than five months. Yep, the rich are getting richer... again.

Watch retail analyst Howard Davidowitz rip apart the notion of "growth" in the video below:

Hundreds of stores closing from a handful of retailers; the rest, Davidowitz calls "train wrecks."

A couple of lines gleans from Hewlett-Packard's (HPQ) newly-minted CEO, Meg Whitman, aptly demonstrate what's wrong with corporate and political America. First, Ms. Whitman, who, after a stint as the CEO of eBay, launched an unsuccessful bid for the governorship of California. Out of luck and out of a job, Meg was pegged to lead HPQ out of the abyss.

Good luck with that, you clueless board members. Whitman is uniquely suited to drive Hewlett Packard even deeper into an already well-dug hole. Her "success" at eBay can more or less be summed up in one line: A trained monkey could have done as well, and probably without alienating as many people, buyers and sellers alike.

Ebay was one of the few dotcom companies that fit the new paradigm of the internet perfectly, allowing small businesses and individuals to buy and sell just about anything under the sun. Ms. Whitman had, in reality, little to do with making the company a household name. It was all about eBay's near-monopolistic position in the online retail space that made the company a success. It would have actually been more of a surprise had she not succeeded. Meg Whitman didn't start the company. She got in when the getting was good.

In any case, here's some of the cliche claptrap that Whitman spewed on her CNBC interview this morning:

• On the timing of HPQ's turnaround: "Fundamental change... will take some time."
• On the challenges facing the company: "There are three 'buckets' of challenge: 1) basic execution, 2) each business has it's own unique challenges, 3) there have been changes in our business."
• On HPQ's structure: "We have to zero-base the bureaucracy..."
• "We have to save so we can invest and compete more effectively."
• "We're not where we want to be in China." (Meg should know. Ebay shuttered its China operations under Whitman after years of abject failure and lack of traction.)
• On when HPQ's metrics will show some change: "We'll know a lot by the end of 2012. Revenue acceleration in 2013."

It's a shame Ms. Whitman's on-the-job training as CEO of a real company didn't include lessons in humility, because the market provided some for her after the company beat (lowered) expectations narrowly this quarter, but was short on revenue and even shorter on guidance. Traders punished HPQ to the tune of a 6.5% decline upon the occasion of the release of its most recent quarter's numbers. That's a pretty impressive drop, considering the company had already lost a two-fifths of its value in just the past year. Meg Whitman is your gal, especially if you ascribe to the Peter Principle.

There isn't a day of reckoning coming. There will be many days of many reckonings over the coming years because the entire global financial and commercial system is being kept afloat on dreams, lies, cronyism and hype.

Dow 12,984.69, +46.02 (0.36%)
NASDAQ 2,956.98, +23.81 (0.81%)
S&P 500 1,363.46, +5.80 (0.43%)
NYSE Composite 8,135.98, +41.60 (0.51%)
NASDAQ Volume 1,723,876,625
NYSE Volume 3,726,037,500
Combined NYSE & NASDAQ Advance - Decline: 4040-1606
Combined NYSE & NASDAQ New highs - New lows: 243-24 (Wowser! Only one new low on the NYSE.)
WTI crude oil: 107.83, +1.55 (up 10% in February)
Gold: 1,786.30, +15.00 (closing in on all-time highs)
Silver: 35.56, +1.30 (about to break out)

Nice Day for Dow Industrials, Thanks to IBM; Housing Fix Not In

Stocks continued their happy saunter through the cold of January, with the Dow Jones Industrials posting another nearly-100-point gain, thanks in large part to IBM (up 7.98 to 188.50 (+4.42%) on solid 4th quarter earnings reported after the bell Thursday), which accounted for half of the Dow's gain all by itself.

The other indices lagged far behind the Blue Chips, courtesy of Google's (GOOG) worst earnings miss in six years, reporting a profit of $2.7 billion on revenue of $10.6 billion, well below Wall Street non-GAAP estimates of $9.50 per share versus an estimate of $10.46. Whoops! Shares of the internet behemoth were down 53.58 points, a loss of better-than eight percent.

Two other tech titans - Microsoft (MSFT) and Intel (INTC) - reported excellent quarters, helping to keep the montl-long rally going. The Dow, S&P and NYSE Composite were up each of the four trading days this week; the NASDAQ fell just short, losing 1.63, despite a valiant, last-half-hour rally.

Despite the outstanding gains from the last half of December through today, there are signs of trouble, and the fact that today marked options expiry, may lead to declines next week as more companies report. With just about 20% of the S&P 500 having reported, only 55% have beaten expectations, a ten year low. The average for the past ten years has been that 62% of companies beat street estimates. Considering that the big banks have all reported already - and all of them matched or beat - this does not bode well for the bulk of reporting companies which are set to report over the next two weeks.

Meanwhile, the Dow is back at levels last seen in mid-July, today's close just missing (four points) making a six-month high. It will be interesting to see if the Dow can crack through next week and continue onward toward exceeding the 2011 high of 12810.54 made on April 29. Yes, it's getting a bit frothy. The word for next week is likely to be "overbought," as in "we're market pumping day-traders who don't give a hoot about fundamentals, just making a profit."

