On Monday, stocks fell in dramatic fashion right from the opening bell until the close of trading, without interruption or even a hint of a rally. Odd, isn't it, that after 6 consecutive weeks of gains, stocks would take their worst beating in well over a month?
Not at all, if one considers the power of the major players on Wall Street to influence the direction of stocks to their liking. The only thing that's changed since Friday is that there are no options close to expiration, no easy profits to be made on the backs of trusting investors, so the big money did on Monday what they always do when there's no "easy" money to be had, they sold off en masse.
My own family and friends often ridicule me for my extreme views on market manipulation, but I don't complain. Over the weekend, while at a family gathering, the "geniuses" of finance were all gloating over the recent rally, claiming that the economy was all well and good, and that my "gloom and doom" was once again proven wrong. I replied that there was 100% certitude that the rally was over and stocks would end their 6-week streak beginning this week, precisely for the aforementioned reasons.
Unfortunately for me, I didn't make any bets with the naysayers on my prediction, as I'd be cashing them later this week. Stocks have become overbought to the extreme and the big money knows it's time to take money off the table before the deluge of disappointing earnings commences.
The action on the street was one-way, broad-based and heavy. No surprise there. Where it goes from here is probably going to be a little more difficult to predict on a daily basis as the markets will gyrate through earnings season. Some stocks will do well while others will crack new 52-week lows. Overall, however, the action will be to the downside, as the media hypes unemployment, commercial real estate blowup, continuing housing crisis, banks that don't lend, consumers that don't spend and an economy that refuses to mend. (amazingly, gloom and doomers can rhyme pessimistically)
For some perspective, Monday's loss n the Dow was the largest since March 2nd, and the fifth largest of 2009. There have been some very bad days on Wall Street this year, and today's decline provides an argument that they are far from over. Investors refused to capitulate after the collapse from September to November of 2008, and the subsequent fall-over from January through mid-March, so logic dictates that the final leg of this great bear market has yet to occur. There is every reason to believe that stocks will retest and even surpass the March 9 lows, just as they have crushed September and October, 2008 lows and the November, 2008 lows. Brace for impact.
Dow 7,841.73, -289.60 (3.56%)
NASDAQ 1,608.21, -64.86 (3.88%)
S&P 500 832.39, -37.21 (4.28%)
NYSE Composite 5,220.12, -260.48 (4.75%)
To illustrate the depth of today's sell-off, consider that declining issues beat back advancing ones by a large ratio - 6 to 1 - 5548-918. The most persistent indicator - new highs vs. new lows - maintained its bias throughout the recent rally toward new lows as it has for the past 18 months running and expanded the gap on Monday with 68 new lows to just 8 new highs. Expect that margin to increase dramatically over the coming weeks.
And if there was any one indicator pointing directly to the false aspects of this six-week rally it was trading volume, which was literally at the highest level of the year.
NYSE Volume 1,761,254,000
NASDAQ Volume 3,246,035,000
The rally of the past six weeks was built entirely on hype, lies and manipulation, the catalyst being those billions of dollars passed out from the government to the banks, which also double as brokerages. Want to know where the TARP money went? Take a look at that massive rally. It went into stocks and is now going to disappear, just like the money thrown into phony structured mortgage securities and credit default swaps.
Let the arguments for inflation begin and end right here. All of the stimulus and excess spending will not result in inflation and a lower dollar. The dollar has been rising against other currencies throughout the recent spending spree, and for good reason, the money created was phony, just like the prices of stocks. Nobody except the most expert of traders actually made money during this rise, and many of them are in the process of giving that back and then some. As much as the Federal Reserve would like to re-ignite the flames of inflation, they cannot do it by simply creating more money. As much as they create, Lord Keynes' "invisible hand" of the market will seek it out and destroy it with greater purpose and efficiency.
The basic structure of the economy is unbalanced. Labor, capital and resources have nowhere to go. Jobs continue to be lost, capital wasted and resources idled. Unless money, labor and resources are put to productive use - not into the stock market for paper gains - recovery and balance is impossible. Inflating the amount of money "in circulation" when it is actually being hoarded and squandered by the banks will not produce prosperity. Only a real, true accounting of the malinvestments and an orderly disposition of the liabilities produced can produce a resumption of prosperity. Anything less than that will produce only what we've already seen: false market rallies, continued deflation and ultimately - unless we change our ways - the complete breakdown of all contracts - economic, political and social.
