Cyprus Situation Still Uncertain; US Traders Content to Take the Risk

With the situation in Cyprus still murky, at best, US investors shrugged off the dilemma from overseas and bid stocks up to their best levels of the week during Friday's session, ending the week down marginally, but essentially flat.

Holding stocks over the weekend seems a risky bet, being that the troika has given the Cypriot government until Monday to sort things out and come up with a solution to salvage what's left of their failed banking system and creaking government.

The latest from Nicosea, the capitol of Cyprus, appeared to have the parliament eyeing a tax on depositors once again in an effort to keep the deal offered by the ECB and IMF on the table. The parliament had unanimously rejected the option to tax deposits in Cypriot banks earlier in the week, but it now appears that they have run out of viable options.

How the tax, or levy, is finally worked out remains a sticking point. Deposits of under 100,000 euros are supposedly protected by law, as they are by the FDIC in the US, but lawmakers and Eurozone leaders seem willing to overturn that protection in favor of bailing out the troubled banks and economy of Cyprus.

Taxing savers will no doubt raise the specter of fear in many european nations, that regular depositors will no longer be protected by laws designed to keep governments and financial authorities' hands off the people's money.

With Europe already on a weekend, there's little doubt what savers in countries like Greece, italy, spain and Portugal have been doing on Friday: withdrawing sufficient fund to weather the weekend and beyond, should the leaders in the EU and Cyprus continue on their mad path to destruction of confidence in the financial system.

Banks in Cyprus will remain closed until Tuesday, no matter what is decided or left up in the air. The weekend should prove to be an interesting one from the standpoint of global economic viability.

Dow 14,512.03, +90.54 (0.63%)
NASDAQ 3,245.00, +22.40 (0.70%)
S&P 500 1,556.89, +11.09 (0.72%)
NYSE Composite 9,065.65, +56.00 (0.62%)
NASDAQ Volume 1,631,320,375
NYSE Volume 3,145,706,000
Combined NYSE & NASDAQ Advance - Decline: 3898-2398
Combined NYSE & NASDAQ New highs - New lows: 323-29 (flat)
WTI crude oil: 93.71, +1.26
Gold: 1,606.10, -7.70
Silver: 28.70, -0.514

Cyprus Still an Issue; Fed Statement a Snoozer

For some reason known only to those who choose to follow rather than lead, everything market-related hinged upon the release of the FOMC policy statement on federal funds rates, which, as almost everyone in the civilized world already knew, would remain unchanged.

Nonetheless, the bearded chairman and his scholarly cohorts ripped Cyprus from the front pages of economic news for the day and delivered their usual hokum statement about "moderate growth", "targeted inflation" and other assorted word-bites designed to make the markets kowtow to their planned economic dictums.

The committee also released forecasts on economic growth and unemployment for the remainder of 2013, 2104 and 2015 - forecasts which are generally nothing but flights of fancy and will almost certainly miss their marks widely.

And, there was a press conference and question and answer period, in which chairman Bernanke reread the aforementioned statement, added a few humorless remarks and fielded a number of softball questions from the drooling press pool.

It was enough to lull babies and pets to sleep.

Meanwhile, the ECB and IMF continue to wrestle with the issue of what to do about Cyprus, which is still unsettled and operating without banks being open for a fifth straight day. Today's announcement was that Cypriot banks will remain closed until Tuesday of next week, as the government expects massive bank runs once they are open for business.

Imagine the grand, self-important EU ministers losing any remaining credibility over what amounts to a three to six billion euro matter. Incredible as it sounds, that's what's happening.

Party on, America.

Party on, Europe.

Dow 14,511.73, +55.91 (0.39%)
NASDAQ 3,254.19, +25.09 (0.78%)
S&P 500 1,558.71, +10.37 (0.67%)
NYSE Composite 9,081.09, +63.42 (0.70%)
NASDAQ Volume 1,605,044,125
NYSE Volume 3,682,038,000
Combined NYSE & NASDAQ Advance - Decline: 4657-1782
Combined NYSE & NASDAQ New highs - New lows: 506-37
WTI crude oil: 92.96, +0.80
Gold: 1,607.50, -3.80
Silver: 28.82, -0.026

Stocks Trashed Again on Brace of Poor Economic Data

Possibly more than anything else, the horrific -12.5 print by the Philadelphia Fed was responsible for the added declines on Thursday, following Wednesday's setback after the FOMC minutes from january were announced.

The market was expecting a reading of 1.5 from the Philly Fed in its survey of business conditions, which, in and of itself, is a bit of an embarrassment, but were greeted with an even lower number for February after january came in at a disappointing -5.8. Obviously, there's little to no catalyst for improvement in the region, and the same is pretty much true in other Fed outposts, though the Philadelphia survey gets more attention, it representing a solid hub of business activity.

Beyond the sorry report, other economic data was less-than-encouraging. First-time unemployment claims ticked up 20,000, from a revised 342K last week, to 362K in the latest reporting period, dashing - for the time being - any hope of a rebound in employment.

This is a fickle, almost psychotic market. On the one hand, traders get worried that the Fed will take away the punch bowl of unlimited QE and low interest rates, but, on the other, they are equally concerned that the general economy is again approaching stall speed, as it did last year and in 2011 in the early months.

Whatever the market is feeling these past two days, it is mostly confusion and consternation. The major averages took some serious dips into the red today before a wicked, final-hour, short-covering rally brought them close to unchanged on the day, eventually failing in the final half hour of trading.

One can hardly blame the shorts for pulling a quick trigger on their positions this afternoon. Attempting to short this market and counter the Fed's relentless money creation machine has been a losing trade for the better part of four years and its a testament to the resolve of the non-believers to hold true even on a two-day reversal.

US markets were not the only ones being handed their hats on Thursday. European markets were shattered even worse after a key reading on services and manufacturing fell from 48.6 in January to 47.3 in February, well short of expectations, where the consensus was 49. It may be finally dawning on european investors that various bond schemes by the ECB and austerity measures in various countries aren't producing the desired effects and may even be contributing to continued weakness in the Eurozone.

Taken together, the Eurozone and the US are beginning to look like a pair of gussied-up party girls after a long night on the town. The makeup is fading and cracking and the hangover is setting in with a passion.

Even though two days of trading does not constitute a trend of any sort, the past two have been the worst in succession for US stocks this year and there may not be much of a respite with sequestration issues and a budget battle looming between the opposing parties in the nation's capitol, and those are two fights the American public is hardly keen on, as congress and the president have both shown an unwavering reluctance to handle pressing business like adults, preferring to play the blame game and seek short-term, band-aid types of approaches.

How the markets play out over the next few weeks and months will go a long way toward determining the mood on Wall Street and Main Street, and the mood - despite the best intentions by business - is beginning to show signs that patience is growing exceedingly thin.

Elsewhere, gold got a bit of a dead-cat-bounce after a month of steady declines, giving back those gains during the open session, though silver remains mired at multi-month lows. The metal prices may move even lower, in union with stocks, although one would be hard-pressed to find an actual physical holder of either willing to part with any or all of his or her holdings. Suppression by central banks and other operators has been well-documented, and the more they push down, the more dire conditions for a sharp response become.

Crude oil also has been taken a beating as speculators are having their lunch eaten. Overabundant supplies of WTI crude and slack demand is causing a serious disruption in the trading, which has been nothing but straight up since December. Oil and gas at the pump are about to get a whole lot cheaper.

It's getting a little bit interesting out there after the champagne rally of the first seven weeks of the year. The A-D line has been in reversal for two straight days and today's new highs - new lows reading was nearly at parity, a condition foreign to these markets since last November.

