Yesterday's manipulated close above the false bottom at Dow 7552 could not hold, not even for a day, in the wake of unprecedented government handouts and institutional selling that nearly brought the major stock indices to their knees in the final hours of Thursday's session. The Dow Jones Industrials finished the day at their lowest level since October 9, 2002, prior, even to the start of the Iraq War.
The best the government interlopers (through their proxies at Goldman Sachs, Morgan Stanley, et. al.) could muster today was putting a good face on an unmitigated disaster. The game is over for Wall Street. A massive systemic collapse of global finance is palpable and seemingly inevitable.
With an opening pop, investors bought the Dow up about 60 points, but the market could not sustain the gains. By 10:30 the index was back into the red. After a brief, heartless rally, stocks cascaded lower with the Dow eventually falling below 7450. From 11:30 to the close, the the major indices were all under water. Selling was relentless, with the occasional covering of options positions, which close tomorrow. A line could be drawn diagonally across the tops. The slope of the bottoms was more severe.
Dow 7,465.95, -89.68 (1.19%)
NASDAQ 1,442.82, -25.15 (1.71%)
S&P 500 778.94, -9.48 (1.20%)
NYSE Compos 4,881.16, -43.38 (0.88%)
It was not the size of the losses that mattered much in this session, but the overall tenor and tone of trading. The level of desperation as a standard emotion continues to deepen, even daily. People are angry. The press, economists, and the public are all up in arms over the rapid-fire moves of the federal government. Most of the abuse is being heaped upon newly-elected President Obama, though much of the focus is rightfully on the US congress.
Unsurprisingly, the Dow components were a shambles, 20 down and 10 up, with most of the largest losses sustained by financials and tech, though the damage was truly broad-based. Paradoxically, the largest percentage gainer on the Dow was Home Depot, which gained 1.82%, up 0.36 to 20.16.
If you're seeking a good proxy for the Dow, look no further than JP Morgan Chase (JPM), which turned negative today just as the Dow was rolling over. The pride of Wall Street banking, JPM is probably overvalued by a factor of 5-10, since it is in largely the same boat as brethren Bank of America and Citigroup, all of whom are in the government's notorious gang of Systemically Significantly Failing Institutions under the Capital Purchase Program.
JP Morgan Chase dipped 0.91 to 20.60, a mere 4.23% loss, but it is joined at the hip to Bank of America (-0.64, 3.93, -14%) and Citigroup (-40, 2.51, -13.75).
The January Producer Price Index (PPI) registered its first gain in six months, edging up 0.8% over December. This shouldn't have come as much of a surprise, since retailers discounted heavily in December during one of the worst holiday shopping seasons in memory.
Inflation alarmists should also take a cold shower on this news, as much of the increase was due to slightly higher energy prices, and, of course, the figures are seasonally adjusted. Deflation continues to rule.
But the real story of the day was the final breakdown through the November 20 bottom on the Dow. The process will no doubt continue as the other indices approach and retest their lows. The markets are again in uncharted territory.
Friday's action most certainly will be among the most volatile of recent vintage. Thursday was only a prelude to the real wealth-cleansing that will occur over the coming days, weeks and months.
Internals did little to mask the carnage. Decliners swept by advancers, 4384-2129. New lows outnumbered new highs, 617-11. Volume was strong enough to suggest more selling as more participants become engaged in a race to the bottom.
NYSE Volume 1,485,501,000
NASDAQ Volume 2,036,313,000
Commodities exhibited perhaps the most random and directionless trade in decades. Oil priced $4.86 higher, to $39.48. Gold fell $1.70, to $976.50, while silver lost 36 cents, to $13.94. The metals cooled off what was, until today, a torrid rally. Beef and corn were up, pork and soybeans were down. Natural gas fell to a new seasonal low as at $4.11, as milder weather and conservation measures are keeping demand tamped down.
The level of unrest, not only on Wall Street but on Main Street and across the nation and around the world, cannot be underestimated. Cheats and scoundrels in government and business have opened the gates of hell with their wrong-headed policies over many years. Another of America's dates with destiny is fast approaching.