In brief, the government, by tinkering with money supply and public relations trickery instead of doing the hard, necessary work of admitting that certain large banks are insolvent, threatens the very existence of not just the economy, but of the political process by which they were elected and the social fabric the keeps the nation a functional democracy. It's likely that the government has less than a year left to mend its ways or the United States of America runs the very real risk of devolving into chaos and anarchy, complete with threats of state secession, gangs, riots, homelessness, starvation and death.
Sounds like fun, huh?
Government's answers so far have been confined to bank bailouts (handouts), extensions of unemployment insurance (more handouts), increases in welfare payments (even more handouts) all with borrowed money. The spigot is about to run dry as foreign investors refuse to buy our new toxic investments, US Treasury bills, notes and bonds. Meanwhile, the tax burden on individuals grows.
There is no way to spend ourselves out of this mess. Fiscal discipline is a necessity which, thus far, has not even warranted a mention in the congress and various state-houses. Taxes have to be lowered dramatically, along with the requisite cuts in government spending. Those policies - exactly the reverse of what's being tried - are a major part of the solution. The rest of the formula is for investment in actual working industries, in technology, agriculture and manufacturing, not education, public works and education, which produce nothing.
Another proxy for the health of the global economy could be seen on the commodity markets. Crude oil for May delivery lost $4.45, to $45.88, a massive pull-back off recent highs. The precious metals suddenly reversed course, with gold gaining $19.60, to $887.50 and silver adding 32 cents to $12.11 (still a bargain).
There is no pricing power anywhere in anything priced in dollars. From foodstuffs to consumable energy, i-pods to pianos, prices are plummeting as consumers retrench, just as out government entities should. For a change, government should take heed of what the public is doing - hunkering down, avoiding waste, saving - and do likewise.
I've got $1000 that says they won't until it's too late to save themselves from themselves. In the immortal words of the great comic strip Pogo, "we have met the enemy and it is us."
Monday, April 20, 2009
Friday, April 17, 2009
Stocks Chalk Up 6th Straight Winning Week
While the current rally may be nothing more than a bear market variety, it sure has packed a punch, registering 6 consecutive weeks of gains since bottoming out on March 9.
For the record, here are the numbers with the close of March 9 as a baseline:
The Dow Jones Industrials is up 1584 points, from 6547 to 8131, a gain of 24.2%.
The NASDAQ is up 405 points, from 1268 to 1673 (32%).
The S&P 500 is up 193 points, from 676 to 869 (28.6%).
The NYSE Composite is up 1254 points, from 4226 to 5480 (29.7%).
The overall gains this week were not spectacular, something on the order of 2%.
There were no important economic reports, and the corporate earnings releases came from Citigroup (C), General Electric (GE) and after-hours yesterday Google (GOOG). All of the companies beat lowered expectations, but while GE and Google showed profits, their stocks registered a gain of about 1% on the day, Citigroup, which posted a narrower loss than estimated, suffered a 9% decline on the day.
One gets the distinct impression that the gains may be coming to an end as volatility was completely wrung out of the market over the past few sessions, and stocks had already been bid up prior to earnings. The expectation is that investors will take flight - and profits - at the first sign of weakness, since, by and large, earnings have beaten lowered expectations, but overall are down anywhere from 20-90% (as was the case with Nokia) from year-ago figures.
Essentially, the stock gains, when compared to actual earnings, may be a bit overdone, though there seems to be a level of risk appetite not usually seen after deep market bottoms. This is suggestive of investors not having fully capitulated, which, if that is the case, the worst is still to come. To believe that 30 years of excessive credit and spending would be cured with some government hokus pokus is pure folly. Mortgage delinquencies are still churning in at a record pace, and now the commercial market is about to roll over. Unemployment has shown no slowdown whatsoever. Real estate and unemployment will continue to be the main drivers of the downward economy and they are nowhere near bottoms.
Dow 8,131.33, +5.90 (0.07%)
NASDAQ 1,673.07, +2.63 (0.16%)
S&P 500 869.60, +4.30 (0.50%)
NYSE Composite 5,480.60, +26.33 (0.48%)
On the day, advancers dominated decliners, 4150-2345, but new lows continued ahead of new highs, 76-37. Volume was very high, owing to options expiration. However, one could assume, with all of the action options-related activity that the tight range of the past three sessions was indicative of a well-played hand by Wall Street insiders. Otherwise, there would have been more of a radical trading pattern.
