While many investors have focused on the fall of 2008 as the critical juncture for markets, stocks had in fact been falling since the fall of 2007. In August of 2007, the subprime crisis first appeared and was quickly talked down by then-Secretary of the Treasury Hank Paulson and Fed Chairman Ben Bernanke. The two brids famously chirped that the crisis had been "contained," though many market insiders were unconvinced.
The major indices reached peaks just two months later, in October, but then began a steady decline until Bear Stearns finally imploded in March of 2009. The point is that the current bear market is not nearly a year old, but closer to two years of age, and that's a long time for bear markets in general. Granted, this one was different and we may not have seen the worst of it - though it's difficult to imagine conditions worse than those which prevailed in the fall of 2008 or late winter of 2009 - but bears of 22, 23, 24 months or longer are not the norm.
As August 2009 comes to a conclusion Monday, we find the indices at the cusp of a potential new bull market and the conditions are present or emerging which could send stocks much higher in the near term. Noting that today's close was the first negative in 9 sessions for the Dow and and the second in nine for the other majors (except for the NASDAQ, which ended the day positive), the indices have pushed and prodded up against considerable resistance, mostly the marks set at the interim tops on November 4, 2009 of 9625 on the Dow and 1005 on the S&P 500. While the NASDAQ has clearly recovered to a far better condition than the other indices, topping the November 4, 2009 top of 1780 by more than 200 points, the others are lagging the younger, more spirited index by a large margin.
Because the NASDAQ is so obviously overbought and the other two indices just above (S&P) or just below (Dow) resistance, investors have been calling for a pullback for the better part of three weeks, though no meaningful breakdown has occurred, precisely because most traders are positioned long at this juncture, in expectation of a short, shallow reversal before taking off to new, higher levels.
Should the Dow surpass the 9625 mark and the transports confirm, Dow Theory tells us that is a signal for a new, bullish trend. It's likely that stocks will outperform all other asset classes for the remainder of the year, once this soft patch of resistance and investor indecision abates. A pullback of 5-15% is probably the best medicine for the markets in order to supply upward impetus, nut this market has demonstrated firm resistance to any sustained downward trend, so it's by no means a sure thing that stocks will go down before they go up. This week was notable in that as soon as the Dow retreated to the 9500 level - on Monday, Wednesday, Thursday and Friday - or thereabouts, speculators jumped in and stocks rallied.
This has put stocks in a pretty tight trading range, but once either 9500 or 9625 on the Dow is breached, the stage will be set for another push higher.
How high?
Figure another 12-15% before the money managers are exhausted and begin taking serious profits. One should not expect a dramatic increase on par with what markets have done between March 9 and today, but rather a sideways trade with an upside bias through the end of the year. It may be dull, but at least it won't be going down.
Dow 9,544.20, -36.43 (0.38%)
NASDAQ 2,028.77, +1.04 (0.05%)
S&P 500 1,028.93, -2.05 (0.20%)
NYSE Composite 6,709.04, -13.27 (0.20%)
On the day, declining issues outweighed advancers, 3581-2814, and new highs trumped new lows, 183-77. Volume was above average, though still in that subdued summertime range.
NYSE Volume 1,391,884,000
NASDAQ Volume 2,396,156,000
Commodities were generally higher for the second straight day. Oil gained 24 cents, to $72.74. Gold was up $11.50, to $958.80, while silver sported a healthy 56 cent gain to close at $14.82.
After Monday's big rally, the remainder of the week was rather inconsequential owing to the factors addressed earlier in this post. Next week will be something of an oddity, with August ending on Monday and Friday likely to be the major swing day as the Labor Department releases non-farm payroll data for August. That bumps up against the very late labor Day three-day holiday weekend, so there will be plenty to think about both during and after the trading.
Friday, August 28, 2009
Thursday, August 27, 2009
Eight Straight for Dow; Is Resistance Futile?