Brace yourself.
Thursday, February 19, 2009
Will Congress Ever Represent the Public Interest?
Now that President Obama and the Dem-controlled congress has spent somewhere in the neighborhood of $1.5 Trillion over the past few weeks, one wonders from where - especially in the stimulus bill - the new jobs are going to come.
There is plenty of money being thrown at Wall Street banking interests, state governments, food stamps, unemployment insurance, mortgage defaults and public works projects, but nowhere is found a single tax credit or incentive for small businesses to actually hire anyone.
It seems that since small business creates more than 90% of private sector jobs, congress would have included something along those lines, maybe even (my idea here) swapping unemployment benefits for actual work. My concept would put to work people collecting unemployment, by requiring them to find a job in a relevant industry. The business would only have to pay a small amount for, say, six months, like 1/4 to 1/3 of the amount the recipient is receiving in benefits, while the worker is integrated into the business.
Not only would the worker have a job guaranteed after his benefits run out, the government would pick up much of the tab during the initial period. Of course, the business would have to keep all current employees on the job (to avoid cheating the system) during this period and guarantee employment to the worker for at least another 6 months to a year.
Well, that's just one idea, but another would be for congress to actually get up to speed with the rest of us by running some public surveys available in 360 degree software or other such programs.
Imagine congress sending an email to constituents, or putting a public interest poll on their taxpayer-funded web sites with real choices for real legislative options.
Maybe it's just too much to ask of our special interest congress. But, it is nice to think about.
There is plenty of money being thrown at Wall Street banking interests, state governments, food stamps, unemployment insurance, mortgage defaults and public works projects, but nowhere is found a single tax credit or incentive for small businesses to actually hire anyone.
It seems that since small business creates more than 90% of private sector jobs, congress would have included something along those lines, maybe even (my idea here) swapping unemployment benefits for actual work. My concept would put to work people collecting unemployment, by requiring them to find a job in a relevant industry. The business would only have to pay a small amount for, say, six months, like 1/4 to 1/3 of the amount the recipient is receiving in benefits, while the worker is integrated into the business.
Not only would the worker have a job guaranteed after his benefits run out, the government would pick up much of the tab during the initial period. Of course, the business would have to keep all current employees on the job (to avoid cheating the system) during this period and guarantee employment to the worker for at least another 6 months to a year.
Well, that's just one idea, but another would be for congress to actually get up to speed with the rest of us by running some public surveys available in 360 degree software or other such programs.
Imagine congress sending an email to constituents, or putting a public interest poll on their taxpayer-funded web sites with real choices for real legislative options.
Maybe it's just too much to ask of our special interest congress. But, it is nice to think about.
Wednesday, February 18, 2009
Dow Players Paint Tape, Confirm (False) Double Bottom
Stocks began the day with small gains and hit the day's highs shortly after noon, though they were clearly under pressure all day.
While the Dow flirted with the flat line in a very narrow range through almost all of the session, sentiment was severely split. Neither bears nor bulls could muster enough energy to move stocks clearly in one direction or the other, though the NYSE Composite and the S&P 500 spent the majority of the day in the red.
The Dow stayed on a somewhat even keel all session long, even though there were never more than 13 of the 30 stocks inside the index showing gains. Chief among the gainers was Wal-Mart (WMT), which finished the day with the biggest gain of any Dow component, up 1.76, to an even 50.00.
Others which aided the index from falling were Intel (INTC), McDonald's (MCD), IBM (IBM), Proctor Gamble (PG) and ExxonMobil (XOM). The case could be made for selective boosting of the Dow by insiders, as any number of players did not want to witness another bout of selling after yesterday's classic double bottom formation.
One had to look only so far as ExxonMobile vs. Chevron (CHV). While the former was higher all day, the latter was underwater throughout the afternoon except for the final half hour, despite the two of them being in essentially the same business. Chevron finished with a 6 cent loss, while ExxonMobil ended the day with a 66 cent gain.
At the end of the day, the bulls prevailed, lifting the Dow by the smallest of margins, notably on late day buying of just three stocks: Chevron (CHV), American Express (AXP) and Merck (MRK), each of which spent almost the entire day lower before a burst of buying in the final half hour of trading.
