Is this how downtrends end? With a one-day wonder resurgence that erases any doubt that the US economy, American resolve and corporate equities are safe investments, the markets have made a bold statement.
Too bad it's impossible to believe.
The Dow added 157 points, the NASDAQ was up 44.46, the S&P gained 21.29 and the NYSE Composite index grew by 168. These were solid gains all around, led by the NYSE Composite and the NASDAQ's 1.9% improvement, but one good day, after a series of bad ones, does not a bull market make. The trend is still to the downside. The Dow, for example, is still nearly 600 points below it's high of 12,795.93, achieved less then a month ago. It's broken through the 50 day moving average and today's gain - albeit impressive - leaves it more than 300 points below that mark.
Further, the big 416-point drop last Tuesday was preceded by four consecutive down sessions. Today's winner was only the 2nd positive close of the last 10 sessions. Bulls, hard-headed as they are, usually need to be hit over the head with a mallet before they stop charging ahead, so maybe more evidence is needed. Give them a couple more weeks.
The advance-decline and volume numbers for today were real shockers. This was no ordinary buying spree. Every sucker in the universe was taking the plunge, a sign that cooler heads (Bears, shorts and put options players) are about to take more of their money.
Gainers outnumbered losers by a 4-1 margin, but the volume figures were extraordinary. Dow volume checked in at only 5-6% on the combined averages. Up volume of 94% signals just one thing - this is nothing more than a dead cat bounce on a temporarily oversold condition. Everybody moving at once is never a good sign because the chances of everybody being right are slim to none.
This market will likely give today's gains back by the end of the week. If this mini-rally gets legs and moves another step forward, it may take until the end of next week to unwind, but unwind it will. The market is not in any condition to regroup and head for higher ground. This correction is still in its earliest stage. We can call today the beginning of stage two, in which those who did not lose enough to be wary in phase one will be eaten alive.
New highs reversed the recent trend, though not by much, winning the day by a slim margin of 123-108. That's encouraging for the Bulls, but nothing to write home about.
Oil, gold and silver were up marginally. Commodities are still stuck in somewhat overbought ranges and cannot move higher when the global economy is in a cooling period or slowing down, which it is. For bulls of all persuasions, however, today was needed relief. But, like all relief rallies, they are usually dramatic and short-lived. This was no exception.
Tuesday, March 6, 2007
Monday, March 5, 2007
Wider and Deeper
The US stock markets are in a protracted downturn that isn't likely to end soon, though the measure of the carnage on the NASDAQ has already nearly reached my expectations (7-9%).
People (like headline writers for major news services) usually search to find reasons behind the numbers, but in this current case, there need be no rationale. Stocks are falling because people are selling, plain and simple. A combination of certain perceptions, including, a) a slowing economy (real), b) overvaluation of stocks (again, real), and c) fear that the future may not be so bright (perceived, and only possibly real), have all contributed to the sell-off of the past week.
These perceptions are not about to change soon. Only revaluation (i.e., lower stock prices) is going to solve the problem and that means lower we must go. There's little confidence on Wall Street or Main St. right now and it's being reflected in the indices on an everyday basis.
Today was no exception as we saw the Dow hang in positive territory until capitulation in mid-afternoon. The NASDAQ and S&P 500 spent most of their day in the red.
Dow 12,050.41 -63.69; Nasdaq 2,340.68 -27.32; S&P 500 1,374.12 -13.05
The real carnage was on the NYSE Composite, which lost 120 points today (1.34%). Market metrics established that the correction is broadening and deepening. Overall NYSE and NASDAQ advance-decline lines ran roughly 5-1 in favor of the losers. NYSE volume was 10-1 in the red. But the most compelling data to confirm the ongoing train wreck were the 189 new lows which swamped the 98 new highs. That number had been relatively flat until Friday, at which time the new lows took over leadership.
The new lows will have to reach more than 300 combined before we can begin to take sight on a bottom, so there's much further to go.
Watching the tape today was a painful, gut-wrenching experience for most investors, except for the brilliant few who had already departed. There's still time to get out, however, before a simple loss becomes a life-changing event. As I've repeatedly noted, we are only in the early phase of this downturn and while I may be wrong about the actual bottom for the Dow, I've already been proven vulnerable on the depth of NASDAQ losses. The upcoming earnings season should prove to be a doozy and we're still 5-6 weeks away from that. Prudence would prescribe selling now, not later.
