Stocks Continue Slide through Sixth Straight Session

Another day, another decline on US stock markets.

One should not be at all surprised by the development that stocks have found the path of least resistance to be lower. After all, they were goosed the past two years by almost $2 tillion in Federal Reserve subsidies and slippery dealings by the major banks.

Once again, stocks started out near their highs of the day, and, through a choppy session, ended in a massive sell-off into the close. The NASDAQ took the brunt of the beating, never making it out of negative territory the entire day. Again, this is unsurprising, as most of the momentum stocks which drove the two-year rally are indexed on the NASDAQ.

The bigger picture involves risk of all sorts, much of which is unquantifiable, such as the level of interest in, or general terms of, the bailout of Greece and whether or not the congressional clowns can come to some agreement on lifting the debt ceiling or not. Absent reliable information on either of those issues, and adding to the fact that there's scant economic data upon which to trade, stocks took another leg down in what is fast becoming a summer of discontent.

Perhaps the government agents and Wall Street wizards should be just happy to take their lumps in money, lest the American public come after them hammer and tong. They have destroyed not only the general economy of the nation, but have misused the public trust to a point at which there no longer is any.

The path to Dow 10,000 or S&P 1000 is likely going to be paved with the corpses of the major banks, still insolvent in many regards, especially Bank of America (BAC), which hit another tw-year low today, losing 0.11 to 10.54. Wells-Fargo (WFC), JP Morgan Chase (JPM), Citigroup (C), Goldman Sachs (GS) and Morgan Stanley (MS) all took on water, though these stocks and the averages were all aided by a futile, though furious, late rally in the final fifteen minutes of trading.

Dow 12,048.48, -21.87 (0.18%)
NASDAQ 2,675.38, -26.18 (0.97%)
S&P 500 1,279.56, -5.38 (0.42%)
NYSE Composite 8,081.33, -50.34 (0.62%)

Despite the seemingly paltry losses, internals were crushed once again, and therein lies the problem with the markets. Almost everything is still overvalued and the reversal, by fear, extends to all equities. Declining issues hammered advancers, 4824-1767. On the NASDAQ, there were 22 new highs and 140 new lows, Over on the Big Board, 23 new highs, and 97 new lows, putting our totals at 45 new highs and 237 new lows, the fifth straight win for the lows, an expanding margin of difference and a sure sign the correction has further leg-stretching to do.

Volume perked up a bit from the previous two sessions, another indication that the selling pressure is intense and not about to abate.

NASDAQ Volume 2,038,875,125
NYSE Volume 4,442,987,500

Defying all logic, crude oil futures rose $1.65, to $100.74, as OPEC nations meet in Vienna, but came to no agreement on raising production quotas. It was another rough day from precious metals speculators, with gold down $6.90, to 1537.80, and silver off 17 cents, to $36.97.

Markets may get some relief from initial unemployment claims due out prior to the market open tomorrow, but counting on that is akin to betting the Cubs will make the playoffs. Not a sound bet.

Correlation Trade: Dollar Up, Stocks Down

After a roller coaster type of week, the major indices and commodities ended fairly flat, but that's how the skimmers of Wall Street make their dough: bidding prices up and selling out underneath momentum buyers. This is a fun game for them, not so nice for individual investors, but eventually all the trades will go in one direction and it won't be good for anyone except committed short sellers.

Stocks really got off to a piddling start, but accelerated mid-day, with the Dow down as much as 150 points. While the Dow rallied into the close a bit, the NASDAQ stayed down at finished at its low point of the session.

April CPI was a non-event, coming in at expectations of 0.4% gain for April. Michigan Consumer Sentiment showed a small rise, to 72.4, from 69.8 in March. Despite the steep drops on the averages, it was, all tolled, a pretty dull session. The major trade consisted of shedding stocks (risk) as the dollar advanced, closing at 75.793, up 0.60 as measured by the Dollar Index. It's become the most reliable correlation trade: dollar up, stocks down.

Dow 12,595.75, -100.17 (0.79%)
NASDAQ 2,828.47, -34.57 (1.21%)
S&P 500 1,337.77, -10.88 (0.81%)
NYSE Composite 8,371.67, -84.51 (1.00%)

Declining issues roared past advancers, 4790-1789. On the NASDAQ, the gap tightened with 97 new highs and 51 new lows. A similar situation prevailed on the NYSE with 182 new highs topping 22 new lows. Volume was back in the doldrums, signaling the beginning of the summer season, with traders taking off early and heading for the hills, the Hamptons, or Hades.

NASDAQ Volume 1,885,009,375
NYSE Volume 3,921,132,750

Commodities put in an equally lackluster performance, though most were trending lower through much of the day. WTI crude oil on the NYMEX, down most of the session, caught a bid late in the day, finishing up 68 cents, at $99.65. Gold was swamped today, losing $13.10, to $1493.80, while silver managed to eek out a small, 64 cent gain, at $35.26.

