Considering what the US economy has been through the past 2 years, maybe a little break in the action now and then is a welcome relief. The considerable slowing of news flows over the past few weeks have truncated trading volumes in US equity markets by as much as 40% in recent days.
There were absolutely no economic reports on which to hang a trade on Friday.
Volume was quite a bit healthier due to a quadruple witching condition which produced a touch of volatility and a good deal more trading activity than has been the norm of recent days. It was another split session for stocks, the third in as many days, which is likely a symptom of the general insecurity and lack of direction which has plagued the markets for two weeks running.
The general direction is down, but people are far from convinced. Meanwhile, many of the biggest players have already headed for vacation spots and have money parked in either defensive positions or fixed investment vehicles.
This was, however, the worst week for the major indices since the week ended May 15 this year. The Dow surrendered 260 points, the S&P gave back 25 points, the NASDAQ shed 31 points, and the NYSE Composite lost 214 points.
Dow 8,539.43, -16.17 (0.19%)
NASDAQ 1,827.47, +19.75 (1.09%)
S&P 500 921.19, +2.82 (0.31%)
NYSE Composite 5,934.05, +27.85 (0.47%)
For the day, advancers finished far ahead of decliners, 3854-2487. New lows narrowly led new highs, 56-55. It was the 6th straight session marking the lows above the highs, though the margin continued to deteriorate over the past 3 sessions.
NYSE Volume 2,127,423,000
NASDAQ Volume 2,954,731,000
Finally, the speculators eased off their ridiculous bid on crude oil, sending it to steep losses, down $1.82, to $69.55. Perhaps this is a sign of a topping point in the seasonal bid. With no real demand rationale to push prices higher, maybe the speculators thought better of their positions and see an end to the over-hyped, and over-extended, trade.
Gold gained $1.60, to $936.20; silver went the other way, down 4 cents, to $14.20.
There is scant economic news next week as the end of the second quarter approaches. After a blank Monday, figures for Existing Home Sales are released on Tuesday, with New Home Sales on Wednesday along with Durable Goods Orders and Crude Inventories. Wednesday is also slated for a rate decision by the Fed's FOMC, so trading should be less than robust until 2:15 in the afternoon, in anticipation of what is surely to be a "no change" call. Regardless, many market participants will hang breathlessly on every word and make trades according to the whims and innuendo of the FOMC.
Markets really ought to begin churning a little bit just before the 4th of July weekend, because right after that, companies will be reporting 2nd quarter earnings, so there will be some fur flying. Until then, investors are either getting out of the way or just staying put, waiting for another seminal trading moment. That next moment may come when the Dow breaches 8000, probably within a month's time.
Friday, June 19, 2009
Thursday, June 18, 2009
Trends Continue to Weigh on Stocks
Despite Thursday's overall gains - except on the NASDAQ, yesterday's only winner and today's only loser - the tenor of trade is definitely showing all the requisite signs of a significant market breakdown. After slipping at the open, stocks quickly ramped up, with the Dow reaching 8550 by 10:00 am. From that time until 3:45 pm, the Dow traded in a very tight 40-point range between 8550-8590, so the entire session looks somewhat suspect. In the final 15 minutes, the index dipped below 8550 briefly, but caught a bid late in the session.
Dow 8,555.60, +58.42 (0.69%)
NASDAQ 1,807.72, -0.34 (0.02%)
S&P 500 918.37, +7.66 (0.84%)
NYSE Composite 5,906.20, +41.65 (0.71%)
There was little in the way of economic news or reports, though weekly unemployment claims came in slightly higher than expected and the continuing claims number actually fell for the first time since January. That's another actually positive sign, but far too little upon which to pin any trades. In fact, volume dipped again to levels resembling last week, which was horribly slow.
The Conference Board Leading Economic Index increased by 1.2% in May, marking the first time since July 2007 that the 6-month change in the index has been positive. May was also the second straight month that the LEI had improved, another positive sign that the recession was easing.
