It's a big world and US investors seem to be gaining confidence - little by little - in certain companies' ability to deliver goods and/or services at a profit. While governments enjoy the luxury of fiscal irresponsibility, running enormous deficits, businesses are treated rather differently, especially on Wall Street, where no earnings equals no share price. There are enough good companies listed on the major exchanges to continue the current long term upward trend for many more months, notwithstanding the effects of macroeconomic factors, especially job growth and capital formation.
The recovery in progress is one of the more quiet in recent recollection. Many analysts and investors don't even believe it's at all real, that the economy will sink back to less-than-optimum conditions, such as existed in the fall of 2008 and the winter of 2009. Unfortunately, the conditions present then are not even an approximation of economic reality today. Nothing stays down forever; nothing moves in a straight line; no indicator is infallible. We tend to trust ours, as much as our own eyes and ears some times, and that's a danger, but Thursday came in pretty much as expected. Some bulls got a little anxious and moved enough stocks ahead to finish with all the major averages sporting reasonable gains.
Dow 9,344.61, +63.94 (0.69%)
NASDAQ 1,983.20, +16.13 (0.82%)
S&P 500 1,003.24, +8.49 (0.85%)
NYSE Composite 6,546.60, +71.81 (1.11%)
Advancing issues rolled past decliners, 4477-1789. It was a nice little turn aided by some nervous short covering. Betting against rallies can be hazardous to your portfolio and this one is no exception. Economic reports have been neutral to good, evincing signs of a nascent recovery. It's not pretty... yet. New highs also led new lows, 114-46, on now normal, low volume.
NYSE Volume 4,624,282,000
NASDAQ Volume 1,905,575,000
While oil was barely changed, down 9 cents, to $67.96, the metals were skyrocketing. Gold bounded ahead $19.20, while silver added a massive 93 cents, to close at $16.29, a 12-month high.
Friday gets off with either a bang or a yawn as the August non-farms payroll data is released prior to the bell. Heading into the last holiday of summer, there probably won't be a huge reaction in the markets and the afternoon is usually dull. The markets are stabilized as much as possible with sentiment leaning in both directions. It's a nice set-up if your a prudent bull.
Thursday, September 3, 2009
Wednesday, September 2, 2009
No Follow-Through to Downside
There really wasn't much to trade upon on Wednesday, unless one is prone to picking up bargains the day after a substantial decline. The major indices traded in very narrow ranges and finished with marginal losses across the board. While a fourth straight losing session for the S&P may be significant in a chartist's world, today's close brings that average down to whare it was two weeks ago, hardly a cause for concern.
Oddly enough, there seemed to be more fright toward the close, as all the averages were at break even with about 1/2 hour left in the trading day and then drooped. Volume, which was the big story yesterday (read: planned liquidation of some positions mostly accomplished within a two hour period), was back to its usual somber self. There just wasn't anything for anybody to get excited about, not even the ADP private sector jobs data, which revealed that another 298,000 Americans got pink slips in August. The number was worse than expected, but, then again, expectations for a swift recovery are going to be off the mark. That the number was better than the prior month, which was revised lower (fewer job losses) seemed to be good enough to keep markets stable, at least.
Though the ADP number seems to usually upstage the government non-farm payroll data, which always is delivered two days later, investors may still be watchful for that figure, due out on Friday morning prior to the market open. Suffice it to say that it should not be all that dramatic.
Dow 9,280.67, -29.93 (0.32%)
NASDAQ 1,967.07, -1.82 (0.09%)
S&P 500 994.75, -3.29 (0.33%)
NYSE Composite 6,474.79, -13.02 (0.20%)
Decliners held a slight advantage over advancing issues: 3580-2780. but new highs maintained their edge over new lows, 74-51, though the margin narrowed significantly. The risk of the high-low numbers flopping over is pretty good presently, though I'm personally not buying into the "correction" argument until I see actual carnage of 6-8% declines off the top and heavy volume on a consistent basis. Those two conditions have not been met presently.
