Stocks Enter Fourth Quarter With A Bang, NASDAQ Fades To Red, Oil Rallies

At the open, on the first day of trading in the fourth quarter, stocks powered ahead, posting massive gains on the back of President Trump's successful renegotiation of the NAFTA treaty with Mexico and Canada.

It was a giddy start to October, generally a month with plenty of volatility, due partially to funds which tend to close out their books prior to November, short and long term rules of capital gains taxation, and sometimes explosive conditions in the political realm prior to November elections.

On the trade Monday, the divergence pattern which has persisted for more than a year now, appeared again, as the NASDAQ sold off while the Dow and S&P held onto gains. This divergence of mainstream vs. largely tech stocks has been confounding to index and passive investors, as the old world and new have often traded in opposite directions. The solution has been to own some of both sides, with Dow and dividend-paying stocks on one side and speculative, tech stocks on the other.

In such a case, Monday's moves were a win for the old school, as the Dow powered ahead while the NASDAQ soured during the day. Over the long term, the two varieties of stocks have moved up in tandem, producing quality gains this year.

While stocks were hot and bonds stable, the big move of the day was in the oil field, with WTI crude futures up sharply, above 75.50 into the close. The higher price is possibly a reflection of easing of concerns over trade wars, with the new North American agreement at the forefront. In addition, coming sanctions on Iran - which begin on November 4 - are expected to crimp supply. Crude prices are currently trending at four-year highs. If the condition persists, high prices at the pump for consumers could hurt holiday sales, with the big shopping season less than two months ahead.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90

At the Close, Monday, October 1, 2018:
Dow Jones Industrial Average: 26,651.21, +192.90 (+0.73%)
NASDAQ: 8,037.30, -9.05 (-0.11%)
S&P 500: 2,924.59, +10.61 (+0.36%)
NYSE Composite: 13,125.35, +42.83 (+0.33%)

Optimism Can Be Good or Bad

Americans are an optimistic lot. Nothing wrong with that, as long as some of the optimistic sentiment is grounded in reality. There's a big difference between wishing and hoping for some desired result that may not have a good chance of happening and confidence based on experience and factual data.

Overnight, conditions in Japan took a turn for the worse as another reactor at the damaged Fukushima Daiichi nuclear facility about 100 miles North of Tokyo suffered an explosion. Japanese officials tried to appear calm, but the fear and panic on their faces was not easy to hide. Reactor #2 at the plant incurred a violent explosion that reportedly damaged part of the containment vessel which holds the unstable rods of highly-charged uranium.

Shortly after that blast, a fire in reactor #4 was reported to have occurred in the pools holding spent fuel rods, also highly toxic and radioactive. Reactors #2 and #3 had already been damaged by xplosions in the aftermath of the 9.0 earthquake and tsunami which hit the island nation on Friday.

The Japanese stock market, the NIKKEI 225, suffered a substantial loss of nearly 11% before trading was halted. Other Asian markets took losses as well, and European markets were down more than 2% when stocks opened in New York.

The drop on the open was a stark and panic-stricken response to what appeared to be possible meltdown in the #2 reactor and spreading risk of contamination to a large area of Japan. A radius of 20 kilometers (12 miles) was evacuated and another in another area further out - to 30 kilometers - residents were told to stay inside due to increased risk of exposure to radioactive elements in the air.

Most of the news occurred during the night for Americans, so there was a bit of unease at the open. The Dow fell 310 points in the opening minutes of the session, with the other major indices taking similar falls.

But, as it turns out, that was the worst of it for US stocks, which rallied in a diagonal path all day as no new news came from Japan. While traders put their most optimistic attitude front and center, the conditions in Japan are still very much in a state of flux. For now, most of the damage has been contained, but the risk of complete meltdown of any one of the three badly-damaged reactors is still prevalent, which is why the attitude of the American traders and investors may be a bit premature.

Besides the nuclear plant situation, conditions on about a third of the main island remain challenging and desperate. Aid is only now reaching some of the victims, the death toll continues to mount and reconstruction is still weeks and months from even beginning. The scope of the devastation is being underplayed by American media. This is a disaster that will play out over months and years, not days and weeks.

The major indices still suffered substantial losses, though they easily could have been worse. The intra-day drops of the past two days have broken through support areas - areas that will be retested before any hint of a rally occurs.