NYSE Volume 1,953,123,000
NASDAQ Volume 2,416,468,000
Commodities continued along the same pattern that has persisted over the past few weeks. Oil inched higher, up 35 cents, to $50.33. Crude has bounced above and below $50/barrel but has not escaped the range. While some supposed experts in crude keep calling for $65-75/barrel near term, the massive oversupply currently on the market, juxtaposed with continuing slumping demand should produce oil in the range of $35-40. Since the oil market is tiny and prone to manipulation, it is likely that price is being kept constant by some of the larger players. Eventually, their gambit will fail; the most obvious factor being that oil usually moves in reverse ratio to the dollar. As the dollar has strengthened, oil has not declined accordingly. There is a day of reckoning coming as reality meets markets.
The same could be said of the precious metals, which have been in a protracted decline for weeks. Gold tumbled again today, losing $11.90, to $867.90. Silver was also downgraded, dropping 47 cents to $11.79.
Gold and silver are presenting incredibly good buying opportunities. As soon as the markets begin to retrace their recent gains, the metals should reverse course, though the rise may not be rapid, due to deflationary pressures.
As weeks go, this one was one of a duller variety. Next week, when many more companies will be reporting first quarter earnings, should be more exciting.
For the record, here are the numbers with the close of March 9 as a baseline:
The Dow Jones Industrials is up 1584 points, from 6547 to 8131, a gain of 24.2%.
The NASDAQ is up 405 points, from 1268 to 1673 (32%).
The S&P 500 is up 193 points, from 676 to 869 (28.6%).
The NYSE Composite is up 1254 points, from 4226 to 5480 (29.7%).
The overall gains this week were not spectacular, something on the order of 2%.
There were no important economic reports, and the corporate earnings releases came from Citigroup (C), General Electric (GE) and after-hours yesterday Google (GOOG). All of the companies beat lowered expectations, but while GE and Google showed profits, their stocks registered a gain of about 1% on the day, Citigroup, which posted a narrower loss than estimated, suffered a 9% decline on the day.
One gets the distinct impression that the gains may be coming to an end as volatility was completely wrung out of the market over the past few sessions, and stocks had already been bid up prior to earnings. The expectation is that investors will take flight - and profits - at the first sign of weakness, since, by and large, earnings have beaten lowered expectations, but overall are down anywhere from 20-90% (as was the case with Nokia) from year-ago figures.
Essentially, the stock gains, when compared to actual earnings, may be a bit overdone, though there seems to be a level of risk appetite not usually seen after deep market bottoms. This is suggestive of investors not having fully capitulated, which, if that is the case, the worst is still to come. To believe that 30 years of excessive credit and spending would be cured with some government hokus pokus is pure folly. Mortgage delinquencies are still churning in at a record pace, and now the commercial market is about to roll over. Unemployment has shown no slowdown whatsoever. Real estate and unemployment will continue to be the main drivers of the downward economy and they are nowhere near bottoms.
Dow 8,131.33, +5.90 (0.07%)
NASDAQ 1,673.07, +2.63 (0.16%)
S&P 500 869.60, +4.30 (0.50%)
NYSE Composite 5,480.60, +26.33 (0.48%)
On the day, advancers dominated decliners, 4150-2345, but new lows continued ahead of new highs, 76-37. Volume was very high, owing to options expiration. However, one could assume, with all of the action options-related activity that the tight range of the past three sessions was indicative of a well-played hand by Wall Street insiders. Otherwise, there would have been more of a radical trading pattern.
NYSE Volume 1,953,123,000
NASDAQ Volume 2,416,468,000
Commodities continued along the same pattern that has persisted over the past few weeks. Oil inched higher, up 35 cents, to $50.33. Crude has bounced above and below $50/barrel but has not escaped the range. While some supposed experts in crude keep calling for $65-75/barrel near term, the massive oversupply currently on the market, juxtaposed with continuing slumping demand should produce oil in the range of $35-40. Since the oil market is tiny and prone to manipulation, it is likely that price is being kept constant by some of the larger players. Eventually, their gambit will fail; the most obvious factor being that oil usually moves in reverse ratio to the dollar. As the dollar has strengthened, oil has not declined accordingly. There is a day of reckoning coming as reality meets markets.
The same could be said of the precious metals, which have been in a protracted decline for weeks. Gold tumbled again today, losing $11.90, to $867.90. Silver was also downgraded, dropping 47 cents to $11.79.
Gold and silver are presenting incredibly good buying opportunities. As soon as the markets begin to retrace their recent gains, the metals should reverse course, though the rise may not be rapid, due to deflationary pressures.