The Dow Jones Industrial Average bounced back from morning setbacks to finish with its eighth consecutive session on the upside. Other indices followed suit, most of them now have been up 7 of the past eight trading days.
A fair showing in new unemployment claims - down about 10,000 from the prior week - and reiteration of 2nd quarter GDP estimates of -1% were not enough to compel investors into more buying in the initial going. But after settling down about 60 points, the Dow and other indices eventually made their ways back to the positive by early afternoon and ended the day with modest gains.
Dow 9,580.63, +37.11 (0.39%)
NASDAQ 2,027.73, +3.30 (0.16%)
S&P 500 1,030.98, +2.86 (0.28%)
NYSE Composite 6,722.31, +34.37 (0.51%)
Winners and losers ended the session in a virtual dead heat, with 3171 up and 3175 stocks down. New highs beat new lows again, 147-43, maintaining the kind of advantage that has been typical during the recent run-up. Volume was slightly better than previous sessions this week, though barely noticeable.
NYSE Volume 1,285,654,000
NASDAQ Volume 2,157,144,000
Commodities mostly reverse their two-day losing trend, with oil up $1.06, to $72.49 and gold ahead by $1.50, to $947.30. Silver, however, was set back 4 cents, closing at $14.25.
With a paucity of news upon which to trade, many brokers were mailing it in this week, so as seems to be the current custom, adios, until tomorrow.
A fair showing in new unemployment claims - down about 10,000 from the prior week - and reiteration of 2nd quarter GDP estimates of -1% were not enough to compel investors into more buying in the initial going. But after settling down about 60 points, the Dow and other indices eventually made their ways back to the positive by early afternoon and ended the day with modest gains.
Dow 9,580.63, +37.11 (0.39%)
NASDAQ 2,027.73, +3.30 (0.16%)
S&P 500 1,030.98, +2.86 (0.28%)
NYSE Composite 6,722.31, +34.37 (0.51%)
Winners and losers ended the session in a virtual dead heat, with 3171 up and 3175 stocks down. New highs beat new lows again, 147-43, maintaining the kind of advantage that has been typical during the recent run-up. Volume was slightly better than previous sessions this week, though barely noticeable.
NYSE Volume 1,285,654,000
NASDAQ Volume 2,157,144,000
Commodities mostly reverse their two-day losing trend, with oil up $1.06, to $72.49 and gold ahead by $1.50, to $947.30. Silver, however, was set back 4 cents, closing at $14.25.
With a paucity of news upon which to trade, many brokers were mailing it in this week, so as seems to be the current custom, adios, until tomorrow.
Wednesday, August 26, 2009
Bulls Take a Break; Stocks Up Marginally
With the Dow up seven straight days - though narrowly - reports on Durable Goods and New Home Sales boosted stocks, but the mood was cautious at midweek.
Thanks to the Cash for Clunkers government rebate program, durable goods orders registered their largest monthly gain in two years, up 4.9%, though the gain ex-autos was more in-line with expectations, though still solid at +0.8%.
The Commerce Department reported that sales of new homes rose for the 4th consecutive month in July, up 9.6% to a seasonally-adjusted annual rate of 433,000. Stocks were trading lower prior to to 10:00 am release of that number, but quickly shot into positive territory.
However, as has been the case in each of the last three days, gains were short-lived and all of the major indices spent the rest of the day zig-zagging the break-even line in a listless session. There still exists a good amount of commentary calling for a correction, though market participants are loath to give up gains or miss out on another potential leg up. All of the indices are at or very near resistance points dating back to last November 4, when stocks rebounded sharply after falling in September and October amidst uncertainty over the future of the entire financial system.
That ugly scenario seems to have been averted, but investors remain cooly cautious with summer quickly coming to an end. September is one of the rougher months for stocks and could be even harder considering the outsize gains made during the warm months of July and August.