There was a lot of posturing and positioning, but no real commitment on the buy side. Sellers won the day and the week as we inch ever closer to the end of QE2.

Finally, financial stocks took the brunt of the selling, with Bank of America (BAC) down 27 cents, to 11.93, Citigroup (C) shedding 89 cents, to $41.53 despite declaring a .01 annual dividend. Apparently, investors were not impressed. JP Morgan Chase (JPM) lost 94 cents, to $43.15 and Goldman Sachs (GS) dipping 1.29 to 141.46.

Continued pressure on the banking sector is symptomatic of the sluggish economy and may portend another round of trouble for the mega-banks. Couldn't happen to a nicer bunch.

S&P Shocks Markets, Downgrades US Outlook to Negative

Us markets barely shrugged when Japan's nuclear reactors exploded, Egypt's government was overthrown, Ireland and Portugal needed bailouts and the entire nation of Libya was turned upside down in a violent civil war.

But it was something not destructive, threatening or otherwise physically damaging - a downgrade of the economic outlook from neutral to negative for the United States from ratings agency Standard & Poors (S&P) - that caught everyone's attention on Wall Street and in Washington.

The agency - the very same one which rated hundreds of mortgage-backed securities (MBS) as AAA when they clearly were not - verified what practically everyone on the planet already knew: that the USA was spending well beyond its means and that the federal government needs to fix its financial affairs in short order.

While shying away from actually downgrading the rating, the outlook downgrade comes as a kind of warning to politicians on both sides of the aisle. S&P is concerned that long-term high deficits could lead to dire consequences if not reined in soon. Concerned that Democrats and Republicans will be unable to come to terms with glaring deficits and reach a spending and revenue compromise, S&P said, "The negative outlook on our rating on the U.S. sovereign signals that we believe there is at least a one-in-three likelihood that we could lower our long-term rating on the U.S. within two years."

An actual ratings cut could impact the government spending and borrowing programs in a nyriad of ways, making new and old debt alike more expensive to service due to higher interest rates.

Of course, the United States is not just any country. It still enjoys the best rating possible AAA on long term debt and A-1+ on short term borrowings. Nonetheless, Wall Street stood up and took notice, with across-the-board selling right from the opening bell.

The Dow was down as much as 247 points early on, but managed to pull itself higher in the afternoon, shaving off 2/5ths of the decline.

Dow 12,201.59, -140.24 (1.14%)
NASDAQ 2,735.38, -29.27 (1.06%)
S&P 500 1,305.14, -14.54 (1.10%)
NYSE Composite 8,277.11, -123.20 (1.47%)

Declining issues soared over gainers, 5219-1370. New lows exceeded new highs on the NASDAQ, 50-42, and rolled over on the NYSE as well, with 30 new lows and just 22 new highs. Volume was not impressive, though overall breadth was somewhat stunning, with all sectors ending in the red, led by energy, capital goods, basic materials and financials.

The lack of volume is more ominous than it may appear at first glance, significant in that not all investors took this warning seriously and continue to not only hold stocks, but were buying in the afternoon. With the Fed's QE2 program drawing to a close in just two months time, a tough fight for certain in Washington over raising the debt ceiling and the 2012 budget and an economy still not flourishing a full two years after the banking crisis, there are more than enough potential causes for a rapid - and lasting - decline in stocks.

NASDAQ Volume 1,817,444,625
NYSE Volume 5,013,312,500

Besides the potential S&P downgrade, corporate earnings thus far have been short on results. Bank of America's miss on Friday was widely overlooked, but today after the bell, Texas Instruments (TI) also missed, and revised 2nd quarter estimates. Before the bell tomorrow, Goldman Sachs (GS) is due to announce their results for the first quarter, which, if all goes according to plan for the company that supposes to be doing "God's work," then this downdraft will be quickly forgotten and a new era of prosperity proclaimed.

That's another bet on which we're not taking sides.

Once again, commodities and the consumer were the winners of the day as crude oil slipped $2.54, to $107.12 at the NYMEX close, while gold flirted with the $1500 mark, closing the day at $1,492.90, a gain of $6.90. Silver continued to set new 31-year highs, finishing at 42.96, on a gain of 39 cents, though it was well above the $43 mark through most of the day.

In what had to be the least-appreciated news item of the day, Saudi Arabia cut its oil production by 800,000 barrels a day due to - get this - oversupply.

Now, if only somebody can explain to the millions of drivers worldwide just how that supply-demand dynamic works again maybe we can eliminate some of the obvious gouging that's gone on over the past two months. If the Saudis are cutting production due to oversupply, then oil should be more like $40 a barrel, not over $100, and gas should be a heck of a lot closer to $2.00 a gallon than it is to $4.00.

Trust nobody. It's obvious that our own government could care less about the general welfare of its own people. And for those who paid their income taxes today, too bad, because you just threw your money right down the memory hole.