Dow 11,855.42, -137.74 (1.15%)
NASDAQ 2,667.33, -33.64 (1.25%)
S&P 500 1,281.87, -14.52 (1.12%)
NYSE Composite 8,092.11, -101.85 (1.24%)

Declining issues slaughtered advancers, 5101-1536. There were 23 new highs on the NASDAQ, but those were overshadowed by 134 new lows. On the NYSE, only 29 stocks hit new highs, while 77 made new lows. This was the 4th consecutive day of new lows beating new highs on the NASDAQ and the second in the last four for the NYSE.

From a technical perspective, the high/low readings are beginning to develop into a trend, which, if confirmed by further continuation, will produce one of the strongest directional indicators to be found. The divergence of new highs and new lows normally becomes a long trm trend, lasting anywhere from six months to more than two years as it is a primary trend indicator. While there are no hard and fast rules surrounding that particular metric, any change lasting more than a week in duration should be confirmation of the new direction of the markets, in this case, down.

What is occurring inside the US markets is very much the result of too much money in the system. Today's action in global markets was a liquidity-driven event, as assets of all nature were liquidated in favor of the relative safety of cash. Since the Federal Reserve has been pumping money out at an unprecedented rate, today's sudden drop and subsequent rally has all the characteristics of a flooded market with an unstable or unreliable base.

It's very much the same as an old car that has trouble starting and running. A jump may get the batteries to deliver enough juice to get it rolling, but problems inside the engine cause it to stall out again. Fixes are short-term, before a mechanic says the engine needs a complete overhaul.

That is precisely the situation in US markets. The issues coming from Japan are masking real, structural problems below and the daily new highs vs. new lows on the NASDAQ are flashing warning lights that many are ignoring at the peril of their capital.

Volume was extremely high today as well, another bearish indication.

NASDAQ Volume 2,371,639,000
NYSE Volume 5,944,351,500

What made matters even more convincing that the drops in global markets were driven by a rush for liquidity were evident in commodities. WTI crude oil futures were absolutely hammered, losing $4.01, to $97.18. We can only hope that the world-wide community can see the oil market for what it really is - bloated with excessive supply and wildly overpriced as compared to real economic conditions - and continue selling it off until balance is restored at around the $75-85 per barrel level.

Gold was hit hard as investors raced into cash positions, losing $32.10 on the day, to 1,392.80, but down much more in earlier trading. Silver also took a substantial hit, off $1.72, to $34.12.

Once there is some clarity to Japan's situation, the precious metals should continue their interrupted rally, or, at the worst, outperform stocks in a big way.

There's still far too much uncertainty in the world to be fooling with paper assets unless you're a skilled day-trader who can afford to take occasional large losses. For the rest of us, the safety and security of gold and/or silver are second to none.

Oil Surpasses $91/Barrel; Otherwise, a Whole Lotta Nothing

The major story today was in commodities, since equities were witness to the slowest trading day of the year. Oil spiked above $91/barrel as gold and silver slid, though not by much. A slew of mostly inconclusive economic data failed to move markets as traders peeled away for an early start to the holidays. US equity markets are closed on December 24.


Dow 11,573.49, +14.00 (0.12%)
NASDAQ 2,665.60, -5.88 (0.22%)
S&P 500 1,256.77, -2.07 (0.16%)
NYSE Composite 7,925.36, -6.40 (0.08%)

Decliners beat gainers, 3464-2990. The NASDAQ saw 127 new highs and 14 new lows. There were 146 new highs on the NYSE, to just 11 new lows.

NASDAQ Volume 1,272,585,375.00
NYSE Volume 2,831,742,000

February crude oil futures on the NYMEX spiked $1.03, to $91.51, just in time to raise gas prices on one of the busiest travel weekends of the winter. Gold fell $6.90, to $1,380.50, while silver shed 6 cents, to $29.33. If anything, the precious metals are screaming "buy, buy, buy" at the tops of their lungs. Gold, silver, platinum and palladium have stalled out at elevated levels and are consolidating.

In addition to oil over $90/barrel a death stroke for any kind of economic recovery, the precious metals once more appear to be in a very sweet spot, within percentage points of recent highs, and in the case of gold, an all-time high. They could explode to the upside without any advance notice from their current plateaus. If oil remains persistently above $90 per barrel, watch the PMs advance quickly.

That's all there is. Stocks are a fool's game and fools and their money are soon parted, as the old saw suggests. Gold, silver, arable land, collectibles and rarities and tools of trades are the only safe investments (yes, and canned foods).

