Slaughter on Wall Street

Stocks were once more sliced, diced and dissected by nervous investors as the Dow Jones Industrials dipped to their lowest levels since mid-March.

The NASDAQ and S&P 500 indices also were off sharply, also approaching recent lows. The NASDAQ reached a short-term low of 2,177 on March 17. The S&P bottomed out on March 10, at 1273.37.

We are witnessing the beginning of another downward thrust in the markets as the high price of oil and slumping economies begin to impact stocks in real, tangible ways.

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Also in front of investors is the possibility that the Fed is through cutting interest rates for the time being. Following a series of cuts which began in August of last year, the Fed continues - through speeches by members - to express serious inflation concerns, which are normally fought through higher, not lower, interest rates.

Dow 12,083.77 -205.99; NASDAQ 2,394.01 -54.93; S&P 500 1,335.49 -22.95; NYSE Composite 8,941.27 -125.83

As for market internals, today was one of the worst this year, which is saying quite a bit. Declining issues outpaced advancers by a nearly 4-1 margin, 4974-1332. New lows swamped new highs, 495-72. Once more, the margin between the new highs and lows is elevated and had signaled this decline.

It doesn't take as stock market genius to see where this is headed. Anyone with any experience in markets knows that the March and January lows will be retested before any advance can occur. I've been saying this since late April (maybe even sooner) and it appears to be happening as predicted.

How low the markets actually descend depends largely upon second quarter earnings reports which will be hitting analysts' desks beginning about a month from now and carrying the trading bias through the last two weeks of July and most of August.

Two schools of thought apply. Either the bottom is achieved prior to the upcoming earnings season or the corporate reports cause further erosion. It is too early to tell, but, up until now, outside of financial stocks, companies have not been hard hit by the slowing US economy.

Oil was back up again, gaining $5.07, to $136.38. Gold rebounded somewhat, up $11.70, to $882.70. Silver tagged on gains of 22 cents, closing at $16.86.

The temporary rebound for commodities is still no cause for alarm. If the Fed is serious about raising, or at least not cutting, rates, that should serve to strengthen prospects for the dollar against other currencies. The Fed's next meeting is in two weeks, on June 24-25. A strong policy statement could seal the fate of most commodities (even oil, think of that!), fomenting a sell-off in most key traded markets.

NYSE Volume 1,386,098,000
NASDAQ Volume 2,100,234,000

Wall Street is Stuck

Despite the marginal gain on the Dow today, all other indices traded lower, with the composites (NASDAQ and NYSE) leading declines.

Dow 12,289.76 +9.44; NASDAQ 2,448.94 -10.52; S&P 500 1,358.44 -3.32; NYSE Composite 9,067.10 -81.99

While there was little economic or corporate news upon which to chew, traders were treated to a silly show from the US Senate, where Republicans defeated a bill to impose windfall profits taxes on oil companies.

Actually, the repugnant Republicans in the Senate didn't defeat the bill, they merely kept it from coming to the floor for debate. Democrats, including presidential candidate Barack Obama, promise to revisit the issue again... and again... and again, likely using the lack of debate as an election issue until the Republicans either give in or risk a landslide for Democrats in the fall elections.

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My guess is that they'll cave in to public pressure around Labor Day, after all the damage from $4.50 a gallon gas will have been done. They're like that... evil, uncaring, unrepentant, unscrupulous and in bed with oil money lobbyists.

As for the market internals, they were once again markedly negative. Declining issues led advancers, 3911-2335. New lows once again dominated new highs, 399-71. Along with yesterday, the spread today is signaling - quite loudly - an abrupt directional spike, and it's likely to be to the downside. We should be very close to a complete weak-hands wash-out which could occur at any time.

For a change, commodities took one on the chin. Oil traded $3.03 lower, settling at $131.31. Gold fell by a massive amount, down $26.40, to $871.70, while silver lost 58 cents to $16.64.

Continued weakness in commodity prices, besides being a welcome respite to worldwide inflationary pressures, may also be signaling something more nefarious - a vicious deflationary cycle.

While the Fed presumptively lowered interest rates last year and through the first half of 2008, economic conditions have not improved by any measurable degree. What commodities are telling us is that credit and cash markets are tight, consumers are on the edge of their personal budgetary limits and market dislocations are becoming more and more apparent.

Prices are not rising quickly, if at all, in some areas (and they're actually declining in the most expensive items - homes and autos), and the big boost in all things petrol-based may be more an exception than the norm.

If there are still brains among the various governors at the Federal Reserve, they may see an opening to keep rates steady or actually increase them slightly as a hedge for the battered US dollar. A strengthened dollar, or even the appearance that the US is once more on a reasonable path to growth, would do wonders to the price structures of the oil, gas and energy markets.

It may be simply wishful thinking, but there is some handwriting on the economic wall, even if it's been scrawled in vanishing ink.

As the markets digested a smorgasbord of economics, opinions and theories, volume was anemic.