The problem with these kinds of numbers are that twofold: they are subject to revision, and they do not - outside of any other context - presage the end of the recession, only showing that the rate of decline has eased. In other words, If you are operating at 50% capacity when you should be at 90%, an increase for a month to 55% is good, but in now way predictive of getting production back to 90%. The new reality is that the economy is not going to come back to anything closely resembling the credit-fueled days of 2002-2007, a reason the Obama administration and its lapdog media are so careful when commenting on the economy. The very last thing they want to do is offer false hope, an indication that they know how severe the current condition really is and aren't sharing it with everyone else.
On the day, advancers narrowly beat back decliners, 3574-2827, and new lows finished ahead of new highs for the 5th straight session, 51-39. Volume, as mentioned above, was well below par, which, unlike scoring at the US Open, is not good.
NYSE Volume 1,088,429,000
NASDAQ Volume 2,118,909,000
One thing that's becoming tiresome is the continuing rise in the price of oil, which was up again today by 34 cents, to $71.37. There's no compelling reason for oil prices to be hiking at this time, except the kneejerk seasonal trade that figures US motorists to travel more in summer months. One has to consider this to be one of the worst trades of the decade, and there have been plenty of them. With the world economy in recession and prices falling for just about everything, the only way oil rises is by naked insider speculation. As risky strategies are concerned, this one is nearly off the charts and could easily backfire. If the recession continues through the summer - and who doubts that it won't? - supplies may actually indicate that prices should fall, and quickly. That's when these contracts get unwound and the speculators take on some serious losses. Look for oil to stall out fairly soon (July 4 is usually the high) and head back to a more reasonable level around $55-$60/barrel, if not lower.
The annoying thing about the oil futures trade, is that, like the elections in Iran, they are so blatantly out of kilter with reality. Other commodities were mostly lower, including hating oil and natural gas, so why should oil have some special status? It's all speculation, and with any luck (for automotive travelers everywhere) their price-rigging scheme will blow up in their faces.
Gold ended down $1.40, to $934.60. Silver was off 4 cents, to $14.24.
Unless there's a massive rally tomorrow, the major indices will finish the week with losses, which, after three months of nearly unrelenting gains, is likely not only expected, but healthy.
Dow 8,555.60, +58.42 (0.69%)
NASDAQ 1,807.72, -0.34 (0.02%)
S&P 500 918.37, +7.66 (0.84%)
NYSE Composite 5,906.20, +41.65 (0.71%)
There was little in the way of economic news or reports, though weekly unemployment claims came in slightly higher than expected and the continuing claims number actually fell for the first time since January. That's another actually positive sign, but far too little upon which to pin any trades. In fact, volume dipped again to levels resembling last week, which was horribly slow.
The Conference Board Leading Economic Index increased by 1.2% in May, marking the first time since July 2007 that the 6-month change in the index has been positive. May was also the second straight month that the LEI had improved, another positive sign that the recession was easing.
The problem with these kinds of numbers are that twofold: they are subject to revision, and they do not - outside of any other context - presage the end of the recession, only showing that the rate of decline has eased. In other words, If you are operating at 50% capacity when you should be at 90%, an increase for a month to 55% is good, but in now way predictive of getting production back to 90%. The new reality is that the economy is not going to come back to anything closely resembling the credit-fueled days of 2002-2007, a reason the Obama administration and its lapdog media are so careful when commenting on the economy. The very last thing they want to do is offer false hope, an indication that they know how severe the current condition really is and aren't sharing it with everyone else.
On the day, advancers narrowly beat back decliners, 3574-2827, and new lows finished ahead of new highs for the 5th straight session, 51-39. Volume, as mentioned above, was well below par, which, unlike scoring at the US Open, is not good.