Dow 7,555.63, +3.03 (0.04%)
NASDAQ 1,467.97, -2.69 (0.18%)
S&P 500 788.42, -0.75 (0.10%)
NYSE Composite 4,924.54, -14.57 (0.29%)
Adding to the argument of the bears is the fact that only the Dow finished in positive territory, further evidence of insider trading in a concerted effort to finish above the now double bottom at 7552.29 (Nov. 20) and 7552.60 (Feb. 17). Their argument is hardly convincing when considering the various factors affecting market movement.
The internals were decidedly bearish, to a point at which one must question today's headline results. Advancing issues were buried under a deluge of losers, with decliners ahead, 4396-2120, a better-than 2-1 margin. Further, the gap between new lows and new highs expanded greatly, with 661 new lows to just 22 new highs. Those two indicators strongly suggest that today's finish on the Dow was a serious case of painting the tape so that the bullish cause can now call a bottom, right there at 7552 and change.
Nothing could be further from the truth. First, the Dow's gains were insignificant. Second, the other three indices finished lower and have not come close to retesting their respective lows. Third, the new highs/new lows and advance/decline lines were of a nature more like a day in which the Dow would have lost 100-200 points. Fourth, Most of the Dow stocks were lower, with the final tally at 12 up and 18 down, with the biggest volume stocks sharply lower.
NYSE Volume 1,433,404,000
NASDAQ Volume 2,060,209,000
Two largest volume movers by far - Citigroup (C) and Bank of America (BAC) were down substantially all day long with Bank of America suffering a 6.73% loss, down 0.33, to $4.57. Citigroup was down 4.90%, losing 0.15, to 2.91.
There is a growing acceptance that those two - the largest banks in America - will have to undergo some form of government receivership, or, "nationalization" in a controlled divestiture or bankruptcy proceeding with the likely assistance of the FDIC, Treasury and the Federal Reserve.
Once again, commodity prices were mixed, though similar to Tuesday's action. The metals were all higher, while foodstuffs were markedly lower, as was oil, losing 31 cents, to $34.62. Gold galloped ahead by $10.70, to $978.20, while the rally in silver continued unabated, up another 28 cents, to $14.29.
Adding to the bear case were the four economic indicators, all showing signs of stress by registering numbers for January that were down and lower than expected. Housing starts fell to 466,000, from 560,000 in December. Building permits fell to 521,000, from 547,000 in the prior month. Capacity utilization continued in free fall, down to 72% form 73.3% a month earlier. So too, industrial production, falling by 1.8% on the heels of a 2.4% fall in December.
As far as a double bottom is concerned, the charts will confirm it because they do not lie, even though the results of today's trading are highly suspect. In the end, this will be seen only as a support/resistance level as another move lower is clearly in the cards.
The manipulators in the marketplace may get a temporary boost on false hopes, though it's just as likely that the markets will continue to deteriorate and today was only an effort mixed in with Friday's options expiration. The Dow could easily lose (or gain) 300-500 points be the end of the week. It could also meander along in a meaningless pattern for some time, but eventually, this bottom will be taken out, because it is a false one.
While the Dow flirted with the flat line in a very narrow range through almost all of the session, sentiment was severely split. Neither bears nor bulls could muster enough energy to move stocks clearly in one direction or the other, though the NYSE Composite and the S&P 500 spent the majority of the day in the red.
The Dow stayed on a somewhat even keel all session long, even though there were never more than 13 of the 30 stocks inside the index showing gains. Chief among the gainers was Wal-Mart (WMT), which finished the day with the biggest gain of any Dow component, up 1.76, to an even 50.00.
Others which aided the index from falling were Intel (INTC), McDonald's (MCD), IBM (IBM), Proctor Gamble (PG) and ExxonMobil (XOM). The case could be made for selective boosting of the Dow by insiders, as any number of players did not want to witness another bout of selling after yesterday's classic double bottom formation.
