Just a quick peed at a short term chart of the Dow indicates that stocks have stalled over the last three sessions as earnings season winds down. What seems to be a psychological barrier exists at the 9100 level, but underpinning the pressure on traders is the non-confirmation in the Dow Jones Transportation Index (DJT) that was spoken of here last week.
Without confirmation of a breakout in the transports above the 3717 (January 6, 2009) level (currently 3523), there will be no talk of a new bull market, even though the possibility of one emerging still exists. Traders and analysts are becoming increasingly cautious about making market predictions, still reeling from the effects of last Autumn's tsunami of price declines.
There's also some confusion about just where stocks would have to go in order for a new bull to be proclaimed. Since the current bear is closing in on two years of age (October 2007), this bear may not have much further to proceed. At the very least, the rebound from March is encouraging to the bulls, as the incipient rally will soon reach 5 months. As bear market rallies go, that's a reasonable time frame. Naturally, continued gains would produce the much-desired "V bottom," though macro forces and experience tell us that a "W" is more likely, with the potential for either a truncated or extended third leg possible. For reference, take a look at a Dow chart of 2002-2003, where the Index bottomed just above 7500 at the end of September 2002, and rallied for a short time until hitting the next bottom around 7850 in March, 2003, just over 5 months later.
There were more zig-zags and I am oversimplifying, but the pattern is there for analysis, and could be re-emerging. Also notable is that the War in Iraq began with the beginning of the bull in March, 2003. There may be comparable political and military implications afoot, with increased troop presence in Afghanistan, though other conditions are not so closely aligned.
The issue is whether stocks on the Industrial and Transport indices have to reach January 2009 levels for confirmation or go back to November 2008 rebound highs. There's a big difference. On the Industrials, the November high was 9625; for the transports, a nip over 4000 is the sweet spot.
In any case, hedging for another down leg might be the prudent course at this point in time.
Dow 9,096.72, -11.79 (0.13%)
NASDAQ 1,975.51, +7.62 (0.39%)
S&P 500 979.62, -2.56 (0.26%)
NYSE Composite 6,328.67, -35.99 (0.57%)
The major indices spent almost the entire session in the red, with only the NASDAQ ending positive, a recurring theme. advancing issues held sway slightly over losers, 3163-3130. There were 165 new highs to just 71 new lows, lending credence to the bull ideology. Volume was moderately better than the past two sessions, another bullish signal.
NYSE Volume 1,280,160,000
NASDAQ Volume 2,236,427,000
If the stock market is taking a pause from screaming "recovery," commodities are singing a deflationary tune. September crude fell $1.15, to $67.23. Gold dropped $14.60, to $941.70. Silver lost 25 cents, to $13.74, though the precious metals are coming off two productive weeks of gains. Livestock and grain futures continued to experience price pressures.
There was little in the way of corporate earnings, though Office Depot (ODP) experienced a large second quarter loss. With businesses of every size cutting back, that's not much of a surprise. The stock lost nearly 20%, down 97 cents, to 4.38.
US Steel (X) reported a loss of $392 million, or $2.92 per share for the quarter ended June 30. Sagging demand for steel and steel products has pushed prices lower and crippled most producers. Fallout from the auto business is seen as a major factor affecting both prices and the profits of steel companies. The loss was the second straight quarterly for US Steel.
The S&P/Case-Shiller Home Price Index showed its first gain in nearly three years, though it could be more of a one-off than anything else. After dropping for 34 straight months, the 0.5% increase may amount to nothing more than a rounding error. With foreclosures still extremely high and unemployment showing few signs of abating, home prices may do a double-dip, just like stocks.
Tuesday, July 28, 2009
Monday, July 27, 2009
Stocks Flat As Consolidation Appears Likely
US stocks spent the majority of the session in negative territory, only to catch a bid late in the day and record modest gains. As there were few major companies reporting earnings, traders searched for signs of a recovering economy in new home sales data, which surged 11% from the previous month.
At this point, such news from the housing sector is extremely positive, though foreclosures continue to escalate in hardest-hit areas of the county, such as Michigan, California and the Southwest.