NYSE Volume 1,088,429,000
NASDAQ Volume 2,118,909,000
One thing that's becoming tiresome is the continuing rise in the price of oil, which was up again today by 34 cents, to $71.37. There's no compelling reason for oil prices to be hiking at this time, except the kneejerk seasonal trade that figures US motorists to travel more in summer months. One has to consider this to be one of the worst trades of the decade, and there have been plenty of them. With the world economy in recession and prices falling for just about everything, the only way oil rises is by naked insider speculation. As risky strategies are concerned, this one is nearly off the charts and could easily backfire. If the recession continues through the summer - and who doubts that it won't? - supplies may actually indicate that prices should fall, and quickly. That's when these contracts get unwound and the speculators take on some serious losses. Look for oil to stall out fairly soon (July 4 is usually the high) and head back to a more reasonable level around $55-$60/barrel, if not lower.
The annoying thing about the oil futures trade, is that, like the elections in Iran, they are so blatantly out of kilter with reality. Other commodities were mostly lower, including hating oil and natural gas, so why should oil have some special status? It's all speculation, and with any luck (for automotive travelers everywhere) their price-rigging scheme will blow up in their faces.
Gold ended down $1.40, to $934.60. Silver was off 4 cents, to $14.24.
Unless there's a massive rally tomorrow, the major indices will finish the week with losses, which, after three months of nearly unrelenting gains, is likely not only expected, but healthy.
Wednesday, June 17, 2009
New Regs for Financials; TARP Repayment Sparks Midday Rally
The Obama administration announced a number of proposed regulatory changes which, if enacted, would materially impact the overall functioning of the US economy. The Office of Thrift Supervision would be replaced by a new Consumer Financial Protection Agency and the Federal Reserve would have a larger role in the supervision of the US economy.
To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.
Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.
On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.
S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.
Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.
Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)
Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.
NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000
Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.
May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.
Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.
For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.
To some - including myself - giving the Federal Reserve any more control of the economy is a step in the wrong direction. The Federal Reserve, far beyond any other government or commercial body, bears the brunt of any blame for current economic conditions. After all, they are the issuers of the currency.
Requiring banks and mortgage brokers to offer simplified, clear, concise mortgage documentation is a step in the right direction. Imposition of a national usury law would be even more helpful. The recommendations now fall into the lap of congress to debate.
On the markets, Dan Gallagher has an excellent piece on the record-breaking supply of new issuance in May and speculative analysis of the condition.
S&P lowered credit ratings on 18 banks including Wells Fargo and Capital One, among some of the largest. The first banks began to repay TARP money to Treasury and began negotiating terms to purchase warrants from the government. 10 banks are reportedly repaying $68 billion. While this is truly good news, it is dilutive to the banks. That understanding sent financials to substantial losses on the day.
Stocks began to hit their best stride in late morning, reaching highs of the day shortly before 2:00 pm, but the advances were spare and not broadly-based with only 5 of 12 sectors sporting gains. By day's end, only the NASDAQ ended in positive territory. As far as snap-back rallies are concerned, this had to rank as one of the more disappointing. Besides the NASDAQ, this is the third straight day of losses for major indices. Not only was the midday rally cut short, but the usual late-day bounce failed to materialize approaching the close.
Dow 8,497.18, -7.49 (0.09%)
NASDAQ 1,808.06, +11.88 (0.66%)
S&P 500 910.71, -1.26 (0.14%)
NYSE Composite 5,864.55, -22.21 (0.38%)
Advancing and declining issues were nearly even, with losers leading winners, 3292-3003. New lows surpassed new highs for the 4th straight day, 70-32. Interestingly, volume was at its highest level in the past 8 sessions, suggesting that there's more dumping of stocks than would be apparent and that most of the buying was concentrated in tech and health care.
NYSE Volume 1,316,102,000
NASDAQ Volume 2,561,073,000
Commodities spent the day without much direction, but eventually ended mostly higher. Crude oil gained 56 cents, to $71.03, while gas prices in the US increased for the 50th straight day. Gold finished $3.90 higher, to $936.00. Silver gained another 15 cents, closing at $14.28 the ounce.
May CPI showed an increase of just 0.1%, a far slighter rise than analysts expected, furthering the deflationary argument. Stripping out the gains for gasoline and adjusting for the margin of error, consumer prices were net negative for the month.