Merry Christmas!

Global Markets Under Severe Pressure; Stocks Pounded

The most common term being tossed around Wall Street and other financial capitols the past few days has been "de-risking," (which isn't even a real word), or use of the term, "taking off risk," which implies, correctly, that investing in stocks is generally risky business. That's why the game used to be reserved for wealthy, astute investors with money to spare, though today, the market is comprised of everybody from rich company CEOs to the average cabbie or retail worker, through mutual funds, 401k plans, options, hedges and other schemes that serve to make an already risky proposition even more so.

It doesn't take a Gordon Gecko or even a Warren Buffet to understand that when major investments firms are "taking off risk," i.e., selling stock and/or buying protection via puts or covered calls, that the average Joe or Jane should be doing precisely the same. If the big boys are scared, there's usually a very good reason (of which nobody will speak) to get out of the way, and today was a classic example of just how risky investing in stocks can be.

Days like today, and, incidentally, the past two weeks or trading, are precisely what your broker, financial planner or CNBC doesn't want you to know about. Profits can be gone in a flash - a day, a week - like tossing hard-earned money down a sink-hole. The analysts call these kinds of sell-offs "liquidity plays" or "wealth preservation," when all along anyone with half a brain screwed on properly knows that its just part of the game.

The blog you are reading, Money Daily, has been warning for weeks and months that the recovery in the US was artificial and not long-lasting. The airwaves are full of blame for congress and fear over the intricacies over proposed financial regulation, but the truth of the matter is that the financial collapse which began in August 2007, accelerated into the Fall of 2008 and the Winter of 2009, was never really resolved. Financial firms such as Bank of America, Citigroup and Wells Fargo were not liquidated as they should have been, but bailed out by government fiat, using taxpayer dollars to fund the excesses of a banking system gone wild.

Now, those problems are bubbling up under the surface, and, akin to an actual volcano, are about to spew the flotsam of mal-investment all over the markets. Stocks are wickedly overvalued, the US economy is in immediate danger of re-implosion and many parts of he global system, especially Europe, are in worse shape, so get ready for Financial Armageddon Part II, which was correctly forecast here for months and yesterday identified as the breaking point, when the number of daily new lows shot past the corresponding number of new highs, a trend which accelerated today.

All of the major indices closed the session by crashing through their respective 200-day moving averages, and all are in negative territory for the year. All are also off by more than 10% from their recent highs, the technical definition of a correction, though that small tidbit is the least of what's on people's minds. Where the slide may stop has become an open question.

Adding to the myriad of global problems besetting the markets was today's announcement that 471,000 people filed initial unemployment claims in the most recent week. The number of people seeking unemployment benefits has been growing recently, adding to the "double dip" argument, which now seems to have been the correct call after all.

Dow 10,068.01, -376.36 (3.60%)
NASDAQ 2,204.01, -94.36 (4.11%)
S&P 500 1,071.59, -43.46 (3.90%)
NYSE Composite 6,653.00, -274.21 (3.96%)

Not only was there a dearth of buyers in the marketplace, but all the major indices closed at or near their lows of the day and trading volume was spectacular as well. Advancing issues were completely overwhelmed by decliners, 5162-561; new lows superseded new highs, 312-77. The rout is on, and today's action was only the first or second round. The full force of deflation has yet to be fully comprehended or felt by market participants, though the selling in the oil futures should have provided some indication of what's to come, if the stock moves weren't already enough of an indication.

NYSE Volume 9,629,935,000
NASDAQ Volume 3,258,398,750

Crude oil tumbled to fresh, 10-month lows, as the June futures contracted expired and traders were bolting from it like it was the plague. Crude dropped $1.96, to $68.01, though the contract traded as low as the $65 range. Gold slipped $4.80, to $1,187.80, and silver fell another 40 cents, to $17.69, as investors scrambled into cash positions.

There isn't much more to add to today's monstrosity other than it was entirely expected and astute individuals should be already fully in cash or equivalents, tools of trades or illiquid assets of tangible value because this is only the beginning of what may turn out to be a final reckoning for the likes of zombie banks such as Bank of America, Citigroup and Wells Fargo.

Traders Book Profits; Markets Take a Dip

Contrary to what I posted yesterday about inevitability and the lack thereof in the stock market, investors (many of whom read my blog and no doubt wish to prove me wrong) did what prudence would dictate and booked some profits.

