Bottom Falling Out of Market

In a fitting finale to a truly horrible week for US equity investors, all major indices bottomed out the week with their largest losses. The Dow, S&P and NYSE all closed more than 1.75% lower on the day. The NASDAQ was down more than 2.25%.

The final print on the Dow today was within 100 points of the March 10 low of 11,750. The NASDAQ and NYSE still have cushion from the March 10 bottoms. For the NASDAQ, that mark is 2169. On the same day, the NYSE Composite Index closed at 8534. The S&P 500 is much closer to its low of 1273.

Dow 11,842.69 -220.40; NASDAQ 2,406.09 -55.97; S&P 500 1,317.93 -24.90; NYSE Composite 8,829.25 -159.59

To make matters worse, volume was unusually high, owing partly to the phenomena known as a "triple witching day", in which stock index futures, stock index options and equity options all expire on the same day. With the prevailing sentiment decidedly negative, there was nothing to halt the all-day selling spree that occurred on Friday.

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Declining issues, as expected, far outnumbered advancers, by a better-than 3-1 margin, 4864-1424. New lows soared past new highs, widening the margin to 554-97.

Not unexpectedly, oil rose another $2.76, to $135.36. Gold lost 50 cents to close at $903.70. Silver fell 7 cents to $17.40. While the rally in oil continues, it seems to be over for the metals.

The headline numbers were confirmed by the breadth shown in the internals. The bottom is truly falling out of the market.

This should come as no surprise to anyone trading stocks, holding down a job or putting gas into an automobile. Life in the USA has been heading downhill for average Americans for years and the ineptitude, cowardice and corruption of politicians in Washington, corporate executives and market insiders has only exacerbated the condition.

If we are not nearing a complete collapse of the financial system, then the reaction on Wall Street would be a complete canard. Sadly, it is not. The US, and to a large extent, the world economy is being brought to its knees by absolute corrupted power at the very top of the heap. The rich are squeezing every last drop of blood and money from the middle and lower class and there seems to be no end to their rapacious appetites.

The problem with so much wealth being held by such a small minority - roughly the top 1 or 2 per cent of the population - does hold a certain level of risk for all parties. In a complete rendering of the economic and social fabric, the elites must worry for their very lives. History is replete with examples, from the fall of Rome to the French Revolution. We are approaching a time in which only those with money and/or weapons will be able to survive.

It's a stark statement on the human condition, but a close inspection of the mega-state environment reveals that we are no further away from feudalism than were inhabitants of Europe in the 15th century. The world is being shaped and defined by a contrived and often patently false mass media while huge governments with uncontested power lord over the classes and force their taxes and dictums upon all of the citizenry.

Freedom and liberty are fleeting ideals, even in these once-proud United States. Civil liberties are being challenged daily and the rights of the individual pales in comparison to the absolute power and overwhelming force of the government apparatus.

Stocks will continue to decline for the time being. There is a bottom, somewhere, though the depths plumbed already are merely prologue.

Our politicians preen and strut, presenting images of well-being while doing nothing. Corporatists continue their theft and exploitation of the public, with a focus on home, food and fuel, the basics of human existence. Meanwhile, an ignorant, misinformed public carries on as best it can without a champion or a clue.

We are hurtling headlong into a cataclysmic future and it is closer than most wish to believe.

NYSE Volume 2,018,469,000
NASDAQ Volume 2,601,664,000

Fizzled Rally Syndrome

Stocks traded in lazy fashion on Thursday, buoyed by news that China's government would cut some of its subsidy on gasoline, thus raising prices at the pump in the People's Republic.

This was generally viewed as good news while the US media focused on the phony issue of off-shore drilling and exploration. The truth is that a rise in the price of gas in China is better news than any off-shore drilling would supply over the next 5 years.

Since the price of oil - and gas - is largely out of the control of supply-demand economics and more the function of speculation, the only likely beneficiaries of new drilling or lowering subsidies are oil companies, and we're stuck with them for the foreseeable future.

Dow 12,063.09 +34.03; NASDAQ 2,462.07 +32.36; S&P 500 1,342.83 +5.02; NYSE Composite 8,988.86 -10.72

On the whole, trading was somewhat suspect, with the major indices trading in a tight range tilted only slightly to the positive. In fact, all of Thursday's gains on the Dow could have been made between 2:00 and 3:00 pm. Before and after that was more or less noise and stocks fell noticeably after 3:00 pm.

On the day, advancing and declining issues played a tug-of-war, resulting in a meager victory for the gainers, which ended ahead, 3304-2914. New lows beat new highs again, 444-151.

The tone of investing over the past four sessions indicates a general lack of enthusiasm which almost always results in either outright declines or what I like to call fizzled rally syndrome.

In the latter instance, stocks rise on some - any - kind of positive news, then topple over like an unstable pile of bricks, leaving marginal gains for some, and losses for many. That was today. Tomorrow may be different, but probably, it will be more of the same, low-volume, disinterested kind of trade.

Oil ended happily lower by $4.57, a rather large loss, settling at $132.60. Gold broke over a key psychological barrier, finishing the day $10.70 higher, at $904.20. Silver rose in sympathy, up 13 cents to $17.47.

Following today's scant economic news (Philly Fed -17.1, -15.6 prior month; leading indicators up 0.1%; initial claims -5K), there's nothing on the calendar for Friday, so investors should expect the week to end with the same dull thud with which it began.

In the immortal word of the Mogambo Guru, "ugh."

NYSE Volume 1,199,263,000
NASDAQ Volume 2,274,517,000

Stocks Taken Down Again

For the second straight day, US equities were hammered down as investors continue to express negative sentiment by selling en masse.