NYSE Volume 1,565,960,000
NASDAQ Volume 1,989,856,000
Commodities are behaving as one would like them. Oil finished dead flat at $68.05, while gold zoomed up $22.00, to $978.50, and silver appreciated another 31 cents, to $15.37.
We still have deflation, low interest rates and a sluggish, though recovering economy. Conditions could not be much better for business fundamentals. The correction that is supposed to happen is going to be forgotten soon. Economic data has been just good enough to keep the economy chugging along and there's more than enough investment money sloshing about to keep stocks on a high for some time. The alternatives - real estate and fixed income - don't offer much appeal. The former is too risky and the latter offers no profit.
Oddly enough, there seemed to be more fright toward the close, as all the averages were at break even with about 1/2 hour left in the trading day and then drooped. Volume, which was the big story yesterday (read: planned liquidation of some positions mostly accomplished within a two hour period), was back to its usual somber self. There just wasn't anything for anybody to get excited about, not even the ADP private sector jobs data, which revealed that another 298,000 Americans got pink slips in August. The number was worse than expected, but, then again, expectations for a swift recovery are going to be off the mark. That the number was better than the prior month, which was revised lower (fewer job losses) seemed to be good enough to keep markets stable, at least.
Though the ADP number seems to usually upstage the government non-farm payroll data, which always is delivered two days later, investors may still be watchful for that figure, due out on Friday morning prior to the market open. Suffice it to say that it should not be all that dramatic.
Dow 9,280.67, -29.93 (0.32%)
NASDAQ 1,967.07, -1.82 (0.09%)
S&P 500 994.75, -3.29 (0.33%)
NYSE Composite 6,474.79, -13.02 (0.20%)
Decliners held a slight advantage over advancing issues: 3580-2780. but new highs maintained their edge over new lows, 74-51, though the margin narrowed significantly. The risk of the high-low numbers flopping over is pretty good presently, though I'm personally not buying into the "correction" argument until I see actual carnage of 6-8% declines off the top and heavy volume on a consistent basis. Those two conditions have not been met presently.
NYSE Volume 1,565,960,000
NASDAQ Volume 1,989,856,000
Commodities are behaving as one would like them. Oil finished dead flat at $68.05, while gold zoomed up $22.00, to $978.50, and silver appreciated another 31 cents, to $15.37.
We still have deflation, low interest rates and a sluggish, though recovering economy. Conditions could not be much better for business fundamentals. The correction that is supposed to happen is going to be forgotten soon. Economic data has been just good enough to keep the economy chugging along and there's more than enough investment money sloshing about to keep stocks on a high for some time. The alternatives - real estate and fixed income - don't offer much appeal. The former is too risky and the latter offers no profit.
Tuesday, September 1, 2009
Traders Book Profits; Markets Take a Dip
Contrary to what I posted yesterday about inevitability and the lack thereof in the stock market, investors (many of whom read my blog and no doubt wish to prove me wrong) did what prudence would dictate and booked some profits.
So many profits were booked, in fact, that the selling sparked a mini-panic, sending the major indices down by roughly 2% at the worst of the trading. There's no indication as to what exactly caused all the selling, but it began to occur right after 10:00 am and the worst of it was over by noon, so it looked to be pretty organized, likely by the usual culprits in all this, the Goldman Sachs and Citigroups and JP Morgans.
The brokerages and banks have to book profits, and sending the markets down 2% on volume is nothing to really get excited about. It happens all the time, in bull markets as well as in bears, and there was nothing unusual about this except the overall timing. Market pundits have been calling for this kind of pullback for weeks, so today being the first day of September, it was ripe for the self-fulfilling prophecy trade.
