Stocks Drift, End Higher

The trading today was akin to watching paint dry. All of the indices traded in a narrow range, hovering above and below the flat line. Volume, as it has the last three days, remained on the low side.

Dow 12,594.03 +45.68; NASDAQ 2,486.70 +5.46; S&P 500 1,390.84 +5.49; NYSE Composite 9,364.34 +50.32

The advances of the past two days are highly illusory. In the absence of any concrete economic news, traders are forced into a condition of buying despite their best instincts. It's really a herd mentality at work. Once the market is up for a while, investors get the idea that everything is OK and it's safe to buy stocks.

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And they're buying up anything that has been beaten down over the past 9 months, which is just about everything. Stocks are still risky, despite what any analyst or market wonk may tell you, me, their neighbors or friends. The government continues to sound the "all clear" horns, though behind the scenes, inflation, foreclosures, tight credit and the employment condition have them scared to death.

So, the indices will gain smallish amounts for days, but then, just like last week, there will be a sudden realization that the market stinks and the US economic ship is still sinking. Low volume tells us that the smart money is still sitting on the deck, sipping mai tais, waiting for the eventual storm to capsize the whole ship, crew and all. The correction in stocks may not be swift, but slow and deadly, but one thing is certain, it will be deep, just like the recession the government seeks to avoid/obfuscate/ignore.

On the day, advancers beat decliners, 3481-2811. New lows continue to hold sway over new highs, 196-112. The highs-lows metric continues to suggest lower days ahead, in the near term.

Oil rebounded again, gaining $2.18 to $131.03. Gold dipped, losing $7.80, to $905.00. Silver also lost ground, declining 5 cents to $17.42.

With two days past and two to go in the short week, expect a little bit of turnaround on either Thursday or Friday. Of course, whatever happens will not be extraordinary, unless some outside force is felt on Wall Street, or unless the smart money goes completely to the sidelines, which would likely result in a 3-400 point drop on the Dow.

The more probable condition is the slow-drip torture method we've witnessed over the past months. A few days up, then down. Rinse, repeat. Lose.

NYSE Volume 1,205,546,000
NASDAQ Volume 1,862,700,000

Week Begins with Low-level Markup

There was nothing startling about today's market gains. One can read absolutely nothing into the low volume rally following a three-day weekend except that it is unlikely to last through tomorrow's midday trading.

In fact, today's trade was more evidence of the PPT (Plunge Protection Team a/k/a the President's Working Group on Financial Markets) remaining active in the markets as the upward trajectory was largely the result of two separate, abrupt 50-point moves on the Dow - both between 12,500 and 12,550 - which occurred at 10:00 am and again at 2:30 pm.

The sad part of the manipulation plan for the markets is that both moves failed to create or sustain momentum.

Following the 10:00 am move, the Dow backed off 100 points by noon. The 2:30 pump resulted in the highs of the day an hour later, though by the close, the 12,550 target was not realized.

Dow 12,548.35 +68.72; NASDAQ 2,481.24 +36.57; S&P 500 1,385.35 +9.42; NYSE Composite 9,314.02 -1.76

News was largely inconsequential, as the Conference Board reported that their Consumer Confidence Index dropped to 57.2, from a revised 62.8 in April, it's lowest level since 1992.

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And while new home sales increased 3.3% in April, home prices fell by 14.1% in the first quarter of 2008.

Oil fell on the NY Mercantile Exchange, losing $3.34 on new concerns over - get this - demand - to 128.85. This is not unexpected and it would be no surprise if oil prices stabilized over the summer and subsequently fell in autumn, just in time for energy prices not to be an issue in the November elections.

Since Republicans have been so accommodating to Big Oil, a concerted trading and talking effort will coordinate to keep gas prices below $4.00 in the fall of 2008, and likely under $3.50. Republicans don't want to give Democrats an issue, and this is surely one over which they have control. It's a scandal, a sham and a shame. If a new administration is brought to bear in November, investigations should begin early in 2009.

The average price of a gallon of gas hit an all-time high of $3.93 over the just-concluded Memorial Day weekend. The price is as artificial as an office-lobby fern and should vacillate between $3.60 and $4.00 for the balance of summer, or, as oil execs and politicians on their payroll are fond of calling it, the peak driving season.

