Many Signs Beginning to Appear That Signal the End of the Bull Run

These times, trying for some, are inscrutable for others.

While a small fraction of the population can see the changes in culture, society and technology clear as day, the majority only gets a grasp of the situation when the changes have taken hold and new trends already developed.

We are currently in a period of great change. Two years from today, one will not recognize America. Other countries will undergo massive upheavals. It is already underway.

Look around. The kinds of people - average, middle class folks - you used to see on a regular basis are gone, replaced by walking zombies on food stamps. Get used to it. The welfare-police state is upon us. Alternately, the people who have seen this coming are preparing to prosper. It will get worse before it improves, but, when the current power structure and domination of mega-corporations ultimately fails, small businesses, which have been under the thumb from competition from larger rivals and government regulations gone wild, will emerge, grow and prosper. It's just a matter of time.

As for today's roller-coaster on Wall Street, the movements were up, down, up, with the Dow closing at the mid-point of its 62-point high of the day and the -142-point lows, but still in the red. The S&P and NASDAQ finished with gains, though small.

Reporting prior to the opening bell, Johnson & Johnson (JNJ) reported better-than-expected earnings, but finished the day lower on poor guidance. A similar scenario played out for insurance giant, Travelers (TRV), and cell carrier, Verizon (VZ).

Following the trading close, IBM reported an earnings beat (6.13 ex-items vs. 5.99 est.), but a huge miss on revenues. Analysts were looking for $28.25 billion and got only $27.70 billion.

Sadly, for Big Blue, they are trading at roughly an 11 P/E multiple. The company is a dinosaur and headed for extinction, though that reality is still a way off.

Another slow-footed beast, Texas Instruments (TXN) reported 0.46 per share on revenue of $3.03 billion. Both of these tech behemoths were trading lower in after-hours, with IBM down nearly three percent. Dead money. It's what's not for dinner.

Among the more obvious signs that change is permanent and the bull market in stocks is coming ever closer to a crashing climax:

• Sears, JC Penny and Target.
• Analyst on CNBC says stocks will fall 10%, then fumbles targets of 16,000 on the Dow and 1800 on the S&P. Basic math: FAIL.
• Chris Christie
• Hillary
• Mohamed El-Erian steps down as Pimco CEO
• Another former Pimco exec, Neel Kashkari announces he is running for governor of California.
• Complaints that the Dow is down because some stocks are priced too high. (At least there's a solution for that.)

More are certain to follow.

DOW 16,414.44, -44.12 (-0.27%)
NASDAQ 4,225.76, +28.18 (+0.67%)
S&P 1,843.80, +5.10 (+0.28%)
10-Yr Note 99.30, +0.18 (+0.18%) Yield: 2.83%
NASDAQ Volume 1.91 Bil
NYSE Volume 3.75 Bil
Combined NYSE & NASDAQ Advance - Decline: 3649-2079
Combined NYSE & NASDAQ New highs - New lows: 466-36
WTI crude oil: 94.99, +0.62
Gold: 1,241.80, -10.10
Silver: 19.87, -0.434
Corn: 425.00, +1.00

Dwindling Gains and Is OPEC Friendly?

After barely surpassing the magical 14,000 mark last week, the Dow Jones Industrials struggled to get close again on Money Monday, but close was all they could do. The blue chip index got as close as 27 points from the mark, but that was all, and the index closed some 30 points below that level.

Dow 13,943.42 +92.34; NASDAQ 2,690.58 +2.98; S&P 500 1,545.90 +11.80; NYSE Composite 10,121.58 +41.65

While the Dow and S&P were up handily, the NASDAQ didn't fare quite so well, rising just less than 3 points on the session.

Earnings were still the driver, with Merck (MRK) and Schering-Plough (SGP) getting off first thing in the morning, prior to the open.

• Merck (MRK) said second-quarter net income rose to $1.68 billion, or 77 cents a share, from $1.5 billion, or 69 cents a share, a year earlier. Excluding restructuring and other charges, official earnings rose to 82 cents a share from 73 cents a share a year ago, exceeding the widely-held forecast of 72 cents per share. Shares of Merck soared on the news, up 3.31 to 52.33.


• Schering-Plough (SGP): Net income climbed to $517 million, or 34 cents per share, after preferred dividends for the quarter ended June 30 from $237 million, or 16 cents per share, a year ago. The stock lost 19 cents, closing the session at 31.30.


• For Dick Cheney lovers (and who doesn't love Dick?), Halliburton (HAL) reported net income of $1.53 billion, or $1.62 a share, up from $591 million, or 55 cents, a year earlier. The most recent quarter's results include a gain of $933 million relating to the KBR split. Analysts were only looking for 56 cents, so the stock made a new 52-week high during the trading session before closing up 1.17 at $37.74.


• After the close, American Express (AXP) reported second quarter net income for the quarter also totaled $1.1 billion, up 12 percent from $945 million a year ago, and 0.88 per share, up 16 percent from 0.76. Analysts were seeking 0.86 and their solid quarter should help stocks on Tuesday.


• Texas Instruments (TXN) reported revenue of $3.42 billion for the second quarter of 2007. Earnings per share (EPS) were $0.42, down from 0.47 in the year-ago period. The results were in line with expectations, but the results will do little to excite tech investors.

Decliners actually led advancing issues by a narrow ratio of roughly 16-15, while new highs narrowly beat new lows, 327-286. These numbers are in line with our own expectations that this earnings season is not as robust as Wall Street might like. With a preliminary reading on 2nd quarter GDP due out on Friday, this week could determine direction for the remainder of the summer, and it's not looking particularly encouraging.

Who's the best friend of the American motorist? Would you believe OPEC President and UAE Energy Minister Mohammed al-Hamli? How about Hasan Qabazard?

Concerned over high prices, al-Hamli said that the world economy was still expanding, despite the exorbitant price for crude. Analysts saw his comment as indicative that OPEC may announce a supply increase at their September meeting.

Qabazard, head of OPEC's global research division, stated separately that a price of between $60 and $65 per barrel would be advantageous for both producers and consumers.

Light crude settled 90 cents lower at $74.89 a barrel on the New York Mercantile Exchange. Kudos to our friends in the Arabian world! They actually may be more concerned - and effective - about lowering gas prices than our very own Congress or President. Ya gotta have friends...

Meanwhile, the rally in gold and silver was cut short, with both falling marginally on Monday.

With techs showing some weakness today and after-hours and readings on existing and new home sales due Wednesday and Thursday, respectively, Tuesday may be a good time to exit positions if the market doesn't respond well by mid-day.

Tomorrow's earnings calendar is reasonably heavy, with reports due from Amazon.com (AMZN), AT&T (T), DuPont (DD), Eli Lilly (LLY), JetBlue Airways (JBLU), McDonald's (MCD), Occidental Petroleum (OXY), PepsiCo (PEP), UPS (UPS), United States Steel (X), and many, many others.