Stocks Trampled Into Correction

Remember that little 180-point Black Friday rally on the Dow?

Well, forget about it. On Monday, the Dow wiped out all of that half-session gain and then some, pushing the Dow into negative territory for the year and the blue chip index officially into a correction - down 10% from the highs.

Dow 12,743.44 -237.44; NASDAQ 2,540.99 -55.61; S&P 500 1,407.22 -33.48; NYSE Composite 9,389.50 -193.48

Additionally, Monday - the first full day of trading during the "holiday season" - saw the S&P 500 fall into negative territory for the year.

The NASDAQ fell into "correction" territory as well, off its October 31 high of 2859.12. It has shed more than 11% of its value in less than a month - 17 trading sessions.

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As usual, the main culprit for the fall in US equities was the continuing credit/mortgage/housing crisis. Two stories were front and center on the topic. CitiGroup (C) announced that another round of cost-cutting might include layoffs, and financial network CNBC commented that the layoffs could number 45,000.

Embattled lender Countrywide Financial (CFC) was the subject of a letter from NY Senator Charles Schumer, who sought a probe of more than $50 billion Countrywide borrowed from the Federal Home Loan Bank system.

Countrywide fell $1.01, or 10 percent to $8.64, while CitiGroup slumped 1.00 (3.15%) to $30.70.

In the overall market, declining issues led advancers, 4843 to 1603, a ratio of better than 3 to 1. New lows surged to 627, as opposed to 99 new highs. While housing and credit are getting most of the headlines, the declines are being seen in all market segments.

Oil dropped 48 cents to settle at $97.70 per barrel on the New York Mercantile Exchange. Gold and silver posted modest gains, though commodities were barely the focus of Monday's trading.

The 200-point decline on the Dow was the 6th of that magnitude this month, making November easily the worst month for the markets this year. In all, the Dow has lost 1187 points during the penultimate month of 2007.

NYSE Volume 3,706,467,250
NASDAQ Volume 2,019,342,250

Dow Pounded to 7-Month Low

In a wild, pre-holiday session on Wednesday, the Dow Jones Industrials, with all other major indices in tow, crashed through near-term support levels and closed at a 7-month low.

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The April 17 close of 12,773.04 was the last time the Dow closed below 13,000, leaving the blue-chip average up just 336 points for the year, or just over 3%.

The NASDAQ and S&P 500 closed at a 3-month low, the NASDAQ just 20 points above the lows registered in August, while the S&P ended 10 points higher than the August 16 low. While the NASDAQ is still trading up 4% for the year, the S&P fell into negative territory for 2007. The widely-watched average closed at 1418.30 on December 31 of 2006.

The NYSE Composite Index, the broadest measure of stocks, remained well above the August 16 low of 9,087.10 and remains in positive territory for the year.

Dow 12,799.04 -211.10; NASDAQ 2,562.15 -4.66; S&P 500 1,416.77 -22.93; NYSE Composite 9,405.22 -170.07

The decline on the Dow was the 5th session registering a loss of 200 or more points and is perilously close to being technically in a correction (down 10%). From it's high, the Dow would have to close below 12,748. Unless Wall Street investors are capable of pulling multiple rabbits from their hats, the Dow will be in a correction by next week.

Credit fears continue to dog the markets and soon the consumer will take center stage, as the holiday shopping season commences on Black Friday, the day after Thanksgiving. Prospects for a buoyant Christmas season are dim for many retailers, who see consumers as tapped out and spending less due to high gas prices, fears of an economic downturn and housing woes. Credit card debt is at an all-time high and more consumers are using credit cards for everyday purchases, an ominous sign.

Measuring market internals, declining issues outpaced advancers, 4578-1788. New lows rang in at 876, with only 67 stocks marking new highs. Both the gap between the new highs/lows and the minuscule number of new highs are alarming and sending strong sell signals.

The price of a gallon of oil remained persistently high, although crude lost 74 cents to $97.29. Gold was up $7.20 to close at $798.60, while silver slipped 8 cents to $14.42.

With all the turmoil and volatility in US markets, the final five weeks of the year should pose significant problems for investors. Adding to the woes of an already troubled - and increasingly skittish - market are concerns about year-end tax selling in addition to what appears to be an uphill climb for retailers this holiday season.

With Thanksgiving tomorrow, investors are probably thankful they still have the opportunity to trim losses, though finding stable stocks to purchase may be a challenge.

NYSE Volume 4,141,169,750
NASDAQ Volume 2,079,205,875

Wild Wall Street Ride

Stocks zigzagged their way to positive closes on the major indices Tuesday, thanks to a late day "miracle" rally, largely credited to a spike in the price of oil and subsequent gains by ExxonMobil (XOM), which finished higher by 3.71 points at 87.82.

What's interesting and almost laughable about that explanation is that higher oil prices are not good for most stocks, only oil stocks, so why did the NASDAQ erase a 34-point decline and close up 3.43? Surely the tech-laden NASDAQ is largely insensitive to oil prices.

The absolute, no-doubt-about-it truth of the matter is that the Plunge Protection Team (PPT) was busy keeping the markets from collapsing again. As it was, the Dow, which was up as much as 150 points early on, lost all of that and was down over 100 points between 2:00 and 3:00 pm. When the PPT got to work on pumping the various market futures, the Dow rose from -80 to +80 in a matter of roughly 20 minutes. All other indices saw similar gains.

