Stocks Finish First Week of 2012 in Mixed Fashion, Though Higher for Week

Yesterday, a commenter on a popular blog site made the bold statement that we may have already seen the highs for the year - meaning 2012, just three trading days into the new year.

While this prognosis has already been proven wrong vis-a-vis the NASDAQ, which was the only major US index to finish with a gain today, he may actually have a point.

Holiday sales figures continue to trickle in, and, as expected, the optimistic gains predicted by the National Federation of Retailers (talk about having an agenda!) have been somewhat diminished. The International Council of Shopping Centers reported that November-December sales were up just 3.3%, as opposed to last year's 3.8% gain and less than the NFR's rosy 4.5% prediction.

While companies such as Limited Brands, Macy's and Nordstrom showed solid gains over last year, their revenue figures may have exacted a serious toll on their profit margins and earnings. Target, Kohl's, Best Buy and J.C. Penney have already slashed their 4th quarter estimates, citing warmer-than-usual weather and a tough economy (duh!) as the main factors contributing to a slowdown in holiday sales.

Wal-Mart, the nation's largest retailer by number of stores and gross sales volume does not report figures on a month-by-month basis, but was expected to have had a good, though not stellar, holiday sales season.

Bloomingdale's and Macy's have already announced planned store closures as America's appetite for non-stop spending on non-essentials seems to have fallen victim to real economic pain.

Today's release of the BLS' December non-farm payroll data put credence to the idea that Thursday's ADP announcement of 325,000 net new private sector jobs in the month was - as usual - coming from a separate reality, as the Labor Department reported 200,000 (a nice round number) new American jobs in December.

However, a number of analysts - notably those from Morgan Stanley - contend that the BLS figures, which are supposedly seasonally-adjusted, may not, in fact, have been adequately adjusted, citing the huge gains in transportation, particularly in the subset of couriers and messengers (+42,000), and retail (+28,000). Also, the construction industry gains of 20,000 were due to mild weather across most of the country, so the real figure, which will be eventually revised lower, though probably not down to its actual level, is likely somewhere in the neighborhood of 120,000.

Wall Street certainly wasn't buying any of it, as Thursday was mostly flat after the ADP report and Friday was a loser overall. Traders - those few remaining in the worst trading market in years - seemed more concerned about the weakening Euro and the prospects of an EU breakup prompted by any of a number of characters, from Greece to Italy, Spain, Hungary or Portugal.

So, could 2012 be a real downer for stocks? It's probably too early to tell, though there are signs from europe that nothing is fixed, which is similar to what happened in the US in the aftermath of the 2008 financial crisis. The banks were bailed out and business went on for many, almost as usual. The core issues plaguing both the US and Europe are still government-related. Huge bureaucracies spend too much money they don't have, tax rates can't get any higher and unfunded liabilities - primarily pensions and health care - continue to contribute to a growing mountain of debt.

It is too soon to tell, for sure, but no catalyst for positive gains is present or on the horizon. Earnings reports will start to trickle in beginning Monday and will become a deluge by mid-month, and that will provide some direction. Corporate profits have been solid, but 4th quarter results will be a key element moving forward.

There's a sense that solid 4th quarter results have already been priced in and any misses or near-misses will be dealt with severely. The remainder of January and early February may be a period in which companies are punished even for just meeting expectations as investors may view this time as the end of a virtuous profit cycle.

And, of course, there's always Iran, and China, and the ongoing continental problems in the European Union. Any gains will be indeed climbing a wall of real worry.

The first week of 2012 was positive, but marginally so. The Dow Industrials sported a gain of just 142 points, the S&P 500 was up 20 points, the NASDAQ gained 69 points and the NYSE Composite added 80. Volume remained at disinterested levels.

Dow 12,359.92, -55.78 (0.45%)
NASDAQ 2,674.22, +4.36 (0.16%)
S&P 500 1,277.81, -3.25 (0.25%)
NYSE Composite 7,557.68, -42.29 (0.56%)
NASDAQ Volume 1,706,200,875
NYSE Volume 3,544,665,750
Combined NYSE & NASDAQ Advance - Decline: 2524-3040
Combined NYSE & NASDAQ New highs - New lows: 138-47
WTI crude oil: 101.56, -0.25
Gold: 1,616.80, -3.30
Silver: 28.68, -0.61

Greece Will Not Default... This Week, Maybe Next

The Markets

All you need to know about today's "out of the blue" rally.

According to a Bloomberg report:

"Greece is an integral part of the euro area and recent decisions to meet budget targets will help shield the economy," the Greek government said in a statement today following a call between Greek Prime Minister George Papandreou, German Chancellor Angela Merkel and French President Nicolas Sarkozy.

...and with that, it was off to the races for the algo-spitting machines which double for a perfectly-functioning market.

Seriously, there was nothing other than that, oh, well, both PPI and retail sales figures were unchanged from the prior month, so nothing to see, there, really, move along. Something (not sure what) spooked the machines at about 3:30, just after the major indices hit their highs of the day and were careening toward an even bigger ramp up, but whatever it was, it took 140 points off the Dow and made today's extraordinary rally look... ordinary.

So, if reading the Wall Street tea leaves correctly, all that has to happen is for Greece not to default and we'll see Dow 20,000 in a matter of months. That appears to be the general herd mentality.

Just for a reference point, take a look at how far below the April highs the S&P, NASDAQ and Dow are and then rethink that strategy of buying everything that has momentum, like Netflix or Apple or maybe LuluLemon. Here's a hint: the Dow closed at 12810.54 on April 29, the high for the year, and, since we're checking, the close on Decembre 31, 2010 was 11557.51, so we're down for the year and about 1500 points off the high.