One had to look only so far as ExxonMobile vs. Chevron (CHV). While the former was higher all day, the latter was underwater throughout the afternoon except for the final half hour, despite the two of them being in essentially the same business. Chevron finished with a 6 cent loss, while ExxonMobil ended the day with a 66 cent gain.
At the end of the day, the bulls prevailed, lifting the Dow by the smallest of margins, notably on late day buying of just three stocks: Chevron (CHV), American Express (AXP) and Merck (MRK), each of which spent almost the entire day lower before a burst of buying in the final half hour of trading.
Dow 7,555.63, +3.03 (0.04%)
NASDAQ 1,467.97, -2.69 (0.18%)
S&P 500 788.42, -0.75 (0.10%)
NYSE Composite 4,924.54, -14.57 (0.29%)
Adding to the argument of the bears is the fact that only the Dow finished in positive territory, further evidence of insider trading in a concerted effort to finish above the now double bottom at 7552.29 (Nov. 20) and 7552.60 (Feb. 17). Their argument is hardly convincing when considering the various factors affecting market movement.
The internals were decidedly bearish, to a point at which one must question today's headline results. Advancing issues were buried under a deluge of losers, with decliners ahead, 4396-2120, a better-than 2-1 margin. Further, the gap between new lows and new highs expanded greatly, with 661 new lows to just 22 new highs. Those two indicators strongly suggest that today's finish on the Dow was a serious case of painting the tape so that the bullish cause can now call a bottom, right there at 7552 and change.
Nothing could be further from the truth. First, the Dow's gains were insignificant. Second, the other three indices finished lower and have not come close to retesting their respective lows. Third, the new highs/new lows and advance/decline lines were of a nature more like a day in which the Dow would have lost 100-200 points. Fourth, Most of the Dow stocks were lower, with the final tally at 12 up and 18 down, with the biggest volume stocks sharply lower.
NYSE Volume 1,433,404,000
NASDAQ Volume 2,060,209,000
Two largest volume movers by far - Citigroup (C) and Bank of America (BAC) were down substantially all day long with Bank of America suffering a 6.73% loss, down 0.33, to $4.57. Citigroup was down 4.90%, losing 0.15, to 2.91.
There is a growing acceptance that those two - the largest banks in America - will have to undergo some form of government receivership, or, "nationalization" in a controlled divestiture or bankruptcy proceeding with the likely assistance of the FDIC, Treasury and the Federal Reserve.
Once again, commodity prices were mixed, though similar to Tuesday's action. The metals were all higher, while foodstuffs were markedly lower, as was oil, losing 31 cents, to $34.62. Gold galloped ahead by $10.70, to $978.20, while the rally in silver continued unabated, up another 28 cents, to $14.29.
Adding to the bear case were the four economic indicators, all showing signs of stress by registering numbers for January that were down and lower than expected. Housing starts fell to 466,000, from 560,000 in December. Building permits fell to 521,000, from 547,000 in the prior month. Capacity utilization continued in free fall, down to 72% form 73.3% a month earlier. So too, industrial production, falling by 1.8% on the heels of a 2.4% fall in December.
As far as a double bottom is concerned, the charts will confirm it because they do not lie, even though the results of today's trading are highly suspect. In the end, this will be seen only as a support/resistance level as another move lower is clearly in the cards.
The manipulators in the marketplace may get a temporary boost on false hopes, though it's just as likely that the markets will continue to deteriorate and today was only an effort mixed in with Friday's options expiration. The Dow could easily lose (or gain) 300-500 points be the end of the week. It could also meander along in a meaningless pattern for some time, but eventually, this bottom will be taken out, because it is a false one.
Tuesday, February 17, 2009
What's in Your Wallet? Not Much, Says Capital One
I'm not sure, but probably more than 30% of all adult Americans have a Capital One credit card. I used to have two, before the company - kicking and screaming all the way - finally acceded to my demands to combine them into one.
While checking some financial sector stocks earlier today, I noticed that Capital One (COF) has taken a hellacious beating this year. Since closing at 31.05 on December 31, 2008, the stock has received a 67% haircut, down to 10.13. Capital One is the nation's largest purveyor of individual credit cards, but also dabbles in making new car loans, home equity loans and other, similarly risky endeavors.
