Markets spent most of the day on Tuesday trading in a narrow range in slightly negative territory, with the Dow Industrials the most pressured stocks of the session. In the end, markets finished in mixed fashion as investors weighed a shift in the dollar-commodity-stocks relationship and a mega-deal by Warren Buffett while awaiting a policy decision from the Fed on the morrow.
Overall, stocks began the session lower and gained strength throughout the day, especially in the case of the NASDAQ, which finished on the uptick. Markets are still very much undecided about direction. Additionally, there was some measure of decoupling of gold from the dollar, as the yellow metal soared in price on a sale of 200 metric tons from the International Monetary Fund (IMF) to India's Central Bank, setting a record price in the process.
The extraordinary rise in the price of gold came in the face of a stronger dollar, which is absolutely counter to the prevailing trend. Though the dollar weakened through the day, oil and silver also gained in price, but the relationship was badly dented, with the commodities working on their own path, unrelated to that of the greenback.
This conundrum had heads spinning in the trading pits, from futures to forex. The implications of such a huge buy by India's Central Bank, without any hint of a discount - and with the understanding that they are prepared to purchase more - leaves dollar traders in the lurch if India's intent is to partially back the rupee with physical gold. It represents a dramatic shift away from fiat currency to hard assets.
Another item buttressing the markets was Berkshire Hathaway's Warren Buffet announcing the purchase of one of the largest railroad operations in the country, Burlington Northern Santa fe (BNI). The $44 billion deal, Berkshire's largest ever, will be paid in stock and cash. Additionally, Berkshire Hathaway announced a 50-for-1 split of its Class B common stock, which will make the pricey shares more attractive to the general public. The ticker symbol BRK-B currently trades in a range around 3,300 per share, putting even ten shares out of reach of the ordinary investor. After the split, the stock will sell initially around a much more reasonable price of 66 per share.
On the news, Burlington Northern (BNI) gained 20.93, to 97.00 at the close.
Dow 9,771.91, -17.53 (0.18%)
Nasdaq 2,057.32, +8.12 (0.40%)
S&P 500 1,045.41. +2.53 (0.24%)
NYSE Composite 6,812.70, +27.76 (0.41%)
On the day, advancing issues beat decliners, 3888-2563. New highs regained the high ground over new lows, though by the narrowest of margins, 98-94. Evidently, investors are standing pat until after the Fed speaks. Oddly enough, the Fed is not expected to say much, if anything, different from policy statements from the past 8 months. Investors are looking for any subtle change in wording of their statement which might indicate a willingness to raise rates in the near term. The outlook is for the Fed to keep rates at their absurdly low levels until Spring. What also is weighing on investors' minds is the unemployment picture. While the govrnment's Non-farms payroll data will be released on Friday, the market will get an early glimpse tomorrow morning when ADP releases it's proprietary private sector employment report for October.
Volumes were muted, without a doubt in anticipation of the FOMC rate decision on Wednesday at 2:00 pm. Instead of outright selling, investors are showing a good deal of resolve, especially in the face of recent market weakness, preferring to hold stocks and simply not stake out new positions presently.
NYSE Volume 6,209,336,000
Nasdaq Volume 2,042,206,500
As mentioned above, commodities took off on their own trajectory today. Oil gained $1.47, to $79.60. Gold soared $31.20 to a new all-time high of $1,085.20. Silver gained in sympathy, up a very healthy 75 cents, to $17.19, close to its highs for the year.
Uncertainty reigns at the moment, though the current tightness should abate with the release of key economic data and the Fed announcement. With stocks off roughly 5% from their recent highs, there should be no lack of demand pent up for stock speculation into the holidays.
Tuesday, November 3, 2009
Monday, November 2, 2009
Markets Remain Volatile Despite Solid Economic Reports
The extreme volatility which reappeared last week was back again on Monday, as stocks whipsawed though an up-down-up session, with the major indices finally deciding on a positive close at the end of the day.
After a major sell-off last Friday, stocks started out modestly positive, except for the NASDAQ, which has been a laggard recently. Once data on construction spending, pending home sales and the ISM Index came out at 10:00 am, all of the indices moved markedly higher, with the Dow sporting a gain of more than 140 points.
Construction spending for September registered an increase of 0.8%, blasting estimates for a decline of 0.2%. Pending home sales were up 6.1%, following a reading of +6.4% in August, regarded as an impressive string of increases in the pressured real estate market.
The ISM Index was the real popper of the grouping, however, with the October reading coming in at 55.7, after a solid showing of 52.6 in September.
Around noon, rumors that the US government was seeking to get back its money owed through the TARP program from Citigroup (C) rattled the markets, sending all of the indices temporarily into negative territory around 1:00 pm. Through the remainder of the afternoon, stocks vacillated and moved slightly higher, registering shaky, but modest gains at the close.