Another sign of the times is today's bankruptcy filing by retailer Eddie Bauer (EBHI) and bid agreement to sell the remaining assets to a private equity firm.
For the optimistic crowd, here's Charles Schwab Chief Investment Advisor Liz Ann Sonders declaring that the recession is over. We'd like to believe her, but isn't she really longing to say that the worst of the recession may be over? See for yourself.
Tuesday, June 16, 2009
Stocks Bombed Second Straight Session
The turning point for the stock market has finally come. Stocks sold off broadly and sharply for the second straight session as investors increasingly take profits and head for the sidelines. Others, specifically speculators, have quite literally been shut out of the market by excessive valuations, which, as anyone who has ever done any kind of investing knows, is a path to ruin. Buying after a significant rally, such as the one which lasted from March 10 to June 12, will almost always lead to sizable losses mounting quickly.
Technical indicators have presaged the end of the rally astonishingly well. Just as the S&P 500 50-day and 200-day moving averages converged, the selling commenced. Today's market action was particularly acute and different from the usual fare. Instead of a positive response to benign PPI figures for May (a gain of 0.2%, against an expected rise of 0.5%) analysts took this as a sign that the economy was not recovering as quickly as some might hope and that inflation fears have been wildly overblown. Stocks were up mildly at the open, and after vacillating across the break even line for most of the morning, finally began to fall off just before noon. By 2:00 pm, the indices were striking new lows, and, instead of a late day rally, stocks sold off wildly in the final 15 minutes, closing at the lows of the day.
This should come as little surprise to anyone following the money. The Fed has more than doubled the size of its balance sheet since fall of 2008, the money supply has been ramped up gigantically, yet the banks still aren't lending, defaults on credit cards and auto loans are now matching up to the foreclosure numbers, and wages remain flat, if not declining. Companies are finding little in the way of pricing power, except in industries which have virtual, government-allowed monopolies, such as energy and utility companies.
Where has all this money gone? Directly into the hands of the banks, and much of it was certainly used to pump up stock prices. The timing of the rally and the second round of TARP funding were surely more than coincidental. Now that the money has been spent and distributed through the market, it has to be removed and put back on the banks' balance sheets. There is one fatal flaw to the government-Wall Street scheme: nobody's buying on the way down, just as nobody was buying during the secondary crash in early 2009, nor during the subsequent run-up. The entire three-month rally was nothing more than massive self-dealing, a complete sham, with the bank CEOs, the Fed, the Treasury and high-ranking government officials fully complicit in the charade.
While there's nothing implicitly illegal about buying stocks cheap and selling them a few months later at a profit, the obvious questions to ask are, first, how prevalent among the insider banking community and the government was the knowledge that stocks weren't really worth the asking prices of recent weeks and, second, what was being to to the general public and the banks' clients?
Telling clients to buy securities at the same time your own brokerage is unloading them is fraud, though, as far as Wall Street practice is concerned, it happens all the time, day in and day out. Seemingly, the only way to make money in this environment is to play along with the big money. Buy when they are buying, sell when they are selling. It's now time to sell.
Dow 8,504.67, -107.46 (1.25%)
NASDAQ 1,796.18, -20.20 (1.11%)
S&P 500 911.97, -11.75 (1.27%)
NYSE Composite 5,886.76, -80.50 (1.35%)
Once again, decliners beat back advancing issues, 4475-1914. For the second straight day, new lows outnumbered new highs, 68-26. Volume remained subdued, so get used to this level of activity. It's summer, and many of the usual heavy players are not involved.
NYSE Volume 1,176,238,000
NASDAQ Volume 2,262,585,000
Commodities were mixed. Oil spent most of the day with gains, but closed down 15 cents, at $70.47. Gold was up $4.70, to $932.20. Silver, after Monday's 85 cent bludgeoning, was up just a dime, to $14.13. Natural gas was down slightly. Pork bellies continued to price higher.