So, when Greece does default - because they surely will at some point - whether it be orderly or not, what will stocks be worth then?

Dow 11,246.73, +140.88 (1.27%)
NASDAQ 2,572.55, +40.40 (1.60%)
S&P 500 1,188.68, +15.81 (1.35%)
NYSE Composite 7,199.12, +89.17 (1.25%)
NASDAQ Volume 2,300,166,500
NYSE Volume 4,961,128,500
Combined NYSE & NASDAQ Advance - Decline: 4804-1800
Combined NYSE & NASDAQ New highs - New lows: 52-110
WTI crude oil futures: 88.91, -1.30
Gold: 1819.70, -14.50
Silver: 40.69, -0.44

Stocks Close Green, but Well Off Highs of Day, Down for Week

One of the wildest weeks in US stock market history came to a rather anti-climactic close on Friday, with modest gains on all of the major indices, though the close was well off the highs of the session.

The Dow was the biggest winner of the day in percentage terms, suggesting that money is being plowed into the global behemoths for their international reach and dividend yields, but the week-ending rally was well short of spectacular and the Dow ended the day close to the middle of the range after it had been up 203 points at the high.

The S&P 500 had been as high as 1189 before losing more than half its gains through the afternoon. So too, the NASDAQ, which was up as much as 32 points before surrendering much of those gains as the day wore on.

For the week, all the major averages were lower. The Dow gave up 175 points over the roller coaster week; the NASDAQ lost 25 points, or about one percent, and the S&P shed 20 points, closer to 2%.

It was the third straight week of losses for the major averages, though hardly as bad as it could have been, measured by the lows set in place on Wednesday. The troubling characteristics of the week's trading were extreme volatility, high volume and the uncanny ability - in the near future - for indices to retest lows before making decisive moves.

With Europe still unresolved and US problems probably put away for a while with the start of preseason football, Friday turned out to be a day of celebration, not for the gains of the session, but for the fact that markets did not continue to slide as the week wore on and out.

Another troubling aspect was the 10:00 am reading from the University of Michigan's survey of consumer sentiment, which plunged to an 31-year low of 54.9, after a reading of 63.7 in July.

On the other hand, retail sales posted positive gains for July according to the Department of Commerce, though their readings and estimates have proven in the past to be more hot air than fact.

Not to hose down anyone's equity parade, but the global economy is still rather shaky, and unless long-term, structural problems with debt and the global currencies themselves are addressed, we are sure to repeat this kind of market behavior and sluggish economic growth. As it is, it's been nearly three years since the collapse of Lehman Brothers and the world is hardly a better place. Investments have become short term holdings, while real money has gravitated to bonds, gold or hard assets.

Dow 11,269.02, +125.71 (1.13%)
NASDAQ 2,507.98, +15.30 (0.61%)
S&P 500 1,178.81, +6.17 (0.53%)
NYSE Composite 7,303.88, +46.30 (0.64%)

Advancing issues topped decliners, though the margin was slight, 3965-2678. New highs on the NASDAQ numbered just four (4), with 60 new lows. On the NYSE, there were only seven (7) new highs and 24 new lows. The combined total of 11 new highs and 84 new lows - low numbers on both sides - suggests exactly what the market shows, that we are in a mid-range between a rally and collapse, with a bias to the negative.

Volume dropped off substantially, as traders were worn out and some caution and reason was applied to today's trading.

NASDAQ Volume 2,222,537,500
NYSE Volume 5,581,791,000

Commodities were sluggish. Oil fell 34 cents, to $85.38. Gold dipped $8.90, ending the week at $1,742.60, while silver speculators snapped back at onerous margin requirements, gaining 45 cents, to $39.11.

At the end, it was a smooth finish, but hardly inspiring to the bulls. After all, this is a three-week skid and the major markets are still bound between correction (-10%) and a bear market (-20%). It will likely take more than a few good days of trading to come to some understanding of future direction.

Twelve Days Until Retailers Call It a Day

If this weren't the most over-hyped Christmas season in the past six years, one would be wondering where all the ads are on TV. Retailers continue to proclaim that this year will be better than last year (which was pretty bad, in itself), that same-store sales are showing solid improvement and all the rest of the nonsense they banter about to shareholders and keepers of the materialist Christmas buying season creed.

But, with just twelve days to go before everybody stops shopping and actually opens the presents, there are some indications that this holiday season is going to be quite awful for many a retailer.

Here's a few reasons why:

• "Same-store sales" are always measured against stores open a year or longer. Most of the larger retailers have already closed many non-or-under-performing stores, so the comparisons look better, even though there is less volume.
• November non-farm payrolls actually showed a decrease in November retail hiring, at a time which retailers are normally hiring more staff for the "Christmas rush." This is a troubling sign that there is no rush this year.
• Inflation has pushed up prices for many gift items, especially clothes, which are primarily made of cotton, which price went nearly exponential this year. Higher prices will result in high same-store sales, though buying the same sweater this year rather than last will cost 5-10% more, making it look like there were more sales when in fact there were not.
• On Friday, December 10, TJX Cos., the parent company of TJ Maxx, Marshall's and HomeGoods, announced the closing of 71 A. J. Wright stores and the conversion of 91 others into TJ Maxx or Marchall's stores, and permanent job cuts of 4400 nationwide.
• According to a BDO survey, 63% of retailers are spending what they did last year on advertising and marketing; 20% are spending less, and just 17% have increased their budgets over 2009.
• Retail sales for October were up 1.2% (ex-auto, 0.4), but November, the start of the holiday shopping season, is expected to show a gain of only 0.5%. The figures are due out on Tuesday, and anything less than that may cause investors to reconsider retailers in their investment strategies.