Perhaps the only good news on the day was that oil for April delivery closed down 1.57 to 60.07. Lower oil and gas prices would be welcome relief and surely more representative of the actual supply-demand scenario. Gold and silver were also lower again, signaling that there truly is no safe haven.
The Dow has lost nearly 600 points in just the last 5 sessions. If that isn't enough of a departure signal for you, maybe being hit by the actual train will do. It's very clear that another 1000 points will be sacrificed over the next 3-5 weeks. Caveat emptor.
People (like headline writers for major news services) usually search to find reasons behind the numbers, but in this current case, there need be no rationale. Stocks are falling because people are selling, plain and simple. A combination of certain perceptions, including, a) a slowing economy (real), b) overvaluation of stocks (again, real), and c) fear that the future may not be so bright (perceived, and only possibly real), have all contributed to the sell-off of the past week.
These perceptions are not about to change soon. Only revaluation (i.e., lower stock prices) is going to solve the problem and that means lower we must go. There's little confidence on Wall Street or Main St. right now and it's being reflected in the indices on an everyday basis.
Today was no exception as we saw the Dow hang in positive territory until capitulation in mid-afternoon. The NASDAQ and S&P 500 spent most of their day in the red.
Dow 12,050.41 -63.69; Nasdaq 2,340.68 -27.32; S&P 500 1,374.12 -13.05
The real carnage was on the NYSE Composite, which lost 120 points today (1.34%). Market metrics established that the correction is broadening and deepening. Overall NYSE and NASDAQ advance-decline lines ran roughly 5-1 in favor of the losers. NYSE volume was 10-1 in the red. But the most compelling data to confirm the ongoing train wreck were the 189 new lows which swamped the 98 new highs. That number had been relatively flat until Friday, at which time the new lows took over leadership.
The new lows will have to reach more than 300 combined before we can begin to take sight on a bottom, so there's much further to go.
Watching the tape today was a painful, gut-wrenching experience for most investors, except for the brilliant few who had already departed. There's still time to get out, however, before a simple loss becomes a life-changing event. As I've repeatedly noted, we are only in the early phase of this downturn and while I may be wrong about the actual bottom for the Dow, I've already been proven vulnerable on the depth of NASDAQ losses. The upcoming earnings season should prove to be a doozy and we're still 5-6 weeks away from that. Prudence would prescribe selling now, not later.
Perhaps the only good news on the day was that oil for April delivery closed down 1.57 to 60.07. Lower oil and gas prices would be welcome relief and surely more representative of the actual supply-demand scenario. Gold and silver were also lower again, signaling that there truly is no safe haven.
The Dow has lost nearly 600 points in just the last 5 sessions. If that isn't enough of a departure signal for you, maybe being hit by the actual train will do. It's very clear that another 1000 points will be sacrificed over the next 3-5 weeks. Caveat emptor.
Friday, March 2, 2007
What a Week: Devaluing Corporate America
Our country is under attack, not by terrorists or a foreign army, but by foreigners, after all, who own most of our debt and a lot of the very same stocks they sold this week.
Corporate America took a nearly 5% devaluation in the course of trading this week. It wasn't a happy sight, nor was the close of trading today, with all three major indices closing at - or very close to - their lows. Such a close does not bode well for Monday.
Assessing the damage, Friday's numbers:
Dow: 12,114.10 -120.24; NASDAQ: 2,368.00 -36.21; S&P 500: 1,387.17 -16.00
And for the week:
Dow: -533.38 (-4.22%); NASDAQ: -147.1 (-5.83%); S&P 500: -64.02 (-4.41%)
What's surprising (at least to me) is the extent of the selling on the NASDAQ. I'd assumed that since the NASDAQ had not recovered from 2000 as well as the other indices, that it would be less prone to massive meltdowns, but the numbers don't lie: techs took a beating this week, nearly half again as much in percentage losses of the other major exchanges.
I can't put my finger on just what it is, but making the NASDAQ the whipping boy in this downtown doesn't exactly add up. Perhaps the market - or some entity acting as a proxy for the market - is trying to make the case that stocks on the junior circuit just aren't as stable and capable of handling bad news, that they are overvalued to an exaggerated degree, or that the NASDAQ is an inherently unsafe haven for investment money.