As weeks go, this one was one of a duller variety. Next week, when many more companies will be reporting first quarter earnings, should be more exciting.
Thursday, April 16, 2009
NASDAQ Leads Broad Rally
Excuse me for being blunt, but this rally - now stretching through its sixth straight week without a break - is built on the same thing as the election of Barack Obama: hope.
And so far, the election has turned out to be nothing but a disgrace. Yesterday, hundreds of thousands of ordinary Americans made their way to 500-800 "tea parties" across the country to express their dislike for government policies which will almost surely destroy the country. Today, stocks took a little while to get started, but eventually put on a demonstration of purely idiodic exuberant behavior, not seen since the heady days of 1999, in the middle of the dotcom boom (which months later went bust).
Recent trading activity gives credence to the words of the great showman, P.T. Barnum, who correctly stated that there was a sucker born every minute. Mr. Barmun would no doubt revel in the hijinks of the current market, as investors buy in at stocks' highs, hoping to catch the wave. The reality is that these froth-finders will end up as abject bag-holders. And who can fault anyone who sees fit to remain on the sidelines in this overheated environment? Just a month ago, stocks hit 12-year lows. Today, the major averages have rebounded more than 30%. To consider the stock market unsafe in the near term is to miss the "rally", but getting in now would actually be the height of foolishness.
What we are witnessing is tantamount to making excuses for murder and allowing the criminals to not only walk away free men, but to have full use of their guns as well. Stocks are reporting horrible numbers, like Gannett, which reported a 60% decline in quarterly profit from a year ago, yet was traded higher on the day.
Ditto JP Morgan (JPM), Nokia (NOK) - profits off nearly 90%, yet the stock was up 10% today - and various smaller companies which recorded steep profit declines which miraculously beat lowered expectations and were glibly bought up by overzealous investors seeking to recoup losses from the second half of 2008 and the first quarter of 2009. Good luck to them.
The close on the NASDAQ today was the highest since November 5, 2008. It is not a significant number. The NASDAQ could still go higher without signaling a true bull market. The bear persists. despite that, this rally not only has legs, it has, as of today, sprouted wings and taken flight.
Dow 8,125.43, +95.81 (1.19%)
NASDAQ 1,670.44, +43.64 (2.68%)
S&P 500 865.30, +13.24 (1.55%)
NYSE Composite 5,454.27, +69.30 (1.29%)
Advancers trounced decliners, 4907-1639, however, the key metric which has held true throughout the decline from October 2007, new highs-lows, retained its bias toward new lows, 90-42. While the gap has narrowed significantly and the number of daily new highs continues to improve, the bias is still negative. When and if this rolls over is the big question. We are reaching points at which many stocks had hit 52-week lows a year ago, so some of the new highs are more than likely nothing more than bounces off the bottoms. Still, this persistent indicator remains the strongest evidence that the markets are in a false recovery which will eventually roll over and die.
Volume was very high, owing to the expiration of options on Friday.
NYSE Volume 1,604,455,000
NASDAQ Volume 2,376,984,000
Commodities were mixed. Oil for May delivery - a new contract - gained 73 cents, closing at $49.98. Gold continued its slow deterioration, dropping another $13.70, to $879.80. Silver also was hammered lower, losing 55 cents, to $12.26. The metals are exhibiting tell-tale deflation, while oil also struggles to gain ground. Usually, as spring commences, oil shows more pricing power, though the signs of slack demand and oversupply are everywhere and the price of crude could easily see mid-40s or lower as the global recession continues.
Naturally, there is a good deal of euphoria about the rebound in stocks, seen as a leading indicator that the bottom has been found and the recession will soon be over. Not that I am routinely pessimistic, I just read the tea leaves differently and consider the entire public sector to be horribly corrupt, taking its cue from the unapologetic banking firms of Wall Street, with the mainstream media in tow. There's been an overabundance of hype about banks suddenly being solvent and prosperous, while just six months ago these same outfits were facing destruction and bankruptcy and the global economy on the verge of implosion.
Color me skeptical, but I just don't see how one can have it both ways. Either the banks were badly damaged, especially the largest ones, or the entire episode in which the government threw trillions of dollars of taxpayer money at the problem was a complete scam. More than likely, banks are now "solvent" due to the recent easing of accounting rules, which did away with mark-to-market and adopted mark-to-model, which is allowing the banks to mark toxic assets at 98 cents on the dollar rather the the 30 to 40 cents (mark to market) they are worth in the real world.