The company is notably the subprime credit lender of nearly last resort to consumers who have tapped out their home equity and are now piling up credit card debt, typically at rates of 15% and higher, and now it appears that many are not paying back their lender, as Forbes reports:
Apparently, when it comes to paying their debt to Capital One, there really isn't much left in people's wallets, much to the displeasure of COF shareholders, as the company wiped out all of the year's gains in 2008 with a 4th quarter loss of $3.74 per share.
Much of Wall Street was sharing the pain with Capital One, as stocks took yet another drubbing, with the Dow falling to within a whisker of the November 20 low (7552.29), closing right at the lows of the day, 7552.60.
This sets the stage for an interesting remainder of the week, as today's close is undeniably a double bottom on the Dow. The other majors are close to their previous lows, but not quite there.
Dow 7,552.60, -297.81 (3.79%)
NASDAQ 1,470.66, -63.70 (4.15%)
S&P 500 789.17, -37.67 (4.56%)
NYSE Compos 4,939.12, -267.64 (5.14%)
The NASDAQ has another 154 points to go, the S&P would have to shed another 36 points and the NYSE Composite is still 288 above its November 20 close. Obviously, the bank and financial stocks of the Dow have weighed heavily of late.
Bank of America (BAC) crossed the $5 Rubicon again, closing at 4.90, down 67 cents. CitiGroup (C) continued down the rat hole, losing 43 cents, to 3.06. even venerable JP Morgan Chase (JPM) lost 3.04, to 21.65. Each of those company's shares were down by more than 12% on the session.
Market internals verified just how rough a day it was for US stocks. Declining issues absolutely slammed advancers, 5803-775. New lows expanded to 555, versus a paltry 18 new highs. Volume was outstanding, signaling more selling dead ahead. Only one issue of the Dow 30 closed with a gain: Wal-Mart (WMT). For more on that, see below.
NYSE Volume 1,590,783,000
NASDAQ Volume 2,395,914,000
Commodities were split down the middle. Anything consumable, from unleaded gas to pork bellies, was down, while the precious metals shot to short term highs. Crude oil for March delivery were down $2.58, to $34.93; natural gas was off 22 cents, to $4.22, and wholesale unleaded gas closed at $1.11, begging the question as to how most consumers are paying roughly $2.00 at the pump. Look for another record quarter for the oil companies.
Gold gained $25.30, to $967.50. Silver broke 39 cents higher, to $14.01. With deflation clearly the issue, one has to wonder how far the bulls will push the metals. They are, after all, investment hedges - primarily against inflation - but commodities at heart.
Investors find themselves at a critical crossroad at the open tomorrow. Considering that only the Dow has retraced its low, it should be a pretty safe bet that all indices are heading lower in the short term.
Want to know why Wal-Mart was the only Dow component to show a gain on the day? Watch the video below:
While checking some financial sector stocks earlier today, I noticed that Capital One (COF) has taken a hellacious beating this year. Since closing at 31.05 on December 31, 2008, the stock has received a 67% haircut, down to 10.13. Capital One is the nation's largest purveyor of individual credit cards, but also dabbles in making new car loans, home equity loans and other, similarly risky endeavors.
The company is notably the subprime credit lender of nearly last resort to consumers who have tapped out their home equity and are now piling up credit card debt, typically at rates of 15% and higher, and now it appears that many are not paying back their lender, as Forbes reports:
The company also reported its annual net charge-off rate a measure of credit default, for U.S. credit cards rose to 7.82% in January from 7.71% in December.
Apparently, when it comes to paying their debt to Capital One, there really isn't much left in people's wallets, much to the displeasure of COF shareholders, as the company wiped out all of the year's gains in 2008 with a 4th quarter loss of $3.74 per share.
Much of Wall Street was sharing the pain with Capital One, as stocks took yet another drubbing, with the Dow falling to within a whisker of the November 20 low (7552.29), closing right at the lows of the day, 7552.60.