Dow 13,880.62, -46.92 (0.34%)
NASDAQ 3,131.49, -32.92 (1.04%)
S&P 500 1,502.42, -9.53 (0.63%)
NYSE Composite 8,816.74, -66.88 (0.75%)
NASDAQ Volume 2,007,395,000
NYSE Volume 4,414,224,500
Combined NYSE & NASDAQ Advance - Decline: 1942-4569
Combined NYSE & NASDAQ New highs - New lows: 104-78
WTI crude oil: 92.84, -2.38
Gold: 1,578.60, +0.60
Silver: 28.70, +0.077

Print, Baby, Print; Dow Over 14,000 Again

The Dow topped the 14,000 mark for the first time since February 1, setting a closing high that was the best in more than five years.

Thank you, Mr. Bernanke.

There's no substitute for rampant liquidity in a market climate such as this one. Uncertainty continues to abound, the economies of the developed nations are in the proverbial toilet, circling the bowl either in recession (Europe), complete deflationary stagnation (Japan), or barely chugging along at under 2% GDP (USA).

Of late, the Japanese have embarked on "unlimited" quantitative easing (printing money with nothing at all backing it), though the US continues as king of the hill, with the world's largest sovereign economy, the Fed buying up all the rancid mortgage paper and monetizing the federal debt to the tune of $85 billion a month (a touch over $1 trillion per year, annualized).

Europe seems to be getting the message that it's finally time to play no-holds-barred currency war, though the socialists on the continent seem fairly sanguine about continuing their efforts to bail out banks and sovereigns one-by-one, a little at a time, rather than using the bazooka approach favored by Mr. Bernanke.

Sooner or later, the Europeans will devalue by printing, mostly because the high level of the Euro is crimping Germany's exports, and, if Germany's economy suffers, one can probably bet on the good people of Deutschland not being very supportive of the Euro and/or wanting more in return from their Euro-brethren to the south, who, like the American welfare caste, produce nothing, but get much in return.

So the US and other major countries will continue to print, print, print their feckless paper fiat, a time-honored practice that has never ended well, ever. In the meantime, however (and that meantime could stretch out to 2016, 2017, or beyond), one cannot fault stock investors in their search for yield. The past four years in stocks has been nothing but Fat City Easy Street to the xxxxxth degree. During the period from March 9, 2009 until the present, it's been nothing but straight up for stocks, to a point at which the general market is now sporting a 14 multiple, even though many companies are not growing earnings one whit, others making their numbers through cost-cutting and downsizing.

Global finance is in an unsustainable state, but, as long as the printing presses continue to churn out crisp currency, nobody seems to care.

There are signs that it's getting a bit wearisome. Oil is heading over $100 a barrel for WTI crude, despite a glut on the market, especially in the US. Food prices have moderated lately, but they're higher overall than a year, two, three years ago and will only rise from here.

It's a great market for speculators, especially those wearing blinders. Giddy-up!

Dow 14,018.70, +47.46 (0.34%)
NASDAQ 3,186.49, -5.51 (0.17%)
S&P 500 1,519.43, +2.42 (0.16%)
NYSE Composite 8,955.92, +36.90 (0.41%)
NASDAQ Volume 1,719,904,375
NYSE Volume 3,424,131,000
Combined NYSE & NASDAQ Advance - Decline: 4076-2361
Combined NYSE & NASDAQ New highs - New lows: 450-31
WTI crude oil: 97.51, +0.48
Gold: 1,649.60, +0.50
Silver: 31.02, +0.109

Europe, Ratings Agencies In Focus as Markets Zig-Zag

Editor's Note: Our regrets and apologies to readers for missing our regularly-scheduled post after the close on Monday. There were negotiations from which we could not extricate ourselves in a timely manner.

Stocks took a dive on Monday, but rebounded sharply on Turnaround Tuesday, raising the indices nicely, but not back to levels seen before Monday's decline.

In the news on Monday was Europe (remember them?), once again rearing its ugly, socialist head over stories emanating from Spain over alleged corruption in the government of Prime Minister Mariano Rajoy (no, really?), which the Spanish PM has denied. While there's little doubt that corruption exists in all levels of government worldwide, especially at the sovereign or federal level, proving such becomes a task not for the feint of heart, as there are vested interests which will defend their salaries, positions and perks like maddened pit bulls.

Italy was also in the news Monday, as fraud and conspiracy charges are being levied against the world's oldest bank, Banca Monte dei Paschi di Siena, and are slowly but surely finding their way to the top of government, eventually to land in the lap of Prime Minister Mario Monti.

National elections are slated for February 24-25, with former Premier Silvio Berlusconi, 76, gaining on front-runner Pier Luigi Bersani. Unemployment and rampant waves of criminality are among major issues in Italy.

On the US home front, the Justice Department finally found some level of damming evidence over which to bring charges against Standard & Poor's. The rating agency is alleged with fraud over their ratings of sub-prime loans in the 2004-06 period, helping bring about the 2008-09 market crash and financial panic. The government is seeking $5 billion in damages.

While the DoJ has reportedly combed through two million pages of emails and internal documents, the real reason for the agency to now bring charges is that - after four months of negotiations with the firm - it wants and needs the money that fines will bring to the federal coffers. Besides that, statues of limitations on fraud are expiring quickly, prompting action. It's a shame this is happening so late in the game and also that the banks which originated and packaged the faulty loans aren't being prosecuted as well.

There was a rush of earnings news, mostly positive, though YUM Brands (YUM) was hard hit on Tuesday even though the company beat on both the top and bottom lines. At the heart of the company's issues is KFC, and tainted chicken sold though their Chinese outlets. The government is continuing its probe of the company which guided forward flat earnings due to the issues arising from the problematic cluckers. KFC is highly profitable in China. More than 40% of YUM's profits come from China.

Dow 13,979.30, +99.22(0.71%)
NASDAQ 3,171.58, +40.41(1.29%)
S&P 500 1,511.29, +15.58(1.04%)
NYSE Composite 8,920.13, +67.31(0.76%)
NASDAQ Volume 2,150,602,500
NYSE Volume 3,859,714,750
Combined NYSE & NASDAQ Advance - Decline: 4674-1828
Combined NYSE & NASDAQ New highs - New lows: 386-22
WTI crude oil: 96.64, +0.47
Gold: 1,673.50, -2.90
Silver: 31.88, +0.159

"Cliff" Negotiations Going Nowhere; Wall Street Begins to Get the Message

Anybody who took the time to watch any of the Sunday morning comedy shows, otherwise known as "Meet the Press", "This Week" or "face the Nation could come to no other conclusion than the Democrats and Republicans were still miles apart on solutions to fixing issues pertaining to the "fiscal cliff" that has become the cause celebre in Washington, on Wall Street and just about everywhere else in America.

Alternating between Treasury Secretary Timothy Geithner, House majority leader, John Boehner and a parade of politicians, pundits and philosophers (notably, Grover Norquist), there was widespread agreement on one thing: that there was no middle ground upon which anybody was seen standing. The Democrats and Republicans are so far apart that the idea that there might not be a deal in time for all the Bush tax cuts to expire, sequestration of mandatory budget cuts would take place and the US economy - and with it the world - would fall into recession early in 2013.

It took Wall Street most of the day to figure out that a deal might not be forthcoming by the clowns they purchased in the last election cycle, a thought so pregnant with dire consequences that many in the (cough, cough) investment community might just be in denial on the topic.