NYSE Volume 1,387,509,000
NASDAQ Volume 2,067,336,000

PPT Rallies Market

Since there's no other salient explanation for today's rise on the Dow, I will be the first to indict the President's Working Group on Financial Markets (a/k/a The Plunge Protection Team or PPT) for boosting stocks after Friday's shock waves sent investors scurrying for cover.

The Bush administration has a vested interest in keeping the illusion of a healthy economy alive. Their buddy, John McCain, is going to have to have something upon which to hang his hat, and most Americans respond well to positive economic conditions.

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Of course, anybody with at least half a brain knows that the US economy is in dire straits. Today's laggards - as they have been through much of the past 10 months of declines - were the financials, and, we have a new leader. JP Morgan Chase (JPM), on no discernible news, took a major dive this afternoon, dipping as much as 3 1/2 points (9%) before recovering about a point into the close (-2.58, 37.51).

I would be reticent if I did not mention that this was one of the three strong sells (via puts) I recommended on June 4 to subscribers to the Fearless Stocks & Options Advisory Newsletter. The other two recommendations are also doing just fine, but you'll have to pony up $49.95 for that information (a steal if you're serious about options).

Were I an investor in JPM, I would be bailing right now, if not sooner. Of course, since I'm not so stupid as to invest in the work of bankers - a clueless lot of overstuffed shirts if ever there was one - I own no shares of any bank, brokerage or financial institution, and probably never will.

But JPM is worth watching over the next few months. Something is definitely not right there, and considering the recent performance of banking interests, there could be another round of imploding assets involving financial issues. Morgan has not been hard hit until today, and they may be next in line with their hands out to the various sovereign funds like those in Saudi Arabia, the UAE, Kuwait and Taiwan.

On the question of whether the PPT was actively pumping futures and indices today, I would say the evidence is clearly there. The Dow was up sharply at the open, as a stabilizing influence, but stumbled to break-even by 3:00 pm. All of today's gain was made within the final hour of trade. I rest my case.

Dow 12,280.32 +70.51; NASDAQ 2,459.46 -15.10; S&P 500 1,361.76 +1.08; NYSE Composite 9,149.09 -3.42

To get an idea of just how misleading the headline number (Dow up 70!) is, take a look at the internals. Declining issues hammered advancers by a nearly 2-1 margin, 4121-2114. New lows expanded their edge over new highs, 371-114. That's the widest margin in about a month, if not more.

The markets could rally for the next few days or the balance of the week, though I don't think that's in the cards. This market is marked for declines, and steep ones, with the Dow currently hovering less than 500 points above the January and March lows and off nearly 2000 points from the October '07 highs.

Only the concerted will of market insiders and the PPT can save the stock market from incessant mark-downs over the next 2-4 months. They will do everything they can, short of imposing price controls on gasoline, to keep markets from melting down prior to November. Naturally, a summertime collapse with a snap-back weeks-long rally leading up to the elections would suit the slimy Republican propaganda machine just fine, and that's what is staring us dead in the face.

Oil actually eased a bit on Monday, losing $4.19, to $134.35. Gold eased 90 cents to $898.10. Silver lost 22 cents to close at $17.21 the ounce.

Volume on the equity markets was moderate.

NYSE Volume 1,349,556,000
NASDAQ Volume 2,116,800,000

Oil, Unemployment Double Whammy Rocks Wall St.

Before Friday's session even began, there was dire news from the Dept. of Labor. With the release of the Non-Farms Payroll data for May - which showed a loss of 49,000 jobs and an increase in the unemployment rate to a ghastly 5.5% - stock futures tanked and when the market opened, the Dow was immediately down 150 points.

As the day wore on, further declines in the value of the US dollar and a monstrous spike in the price of oil - up $10.75, to a record of $138.54 - drove stocks into a deep nosedive.

Dow 12,209.81 -394.64; NASDAQ 2,474.56 -75.38; S&P 500 1,360.68 -43.37; NYSE Composite 9,152.51 -255.98

After yesterday's rally out of thin air, today was a fitting response for those who have not been heeding the warning signs everywhere. $4.00 a gallon gas, layoffs piling up, 1 in 10 homeowners either in default or behind on mortgage payments, home prices still heading lower, food banks running low due to increased demand.

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If there's any question that the US economy is in a world of hurt - recession or no recession - today's unemployment figures and the spike in oil should answer any doubters.

And to Richard Russell of the Dow Theory Letters, who changed his outlook and his opinion in April from Bear Market to correction, you have lost all credibility. Get into line with the liars from the Bush administration, 90% of congress and the jackal of them all, Treasury Secretary Henry Paulson, who keeps insisting that the worst is behind us and the economy will create 1 million new jobs by Christmas.

Mr. Paulson, besides being an ignorant, overpaid buffoon, may be on to something. If things continue on their current paths, there may be more jobs by Christmas - DIGGING OUR OWN GRAVES.

