Investors Still Not Buying

As we wend our way toward falling leaves and cooler weather, Wall Street seems to have taken the lead with a cold attitude toward stocks and falling prices all around.

Monday began in a somber way. On the lightest volume session of the year, most of the activity involved selling, indiscriminate selling, as all sectors were down more than 1%, led, of course, by the battered financial stocks.

Though there was little in the way of actual news, the mood was as dour as it has been throughout the 1+ year since the initial shock waves of the subprime malaise.

Dow 11,386.25 -241.81; NASDAQ 2,365.59 -49.12; S&P 500 1,266.84 -25.36; NYSE Composite 8,229.03 -144.52

The headline numbers matched the internals. Declining issues overwhelmed advancers, 4959-1394. There were 212 new lows to just 63 new highs. The numbers are so low because there have been more new lows than new highs every day for nearly a year now and those losing stocks are already bottomed out.

With markets overall down roughly 20% from a year ago, a huge number of new lows - in the 500-800 range - would be symptomatic of a more catastrophic downturn.

As it is, stocks are already so battered and beaten, investors so burned, that a good deal of money has already exited US markets, seeking gains on foreign exchanges or in other investment vehicles.

Commodities didn't fare much better. Oil gained 52 cents, to $115.11, though that price was largely a rebounding bounce following Friday's $6+ loss. Gold diminished by $7.80, to $825.70. Silver fell 11 cents to $13.48.

With summer winding down, one would expect low volume, but today's massive loss is troubling. The markets simply do not have any life, any measurable bounce. There is almost a certainty that stocks - in the near term, at least - are going to continue heading lower.

Hang on to your cash. Bank failures and other financial cataclysms are on the way.

NYSE Volume 865,190,000
NASDAQ Volume 1,454,557,000

Playing or Being Played?

August has been a month of ups-and-downs with plenty of money sitting on the sidelines. Considering the absurdly low level of participation, via trading volume, one might be under the impression that many professionals have taken the month off.

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While that may explain the low volume to some degree, it also suggests something more sinister: that sparsely-traded markets are more easily manipulated. For instance, regulators, the little pea-brains that they are, already concluded that the overgrown gains in the price of oil earlier this year were simply the result of ordinary supply-and-demand forces. Of course, they came to that conclusion before it was revealed that a few speculators dominate the oil futures trading markets.

To get an idea about how ordinary, individual investors feel about manipulation and the lack of regulation, check out this fairly lame article with excellent reader comments on Yahoo's Tech Ticker.

I make mention of the dubious art of market manipulation from time to time because it is not only plausible in today's mega-billion-dollar environment but also probable and proven to have occurred, especially in the case of the President's Working Group on Financial Markets, a/k/a the Plunge Protection Team (PPT).

Toady's gallop ahead may prove instructional.

Dow 11,628.06 +197.85; NASDAQ 2,414.71 +34.33; S&P 500 1,292.19 +14.47; NYSE Composite 8,373.55 +59.41

Lest we forget, the week began with two consecutive days of declines, but it ended with 3 straight gains. Remember, I said yesterday that the week would be of little consequence.

For the week, the Dow Jones Industrials lost a whopping .... wait for it... 31 points. So, we're just about even. It's all good! Crown me genius!

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(Just a side note: yesterday, oil was up $5 and change and the culprit was the dastardly nation of Russia, causing tensions with the US and its allies over Georgia. Today, oil was down a similar amount, and, what a coincidence, the Russians are leaving. Would nations and traders collude to have little wars and occupations just to move the price of oil? Count on it.)

On the day, advancing issues overwhelmed decliners, 4421-1773. New lows defeated new highs, 153-59.

Oil dropped $6.59, to end the week at $114.59. Gold lost $5.50, to $833.50. Silver fell 25 cents to $13.59. Everything seemed to go absolutely nowhere this week.

Volume on the equity markets was the lowest of a very low volume week.

So, are you playing or being played?

NYSE Volume 888,139,000
NASDAQ Volume 1,395,867,000

A Day (and Week) to Forget

Trading volume this week has been so dreadfully slow that many on Wall Street have already made their way towards the Hamptons or other relaxing locales. If you're searching for value in this dreadful environment, maybe you should do the same because whatever transpires on the markets this week will be of little importance a month down the road.