Dow 9,789.21, +76.48 (0.79%)
NASDAQ 2,049.20, +4.09 (0.20%)
S&P 500 1,042.88, +6.69 (0.65%)
NYSE Composite 6,784.94, +45.49 (0.67%)
Simple indicators displayed the confusion quite adequately. 3309 stocks advanced, while 3190 declined. There were 78 new highs, but 103 new lows. These figures indicate that the market is unable to determine direction, despite strong signs of economic recovery, probably due to many individual issues being overpriced.
Volume was steady, in line with previous sessions. There still has not been a spike in volume on a positive day, though with the increased volatility, it would be difficult to ascertain whether or not the volume was a contributor to overall gains. Taking today, for instance, up and down volume were virtually even, so it would be difficult to say that any of it was influential one way or the other.
NYSE Volume 7,318,034,000
NASDAQ Volume 2,340,403,500
Commodities took advantage of the weaker dollar to advance. Oil advanced $1.13, to $78.13. Gold was up $13.60, to 1,054.00, and silver added 19 cents, closing at $16.44.
As the number of companies reporting 3rd quarter earnings slows - over 80% of the S&P 500 have already reported - investors will have to rely on economic data and events to move markets. On Wednesday the FOMC of the Federal Reserve issues a policy statement, in which the Fed is widely expected to keep key interest rates the same, though some analysts are looking for a change in wording, especially where the Fed says they expect to keep rates low for "an extended period." A change in that wording could signal that the fed sees signs that it is time to tighten, or raise, interest rates, a move which could roil markets.
Before that, auto sales data for October is due out on Tuesday. Also on Wednesday, ADP issues their montly reading on private sector employment for October, a precursor to Friday's Non-farms payroll report.
Marathon Oil (MRO), Polo Ralph Lauren (RL) and European financial giant UBS (UBS) report prior to tomorrow's opening bell. Tech bellwether Cisco Systems (CSCO) reports after the close on Wednesday.
After a major sell-off last Friday, stocks started out modestly positive, except for the NASDAQ, which has been a laggard recently. Once data on construction spending, pending home sales and the ISM Index came out at 10:00 am, all of the indices moved markedly higher, with the Dow sporting a gain of more than 140 points.
Construction spending for September registered an increase of 0.8%, blasting estimates for a decline of 0.2%. Pending home sales were up 6.1%, following a reading of +6.4% in August, regarded as an impressive string of increases in the pressured real estate market.
The ISM Index was the real popper of the grouping, however, with the October reading coming in at 55.7, after a solid showing of 52.6 in September.
Around noon, rumors that the US government was seeking to get back its money owed through the TARP program from Citigroup (C) rattled the markets, sending all of the indices temporarily into negative territory around 1:00 pm. Through the remainder of the afternoon, stocks vacillated and moved slightly higher, registering shaky, but modest gains at the close.
Dow 9,789.21, +76.48 (0.79%)
NASDAQ 2,049.20, +4.09 (0.20%)
S&P 500 1,042.88, +6.69 (0.65%)
NYSE Composite 6,784.94, +45.49 (0.67%)
Simple indicators displayed the confusion quite adequately. 3309 stocks advanced, while 3190 declined. There were 78 new highs, but 103 new lows. These figures indicate that the market is unable to determine direction, despite strong signs of economic recovery, probably due to many individual issues being overpriced.
Volume was steady, in line with previous sessions. There still has not been a spike in volume on a positive day, though with the increased volatility, it would be difficult to ascertain whether or not the volume was a contributor to overall gains. Taking today, for instance, up and down volume were virtually even, so it would be difficult to say that any of it was influential one way or the other.
NYSE Volume 7,318,034,000
NASDAQ Volume 2,340,403,500
Commodities took advantage of the weaker dollar to advance. Oil advanced $1.13, to $78.13. Gold was up $13.60, to 1,054.00, and silver added 19 cents, closing at $16.44.
As the number of companies reporting 3rd quarter earnings slows - over 80% of the S&P 500 have already reported - investors will have to rely on economic data and events to move markets. On Wednesday the FOMC of the Federal Reserve issues a policy statement, in which the Fed is widely expected to keep key interest rates the same, though some analysts are looking for a change in wording, especially where the Fed says they expect to keep rates low for "an extended period." A change in that wording could signal that the fed sees signs that it is time to tighten, or raise, interest rates, a move which could roil markets.
Before that, auto sales data for October is due out on Tuesday. Also on Wednesday, ADP issues their montly reading on private sector employment for October, a precursor to Friday's Non-farms payroll report.
Marathon Oil (MRO), Polo Ralph Lauren (RL) and European financial giant UBS (UBS) report prior to tomorrow's opening bell. Tech bellwether Cisco Systems (CSCO) reports after the close on Wednesday.
Sunday, November 1, 2009
How Much Gold Should You Own?
With gold recently soaring past the $1000 mark and making a new high over $1050, more than a few formerly-gold-averse investors have become more interested in adding precious metals investments to their portfolios.