Dow 9,543.52, +4.23 (0.04%)
NASDAQ 2,024.43, +0.20 (0.01%)
S&P 500 1,028.12, +0.12 (0.01%)
NYSE Composite 6,687.94, -9.28 (0.14%)
Declining issues narrowly beat back advancers, 3261-3111, but new highs finished ahead of new lows again, 174-45. If one was to take a cue from the indications supply by the new high-lows metric, it would appear that the market is not ready to relinquish its bullish posture. The number of new lows has continued to shrink in the face of growing investor optimism. Even bad stocks are getting bids.
Volume was its usual slow self, with nothing much in the way of volatility even whispered at this point. Stocks have barely budged all week and volume has been sluggish.
NYSE Volume 1,169,384,000
NASDAQ Volume 2,054,796,000
Crude oil future, now in the October delivery contract, tumbled another 62 cents, to $71.43. Gold dropped 20 cents, to $945.80. Silver shed 6 cents, to $14.29. While it was a slow day everywhere, that didn't prevent futures traders to send most commodities lower for the second straight day. Today it was the food category hardest hit after yesterday's assault on the energy sector.
Tomorrow morning all eyes will be trained on the 8:30 am release of new unemployment and continuing claims. That number should set the tone for the market, though there are more than enough other forces at work to swing consensus one way or the other. With resistance just overhead, it's becoming increasingly difficult for stocks to continue their heady climb.
Thanks to the Cash for Clunkers government rebate program, durable goods orders registered their largest monthly gain in two years, up 4.9%, though the gain ex-autos was more in-line with expectations, though still solid at +0.8%.
The Commerce Department reported that sales of new homes rose for the 4th consecutive month in July, up 9.6% to a seasonally-adjusted annual rate of 433,000. Stocks were trading lower prior to to 10:00 am release of that number, but quickly shot into positive territory.
However, as has been the case in each of the last three days, gains were short-lived and all of the major indices spent the rest of the day zig-zagging the break-even line in a listless session. There still exists a good amount of commentary calling for a correction, though market participants are loath to give up gains or miss out on another potential leg up. All of the indices are at or very near resistance points dating back to last November 4, when stocks rebounded sharply after falling in September and October amidst uncertainty over the future of the entire financial system.
That ugly scenario seems to have been averted, but investors remain cooly cautious with summer quickly coming to an end. September is one of the rougher months for stocks and could be even harder considering the outsize gains made during the warm months of July and August.
Dow 9,543.52, +4.23 (0.04%)
NASDAQ 2,024.43, +0.20 (0.01%)
S&P 500 1,028.12, +0.12 (0.01%)
NYSE Composite 6,687.94, -9.28 (0.14%)
Declining issues narrowly beat back advancers, 3261-3111, but new highs finished ahead of new lows again, 174-45. If one was to take a cue from the indications supply by the new high-lows metric, it would appear that the market is not ready to relinquish its bullish posture. The number of new lows has continued to shrink in the face of growing investor optimism. Even bad stocks are getting bids.
Volume was its usual slow self, with nothing much in the way of volatility even whispered at this point. Stocks have barely budged all week and volume has been sluggish.
NYSE Volume 1,169,384,000
NASDAQ Volume 2,054,796,000
Crude oil future, now in the October delivery contract, tumbled another 62 cents, to $71.43. Gold dropped 20 cents, to $945.80. Silver shed 6 cents, to $14.29. While it was a slow day everywhere, that didn't prevent futures traders to send most commodities lower for the second straight day. Today it was the food category hardest hit after yesterday's assault on the energy sector.
Tomorrow morning all eyes will be trained on the 8:30 am release of new unemployment and continuing claims. That number should set the tone for the market, though there are more than enough other forces at work to swing consensus one way or the other. With resistance just overhead, it's becoming increasingly difficult for stocks to continue their heady climb.