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On Thursday, volume hit a low for the year with far less than 1 billion shares changing hands on the NYSE. A normally "slow" day is 1.2 billion shares. The reasons for the slowdown are pretty obvious. Being the second last week of unofficial summer, there are fewer people trading stocks. Add to that the current conditions which lend themselves to taking profit and running away and you have the general idea.

If this kind of non-trading persists after Labor Day, it might actually be the beginning of a horrible trend, though it's probably more the good weather than the bad economic conditions at this point.

Nevertheless, there were a few relatively ugly economic reports on the day, not the least of which was the Commerce Board's Index of Leading Economic Indicators, which fell by 0.7% in July. It was the second decrease in the past three months and worse than expected.

What's worse than the US decline is news from the same organization that similar indices have fallen in Spain, Germany, France, the UK, South Korea, Japan, Mexico and Australia as well. Remember that global recession I've been warning about for the past few months, the one in which all asset classes fall? Well, there's some proof that it's already here.

Dow 11,430.21 +12.78; NASDAQ 2,380.38 -8.70; S&P 500 1,277.72 +3.18; NYSE Composite 8,314.14 +37.23

Amazingly, three of the four major stock indices we track were up, with the NASDAQ the notable exception.

The internals shed more light on the situation, as declining issues outnumbered advancers, 3603-2573, and new lows held sway over new highs, 242-49.

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Commodities made the most of it, with oil pumping up $5.62, to 121.18, gold gaining $22.70, to $839.00 and silver rising 69 cents, to $13.84.

Somebody please inform these speculators in the commodity pits about this global recession thing. Obviously, they did not receive the memo. Oddly enough, the fat rise in the price of oil is being attributed to tensions between the US and Russia over the Georgian conflict. That's entirely laughable, since there are no real tensions of which to speak. Considering the morally bankrupt and militarily-overstretched position of the United States, Russia can and will do as it pleases in its former colony. The posturing by the US, and, to some lesser extent, various European nations, is just for show. All parties know there's no possibility of anyone threatening the Russians with any kind of force.

Politics and media manipulation aside, this is a week better spent working on a tan rather than your portfolio.

NYSE Volume 912,306,000
NASDAQ Volume 1,558,441,000

Sellers Take a Breather on Slow News Day

One of the slowest news days of recent memory may have helped investors on Wednesday, halting a two-day slide that threatened to expand into a truly grotesque selling spree. Possibly the best news were two little items: the largest increase in US oil stockpiles since 2001 (9.3 million barrels), and Hewlett-Packard's (HPQ 46.16, +2.47) solid quarter, posting 80 cents a share profit on sales of $28 billion.

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Any news on surplus oil is welcome, as are stellar quarters by sound companies, especially those whose membership includes the Dow Jones Industrials. Hewlett-Packard easily led the 16 other gainers in the blue chip index and itself accounted for much of the gain on the day.

While the US oil stockpile news was significant, it didn't stop traders from upping the price of crude for October delivery in a volatile session. The rise in oil was probably due to a technical situation, one in which the slippery stuff has sold off so much in recent days, that traders are looking for a bounce. Hopefully, for those of us who have felt the pain from higher gas prices, today's gains will be soon forgotten.

Dow 11,417.43 +68.88; NASDAQ 2,389.08 +4.72; S&P 500 1,274.54 +7.85; NYSE Composite 8,276.91 +64.44

Market breadth was nearly non-existent, with gainers outpacing losers, 3181-3020, indicating that today's rise was nothing more than some short covering and minor speculation, rather than the beginning of something more exciting. As further proof, new lows were once well ahead of new highs, 220-43. The most alarming number there is that only 43 stocks (out of a pool of more than 6000) recorded a 52-week high. That's a very, very low number and implying that the general market is going nowhere but down.

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Overall volume continues to be slack and it appears that this week will be the lowest volume stretch of the year, unless, of course, next week is even worse.

Putting today's up-and-down trading into perspective, oil gained $1.02, to $115.56, while gold slipped 50 cents to $816.30 and silver lost 7 cents, closing in New York at $13.15. That the metals did not follow oil's advance may be noteworthy, if only to presage another round of losses for commodities. It will be worth watching commodities closely over the next few weeks, though the most optimistic outlook would be for a small bounce upwards before continuing the trend lower.

