Stocks End Rough Week With Mixed Results

With volatility firmly back in place, on Friday, investors felt safe establishing positions to hold over the weekend. Stocks had been buffeted about by alternating winds of change during a somewhat tumultuous week, but ended higher on the day, but mixed for the week.

This, after a near-400-point drubbing of the Dow just one week ago.

Dow 12,307.35 +165.77; NASDAQ 2,454.50 +50.15; S&P 500 1,360.03 +20.16; NYSE Composite 9,063.23 +115.50

The Dow Jones Industrials finished the week higher by 97 points, but it was the only major index to record gains. For the week, the NASDAQ was down 20 points, the S&P lost 0.65 and the NYSE Composite ended 89 points lower.

Obviously, there was more work for stocks to do before anyone would say this is a true sustainable rally or that any progress had been made vis-a-vis the economy.

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Investors were encouraged by news that the CPI was up only 0.6% in May, with core inflation - excluding food and energy - only 0.2% higher. While those figures may be of some relief to traders, they still indicate an economy dealing with 7.2% annual inflation, though somewhat tempered in that most of it is coming from the obscene rise in the price of crude oil and motor fuel.

On the session, advancing issues finished well ahead of decliners, 4474-1786, though new lows continued to outperform new highs, 330-96, a persistent, troubling trend.

Oil actually lost some ground heading into the weekend, losing $1.91, to $135.47. Gold finished ahead marginally, up $1.10, at $873.10. Silver also posted minor gains, up 8 cents, to $16.56.

Consumer sentiment was markedly lower, with the University of Michigan June survey checking in at 56.7, from 59.8 in May, the lowest level since 1980.

The mixed results on Wall Street are indicative of contentious times for investors. There still needs to be a complete flushing of weak hands before any substantive move forward is warranted.

On the inflation front, the Fed may be convinced that it's time to tighten the credit spigot a bit to keep prices from spiraling out of control. By merely standing pat, or even raising rates 25 basis points, the markets would surely get the message. Such a move at the June 24-25 meeting would be a very stabilizing influence on markets and a strengthening motivation for the US dollar.

Volume on US equity exchanges was moderately lower than the 4-week average.

NYSE Volume 1,224,933,000
NASDAQ Volume 2,113,058,000

Early Rally Fizzles, PPT Steps in to Save Markets

We knew (didn't we?) that after the deep declines Wednesday and last Friday, there would be plenty of bottom-fishing, and this morning, stocks were up sharply. The Dow was higher by nearly 200 points between 11:00 am and noon, but the realities of the market brought fresh waves of selling throughout the afternoon.

Shortly after 3:00 pm, the Dow had sunk back to break-even, with all other indices showing in the red. It was at that point, with markets apparently breaking down badly, that stocks began moving forward again, a sure sign that the Plunge Protection Team (PPT) was back at work, salvaging what little is left of the formerly free and fair equity markets.

Dow 12,141.58 +57.81; NASDAQ 2,404.35 +10.34; S&P 500 1,339.87 +4.38; NYSE Composite 8,947.72 +6.45

As usual, on days such as this, the internals offer a better view of what's really going on. Advancing issues actually fared better than decliners on the day, though by a very slim margin, 3208-2833. New lows continued to dominate new highs, 367-73. These numbers continue to confirm that stocks are stuck in a near-term down trend that isn't likely to end until recent lows (March) are retested.

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That the PPT (correctly known as the President's Working Group on Financial Markets) would enter into the fray is completely expected. As a matter of conjecture, they've probably been plying their trade with due diligence over the past few months, attempting to stabilize some truly upsetting conditions which persist in US markets.

Markets received a bit of good news in terms of retail sales figures this morning, but those were quickly dismissed as a natural outgrowth of the millions of government stimulus checks which were finding taxpayers. The fundamentals of a weak economy, with inflation, low job creation and a crumbling currency, are still in place and have not improved.

Oil was up again, gaining 40 cents, after being lower most of the day, settling at the unsettling price of $137.38. Metals were once more under pressure, with gold losing $10.90, to $872.00, and silver dropping 37 cents to $16.49 an ounce.

Traders are largely running scared at this juncture and until there is clear evidence of some positive changes in the economy, or a new president with the full backing of congress, or both, markets should remain under selling pressure.

NYSE Volume 1,332,073,000
NASDAQ Volume 2,246,544,000

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