Tuesday, August 25, 2009
Rally Continues, Though Pace is Sluggish; Bernanke Gets Obama Nod
After the Dow took a day off from recording gains on Monday, it was back to business as usual, as the Blue Chips joined the other major indices with gains on Tuesday, marking the 6th straight day of positive returns for the S&P, NASDAQ and NY Composite. Signs that the rally is running out of gas, or already is on empty, were evident in afternoon trading, not only today, but on monday as well, as stocks gave back earlier winnings.
The news flow was almost all positive on the day that President Barack Obama announced his intention to reappoint Ben Bernanke as Chairman of the Federal Reserve. Bernanke faces scrutiny by the Senate, which must confirm him for a second four-year term. That news, along with an upbeat report from the housing sector, got stocks off to a flying start, but enthusiasm waned as the day wore on, though all of the indices remained in positive territory for the entire session, ending - for the second straight day - with less-than-impressive moves.
The slow pace of advance is probably a good sign for traders, as investors are now aware that the market may have gotten ahead of itself last week and that the potential for a pullback - though not a substantial one - is great. With confidence building in most sectors, the fear is not that stocks will suffer a severe setback, but that precious profits will erode. many investors were hit hard by the bear market of 2008 and earlier this year and are still very cautious, thus booking gains at almost any opportunity. Riding this long rally has taken nerves of steel, and while some kind of correction seems inevitable, there's a solid chance that stocks may continue to ride high.
Judging by Tuesday's news - consumer confidence up from 48.1 in July to 54.0 in August and another monthly improvement in the S&P/Case-Shiller Home Price Index [PDF, with charts] - doubts for a successful recovery continue to be shredded. The widely-accepted housing index showed another decline year-over-year, but fared better than in the first quarter. While not much to go on, the hope is that housing woes have diminished and the sector will continue to improve, though there's debate on that front as well as others.
Dow 9,539.29, +30.01 (0.32%)
Nasdaq 2,024.23, +6.25 (0.31%)
S&P 500 1,028.00, +2.43 (0.24%)
NYSE Composite 6,697.22, +26.08 (0.39%)
Since the news flow was somewhat choppy and unconvincing, though still is more positive than negative, investors showed considerably more resolve than on Monday, with advancing issues trumping decliners, 3731-2686, and 220 stocks making new highs compared to just 73 new lows. Volume was disappointing once again, though the indices are now at or near highs for the year.
NYSE Volume 1,303,106,000
Nasdaq Volume 1,952,415,000
Part of the reason for the flaccid returns in equties were due in some part to the nearly across-the-board declines in commodities. Crude oil led the energy sector lower, losing $2.32, to $72.05. The metals were about the only winners, with gold up $2.30, to $946.00 and silver ahead marginally as well, gaining 12 cents, to $14.35. Almost all of the consumable commodities - from live cattle to coffee - trended lower. There's still no real pricing power at the low end of the supply chain, making margins tight and profits for finished goods and businesses difficult to attain.
Wednesday's Durable Goods Orders kicks off the morning session, with anticipation high over the success of the "Cash for Clunkers" program and how it will skew the figures in the automotive sector. It's a wall of worry, to be sure, but the market continues to climb. Any pullback here would more than likely be short-lived and narrow.
The news flow was almost all positive on the day that President Barack Obama announced his intention to reappoint Ben Bernanke as Chairman of the Federal Reserve. Bernanke faces scrutiny by the Senate, which must confirm him for a second four-year term. That news, along with an upbeat report from the housing sector, got stocks off to a flying start, but enthusiasm waned as the day wore on, though all of the indices remained in positive territory for the entire session, ending - for the second straight day - with less-than-impressive moves.
The slow pace of advance is probably a good sign for traders, as investors are now aware that the market may have gotten ahead of itself last week and that the potential for a pullback - though not a substantial one - is great. With confidence building in most sectors, the fear is not that stocks will suffer a severe setback, but that precious profits will erode. many investors were hit hard by the bear market of 2008 and earlier this year and are still very cautious, thus booking gains at almost any opportunity. Riding this long rally has taken nerves of steel, and while some kind of correction seems inevitable, there's a solid chance that stocks may continue to ride high.