What's in store from here is anybody's guess, but you can count on a number of things: the politicians will continue to bicker and fight like little girls and accomplish next to nothing; the bankers will continue to evade prosecution for their frauds and receive bigger bonuses; and the American people - sheep that they are - will not protest but will still want their iPads, food stamps and football.

Fade the Banks: BofA, JP Morgan, Citi, Goldman Sachs Under Scrutiny

We found significant deficiencies that represent not only unsafe and unsound practices, but a breakdown in way customers are treated...

That was the statement made by acting Comptroller of the Currency John Walsh in regards to the Consent Order directed at the nation's sixteen largest banks, issued by his and other regulatory agencies yesterday.

Initial reaction was that the ruling was more a wrist-slapping by the regulators, but Walsh came out in its defense, as did others, such as FDIC's Sheila Bair.

The order includes provisions for the banks to undertake a complete review of their foreclosure practices and rectify any errors that may have affected consumers negatively. Additionally, the banks are instructed to pursue a “comprehensive, independent review” of their foreclosures from 2009 and 2010, institute a system for a single contact person for each foreclosure or mortgage modification action. The agencies - which include the Federal Reserve and the Office of Thrift Supervision - will closely monitor the banks' progress, look more closely at their practices and determine appropriate fines for each firm.

These actions, apart from the voluminous litigation already begun and sure to follow, plus the conclusion of 50 state attorneys general is likely to cost the banks a good deal of time, effort and money. When all is said and done, revealing their openly fraudulent practices and procedures will have two major effects: 1) they will not be so prone to play fast and loose with mortgage money, and 2) housing loans will become even more difficult to get.

On the surface these outcomes may be more of a detriment to recovery in the housing market, but homes will at least become more affordable. Making it difficult to qualify for a loan, the cost of residential housing will fall accordingly until some balance is achieved in the market. After that, homeowners can begin going after tax assessments and "fair value" assessments which are now likely more than 40% too high in many hard-impacted communities.

While the process will be riddled with starts and stops, the long-range outcome should be more affordable housing for lower and middle class people, without onerous tax implications. we may be turning a corner after all.

One other note of interest in terms of bank-hating worldwide was Senator Carl Levin's well-directed attack on Goldman Sachs today:

The Senator says he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought collateralized debt obligations without knowing the firm was betting they would fall in value.

Levin believes that not only did Goldman Sachs' executives delude their clients and break their fiduciary trust, but also lied to congress when brought in front of the Financial Inquiry panel.

Heck, as our link confirms, even FoxNews is pushing this agenda forward, but it remains to be seen if Attorney General Eric Holder will come out of hiding and actually pursue prosecution. If not, maybe it's time to indict the AG himself, because Levin and other members of congress have rightly identified Goldman Sachs and their brethren in the "big banking" world as the criminals who caused the financial meltdown of 2008 and sank the economy.

Watch Senator Levin tear into Goldman Sachs' Daniel Sparks:



Wall Street's reaction to this background noise was all-too-typical behavior by the very same banks that have grown in size over the past 2 1/2 years: they turned a perfectly plausible market downturn into marginal gains. The Dow was down 107 points before the pimps and pumpers jacked it up to a 14 point gain by the closing bell.

As expected, in the face of bad news, the financial gamblers could only cover their tracks, put on happy faces and say "all is well." Perhaps these thieves will be singing another tune when a few of them are perp-walked from their ivory towers in full view of the public which has grown to hate them and all they stand for.

All we've seen from the likes of the biggest banks in America is denial of wrongdoing, obfuscation, outright lying, and complete, unabashed manipulation of all markets they touch - bonds, equities and commodities - not to mention the under-the-table mortgage securitization, CDO and debt swap markets.

They are the most ruthless criminals on the planet, completely without conscience, and hopefully, lawmakers are beginning to catch on to their evil ways. Corners must be turned; equity and law must prevail.

Dow 12,285.15, +14.16 (0.12%)
NASDAQ 2,760.22, -1.30 (0.05%)
S&P 500 1,314.52, +0.11 (0.01%)
NYSE Composite 8,374.16, +6.85 (0.08%)

Not to belabor the obviously-fragile nature of the markets, advancing issues outdid decliners oddly enough, 3611-2838. However, new lows overtook new highs on the NASDAQ, 50-49, but new highs remained stubbornly ahead of new lows on the NYSE, 53-23, though the margin has shrunk considerably over the past few session. Volume remained purely a function of lack of interest.

NASDAQ Volume 1,728,764,375
NYSE Volume 4,249,863,500

Perhaps in response to the continuing turmoil, or maybe because the "Sultans of Swap" were too busy shedding documents to keep a handle on them, commodities took another robust turn positive. Crude oil gained another $1.00 during the NYMEX session, to close at $108.11, but gold and silver took home the trophies. Gold rocketed to another in a series of all-time highs, gaining $16.80, to $1,472.40 and silver exploded up $1.43, to $41.66, though both were higher in foreign markets, with gold at $1475.70 and silver romping higher at $42.14 per ounce.