So many profits were booked, in fact, that the selling sparked a mini-panic, sending the major indices down by roughly 2% at the worst of the trading. There's no indication as to what exactly caused all the selling, but it began to occur right after 10:00 am and the worst of it was over by noon, so it looked to be pretty organized, likely by the usual culprits in all this, the Goldman Sachs and Citigroups and JP Morgans.

The brokerages and banks have to book profits, and sending the markets down 2% on volume is nothing to really get excited about. It happens all the time, in bull markets as well as in bears, and there was nothing unusual about this except the overall timing. Market pundits have been calling for this kind of pullback for weeks, so today being the first day of September, it was ripe for the self-fulfilling prophecy trade.

And, while volume was significantly higher, it was still not so extreme as to cause alarm. In fact, large-scale selling of positions that, prior to today, were considered solid, is nothing more than an invitation to buy more because the bull market is really just kicking into a secondary phase in which wild gyrations in both directions will be evident, with the overall result being a slight increase on the indices at the end of each month or quarter.

This one-day event should not cause anyone to second-guess themselves or their positions, except to maybe take a little off the table. Stocks are for the long run, and this is a short-term move. While there's some concern that we may be headed for a "double-dip, " the data doesn't suggest it and the markets won't tolerate any unjustified corrections. September is an odd month, coming at the end of summer and just prior to third quarter earnings. It's essential to stay very focused and not be swayed by short-term thinking as it may all prove to be wrongly-directed.

Dow 9,310.60, -185.68 (1.96%)
NASDAQ 1,968.89, -40.17 (2.00%)
S&P 500 998.04, -22.58 (2.21%)
NYSE Composite 6,487.81, -155.43 (2.34%)

The internals confirmed what was already obvious. Decliners led advancers by a wide margin, 5218-1283, but it is interesting to note that there are still a good number more new highs being posted - even today - than new lows. New highs took the edge once again, 123-48. There were more new highs and fewer new lows than yesterday, which may supply some insight into this little bout of selling, notably, that there were still buyers bidding up the high fliers while not unloading the bottom-feeders. Looks and smells like garden variety profit taking according to those figures. Volume, as noted, was among the top ten highest of the year, but hardly unusual.

NYSE Volume 7,914,128,500
NASDAQ Volume 2,727,714,500

Commodities took the brunt of the selling, mostly those in the energy-related sector. Crude oil for October delivery was thumped again, down $1.91, to $68.05. Natural gas, for which there is an abundance of supply, was smashed lower again, down 16 cents to $2.82. The combination of lower oil, gasoline, heating oil and natural gas has to be seen as a positive for the consumer. Even though Wall Street may not initially appreciate the ramifications of lower energy prices, the gain in purchasing power is to everyone's advantage. Instead of plowing more and more money into non-renewable expenses, consumers, if energy prices continue lower into the winter, will have more discretionary income and spending power. Leading into the final months of 2009, the benefits of a stronger consumer are obvious.

The metals were the only sector showing any gains on the day. Gold added $3.00, gaining to $956.50. Silver was up 14 cents, to $15.06. The silver closing price was the highest since June 11 and continues to indicate higher prices for silver in coming months. Aside from its collectible and intrinsic value, silver enjoys more industrial use than gold, and supply is being strained. If economies worldwide advance, silver could top the $20 it saw in 2008.

Today's trading was expected and hardly a blip on the worldwide equity radar screen. Unless there is significant follow-through Wednesday through Friday, it will be seen as profit-taking and nothing more. If Wednesday's private employment figures from ADP and other data are positive, as today's ISM report was, then the market is taking off on its own tangent and presaging a potential pitfall in months ahead for the US and world economies.

Nothing will be set into stone until the government's non-farm payroll report for August hits the wires on Friday. This is a data-heavy week which bears close scrutiny and an iron will.

Was Friday the Top?

If you're prone to watching the financial news networks - warning, doing so may be harmful to your portfolio - Tuesday must have been like living in a giant echo chamber. Everyone on the air was screaming "sell, sell, sell," neatly flowing into the dwnward trend of the market, for the second straight day.

Anyone who pays attention to the talking heads on CNBC or elsewhere probably noticed that the mood had shifted dramatically from the effusive optimism on Friday to the terrified pessimism on Tuesday. The reasons for the sudden change of heart are manifold and diverse, but the overriding themes were that markets had run too far, too fast, and that the banking sector was being mercilessly pounded.