And, while volume was significantly higher, it was still not so extreme as to cause alarm. In fact, large-scale selling of positions that, prior to today, were considered solid, is nothing more than an invitation to buy more because the bull market is really just kicking into a secondary phase in which wild gyrations in both directions will be evident, with the overall result being a slight increase on the indices at the end of each month or quarter.
This one-day event should not cause anyone to second-guess themselves or their positions, except to maybe take a little off the table. Stocks are for the long run, and this is a short-term move. While there's some concern that we may be headed for a "double-dip, " the data doesn't suggest it and the markets won't tolerate any unjustified corrections. September is an odd month, coming at the end of summer and just prior to third quarter earnings. It's essential to stay very focused and not be swayed by short-term thinking as it may all prove to be wrongly-directed.
Dow 9,310.60, -185.68 (1.96%)
NASDAQ 1,968.89, -40.17 (2.00%)
S&P 500 998.04, -22.58 (2.21%)
NYSE Composite 6,487.81, -155.43 (2.34%)
The internals confirmed what was already obvious. Decliners led advancers by a wide margin, 5218-1283, but it is interesting to note that there are still a good number more new highs being posted - even today - than new lows. New highs took the edge once again, 123-48. There were more new highs and fewer new lows than yesterday, which may supply some insight into this little bout of selling, notably, that there were still buyers bidding up the high fliers while not unloading the bottom-feeders. Looks and smells like garden variety profit taking according to those figures. Volume, as noted, was among the top ten highest of the year, but hardly unusual.
NYSE Volume 7,914,128,500
NASDAQ Volume 2,727,714,500
Commodities took the brunt of the selling, mostly those in the energy-related sector. Crude oil for October delivery was thumped again, down $1.91, to $68.05. Natural gas, for which there is an abundance of supply, was smashed lower again, down 16 cents to $2.82. The combination of lower oil, gasoline, heating oil and natural gas has to be seen as a positive for the consumer. Even though Wall Street may not initially appreciate the ramifications of lower energy prices, the gain in purchasing power is to everyone's advantage. Instead of plowing more and more money into non-renewable expenses, consumers, if energy prices continue lower into the winter, will have more discretionary income and spending power. Leading into the final months of 2009, the benefits of a stronger consumer are obvious.
The metals were the only sector showing any gains on the day. Gold added $3.00, gaining to $956.50. Silver was up 14 cents, to $15.06. The silver closing price was the highest since June 11 and continues to indicate higher prices for silver in coming months. Aside from its collectible and intrinsic value, silver enjoys more industrial use than gold, and supply is being strained. If economies worldwide advance, silver could top the $20 it saw in 2008.
Today's trading was expected and hardly a blip on the worldwide equity radar screen. Unless there is significant follow-through Wednesday through Friday, it will be seen as profit-taking and nothing more. If Wednesday's private employment figures from ADP and other data are positive, as today's ISM report was, then the market is taking off on its own tangent and presaging a potential pitfall in months ahead for the US and world economies.
Nothing will be set into stone until the government's non-farm payroll report for August hits the wires on Friday. This is a data-heavy week which bears close scrutiny and an iron will.
So many profits were booked, in fact, that the selling sparked a mini-panic, sending the major indices down by roughly 2% at the worst of the trading. There's no indication as to what exactly caused all the selling, but it began to occur right after 10:00 am and the worst of it was over by noon, so it looked to be pretty organized, likely by the usual culprits in all this, the Goldman Sachs and Citigroups and JP Morgans.
The brokerages and banks have to book profits, and sending the markets down 2% on volume is nothing to really get excited about. It happens all the time, in bull markets as well as in bears, and there was nothing unusual about this except the overall timing. Market pundits have been calling for this kind of pullback for weeks, so today being the first day of September, it was ripe for the self-fulfilling prophecy trade.
And, while volume was significantly higher, it was still not so extreme as to cause alarm. In fact, large-scale selling of positions that, prior to today, were considered solid, is nothing more than an invitation to buy more because the bull market is really just kicking into a secondary phase in which wild gyrations in both directions will be evident, with the overall result being a slight increase on the indices at the end of each month or quarter.