On the day, decliners absolutely squashed advancing issues, 5076-1164, nearly a 5-1 margin, one of the worst thrashings we've seen in a long time. New lows surpassed new highs, 307-211, though the number of new highs is likely incorrect, as are many numbers on the Yahoo Finance web site. One wonders why Microsoft would even entertain any notion of buying up Yahoo in the first place. What they offer is largely second-rate and easily duplicated. Second, they've overstayed their welcome on the internet. Other companies do everything they do, and usually better.

Gold gained $23.50, to $899.00. Silver added 26 cents, to $17.43. It bears repeating that a barrel of crude rose $10.75, on top of $5.00 yesterday, to a record close of $138.54. If America isn't ready for $4.00 a gallon gas, how will they like it at $5.00?

I must point out that I scarcely believe the unemployment figures, since last month's were such a disgraceful exercise in fudging numbers. While the number of jobs lost is likely close (and last month was revised downward to -28,000, from 20,000), it is probably short of reality.

US jobs are going away faster than civil manners at a keg party. The snowball effect is beginning to kick in, wherein so many jobs are lost that there simply isn't enough consumerism to go around, and the spiral worsens.

There's also a hint of the Obama effect. Now that he's secured the nomination and Republicans know John McCain has about as much chance of beating him as a candle in the wind does of staying lit, the truth is beginning to seep out from all corners. Yesterday, it was the Senate Intelligence Committee reiterating - in the nicest possible terms - that the Bush administration selectively employed intelligence to sell the Iraq threat, and the war, to the American public. Today, it was the Labor Department coming clean somewhat. More truths about the state of the American experience will be forthcoming as the unnecessary election campaign season drags on. Barack Obama will not only become the first black man to be president of the United States, he will win by an absolute landslide margin.

So, if you think today's action on the markets was bad, be prepared for much, much worse. The Bush administration and a supine congress has created the perfect mess. It will take determination and unity of purpose to heal the nation.

God save us all.

NYSE Volume 1,377,134,000
NASDAQ Volume 2,197,451,000

Where Have the Bulls Been Hiding?

Well, just when you think the worst is coming, investors get a little bit brave and a lot stupid.

Such was the case today after Wal-Mart and other retailers reported improved same-store sales for May and the unemployment reading came in 18,000 below expectations.

New claims filed were at 357,000, instead of the expected 375,000. Of course, everyone forgets that the four factories to be shut down by General Motors (GM) will result in more job losses and that's not even counting 19,000 UAW members across the country that have already accepted early retirement or buyout offers.

Never mind that gas prices are at their highest levels ever, a national average of $3.99 per gallon as of this morning and surely over $4.00 by now.

Dow 12,604.45 +213.97; NASDAQ 2,549.94 +46.80; S&P 500 1,404.05 +26.85; NYSE Composite 9,408.49 +195.73

Some of us - index options players - are actually giddy that the market could see fit to rise so much in just one day. Loving the volatility, it gives us more opportunity to play puts on all the shoddy corporations out there.

Maybe it's just a state of mind, but I see dark clouds over the US economy, and, unlike the knee-jerk traders on Wall Street, fail to discern any semblance of a silver lining.

Ambac and MBIA both had their credit ratings cut today, but that doesn't matter. Only 357, 000 people applied for unemployment.

On the day, advancers trampled decliners, 4808-1410. Wow! Considering that we're in the heart of a bear market, those numbers are impressive. We haven't seen anything even close to that on the opposite end of the spectrum. It's nearly a 4-1 ratio. Also somewhat surprisingly, new highs topped new lows, 203-171.

Volume was not impressive, holding at the same level as the past two sessions.

However, crude oil gained $5.47, to $127.79, and just when we thought there was some sanity left in the world. Gold fell again, losing $8.30, to $875.50. Silver gained on actual supply concerns, picking up 23 cents to $17.17. Silver has been cheap compared to the price of gold. That is beginning to correct.

Having absolutely no confidence in the integrity of our equity markets, government statistics or the news media, this whole rally thing has me thinking there are a bunch of Republicans pulling all the strings behind the scenes. Now that Barack Obama has officially become the Democratic nominee, they need a stock market rally to "prove" that the economy is in grand shape, so John McCain doesn't have to answer any tough questions about economic stimulus.

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And speaking of stimulus, those same-store sales are more than likely the result of millions of dollars of government checks that went out this past month. So, more than being just what the (Republican) doctor ordered, it should have been expected. The problem is that it's akin to putting a band-aid on a gunshot wound. It won't last long.

But fear not, by October, the powers that be will have some other trickery in store. Who wants to bet that gas will be "only" $3.40 a gallon just weeks before the elections?

Tomorrow, the Commerce Dept. releases its laughable Non-farms payroll report, which is likely what this rally was all about. The shady report will probably say only 10,000 jobs were lost in the month of May, and we'll have another 200-point rally to end the week.

Hey, tomorrow's Friday. Party on!

NYSE Volume 1,314,636,000
NASDAQ Volume 2,243,652,000