The crazies on TV are probably not so much in tune with the inner workings of the market as say, your average cat or dog. The downturns over the past week have been generally mild, and today's was nothing really different. Investors were taking profits at the end of a particularly solid earnings season came and went. There's nothing obscene or mysterious about taking some money off the table. In fact, it's rather prudent, sound and eventually productive for the markets. Any money coming out of stocks today will likely go back in within weeks. Traders, being driven alternately by fear and greed, won't sit idle for long, especially if stocks rebound quickly, though a prolonged period of sideways movement cannot be ruled out altogether. By the start of football season, in about 3 weeks, stocks won't be much changed from current levels.

Another consideration is that the financials, which have largely led the most recent one-month rally, are more than a little overbought. Remember, it was less than a year ago that the largest banking institutions in the world were about to implode from various malinvestments and poor money management. Faith in these same companies is fickle and thinly-based. A cyclical movement away from financial stocks and into more fundamental companies like industrials, key services or raw materials makes more sense than an abrupt end to the rally.

Dow 9,241.45, -96.50 (1.03%)
Nasdaq 1,969.73, -22.51 (1.13%)
S&P 500 994.35, -12.75 (1.27%)
NYSE Composite 6,463.62, -86.43 (1.32%)

On top of the aforementioned rationales for the rally not really being over, the lack of volume on Tuesday was really the most telling signal that not everyone was on the CNBC selling bandwagon. To say that the pace of trading was slow would be putting it lightly. Stocks were absolutely crawling off the ticker. There was no sign of the usual rush for the exits that would normally accompany a major sell-off. Losers beat gainers, by a substantial margin, 4682-1745. New highs maintained their edge over new lows, 108-47. The gap between the new highs and lows has narrowed, but nothing, not even our most consistent indicator of market strength or the lack thereof, moves in straight lines.

NYSE Volume 1,325,736,000
Nasdaq Volume 1,975,425,000

Crude oil futures finally cracked down below $70/barrel, losing $1.15 on the day, to $69.45. Gold gained 70 cents, to $947.60, while silver lost a penny to $14.35. Oil prices are likely to be further influenced by Wednesday's weekly inventory report. They continue to defy logic, gravity and natural supply-demand constraints. Oil should be selling for about $45/barrel because there's an absolute oversupply, slack demand and no natural disasters disruptive of supply.

One final caveat on the trading of Tuesday. Some of this can surely be attributed to fear of the Fed, which concludes a two-day meeting Wednesday with the release of their rate statement, which undoubtedly will be unchanged at 0-.25%. The kicker is whether the statement will be rife with discouraging commentary or filled with more hopeful - and helpful - statements. It's likely to be a little bit of both, after which the markets can get back to evaluating stocks instead of musing over macroeconomics.

Dull Trading with Minimal New Flows

Considering what the US economy has been through the past 2 years, maybe a little break in the action now and then is a welcome relief. The considerable slowing of news flows over the past few weeks have truncated trading volumes in US equity markets by as much as 40% in recent days.

There were absolutely no economic reports on which to hang a trade on Friday.

Volume was quite a bit healthier due to a quadruple witching condition which produced a touch of volatility and a good deal more trading activity than has been the norm of recent days. It was another split session for stocks, the third in as many days, which is likely a symptom of the general insecurity and lack of direction which has plagued the markets for two weeks running.

The general direction is down, but people are far from convinced. Meanwhile, many of the biggest players have already headed for vacation spots and have money parked in either defensive positions or fixed investment vehicles.

This was, however, the worst week for the major indices since the week ended May 15 this year. The Dow surrendered 260 points, the S&P gave back 25 points, the NASDAQ shed 31 points, and the NYSE Composite lost 214 points.

Dow 8,539.43, -16.17 (0.19%)
NASDAQ 1,827.47, +19.75 (1.09%)
S&P 500 921.19, +2.82 (0.31%)
NYSE Composite 5,934.05, +27.85 (0.47%)

For the day, advancers finished far ahead of decliners, 3854-2487. New lows narrowly led new highs, 56-55. It was the 6th straight session marking the lows above the highs, though the margin continued to deteriorate over the past 3 sessions.

NYSE Volume 2,127,423,000
NASDAQ Volume 2,954,731,000

Finally, the speculators eased off their ridiculous bid on crude oil, sending it to steep losses, down $1.82, to $69.55. Perhaps this is a sign of a topping point in the seasonal bid. With no real demand rationale to push prices higher, maybe the speculators thought better of their positions and see an end to the over-hyped, and over-extended, trade.