Perhaps, more than turning corners, financial markets are meeting their eventual end, with paper currencies under attack from the growing howls of the general public worldwide, unhappy with rising prices and stagnant wages, governments with too much power and not enough nerve, honesty or will to do right.

These explosive moves in the precious metals are not to be taken lightly. The global Ponzi scheme of fiat money is being put to a severe test and is failing badly, today's activity just another warm-up for the real fireworks coming when the US congress considers whether or not to raise the debt ceiling, something they've done 174 times before.

From the ominous sounds emanating from the Tea Party wing in the House of Representatives, these could be the final days not only for the dollar as a reserve currency, but for every form of money not backed by some tangible asset, of which gold and silver are the obvious choices.

After the bell, Google announced its results for the first quarter of 2011, and from the looks of how it was trading after hours, investors were none too pleased that they missed their earnings per share estimate by three cents.

Even though Google topped revenue expectations, the stock was down nearly 30 points in the after-hours, a decline of more than five per cent.

That does not bode well for tomorrow's opening, which of course will have as an added bonus, the earnings release of the bank everyone loves to hate, Bank of America. Friday ought to be a doozy of a day.

Sucker Rally, Part Two: Rally 'Round BP

Whatever yesterday's steep sell-off was about, today's gap-up rally was about making up lost ground, in a hurry.

The Dow Jones Industrials gapped up at the open - once again shutting out all but the insider firms - 150 points, and by 10:00 am, it was up nearly 250. This kind of quick-start rally doesn't occur in a vacuum, so most of the clueless analysts attributed the rise to explosive numbers coming out of China, saying that exports increased at a rate of 48.5% year-over-year.

Suffice it to say that nobody wanted to mention that a year ago, exports were at an absolute nadir, Chinese officials were doing their best to control riotous laid-off workers and that global trading conditions were abysmal. Some comparisons, especially those which favor the bullish case, are almost always kept out of view, as was the case today.

Concerns over the sudden revitalization of stock-buying fervor were put on the back burner for the day, allowing investors to bask in the glow of at least some temporary relief to what has been a relentless decline since the beginning of May, and that's why bear market rallies are never useful barometers of market health. This one, like all others, will be soon forgotten, for it is only speculative and quite possibly just a trading phenomenon, likely linked to options expiration only a week away.

Besides the obvious rallying around poor, misunderstood British Petroleum (BP), financial stocks also rallies, perhaps on suspicion that congressional debate on financial regulation seems to be going the way the bankers would like, toward a watered-down bill that is nothing more than cosmetic, allowing the political class to find some cover heading into the fall election cycle.

The pols have their hands in the banks' pockets and vice versa, so don't expect anything hard-hitting to come of "FinReg," despite the inclusion of Senator Blanche Lincoln's controversial derivatives proposal, which threatens to drive as much as 30% of large bank profits overseas. The bill is in the hands of the conference committee, chaired by Barney Frank, which will reconcile differences between the Senate and House versions.

So, was this the mother of all sucker rallies, or does this mark the end of the month-long decline in equities and the beginning of a new bull run?

The jury's still out, but consider, if you will, the key numbers that will tell the story in coming days. On Friday, June 4, after the non farms payroll report showed little progress in private sector employment, stocks sank to a closing low of 9931.97 on the Dow and 1064.88 on the S&P. The follow-on sell-off Monday, June 7, saw the Dow close below the previous interim low (February 8), finishing at 9816.49. The S&P likewise closed below its previous low, ending the day at 1050.47.

Bottom pierced, any chartist with rudimentary skills would have promoted the idea that further downside risk was being telegraphed. Then came Tuesday's sharp rally, Wednesday's failed rally and today's super rally, on low volume, and on suspect news from - of all places - China. To believe that strength in Chinese markets somehow translates to good news for US firms requires a requisite leap of faith, when the obvious truth was that this rally was really all about saving the prospects of BP, the incomes of one out of seven British pensioners, and keeping the world awash in crude oil (both figuratively and, in the Gulf, literally).

For the bulls, their new targets are 11,205.03 on the Dow and 1217.28 on the S&P, somewhat of a stretch from where stocks have currently settled. Even from today's lofty closing values, a rally of 11% would be needed to return to the previous highs, whereas a decline of just 3.5% would send the two main indices back below their recently-achieved bottoms.

Sideways trading leaves us in a state of suspended animation, though investors will be mulling the news from the BP oil gusher and Europe's deteriorating debt condition over the next four weeks prior to earnings season, which could be a bellwether or a Waterloo, depending on results. Chances still seem to favor the bearish case, with much of this week's trading being perceived as mere "noise."