This sets the stage for an interesting remainder of the week, as today's close is undeniably a double bottom on the Dow. The other majors are close to their previous lows, but not quite there.
Dow 7,552.60, -297.81 (3.79%)
NASDAQ 1,470.66, -63.70 (4.15%)
S&P 500 789.17, -37.67 (4.56%)
NYSE Compos 4,939.12, -267.64 (5.14%)
The NASDAQ has another 154 points to go, the S&P would have to shed another 36 points and the NYSE Composite is still 288 above its November 20 close. Obviously, the bank and financial stocks of the Dow have weighed heavily of late.
Bank of America (BAC) crossed the $5 Rubicon again, closing at 4.90, down 67 cents. CitiGroup (C) continued down the rat hole, losing 43 cents, to 3.06. even venerable JP Morgan Chase (JPM) lost 3.04, to 21.65. Each of those company's shares were down by more than 12% on the session.
Market internals verified just how rough a day it was for US stocks. Declining issues absolutely slammed advancers, 5803-775. New lows expanded to 555, versus a paltry 18 new highs. Volume was outstanding, signaling more selling dead ahead. Only one issue of the Dow 30 closed with a gain: Wal-Mart (WMT). For more on that, see below.
NYSE Volume 1,590,783,000
NASDAQ Volume 2,395,914,000
Commodities were split down the middle. Anything consumable, from unleaded gas to pork bellies, was down, while the precious metals shot to short term highs. Crude oil for March delivery were down $2.58, to $34.93; natural gas was off 22 cents, to $4.22, and wholesale unleaded gas closed at $1.11, begging the question as to how most consumers are paying roughly $2.00 at the pump. Look for another record quarter for the oil companies.
Gold gained $25.30, to $967.50. Silver broke 39 cents higher, to $14.01. With deflation clearly the issue, one has to wonder how far the bulls will push the metals. They are, after all, investment hedges - primarily against inflation - but commodities at heart.
Investors find themselves at a critical crossroad at the open tomorrow. Considering that only the Dow has retraced its low, it should be a pretty safe bet that all indices are heading lower in the short term.
Want to know why Wal-Mart was the only Dow component to show a gain on the day? Watch the video below:
Friday, February 13, 2009
Got Stocks? Too Bad!
Some days are better than others, and Friday, being the end of the work week - despite being the unlucky 13th - is generally better than most. Wall Streeters, however, must be leaving their posts with sullen feelings, as the stock market took another one on the chin.
For those keeping score, the major indices - Dow, NASDAQ, S&P 500 and NYSE Composite - all fell this week, marking the 5th weekly loss against just one weekly gain - last week.
For the week, the Dow lost 420 points. The NASDAQ was down 57. The S&P finished 41 points lower and the NYSE Composite was down 268 points. Not very pretty, and not likely to improve much in the coming weeks and months. While some may point out that stocks are generally cheap (some are, most aren't, and besides, it's a question of value, which is relative), and the market is oversold, there is still unfinished business on the downside.
It's likely that investors are scared silly of making significant investments at this point in time, being that the political condition is as unstable and the nation's finances. The banks continue to be at the center of the storm, and every day that passes that they are not brought under the bright light of scrutiny is a day lost to the US economy, and to the global financial system as well.
As many as eight major banking outfits are technically insolvent - and you don't have to ask me, just try Nobel Prize winner Paul Krugman:
So there you have it. The malinvestments made by these banks have to be written down and if the banks don't have sufficient assets to cover their losses, like any other business, they will be forced to liquidate or reorganize. That is their fate, and the sooner it gets done, the better.
Dow 7,850.41, -82.35 (1.04%)
NASDAQ 1,534.36, -7.35 (0.48%)
S&P 500 826.84, -8.35 (1.00%)
NYSE Compos 5,206.76, -49.69 (0.95%)
Despite a near total absence of corporate news or economic reports (the University of Michigan reading of consumer confidence fell in at 56.2, down from 61.2 last month), the public is clearly displeased and traders are feeling the pinch.
On the day, internals were in line with headline numbers, as declining issues outdid advancers, 3629-2862, an expansion of the margin. New lows continued their 15+ month-long streak of beating out new highs, 201-19. Volume was on the light side, for a Friday.