Call me cynical, but when 28 of the 30 Dow components show losses, as they did on Friday, I'd consider that to be a vulnerable situation. Of course, there's a degree of crossover, as some of the Dow stocks are listed on the NASDAQ, but that still doesn't account for the disparity.
Perusing the Dow components, one after another sports a p/e in the teens, dividend yield of less than 3% and a long history of positive earnings. With that in mind, perhaps there was somewhat of a flight to quality, with investors seeking safe haven in the Blue Chips. If that is indeed the case and we are in the initial stages of a serious correction, I may be out ahead of myself. Over the next 2-4 weeks, we should see the Dow - and the S&P - running a little colder than the NASDAQ. Eventually, bargains will emerge in the beaten down techs as the downtrend lengthens and broadens.
At some point - probably mid-to-late April - we will hear the term shooting the generals at which point I would suggest buying unduly depressed NASDAQ stocks with gusto. The aforementioned term comes from military parlance, and envisions the end-point of a war, when the well-protected leaders are finally rousted and dispatched. So it may be with the Dow stocks which look safe for now, but will eventually capitulate near the end of the correction.
The commodity markets also deserve a glance. Oil was off 36 cents to close at $61.64. I'd like to say that the price of crude has topped or is capped around $62-64, but that would be nothing more than wishful thinking. The charts show that oil isn't about to rise dramatically any time soon unless there is a politically-unstabilizing event or more outright manipulation of the price. With heavy driving months of Spring and Summer approaching, the price is expected to rise, but supply-demand dynamics and a slowing economy may derail such a movement. We can only hope that the charts, which indicate a retracement back into the 50s in the cards, are more prescient than the news media and crude hucksters who preach "driving season" economics.
Gold got slammed again, down 21.00/oz. to 644.10. Silver tagged along again, failing from its breakout at 14.35. Today, the price of silver slumped 0.69 to close at 12.96. Safe haven, my foot! You'd be better off stuffing mattresses.
Corporate America took a nearly 5% devaluation in the course of trading this week. It wasn't a happy sight, nor was the close of trading today, with all three major indices closing at - or very close to - their lows. Such a close does not bode well for Monday.
Assessing the damage, Friday's numbers:
Dow: 12,114.10 -120.24; NASDAQ: 2,368.00 -36.21; S&P 500: 1,387.17 -16.00
And for the week:
Dow: -533.38 (-4.22%); NASDAQ: -147.1 (-5.83%); S&P 500: -64.02 (-4.41%)
What's surprising (at least to me) is the extent of the selling on the NASDAQ. I'd assumed that since the NASDAQ had not recovered from 2000 as well as the other indices, that it would be less prone to massive meltdowns, but the numbers don't lie: techs took a beating this week, nearly half again as much in percentage losses of the other major exchanges.
I can't put my finger on just what it is, but making the NASDAQ the whipping boy in this downtown doesn't exactly add up. Perhaps the market - or some entity acting as a proxy for the market - is trying to make the case that stocks on the junior circuit just aren't as stable and capable of handling bad news, that they are overvalued to an exaggerated degree, or that the NASDAQ is an inherently unsafe haven for investment money.
Call me cynical, but when 28 of the 30 Dow components show losses, as they did on Friday, I'd consider that to be a vulnerable situation. Of course, there's a degree of crossover, as some of the Dow stocks are listed on the NASDAQ, but that still doesn't account for the disparity.
Perusing the Dow components, one after another sports a p/e in the teens, dividend yield of less than 3% and a long history of positive earnings. With that in mind, perhaps there was somewhat of a flight to quality, with investors seeking safe haven in the Blue Chips. If that is indeed the case and we are in the initial stages of a serious correction, I may be out ahead of myself. Over the next 2-4 weeks, we should see the Dow - and the S&P - running a little colder than the NASDAQ. Eventually, bargains will emerge in the beaten down techs as the downtrend lengthens and broadens.
At some point - probably mid-to-late April - we will hear the term shooting the generals at which point I would suggest buying unduly depressed NASDAQ stocks with gusto. The aforementioned term comes from military parlance, and envisions the end-point of a war, when the well-protected leaders are finally rousted and dispatched. So it may be with the Dow stocks which look safe for now, but will eventually capitulate near the end of the correction.