Judging by Tuesday's news - consumer confidence up from 48.1 in July to 54.0 in August and another monthly improvement in the S&P/Case-Shiller Home Price Index [PDF, with charts] - doubts for a successful recovery continue to be shredded. The widely-accepted housing index showed another decline year-over-year, but fared better than in the first quarter. While not much to go on, the hope is that housing woes have diminished and the sector will continue to improve, though there's debate on that front as well as others.
The S&P/Case-Shiller U.S. National Home Price Index – which covers all nine U.S. census divisions – recorded a 14.9% decline in the 2nd quarter of 2009 versus the 2nd quarter of 2008. While still a substantial negative annual rate of return, this is an improvement over the record decline of 19.1% reported in the 1st quarter of the year.
Dow 9,539.29, +30.01 (0.32%)
Nasdaq 2,024.23, +6.25 (0.31%)
S&P 500 1,028.00, +2.43 (0.24%)
NYSE Composite 6,697.22, +26.08 (0.39%)
Since the news flow was somewhat choppy and unconvincing, though still is more positive than negative, investors showed considerably more resolve than on Monday, with advancing issues trumping decliners, 3731-2686, and 220 stocks making new highs compared to just 73 new lows. Volume was disappointing once again, though the indices are now at or near highs for the year.
NYSE Volume 1,303,106,000
Nasdaq Volume 1,952,415,000
Part of the reason for the flaccid returns in equties were due in some part to the nearly across-the-board declines in commodities. Crude oil led the energy sector lower, losing $2.32, to $72.05. The metals were about the only winners, with gold up $2.30, to $946.00 and silver ahead marginally as well, gaining 12 cents, to $14.35. Almost all of the consumable commodities - from live cattle to coffee - trended lower. There's still no real pricing power at the low end of the supply chain, making margins tight and profits for finished goods and businesses difficult to attain.
Wednesday's Durable Goods Orders kicks off the morning session, with anticipation high over the success of the "Cash for Clunkers" program and how it will skew the figures in the automotive sector. It's a wall of worry, to be sure, but the market continues to climb. Any pullback here would more than likely be short-lived and narrow.
Monday, August 24, 2009
Rally Stalls After Four Straight Up Days
Even though the Dow Jones Industrials finished with a gain, the other major indices suffered marginal losses to begin the last week of August and the unofficial end of summer. Compared to the drop last Monday, today's action was little more than profit-taking posturing and a pause prior to Tuesday's reading of durable goods orders.
There is still a good deal of trepidation in traders' hearts, and following such an impressive run last week, a break was surely in order. Along with the durable goods report for July, there's the Conference Board's consumer confidence index and the S&P/Case-Shiller Home Price Index with which to deal on Tuesday morning. That home price index has been a rally-killer in the past, though last month's data suggested that the housing market was beginning to turn around as the 10-City and 20-City Composites improved for the fourth consecutive month.
Investors, keenly aware that jobs and home-buying are two of the biggest factors in recession and recovery, will be keeping a close eye on that index as well.
Otherwise, Monday was moribund and listless, with traders going through the motions instead of staking out new positions. After a brief upsurge in the morning, stocks lost ground, tracing out the break-even line into the close. Some may have said it was hardly worth getting out of bed, though from the volume slant, most stock jockeys were at their desks bright and early.
Dow 9,509.28, +3.32 (0.03%)
NASDAQ 2,017.98, -2.92 (0.14%)
S&P 500 1,025.56, -0.57 (0.06%)
NYSE Composite 6,671.14, -5.12 (0.08%)
Declining issues held a narrow lead over advancing ones, 3276-3187, but new highs held a large edge over new lows, 227-88. Volume was solid, but uninspiring.