Dow 9,108.51, +15.27 (0.17%)
NASDAQ 1,967.89, +1.93 (0.10%)
S&P 500 982.18, +2.92 (0.30%)
NYSE Composite 6,364.66, +27.20 (0.43%)
Internals were in line with the headline numbers, though the trading range was extremely narrow (80 points on the Dow). Not to put too fine a point on it, but nothing much was moving in any direction following a week of relatively strong gains. Advancing issues outnumbered decliners, 3886-2522 and new highs continued their recent reign over new lows, 213-86. Volume was moderate, as traders change positions in what may be another consolidation phase.
NYSE Volume 1,045,247,000
NASDAQ Volume 2,159,129,000
The issue for markets is once again technical, as indices have surged again to positions indicating a recovering economy and possible renewed growth, though signs of such are remain few and far between. With many of the major companies already having reported, the market is likely to experience a bout of profit-taking near term, though many indicators are pointing towards a continuation of the rally.
It would be nice to be able to sound the "all clear" horn, but macro-economic forces, especially the solvency and liquidity issues in the banking fortress, are still in a state of virtual shutdown. Further out, the only geopolitical zone which shows any potential for long-term growth is the Pacific Rim, India and China. The US and Europe remain basket cases with far too much overhang in government deficits, an indirect result of last fall's near catastrophe. Money to lend remains on short leashes, with only the best credit-worthy of borrowers able to dip into the pool. Small business in the private sector offers great potential, but is being stifled without financing, causing a serious negative feedback loop into the general economy.
The US is being kept afloat by the patchwork done by the Fed, Treasury and the continued funding of the huge swath of entitlement programs. Payments to beneficiaries of Social Security, state and local pensions, disability, unemployment insurance and welfare are providing a floor upon which the broader economy will try to grow. It's a very bottom-up approach, and entirely built upon the generosity of Congress and borrowed funds from a variety of sources, a good deal of it in the quantitative easing being undertaken at the Fed.
While it is entirely possible that the Obama stimulus plan will provide enough of a boost to avoid a rerun of 2008, there are serious issues such as inflation, ballooning state government deficits and the unusually high rate of unemployment. Until there are actual jobs being created, it's more or less a slowly plodding domestically-based cash economy without real gains in either productivity and job creation. As such, it's difficult to recommend any long-term stock buying. The market remains a casino for quick returns or losses.
Commodity trading was also sluggish. September light crude rose 33 cents, to $68.38. Gold gained 40 cents, to $956.30, and silver was up 12 cents, to $13.99. Oil remains overpriced in consideration of demand, flat to declining even in the full bloom of summer.
More companies report on Tuesday. The ones which will be watched the closest are Deutsche Bank (DB), Hitachi (HIT), Universal Health Services (UHS), United States Steel (X) and Valero Energy (VLO).
At this point, such news from the housing sector is extremely positive, though foreclosures continue to escalate in hardest-hit areas of the county, such as Michigan, California and the Southwest.
Dow 9,108.51, +15.27 (0.17%)
NASDAQ 1,967.89, +1.93 (0.10%)
S&P 500 982.18, +2.92 (0.30%)
NYSE Composite 6,364.66, +27.20 (0.43%)
Internals were in line with the headline numbers, though the trading range was extremely narrow (80 points on the Dow). Not to put too fine a point on it, but nothing much was moving in any direction following a week of relatively strong gains. Advancing issues outnumbered decliners, 3886-2522 and new highs continued their recent reign over new lows, 213-86. Volume was moderate, as traders change positions in what may be another consolidation phase.
NYSE Volume 1,045,247,000
NASDAQ Volume 2,159,129,000
The issue for markets is once again technical, as indices have surged again to positions indicating a recovering economy and possible renewed growth, though signs of such are remain few and far between. With many of the major companies already having reported, the market is likely to experience a bout of profit-taking near term, though many indicators are pointing towards a continuation of the rally.
It would be nice to be able to sound the "all clear" horn, but macro-economic forces, especially the solvency and liquidity issues in the banking fortress, are still in a state of virtual shutdown. Further out, the only geopolitical zone which shows any potential for long-term growth is the Pacific Rim, India and China. The US and Europe remain basket cases with far too much overhang in government deficits, an indirect result of last fall's near catastrophe. Money to lend remains on short leashes, with only the best credit-worthy of borrowers able to dip into the pool. Small business in the private sector offers great potential, but is being stifled without financing, causing a serious negative feedback loop into the general economy.