After the close, Google (GOOG) beat analyst estimates, and the stock took off in after hours trading, up more than 20 points (5.35%). With that as a backstop, expect stocks to soar again on Friday. They have exploded to near-term highs with little resistance ahead.
On the other hand, Foreclosure filings jumped 24%, new home construction fell 11%, jobless claims were down in the most recent week (though analysts failed to report that last week included Good Friday, a half day or holiday for many), and the nation's second-largest mall operator - General Growth Properties - filed for bankruptcy protection, as the firm was unable to roll over debt.
All's well... well, maybe.
And so far, the election has turned out to be nothing but a disgrace. Yesterday, hundreds of thousands of ordinary Americans made their way to 500-800 "tea parties" across the country to express their dislike for government policies which will almost surely destroy the country. Today, stocks took a little while to get started, but eventually put on a demonstration of purely idiodic exuberant behavior, not seen since the heady days of 1999, in the middle of the dotcom boom (which months later went bust).
Recent trading activity gives credence to the words of the great showman, P.T. Barnum, who correctly stated that there was a sucker born every minute. Mr. Barmun would no doubt revel in the hijinks of the current market, as investors buy in at stocks' highs, hoping to catch the wave. The reality is that these froth-finders will end up as abject bag-holders. And who can fault anyone who sees fit to remain on the sidelines in this overheated environment? Just a month ago, stocks hit 12-year lows. Today, the major averages have rebounded more than 30%. To consider the stock market unsafe in the near term is to miss the "rally", but getting in now would actually be the height of foolishness.
What we are witnessing is tantamount to making excuses for murder and allowing the criminals to not only walk away free men, but to have full use of their guns as well. Stocks are reporting horrible numbers, like Gannett, which reported a 60% decline in quarterly profit from a year ago, yet was traded higher on the day.
Ditto JP Morgan (JPM), Nokia (NOK) - profits off nearly 90%, yet the stock was up 10% today - and various smaller companies which recorded steep profit declines which miraculously beat lowered expectations and were glibly bought up by overzealous investors seeking to recoup losses from the second half of 2008 and the first quarter of 2009. Good luck to them.
The close on the NASDAQ today was the highest since November 5, 2008. It is not a significant number. The NASDAQ could still go higher without signaling a true bull market. The bear persists. despite that, this rally not only has legs, it has, as of today, sprouted wings and taken flight.
Dow 8,125.43, +95.81 (1.19%)
NASDAQ 1,670.44, +43.64 (2.68%)
S&P 500 865.30, +13.24 (1.55%)
NYSE Composite 5,454.27, +69.30 (1.29%)
Advancers trounced decliners, 4907-1639, however, the key metric which has held true throughout the decline from October 2007, new highs-lows, retained its bias toward new lows, 90-42. While the gap has narrowed significantly and the number of daily new highs continues to improve, the bias is still negative. When and if this rolls over is the big question. We are reaching points at which many stocks had hit 52-week lows a year ago, so some of the new highs are more than likely nothing more than bounces off the bottoms. Still, this persistent indicator remains the strongest evidence that the markets are in a false recovery which will eventually roll over and die.
Volume was very high, owing to the expiration of options on Friday.
NYSE Volume 1,604,455,000
NASDAQ Volume 2,376,984,000
Commodities were mixed. Oil for May delivery - a new contract - gained 73 cents, closing at $49.98. Gold continued its slow deterioration, dropping another $13.70, to $879.80. Silver also was hammered lower, losing 55 cents, to $12.26. The metals are exhibiting tell-tale deflation, while oil also struggles to gain ground. Usually, as spring commences, oil shows more pricing power, though the signs of slack demand and oversupply are everywhere and the price of crude could easily see mid-40s or lower as the global recession continues.
Naturally, there is a good deal of euphoria about the rebound in stocks, seen as a leading indicator that the bottom has been found and the recession will soon be over. Not that I am routinely pessimistic, I just read the tea leaves differently and consider the entire public sector to be horribly corrupt, taking its cue from the unapologetic banking firms of Wall Street, with the mainstream media in tow. There's been an overabundance of hype about banks suddenly being solvent and prosperous, while just six months ago these same outfits were facing destruction and bankruptcy and the global economy on the verge of implosion.
Color me skeptical, but I just don't see how one can have it both ways. Either the banks were badly damaged, especially the largest ones, or the entire episode in which the government threw trillions of dollars of taxpayer money at the problem was a complete scam. More than likely, banks are now "solvent" due to the recent easing of accounting rules, which did away with mark-to-market and adopted mark-to-model, which is allowing the banks to mark toxic assets at 98 cents on the dollar rather the the 30 to 40 cents (mark to market) they are worth in the real world.