Gold gained $1.60, to $936.20; silver went the other way, down 4 cents, to $14.20.

There is scant economic news next week as the end of the second quarter approaches. After a blank Monday, figures for Existing Home Sales are released on Tuesday, with New Home Sales on Wednesday along with Durable Goods Orders and Crude Inventories. Wednesday is also slated for a rate decision by the Fed's FOMC, so trading should be less than robust until 2:15 in the afternoon, in anticipation of what is surely to be a "no change" call. Regardless, many market participants will hang breathlessly on every word and make trades according to the whims and innuendo of the FOMC.

Markets really ought to begin churning a little bit just before the 4th of July weekend, because right after that, companies will be reporting 2nd quarter earnings, so there will be some fur flying. Until then, investors are either getting out of the way or just staying put, waiting for another seminal trading moment. That next moment may come when the Dow breaches 8000, probably within a month's time.

The Strangest Rally of All Time

It would be difficult, if not impossible, to describe the absurdity of the current rally in equities in terms that would do it justice. Mere mortals stand in awe of the magnificence, the enormity, and the one-sidedness of the US stock markets since March 9, 2009, until today... and probably beyond.

To try to offer some perspective, the S&P 500 closed today at 94xx, from the March 9 low of 676.53. That is a gain of 39.6% over a span of 57 sessions - 33 up, 24 down. Obviously, the days in which the index recorded gains, those were far superior in size than the days with losses. How well this has been orchestrated would make celebrated composer Leonard Bernstein blush.

Today's gains marked the 12th time during this span that the S&P has been up more than 20 points. By contrast, the index declined by that amount or more only 4 times through the same period. There has been no pullback or correction, as is almost always the case in rallies, no matter what the conditions or the degree of positive sentiment. This rally, unlike all others, has been nearly straight up, without any hint of a respite.

The kicker is that the S&P 500 index, should one like to apply Dow theory to it, should now be considered a PRIMARY BULL market, having successfully reversed the primary trend by topping the previous interim high of 934.70, posted at the close on January 6 of this year. That was off the low of November 20, 2008, of 752.44, and prior to the subsequent low of 676.53 (March 9, 2009). If one follows only the S&P 500, chartists would have to agree that we are now - without a doubt - in a bull market.

As an offset to that queer finding, the actual Dow Jones Industrial Index, upon which Dow Theory is based, still has room to run before breaking the primary - bearish - trend. The Dow would have to reach 9034.69, which it did on January 2, 2009, before declaring a new primary Bull market. The transportation index would also have to confirm, and, since those two events have yet to occur, one can safely assume that the current rally is indeed of the bear market variety, albeit quickly closing ground on fully debunking that data set.

All of this has occurred in an environment of growing, near-record unemployment, continuing declines in the median price of housing, a handful of Fed and Treasury initiatives to stimulate the economy, and the bankruptcies of Chrysler and General Motors, the latter occurring today and being the largest bankruptcy in the history of the United States.

While the Fed floods the world with newly-printed currency, commodities have also gained - not unexpected - as the dollar has declined against other currencies. All of this adds up to a great deal of uncertainty, a condition usually associated with market declines, not rapid, non-stop gains.

I, among others, have called the "top" incorrectly more times than we'd like to admit. There seems to be no stopping the engine of Wall Street, despite stocks on the S&P 500 having cut dividend returns to record lows while price-earning ratios have soared to levels normally associated with the end of long bull markets. The only way this rally continues is if the market is being manipulated, and that is the only conclusion which I can make at this point. There simply is not enough evidence that the economy has returned to a growth posture, nor any indication that stocks are actually being valued correctly, that is, discounting future growth. Most of the large gainers are actually showing a negative trend of declining earnings, which, in more normal times, would spark selling, not buying.

Dow 8,721.44, +221.11 (2.60%)
NASDAQ 1,828.68, +54.35 (3.06%)
S&P 500 942.87, +23.73 (2.58%)
NYSE Composite 6,169.0698, +165.00 (2.75%)

Advancing issues crushed decliners, 5159-1405. The biggest story of the day has to be the rollover of new highs finally surpassing new lows, 130-105. This is a reversal of a trend that has held in place every day except five or six since September, 2007. This is either the starting point of another bull run, which could dwarf even the current run-up, or a signal to sell everything as quickly as possible. The rally has pulled even the worst companies up by the bootstraps.