All of this points to a ho-hum kind of Christmas season, when a whiz-bang one is what's needed. Unemployment is too high and consumer deleveraging continues at such a hot pace that one cannot reasonably expect high demand for consumer products. Some retailers may actually close more stores in January or February, or file bankruptcy, as Great Atlantic & Pacific Tea Company (A&P), parent of Waldbaum's and Pathmark stores, did last week.

Harder hit will be smaller, "mom-and-pop" type retailers, who generally have less room for error, tight - if any - lines of credit and no tolerance for losses. Retailing has been hit hard since the market collapse of 2008, and many small businesses fall into the retail category.

A little bit of good news is that some of these retailers may close their Main Street or mall shops, only to re-emerge online with business being run out of a home or less-expensive location. The trend from brick-and-mortar to online continues to grow and has actually been pushed by tight margins and high rents which plague many a retailer.

Still, when the country wakes up on December 26 and again in early January, only to find that the economy is still as sluggish as ever, there will be repercussions and more casualties.

Some of that sentiment may have been reflected in today's trading on the stock markets, which broke higher in the morning, peaked just before 3:00 pm and sold off hard into the close. It was an unexpected start to the week and may be offering a clue about tomorrow's 8:30 am retal sales release.

The Dow, NYSE and S&P registered marginal gains, closing at or near the lows of the session, while the NASDAQ broke an eight-day winning streak.

Dow 11,428.56, +18.24 (0.16%)
NASDAQ 2,624.91, -12.63 (0.48%)
S&P 500 1,240.46, +0.06 (0.00%)
NYSE Composite 7,850.02, +26.72 (0.34%)

Decliners beat advancers, 3459-3059. NASDAQ New Highs: 279; Lows: 19; NYSE New Highs: 271; Lows: 87. Volume was dull, as per usual.

NASDAQ Volume 1,853,841,375
NYSE Volume 4,861,153,000

The real action today was in the commodity space, which heated up once again with the Fed injecting $8.9 billion in fresh cash to the Primary Dealers through Treasury purchases. Oil advanced 82 cents, to $88.61. Prices for non-leaded regular gas are now over $3.00 per gallon in most of the United States. The most recent gold price was $1394.50, up $8.90. Silver had a huge rally, up 87 cents, to $29.55, and should break through the magic $30 mark this week if trends outlined by Turd Ferguson play out with resistance at 29.50 broken by today's close.

... And Now, the Rally That Was... a Real Phony

Viewing the market over the past two trading sessions, a comparison to an olympic athlete might be apropos, say, that of a high-jumper, like Dwight Stones back in the day, sailing over the bar at 7'1", but then failing at the next height, and again, until finally getting his steps and takeoff and velocity all right on the third attempt, at which point he flies into Olympic history.

That's what the market appears to have done, after failing badly on Tuesday, finally getting the commitment and the volume and the lack of bad economic data points and the short sellers all lined up in the proper order to propel the Dow back over the 10,000 bar, taking the antecedent indices along for the joyful ride.

With the level of short interest in the marketplace, there's no doubt that the push higher in the final minutes of trading on Monday continued into Tuesday on the backs of the shorts, who, like it or not, have been having their way for the past two months running. Anybody getting squeezed here was either in too late or was already well in the money and made profits when they covered their bets. Worse yet, many of the same players who profited today on the upticks were the same people making hay on the way down. It's just the way Wall Street works these days, now that the buy and hold investment strategy (the one which our fathers and grandfathers used to make money slowly and honorably) have been relegated to the dustbin of market history in favor of "quant" trading and electronic push-button charting and graphing which the investment houses are now all shoving down our throats.

Sure, you can trade right from your iphone, computer or other electronic instrument, as though it's a race to see who squeeze the last few pennies on execution, but is that any way to treat your money? Not really, though the masters of the universe running the funds and brokerages are generally using OPM (other people's money), so who cares? And that's why today's rally pushed higher and higher. The money masters flicked the switch at the open in the US, abruptly turning around all of the European markets - which were suffering severe declines until late in their respective trading days - and sending US stocks soaring.

One can only be amused by the cheerleading nature of the financial press, despite mountains of data that not only suggest, but verify, that the "recovery" was something of a chimera, and that global markets are still fundamentally unsound. Reading a headline like, "European bank stress tests and U.S. retail sales lift the Dow" gives one reason to probe deeper, as we come to find out that the stress tests to be performed on European banks haven't actually been started, but that a few details about what they may entail were released. Also, we find out that the esteemed group known as the International Council of Shopping Centers reported same store sales in the ICSC-Goldman Sachs (hmm, those guys again) weekly index, which is "constructed using sales-weighted geometric average growth rates to preserve long-term consistency and is statistically benchmarked to a broad-based monthly retail industry sales aggregate" (in other words, it's bull-$^%#), was up 3.9% year-over-year, the best level since May.

Well, that being only two months ago, why did the market go straight down then? Also, one may recall that retail sakes a year ago were pretty dismal, so, being up nearly 4% is not even back to what anyone would consider "good," though it apparently works for the fraudsters and con men who populate the equity trading markets.