This one-day event should not cause anyone to second-guess themselves or their positions, except to maybe take a little off the table. Stocks are for the long run, and this is a short-term move. While there's some concern that we may be headed for a "double-dip, " the data doesn't suggest it and the markets won't tolerate any unjustified corrections. September is an odd month, coming at the end of summer and just prior to third quarter earnings. It's essential to stay very focused and not be swayed by short-term thinking as it may all prove to be wrongly-directed.
Dow 9,310.60, -185.68 (1.96%)
NASDAQ 1,968.89, -40.17 (2.00%)
S&P 500 998.04, -22.58 (2.21%)
NYSE Composite 6,487.81, -155.43 (2.34%)
The internals confirmed what was already obvious. Decliners led advancers by a wide margin, 5218-1283, but it is interesting to note that there are still a good number more new highs being posted - even today - than new lows. New highs took the edge once again, 123-48. There were more new highs and fewer new lows than yesterday, which may supply some insight into this little bout of selling, notably, that there were still buyers bidding up the high fliers while not unloading the bottom-feeders. Looks and smells like garden variety profit taking according to those figures. Volume, as noted, was among the top ten highest of the year, but hardly unusual.
NYSE Volume 7,914,128,500
NASDAQ Volume 2,727,714,500
Commodities took the brunt of the selling, mostly those in the energy-related sector. Crude oil for October delivery was thumped again, down $1.91, to $68.05. Natural gas, for which there is an abundance of supply, was smashed lower again, down 16 cents to $2.82. The combination of lower oil, gasoline, heating oil and natural gas has to be seen as a positive for the consumer. Even though Wall Street may not initially appreciate the ramifications of lower energy prices, the gain in purchasing power is to everyone's advantage. Instead of plowing more and more money into non-renewable expenses, consumers, if energy prices continue lower into the winter, will have more discretionary income and spending power. Leading into the final months of 2009, the benefits of a stronger consumer are obvious.
The metals were the only sector showing any gains on the day. Gold added $3.00, gaining to $956.50. Silver was up 14 cents, to $15.06. The silver closing price was the highest since June 11 and continues to indicate higher prices for silver in coming months. Aside from its collectible and intrinsic value, silver enjoys more industrial use than gold, and supply is being strained. If economies worldwide advance, silver could top the $20 it saw in 2008.
Today's trading was expected and hardly a blip on the worldwide equity radar screen. Unless there is significant follow-through Wednesday through Friday, it will be seen as profit-taking and nothing more. If Wednesday's private employment figures from ADP and other data are positive, as today's ISM report was, then the market is taking off on its own tangent and presaging a potential pitfall in months ahead for the US and world economies.
Nothing will be set into stone until the government's non-farm payroll report for August hits the wires on Friday. This is a data-heavy week which bears close scrutiny and an iron will.
Monday, August 31, 2009
Is This The Correction We've Been Hearing About?
Unless you've been asleep for the past three weeks, or simply not paying much attention (probably not a bad idea), you know all the financial talk has been about the eventuality of a correction in the US stock markets. The major indices have flown too far, too fast, say the pundits and CNBC-geniuses, and a 10-15% pullback is not only necessary and healthy, but, get this, inevitable.
News flash: Nothing, and I do mean nothing, is ever inevitable when it comes to stocks. Not even the most mundane exercise as paying out a quarterly dividend is a sure thing until the deed itself is done. Jail cells, rooming houses and cheap bungalows are full of the leftover souls who bet on a sure thing... and lost. There is no such creature ever made, I tell you. Certainty is the stuff of wide-eyed speculators, little children, kings and tyrants. It has never been the province of the investor class, and never shall it be. Because just as certain as one is certain, there is certain to be destruction in one's path. As soon as investors get too complacent, giddy or confident, there is almost surely going to be a set of circumstances which kicks the platform right out from under their feet.