After the close, Google (GOOG) beat analyst estimates, and the stock took off in after hours trading, up more than 20 points (5.35%). With that as a backstop, expect stocks to soar again on Friday. They have exploded to near-term highs with little resistance ahead.
On the other hand, Foreclosure filings jumped 24%, new home construction fell 11%, jobless claims were down in the most recent week (though analysts failed to report that last week included Good Friday, a half day or holiday for many), and the nation's second-largest mall operator - General Growth Properties - filed for bankruptcy protection, as the firm was unable to roll over debt.
All's well... well, maybe.
Wednesday, April 15, 2009
Tax Day Slowdown
Yesterday, I posited that stocks would trade sideways for the foreseeable future. What I failed to point out is that they have been doing so for the past two weeks.
Over the last nine trading sessions, the Dow has vacillated between 7800 and 8100, a fairly tight range. Today's trading took place between 7870 and 8000, excepting the final 10 minutes of trading. In fact, all of the gains on the Dow were accounted for in the final hour.
Dow 8,029.62, +109.44 (1.38%)
NASDAQ 1,626.80, +1.08 (0.07%)
S&P 500 852.06, +10.56 (1.25%)
NYSE Composite 5,384.97, +83.47 (1.57%)
It was an uneventful session, as advancing issues outnumbered decliners, 4305-2131. New lows outpaced new highs, 69-18. Volume was moderate, with a surge of trading into the close.
NYSE Volume 1,480,115,000
NASDAQ Volume 2,067,344,000
Commodity trading was equally sluggish, with oil falling 16 cents, to $49.25; gold higher by $1.50, to $893.50; and silver up 4 cents to $12.80.
As Americans officially met the deadline for filing taxes from 2008, the markets took a needed breather.
Capacity Utilization for March fell to 69.3%, from 70.3% in February. Likewise, Industrial Production was off 1.5% in March, rebuking the numerous predictions and proclamations that the worst of the recession was behind us. It appears that the economy is still sinking, as the Fed's Beige Book - released at 2:00 pm today - also suggested.
Over the last nine trading sessions, the Dow has vacillated between 7800 and 8100, a fairly tight range. Today's trading took place between 7870 and 8000, excepting the final 10 minutes of trading. In fact, all of the gains on the Dow were accounted for in the final hour.
Dow 8,029.62, +109.44 (1.38%)
NASDAQ 1,626.80, +1.08 (0.07%)
S&P 500 852.06, +10.56 (1.25%)
NYSE Composite 5,384.97, +83.47 (1.57%)
It was an uneventful session, as advancing issues outnumbered decliners, 4305-2131. New lows outpaced new highs, 69-18. Volume was moderate, with a surge of trading into the close.
NYSE Volume 1,480,115,000
NASDAQ Volume 2,067,344,000
Commodity trading was equally sluggish, with oil falling 16 cents, to $49.25; gold higher by $1.50, to $893.50; and silver up 4 cents to $12.80.
As Americans officially met the deadline for filing taxes from 2008, the markets took a needed breather.
Capacity Utilization for March fell to 69.3%, from 70.3% in February. Likewise, Industrial Production was off 1.5% in March, rebuking the numerous predictions and proclamations that the worst of the recession was behind us. It appears that the economy is still sinking, as the Fed's Beige Book - released at 2:00 pm today - also suggested.
Tuesday, April 14, 2009
Earnings Season: Churn, Churn, Churn
Speaking to a fellow trader earlier today, I mentioned that I thought the overriding tone of trading during this earnings season would be that of selling upon announcement of earnings. To clarify, most stocks with any kind of momentum will gain prior to their earnings release date, and upon the announcement, traders would quickly scoop up profits, causing most stocks to fall.
In response, my friend said, "then you expect stocks to go down over the next few weeks."
I replied, "no, because while some stocks will be going down, others will be bid up in advance of earnings. I expect the market to go sideways."
Therein lies the rub. This is the classic trader's market, wherein quick reflexes and astute chart-monitoring will result in healthy gains for those who are eager to lock in profits. In a general sense, stocks are already somewhat overbought, though there could still be more to this rally, even though it may take weeks for it to make another forward move. The most likely outcome is that stocks will end up generally right where they are now, somewhere between (on the Dow) 7700 and 8100. The 8100 level has yet to be cracked, but there is plenty of room on the upside - all the way to 9000 - before violating the primary bearish trend.