And, by the way, that ICSC-Goldman Sachs index excludes restaurants and vehicle sales, which, unless you have consumers who neither eat nor drive, seems to be an important element in tracking retail sales performance. They have plenty of other modifiers with which they can interpret the data seemingly any way they like, such as the "Piser Method, which was popular in the early 1930s." I guess they tried lying to people back in the Great Depression, too, and we all know how well that worked out.

One should not overlook - though everybody trading stocks apparently did today - that vacancies at large malls in the top 80 U.S. markets rose to 9 percent in the second quarter and open-air center is now at 10.9%, that data coming from the same web site as the cheery same-store sales index.

So, the market cleared the bar of 10,000, but only until maybe tomorrow, when initial unemployment claims for the most recent week are released. Maybe the government can fudge those numbers a bit, as they've been downright depressing lately. Of course, this rally could go on for another few weeks, especially since earnings begin flowing to the street in short order, and, of course, options expire on Friday of next week. Getting the picture yet?

The real kicker to the whole "rally" story is what happened to Family Dollar (FDO) after it released its earning report. Quarterly profit jumped 19%, but earnings guidance disappointed as the CEO said consumers remained wary. No surprise there, but the stock lost 8% on the day, down 3.18 to 36.26. And you thought retailers were doing well.

Dow 10,018.28, +274.66 (2.82%)
NASDAQ 2,159.47, +65.59 (3.13%)
S&P 500 1,060.27, +32.21 (3.13%)
NYSE Composite 6,685.78, +199.66 (3.08%)

Internals told a mixed story. Advancers eviscerated decliners, 5351-1212, but new lows led new highs, 205-121. Volume was at average levels for the second straight session, another indication that this was more a relief rally or a knee-jerk reaction to oversold conditions, or a combination with short-covering mixed in for good measure.

NASDAQ Volume 2,190,606,000
NYSE Volume 5,861,473,500

Crude oil for August delivery rose $2.06, after falling for six consecutive sessions, to $74.07. Gold snapped back to life, gaining $3.80, to $1,198.60, with silver adding 15 cents, to close at $17.98.

Considering that financial and energy stocks (including, notoriously, BP) - the two most beaten down groups over the past few weeks were the rally leaders, one shouldn't put too much trust in this one-day wonder rally, as it appears to be contain more bark than bite, more reflection than reality, and no fundamentally good reason to have happened at all except for a one-day dearth of economic reporting.

Stocks Finish First Positive Week in Last Four

Thanks to the rally from nowhere, based upon nothing, that materialized on Thursday, all of the major equity indices will finish with their first weekly gain in the past four weeks.

Investors were stunned prior to the opening bell on Friday with a report on May retail sales that showed Americans spending at a rate 1.2% lower than in April. The news was another disconcerting data point for the bulls, coming just a week after the unnerving non farm payroll report which quite graphically demonstrated that the "recovery" had ceased creating jobs in the private sector, if it was even creating any at all prior to May.

The little piece of news wasn't at all expected by the expert economists who track - or, apparently guess at - these kinds of things, who were looking for a gain in retail sales in the neighborhood of 0.2%. The stark difference between expectations and reality points up just how juiced the media has been with all the phony recovery talk over the past six months.

Anybody who simply lives in an average American community can see for themselves that business conditions are not optimal. Stores in retail strip malls and spaces in enclosed malls go begging for tenants, jobs are hard to come by and state and local governments are dealing with budget deficits brought on by lower tax receipts and shrinking tax revenues, all effects of the recession and the lack of a powerful recovery.

Wall Street is about the only place in the country which seems to be of the opinion that all's well in the USA and the economy, though the recent declines in the market make clear that not everyone is euphoric over future prospects. The headwinds of future taxation, continued high unemployment and a critically ill housing market are beginning to take their tolls on even the most ardent bulls.

Strains in the European Union banking complex and the continuous flow of oil from deep beneath the Gulf of Mexico - putting thousands of shrimpers, clammers and fishermen out of work - certainly aren't helping matters.

As inexplicable as Thursday's rally was, today's late-day trade was equally out-of-the-blue. The Dow, which had, along with the S&P, spent nearly the entire session in negative territory, tacked on 75 points in the final three-quarters of the hour, helping push all the indices into plus territory. Once again, organized trading by a consortium of insiders or perhaps machine-driven, stocks ran counter-trend late in the day.

Dow 10,211.07, +38.54 (0.38%)
NASDAQ 2,243.60, +24.89 (1.12%)
S&P 500 1,091.60, +4.76 (0.44%)
NYSE Composite 6,814.76, +31.25 (0.46%)

In spite of the late-session tape-painting, advancing issues finished well ahead of decliners, 4619-1830. New highs broke through above new lows, 125-76, in a temporary reversal of the trend. Volume, however, was absolutely pathetic, the lowest in months.

NYSE Volume 4,672,237,500.00
NASDAQ Volume 1,731,446,375.00

Crude oil sold off, losing $1.49, to $73.99, which made sense in light of the sour retail figures. Precious metals were split, with gold gaining $5.70, to $1,228.10, while silver dipped 12 cents, to $18.24.

Looking ahead to next week, trading decisions will be led largely by out-of-market forces, those being the situation the in Gulf, the debt contagion in Europe and the advancement of the Financial Reform bill in congress, though mid-week economic data, including PPI, CPI, industrial production, capacity utilization and housing starts may provide some surprises.

Unemployment, Retail Offer Mixed Picture

Stocks opened the day to the downside, nervous about the persistently high level of unemployment claims. Initial claim came in this morning at 460,000, about 25,000 more than had been expected. They've been in that mid-400,000 range for months and don't seem to be changing much. Continuing claims were down by 131,000, which somewhat tempered the pessimism.