The US is being kept afloat by the patchwork done by the Fed, Treasury and the continued funding of the huge swath of entitlement programs. Payments to beneficiaries of Social Security, state and local pensions, disability, unemployment insurance and welfare are providing a floor upon which the broader economy will try to grow. It's a very bottom-up approach, and entirely built upon the generosity of Congress and borrowed funds from a variety of sources, a good deal of it in the quantitative easing being undertaken at the Fed.
While it is entirely possible that the Obama stimulus plan will provide enough of a boost to avoid a rerun of 2008, there are serious issues such as inflation, ballooning state government deficits and the unusually high rate of unemployment. Until there are actual jobs being created, it's more or less a slowly plodding domestically-based cash economy without real gains in either productivity and job creation. As such, it's difficult to recommend any long-term stock buying. The market remains a casino for quick returns or losses.
Commodity trading was also sluggish. September light crude rose 33 cents, to $68.38. Gold gained 40 cents, to $956.30, and silver was up 12 cents, to $13.99. Oil remains overpriced in consideration of demand, flat to declining even in the full bloom of summer.
More companies report on Tuesday. The ones which will be watched the closest are Deutsche Bank (DB), Hitachi (HIT), Universal Health Services (UHS), United States Steel (X) and Valero Energy (VLO).
Friday, July 24, 2009
Quiet End to Big Earnings Week
For the most part, investors cheered second quarter results from a wide swath of companies, sending the Dow Jones Industrials and other major indices to 2008 highs. The NASDAQ reached levels not seen since last October, while the S&P 500 careened back to its November 2008 levels.
Even though it was a down day for the NASDAQ - highly influenced by poor showings by Microsoft and Amazon after the close Thursday - that index ended a 12-day winning streak.
Dow 9,093.24, +23.95 (0.26%)
NASDAQ 1,965.96, -7.64 (0.39%)
S&P 500 979.26, +2.97 (0.30%)
NYSE Composite 6,337.46, +34.94 (0.55%)
For Friday, gainers led losers, 3818-2532. New highs cooled off after yesterday's exceptional showing, but still led new lows by a healthy, 2-1 margin, 164-82. Volume tapered off, with trading back to slow midsummer levels.
NYSE Volume 1,024,974,000
NASDAQ Volume 2,267,459,000
Commodities were again all over the map. September crude gained 89 cents, to $68.05, while gold fell $1.70 after a nice run-up, to end the week at $953.10. Silver was a winner, gaining another 11 cents, to $13.88, a magical level at which US silver coins are worth 10 times their face value. Both gold and silver once again seem poised to take off for new heights, though they've been in this territory before and rallies have been squelched by bouts of selling. with the US greenback under increasing pressure, however, this could be the moment for the precious metals to finally proclaim their value both as investments and hedges. Far and away, the precious metals have been the most stable investments this year, and since they are still in bull markets, there's little reason to believe they won't end the year shining.
The week was most impressive due to the relatively small number of companies posting poor second quarter results and next week may represent the last gasp of the long - now 5 month - rally. Within a rugged trading environment, wherein stocks and entire indices can turn on a dime, quick turnaround trades have been the best ally of most investors. The continued low volume indicates that the market is conducive to day-trading and that many players of all sizes are still sitting on the sidelines or have already been wiped out.
Next week is the highlight of the earnings season and also the end of another month. With the July employment report due out on August 7, there's ample reason to take profits and run, though the true high risk-takers may continue to hold, hoping that the incipient bear market rally erupts into a full-blown bull. The evidence for that happening is still a matter of great conjecture and clouded by a diversity of opinions and economic reports.
Best advice is to hang tight and hope for the best, though short term trading remains the obvious choice to avoid major losses. Wall Street has never resembled a casino more than at the current time. There are updrafts and downdrafts which could swing stocks in either direction. In such a context, apathy could be one's worst enemy and fear a grand ally.
Even though it was a down day for the NASDAQ - highly influenced by poor showings by Microsoft and Amazon after the close Thursday - that index ended a 12-day winning streak.