Gold lost $19.20 to $906.60. Silver finished 83 cents lower at $17.47.

Market internals were on opposite axes, as advancing issues outpaced decliners, 3976-2289, but new lows continued to dominate new highs, 182-103.

With little corporate news and a dearth of economic releases this week, expect stocks to vacillate with a slim bias to the upside. Investors are still very much in the dark as to the true strength or weakness of the economy and are desperate for gains. Anyone on the buy side over the next few weeks is likely to find eventual disappointment as the indices will retest March lows at some point in the near term.

NYSE Volume 1,129,459,000
NASDAQ Volume 1,720,927,000

Stocks Finish Week Badly

The only catalyst needed to send stocks into a pre-holiday funk was word that existing home sales fell for the 8th time in the last nine months. Right from the opening bell, investors were selling and getting out of town.

Market lows came early on - prior to noon - and stocks drifted in a negative range all session long. And while the housing news was widely expected, it served as just another reminder that the US economy has a long way to go towards recovery.

e Dow 12,479.63 -145.99; NASDAQ 2,444.67 -19.91; S&P 500 1,375.93 -18.42; NYSE Composite 9,315.78 -117.57

Declining issues outpaced advancers by the widest margin of the week, 4335-1742. New lows opened a huge gap over new highs, 212-65, the widest in weeks.

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Even though volume was very light - typical of a pre-holiday get-away - the hangover effects of a horrible end to the week will certainly spill over into the final week of May and into June, a period normally highlighted by sluggish trade and nitpicking over corporate details.

Many investors find that May-August are best spent on the beach or the vacation home and a rally this summer would certainly be something of a lark.

Crude oil regained $1.38 to close out the week at $132.19, while gold advanced $7.50 to $925.80 and silver edged 27 cents higher to $18.29.

All told, the Dow lost 3.5% for the week with other major indices following suit.

Remember our fallen heroes this weekend. It is because of them that we enjoy our freedoms.

NYSE Volume 1,105,550,000
NASDAQ Volume 1,727,578,000

Wall St.: Going Nowhere, Slowly

The markets traded in a tight, positive range on Thursday, on extremely low volume characterized by choppiness all session long.

Little more can be said about one of the most lackluster sessions in recent memory.

There was no shocking news on the housing front (wait until tomorrow for that, when Existing Home Sales data is released), few analyst advisories of note, no big Fed speeches or astounding earnings figures.

It was a relief, of sorts, after two consecutive days of deep declines. Investors have to weigh the relative merits of buying into new positions or taking profits as we head into a long and very uncertain summer.

Dow 12,625.62 +24.43; NASDAQ 2,464.58 +16.31; S&P 500 1,394.35 +3.64; NYSE Composite 9,433.35 +36.32

The price of oil on the futures market actually took a breather for a change, dropping $2.36, to $130.81. It's almost as though the schemers in the futures pits realize that the entire world's attention is now focused on them and it was time to take a little froth off the top.

As I've mentioned here previously, oil and energy prices hold the potential for worldwide economic maladies, forcing all manner of inequities in prices for food, especially, and just about any other aspect of human life. Speculation in oil futures has been largely overblown, and, like any orderly market, some kind of correction should be on the horizon.

The oil markets, however, are obviously not orderly. In fact, they are one among the most misunderstood and unregulated of any commodities. There simply are too many sources of data and conflicting readings for anyone to actually have a handle on the true value of a barrel of crude.

Thus, the futures take the path of least resistance, and possibly that of outright manipulation, heading up. Bringing down prices will almost certainly take something approaching an act of God, since there is no hard-and-fast pricing mechanism. Only one thing is certain. We all pay more for heating homes and driving autos.

Advancing issues took a slight edge over decliners, 3476-2548, though new lows once again trumped new highs, 180-91. The recent see-sawing between the new highs-lows and advance-decline metrics continues to suggest more sideways trading with a bearish bent.

It is worth noting that today's spread between the new lows-highs (89) is among the largest in recent vintages.

Gold lost $10.80 to $918.30, while silver dropped just 3 cents to close at $18.03.

With tomorrow the final session before a three-day weekend, another 100+ point loss on the Dow would not be surprising in the least, though another day just like today is probably more likely.

NYSE Volume 1,187,776,000
NASDAQ Volume 1,964,569,000

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