Once stocks began trading, however, everybody became a buyer in what turned into a day-long rally, ending on the upside for all of the major indices. Retail sales figures for March were generally superior, though they did happen to include the week prior to Easter, which fell in April last year, skewing comparisons for same-store sales throughout the industry.

Again, they proved good enough to entice investors to buy, or at least not run screaming from them. Most of the economic data of late has been mixed, except for housing and unemployment, which remain seminally ugly.

Dow 10,927.07, +29.55 (0.27%)
NASDAQ 2,436.81, +5.65 (0.23%)
S&P 500 1,186.43, +3.99 (0.34%)
NYSE Composite 7,565.33, +19.15 (0.25%)

Advancers took back the edge from decliners, 3396-3016. New highs are beginning to come back to earth, only 398 of them today, as opposed to 27 new lows. Volume was better than normal, though still below 2003-07 levels.

NYSE Volume 5,246,828,500
NASDAQ Volume 2,342,815,500

Oil trended lower for the second straight day, losing 49 cents, to $85.39. Gold dipped 10 cents, to $1,152.20 and silver fell 7 cents, to $18.12. The day in commodities lacked clear direction.

More attention was being paid to Tiger Woods' return to golf at the Masters than the prices of stocks today. Between that distraction and generally nice weather, it's surprising anybody even shows up to trade on the Street these days.

Sellers Creeping into Market

Call it what you will, but today's action was indicative - as all of the past week has been - of uncertainty about further stock market advances and profit-taking.

Stocks have stalled on low volume, though with the steady supply of cheap money being fed into the system, the small, fractional gains could continue, though sharper players probably have already exited profitable positions.

Dow 10,624.69, +12.85 (0.12%)
NASDAQ 2,367.66, -0.80 (0.03%)
S&P 500 1,149.99, -0.25 (0.02%)
NYSE Composite 7,362.85, +9.61 (0.13%)

Internal indicators are still positive, however, with advancing issues eking out a win over decliners, 3378-3127. That was the closest margin in days, if not weeks. New highs came in explosively, at 805, but the number of new lows also climbed, to 69 on the day. Volume continues to be stuck in neutral; very low participation is indicated.

NYSE Volume 5,506,876,500
NASDAQ Volume 2,035,983,000

Commodities were flat, with oil dipping 6 cents, to $81.24. Gold lost $1.20, to $1,107.00, and silver fell 17 cents, to $17.03. An interesting indicator is the gold-silver ratio, which has been out of whack since 2003, but on pull-backs, silver, with more industrial uses than gold, usually gets hit harder. It's an interesting dynamic. Silver will follow gold to the upside, but generally underperform it. On the downside, it may be instructive as a predictor of future gold moves. Since silver is more closely tied to the real economy, it goes to reason that it would feel the pinch prior to its cousin gold, which is almost entirely an investment instrument.

A couple of data points should have moved the market, and might have been partially responsible for the poor showing on Friday. Retail sales were strong in February, up 0.3%, but january was revised sharply lower, from +0.5 to +0.1. That revision may have put a scare into investors, sensing that the current numbers were likely overstated. If so, that would jibe with the Michigan Sentiment survey, which fell to 72.5 from 73.6 in February.

Additionally, inventories were flat when the expectation was for a noticeable build. It didn't occur, thus, skepticism prevailed, and the market doesn't appreciate any kind of uncertainty, of which there is more than enough to go around.

At least the weather is improving and can't be blamed for anything.

Double Top Breakout for Stocks; Silver Tops $17

The markets continued to tack on gains Monday and Tuesday, confirming a double top breakout on the latter, promising more gains straight ahead. Tuesday's trade was touch-and-go early on, as the market digested solid August retail sales figures (up 2.7%, +1.1 ex-autos) and an uptick in the Producer's Price Index (PPI), which was up a solid 1.7% (+0.2% core). What gave investor's caution was Best Buy's (BBY) quarterly report, in which the nation's largest electronics retailer missed earnings estimates - 0.37 actual vs. 0.42 estimate - but raised guidance for the year.

Expecting much more from the retailer, especially since Best Buy was poised to benefit greatly from the demise of Circuit City, which went bankrupt and closed all its stores earlier this year, the stock sold off, losing 2.09, to $38.32, a dip of more than 5%. The overall market viewed this as another sign that the consumer is not yet ready to open the wallet for discretionary purchases such as LCD TVs, game consoles and other electronic and high-ticket items.

Shortly after 10:00 am, during a question-and-answer period, Fed Chairman Ben Bernanke let it slip that the recession was "probably over" which gave everyone a small boost of confidence. Markets really didn't begin to take off until after President Barack Obama's first speech of the day, which ended about 11:30 am. It was as though traders were waiting to see if eithre Bernanke or Obama would drop a verbal bomb. When they didn't, it was off to the races in a broad-based strong rally.

Dow 9,683.41, +56.61 (0.59%)
NASDAQ 2,102.64, +10.86 (0.52%)
S&P 500 1,052.63, +3.29 (0.31%)
NYSE Composite 6,917.07, +37.08 (0.54%)

Advancing issues outpaced decliners by a solid margin, 4183-2254, while new highs registered their highest one-day total since October 2007, at 412. There were 87 new lows, with only 8 of them appearing on the NASDAQ. Volume was once again above normal, as investors rushed to get into equities. The rally continued almost through the end of the session, with stocks closing near their highs. Longer term, the current bull run is more than six months old, though the performance for September, thus far, has been exceptional and in strong opposition to many who were calling for a pull-back.