Other economic data of note included industrial production, down 1.1%, and capacity utilization, checking in at 68.3% for May, after posting a revised 69.0% for April. These numbers are continuing evidence of the severity of the recession. Rather than seeing "green shoots," of potential recovery, the latest round of figures suggests what reality is really showing us, a deepening and swelling depression which threatens to take down every segment of the US economy, and with it, much of the world's.
The banks and other far-flung, covert, secluded monied interests are hoarding capital. The only way to wring it from their cold, clammy hands is through inflation, and that's not happening. Nobody knows where the bottom is, but a good bet would be that we're nowhere close to one. Government bailouts and stimulus have only quieted the rout for the time being. Unemployment continues to increase and deficits are growing as far as the eye can see. Now is definitely not a time to be speculating for stock gains.
Technical indicators have presaged the end of the rally astonishingly well. Just as the S&P 500 50-day and 200-day moving averages converged, the selling commenced. Today's market action was particularly acute and different from the usual fare. Instead of a positive response to benign PPI figures for May (a gain of 0.2%, against an expected rise of 0.5%) analysts took this as a sign that the economy was not recovering as quickly as some might hope and that inflation fears have been wildly overblown. Stocks were up mildly at the open, and after vacillating across the break even line for most of the morning, finally began to fall off just before noon. By 2:00 pm, the indices were striking new lows, and, instead of a late day rally, stocks sold off wildly in the final 15 minutes, closing at the lows of the day.
This should come as little surprise to anyone following the money. The Fed has more than doubled the size of its balance sheet since fall of 2008, the money supply has been ramped up gigantically, yet the banks still aren't lending, defaults on credit cards and auto loans are now matching up to the foreclosure numbers, and wages remain flat, if not declining. Companies are finding little in the way of pricing power, except in industries which have virtual, government-allowed monopolies, such as energy and utility companies.
Where has all this money gone? Directly into the hands of the banks, and much of it was certainly used to pump up stock prices. The timing of the rally and the second round of TARP funding were surely more than coincidental. Now that the money has been spent and distributed through the market, it has to be removed and put back on the banks' balance sheets. There is one fatal flaw to the government-Wall Street scheme: nobody's buying on the way down, just as nobody was buying during the secondary crash in early 2009, nor during the subsequent run-up. The entire three-month rally was nothing more than massive self-dealing, a complete sham, with the bank CEOs, the Fed, the Treasury and high-ranking government officials fully complicit in the charade.
While there's nothing implicitly illegal about buying stocks cheap and selling them a few months later at a profit, the obvious questions to ask are, first, how prevalent among the insider banking community and the government was the knowledge that stocks weren't really worth the asking prices of recent weeks and, second, what was being to to the general public and the banks' clients?
Telling clients to buy securities at the same time your own brokerage is unloading them is fraud, though, as far as Wall Street practice is concerned, it happens all the time, day in and day out. Seemingly, the only way to make money in this environment is to play along with the big money. Buy when they are buying, sell when they are selling. It's now time to sell.
Dow 8,504.67, -107.46 (1.25%)
NASDAQ 1,796.18, -20.20 (1.11%)
S&P 500 911.97, -11.75 (1.27%)
NYSE Composite 5,886.76, -80.50 (1.35%)
Once again, decliners beat back advancing issues, 4475-1914. For the second straight day, new lows outnumbered new highs, 68-26. Volume remained subdued, so get used to this level of activity. It's summer, and many of the usual heavy players are not involved.
NYSE Volume 1,176,238,000
NASDAQ Volume 2,262,585,000
Commodities were mixed. Oil spent most of the day with gains, but closed down 15 cents, at $70.47. Gold was up $4.70, to $932.20. Silver, after Monday's 85 cent bludgeoning, was up just a dime, to $14.13. Natural gas was down slightly. Pork bellies continued to price higher.
