Markets Mashed Again

Taking its cue from yesterday's day-long sell-a-thon, investors took some time Wednesday morning determining the direction of the market. The major indices hugged the flatline or traded slightly negative all morning, but, by 2 PM, the selling had accelerated into another rout of the bulls.

Dow 12,601.19 -227.49; NASDAQ 2,448.27 -43.99; S&P 500 1,390.71 -22.69 NYSE Composite 9,397.03 -138.98

The precipitous drop in stocks coincided with the release of minutes from the Fed's April meeting. The Fed governors apparently were very close to not cutting rates at all (they cut federal funds .25%) and indicated that the economy was very weak, with stresses from the high price of oil, gas and food; credit issues; and continued weakness in the housing market were paramount concerns.

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Once again, oil exploded to another record high price, settling at $133.17, up a dramatic $4.19 in just one day. This also contributed to the selling of stocks, with oil markets reacting to a large, unexpected drop in US crude inventories.

Normally, Fed minutes and oil inventory figures would not prompt such a strong reaction, but, given the market's jittery current composition, sentiment sent stocks to shocking new lows.

Speaking of new lows, there were 216 of them, compared to 204 new highs, somewhat of a surprise considering the breadth and depth of the sell-off. With trading characterized best as "one-sided," decliners outnumbered advancing issues, 4201-1820. These internal figures are still rather modest. More concerted selling and borderline panic would show the gap between new lows and highs much more pronounced, while the decline-advance ratio would be more like 4-1 or 5-1, rather than today's 2-1 ratio.

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With only two sessions remaining before a three-day holiday weekend, it's difficult to see investors staking out significant positions in stocks on Thursday and Friday. More likely, the markets will mark time, squaring up solid positions while dumping weak sisters.

Now that the markets have broken out of their tight 4-week trading range (see yesterday's posting), the stage is set for a retest of the March lows. This could occur rapidly, as sentiment has turned decidedly negative of late, but a gradual drift back to 12,000 seems to be in the cards over the coming two weeks.

The metals continued their sustained rally, with gold advancing $8.40 to $928.60 and silver gaining 33 cents to $18.05.

NYSE Volume 1,389,451,000
NASDAQ Volume 2,192,166,000

Stocks in Full Retreat Mode

Stocks continued their 23-session-long see-sawing as indeterminate investors pushed the major indices back down throughout the day on Tuesday.

Using the Dow as a guide, the markets have traded in roughly the same range since April 18. During that span, the blue-chip index has seen a maximum closing low and high of 12,745 and 13,058, a stretch of just over 300 points, or, just a bit more than 3%.

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The sideways trade is frustrating for both longs and shorts. Direction must be determined at some point, and one likely scenario (bearish) is for a full-blown shakeout back to retest the March lows. Bulls will say the market is consolidating at a new level for a burst higher. Either condition could prevail. In the absence of corporate earnings until mid-July, news, economic reports and consensus opinion will determine direction over the near term.

Dow 12,828.68 -199.48; NASDAQ 2,492.26 -23.83; S&P 500 1,413.40 -13.23; NYSE Composite 9,536.01 -66.77

Not unexpectedly, advancing issues took a back seat to a deluge of decliners, 3795-2264. New lows regained the edge over new highs as well, 182-143.

The major catalysts on the day were more bleak news from the financial center, as Oppenheimer analyst Meredith Whitney predicted the credit crisis would continue into 2009. First quarter results from Home Depot (HD, 27.37, -1.50) beat lowered estimates, but still were disappointing. The PPI shot up 0.2%, with core PPI up more than expected, 0.4%. Naturally, the price of oil continued to another record close. The superfecta of bad news just was too much to overcome.

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Oil shot up another $2.26, to close at $128.98. Gold gained $14.40 to $920.20. Silver improved 70 cents to $17.73 per ounce.

Essentially, it was a bad day to hold anything you couldn't touch or feel.

The balance of the week doesn't hold much promise with few economic reports due. Only April existing home sales on Friday at 10:00 am offers a blockbuster number, and that could be very bad, as has been the case since August of last year.

I remain somewhat bearish, though mindful that the market could take off without any kind of impetus. However, we've witnessed a triple top in the 13,020-13,058 range and the market just can't seem to break through that level.

NYSE Volume 1,236,900,000
NASDAQ Volume 2,018,207,000

Reversal of Fortune

The kind of action seen today on the indices is usually reserved for a Turbulent Tuesday or a Turnaround Thursday, but today being Monday, we'll just have to call it an Afternoon About-face.

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When the Conference Board released their Index of Leading Economic Indicators for April, investors bought up stocks based on the second straight monthly gain of 0.1%.

By mid-afternoon, with all the indices up smartly (the Dow hit an intraday high of 13,136.39), the reality of such a smallish gain just hit traders over the head like a bag of hammers and brisk, widespread selling began in earnest, taking the Dow down to nearly break-even and sinking the other indices into the red, especially the NASDAQ, which suffered the worst decline of the day.