Dow 9,093.24, +23.95 (0.26%)
NASDAQ 1,965.96, -7.64 (0.39%)
S&P 500 979.26, +2.97 (0.30%)
NYSE Composite 6,337.46, +34.94 (0.55%)
For Friday, gainers led losers, 3818-2532. New highs cooled off after yesterday's exceptional showing, but still led new lows by a healthy, 2-1 margin, 164-82. Volume tapered off, with trading back to slow midsummer levels.
NYSE Volume 1,024,974,000
NASDAQ Volume 2,267,459,000
Commodities were again all over the map. September crude gained 89 cents, to $68.05, while gold fell $1.70 after a nice run-up, to end the week at $953.10. Silver was a winner, gaining another 11 cents, to $13.88, a magical level at which US silver coins are worth 10 times their face value. Both gold and silver once again seem poised to take off for new heights, though they've been in this territory before and rallies have been squelched by bouts of selling. with the US greenback under increasing pressure, however, this could be the moment for the precious metals to finally proclaim their value both as investments and hedges. Far and away, the precious metals have been the most stable investments this year, and since they are still in bull markets, there's little reason to believe they won't end the year shining.
The week was most impressive due to the relatively small number of companies posting poor second quarter results and next week may represent the last gasp of the long - now 5 month - rally. Within a rugged trading environment, wherein stocks and entire indices can turn on a dime, quick turnaround trades have been the best ally of most investors. The continued low volume indicates that the market is conducive to day-trading and that many players of all sizes are still sitting on the sidelines or have already been wiped out.
Next week is the highlight of the earnings season and also the end of another month. With the July employment report due out on August 7, there's ample reason to take profits and run, though the true high risk-takers may continue to hold, hoping that the incipient bear market rally erupts into a full-blown bull. The evidence for that happening is still a matter of great conjecture and clouded by a diversity of opinions and economic reports.
Best advice is to hang tight and hope for the best, though short term trading remains the obvious choice to avoid major losses. Wall Street has never resembled a casino more than at the current time. There are updrafts and downdrafts which could swing stocks in either direction. In such a context, apathy could be one's worst enemy and fear a grand ally.
Thursday, July 23, 2009
Revisiting Dow Theory As Industirals Reach '09 High
The midsummer rally caught fire on Thursday, as investors were encouraged by strong results from a wide range of companies, including Ford Motor Company (F), which announced better-than-expected earnings for the second quarter.
Also buoying the buyers was the third straight month of higher existing home sales, as reported by the National Association of Realtors (NAR). Not only were there more homes sold in June than in the previous month, but the number of foreclosure sales and short sales were of a smaller percentage than had been previously seen. The trade association also reported that the existing supply of homes for sale had fallen to just over 9 months.
3M (MMM) beat expectations, McDonald's (MCD) and American Express (AXP) missed. Amazon (AMZN), the world's largest online retailer, saw higher sales volume for the quarter but lower earnings, reporting 32 cents per share on $4.65 billion in sales. The stock was higher during regular trading hours, but had taken a $6.5% hit after hours.
Also after the close, Capital One (COF), a major credit card issuer, posted a $275.5 million loss as delinquencies continued to wrack the company's profits. They lost 65 cents per share in the quarter compared with a profit of $1.21 per share in the same period a year ago.
Another significant company reporting after the bell was Microsoft (MSFT), which missed both sales and earnings targets by wide margins. The global software, gaming and internet giant is being affected not only by the downturn in the economy, but by hardball competition from the likes of Google.
However, most of the trading day was cheery, with the Dow Jones Industrials exceeding its previous high from January 2nd, an initial sign of a possible new bull market emerging. However, the transportation index (DJT) failed to confirm, closing at 3506.12, far below the January 6 high of 3717.26. The mixed results after the bell, juxtaposed with the Dow's closing high and non-confirmation, sets up an interesting close for the week on Friday. As opposed to the nearly 300 companies which reported on Thursday, Friday will pale by comparison, with fewer than 80 companies scheduled to release earnings, none of them major firms.