Supposedly, these infusions of buying by the Fed, Treasury, and their agents - the brokerages - are good for the market. That might be true if you are ignorant and holding stocks currently, but anyone with a working brain has long since left the market or is short the market. Short-sellers need honest markets, too, and these markets are anything but honest.

Dow 13,010.14 +51.70; NASDAQ 2,596.81 +3.43; S&P 500 1,439.70 +6.43; NYSE Composite 9,575.29 Up 77.96

As usual, proof that the "rally" was a phony as our president lies in the advance/decline line.Declining issues outpaced advancers 3471-2946. New lows cracked the century mark at 1028, as compared to a paltry 92 new highs. Sure the market was up. Inflation, $100/barrel oil, a corrupt federal administration and a credit crisis as severe as any one since the Great Depression naturally sends investors out seeking overpriced stocks with buy orders in both hands. Sure.

The whole rigged racket is droll, so obvious, so blatant and so ignorant that it is often difficult to write about it. I personally want to throw up my hands in disgust whenever I see these absurd price gains across the entire market. Veterans of the exchanges must have gotten used to the abuse by now though mostly they remain silent. After all, their jobs are at stake.

Oil was up $3.39 to close at $98.03. Gold was higher by $13.40 to $791.40. Silver gained 35 cents to close at $14.51.

Thank God Wednesday is a short session. The trading action is highly suspect and I need a break.

NYSE Volume 4,806,186,000
NASDAQ Volume 2,641,784,250

Credit Concerns Sink Stocks... Again

The pre-holiday festivities were none too festive as investors got back to work selling stocks on Monday. All major indices were sharply lower, with the Dow dropping more than 200 points for the 4th time this month - a span of only 13 trading days. The Dow has slipped into negative territory in 7 of the last 9 sessions and today's decline was in the red right from the start as traders weighed in with concerns over the banking and financial sector once again.

Goldman Sach's downgraded CitiGroup to a sell, saying that the firm would have to take writedowns on $15 billion worth of sub-prime related debt. That news set a pallor over the entire market and especially affected the larger banking firms, Merrill Lynch, Morgan Stanley, Wells Fargo and CitiGroup.

Dow 12,958.44 -218.35; NASDAQ 2,593.38 -43.86; S&P 500 1,433.27 -25.47; NYSE Composite 9,497.33 -204.05

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Market breadth was decidedly negative. Declining issues slaughtered gainers by a 5-1 margin, while new lows expanded to 907 (nearly 20% of all stocks traded). There were only 87 new highs.

Oil advanced 80 cents to $94.64. Gold lost $9.00 to $778.00. Silver lost 35 cents to $14.16.

With a short week, scant economic news forthcoming, and continued pressure on the financials, prospects for a holiday rebound are fading fast. The Dow and S&P 500 are within shouting distance from the August lows. If the Dow cracks below 12,800, the next support level is roughly in the area of 12,150-12,300. That much slippage would qualify this market as unabashedly in a corrective mode.

NYSE Volume 4,171,323,000
NASDAQ Volume 2,199,688,500

Plunge Protection Team at Work

There is evidence of the Federal Reserve, in conjunction with the Treasury and major brokerages, rigging the market to the upside. Friday's activity was more evidence of the President's Working Group on Financial Markets (otherwise known as the Plunge Protection Team or PPT) helping US equity markets from slipping into the red.

There were, in fact, two separate events. On the Dow, this was manifested as one 100-point move from 11:30 to 12:15, and another roughly 90-point move from 3:40 pm into the close. It's a safe bet to assume that the Dow and other indices would have finished lower yet again without the pumping from our benefactors inside the shadowy world of high finance.

Dow 13,176.79 +66.74; NASDAQ 2,637.24 +18.73; S&P 500 1,458.74 +7.59; NYSE Composite 9,701.38 +48.86

What did these chump-change gains look like from inside the market? Declining issues checked in ahead of advancers, 3416-2899 and new lows slaughtered new highs, 628-89. In other words, much of the market is sick and minuscule gains like today are akin to spitting from the beach into the Pacific. There has been fundamental damage done to stocks, and generally speaking,

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what fixes markets like this is exactly what is happening. Stocks need to fall to reasonable valuations before investors can feel comfortable throwing money at them.

With earnings hitting the skids and the general economy on a rocky road, now is not the time to dive into equities. I have reiterated this sentiment over and over the past three months. Technical factors aside, the markets are in a corrective phase and may be entering an outright bear market. We'll know more over the remainder of the year as the holiday season and tax-selling ensues.

The price of crude oil continues to be a thorny issue as the per barrel price jumped another $1.67 to close at $95.10 on Friday. Gold was down marginally and silver gained 2 cents.

Volume was particularly strong on the NYSE and has been for over a week. Technology stocks are still somewhat of a safe bet and defensive plays would include consumer staples, mining and energy.

The coming week will be short with Thanksgiving on Thursday. Traditionally, the Wednesday and half-day Friday sessions are usually not volatile. It may serve as the calm before the storm.

NYSE Volume 4,129,085,250
NASDAQ Volume 2,515,753,750