NYSE Volume 1,241,224,000
NASDAQ Volume 2,022,550,000
Commodities were all over the map, with crude oil more than 10% higher, up $3.53, to $37.51. Gold gave back some recent gains, losing $7.00, to $942.20, though silver continued to rise, up another 12 cents, to $13.63, currently above our preferred buying range.
As mentioned previous in posts past, the eventual unwind to Dow 7550 might take six days or six months. We don't know for sure - nobody does - but we're certain that it will happen. The eventual fall will likely be tied to some event, such as the shuttering of Bank of America or some other plausible, but still shocking, news.
As I have personally been out of the market for about four months, including not even playing any options, the time seems to be coming for first a downdraft, and then a possible short-term buying opportunity. As sure as the Dow will test 7550, it will also either bounce off there, establishing a long-sought-after bottom, or it will go even lower. I am of the opinion that the latter is more likely, with 6600 as a final resting place, though I have heard some analysts saying the Industrials could eventually hit the 4000 range.
It's all speculation, so keep your powder dry.
For those keeping score, the major indices - Dow, NASDAQ, S&P 500 and NYSE Composite - all fell this week, marking the 5th weekly loss against just one weekly gain - last week.
For the week, the Dow lost 420 points. The NASDAQ was down 57. The S&P finished 41 points lower and the NYSE Composite was down 268 points. Not very pretty, and not likely to improve much in the coming weeks and months. While some may point out that stocks are generally cheap (some are, most aren't, and besides, it's a question of value, which is relative), and the market is oversold, there is still unfinished business on the downside.
It's likely that investors are scared silly of making significant investments at this point in time, being that the political condition is as unstable and the nation's finances. The banks continue to be at the center of the storm, and every day that passes that they are not brought under the bright light of scrutiny is a day lost to the US economy, and to the global financial system as well.
As many as eight major banking outfits are technically insolvent - and you don't have to ask me, just try Nobel Prize winner Paul Krugman:
The problem is not toxic assets. The problem is that financial institutions have lost a lot of money and many of the big ones, if they are not actually insolvent, are very close.
So there you have it. The malinvestments made by these banks have to be written down and if the banks don't have sufficient assets to cover their losses, like any other business, they will be forced to liquidate or reorganize. That is their fate, and the sooner it gets done, the better.
Dow 7,850.41, -82.35 (1.04%)
NASDAQ 1,534.36, -7.35 (0.48%)
S&P 500 826.84, -8.35 (1.00%)
NYSE Compos 5,206.76, -49.69 (0.95%)
Despite a near total absence of corporate news or economic reports (the University of Michigan reading of consumer confidence fell in at 56.2, down from 61.2 last month), the public is clearly displeased and traders are feeling the pinch.
On the day, internals were in line with headline numbers, as declining issues outdid advancers, 3629-2862, an expansion of the margin. New lows continued their 15+ month-long streak of beating out new highs, 201-19. Volume was on the light side, for a Friday.
NYSE Volume 1,241,224,000
NASDAQ Volume 2,022,550,000
Commodities were all over the map, with crude oil more than 10% higher, up $3.53, to $37.51. Gold gave back some recent gains, losing $7.00, to $942.20, though silver continued to rise, up another 12 cents, to $13.63, currently above our preferred buying range.
As mentioned previous in posts past, the eventual unwind to Dow 7550 might take six days or six months. We don't know for sure - nobody does - but we're certain that it will happen. The eventual fall will likely be tied to some event, such as the shuttering of Bank of America or some other plausible, but still shocking, news.
As I have personally been out of the market for about four months, including not even playing any options, the time seems to be coming for first a downdraft, and then a possible short-term buying opportunity. As sure as the Dow will test 7550, it will also either bounce off there, establishing a long-sought-after bottom, or it will go even lower. I am of the opinion that the latter is more likely, with 6600 as a final resting place, though I have heard some analysts saying the Industrials could eventually hit the 4000 range.
It's all speculation, so keep your powder dry.
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