Dow 9,069.29, +188.03 (2.12%)
NASDAQ 1,973.60, +47.22 (2.45%)
S&P 500 976.29, +22.22 (2.33%)
NYSE Composite 6,302.52, +151.12 (2.46%)
The good news is that the NASDAQ rally has now reached 12 straight sessions, and the majority of companies reporting are turning profits and many are beating expectations. On the day, advancing issues trampled decliners, 5206-1305 and new highs catapulted past new lows, 272-112. The number of new highs for the day was the most in nearly 2 years, a remarkable number. Volume also offered an encouraging signal, with a massive number of shares traded on the NASDAQ and a solid showing for the NYSE as well.
NYSE Volume 1,396,542,000
NASDAQ Volume 3,083,885,000
Commodities responded with mostly higher futures prices, especially oil, which gained $1.76, to $67.16. Gold was up another $1.50, to $954.80, while silver continued to rally off recent lows, up 7 cents, to $13.77.
While the economy may still be a little wobbly, the worst may indeed be behind us. However, investors are still skittish over stocks following last year's October surprise, the worst spate of stock selling since the Great Depression. Whether or not the transportation index will confirm a new bull market remains a distant outlook and how far investors will stretch their gains through the earnings season will also bear close attention.
Also buoying the buyers was the third straight month of higher existing home sales, as reported by the National Association of Realtors (NAR). Not only were there more homes sold in June than in the previous month, but the number of foreclosure sales and short sales were of a smaller percentage than had been previously seen. The trade association also reported that the existing supply of homes for sale had fallen to just over 9 months.
3M (MMM) beat expectations, McDonald's (MCD) and American Express (AXP) missed. Amazon (AMZN), the world's largest online retailer, saw higher sales volume for the quarter but lower earnings, reporting 32 cents per share on $4.65 billion in sales. The stock was higher during regular trading hours, but had taken a $6.5% hit after hours.
Also after the close, Capital One (COF), a major credit card issuer, posted a $275.5 million loss as delinquencies continued to wrack the company's profits. They lost 65 cents per share in the quarter compared with a profit of $1.21 per share in the same period a year ago.
Another significant company reporting after the bell was Microsoft (MSFT), which missed both sales and earnings targets by wide margins. The global software, gaming and internet giant is being affected not only by the downturn in the economy, but by hardball competition from the likes of Google.
However, most of the trading day was cheery, with the Dow Jones Industrials exceeding its previous high from January 2nd, an initial sign of a possible new bull market emerging. However, the transportation index (DJT) failed to confirm, closing at 3506.12, far below the January 6 high of 3717.26. The mixed results after the bell, juxtaposed with the Dow's closing high and non-confirmation, sets up an interesting close for the week on Friday. As opposed to the nearly 300 companies which reported on Thursday, Friday will pale by comparison, with fewer than 80 companies scheduled to release earnings, none of them major firms.
Dow 9,069.29, +188.03 (2.12%)
NASDAQ 1,973.60, +47.22 (2.45%)
S&P 500 976.29, +22.22 (2.33%)
NYSE Composite 6,302.52, +151.12 (2.46%)
The good news is that the NASDAQ rally has now reached 12 straight sessions, and the majority of companies reporting are turning profits and many are beating expectations. On the day, advancing issues trampled decliners, 5206-1305 and new highs catapulted past new lows, 272-112. The number of new highs for the day was the most in nearly 2 years, a remarkable number. Volume also offered an encouraging signal, with a massive number of shares traded on the NASDAQ and a solid showing for the NYSE as well.
NYSE Volume 1,396,542,000
NASDAQ Volume 3,083,885,000
Commodities responded with mostly higher futures prices, especially oil, which gained $1.76, to $67.16. Gold was up another $1.50, to $954.80, while silver continued to rally off recent lows, up 7 cents, to $13.77.
While the economy may still be a little wobbly, the worst may indeed be behind us. However, investors are still skittish over stocks following last year's October surprise, the worst spate of stock selling since the Great Depression. Whether or not the transportation index will confirm a new bull market remains a distant outlook and how far investors will stretch their gains through the earnings season will also bear close attention.
Wednesday, July 22, 2009
NASDAQ Extends Streak, Earnings Up and Down
Editor's Note: I sincerely apologize for the last two days in which I have not posted as I regularly do. Unfortunately, events of the past few days have completely overwhelmed my usual habits, as my father passed away on Thursday of last week and the wake (Monday), funeral (Tuesday) and other family affairs have been very time-consuming. It is my sincere hope to get back onto my regular schedule as of today.