And that's why I'm convinced the market is going higher: because so many people are saying it's got to go down.
Let's face the facts, or, rather, the facts as they were presented to us. A year ago, we all thought the world was coming to an end, at least on Wall Street. Bear Stearns went belly up. Then Lehman Bros. dove into the dustbin of history, then Merrill Lynch followed. Stocks swooned. It was, actually, the second leg of the bear market which had begun almost a year earlier, in October, 2007. The third leg was January through March of 2009, and that, my friends, was probably the most brutal, excruciatingly painful period for most investors because it was not so sudden, like the fall of 2008, but rather akin to Chinese water torture: a slow drip, drip, drip that left wallets empty, portfolios drained and fund managers whimpering for mercy.
And then, just like somebody flipped a switch, it stopped. Stocks started going higher. A little bit at first, then more momentum carried a second wave and folks began to pile into stocks again. Even though unemployment spiked, there seemed to be plenty of money out there in America, thanks largely to the Fed and the Treasury and the stimulus and the trillions of dollars pumped into the economy through a variety of means. We survived. And now we shall prosper, shall we not?
If you haven't got enough nerve to hold onto winners through the next six to eight weeks - putting us firmly into 3rd quarter earnings season - then maybe you shouldn't be trading stocks, gambling with your retirement money. Those who follow the crowd and cash out - little piggies - will get slaughtered by missing the next wave. Sure, there is going to be some sideways action, but there's a magic number out there, there always is and it's 9625 on the Dow. Once that level - which is the interim peak after the major September-October 2008 decline, reached on November 4, 2008 - is breached, and the index closes above that level, we will have re-entered bull market territory.
The Dow has already crossed that particular rubicon twice: on August 24, 25, 27 and 28, and each time it met that resistance, the index pulled back. Like an impatient lover, it keeps probing and prodding, but the object of its affection - higher prices - remains just out of reach and pushing back. Today, Monday, was nothing more than a sign of frustration on the part of many, many investors, who feel that penetrating resistance has become futile just because we're entering the month of September, a traditionally poor month for stocks.
Rubbish! The time of year has about as much to do with trading stocks as the moon phases, floral patterns or the zodiac. Trading is about fundamentals, not tea leaves, Tarot cards or Ouija boards, and the core fundamentals won't be fully understood until after companies release 3rd quarter, or even 4th quarter, earnings reports, and by then, good buddies, it will be TOO LATE. TOO LATE. TOO LATE. The profit train will have left the station. So, if you're not already on board, get on board and if you're already on board, hold on for a bumpy ride. The US economy is still the most powerful engine of growth in the world and it hasn't quite run out of steam, or gas, or coal, just yet.
Getting back to stocks, just take a look at the prior six closes on the Dow: 9505.96, 9509.28, 9539.29, 9543.52, 9580.63, 9544.20. And today's close, 9496.28, well, that's almost 10 whole points lower than where we started on Friday, August 21. In seven sessions, the closing prices for the Dow have been within a 1% range. That's called consolidation, not breakdown. The people saying there's a correction coming just don't know how to read charts. Besides, there is still money sitting on the sidelines, waiting for an opportunity to get into the market. This money is mostly in the hands of the most nit-picking and skittish investors with no appetite for risk, probably baby boomers within three years of retirement who have seen their plans upended over the past two years. Now, they won't be water skiing in the Bahamas in 2013, but backyard barbecuing in Bangor, more likely, BECAUSE THEY, TOOK THEIR LUMPS LIKE LOSERS AND MISSED THE PROFIT TRAIN AS IT LEFT THE STATION.