Dow 10,172.53, +273.28 (2.76%)
NASDAQ 2,218.71, +59.86 (2.77%)
S&P 500 1,086.84, +31.15 (2.95%)
NYSE Composite 6,783.53, +223.82 (3.41%)

As expected on such a huge upside move, advancers dominated decliners, 5550-1011, though new lows maintained their edge over new highs, 120-104. That, and low volume, are very telling signals to where the market is intended.

NYSE Volume 5,718,455,000.00
NASDAQ Volume 2,023,046,625.00

Oil gained again today, picking up $1.07, to $75.45. Gold fell for the second straight day, down $7.70, to $1,220.80, with silver up 18 cents, to $18.34. Confusing variations in the commodity space lends credence to the directionless market theory and to a resumption of the bearish case in short order.

Goldman Sachs (GS) was under pressure again today as the SEC began examining another mortgage investment for potential fraud - Hudson Mezzanine - and was hit with a $1 billion lawsuit from Basis Capital, an Australian hedge fund that invested in Timberwolf, an MBS that Goldman sold in 2007. The troubles just keep mounting on the investment bank everyone loves to hate.

SEC Sues Goldman Sachs; Is the Tide Turning?

There was only one piece of news today that mattered and it was the enormous disclosure that the SEC has initiated a civil lawsuit against the leading investment bank in America: Goldman Sachs.

The case alleges fraud by Goldman Sachs in the marketing and selling of certain mortgage-backed securities selected by hedge fund Paulson & Co. Investors lost $1 billion, though Paulson, allegedly aided by Goldman Sachs, made bets (credit defaults swaps or CDS) against the securities and made $1 billion by being on the opposite side of the transaction.

Obviously, the SEC has targeted only one instance of alleged fraud in the marketing of mortgage-backed securities which consisted primarily of sub-prime mortgages, though the case may serve as a test for many more lawsuits to follow. What's apparent from the government's position is that Goldman Sachs will be brought under severe scrutiny in the arcane area of collateralized debt obligations (CDOs), at last seeking to pull back the veil of secrecy surrounding the financial instruments which eventually resulted in a massive collapse of the financial industry and the larger economy.

Should the government prevail against Goldman, the implications could be severe. It's not as though Goldman's marketers were the only Wall Street big wheels who were involved in the sale of such securities. Other banks and financial institutions may find themselves on the receiving end of the government's wrath, notably Bank of America, Morgan Stanley and Citigroup, while JP Morgan Chase may receive something of a pass. Bank of America may be culpable after its acquisition of Merrill Lynch in 2008, while Citigroup and Morgan Stanley merged their brokerage units in January, 2009 under the Smith Barney moniker.

With all of this potential litigation weighing in the background, investors scurried out of Goldman Sachs and other financial stocks en masse on Friday. Goldman Sachs (GS) closed at 160.70, down 23.57 points (12.79%). Other financial stocks suffered declines ranging between 5 and 10%, but the broader market was noticeably spooked, sending all the major indices tumbling into the red. As such, investors were granted the perfect opportunity to bail out and head to the sidelines for the time being, though these lawsuits could take years in which to unravel.

It is worth noting that today's tumble nearly wiped out all of the gains for the week. The news could not have come at a worse time, right in the midst of earnings season. The potential for billions of dollars being vaporized is once again front and center as scandalous lawsuits will almost surely put a lid on further advances and may actually serve to focus investors on other less-than-satisfactory economic news.

Dow 11,018.66, -125.91 (1.13%)
NASDAQ 2,481.26, -34.43 (1.37%)
S&P 500 1,192.13, -19.54 (1.61%)
NYSE Composite 7,584.62, -135.04 (1.75%

The extraordinary nature of todays trade was evident in the internals. Declining issues trumped advancers, 4991-1524. New highs slipped back to 464, though there were only 39 new lows. Volume was at the highest level in months, nearly double the normal volume on the NYSE alone.

NYSE Volume 9,108,087,000
NASDAQ Volume 2,878,199,000

The Goldman news spared no markets. Crude oil dropped $2.27, to $83.24. Gold was hammered, losing $23.40, to $1,136.30. Silver was battered down 76 cents, closing at $17.67 per ounce.

One can only wonder about the timing of the SEC suit and its effect on the markets. Was it mere coincidence that stocks had become ridiculously overbought in recent days or was this yet another well-timed assault on the senses by the money moguls?

Only time will tell, but this is certainly not a time to be very confident in buying stocks. Again.

Dow Pops 10,000

I am actually exhausted from playing today's breakout rally. I've been up since 4:00 am, so great was my anticipation of the day the Dow finally popped 10,000. Here's what you need to know:

The last time the Dow crossed and closed above 10000 was on December 11, 2003. By January 26, 2004, it had topped out at 10,702, finally peaking in October, 2007 above 14,000.

Prior to that, the Dow's first cross of 10,000 was March 26 of 1999, during the heat of the dot-com boom. After testing the level for 5 trading days, the index finally climbed above the mark on April 7. On January 16, 2000, it peaked at 11722.98.