Less seasoned investors will see any rally past 8200-8300 as signs of a new bull, but they will be sadly mistaken. The Dow in particular has plenty of room to roam before breaking into bullish ground, and the chances of that are, at this time, slim to none. Most analysts of any quality are now calling for recovery in the year 2010, so even a presaging move by the markets before July would be premature and likely to be killed off by a combination of profit-taking and outright selling.
There's almost surely to be another round of terror in the markets, caused by anything from a large company reporting truly ugly results, another nightmare from the banking sector, bad housing (or commercial property) news, more unemployment, and so on. There is truly no limit to the scenarios within which the Dow and associated markets could take another dive below 7000, the S&P back into the 750 range and so forth. Getting through April will look like a picnic in retrospect by the time June rolls around. There is still widespread uncertainty concerning everything from the government's budget deficits to bank solvency to a GM bankruptcy. Anything can happen, and it probably will.
The case today was cynical, on the whole. After Goldman Sachs (GS) announced their "outstanding" earnings a day early, the company came back with a stock offering at 123, sending shares lower at the open. It was something of an outlier and partially designed to cover the great deceit which GS played on investors. Their 1st quarter earnings covered the period of January through March, but since GS ad changed their accounting periods when they changed their designation from an investment bank to a commercial bank, they managed to leave out their $1 billion loss from December, 2008.
Seriously, it was just never reported, which is something of a first, and an evil ploy to hoodwink not only investors, but the financial media as well, who did little to uncover the fact.
In any case, Goldman set the tone out of the gate, sending the major indices out in the red, a place in which they remain until the closing bell.
Dow 7,920.18, -137.63 (1.71%)
NASDAQ 1,625.72, -27.59 (1.67%)
S&P 500 841.50, -17.23 (2.01%)
NYSE Composite 5,301.50, -108.78 (2.01%)
On the day, declining issues ran well ahead of advancing ones, 4403-2102. New lows remained in the dominant position over new highs, 76-19. Volume was better than it has been in days, owing to options expiration on Friday and a willingness, seemingly, to take profits in all quarters.
NYSE Volume 1,749,256,000
NASDAQ Volume 2,267,111,000
Over in the commodities arena, oil drooped 64 cents, hitting $49.41 at the close, the first close below $50 in over a week. Gold fell $3.80, to $892.00. Silver finished unchanged, at $12.77.
For all the excitement in the markets, it was a fairly quiet session, as stocks, once they bottomed out around the noon hour, traded in a fairly tight regimen the rest of the day. also weighing on investors were lower retail sales figures for March (-1.1%), and a sharp decline in the PPI, off 1.2% in March. Both readings were said - by the supine financial press - to be surprising, though one wonders just who was surprised that spending and prices were both dropping. It seemed to be not so much of a shock, but merely more evidence that the recession is deeper and longer than most people would like.
Speaking on the economy, both President Obama and Fed Chair Ben Bernanke, voiced concerns that while there have been signs of hope, the economic forces at work were nowhere near done doing their dirty work on the US economy. As per usual, both politicians spoke from both sides of their mouths simultaneously. One could take the entire volume of their words and just chuck it all in a waste bin, as all they do is mouth the same garbage all the time. Their speeches, and those of Treasury's Tim Geithner, are about as meaningful as seeing flowers bloom in Spring. Nothing new comes from anybody involved in the various government bailouts, rescues and assorted alphabet soup plots and plans, as they are mostly designed to cover up the most obvious bank insolvencies (B of A, Citigroup, JP Morgan Chase) and will more than likely do more harm than good.
Of the few bright spots was Dow component, Johnson & Johnson (JNJ), which reported earnings which were 0.04 ahead of Street expectations, at $1.26 per share. Other than that, of the 30 Dow components, only Citigroup (C), Intel (INTC) and General Motors (GM) finished the day with gains.
Don't look for any loud corporate noises on Wednesday, as there are no influential companies reporting. On Thursday, Biogen Idec Inc. (BIIB), Google (GOOG), JPMorgan Chase & Co. (JPM) and Nokia (NOK) will add a degree of interest as they report 1st quarter results.
In response, my friend said, "then you expect stocks to go down over the next few weeks."
I replied, "no, because while some stocks will be going down, others will be bid up in advance of earnings. I expect the market to go sideways."