By late afternoon, President Obama took his case to the Twitter-world, answering questions from his point of view. A little later, there was a counter-offer from Boehner's office, though it was much like the president's original proposal: having no chance of acceptance and merely a bargaining salvo, testing the waters, so to speak.

By the end of the day, there was some damage done, though it was nothing like what may occur should Wall Street types begin embracing the idea of actually plunging over the "cliff."

Incidentally, the Dow pooped out right at its 200-day moving average, especially in light of the somewhat stunning November ISM index, which drooped into contraction territory with a 49.5 reading, on expectations of 51.2. Naturally, hurricane Sandy was blamed for the bad read, though a number of analysts did not agree with that assessment, believing that Sandy might be responsible for 0.3 to 0.5 of the shortfall, which would still render a reading of 50, at best.

Spain requested a 39.5 billion euro bailout for its ailing banks, but fell short of making an official request for a sovereign bailout. In the best counterintuitive fashion, European stocks rallied and bond yields fell. Talk about denial! The Euros have that market cornered.

As the cliff diving enters a critical phase this week - because the politicians plan on making their escape from DC on the 14th of December, naturally, taking an extra week off on the taxpayer's dime - expect markets to get ever more jittery. Adding to the unusual noise, Friday's non-farm payroll report for November might rattle a few cages as well.

Dow 12,965.60, -59.98 (0.46%)
NASDAQ 3,002.20, -8.04 (0.27%)
S&P 500 1,409.46, -6.72 (0.47%)
NYSE Composite 8,223.54, -36.90 (0.45%)
NASDAQ Volume 1,666,248,500
NYSE Volume 3,060,504,000
Combined NYSE & NASDAQ Advance - Decline: 2307-3205
Combined NYSE & NASDAQ New highs - New lows: 213-44
WTI crude oil: 89.09, +0.18
Gold: 1,721.10, +8.40
Silver: 33.76, +0.48

Washington Gets Back to Work (Kinda); Stocks Slump Despite (Kinda) Positive Data

Tuesday began with a flurry of good news.

First, over in Bizzarro-world(aka Europe), EU ministers were glad-handing and slapping each other's backs for another successful bailout of Greece (really, is this the third, fourth or fifth? Who's counting?), then, at 8:30 am ET, durable goods orders came in better than expected.

At 9:00 am ET, the September Case-Shiller Housing Index showed another in a series of positive gains for housing. Better yet, consumer confidence hit a four-and-a-half-year high, reported at 10:00 am ET.

So, why were the markets in such a sour mood, why did they end lower, and why were they not even lower than where they finished?

Ah, grasshopper, so many questions...

First, that somewhat refreshing zero print on durables was, in fact, pretty ugly, once one ventured to peek under the hood. As Zero Hedge reports, a continued collapse in durable goods new orders virtually guarantees that we're already in a recession, fiscal cliff or not (more on that canard later).

The Case-Shiller data, which showed the average price of a home purchase up by 3.6% nationally, has to be faded a little, only because housing is not stocks, and, even though home-buying is a relevant statistic, it matters little in the broader scheme of things, especially when the banks are keeping massive numbers of homes off the market in what's known as "foreclosure stuffing." Those in the know, really, really do know.

As far as the consumer confidence number, well, anybody who allows themselves to be branded a consumer for purposes of a survey can't be all that bright, after all.

In the case of the nth installment of the Greek bailout, there were scant details, the IMF hasn't signed off on it yet, the "deal" has to be approved by each member (17) country, so, the Euro sold off, anathema to US markets.

And then, about 2:30 pm ET, US lawmakers (that's a joke, son) emerged from talks over the fiscal cliff (that's not a pun, son) and did what everyone thought they'd do, since their track record is so plain and clear on this point: point fingers at the other side for not playing fairly.

Senate majority leader Harry Reid: "...little progress with Republicans..."

Senate minority leader Mitch McConnell: "...some difficulty turning off the campaign..."

Is it any surprise to anybody that working out a deal in DC was going to be a difficult, if not impossible, issue? After all, this whole "fiscal cliff" miasma started more than a year ago when the two sides failed to reach conciliatory postures on increasing the debt limit, and that puny increase of roughly $1.2 trillion is about to run out.

So, with no deal even remotely being discussed, the Titans of Wall Street started selling in earnest and continued selling into the close. They will probably still be selling when the opening bell rings on Wednesday and maybe even beyond that, because depending on Washington politicians to reach a concord on any matter of even insignificant importance is like getting cats and frogs to behave well together. It's just not going to happen.

Further, indispensable reading from the Wall Street Journal comes in the form of an editorial by Chris Cox and Bill Archer - respectively, former chairman of the House Republican Policy Committee and the Securities and Exchange Commission and former chairman of the House Ways & Means Committee - explaining why the fiscal cliff of $600 billion is merely a puff of smoke compared to the conflagration that is the real unfunded liabilities of Medicare and Social Security, refreshingly written in language even a protesting Wal-Mart worker could comprehend.

The saga continues to unfold tomorrow. Oh, by the way, so many people did their holiday shopping on Thanksgiving, Black Friday, Small Business Saturday and online on Cyber Monday this year, and, considering that since Turkey Day was so early this year that there's an extra week in the holiday shopping season, retail sales are going to be very slow for the one, two, three, four next weeks, until the last Saturday before Christmas (the 25th is a Tuesday), so, Happy Holidays! Free houses, Greek bailouts, durable goods and fiscal cliff-diving for everyone... including consumers!

Dow 12,878.13, -89.24 (0.69%)
Nasdaq 2,967.79, -8.99 (0.30%)
S&P 500 1,398.94, -7.35 (0.52%)
10-Yr Bond 1.65% -0.02
NYSE Volume 3,294,930,000
Nasdaq Volume 1,762,521,750
Combined NYSE & NASDAQ Advance - Decline: 2462-3041
Combined NYSE & NASDAQ New highs - New lows: 154-40
WTI crude oil: 87.18, -0.56
Gold: 1,742.30, -7.30
Silver: 33.98, -0.156

Early Case of Holiday Blahs for Equities

Trading was sluggish and mostly to the downside in the morning session - likely on quick profit-taking from the Black Friday rally - but capital was re-allocated in the afternoon, as stocks rallied into the close.

Concerns over resolution to US fiscal issues and Europe's finalizing yet another round of financing for Greece kept stocks in the red for almost the entire day, except for the NASDAQ, which was boosted largely on trades in Apple (AAPL), which was up more than three percent on the day.

There was little in the way of economic data or corporate news to move markets, as trading volumes were at low levels.

Simply put, there wasn't even a left-over turkey leg to Friday's rally as traders were quick to pul the sell lever with so many issues overhanging the markets.

The Dow, down as much as 109 points before noon, rallied to close near the best level of the day, which, of course, means nothing.

Things should get more interesting as news of talks between Republicans and Democrats on the "fiscal cliff" issue begin to circulate throughout the week.

Dow 12,967.37, -42.31 (0.33%)
Nasdaq 2,976.78, +9.93 (0.33%)
S&P 500 1,406.29, -2.86 (0.20%)
NYSE Composite 8,197.48, -28.02(0.34%)
NYSE Volume 2,833,759,250
Nasdaq Volume 1,559,037,750
Combined NYSE & NASDAQ Advance - Decline: 2636-2880
Combined NYSE & NASDAQ New highs - New lows: 124-40
WTI crude oil: 87.74, -0.54
Gold: 1,749.60, -1.80
Silver: 34.14, +0.021

Stocks Take Another Beating; Dow Off 185, NASDAQ in Correction

All the issues and problems facing the US and global economies are coming home to roost in a perfect storm of excessive debt, fiscal intransigence, monetary experimentation, overpriced equities, general distrust of leadership, lack of growth, geopolitical tension and poor earnings prospects for corporations.