The commodity markets also deserve a glance. Oil was off 36 cents to close at $61.64. I'd like to say that the price of crude has topped or is capped around $62-64, but that would be nothing more than wishful thinking. The charts show that oil isn't about to rise dramatically any time soon unless there is a politically-unstabilizing event or more outright manipulation of the price. With heavy driving months of Spring and Summer approaching, the price is expected to rise, but supply-demand dynamics and a slowing economy may derail such a movement. We can only hope that the charts, which indicate a retracement back into the 50s in the cards, are more prescient than the news media and crude hucksters who preach "driving season" economics.
Gold got slammed again, down 21.00/oz. to 644.10. Silver tagged along again, failing from its breakout at 14.35. Today, the price of silver slumped 0.69 to close at 12.96. Safe haven, my foot! You'd be better off stuffing mattresses.
Thursday, March 1, 2007
Oopsie, Daisy, We Almost Did It Again
US equity markets opened in an ugly mood today. Gapping lower at the open the Dow quickly sold off over 200 points but quickly recovered all except 50 points, all in the first half hour of trading. The other indices followed roughly the same pattern.
From there, the markets dawdled just below the even line for most of the day, briefly going positive in late afternoon before selling off into the close.
All told, it wasn't very pretty.
This is a market that wants to sell off, knows it is going to sell off and will sell off. There's no impetus for further upside movement and jittery brokers know it. Volumes showed a heavy bias on the negative again today. New lows are beginning to proliferate; 176 today, topping out new highs by a slight margin.
Dow 12,234.34 Down 34.29; NASDAQ 2,404.21 Down 11.94; S&P 500 1,403.17 Down 3.65
Oil persisted in reflecting unreal expectations for future demand, tacking on another quarter to even out at $62.00 per barrel. The price is pure fantasy on the part of futures traders and is in now way reflective of actual supply-demand dynamics. The price of oil - and refined, of gas - is pure fiction, built on greed and monopolist politics. It's a surfeit of corporate and international culture that is out of control and continues to plague markets as the single most dangerous threat to stabilized markets in the world.
The oil gambit is doomed to failure, however, as are all frauds and schemes. Eventually, markets will adjust to what they consider unfair arrangements and move to alternatives. And alternatives are emerging at a more rapid pace than the oil organizers care to admit.
Gold took a beating again, and today, silver followed dutifully along, though silver's loss was less than half in magnitude to gold's injury of -7.40. The metals, like everything else, looks stuck, waiting for the other shoe to drop
...which could happen at any time.
From there, the markets dawdled just below the even line for most of the day, briefly going positive in late afternoon before selling off into the close.
All told, it wasn't very pretty.
This is a market that wants to sell off, knows it is going to sell off and will sell off. There's no impetus for further upside movement and jittery brokers know it. Volumes showed a heavy bias on the negative again today. New lows are beginning to proliferate; 176 today, topping out new highs by a slight margin.
Dow 12,234.34 Down 34.29; NASDAQ 2,404.21 Down 11.94; S&P 500 1,403.17 Down 3.65
Oil persisted in reflecting unreal expectations for future demand, tacking on another quarter to even out at $62.00 per barrel. The price is pure fantasy on the part of futures traders and is in now way reflective of actual supply-demand dynamics. The price of oil - and refined, of gas - is pure fiction, built on greed and monopolist politics. It's a surfeit of corporate and international culture that is out of control and continues to plague markets as the single most dangerous threat to stabilized markets in the world.
The oil gambit is doomed to failure, however, as are all frauds and schemes. Eventually, markets will adjust to what they consider unfair arrangements and move to alternatives. And alternatives are emerging at a more rapid pace than the oil organizers care to admit.
Gold took a beating again, and today, silver followed dutifully along, though silver's loss was less than half in magnitude to gold's injury of -7.40. The metals, like everything else, looks stuck, waiting for the other shoe to drop
...which could happen at any time.
Wednesday, February 28, 2007
Cooler Heads Prevail; Wall St. Bucks Up
A day after one of Wall Street's more impressive downflights, the suits got back on their trains this morning as usual and began buying some stocks.
It wasn't exactly an overwhelming affirmation of the miracle of capitalism, but Wall Street, being the fickle beast that it is, turned the tide and restored some confidence after a severe battering on enormous volume - the largest ever for the NYSE.