With conditions in credit markets still unstable and the general economy looking a little bit putrid, Thursday's unemployment report (new claims) may be more significant than usual. There are few, if any, catalysts for upside momentum, and the bias, despite today's rather unportentious finish, is still rather negative.

NYSE Volume 1,068,481,000
NASDAQ Volume 1,782,049,000

Prices Peaking? Stocks Shrivel

The week has not begun well for investors, with the Dow Jones Industrials having shed over 300 points in the first two days and the other major indices following that lead.

On Monday, it was fear of financial firms which led the way, but on Tuesday, prices grabbed the headlines as wholesale prices jumped by 1.2% in July, marking the fastest annual inflation rate in 27 years. The core rate, excluding food and energy, were up a whopping 0.7%, indicating that inflated pricing was seeping into all parts of the economy.

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If rising prices weren't enough to worry about, the Commerce Department obliged by releasing a report on new home construction, noting that builders were breaking ground at the lowest rate in 17 years.

Confused? So are investors.

Home prices are falling, all other prices are rising, but wages are stagnant at best. Meanwhile, the prices of commodities - oil, gold, corn, wheat, etc. - have been going down for weeks.

Dow 11,348.55 -130.84; NASDAQ 2,384.36 -32.62; S&P 500 1,266.68 -11.92; NYSE Composite 8,212.47 -69.39

Here's an explanation, though I offer it only as one of possibly many: prices have peaked. We're likely to see a slowdown in August, if not an outright decrease (a very rare occurrence). In a cooling worldwide economy, prices are not going to rise, and if they do, they won't rise quickly. The years of overexpansion of money supply to accommodate the needs of greedy bankers and corporations are over. We're about to backslide into a general slowdown. If your wages don't go down, or you're able to keep your job, you'll survive nicely.

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The crash in commodities has been telegraphing this all along, so, get over the inflation fear and start dreading deflation, because it's a thornier economic condition. Besides, those inflation figures are compiled by economists and statisticians, who aren't really well known as bargain hunters. They're looking at wholesale prices, which nobody - outside of manufacturers - actually pays.

As with Monday, declining issues overwhelmed advancers on Tuesday, 4494-1724. New lows expanded their edge over new highs, 286-43. The abnormally low number of new highs belies the real weakness in stocks. The number of companies actually thriving in this environment is becoming more minute by the day. The stresses of a long-overdue recession, held in abeyance by politicians with tax rebates and regulators such as Federal Reserve Chairman Ben Bernanke's emergency interest rates and borrowing rules.

Following the briefest of bumps in late July and early August, stocks are now poised to retest those mid-July lows. Get ready for serious drops in the indices over the next 3-6 weeks, during which the president (and the Republican candidate for that office) will assure us that the economy is still basically sound.

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Commodities continued to rebound, though it's hardly a trend. Crude oil for October delivery added $1.65, to $114.54. Gold leapt another $11.10, to $816.80, though silver was unchanged at $13.22 per ounce. The recent run-up in commodities is largely an effect of falling stocks. With nowhere else to turn for profits, speculators are moving into the market of last resort. When the commodities market finally fails, along with the rest of the asset classes, the perfect storm for global recession will be in place.

The news for the past few weeks has been one of a strengthening dollar. What's generally been untold is the story of how the dollar has been beaten down below fair value in relation to other currencies and consequently propped up by foreign governments in a vain effort to avoid a complete economic collapse. The truth is that the economies of other countries - particularly those in Europe - are not all that sound either. Far Eastern economies - China and Japan - are going to fare much better than the West in the coming downturn, which is expected to bottom sometime in late 2009.

With those concepts in hand, investors should be aware that gains in stocks are going to be difficult, if not impossible, to attain.

Once again, volume was on the very low end of the scale, indicating an aversion to US equities - one which has been growing over the past year and is now reaching fruition. Stocks have much further to fall, but much of the big money is already on the sidelines and into fixed investments or other equity markets.

NYSE Volume 1,012,756,000
NASDAQ Volume 1,748,704,000