The selloff today was a continuation of what's been occurring since before the election, but has accelerated dramatically since. Wall Street is quite unhappy with prospects that President Obama will not budge from his position to eliminate the Bush tax cuts on the wealthiest two percent of Americans, as emphatically spelled out in an early afternoon press conference.

The president was cool, calm and collected, fielding questions on a variety of topics, but, even though he mentioned compromise frequently, he did not waver in his commitment to tax the wealthy at more than their current rates, including gains on investments, particularly - Wall Street fears - regular income and dividends.

Taking their cue from the president's message, stocks, which opened briefly higher, but quickly fell deep into the red, made new lows nearing the end of his remarks and continued lower into the close, the Dow suffering a 185-point loss and the NASDAQ reaching levels 10% below their recent highs, crashing into correction territory.

With all of the major indices, including even the Russell 2000 of mostly small cap stocks, continuing their descent below their respective 200-day moving averages, bottoms were sought out, though none could be found.

The massive run-up which began in March of 2009 is being unwound, with most of the blame being laid upon the politicians in Washington, DC, though there are more than a few more scapegoats, notably the greed and feed crowd that started the entire mess - the irresponsible banking community and their masters of control, the Federal Reserve.

With the dual policies of ZIRP and massive monetization, the Fed enabled much of Wall Street's excess and continues to do so even today. The neo-Keynesian policies of Ben Bernanke and his predecessor, Alan Greenspan, has spawned a debt bubble deflation crisis that they cannot - as much as they try - spend their way out of.

Most individual investors have been fleeing the market or have already taken their seats on the sidelines, so the damage being done to stocks is going to impact the middle and upper classes the most, with 401k, investment and pension plans taking the brunt of the declines.

In particular, Dow stocks, seen by many as representing the core of American industrialism, have lost more than 1100 points since their highs in early October, erasing most of the gains made throughout the year.

While Washington politicians dither over negotiations to avoid massive tax increases and huge budget cuts (which some say are needed), investors are worried that whatever solution they arrive at will be too little, too late and more of a can-kicking exercise than real reform.

With the holidays fast approaching, Americans are not in a mood for more business as usual from either Wall Street or Washington, and the anger is growing, even on Main Street, where small businesses continue to suffer or skirt taxation completely.

The next few days and weeks could easily turn into a crisis more severe than that of 2008, since none of the improprieties produced by that financial peer into the abyss have yet to be resolved, and now there are fewer measures the Fed or the Treasury can employ to keep the economy afloat.

If anyone thought that the crisis in America was over - to say nothing of the even worse conditions in Europe - they should pay close attention to what happens over the next sixty to ninety days, because they will surely be replete with wild market swings, irony and recriminations from all sides against each other.

Surviving into and beyond 2013 will be a major test of not only the American spirit but of Americans' willingness to accept leadership. President Obama's election to a second term was probably the correct choice, but he alone cannot fix the mess others created.

After today, the bankers and the wizard genii of Wall Street should be running for cover they should have sought out years ago.

Today was a truly dark day, though, from the looks of things, there are many more to come.

Grow some crops if you can, stay close to home and loved ones, and remember our motto: FREE HOUSES FOR EVERYONE!

Dow 12,570.95, -185.23 (1.45%)
NASDAQ 2,846.81, -37.08 (1.29%)
S&P 500 1,355.49, -19.04 (1.39%)
NYSE Composite 7,903.42, -119.81 (1.49%)
NASDAQ Volume 2,103,531,000
NYSE Volume 4,062,878,250
Combined NYSE & NASDAQ Advance - Decline: 822-4741
Combined NYSE & NASDAQ New highs - New lows: 39-333 (WoW!)
WTI crude oil: 86.32, +0.94
Gold: 1,730.10, +5.30
Silver: 32.88, +0.393

Slipping Over the Fiscal Cliff? Stocks Dumped at End of Day

Today's late day action isn't what has been the norm for this artificially-pumped-up market for the last three-and-a-half years. Normally, at the end of the session, the markets stage a "miracle" rally out of the blue, then send futures soaring into the next day's trading.

Today was a little bit different and investors better get used to it or get out, go short or just suffer losses.

Fear of the US going over the fiscal cliff and sending the economy into a tailspin recession would be an unabashed disaster, but that seems to be more on the mind of traders than anything else these days. The problem is that the issues facing the US government aren't going away soon and aren't likely to be solved by a president who's done little in four years and a congress that's done nothing good for the American public for the past 12.

So, after taking on a 67-point loss on the Dow in early trading, stocks regained their momentum (what little there was), based largely on results from Home Depot (HD) which beat third quarter estimates and was traded up to a 12-year high on the day. As has been the pattern recently, however, the rally which took the Dow up 83 points was quickly sold off, and, in the final hour of trading, stocks took the beating they so richly deserved in the morning.

If not for the bogus midday rally (which, remarkably, was a pan-Atlantic event, taking all European stock indices up sharply at the closes of their sessions), the Dow may well have suffered a 100+ loss, but the day-trading crowd that controls all buying and selling with their wickedly fast HFT computer algos couldn't have that, so, the small loss is what got cooked into the day.

With no economic news and very few significant companies reporting third quarter earnings, the markets are stuck with waiting on the government for solutions, and, from what we've seen here and in Europe and Japan, that can be a long and painful wait.

The action continues tomorrow, with just two days left before options expiration on Friday. This current round hasn't been pretty nor profitable for many.

It was the fifth straight day in which new lows topped new highs (and by a widening margin) and the same for the A-D line being negative. all of the major indices are trading below their 200-day moving averages, with no relief in sight.

Dow 12,756.18, -58.90 (0.46%)
NASDAQ 2,883.89, -20.37 (0.70%)
S&P 500 1,374.53, -5.50 (0.40%)
NYSE Composite 8,023.23, -30.83 (0.38%)
NASDAQ Volume 1,814,780,250
NYSE Volume 3,427,123,250
Combined NYSE & NASDAQ Advance - Decline: 1773-3741
Combined NYSE & NASDAQ New highs - New lows: 56-249
WTI crude oil: 85.38, -0.19
Gold: 1,724.80, -6.10
Silver: 32.49, 0.035

Stocks Get Whacked Again; Dow Down 100+; Support on Major Indices Breached

Make no doubt about it, there's real fear on Wall Street.

For the second day in a row, stocks spent the day wallowing in negative territory, amid fears of the fiscal cliff - higher taxes, imposed budget cuts, more - the souring condition of the European Union, notably Greece and, yes, Germany, post-election hand wringing, and generally overpriced stocks in a market that is supposed to be buoyed by unlimited bond purchases by the Federal Reserve.

Word to the Street: It's not working.

Stock market participants who were brave enough to bid stocks up at the open (aka, suckers) were immediately punished for thinking that after the worst down day in a year on the Dow, stocks were ready to rebound, as all the major averages got a brief boost at the open but fell back into the red shortly after the first half hour of trading.

Trading volumes were brisk and stocks continued to gyrate lower, finally ending with a rush to finish at the lows of the day right at the closing bell, hardly an encouraging sign for those who believe this recent pull-back was nothing but blues for Mr. Romney's loss in the presidential sweepstakes.

All of the major indices closed below their 200-day moving averages, the first time this has happened since the end of May, beginning of June, when investors were worried that the Fed would not extend its easing measures (they did, of course).