The people telling you that Dow 10,000 is insignificant and that it has crossed over that point 26 times are misleading you, whether on purpose or through partial ignorance. Every time the Dow has pierced the 10,000 mark to the upside in the midst of a rally, it has continued higher, significantly.

Today's move was interesting in that it came with options expiration just 2 days away. This kept a lid on stocks through most of the session, frustrating all but the most savvy investors, who knew that option positions were being flipped with every uptick short of 10,000. By 3:00, the lid came off as players sat back, counted their profits and held overnight. Some of the biggest options payoffs come on the final days of trading, though recently, Wednesdays have been the most active. Nobody wants to be caught in an upside down position with no way out, so holding until the final expiration is only for the best or the worst options traders.

Noting that, Thursday and Friday may be a little light, but Monday, when new positions are being staked out, should be explosive. There are more earnings due out over the course of the next three weeks, with the next two the busiest. Knowing which stocks to play will be essential to profits.

Dow 10,015.86, +144.80 (1.47%)
NASDAQ 2,172.23, +32.34 (1.51%)
S&P 500 1,092.02, +18.83 (1.75%)
NYSE Composite 7,182.38, +150.51 (2.14%)

Today really was all about the Dow Jones Industrials, but only 25 of the 30 stocks were gainers. Home Depot (HD), Johnson & Johnson (JNJ), AT&T (T), Verizon (VZ) and Wal-Mart (WMT) were the only losers and their losses were light. There will always be laggards, but as long as there are leaders, the Dow Index is still relevant.

On the day, simple indicators expressed exactly what kind of session it was: BULLISH! Advancers clobbered declining issues, 4887-1640 (3-1). New highs were all over the place, 921 of them, the most in over two years. There were 94 new lows. Volume was average, which means that those still out of the market have not yet found the courage to get in the game. They have missed the most significant rally of a generation, but the best part is that they don't know it's not over yet. There are still plenty of success stories to be told in this rally. When the outside money comes in, it will just add fuel to the already overheated fire and probably cause a correction as profits are taken with enthusiasm. Market tops always occur when the late money or stupid money gets involved and this is no different.

NYSE Volume 6,248,702,000
NASDAQ Volume 2,383,078,250

Talk has been rampant about predictions for the end of the year. Dow 10,700 and 11,150 and S&P 1200 have been popular numbers thrown out by experienced, professional traders. Those sound like reasonable targets. All of the major indices made new 2009 and multi-month highs.

Commodities took a back seat to stocks. Oil gained $1.03, to $75.18. Gold fell 30 cents, to $1,064.70. Silver was up 7 cents, to $17.91. They were a side show, but still tradable on pullbacks.

The rally was led by a troika of grand news. Intel posted exceptional 3rd quarter numbers and even better guidance. JP Morgan Chase blew the lid off, beat the 52 cents the street was expecting by 30 cents. 82 cents per share! Then, at 8:30 am, retail sales showed improvement when the cash for clunkers was stripped out. Finally, consumer demand has emerged. Just n time for Christmas.

There are more companies reporting tomorrow, notable Goldman Sachs (GS) and Google (GOOG). They are both expected to have blockbuster results.

The importance of Dow 10,000 cannot be underestimated. everyone who works on Wall Street feels better tonight than they did this morning. All investors who are in the market are probably a little more at ease. We, after all are human, and the number is an emotional one. It just plain makes us feel good about the economy. Everyone on the planet can relate to the big, round number, especially following the events of the past year.

There are more gains ahead.

Happy trading!

Financials Fun or Another Sucker Rally?

With 2nd quarter earnings about to begin rolling out tomorrow, Monday's movement in the markets was something to ponder befor possibly jumping into the breach. Leading the way were financials, the very same banks that caused huge financial failures less than a year ago.

Are the banks fully rejuvenated? Can they be trusted as guardians of important capital - for mortgages, college, retirement, etc. - or have investors forgotten so soon how cavalier these same bankers were with other people's money. Sadly, I am of the camp that says they cannot be trusted. Every time financial stocks lead rallies, I see the same fraudulent faces, the same lying CEOs, none of whom have been rightfully indicted, prosecuted and jailed for their various crimes: collusion, delusion, evasion and deceit.

After falling for four straight weeks, maybe the market was prime for gains, but one must bear in mind where we are in the greater cycle. Stocks are just coming off highs, and, with the economy still struggling, one has to question the wisdom of jumping in at this particular juncture. Maybe for short term profits, this is the right move, but longer term, stocks could easily become cheaper in months ahead. If this is a short term timing rally and an in-and-out play, which is predominantly what our markets have become, this may be worthwhile, but waiting until the first few days' worth of earnings results come to the fore seems to be a more prudent position.

In any case, stocks were brought higher by the banks, which lifted every sector by at least 1%.