NYSE Volume 1,496,974,000
NASDAQ Volume 2,400,533,000

Commodities got in on the action as well. Crude oil for October delivery gained $2.07, to $70.93. Gold rebounded, up $5.20, to $1,006.30, but silver was the star of the day, picking up 38 cents per ounce, to $17.00, and higher after the close in New York.

In general terms, this six-month-old rally is getting a little bit winded, as daily gains are measured and not overly large, though by and large the bull market seems to be intact and booming, though a blow-off top could occur at any stage, now that the double top has been confirmed over 9650 on the Dow.

Investors have been taking some money off the table, though much seems to be going right back in to the market, either in sector rotation or buying the same shares on dips, even though there hasn't been much of a break in the upside action.

All the data and speeches by the Fed Chair and the President have set a very positive tone heading into fall and the upcoming earnings season. The downside is that any disappointments will likely be dealt with in rather harsh manners. Companies which fail to meet expectations in the coming weeks could see their share prices slashed without mercy. On the other hand, data continues to point towards recovery. The issue is whether companies can extract profits as a normal function of business, since the past two quarters' profits have come largely from cost-cutting.

Housing and employment continue to underpin the markets, keeping a lid loosely over stocks, for now.

Stocks Slip for Second Straight Session

US stock indices finished in the red for the second straight day as another spate of so-so economic news crossed the new wires. It wasn't so much the initial jobless claims figures that shook things up - they were improved over the previous week at 550,000, but the continuing claims were higher, at 6.31 million, due to extensions in unemployment benefits keeping more workers on the government dime for longer than the usual 39 weeks.

With money coming in and no prospects for gainful employment on the horizon, many of those already furloughed are living check to check, those being furnished by government agencies. As long as no new jobs are being created, America will continue to devolve from a nation of entrepreneurs into a de facto welfare state, with government picking up the tab for everything from rent to food to health care to spending money. The hard side of that reality is for the businessman or woman who will face ever higher taxes and costs related to doing business with a sub-prime clientele.

The path of the nation doesn't have to be as stark, though the current crop of clowns in congress certainly seem to be pushing in that direction. Gone is the resolve to work hard, the commitment to family values and self-reliance. They are being rapidly replaced with the mantra of "good-for-the-whole" socialism, with all of its incentives for sloth, laziness, avarice and assorted vices. The malaise which began with a real estate bubble promoted by George W. Bush's "ownership society" - truly the most false and baseless political creed of recent memory - has proceeded along a perceptible, predictable and inescapable path to homelessness and destitution across a wide swath of the country.

Some areas are doing better than others, obviously, but the hardest hit are those which have suffered the double-whammy of rampant unemployment on top of foreclosures, such as Detroit, most of southern Florida, Las Vegas and many parts of exurbia Southern California. The deep South, never a bellwether for enterprise, is still largely backwards, the Northeast and West Coast are still culturally significant and maintaining a facade of social manners, though the biggest states - New York and California - are overburdened by huge government apparatus and absurdly high rates of taxation. The Midwest continues to hold pockets of civility, though many of the larger cities are reeling from the economic downturn.

While most to these realities are overlooked by the financial media and Wall Street's "everybody's an investor" mentality, the general welfare of the bulk of the lower and middle class populations is not of great concern so long as government largely continues to foot the bills. All of this works for smart companies who ignore the larger picture, have cut labor and other costs and continue to profit and take market share. The largess of the government these past five months has been like manna from heaven for many keen companies. They'll keep making money without regard to its source.

That's why the past two days haven't been very dramatic. Investor types know that their recent gains could eventually sour, but current government policies, like cash for clunkers, are greasing the wheels with billions of borrowed dollars. And those polices are going to stay in place and have other, similar, social-programming policies piled atop them. Business could care less, as long as the money continues to roll in.

Dow 9,256.26, -24.71 (0.27%)
NASDAQ 1,973.16, -19.89 (1.00%)
S&P 500 997.08, -5.64 (0.56%)
NYSE Composite 6,517.67, -40.52 (0.62%)

Declining issues grabbed the edge over advancers once again, today by a wider margin, 4185-2223, but new highs were better than new lows, 169-63. Volume continued to run at a less-leisurely pace than in previous weeks for the second straight day.

NYSE Volume 1,389,338,000
NASDAQ Volume 2,447,769,000

Commodity prices stagnated, with oil off 3 cents, to $71.94, gold down $3.40, to $962.90 and silver off 12 cents, at $14.65.

The real troubling news came from the retail sector, which has been taken out to pasture and summarily slaughtered over the past 12 months, as company after company reported dismal same-store sales in comparison to a year ago. Those retail figures are likely to remain bad until they can be matched up against already bad numbers, and that won't begin until November or December at the earliest. While retail wonks are concerned about back-to-school sales (somewhat of a non sequitur - how much beyond a few new items of clothing, notebooks, pens and gadgets do students really need?), the more serious concern is the holiday season, now less than five months out. After a dismal Christmas season for many retailers, the concern is that consumers will still be buying at less-than-robust levels. That may already be a given and currently being priced into many retail stocks, though the consumer tech area could really be hit hardest of all through the fall and winter.