In the current environment, traders are more or less on their own. Many funds have closed their books for the year and are taking on losses as sharp-nosed hedge fund managers skewer the slow-footed and long-term types with shorting and controlled demolitions of individual stocks and groups. High beta stocks, which posted the greatest gains over the past 10 months, are being hammered relentlessly as profit-taking has become more akin to skinning tomatoes, a slippery job at best and a troublesome trade at worst.

There are scant buyers, though the "semi-invisible" hand of the Plunge Protection Team (PPT) may actually be keeping stocks from falling directly into the East River or beyond.

Foreign markets have been hard hit as well, with almost all Asian, European and Latin American markets feeling the pinch the past two days.

In Europe, the truly laughable situation that the ECB finds itself in is truly one for he history books, as Greece steps closer to civil war after voting once again for austerity measures and another round of cash from the monetary authorities in Brussels and Germany. Thing are relatively quiet in the other Southern European detor nations, though Spanish bond yields are beginning to rise, frightening everybody from Angela Merkel - who wants more time (sorry, honey, you've had enough) - to Mario Draghi, who has expressed openly that the lone bright spot in the EU - Germany - is beginning to lose its luster.

Thankfully for most traders, tomorrow is Friday, making the end of what will likely go down as one of the worst weeks of the year, with the Dow down more than 400 points thus far, and the issues presented to the market anything but resolved.

It's been said many times that the market hates uncertainty, and that's all they've got in front of them presently. Worse yet, the underlying conditions set by global central bankers are proving more destructive and costly than anyone could possibly have imagined (except for a few select bloggers and out-of-the-mainstream market watchers). The favored positions of bailing out banks, major companies and sovereign nations with increased easing of monetary policy and near-zero interest rates has created an environment with no escape hatch.

The hands of the central bankers are tied, and with them, all appendages of the trading community. If there was ever a time to book profits (what's left of them), it's now, or rather, it was Tuesday. Since the massive ramp job in anticipation of a Romney victory, stocks have been beaten and battered to a point at which the Dow now sports a gain of less than 600 points on the year, roughly a five percent move from the close of 12217.56 on December 30, 2011.

The NASDAQ being the hardest-hit in the recent downtrend, had the most to give up and is still holding onto a gain of nearly 300 points, having begun the year off the close at 2605.15 at the end of last year. Starting the year at 1257, the S&P 500 is still holding onto a 120-point gain, just less than 10% higher on the year, which, in normal times, would be considered excellent, but those gains seem to be eroding faster than the confidence that the Democrats and Republicans in Washington can find an ultimate solution (they can't; they're broke themselves).

New highs have been subsumed by new lows, 91-185, the second straight day in which the lows have registered a win. It, however, this is just the beginning of a correction of seven to fifteen percent, there's further to fall, something many on wall Street don't want to think about until maybe Monday, when all hell may break loose.

There's still one more day to get through this week and all pretense has been removed. There's a general fear about being in the market at all presently and the last man standing is not the preferred position, nor is the act of catching a falling knife, currently the only places left on the market floor.

From a chartists' perspective, the move lower was nearly overdue, but the timing could not have been more predictable after the major indices made new highs in early October, fall back, and failed to achieve those same levels later in the month, at which point began the eventual fall-out. The bull market which began in March of 2009 is now getting a little long in the tooth, at 44 months, and it could be all she wrote as third quarter results were messy to horrifying and Wall Street's dirty little secret - that stocks are not growing their earnings - is beginning to get out.

Tomorrow could see a bit of a snap-back, dead cat bounce, but all indications are that more pain is ahead and that period could extend through the remainder of 2012 and into next year.

There were winners, ominous ones at that: gold and silver.

Dow 12,811.32, -121.41 (0.94%)
NASDAQ 2,895.58, -41.71 (1.42%)
S&P 500 1,377.51, -17.02 (1.22%)
NYSE Composite 8,050.83, -87.98 (1.08%)
NASDAQ Volume 1,876,133,130
NYSE Volume 3,759,670,250
Combined NYSE & NASDAQ Advance - Decline: 1462-4062
Combined NYSE & NASDAQ New highs - New lows: 185-91
WTI crude oil: 85.09, +0.65
Gold: 1,726.00, +12.00
Silver: 32.24, +0.579

Dead Cats Don't Bounce; No Joy in Fraudville; Stocks Continue Slide

Maybe, as the movie title suggests, white men can't jump, but Wall Street proved today that dead cats don't bounce... at least not very high.

Stocks got a little bit of a boost from futures pumping prior to the opening bell, but the dismal nature of earnings for the third quarter made any gains transitory, fleeting and utterly disappointing (much like a lot of people in this author's life).

It is as it should be, perhaps. Fed policies do not a market make, so the major indices are now well below the levels encountered when the Chairman, the pseudo-salubrious Ben Bernanke, announced QE3, or, rather, QEtc. or QEternity on September 13.

The prescription the good doctor of economics gave the markets was unlimited buying of mortgage-backed securities (MBS), those ubiquitous instruments of mass financial destruction that essentially started the whole financial and economic mess in the first place, and which will, almost without doubt, end up worth less than what the Federal Reserve pays for them.

With any luck, the Fed's foray into economic wonderland, replete with diamond-farting unicorns and frogs that belch profits, will end in tears and anguish for not only the lower and middle classes, but the rich and self-appointed masters of the universe as well. We wish them no luck, because tactically, they have erred in their assessment of the global economy, not once or twice, but repeatedly since the advent of the crisis in 2007 or 2008, take your pick.

Today's FOMC rate policy decision was another non-event, the Fed reiterating that it would stick to its plans until 2015, which would be long after the chairman has departed, ostensibly in early 2014, should he even last that long.

The market is more interested these day in politics and earnings, each of which offering a mixed bag of blessings or banes, so precarious is the global outlook. Fears are rising that President Obama will win re-election, though the real fears are over the poor earnings reports pouring into the street like so many viperous snakes ready to bite the legs of impudent investors standing still.

Layoff announcements from Ford, Dow Chemical and Volkswagen were only whispered on Wall Street today. In the coming months, workforce reductions will be major headlines as all attempts to revive the economy the banks destroyed will ultimately fail. Europe is sinking steadily deeper into a black hole of debt and deflation, with Asia following soon, and the US - the last bastion of relief in a sea of declining opportunity - to join them in the hell of destroyed currencies and wrecked economies within short order.

Stocks have levitated for months, but the handwriting is clearly written and the game is nearly up. The US elections of November 6 mark a turning, a reckoning that will be absolute and without reprieve. All of the Merkels, Bernankes, Legardes and Draghis of the world cannot resurrect that which was already dead when they first took notice.

While there may be a few days of brightness ahead in the near future for stocks, to outlook continues to deteriorate and today's market action verifies the quietly-held beliefs of the skeptics: all is lost.

There is no joy in Fraudville; mighty Bernanke has struck out.

Dow 13,077.34, -25.19 (0.19%)
NASDAQ 2,981.70, -8.76 (0.29%)
S&P 500 1,408.75, -4.36 (0.31%)
NYSE Composite 8,179.26, -16.05 (0.20%)
NASDAQ Volume 1,965,715,000
NYSE Volume 3,346,029,500
Combined NYSE & NASDAQ Advance - Decline: 2404-3120
Combined NYSE & NASDAQ New highs - New lows: 97-94
WTI crude oil: 85.73, -0.94
Gold: 1,701.60, -7.80
Silver: 31.62, -0.173

Markets Close Down 17th Time in Last 19 Mondays

The headline says all you need to know.