Don't be like them. Stay invested. Sure, take some profits, but plow them back in. The last four months of 2009 are going to be nice. There'll be a pullback here and there, but nothing dramatic. At some point in either October or November, the CNBC talking heads can celebrate breaking 10,000 again! How often does that happen? Answer: Seven times in 10 1/2 years: March 1999; March 2000, April 2001, February 2002, May 2002, January 2004 and of course, here in late 2009. It's actually overdue. Don't be a party pooper.
Dow 9,496.28, -47.92 (0.50%)
NASDAQ 2,009.06, -19.71 (0.97%)
S&P 500 1,020.62, -8.31 (0.81%)
NYSE Composite 6,643.24, -65.80 (0.98%)
On the day, advancers took a serious beating by declining issues, 4673-1772, but new highs maintained the bias over new lows, 104-51, though the numbers on both sides of that ledger have been shrinking of late, indicating some kind of pressure mounting for a movement one way or the other. Volume was on the sluggish side, when it should actually be improving. It could, of course, be a semi-permanent feature of the markets. Hedge funds and little guys have gotten kicked so often and so squarely in the teeth that they may have made their way off the island and into permanent retirement. Maybe they're saving coins and stamps or clipping bond coupons. In any case, volume has been depressed for months, so maybe that's good.
NYSE Volume 1,513,536,000
NASDAQ Volume 2,268,241,000
Commodities took a more serious turn to the downside on this last day of August, with a few notable exceptions. Oil for October delivery fell $2.78, to $69.96. Hooray! Drivers need a little break and now, with all those clunkers off the road, there should be more supply, right?
Gold dipped $5.30, to $953.50, but silver gained 11 cents, bucking the trend by ending higher, at $14.92. Silver is going higher from here; oil lower. Gold will remain stuck in a range between $845 and $985. It will NOT break $1000 this year.
News flash: Nothing, and I do mean nothing, is ever inevitable when it comes to stocks. Not even the most mundane exercise as paying out a quarterly dividend is a sure thing until the deed itself is done. Jail cells, rooming houses and cheap bungalows are full of the leftover souls who bet on a sure thing... and lost. There is no such creature ever made, I tell you. Certainty is the stuff of wide-eyed speculators, little children, kings and tyrants. It has never been the province of the investor class, and never shall it be. Because just as certain as one is certain, there is certain to be destruction in one's path. As soon as investors get too complacent, giddy or confident, there is almost surely going to be a set of circumstances which kicks the platform right out from under their feet.
And that's why I'm convinced the market is going higher: because so many people are saying it's got to go down.
Let's face the facts, or, rather, the facts as they were presented to us. A year ago, we all thought the world was coming to an end, at least on Wall Street. Bear Stearns went belly up. Then Lehman Bros. dove into the dustbin of history, then Merrill Lynch followed. Stocks swooned. It was, actually, the second leg of the bear market which had begun almost a year earlier, in October, 2007. The third leg was January through March of 2009, and that, my friends, was probably the most brutal, excruciatingly painful period for most investors because it was not so sudden, like the fall of 2008, but rather akin to Chinese water torture: a slow drip, drip, drip that left wallets empty, portfolios drained and fund managers whimpering for mercy.
And then, just like somebody flipped a switch, it stopped. Stocks started going higher. A little bit at first, then more momentum carried a second wave and folks began to pile into stocks again. Even though unemployment spiked, there seemed to be plenty of money out there in America, thanks largely to the Fed and the Treasury and the stimulus and the trillions of dollars pumped into the economy through a variety of means. We survived. And now we shall prosper, shall we not?
If you haven't got enough nerve to hold onto winners through the next six to eight weeks - putting us firmly into 3rd quarter earnings season - then maybe you shouldn't be trading stocks, gambling with your retirement money. Those who follow the crowd and cash out - little piggies - will get slaughtered by missing the next wave. Sure, there is going to be some sideways action, but there's a magic number out there, there always is and it's 9625 on the Dow. Once that level - which is the interim peak after the major September-October 2008 decline, reached on November 4, 2008 - is breached, and the index closes above that level, we will have re-entered bull market territory.