Looking ahead to Friday, market sentiment will largely be in response to the government's non-farm employment report for July, which is expected to show job losses in the neighborhood of 325-375, 000. The number, unless it is completely out of line with the usual government massage, should fall into that range, which should cheer investors. The actual anticipatory knee-knocking trepidation leading up the the big Friday number has been overdone. While nobody expects miracles, any improvement will be billed as a good sign of a slowly recovering economy, whether or not that is actually the case. Espeically on the heels of ADP's private sector jobs number of -371,000 for July, released just yesterday, the government figure is quickly becoming an anachronistic afterthought, month after tiresome month.

Stocks Up, Outlook Still Cloudy; Retail Sales Horrible

Investors took little time this morning putting stocks back on a positive path, after initial jobless claims came in lower for the 4th consecutive week. Gains were broad-based, though marginal in most cases, with all indices trading in very narrow ranges. The Dow, for instance, traversed just 116 points from the morning low to the afternoon high, finishing close to the top and near recent highs.

Without much to move the markets, stocks were fairly settled as investors seem to be on hold for now, at least awaiting word from the Labor Dept. on May job losses, released tomorrow at 8:30 am EDT. That number should not be much of a surprise, as there's little to indicate that job losses are going to narrow appreciably. The consensus estimate is for about 525,000 more jobs being shed from the pool in the prior month.

Financials led the way again, with Bank of America and Citigroup both gaining more than 5% by the close, providing a significant boost to the Dow Jones Industrials. General Motors was officially removed at the end of the day, as it will now trade over the counter, under the symbol, GMGMQ.PK. Citigroup will also exit as of Monday. The two Dow components will be replaced by Cisco Systems (CSCO) and Travelers Insurance (TRV).

Apparently of less importance to investors were the ugly retail sales figures released by a number of America's largest chain stores. Same-store sales for a group of 30 retailers fell 4.8% from a year ago. The numbers for some of the nation's best-known stores were horrific, reflecting the reality of a declining economy in a deflationary environment. Limited Brands fell 7%; Gap, down 6%; Abercrombie and Fitch collapsed 28%; Dillard's was down 12%; Macy's fell 9.1%; Nordstrom's sales were of 13.1%; Sak's was down 26.6%. even discounters Target and Costco were off by 6.1% and 7%, respectively.

The retail figures underscore the disconnect between Washington, Wall Street and Main Street. While the pols in D.C. and the monied financiers in New York continue to preach that the economy is recovering, real life experience is posting a different message altogether. The condition is becoming particularly acute, and can be seen in the strain for stocks to gain further momentum. Add to the retail woes the coming closure of nearly 4000 auto dealerships by Chrysler and GM and the condition can only deteriorate over the near term.

Dow 8,750.24, +74.96 (0.86%)
NASDAQ 1,850.02, +24.10 (1.32%)
S&P 500 942.46, +10.70 (1.15%)
NYSE Composite 6,110.76, +76.86 (1.27%)

Advancing issues finished well ahead of decliners, 4769-1643, a rather large bias considering the paucity of gains. New highs barely beat new lows, 66-65, so the indicator remains poised to signal either a renewal of the rally or the beginning of a precipitous decline. Volume was a touch higher than Wednesday's, though still not remarkable and thus, not signaling anything.

NYSE Volume 1,358,776,000
NASDAQ Volume 2,488,895,000

Commodities completely reversed yesterday's performance, with nearly everything gaining in value. Oil rose $2.69, to $68.81. Gold was higher by $16.70, to $982.30, with silver up 59 cents to $15.90.

Tomorrow's non-farm payroll report could be significant, no matter which way the numbers are interpreted, though it's becoming increasingly clear that stocks cannot go much higher without support from the real world. Investors are either living in a dream world or seeing a different new reality, obscure to most Americans.

In the best news of the day, former Countrywide CEO, Angelo Mozillo and two other top executives were formally charged with fraud and insider trading by the SEC. It is a civil lawsuit, but may pave the way for the Justice Department to file criminal charges. Mozilo is the first and only executive to be charged with any crimes stemming from the subprime and general banking crisis.

'Green Shoots' Shot Down

For weeks we've been hearing about how the economy is improving, though the data released hardly supported the theory.

Many economic numbers were slightly better than anticipated, and earnings for many companies beat watered-down expectations, but overall, evidence that the economy was actually on the mend was scant.

Today's release of retail sales figures for April sent investors scurrying to take profits and close down option positions en masse. Retail sales were off 0.4%, when expectations were a decline of just 0.2%. March figures were also revised lower. As those numbers hit the street prior to the market's opening, selling commenced right from the opening bell and didn't ease up much all day.

Separately, a report from Realty-Trac showed foreclosures hitting yet another record in April.

Dow 8,284.89, -184.22 (2.18%)
NASDAQ 1,664.19, -51.73 (3.01%)
S&P 500 883.92. -24.43 (2.69%)
NYSE Composite 5,666.47, -192.67 (3.29%)

The broad-based decline was confirmed by market internals. Decliners were handily ahead of advancing issues, 5602-936. The 6-1 ratio was the worst since the markets were bottoming out in early March. The steadfast new lows - new highs ratio remained stubbornly tilted downward, with 76 new lows to a mere 16 new highs, also a low number of new highs not evidenced since March. Volume was not fantastic, but solid and mostly on the sell side.

NYSE Volume 1,766,071,000
NASDAQ Volume 2,404,441,000

Crude oil fell 23 cents, to close at $57.79. Gold fluctuated, eventually finishing $2.00 higher, at $925.90. Silver took a breather after a more than $1.00 week-long run up, losing 20 cents, to $14.02.