NYSE Volume 1,389,159,000
NASDAQ Volume 2,072,289,000
Oil continued to price higher in futures markets, up another 48 cents per barrel, to $74.37 on the NY Merc. Meanwhile, gold was taking another beating, losing $11, to close at $943.70. Silver responded positively, however slightly, up 3 cents, to $14.23 per ounce. Natural gas, trading at 7-year lows, caught a bit of a bid, though a gain to just $2.92 is still well below levels seen in recent years. The disparity between crude oil and natural gas prices is beginning to cause a stir, especially in US markets. Gas discovery and extraction has been aided by technology recently and the word is that the US is probably sitting on at least a 20 year supply - some estimates are as high as 100 years - of natural gas, causing the price to plummet.
If there is such an abundance of natural gas and crude prices remain high, it won't be long before those natural gas conversion kits for cars become all the rage. Of course, there still aren't many places where one could fill up on nat. gas., but with prices so low, don't be surprised if a number of new businesses aren't started up based on the assumption that oil will stay high and natural gas low. Maybe we should have listened to T. Boone Pickens last summer when he was saying that natural gas was the bridge between oil and renewable energy.
On the stock market, naturally, there was the usual chorus of caution from the punditry, with more than a few analysts saying the rally had run its course and it was time to take profits, take a break and get back in at lower levels in the fall. However, the camps between the naysayers and optimists were about evenly split, for varying reasons. Below, one of the more positive calls:
There is still a good deal of trepidation in traders' hearts, and following such an impressive run last week, a break was surely in order. Along with the durable goods report for July, there's the Conference Board's consumer confidence index and the S&P/Case-Shiller Home Price Index with which to deal on Tuesday morning. That home price index has been a rally-killer in the past, though last month's data suggested that the housing market was beginning to turn around as the 10-City and 20-City Composites improved for the fourth consecutive month.
Investors, keenly aware that jobs and home-buying are two of the biggest factors in recession and recovery, will be keeping a close eye on that index as well.
Otherwise, Monday was moribund and listless, with traders going through the motions instead of staking out new positions. After a brief upsurge in the morning, stocks lost ground, tracing out the break-even line into the close. Some may have said it was hardly worth getting out of bed, though from the volume slant, most stock jockeys were at their desks bright and early.
Dow 9,509.28, +3.32 (0.03%)
NASDAQ 2,017.98, -2.92 (0.14%)
S&P 500 1,025.56, -0.57 (0.06%)
NYSE Composite 6,671.14, -5.12 (0.08%)
Declining issues held a narrow lead over advancing ones, 3276-3187, but new highs held a large edge over new lows, 227-88. Volume was solid, but uninspiring.
NYSE Volume 1,389,159,000
NASDAQ Volume 2,072,289,000
Oil continued to price higher in futures markets, up another 48 cents per barrel, to $74.37 on the NY Merc. Meanwhile, gold was taking another beating, losing $11, to close at $943.70. Silver responded positively, however slightly, up 3 cents, to $14.23 per ounce. Natural gas, trading at 7-year lows, caught a bit of a bid, though a gain to just $2.92 is still well below levels seen in recent years. The disparity between crude oil and natural gas prices is beginning to cause a stir, especially in US markets. Gas discovery and extraction has been aided by technology recently and the word is that the US is probably sitting on at least a 20 year supply - some estimates are as high as 100 years - of natural gas, causing the price to plummet.
If there is such an abundance of natural gas and crude prices remain high, it won't be long before those natural gas conversion kits for cars become all the rage. Of course, there still aren't many places where one could fill up on nat. gas., but with prices so low, don't be surprised if a number of new businesses aren't started up based on the assumption that oil will stay high and natural gas low. Maybe we should have listened to T. Boone Pickens last summer when he was saying that natural gas was the bridge between oil and renewable energy.
On the stock market, naturally, there was the usual chorus of caution from the punditry, with more than a few analysts saying the rally had run its course and it was time to take profits, take a break and get back in at lower levels in the fall. However, the camps between the naysayers and optimists were about evenly split, for varying reasons. Below, one of the more positive calls:
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