Dow 8,331.68, +185.16 (2.27%)
NASDAQ 1,793.21, +37.18 (2.12%)
S&P 500 901.05, +21.92 (2.49%)
NYSE Composite 5,761.37, +133.85 (2.38%)

The movement was broad based, with advancing issues beating out decliners, 4980-1400. New lows, however, maintained their edge over new highs, 79-40. Volume was nothing about which to get excited, another indication that not all hands are on board with this move. Weak volume has been an consistent feature marking the end of the rally and the beginning of the correction four weeks ago.

NYSE Volume 1,189,460,000
NASDAQ Volume 1,921,335,000

Commodities were all over the map. Those in the energy-related sector followed oil's downward draft of 20 cents, closing at $59.69. The metals were all up, with gold higher by $10.00, to $922.50, and silver up 14 cents, to $12.79. Livestock and foodstuffs finished in mixed fashion.

Banks will be in focus the rest of this week as a number of big names announce earnings. Goldman Sachs, a particularly important bellwether, reports tomorrow.

Earnings Season: Churn, Churn, Churn

Speaking to a fellow trader earlier today, I mentioned that I thought the overriding tone of trading during this earnings season would be that of selling upon announcement of earnings. To clarify, most stocks with any kind of momentum will gain prior to their earnings release date, and upon the announcement, traders would quickly scoop up profits, causing most stocks to fall.

In response, my friend said, "then you expect stocks to go down over the next few weeks."

I replied, "no, because while some stocks will be going down, others will be bid up in advance of earnings. I expect the market to go sideways."

Therein lies the rub. This is the classic trader's market, wherein quick reflexes and astute chart-monitoring will result in healthy gains for those who are eager to lock in profits. In a general sense, stocks are already somewhat overbought, though there could still be more to this rally, even though it may take weeks for it to make another forward move. The most likely outcome is that stocks will end up generally right where they are now, somewhere between (on the Dow) 7700 and 8100. The 8100 level has yet to be cracked, but there is plenty of room on the upside - all the way to 9000 - before violating the primary bearish trend.

Less seasoned investors will see any rally past 8200-8300 as signs of a new bull, but they will be sadly mistaken. The Dow in particular has plenty of room to roam before breaking into bullish ground, and the chances of that are, at this time, slim to none. Most analysts of any quality are now calling for recovery in the year 2010, so even a presaging move by the markets before July would be premature and likely to be killed off by a combination of profit-taking and outright selling.

There's almost surely to be another round of terror in the markets, caused by anything from a large company reporting truly ugly results, another nightmare from the banking sector, bad housing (or commercial property) news, more unemployment, and so on. There is truly no limit to the scenarios within which the Dow and associated markets could take another dive below 7000, the S&P back into the 750 range and so forth. Getting through April will look like a picnic in retrospect by the time June rolls around. There is still widespread uncertainty concerning everything from the government's budget deficits to bank solvency to a GM bankruptcy. Anything can happen, and it probably will.

The case today was cynical, on the whole. After Goldman Sachs (GS) announced their "outstanding" earnings a day early, the company came back with a stock offering at 123, sending shares lower at the open. It was something of an outlier and partially designed to cover the great deceit which GS played on investors. Their 1st quarter earnings covered the period of January through March, but since GS ad changed their accounting periods when they changed their designation from an investment bank to a commercial bank, they managed to leave out their $1 billion loss from December, 2008.

Seriously, it was just never reported, which is something of a first, and an evil ploy to hoodwink not only investors, but the financial media as well, who did little to uncover the fact.

In any case, Goldman set the tone out of the gate, sending the major indices out in the red, a place in which they remain until the closing bell.

Dow 7,920.18, -137.63 (1.71%)
NASDAQ 1,625.72, -27.59 (1.67%)
S&P 500 841.50, -17.23 (2.01%)
NYSE Composite 5,301.50, -108.78 (2.01%)

On the day, declining issues ran well ahead of advancing ones, 4403-2102. New lows remained in the dominant position over new highs, 76-19. Volume was better than it has been in days, owing to options expiration on Friday and a willingness, seemingly, to take profits in all quarters.

NYSE Volume 1,749,256,000
NASDAQ Volume 2,267,111,000

Over in the commodities arena, oil drooped 64 cents, hitting $49.41 at the close, the first close below $50 in over a week. Gold fell $3.80, to $892.00. Silver finished unchanged, at $12.77.

For all the excitement in the markets, it was a fairly quiet session, as stocks, once they bottomed out around the noon hour, traded in a fairly tight regimen the rest of the day. also weighing on investors were lower retail sales figures for March (-1.1%), and a sharp decline in the PPI, off 1.2% in March. Both readings were said - by the supine financial press - to be surprising, though one wonders just who was surprised that spending and prices were both dropping. It seemed to be not so much of a shock, but merely more evidence that the recession is deeper and longer than most people would like.