Like I said yesterday, nobody should have been in a big hurry to dump their 401k or empty the college fund because yesterday's event was highly staged and will barely be seen as a blip in the long run of events. The fact remains, however, that all of the gains of January and February were wiped out in one day, so we're starting all over again for the year, like some version of an economic do-over.
There were probably more than a few millions made on the short side in options and most of that was likely in the hands of the big brokerages and other uber-traders. Today's mini-rebound notwithstanding, the overall mood is a bit dour and anyone who's anyone knows that stocks were overbought and in need of some kind of reversal. One should also be aware that in this shock-and-awe environment, yesterday's Bear barrage was only the first salvo and more down days are on the horizon.
A 3-4% wallop on one day is certainly a good start for a protracted correction, which is well underway and should see a fair share of up and down days over the next couple of months. Naturally, the down days will be larger and more dynamic that the speculative uppers, and the bottom will eventually be found well below current levels.
For the record, the Dow gained 52.39 points, the NASDAQ plowed ahead 8.29 and the S&P picked up 7.78. Those numbers are dwarfed by yesterday's hammering, but it shows there are still Bulls ready for slaughter.
Make no mistake, the correction has now been well-greased and there are still overvalued stocks aplenty. A couple of my favorites, Yahoo and eBay, are trading at current p/e ratios of nearly 60 and 40, respectively. (I've a mind to buy about a zillion Yahoo April 30 puts but I don't want to disturb the market. I just want to report on it.)
One doesn't have to look far to find stocks to sell. Tuesday's sell-off was rather uniform and orderly - as orderly as a mini-crash can be - and while there were a number of severe casualties, there were no fatalities.
Today's muted reaction was more of a calming session, even though suckers could be found on every issue. Volume was once again abnormally high. There is more downside risk, much more. Keep an eye peeled on oil, silver and gold. Crude has broken above $60 for now, closing today at $61.75, the last day of trading for April futures. Expect a pull-back tomorrow on crude, while gold remains rangebound. Silver is on the verge of a breakout and bears watching if not an outright screaming buy. Considering the carnage from Tuesday, the precious metals certainly displayed some generous giveback today.
It wasn't exactly an overwhelming affirmation of the miracle of capitalism, but Wall Street, being the fickle beast that it is, turned the tide and restored some confidence after a severe battering on enormous volume - the largest ever for the NYSE.
Like I said yesterday, nobody should have been in a big hurry to dump their 401k or empty the college fund because yesterday's event was highly staged and will barely be seen as a blip in the long run of events. The fact remains, however, that all of the gains of January and February were wiped out in one day, so we're starting all over again for the year, like some version of an economic do-over.
There were probably more than a few millions made on the short side in options and most of that was likely in the hands of the big brokerages and other uber-traders. Today's mini-rebound notwithstanding, the overall mood is a bit dour and anyone who's anyone knows that stocks were overbought and in need of some kind of reversal. One should also be aware that in this shock-and-awe environment, yesterday's Bear barrage was only the first salvo and more down days are on the horizon.
A 3-4% wallop on one day is certainly a good start for a protracted correction, which is well underway and should see a fair share of up and down days over the next couple of months. Naturally, the down days will be larger and more dynamic that the speculative uppers, and the bottom will eventually be found well below current levels.
For the record, the Dow gained 52.39 points, the NASDAQ plowed ahead 8.29 and the S&P picked up 7.78. Those numbers are dwarfed by yesterday's hammering, but it shows there are still Bulls ready for slaughter.
Make no mistake, the correction has now been well-greased and there are still overvalued stocks aplenty. A couple of my favorites, Yahoo and eBay, are trading at current p/e ratios of nearly 60 and 40, respectively. (I've a mind to buy about a zillion Yahoo April 30 puts but I don't want to disturb the market. I just want to report on it.)
One doesn't have to look far to find stocks to sell. Tuesday's sell-off was rather uniform and orderly - as orderly as a mini-crash can be - and while there were a number of severe casualties, there were no fatalities.
Today's muted reaction was more of a calming session, even though suckers could be found on every issue. Volume was once again abnormally high. There is more downside risk, much more. Keep an eye peeled on oil, silver and gold. Crude has broken above $60 for now, closing today at $61.75, the last day of trading for April futures. Expect a pull-back tomorrow on crude, while gold remains rangebound. Silver is on the verge of a breakout and bears watching if not an outright screaming buy. Considering the carnage from Tuesday, the precious metals certainly displayed some generous giveback today.
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