Volume on the day was higher than levels experienced last week, for no known reason, though not significantly.

NYSE Volume 1,500,474,000
NASDAQ Volume 2,647,576,000

Commodities in the energy area went ballistic. Crude oil gained $2.27, to $68.58, the highest point since November 4, 2008, seven months ago. Unfortunately, for those of us who still have to use gasoline to power our personal transportation devices, back in November of last year, prices were declining. They are now galloping ahead. Natural gas gained a whopping 41 cents, to $4.25, odd, because natural gas is primarily used for heating homes, and we are heading into warm summer months. The rise in natural gas was more than 11% in just one day.

Just as oddly, the metals responded in less-than-enthusiastic fashion. Gold actually fell 30 cents, to settle at $980.00. Silver gained 13 cents to finish at $15.74 per ounce in New York.

There were more "green shoots" of economic data, such as a 0.5% rise in personal income, a smaller-than-expected decline in personal spending and an 0.8% increase in April construction spending. Of course, those minor positives should have been more than offset by the largest bankruptcy in US history, the coming shutdown of 12-15 plants, job losses between autoworkers and dealers of more than 100,000, and a general malaise in manufacturing.

It just doesn't seem right that on the death of General Motors, Wall Street would throw a party.

Wall Street Still Waiting on Washington

Markets were mildly optimistic on Wednesday, awaiting word from Washington on the proposed $800 billion stimulus bill in Senate-House negotiations, which appeared close to a deal.

Having investors focus on anything other than issues regarding US banking interests was likely preferable, following yesterday's massive sell-off on the heels of Treasury Secretary Timothy Geithner's sketchy bank plan announcement.

Following the initial shock, players in the financial field are beginning to flesh out possible scenarios, each of them fraught with peril as economists delve into the unknown. Preeminent are the individual balance sheets and books of the banks in question, primarily bank of America and Citigroup, the two which seem to be most at risk, though the books of Wells Fargo, JP Morgan Chase and others will surely require the close scrutiny of government fixers before any steps toward a working solution are attempted.

Like an alcoholic with serious addiction issues the major money center banks have not yet taken the serious step of actually disclosing the size of their losses and may never do so, publicly, as the sheer size of the numbers would panic most ordinary people. It's essential to any kind of recovery that the banks confess their shortfalls to the government, so that an appropriate solution can be delivered.

As for the bank plan being devised at Treasury and the Fed, there is some agreement, that, considering the broad outlines, banks will be merged and/or downsized in coming months.

Trading in very narrow ranges, all of the major indices finished on the upside, though only marginally. Much of the trade was tied to hope for quick passage of the stimulus bill or recovery from yesterday's drama. As for a dead cat bounce, today's action barely merited notice, though most traders seemed relieved that the markets didn't devolve into indiscriminate selling.

Dow 7,939.53, +50.65 (0.64%)
NASDAQ 1,530.50, +5.77 (0.38%)
S&P 500 833.74, +6.58 (0.80%)
NYSE Composite 5,252.65, +37.94 (0.73%)

Much of the bounce-back on the Dow was due to the financials, as Citigroup (C) and Bank of America (BAC) each rose by more than 7%, and JP Morgan, another Dow component, lifted to a 4% higher close.

Internally, the market sent a mixed message, one to which traders have become accustomed over the past 18 months. Advancing issues outnumbered decliners, 3669-2769, though new lows sailed past new lows, 232-14, increasing by both raw number and the overall divergence.

NYSE Volume 5,977,889,500
NASDAQ Volume 2,206,760,750

Crude futures took a severe hit after US inventories were reported to be close to 16-year highs. Oil for March delivery fell $1.61, to $35.94.

Gold finished with strong gains for the second straight day, as the flight to safety continues. Gold was up $30.50, to $944.50, with the magic $1000 mark clearly in sight. Silver also showed strong gains, picking up 39 cents to finish at $13.52 in New York.

In yet more good news for consumers, natural gas lost a penny and all food stock futures were lower. After Citigroup analysts downgraded supermarket chain operators Safeway (SWY) and Kroger (KR) on Tuesday, warning of a protracted "price war," shoppers should expect stable to lower prices on grocers' shelves over the near term.

Considering the dark cloud over the stock markets and the number of layoffs occurring in the past few months, cheaper food and fuel are providing the silver lining.

Who caught the falling knife?