Stocks spent the entire day languishing in a narrow, negative range, on really ugly volume (it was, after all, a (half)holiday, Columbus Day), but pared early losses to finish marginally down, except for the NASDAQ, which was dragged down considerably by Apple (AAPL).

Other than the usual Monday blues, there was no economic data to report as traders await third quarter earnings reports, which will be kicked off by Alcoa (AA) Tuesday after the bell.

There's some noise coming from Europe, which may not be all good. The first meeting of the ESM was today, though the ministers spent most of the time arguing about just how big Europe's main bailout fund should be.

Here's a clue for them all: whatever you decide on, it will not be enough.

Dow 13,583.65, -26.50 (0.19%)
NASDAQ 3,112.35, -23.84 (0.76%)
S&P 500 1,455.88, -5.05 (0.35%)
NYSE Composite 8,358.86, -25.21 (0.30%)
NASDAQ Volume 1,173,675,250
NYSE Volume 2,305,869,000
Combined NYSE & NASDAQ Advance - Decline: 2020-3386
Combined NYSE & NASDAQ New highs - New lows: 174-51
WTI crude oil: 89.33, -0.55
Gold: 1,775.70, -5.10
Silver: 34.02, -0.555

Another Leg down for Stocks; BTFD or Correction Coming?

As a fllow-up to Tuesday's dip into the red, stocks could not forge into positive territory on Wednesday, as the NASDAQ suffered its first three-day losing streak since August 2nd, and the other major averages fell in unison.

Losses were not deep, but steady throughout the afternoon session, closing near the lows. Topping concerns was renewed tension in Europe where protests in Spain overnight and in Greece during the day turned violent.

In Madrid, youths turned out in large numbers to protest parliament's ongoing forays into austerity and to voice anger of the 50% unemployment rate plaguing Spanish youth. Police beat protesters with batons and scores of arrests occurred.

Greece's protests were union organized, as many as 200,000 people from the largest public and private unions marched through the capitol. The demonstration was largely peaceful until anarchists began throwing molotov cocktails at police and media stations. Police responded with tear gas and pepper spray.

By comparison, markets were less jittery in the US as compared to Europe, where Spanish stocks slid by more than three percent and the majority of developed nations' bourses suffered losses of between 1.5 and 2.5 percent.

Commodities were also hit, with gold down sharply and oil closing below $90 per barrel for the first time in more than two months. Silver, which slipped nearly one percent in early trading, rebounded to finish the day close to unchanged.

Losses in risk assets prompted questioning over whether the Fed's new QEternity policy would be effective in boosting or maintaining asset prices in the near term or whether the global economies might be sinking further into a condition of malaise and ill-investment. Some analysts saw the pull-back as technical in nature; others thought a correction was overdue and about to commence.

That left traders in a quandary over where to move next: either out of stocks and back into bonds, or, to stay invested in equities.

Sadly, most people being sheeple, risk assets such as stocks are likely to remain in favor until a more robust, sustained devaluation takes place. Such a scenario could very well play out within the next two weeks. The third quarter is quickly drawing to a close, though the overall strength or weakness of the US economy cannot be measured accurately by the stock market.

Anecdotally, new home sales failed to meet expectations, another cause for concern on Wall street.

Hey, it's only money.

Dow 13,413.51, -44.04 (0.33%)
NASDAQ 3,093.70, -24.03 (0.77%)
S&P 500 1,433.32, -8.27 (0.57%)
NYSE Composite 8,221.75, -53.03 (0.64%)
NASDAQ Volume 1,725,565,750
NYSE Volume 3,535,526,250
Combined NYSE & NASDAQ Advance - Decline: 2145-3341
Combined NYSE & NASDAQ New highs - New lows: 136-48
WTI crude oil: 89.98, -1.39
Gold: 1,753.60, -12.80
Silver: 33.94, -0.01

Draghi Delivers Win-Win for Europe, Stocks

ECB president Mario Draghi pleased just about everyone when he unveiled the latest bond-purchasing scheme by the European Central Bank at a news conference early this morning. Stocks rose across Europe and the Americas with the NASDAQ reaching 11 1/2 year highs.

Portions of the new ECB bond purchase program, which is designed to purchase sovereign bonds with maturities of 1, 2, and 3 years, were purposely leaked to the press in the days and weeks prior to the official announcement, which came after the ECB's rate policy meeting (kept the official bank lending rate at 0.75%), during afternoon trading on European bourses and prior to the open of trading in New York.

The plan, called by Draghi, Outright Monetary Transactions (OMT) rests on five main pillars: 1) Strict conditionality will be applied to bond purchases 2) There will be unlimited purchases of bonds with a maturity of one to three years 3) The ECB will not have seniority 4) All transactions will be 'sterilized' 5) Purchases will be reported monthly.

Countries wishing to participate (notably Spain and Italy) will have to make a formal application and adhere to conditions, mostly in the form of austerity measures, something at which many governments have balked.

While the stock markets advanced broadly, the S&P reaching a four-year high there are some land-mines over which the ECB will have to traverse in order to make the program a success.

First, there is the matter of legality, upon which the German high court will rule on Wednesday, September 12. The court is reviewing previous bond-buying programs by the ECB, such as the ESM, to determine if such plans comply the rigors of the German constitution. If the court decides against such plans, everything in Europe will be thrown into chaos, as Germany is the major funder of bailout programs.

The matter of nations applying for funding is another sticking point. Spain and Italy are in fiscal crises, but the political leaders are wary of conditionality, submitting their government to severe austerity measures, such as the recently-proposed six-day work week for Greeks. Additionally, sticking to the conditions ofthe loans is often difficult if not impossible, though the OMT specifically says that bond purchases will be curtailed if conditions are not met.

with the ECB now in the Fed's arena of massive money printing, what lies ahead for the US and global economies is next week's FOMC meeting, at which it is widely believed Fed chairman Ben Bernanke will unveil some new liquidity program of his own, commonly called QE3, though recent economic data, such as today's August ADP employment report and the ISM Services data would seem to indicate that further easing by the Fed is not warranted nor wise at this juncture.

Thus, positive economic data, a recovering economy and anything outside the stock market viewed as positive to growth will be viewed by Wall Street as an impediment to more easy money, likely causing a sell-off in equities.

Tomorrow's non-farm payroll report for August is the linchpin to Fed action. Anything over 150,000 net new jobs may cause the Fed to hold back from further easing. There's also widespread belief that the Fed will be reluctant to move so close to the US presidential elections, not wishing to be perceived as a political entity.

Next week is shaping up to be epic, one way or the other.

Dow 13,292.00, +244.52 (1.87%)
NASDAQ 3,135.81, +66.54 (2.17%)
S&P 500 1,432.12, +28.68 (2.04%)
NYSE Composite 8,160.40, +168.39 (2.11%)
NASDAQ Volume 1,883,115,000
NYSE Volume 3,919,524,250
Combined NYSE & NASDAQ Advance - Decline: 4360-1203
Combined NYSE & NASDAQ New highs - New lows: 494-39
WTI crude oil: 95.53, +0.17
Gold: 1,705.60, +11.60
Silver: 32.67, +0.35

Stocks Split in Another Lackluster Session

There were heaps of indecision and disbelief after yesterday's rise and fall led to a stumbling session for US stocks on Wednesday, with the major indices split after a midday rally pushed the S&P and NASDAQ modestly into positive territory, but left the Dow and Composite with marginal losses.

With literally no data points on which to trade, investors were mostly in a defensive posture until FOMC minutes were released at 2:00 pm EDT. The idea that the Fed might still be considering some easing before the November elections lit a fire under some traders, though the size of the move was unconvincing.