Speaking on the economy, both President Obama and Fed Chair Ben Bernanke, voiced concerns that while there have been signs of hope, the economic forces at work were nowhere near done doing their dirty work on the US economy. As per usual, both politicians spoke from both sides of their mouths simultaneously. One could take the entire volume of their words and just chuck it all in a waste bin, as all they do is mouth the same garbage all the time. Their speeches, and those of Treasury's Tim Geithner, are about as meaningful as seeing flowers bloom in Spring. Nothing new comes from anybody involved in the various government bailouts, rescues and assorted alphabet soup plots and plans, as they are mostly designed to cover up the most obvious bank insolvencies (B of A, Citigroup, JP Morgan Chase) and will more than likely do more harm than good.

Of the few bright spots was Dow component, Johnson & Johnson (JNJ), which reported earnings which were 0.04 ahead of Street expectations, at $1.26 per share. Other than that, of the 30 Dow components, only Citigroup (C), Intel (INTC) and General Motors (GM) finished the day with gains.

Don't look for any loud corporate noises on Wednesday, as there are no influential companies reporting. On Thursday, Biogen Idec Inc. (BIIB), Google (GOOG), JPMorgan Chase & Co. (JPM) and Nokia (NOK) will add a degree of interest as they report 1st quarter results.

Investors Play Waiting Game in Advance of Earnings

On the heels of a long holiday weekend, investors were met with a troubling scenario on Monday, as there was hardly a headline upon which to base trading. As such, stocks took an immediate dive to the negative at the opening bell and stayed down until momentum traders brought the major indices back to positive bearings after the noon hour. The Dow lagged the S&P and NYSE Composite, with the NASDAQ making a sharp turn at midday and closing close to unchanged.

Overall, there was little movement in anticipation of major earnings announcements which begin this week and will be the focus of trading through the end of the month. Of course, following the key Wells Fargo pre-announcement from Thursday, there's a good deal of excitement and anxiety building over first quarter earnings from major banks. The schedule for bank earnings goes as follows: Goldman Sachs (GS) on April 14, JP Morgan Chase (JPM) on April 16, Citigroup (C) on April 17, Bank of America (BAC) on April 20 and Wells Fargo (WFC) on April 22.

It is notable that Wells Fargo is the last to report, as their actual announcement will more than likely result in a sell-off, the company already having jumped the shark by leaking out their earnings news. The balance of this week, however, will be dominated by the three big banks reporting and it should be quite a show.

Dow 8,057.81, -25.57 (0.32%)
NASDAQ 1,653.31, +0.77 (0.05%)
S&P 500 858.73, +2.17 (0.25%)
NYSE Composite 5,410.28, +33.84 (0.63%)

As for today, it was just a low-volume grind in a fairly tight range. For the time being, volatility has been wrung out of the markets if only because stocks have once again topped out. The next move, whether to the upside or down, will be decisive though earnings reports from various companies over time could contribute to wide swings.

Advancing issues were 4644, to 2855 declining. New lows beat down new highs, 93-31, with the margin increasing again. Volume was on the low side.

NYSE Volume 1,481,100,000
NASDAQ Volume 1,832,720,000

What the market was waiting all day for - Talbot's earnings for the 4th quarter and full year of 2008 - finally appeared online after the close. If the market is seeking direction, take note: The company, trading under the symbol TLB, reported a 4th quarter adjusted net loss (period ended January 31, 2009) of $128.4 million or $2.40 per share compared to last year’s adjusted net loss of $7.1 million or $0.13 per share.

Talbot's operates more than 1000 retail apparel stores in the US, UK and Canada, so all this does is re-confirm that the retail sector is in deep trouble. Shares were down nearly 20% in after-hours trading.

Well, that's what we thought the market was awaiting. Instead, Goldman Sachs decided to report a day earlier, posting earnings of $3.39 per share, beating forecasts of $1.64 per share. Expect stocks to gap up at the open tomorrow on that surprise.

What is troubling about Goldman Sachs' earnings is that since changing their designation from an investment bank to a commercial bank, they also changed their reporting periods, which can be seen plainly in this report. [PDF]

The problem is that the company seems to have completely eviscerated the month of December, 2008, in which - according to unpublished reports - the company lost $1 billion, or $2.15 per share, which would have dramatically changed their results. Goldman's actual results - including the December loss - should have been $1.24 per share, well below the expectations. This is all just spin, and possibly accounting fraud, which, of course, will not be investigated. Shares of Goldman Sachs were lower in after-hours trading.

Oil closed down $2.19, at $50.05. Gold gained $12.50, to $895.80, while silver edged higher by 44 cents, to close at $12.77.

With companies - notably banks - jumping the gun on earnings announcements, the trading environment has gone from nearly impossible to "forget it" status. Nothing makes sense any more. Banks which needed billions of dollars just months ago are now reporting healthy profits. Is it all a sham, a grand design to raid the US treasury? We may never know, but all indications sure seem to be pointing that way.