The burning question on my mind - and that of many astute investors, brokers and analysts, I'm sure - is who stepped in to the morass today and actually bought stocks when the Dow was down as much as 340 points at mid-day and off 300 points as late in the day as 3:15 pm.?

It would have to have been a magnificent leap of faith for so many investors to begin snapping up bargains at the same time. Maybe there was a case of mass psychosis on Wall and Broad that sent brokers,trancelike, to their trading machines to begin punching in buy orders.

No, readers, there can be no doubt that this spectacular rally was nothing more than the work of the mysterious Plunge Protection Team, better known as the PPT or the President's Working Group on Financial Markets, established by executive order by Ronald Reagan following the crash of 1987, and in operation - in some form or another - ever since.

The modus operandi is unmistakable. Once the PPT gears into action, stocks climb at dizzying speed and generally in non-stop fashion, just like today. It is also usually the case - as today - that the US markets will run counter to the trends set in the rest of the world's equity index. Today, markets in Europe were roiled, in their worst day in four years while the US markets staged a "miraculous recovery."

Dow 12,845.78 -15.69; NASDAQ 2,451.07 -7.76; S&P 500 1,411.27 +4.57; NYSE Composite 9,087.10 -1.94

Are US stocks so special, or our traders so astute, that they saw such tremendous buying opportunities that they would erase 300 points in losses on the Dow in a matter of 45 minutes? No. Never. The entire afternoon was a charade, designed to keep the public in the dark and avoid an all-out panic.

And they probably accomplished their mission. Americans are so gullible and, may I say, ignorant, as a group. We'll swallow any cockamamie story that is fed to us. We believe that FOX News is actually a news network, or that the Bush administration knew nothing about the 9/11 attacks until they actually took place.

The vast glut of American investors will certainly swallow this miracle rally story. Most of them are too concerned with making sure the tires on their Escalade are shiny or that their Blackberry is the newest model with the most gadgets to care much about the value of their retirement portfolio.

Seriously, what other people, as a group, would allow nameless people to manage an account which will be responsible for their financial well-being years from now? Americans will buy the phony story f today's markets.

You shouldn't. I don't. The global financial system has been brought to its knees and there is no easy way out. A stock market crash is inevitable, or, at best, with a helping hand of the PPT, a long, slow, tortuous decline. You don't have a choice in the matter. The powers that be, behind closed doors, will decide how it's going to play out.

Personally, if I'm going to lose a limb, I'd rather it be cut off with a single blow rather than a thousand small cuts and gnaws over a long period of time. The PPT obviously are fans of Chinese water torture.

Regardless of the intrigue by the PPT, the markets still took a pretty good beating and a lot of people lost more money today. Declining issues held sway over advancers by a 9-5 margin and new lows swamped new highs by a shocking 1475 to 47. To put that number in perspective, nearly one out of every four stocks listed on the NYSE and NASDAQ combined made a 52-week low TODAY!

Rally my arse! Stocks do not just turn corner and head the other way in the midst of a total collapse. Said collapse is still on track. Don't buy the hype.

To get an idea of how seriously close we are to witnessing the total collapse of world economies, check the oil futures today, which sold off as low as $70.10, settling with a loss of $2.33 to end the day at $71.00, on concerns that current and future economic conditions would foment a decline in demand for petroleum products such as gasoline, automotive fuel, petrol, call it what you will. These intrepid plungers don't scare easily, but judging by today's futures prices, they're more than just a little shaken up.

Quite possibly the strangest trading of the day - and the past few weeks, for that matter - has to be in gold. The shiny stuff fell by $21.70 to $658.00. Silver played along, dropping $1.06 to $11.50. For silver, it was a 9% decline in one day. The metals markets are supposed to be somewhat less volatile than that, besides the fact that they should be going up as stocks go down. They surely didn't today and haven't been of late.

The answer to why gold and silver sold off is simple. Everything that isn't cash is being sold to raise liquid funds, metals not excluded.

"Gold's slide into negative territory took an a new and decidedly ominous dimension on Thursday, as price support after price support gave way in the wake of mounting massive liquidations from all quarters," said Jon Nadler, an analyst at Kitco Bullion Dealers, in emailed comments.

"A wide range of commodities were being badly sideswiped in the frenzied quest to raise cash in order to mitigate stock losses by individual and institutional investors alike," Nadler said. "This was a very ugly day across the board."

We'll take his word for it.