Other economic data of note included industrial production, down 1.1%, and capacity utilization, checking in at 68.3% for May, after posting a revised 69.0% for April. These numbers are continuing evidence of the severity of the recession. Rather than seeing "green shoots," of potential recovery, the latest round of figures suggests what reality is really showing us, a deepening and swelling depression which threatens to take down every segment of the US economy, and with it, much of the world's.
The banks and other far-flung, covert, secluded monied interests are hoarding capital. The only way to wring it from their cold, clammy hands is through inflation, and that's not happening. Nobody knows where the bottom is, but a good bet would be that we're nowhere close to one. Government bailouts and stimulus have only quieted the rout for the time being. Unemployment continues to increase and deficits are growing as far as the eye can see. Now is definitely not a time to be speculating for stock gains.
Monday, June 15, 2009
Stocks, Commodities Belted; New Highs-Lows Indicator Calls Shot
After a week of listless trading which ended Friday with an upside-down condition between the headline number and the market internals, the measurement of new highs vs. new lows indicated that a reversal was at hand. On Friday, June 12, the Dow reached its highest level since January 6 of this year, and true to form, marked an interim market top from which a fall was not only predictable, but almost too obvious.
The Dow index was trapped between the last vestiges of a long bear market rally and the nearly-impossible condition of making new highs, converting to a new bull market. Since the transportation index failed to confirm the highs on the Industrial, there seemed to be no other direction but down, and on Monday, investors took the bearish signal and ran with it.
The major indices fall in line with the Dow decline, the worst hit being the Composite, with the broadest base of stocks. As usual, market participants tried to force a last-hour rally, as has been their behavior on nearly every down day, but their efforts failed to recover much of the ground lost during the session. At the low point of the day, the Dow was down 223 points, rallied from 3 pm to 3:45 pm to -175 points, but lost traction in the final 15 minutes of trade with all of the major indices ending near their lows for the day.
As concerns our most valued (and simple) indicator, the new highs-new lows measure went positive for five straight sessions, reversing a 21-month-old pattern, before rolling over into the negative (more new lows than highs) on Friday, in stark contradiction to the upside move on the Dow. Interestingly, the advance-decline line on Friday also went negative, nearly telegraphing Monday's direction.
Dow 8,612.13, -187.13 (2.13%)
NASDAQ 1,816.38, -42.42 (2.28%)
S&P 500 923.72, -22.49 (2.38%)
NYSE Composite 5,967.26, -181.35 (2.95%)
On the day, declining issues led advancers by an enormous margin, 5283-1174, (9-2); while new lows remained in control over new highs, 65-34. Volume was once more in the negligible range, close to levels seen last week, so, not influential. It may be that we are witnessing the summer level of activity on the market. Many participants may have already retreated to the sidelines, and will seek re-entry points at some later date. There are still large amounts of profits to be taken as the markets have not yet gone into "gran mal seizure" mode, though that may occur at any time.
Refreshingly, the new lows-new highs indicator rang true and maintained the negative bias from Friday, restoring faith in the one simple indicator that has been absolutely dead on throughout the market decline of the past 22 months.
NYSE Volume 1,150,418,000
NASDAQ Volume 2,178,292,000
While stocks were sliding, commodities were doing the same, with losses across the spectrum. Notable contrarians were Natural Gas and Pork Belly futures, both up sharply. Crude oil for July delivery fell $1.42, to $70.62. Further pullback, to the $55-62 level is expected, unless there's evidence of increased demand. One can safely assume that the recent rise in oil prices was the result of naked speculation of a seasonal variety, and thus, unlikely to produce long-lasting gains.
Gold was sent southward once more, dipping $13.20, to $927.50. Silver also took a large hit, losing 85 cents (a massive one-day loss), to $14.03. It's likely that the metals may remain somewhat range-bound, much of the trade dependent upon this week's PPI (tomorrow) and CPI (Wednesday) figures. If gains in both are sizable, that would indicate inflation, taking up all commodity prices, but there seems to be unfolding evidence that markets have cooled considerably and will remain moribund for the foreseeable future, making speculation difficult, it not foolish.