Therein lies the rub. This is the classic trader's market, wherein quick reflexes and astute chart-monitoring will result in healthy gains for those who are eager to lock in profits. In a general sense, stocks are already somewhat overbought, though there could still be more to this rally, even though it may take weeks for it to make another forward move. The most likely outcome is that stocks will end up generally right where they are now, somewhere between (on the Dow) 7700 and 8100. The 8100 level has yet to be cracked, but there is plenty of room on the upside - all the way to 9000 - before violating the primary bearish trend.
Less seasoned investors will see any rally past 8200-8300 as signs of a new bull, but they will be sadly mistaken. The Dow in particular has plenty of room to roam before breaking into bullish ground, and the chances of that are, at this time, slim to none. Most analysts of any quality are now calling for recovery in the year 2010, so even a presaging move by the markets before July would be premature and likely to be killed off by a combination of profit-taking and outright selling.
There's almost surely to be another round of terror in the markets, caused by anything from a large company reporting truly ugly results, another nightmare from the banking sector, bad housing (or commercial property) news, more unemployment, and so on. There is truly no limit to the scenarios within which the Dow and associated markets could take another dive below 7000, the S&P back into the 750 range and so forth. Getting through April will look like a picnic in retrospect by the time June rolls around. There is still widespread uncertainty concerning everything from the government's budget deficits to bank solvency to a GM bankruptcy. Anything can happen, and it probably will.
The case today was cynical, on the whole. After Goldman Sachs (GS) announced their "outstanding" earnings a day early, the company came back with a stock offering at 123, sending shares lower at the open. It was something of an outlier and partially designed to cover the great deceit which GS played on investors. Their 1st quarter earnings covered the period of January through March, but since GS ad changed their accounting periods when they changed their designation from an investment bank to a commercial bank, they managed to leave out their $1 billion loss from December, 2008.
Seriously, it was just never reported, which is something of a first, and an evil ploy to hoodwink not only investors, but the financial media as well, who did little to uncover the fact.
In any case, Goldman set the tone out of the gate, sending the major indices out in the red, a place in which they remain until the closing bell.
Dow 7,920.18, -137.63 (1.71%)
NASDAQ 1,625.72, -27.59 (1.67%)
S&P 500 841.50, -17.23 (2.01%)
NYSE Composite 5,301.50, -108.78 (2.01%)
On the day, declining issues ran well ahead of advancing ones, 4403-2102. New lows remained in the dominant position over new highs, 76-19. Volume was better than it has been in days, owing to options expiration on Friday and a willingness, seemingly, to take profits in all quarters.
NYSE Volume 1,749,256,000
NASDAQ Volume 2,267,111,000
Over in the commodities arena, oil drooped 64 cents, hitting $49.41 at the close, the first close below $50 in over a week. Gold fell $3.80, to $892.00. Silver finished unchanged, at $12.77.
For all the excitement in the markets, it was a fairly quiet session, as stocks, once they bottomed out around the noon hour, traded in a fairly tight regimen the rest of the day. also weighing on investors were lower retail sales figures for March (-1.1%), and a sharp decline in the PPI, off 1.2% in March. Both readings were said - by the supine financial press - to be surprising, though one wonders just who was surprised that spending and prices were both dropping. It seemed to be not so much of a shock, but merely more evidence that the recession is deeper and longer than most people would like.
Speaking on the economy, both President Obama and Fed Chair Ben Bernanke, voiced concerns that while there have been signs of hope, the economic forces at work were nowhere near done doing their dirty work on the US economy. As per usual, both politicians spoke from both sides of their mouths simultaneously. One could take the entire volume of their words and just chuck it all in a waste bin, as all they do is mouth the same garbage all the time. Their speeches, and those of Treasury's Tim Geithner, are about as meaningful as seeing flowers bloom in Spring. Nothing new comes from anybody involved in the various government bailouts, rescues and assorted alphabet soup plots and plans, as they are mostly designed to cover up the most obvious bank insolvencies (B of A, Citigroup, JP Morgan Chase) and will more than likely do more harm than good.
Of the few bright spots was Dow component, Johnson & Johnson (JNJ), which reported earnings which were 0.04 ahead of Street expectations, at $1.26 per share. Other than that, of the 30 Dow components, only Citigroup (C), Intel (INTC) and General Motors (GM) finished the day with gains.
Don't look for any loud corporate noises on Wednesday, as there are no influential companies reporting. On Thursday, Biogen Idec Inc. (BIIB), Google (GOOG), JPMorgan Chase & Co. (JPM) and Nokia (NOK) will add a degree of interest as they report 1st quarter results.
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