Dow 13,028.16 +41.36; NASDAQ 2,516.09 -12.76; S&P 500 1,426.63 +1.28; NYSE Composite 9,602.78 -0.23

Outside of the Conference Board's report, there was little else upon which to hang a rally as stocks lost value late in the day even more quickly than they gained in the AM. Again, the catalyst may have been oil or just sentiment that the market is basically outrunning itself ahead of expectations that sent stocks sliding, but, whatever it was, it certainly looked serious, with the drops coming all of a sudden or in waves of high volume.

Internals were expectedly mixed, with declining issues beating advancers, 3336-2708. New highs continued to lead new lows, 248-154, suggesting that there's more from where this rally has come.

Crude oil closed with a gain of 77 cents to $127.06 -another record. The metals crossed key thresholds as gold advanced $5.90 to $905.80 and silver gained 7 cents to close at $17.03 per ounce.

The market is continuing to send mixed signals, though the bias is beginning to tilt towards the positive. Many in the market remain unconvinced, however, as today's sell-off surely showed.

NYSE Volume 1,149,216,000
NASDAQ Volume 2,263,051,000

Markets Finish Week Mixed

We are still in the midst of very turbulent times. Over the past nine months, since the blowup of the subprime mortgage market, the major indices have lost somewhere in the range of 8-12% of their value. Not bad, considering the difficulties faced by lenders, homeowners, small businesses and municipal governments, which have faced a plethora of unhealthy conditions including tight credit, general inflation, falling home values, high energy prices and not much in the way of assistance or direction from government.

Fed Chairman Ben Bernanke tells us that conditions in credit markets have improved, though that's not much solace for consumers who have had to trade off some stability in the credit markets via lower interest rates for a weaker dollar. The result has been higher prices for basic necessities - food and fuel - though these matters haven't seemed to have any noticeable affect on corporate profits.

Treasury Secretary Henry Paulsen said the economy would rebound in the second half of 2008. We've been hearing that refrain for the last six months, though without a good explanation as to why. (Personally, I have no confidence in Paulsen and consider him somewhat of a hollow suit.) Today, in prepared remarks, Paulsen again repeated that the stimulus checks to American taxpayers, plus breaks for business would produce 500,000 new jobs in the last six months of the year. Wishful thinking, for sure, but remember, he's using very slanted government statistics, so the odds that the figures will ring true by November (election time) are good.

Dow 12,986.80 -5.86; NASDAQ 2,528.85 -4.88; S&P 500 1,425.35 +1.78; NYSE Composite 9,603.01 +49.49

Friday's trade could best be described as subdued, as there were few newsy items upon which to trade. The good news from the construction sector - an 8.2% jump in residential housing - was tempered when the Commerce Department reported most of the gain was due to apartment building, not new single-family homes.

Consumer confidence hit a 28-year low while oil gained $2.17 to close at $126.29, another record high. Gold gained $19.90 to $899.90, while silver moved up 28 cents to $16.96.

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Declining issues edged advancers on Friday, 3010-2859. New highs surged past new lows, 252-162, reversing yesterday's decision, another sign of turbulence or volatility.

While the markets were up this week, they are basically unchanged over the past two. Until there is some upside thrust, direction and bias remains sideways to lower.

NYSE Volume 1,314,786,000
NASDAQ Volume 2,276,973,000

Stocks Blast Higher on Options, Optimism

With Wednesday's rally truncated late in the day, investors - apparently not content to sit back and wait - sent stocks higher on Thursday in brisk trading. The S&P, NASDAQ and NYSE Composite all were up more than 1% on the day, breaking through key levels while the Dow Jones Industrials struggled just below the key 13,000 mark.

Dow 12,992.66 +94.28; NASDAQ 2,533.73 +37.03; S&P 500 1,423.57 +14.91; NYSE Composite 9,553.52 +116.07

Spurring investors were a recent spate of corporate mergers and maneuvers, including Hewlett Packad's (HPQ) $13.9 billion purchase of Electronic Data Systems (EDS) and General Electric's (GE) decision to sell off its appliance division.

Also helping investors make stock buying decisions were a number of economic reports, including figures from the NY and Philadelphia Fed, which both saw declines in economic activity, though Philly's was not as severe as expected. Still, the Empire State Index unexpectedly fell to -3.23, while the Philadelphia Fed's General Economic Index improved to -15.6, from -24.9 in April. Manufacturing in the region, however, continued a precipitous decline.

New unemployment claims increased only 6,000 for the week, to 371,000. National industrial production slumped 0.7%, and capacity utilization fell a negligible 0.1% to 79.9%.

Somehow, all of this is viewed on Wall Street as good news. Naturally, one has to view today's gains in the context of options expiration, which occurs tomorrow.

Oil moderated again, losing 26 cents, to close at $123.85 per barrel. Gold, +13.50 finished at $880.00, with silver tacking on 7 cents per ounce to $16.69.

Advancing issues outdid decliners, 3960-2033. Somewhat against the grain, new lows recaptured the lead from new highs, 173-169, suggesting that options activity actually had more to do with today's trading than some optimistic sentiment or market fundamentals, as investors may have been bottom fishing on puts and out of money calls about to expire.

Trading volume was solid, though unspectacular. The markets appear to be doing little more than treading water, however, as the major indices are at roughly the same levels as two weeks ago, except the NASDAQ, which has continued to move forward, but is still down roughly 4% on the year.

NYSE Volume 1,194,660,000
NASDAQ Volume 2,242,104,000