The S&P fell for the third straight session, the longest such streak since a five-day losing skein February 24 - March 3. The consecutive declines are a strong signal of general weakness, as investors and working people struggle for clarity.

Just a week after the much-ballyhooed bank "stress tests" the markets seem to have soured, as rosy predictions of a quick turnaround have given way to more disciplined and rigorous outlooks that see the USA struggling for years to come. Government efforts to conceal bank losses have not be lost on average Americans, who feel short-changed, cheated and lied to by bankers and the political elite.

Investing over the past two months time has been an effort in near-total delusion. The US economy cannot be seen as improving when the Federal Reserve is monetizing Treasury debt as the federal government piles up mountains of unpayable notes overwhelming the public. Foreign investors have seriously curtailed Treasury purchases, especially China.

To make matters worse, the Obama administration seems hell-bent on socializing industry and demolishing what little is left of American entrepreneurism with odious taxes, regulations and heavy-handed wealth redistribution measures. Without a clear reversal of policy - from tax and spend to fiscal austerity - from government at all levels, the American public will continue to lose faith in government's promise to repair the private sector. Further Keynesian tinkering by the Fed and Treasury will only result in a deeper and longer lasting depression.

Make no doubt about it. We entered dangerous waters in 2007 and conditions have only worsened since. Government efforts to revive the economy with the magic bullet of increasing money supply and handouts have thus far only made the situation worse. Beware the summer months, but be even more attuned to the period between August and October. If real progress has not been made by then, expect living conditions in many US cities to deteriorate to near-third world status.

The Dangers of Fraudulent Behavior

Throughout most of the Thursday session, markets were substantially lower for no good reason other than that stocks are still overvalued and too risky right now for the majority of investors.

Right at 3:00 pm, however, it was as though Moses had parted the Red Sea and the enslaved people were freed. The Dow had just broken below 7700 for the first time since November 21, but it would not stay down long. (see image at right)

Like Rocky rising from the canvas, the Dow Jones Industrials staged somewhat of a "miracle" recovery, finishing at 7932.76, easily the best level of the day and a solid 240 points higher in just the last hour of trading.

Hallelujah! Reuters is giving credit to the Obama administration for the rally, citing his sketchy plans to help homeowners.

The real headline - instead of Reuters' tag: S&P and NASDAQ rise after mortgage plan news - should have been "stocks higher as day-trading Wall Street wheedlers cover their shorts."

My headline is probably closer to the truth. Hilary Kramer (left), a frequent guest on PBS "Nightly Business Report" said, during her appearance on the February 11 show, that her most profitable trades of late were short term buys, which she would be out of in less than "48 hours." If Wall Street professionals are day-trading (which is trading, not investing) then what does that say of US equity markets?

It says quite a bit, but clearly expresses an understanding that they are no place for actual long-term investments. Today points up what many people suspect. That Wall Street is becoming even more of an inside game than ever before. The bankers who testified to congress yesterday didn't reveal anything about what or how they were doing internally. Traders won't normally tell either, though one must respect Ms. Kramer's candid behavior on a national financial show.

In any case, we should all be used to substantial bear market rallies appearing out of nowhere for no reason. Today was such a case. In days ahead, expect the losses to resume because hitting 7700 and bouncing off it is not a retest of the November 20 lows - not even close.

It may take six months or six days, but those bottoms must be tested, and they will. No significant bottom has occurred in this market and for good reason: we haven't seen the worst of this recession yet.

Dow 7,932.76, -6.77 (0.09%)
NASDAQ 1,541.71, +11.21 (0.73%)
S&P 500 835.19, +1.45 (0.17%)
NYSE Composite 5,256.45, +3.77 (0.07%)

Faced with a market such as this, individual traders must use their own judgment. The smartest among us are out completely, having moved into the safety of money markets and, in my case, heavily into silver (Since silver broke through 13.50 yesterday, I am temporarily out, awaiting the next buying dip.).

If you must be in play, Kramer's advice is a gem of unusual clarity. In and out is the only way to play.

On the day, there were some interesting economic numbers released, including initial estimates of retail sales for January, which tallied a 1% increase over December, which, in itself, is somewhat of a shocker. In other words, people bought more after the holidays (January) than before or during them (December). Of course, the US Census Bureau's numbers are "adjusted for seasonal variation and holiday and trading-day differences, but not for price changes..."

Well, that's a mouthful upon which I won't bite. Never mind that "Total sales for the November 2008 through January 2009 period were down 9.5 percent (±0.5%) from the same period a year ago."

New unemployment claims were significantly higher, at 623,000, which alone could have accounted for the 200+ point drop on the Dow, that is, until manic buying took hold.

Our trusty internal indicators told a vastly different story. There were more declining issues than advancing, 3319-3050. New lows were 321, compared to just 19 new highs. Volume was quite high, especially on the NASDAQ, not unusual considering the overall volatility.

NYSE Volume 1,480,256,000
NASDAQ Volume 2,470,079,000

Commodities, less prone to manipulation and political head fakes acted more rationally. Oil fell $1.96, to $33.98, its lowest level since mid-December.

Gold's rapid rally stalled slightly, gaining $4.70, to $949.20, a gain much smaller than those of the past few days. Silver dipped a penny, to $3.51.

Congress was still diddling around with the banking fix and the stimulus package, though those two major pieces of legislation/regulation are quickly becoming back burner issues. Stocks are supposed to rise and fall on fundamentals, earnings, profit, not politics, though that is what currently seems to be moving markets. It's a condition which cannot last long before becoming a very unhealthy environment.