The markets continue to gyrate around second quarter earnings news and reports from a wide variety of companies. While the majority of companies have met or exceeded - mostly-lowered - expectations, a number of major firms have posted shoddy numbers, reflecting the struggles being felt across the US economy.
By the close, the only index posting a gain was the NASDAQ, extending its own winning streak to twelve days. The Dow ended an eight-day run of positive finishes with a modest loss.
That the NASDAQ has been a best-performer over the past few weeks should come as no surprise. Many of the companies comprising the index are younger and leaner, without many of the legacy costs and high debt loads usually associated with the companies on the Dow, for instance.
Apple (AAPL) and Starbucks (SBUX), both listed on the NASDAQ reported solid earnings for the quarter, while Advanced Micro Devices (AMD) and Wells-Fargo (WFC), two NYSE stocks, posted steep losses for the quarter.
Dow 8,881.26, -34.68 (0.39%)
NASDAQ 1,926.38, +10.18 (0.53%)
S&P 500 954.07, +0.51 (0.05%)
NYSE Composite 6,151.40, -2.99 (0.05%)
Market internals were in-line with the headline numbers. Advancers finished well ahead of losing issues, 3779-2585, while new highs continued their winning streak over new lows, finishing ahead, 142-96. Volume was very strong on the NASDAQ, but continued to slump on the NYSE, barely making it past the benchmark of 1 billion shares traded.
NYSE Volume 1,079,660,000
NASDAQ Volume 2,371,615,000
Commodities traded all over the map. September crude finished 21 cents lower, at $65.40, while the metal shone, with gold gaining $6.40, to $953.30 and silver up 22 cents to $13.70. Grains and livestock were mixed.
Earnings reports will keep investors on their toes Thursday, with nearly 300 companies reporting. Some of the bigger names include United Parcel Service (UPS), Raytheon (RTN), KLA-Tencor (KLAC), 3M (MMM), Burlington Northern (BNI), Capital One (COF), Credit Suisse (CS), McDonald's (MCD) and Microsoft (MSFT).
The markets continue to gyrate around second quarter earnings news and reports from a wide variety of companies. While the majority of companies have met or exceeded - mostly-lowered - expectations, a number of major firms have posted shoddy numbers, reflecting the struggles being felt across the US economy.
By the close, the only index posting a gain was the NASDAQ, extending its own winning streak to twelve days. The Dow ended an eight-day run of positive finishes with a modest loss.
That the NASDAQ has been a best-performer over the past few weeks should come as no surprise. Many of the companies comprising the index are younger and leaner, without many of the legacy costs and high debt loads usually associated with the companies on the Dow, for instance.
Apple (AAPL) and Starbucks (SBUX), both listed on the NASDAQ reported solid earnings for the quarter, while Advanced Micro Devices (AMD) and Wells-Fargo (WFC), two NYSE stocks, posted steep losses for the quarter.
Dow 8,881.26, -34.68 (0.39%)
NASDAQ 1,926.38, +10.18 (0.53%)
S&P 500 954.07, +0.51 (0.05%)
NYSE Composite 6,151.40, -2.99 (0.05%)
Market internals were in-line with the headline numbers. Advancers finished well ahead of losing issues, 3779-2585, while new highs continued their winning streak over new lows, finishing ahead, 142-96. Volume was very strong on the NASDAQ, but continued to slump on the NYSE, barely making it past the benchmark of 1 billion shares traded.
NYSE Volume 1,079,660,000
NASDAQ Volume 2,371,615,000
Commodities traded all over the map. September crude finished 21 cents lower, at $65.40, while the metal shone, with gold gaining $6.40, to $953.30 and silver up 22 cents to $13.70. Grains and livestock were mixed.
Earnings reports will keep investors on their toes Thursday, with nearly 300 companies reporting. Some of the bigger names include United Parcel Service (UPS), Raytheon (RTN), KLA-Tencor (KLAC), 3M (MMM), Burlington Northern (BNI), Capital One (COF), Credit Suisse (CS), McDonald's (MCD) and Microsoft (MSFT).
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