The world's economies are not as badly damaged as they appeared to be back in the fall of 2008, though the stresses to the overall global system has been significant. Market players are discovering that the recent rally in stocks may have been quite overdone and without justification, forcing many investors into a more defensive posture. Additionally, with the recent Treasury data indicating that foreign involvement has dried up considerably, there's increased pressure on bonds, forcing yields higher, and, thus, moving money away from riskier stocks and commodities.
Given the current conditions, there appears to be few places to make money, so a flight to the relative safely of bonds may be the preferred route for many.
The Dow index was trapped between the last vestiges of a long bear market rally and the nearly-impossible condition of making new highs, converting to a new bull market. Since the transportation index failed to confirm the highs on the Industrial, there seemed to be no other direction but down, and on Monday, investors took the bearish signal and ran with it.
The major indices fall in line with the Dow decline, the worst hit being the Composite, with the broadest base of stocks. As usual, market participants tried to force a last-hour rally, as has been their behavior on nearly every down day, but their efforts failed to recover much of the ground lost during the session. At the low point of the day, the Dow was down 223 points, rallied from 3 pm to 3:45 pm to -175 points, but lost traction in the final 15 minutes of trade with all of the major indices ending near their lows for the day.
As concerns our most valued (and simple) indicator, the new highs-new lows measure went positive for five straight sessions, reversing a 21-month-old pattern, before rolling over into the negative (more new lows than highs) on Friday, in stark contradiction to the upside move on the Dow. Interestingly, the advance-decline line on Friday also went negative, nearly telegraphing Monday's direction.
Dow 8,612.13, -187.13 (2.13%)
NASDAQ 1,816.38, -42.42 (2.28%)
S&P 500 923.72, -22.49 (2.38%)
NYSE Composite 5,967.26, -181.35 (2.95%)
On the day, declining issues led advancers by an enormous margin, 5283-1174, (9-2); while new lows remained in control over new highs, 65-34. Volume was once more in the negligible range, close to levels seen last week, so, not influential. It may be that we are witnessing the summer level of activity on the market. Many participants may have already retreated to the sidelines, and will seek re-entry points at some later date. There are still large amounts of profits to be taken as the markets have not yet gone into "gran mal seizure" mode, though that may occur at any time.
Refreshingly, the new lows-new highs indicator rang true and maintained the negative bias from Friday, restoring faith in the one simple indicator that has been absolutely dead on throughout the market decline of the past 22 months.
NYSE Volume 1,150,418,000
NASDAQ Volume 2,178,292,000
While stocks were sliding, commodities were doing the same, with losses across the spectrum. Notable contrarians were Natural Gas and Pork Belly futures, both up sharply. Crude oil for July delivery fell $1.42, to $70.62. Further pullback, to the $55-62 level is expected, unless there's evidence of increased demand. One can safely assume that the recent rise in oil prices was the result of naked speculation of a seasonal variety, and thus, unlikely to produce long-lasting gains.
Gold was sent southward once more, dipping $13.20, to $927.50. Silver also took a large hit, losing 85 cents (a massive one-day loss), to $14.03. It's likely that the metals may remain somewhat range-bound, much of the trade dependent upon this week's PPI (tomorrow) and CPI (Wednesday) figures. If gains in both are sizable, that would indicate inflation, taking up all commodity prices, but there seems to be unfolding evidence that markets have cooled considerably and will remain moribund for the foreseeable future, making speculation difficult, it not foolish.
The world's economies are not as badly damaged as they appeared to be back in the fall of 2008, though the stresses to the overall global system has been significant. Market players are discovering that the recent rally in stocks may have been quite overdone and without justification, forcing many investors into a more defensive posture. Additionally, with the recent Treasury data indicating that foreign involvement has dried up considerably, there's increased pressure on bonds, forcing yields higher, and, thus, moving money away from riskier stocks and commodities.
Given the current conditions, there appears to be few places to make money, so a flight to the relative safely of bonds may be the preferred route for many.
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