So far, the advance-decline and new highs-new lows indicators are showing no sign of an impending correction, but, with the Dow up nearly 1000 points in just the past four weeks, a short correction would be something a healthy market would fully appreciate.

One other item that may be a canary in the coal mine is the nice rise in gold over the past few weeks, including a healthy advance today, and, finally, silver caught a bid over the past few sessions, finally breaking and holding over the artificial resistance at $30/ounce.

On CNBC today, the network featured a series of reports on housing, calling it, somewhat inappropriately, "The Big Fix." Hottest among the topics was the government plan to sell off Fannie Mae and Freddie Mac's inventory of foreclosed homes (REO) to investor groups which will turn these single-family homes scattered across the country into rental units.

As is usual with government's half-baked plans, there are a rash of questions and arguments against, primarily centered around the whole fairness issue of kicking families out and then reselling - at what should be huge discounts - to well-heeled investors more concerned with turning profits than restoring blighted neighborhoods. The plan is still in the formative stages, but there are indications that the government will allow the investors to rent to whomsoever they please, which would include welfare and other social program recipients, meaning that homeowners ought to be on guard for the ghetto-ization and balkanization of their McMansion neighborhoods, such as is the case in other socialized nations, notably France, where the ghettos are in the suburbs, far from the uber-rich in the well-maintained cites.

One other problem is that the banks - if they actually do the right thing and write down these loans - will be facing far larger write-downs on bulk sales than anticipated. Since the US economy has been predicated for the past six years on keeping the banks free from losses, the government plan looks like a classic election-year crash and burn before it even gets going.

Dow 12,720.48, +96.50 (0.76%)
NASDAQ 2,786.70, -1.63 (0.06%)
S&P 500 1,315.38, +0.88 (0.07%)
NYSE Compos 7,829.34, +9.97 (0.13%)
NASDAQ Volume 1,979,837,250
NYSE Volume 3,911,913,250
Combined NYSE & NASDAQ Advance - Decline: 3289-2274
Combined NYSE & NASDAQ New highs - New lows: 182-26
WTI crude oil: 98.46, -1.93
Gold: 1,664.00, +9.50
Silver: 31.68, +1.17

Bull Trap Has Been Set for US Stock Investors

The Markets

If you're like a lot of people, confused by the volatility of the stock market and the herky-jerky, up-down pattern that has persisted for over two months, you are not alone. Most people simply have given up on stocks and may take a look at their 401k or investment plan statement from time to time, but the day-to-day fluctuations are simply too severe and too random for anybody to really get a grasp on what's going on with stocks.

Fear no more, because Some technical analysis and a couple of definitions from Investopedia explain the condition to the letter. After studying the pattern, it is clear that what we have been experiencing is nothing more than a Bull Trap with a series of Fakeouts built into it.

Using the Dow Jones Industrials as a guide, we know that after the initial decline from 12724 on July 21 to 10720 on August 10, a loss of 2000 points in just 14 sessions, the Industrials have generally traversed a range from 10733 to 11613, a mere 900-point range which the markets cannot seem to penetrate either on the upside on downside. In other words, it's been hovering - up and down - closer the bottom, setting up the classic Bull Trap and offering a series of fakeouts when in an uptrend, only to collapse.

One can take the news of world financial events at face value or ignore them at this point, because unless something truly extraordinary occurs, the global financial conundrum won't matter to the market, as the trap has already been set and the next move will be lower, below the range and below 10733, probably down to 10200 or 9400 before it's finished.

Of course, the timing is everything, and this sideways trading could continue for a few more months or the final breakdown could happen over the next few weeks. It will appear as if the world is coming to an end, but it won't be, as there will still be at least 9000 Dow points underneath as a base. Those caught buying in here will be hung out to dry, with lots of overhead resistance, trapping them into losing positions for six months to possibly a few years, depending on which individual stocks one has bought.

So, the correct strategy at this point is to short near the top of the range, or the middle, but be prepared to wait. Options players may be interested in long-dated, out-of-the-money naked puts on the Diamonds (DIA), which tracks the Dow. A tiered strategy starting in November, December or January may be the best way to go, depending on one's own risk appetite.

That's all for today, some food for thought, as stocks finished in a very diffuse manner again, though in reality it was nothing but another failed rally.

Dow 11,153.98, -143.08 (1.30%)
NASDAQ 2,480.76, -10.82 (0.43%)
S&P 500 1,160.40, -9.34 (0.81%)
NYSE Compos 6,974.91, -97.97 (1.42%)
NASDAQ Volume 2,329,045,750
NYSE Volume 5,151,046,000
Combined NYSE & NASDAQ Advance - Decline: 4292-2216
Combined NYSE & NASDAQ New highs - New lows: 15-367 (still screaming SELL)
WTI crude oil: 82.14, +0.93
Gold: 1,617.30, -0.80
Silver: 30.52, +0.39