Following the release of poor quarterly results by FedEx (FDX, 82.60, -1.73) and Morgan Stanley (MS, 40.69, -0.10) traders quickly sent stocks into negative territory where they spent the remainder of the session.

Dow 12,029.06 -131.24; NASDAQ 2,429.71 -28.02; S&P 500 1,337.81 -13.12; NYSE Composite 8,999.56 -74.85

The Dow closed less than 300 points above the March 10 lows (11,740) which marked a 16-month bottom. Other indices are heading in the same direction.

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Declining issues ran well ahead of advancers, 4294-1690. New lows outdid new highs, 469-129.

Once again, financial issues were the main drag on stocks, though 11 of 12 sectors were lower. Only Basic Materials showed a gain over the course of the session.

Despite the obvious impetus to sell, volume overall was again sluggish.

Crude oil for August delivery gained $2.37 to $136.90. Gold finished $6.60 higher, at $893.50. Silver gained as well, up 27 cents to $17.34.

NYSE Volume 1,282,983,000
NASDAQ Volume 2,060,739,000

Stocks Drop on Low Volume

The inevitable has occurred on Wall Street. Investors, like many other hip, urbane global citizens have figured out that US equities are not the only game on Wall Street, or Fleet Street or in Shanghai, Tokyo, Stockholm, Bombay or any other financial center.

Thus, when the US economy appears shaky, investors look elsewhere. There are stock markets and exchanges everywhere. It's one of the effects of globalization. One of the unintended consequences, to be sure, for Americans, but it is there, and it could be devastating.

On a level playing field, American companies compete with those from China, India, Europe, the Middle East, South America, Australia and everywhere else capital and public companies can be found, which, these days, is just about anywhere on the planet.

Dow 12,160.30 -108.78; NASDAQ 2,457.73 -17.05; S&P 500 1,350.93 -9.21; NYSE Composite 9,074.41 -13.47

With summer on the rise, volume on the US exchanges is usually lower, though this season seems even less vigorous than usual. It's been weeks of sub-par volume on the NYSE and NASDAQ with no end in sight. Today, investors were selling, and it didn't take much to push stocks back to their lowest levels since March.

Adding to investor concerns were today's PPI results from May, which showed producer prices increasing at a 1.4% clip, though this marked jump was almost all attributable to gains in fuel and food, as the core rate increased only 0.2% for the month.

Housing starts fell to their lowest level since 1991, at 975,000 units, which, though more of the same old news, was still an unwelcome reminder that one of the great asset classes was still skidding downhill.

Even more important, though sparsely reported by the bulk of the established economic press, were capacity utilization which fell to 79.4% in May, from 79.6% in the prior month, and industrial production, which notched a -0.2% figure over the same period, adding to the -0.7 drop in April.

Both of these numbers border on dismal. Optimally, capacity utilization should be above 94% and industrial production should be rising, not falling. These are both ominous signs of the considerable risk of recession, or, further proof that the US economy is already receding.

Advancing issues were overwhelmed by decliners, 3647-2327. New lows once again scored past new highs, 189-153, though the majority of the new lows came from the NASDAQ.

Oil fell by 81 cents, to $134.53. Gold was up marginally as well, gaining 60 cents to $886.90. Silver advanced 16 cents to $17.08 the ounce.

For the second consecutive session, the lack of volume was the leading story.

NYSE Volume 1,093,504,000
NASDAQ Volume 1,830,339,000

Stocks Mostly Gain; Dow Lower

US equities took divergent paths on Monday, as the NASDAQ finished higher, the Dow lower, and the S&P 500 mostly unchanged.

Dow 12,269.08 -38.27; NASDAQ 2,474.78 +20.28; S&P 500 1,360.14 +0.11; NYSE Composite 9,087.88 +24.65

Once again, there was little in the way of real economic news to move markets and that was reflected in the sparse volume and slow pace of trade.

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Advancing issues outdid decliners by a healthy margin, 3743-2468. New lows continued to dominate new highs, however, 244-150.

This rather sluggish trading should continue through the end of the month at least, in advance of 2nd quarter earnings reports in the middle and latter part of July. There certainly aren't many bargain stocks - at least on a marginal valuation scale - prompting investors to sit and wait until some kind of catalyst offers some kind of direction to the market.

The Fed, which meets next week, is widely speculated to hold interest rates right where they are, with federal funds at 2%. That leaves Bernanke and Co. very little wiggle room to cut, though there's plenty of room to raise rates should inflation become more of a worry.

The good news is that inflation seems to be quite well contained for a change, but economic expansion is being put on hold, due mostly to high oil and gas prices.

Speaking of crude, it was up early, but actually finished 13 cents lower, at $135.34. Reports are circulating far and wide that Saudi Arabia, the world's largest producer of crude oil, intends to increase output by 200,000 barrels a day, in a move that ostensibly would do away with runaway, rampant price hikes seen of late.

Gold finished sharply higher, at $886.30, up $13.20. Silver also followed suit, gaining 67 cents to $17.23. Both metals are still in a trading range well off their highs, set earlier this year. Should oil prices become more contained, a strengthened dollar and renewed economic expansion in the US could defuse the long-run metals and wider commodity rallies. Some relief from high commodity prices would be a welcome relief for both goods producers and consumers alike.

With the credit markets still in a state of near-siezure, stable to lower prices would be a very good sign that the "recession" or slowdown would be nearing a bottom. The truth is that we may have entered a real recession in December of '07, and the end could easily be marked about the time of the presidential elections at the start of November.

Wishful thinking for a better tomorrow.

NYSE Volume 1,163,712,000
NASDAQ Volume 1,862,187,000