The Dow has already crossed that particular rubicon twice: on August 24, 25, 27 and 28, and each time it met that resistance, the index pulled back. Like an impatient lover, it keeps probing and prodding, but the object of its affection - higher prices - remains just out of reach and pushing back. Today, Monday, was nothing more than a sign of frustration on the part of many, many investors, who feel that penetrating resistance has become futile just because we're entering the month of September, a traditionally poor month for stocks.
Rubbish! The time of year has about as much to do with trading stocks as the moon phases, floral patterns or the zodiac. Trading is about fundamentals, not tea leaves, Tarot cards or Ouija boards, and the core fundamentals won't be fully understood until after companies release 3rd quarter, or even 4th quarter, earnings reports, and by then, good buddies, it will be TOO LATE. TOO LATE. TOO LATE. The profit train will have left the station. So, if you're not already on board, get on board and if you're already on board, hold on for a bumpy ride. The US economy is still the most powerful engine of growth in the world and it hasn't quite run out of steam, or gas, or coal, just yet.
Getting back to stocks, just take a look at the prior six closes on the Dow: 9505.96, 9509.28, 9539.29, 9543.52, 9580.63, 9544.20. And today's close, 9496.28, well, that's almost 10 whole points lower than where we started on Friday, August 21. In seven sessions, the closing prices for the Dow have been within a 1% range. That's called consolidation, not breakdown. The people saying there's a correction coming just don't know how to read charts. Besides, there is still money sitting on the sidelines, waiting for an opportunity to get into the market. This money is mostly in the hands of the most nit-picking and skittish investors with no appetite for risk, probably baby boomers within three years of retirement who have seen their plans upended over the past two years. Now, they won't be water skiing in the Bahamas in 2013, but backyard barbecuing in Bangor, more likely, BECAUSE THEY, TOOK THEIR LUMPS LIKE LOSERS AND MISSED THE PROFIT TRAIN AS IT LEFT THE STATION.
Don't be like them. Stay invested. Sure, take some profits, but plow them back in. The last four months of 2009 are going to be nice. There'll be a pullback here and there, but nothing dramatic. At some point in either October or November, the CNBC talking heads can celebrate breaking 10,000 again! How often does that happen? Answer: Seven times in 10 1/2 years: March 1999; March 2000, April 2001, February 2002, May 2002, January 2004 and of course, here in late 2009. It's actually overdue. Don't be a party pooper.
Dow 9,496.28, -47.92 (0.50%)
NASDAQ 2,009.06, -19.71 (0.97%)
S&P 500 1,020.62, -8.31 (0.81%)
NYSE Composite 6,643.24, -65.80 (0.98%)
On the day, advancers took a serious beating by declining issues, 4673-1772, but new highs maintained the bias over new lows, 104-51, though the numbers on both sides of that ledger have been shrinking of late, indicating some kind of pressure mounting for a movement one way or the other. Volume was on the sluggish side, when it should actually be improving. It could, of course, be a semi-permanent feature of the markets. Hedge funds and little guys have gotten kicked so often and so squarely in the teeth that they may have made their way off the island and into permanent retirement. Maybe they're saving coins and stamps or clipping bond coupons. In any case, volume has been depressed for months, so maybe that's good.
NYSE Volume 1,513,536,000
NASDAQ Volume 2,268,241,000
Commodities took a more serious turn to the downside on this last day of August, with a few notable exceptions. Oil for October delivery fell $2.78, to $69.96. Hooray! Drivers need a little break and now, with all those clunkers off the road, there should be more supply, right?
Gold dipped $5.30, to $953.50, but silver gained 11 cents, bucking the trend by ending higher, at $14.92. Silver is going higher from here; oil lower. Gold will remain stuck in a range between $845 and $985. It will NOT break $1000 this year.
Friday, August 28, 2009
On the Cusp of a New Bull Market?
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.
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.
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