It's unlikely that the Fed would move decisively soon unless there are overt signs of weakness in the economy to a greater degree than has already been proven. Fed Chairman Ben Bernanke and the rest of the world's elite traders, economists and analysts will gather at Jackson Hole, Wyoming, next week for an annual economic symposium, though skepticism over whether the Chairman will make any earth-shattering announcements abounds.

That is primarily what has the the bulls running for cover, because the economy has been sullen and without forward momentum, even while stocks have recorded strong gains through the summer. The entire June-August rally may have been built on false hopes and pipe dreams of another round of quantitative easing.

Without a monetary boost, stocks could suffer anything from a mild to severe correction within the next two weeks, and the charts are beginning to show signs that Tuesday's double top was something to actually be concerned about.

With little in the way of economic data this week (New and existing home sales, initial unemployment claims and durable orders), traders have little upon which to trade, so the late summer doldrums should continue, at least into the early portion of next week and possibly through Labor Day.

After that, the experts will be back on the street with new strategies or old ones, based entirely on best guesses as to the outcome of the elections and how long European leaders can keep their juggling act going without dropping all of the balls.

It's a strange state for the markets, full of uncertainty and doubt, though very close to 52-week highs. It's ripe for something - either a breakout to the upside or a 5-15% slide. And, while everyone has opinions, nobody is really putting out convincing arguments on either side.

The market bears close scrutiny at this juncture, as the next move may be decisive and worth playing, but only if one has guts and conviction to stick with trades over the next couple of months, because, as has been shown all year long, this market likes to gyrate like a lithe belly dancer without giving off any signs of where it's headed next.

Our money is on the downside, but we've been in that posture for a long time and have been in cash or equivalents for the better part of the past four years. If the precious metals continue to gather momentum, that could convince us to take a flier on some puts or shorts in selected stocks or indices. If new highs - new lows continue to compress tomorrow and the A-D line opens negative, we could be all in on Diamond (DIA) and/or Spider (SPY) October puts.

Both gold and silver have broken out of their recent ranges and could put in a long, strong run through the end of the year, so the buying opportunity window may be closing quickly on the metals, a favorable trade the past twelve years, despite persistent meddling and price fixing by major and central banks.

Dow 13,172.76, -30.82 (0.23%)
NASDAQ 3,073.67, +6.41 (0.21%)
S&P 500 1,413.49, +0.32 (0.02%)
NYSE Composite 8,079.02, -3.66 (0.05%)
NASDAQ Volume 1,426,827,000
NYSE Volume 2,809,365,750
Combined NYSE & NASDAQ Advance - Decline: 2122-3396
Combined NYSE & NASDAQ New highs - New lows: 93-53 (compression)
WTI crude oil: 97.26, +0.42
Gold: 1,656.80, +16.30
Silver: 29.84, +0.28

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

Markets Flat Ahead of Fed, ECB, Jobs Data

Following the two-day, euro-induced-free-money rally that closed out last week, stocks to a breather on low volume Monday, ahead of three key events later in the week.

On Wednesday, following the Fed's FOMC policy meeting, it is widely expected that Bernanke and friends will have found sufficient weakness in the US economy to promote another round of QE, which will probably take the form of a furtherance of Operation Twist, plus continued handouts of low interest rate money to the major banks to keep the carry trade going.

While the anticipated Fed action has already been widely lauded and traded upon on Wall Street, their efforts up to this point have done nothing to repair the damaged economy. Rather, it's created a kind of non-virtuous cycle wherein banks get money, don't lend it and the main street economy continues to suffer.

Evidence was seen in Friday's announcement that the economy grew at a rate of just 1.5% in the second quarter and continued weakness in the jobs and real estate markets.

Meanwhile over in Euro-land, the finance crowd awaits some kind of firm action by the ECB when the leaders meet on Thursday. At issue is setting up a credit facility large enough to recapitalize Spain's ailing banking sector, most of which is already insolvent and nearing an illiquid state.

As in the US, central bank debt schemes have been largely insufficient to boost the economies of Europe; all these can-kicking efforts seem to be doing is forestalling the inevitable collapse of the Euro, which fell to $1.2258, retreating from a three-week high of $1.2390 made on Friday against the US dollar on Monday.

News out today suggests that Thursday's meeting will be more style than substance and that any bold action may be as many as five weeks away. A formal request for a bailout by Spain, in addition to the already-proposed bailout of their insolvent banks, and approval on technical issues by a German high court are still issues that will not have been resolved by the end of this week.

On Friday, the BLS reports non-farm payroll data for July, which also could throw sand on the perma-bullish fire of the central bankers.

Considering last week's big run-up, there may be a bit of "sell the news" sentiment afoot, regardless of what decisions and announcements are made by the Fed and the ECB.

Dow 13,073.01, -2.65 (0.02%)
NASDAQ 2,945.84, -12.25 (0.41%)
S&P 500 1,385.30, -0.67 (0.05%)
NYSE Composite 7,911.04, -1.13 (0.01%)
NASDAQ Volume 1,482,648,250
NYSE Volume 3,197,376,750
Combined NYSE & NASDAQ Advance - Decline: 2384-3161
Combined NYSE & NASDAQ New highs - New lows: 262-65
WTI crude oil: 89.78, -0.35
Gold: 1,619.70, +1.70
Silver: 28.03, +0.54

Why Nothing Matters Any More

We've all heard the phrase, "this is going to end badly," before, and, like a failed love affair, so too the centrally-planned economies masquerading as free markets will also surely end in tears, tatters, remorse and recrimination.

Following in the footsteps (or, as the case may be, the mouthpiece) of ECB president Mario Draghi, today, German Chancellor Angela Merkel and French President Francois Hollande issued a joint statement after a teleconference, saying they their government would "do everything to protect" the Euro.

And, with that, the markets were once again off to the races, continuing a rally that is based upon nothing more than promises to pile more debt upon the mountainous pile of unpayable sovereign obligations already in existence, create more deteriorating fiat money, continue bailing out failed financial institutions and keeping interest rates at artificially low yields.

Nothing good has come from any of these efforts thus far, except to perpetuate the status quo of financial fraud run amok without penalties for wrongdoers and the funding of political campaigns by the very same transgressors and beneficiaries of central bank largesse.

Today, the US government announced first quarter GDP grew at a rate of 1.5%, which, in normal times, would be fairly disturbing news, but, couched in the belief that the slowing economy will encourage the Federal Reserve to engender another round of quantitative easing (QE) at its meeting next week of the FOMC, the market soared like an eagle catching a thermal updraft.

The effects of all this money printing and free flow of capital into and out of banks and into government coffers to spend freely beyond their means has been effectively maintained by ultra-low interest rates offered to the world's biggest banks, the ones that were bailed out in 2008, and continue to go to the discount window for Federal Funds at 10 to 16 basis points, invest in longer-term notes and pocket the difference, known as the carry trade. It's easy street for the TBTF banks, which continue to borrow and no loan money, except, of course, to the worst creditors of them all, governments, which haven't balanced their books in decades.

Were the banks and foreign central banks to suspend lending to the US and European entities - an occurrence which has a 100% likelihood to happen at some point - the economic calamity would be unthinkable, thus, the game continues. At certain points, casualties occur, but they are patched over by bailouts or simply shoved aside, as in cases such as Madoff, MG Global and previously, Lehman Bros., Countrywide Financial, Bear Stearns or Merrill Lynch.

The losses are socialized, or, passed onto the taxpayer as it were, though if taxes were at rates commensurate to meet all government obligations and pay off the burgeoning debt load, the average paycheck would be 80-90% taxes and 10-20% take home. It would be likely that most people would stop working for companies, go into a side business of their own and not pay taxes, while larger businesses would suffer from a lack of qualified, willing labor and the whole super-structure of the global economy would grind quickly to a complete halt.

In some sense, that is already happening, and it will continue to worsen, everywhere there are unpayable debt burdens placed upon the citizenry. In Europe, the German people are already braying at the notion of higher and higher tax rates to pay for bailing out the southern states of Greece, Portugal and soon, Spain and Italy.

While the Germans have profited and prospered from fiscal and monetary discipline, the regime of Angela Merkel is rapidly fostering a growing debt burden that will force taxes higher and eventually cripple their own economy. While most of southern Europe is already in a recession and Greece, at least, a depression, Germany, being the lender of last resort, so to speak, is nearing a political breaking point, where the populace is about ready to take a stand against the free-spending policies of their government.

Merkel is tip-toeing on a high wire (a horrifying mental image), balancing her own political future against the success or failure of the Euro. Germany benefits from the declining euro because of its huge export base, so abandoning it and returning to the Deutschemark is out of the question, as the new currency would be among the strongest in the world, making German products prohibitively expense in other countries.

France, which behind Germany is the second largest economy in Europe, seems content to tax and spend to promote their socialist agenda of government handouts to everyone, shorter working hours and large, public pensions. The French people are notorious protesters, who will take to the street at even the slightest hint that any kind of public benefit will be cut, and, as they showed former president Sarkozy the door this past Spring, they will vote against any mention of austerity, a dirty word in the Gallic nation.

In America, it's the culling of the middle class that proceeds apace. Wages have been stagnant, new job creation sparse and sporadic, but price increases in food and energy, along with threats of higher taxes have all but eliminated discretionary spending and saving for growing numbers. The middle class has become a huge class of debt slaves, content to keep paying and playing along until the pensions and social security and health care monies are exhausted.

The rest of the world has other problems, though even growth countries like China, India, Brazil (together with Russia, making up the BRICs nations) are slowing down as the speculative economies strip out all wealth to the top one percent of earners and actual productive growth falters.

There is a tipping point somewhere down the road, and it's a wonder that the whole global mess hasn't completely fallen apart by now, but it does appear that those in charge of "managing" the economy can keep the plates spinning for a while longer, maybe as much as three to five years. By then, these central planners hope that entrepreneurs will have bolstered the fragile, stagnant economy back to life and that a more normalized functioning will have emerged.

It's a pipe dream built on the faulty assumption that expanded liquidity can supplant insolvency. It never has, and it won't. The end game comes from a deflationary spiral in which too little money is chasing too many goods, even in an era of expansionary monetary supply (inflation). The problem is that the money is going into the wrong hands, to those of the bankers, who hoard their cash for liquidity and speculation, as seen repeatedly in the stock market, while the middle and lower classes go begging for credit (at usurious rates), jobs, and eventually, food.

In every instance in which a reserve currency such as the US dollar was not backed by gold, silver or both, or other tangible assets as collateral for debt creation, that currency has failed and been replaced. Every time.

And this time is not different. It's just taking longer than expected.

Dow 13,075.66, +187.73 (1.46%)
NASDAQ 2,958.09, +64.84 (2.24%)
S&P 500 1,385.97, +25.95 (1.91%)
NYSE Composite 7,912.16, +157.65 (2.03%)
NASDAQ Volume 2,085,560,250
NYSE Volume 4,290,734,500
Combined NYSE & NASDAQ Advance - Decline: 4511-1073
Combined NYSE & NASDAQ New highs - New lows: 343-86
WTI crude oil: 90.13, +0.74
Gold: 1,618.00, +2.90
Silver: 27.50, +0.05

More Losses For European, US Markets; Apple Misses Big on Earnings, Revenue

As per the usual, US stocks pared much of their losses in the final fourty minutes of trading, the Dow shaving its decline in half, with the other major indices following suit.

The trend has been lower for three straight sessions, with the Dow losing somewhere in the vicinity of 100 points a day. Catalysts for the declines are various and diverse, from poor US data - the Richmond Fed manufacturing index came in at -17 on expectations of -1, the lowest level since April 2009 - concerns over the Spanish government needing a bailout, or Moody's lowering the outlooks for Germany, the Netherlands and Luxembourg to negative late Monday.

Even China got some play as their flash PMI number rose to the best level in five months, though at 49.5, still showed contraction. The blip from the Far East was seen as a positive, though more than likely, a minor one, as one month's data surely does not make a trend and data from China is widely regarded as highly unreliable.

In Europe, most of the stock indices took losses, though not as heavily as on Monday. The mood on the continent is extremely guarded, as yields on benchmark 10-year notes in Spain and Italy have hovered around or exceeded the 7% mark.

Here in the states, the 10-year yield continues to fall, as predicted by Paul Craig Roberts and other astute economists (see yesterday's post), to a record low yield of 1.39, while the 30-year bond closed at 2.46, also a record low.

Market conditions and sentiment appear to be quickly worsening, with the advance-decline line negative for three straight days and the new highs - new lows metric having reversed to negative on Monday and continuing to worsen with Tuesday's session.

Commodities were mostly lower, with the notable exception of oil, which continues to be boosted by ongoing uncertainty over Iran, though the corn and soybean futures markets were notably nixed, as slack demand seems to be trumping even the effect of the worst drought since the 1950s.

All of the data and market moves seem to be pointing toward Friday's initial reading of second quarter GDP, slated for release at 8:30 am EDT on Friday. Forecasts range from 0.3% to 1.7% growth, though estimates have been coming down from a variety of sources in recent days and third quarter and second half GDP outlooks have been routinely revised lower.

As it turns out, however, the biggest news of the day came may have come after the markets had already closed, when Apple (APPL) reported a fiscal third quarter earnings miss that sent the stock markedly lower.

From the LA Times:

The technology giant said profit rose 21% to $8.8 billion, or $9.32 per share, on revenue of $35 billion, up 22% from a year earlier. The results were less than what analysts had expected. Shares plummeted in after-hours trading, falling $34, or nearly 6%, to $566.78.

Analysts surveyed by Thomson Reuters had estimated that Apple would post earnings per share of $10.36 on revenue of $37.2 billion. A year earlier, the Cupertino, Calif., technology behemoth reported record quarterly revenue of $28.6 billion and record profit of $7.3 billion, or $7.79 a share. That was a 121% increase over its third-quarter 2010 earnings per share.

If Apple, the bellwether for all tech stocks and a major component of the S&P 500 and NASDAQ 100, cannot beat lowered expectations, then perhaps the idea that a global deflationary slowdown is well underway might finally dawn on not ony the wizards of Wall Street but the average Joe and Jane Sixpacks, who likely already have gotten the memo, having not enough income to afford an iPad or iPhone, essentially spending whatever income they have on survival items like food and fuel.

Good grief! Can it get any worse?

We already know the answer to that.

Dow 12,617.32, -104.14 (0.82%)
NASDAQ 2,862.99, -27.16 (0.94%)
S&P 500 1,338.31, -12.21 (0.90%)
NYSE Composite 7,590.61, -79.92 (1.04%)
NASDAQ Volume 1,735,519,125.00
NYSE Volume 3,853,596,750
Combined NYSE & NASDAQ Advance - Decline: 1484-4064
Combined NYSE & NASDAQ New highs - New lows: 118-210
WTI crude oil: 88.50, +0.36
Gold: 1,576.20, -1.20
Silver: 26.81, -0.23