Some have opted to buy the exchange-traded fund (ETF), the SPDR Gold Trust (GLD), though there are any number of reasons to avoid that route and invest in gold coins or purchase gold bullion directly, one of which is the pretty well-determined suspicion that the "Trust" doesn't actually hold or own as much actual gold as it would need to handle a rush of redemptions for investors wanting physical gold in their hands. The other reason is that the ETF doesn't match the moves made by the metal itself. Gold futures and spot prices haven't correlated to similar moves in the ETF.
That's why it is advisable to buy gold coin from a reputable dealer, either in person near your home or on the internet. Either choice is preferable to playing either the ETF or buying mining stocks. Physical gold - or silver or platinum - is easy to store, needs almost no care, and can be instantly converted to cash if necessary, without paperwork or tax issues.
How much a capable investor should hold depends on their needs. Younger, more speculative types may want as little as 5% of their portfolio in gold or silver coins or bullion, while older, more safety-oriented investors may want to hold as much as 20% of their portfolio in gold. In any case, it's an investment that should be part of everyone's diversification.
Some have opted to buy the exchange-traded fund (ETF), the SPDR Gold Trust (GLD), though there are any number of reasons to avoid that route and invest in gold coins or purchase gold bullion directly, one of which is the pretty well-determined suspicion that the "Trust" doesn't actually hold or own as much actual gold as it would need to handle a rush of redemptions for investors wanting physical gold in their hands. The other reason is that the ETF doesn't match the moves made by the metal itself. Gold futures and spot prices haven't correlated to similar moves in the ETF.
That's why it is advisable to buy gold coin from a reputable dealer, either in person near your home or on the internet. Either choice is preferable to playing either the ETF or buying mining stocks. Physical gold - or silver or platinum - is easy to store, needs almost no care, and can be instantly converted to cash if necessary, without paperwork or tax issues.
How much a capable investor should hold depends on their needs. Younger, more speculative types may want as little as 5% of their portfolio in gold or silver coins or bullion, while older, more safety-oriented investors may want to hold as much as 20% of their portfolio in gold. In any case, it's an investment that should be part of everyone's diversification.
Cable or Satellite, Which is the Better Deal?
Since the change over to Digital signals for all broadcast channels, you may have noticed the difference, even if you are a cable subscriber. The picture often freezes or jumps or melts down into what I call, "Impressionist TV," of which Monet, Chagal and contemporary painter, Leroy Neiman, would be proud to show in their homes. But in your home, a jumpy or frozen picture is annoying and unwanted, and when the cable goes down, it all goes, so is there an alternative?
To a large degree, viewers of satellite or Direct TV report many fewer problems than cable viewers, and there are other advantages, regardless of which satellite service you enjoy. The value proposition from satellite DirectTV is that you receive more channels for a lower price and you can also choose movie or sports programming that suits your lifestyle within a variety of affordable plans.
Cable, for what it's worth, seems only interested in getting the maximum amount of money from subscribers. There are few tiered offerings of any value, because most of them start with the "standard" 100 or so channels for a high price and nothing below it of comparable quality.
Directv via satellite offers more choice, better value, and, in the end, a more reliable picture, without the stalls, freezes and jumpiness that is now becoming pandemic among cable and former analog viewers. If you want to enjoy your home theater or large screen TV, satellite is quickly becoming the choice.
To a large degree, viewers of satellite or Direct TV report many fewer problems than cable viewers, and there are other advantages, regardless of which satellite service you enjoy. The value proposition from satellite DirectTV is that you receive more channels for a lower price and you can also choose movie or sports programming that suits your lifestyle within a variety of affordable plans.
Cable, for what it's worth, seems only interested in getting the maximum amount of money from subscribers. There are few tiered offerings of any value, because most of them start with the "standard" 100 or so channels for a high price and nothing below it of comparable quality.
Directv via satellite offers more choice, better value, and, in the end, a more reliable picture, without the stalls, freezes and jumpiness that is now becoming pandemic among cable and former analog viewers. If you want to enjoy your home theater or large screen TV, satellite is quickly becoming the choice.
Friday, October 30, 2009
Volatility Returns to End Wild Week
If you're looking for direction in this market, you're not alone. Following a week in which triple-digit moves on the Dow Jones Industrials were the norm, with the other indices more or less in concert, investors are scratching their heads, backs, bottoms and anything else nearby in almost total confusion.
The Dow was down more than 100 points three days, culminating in the biggest move of the week on Friday (-249.85), and up nearly 200 points on just one day - Thursday - after the government announced the preliminary reading on 3rd quarter GDP at a positive 3.5%. Only Tuesday was tame, with the index up a mere 14 points.
For the week, the Dow lost 260 points, one of the larger weekly declines of the year, but shallow by percentage comparison, at 2.8%. The NASDAQ gave back 109 points, and was the worst performer on a percentage basis, with a loss of 5% for the five days just ended. 43 points were disgorged from the S&P 500, a 4.5% decline. The NYSE Composite was down 327 points, nearly matching the NASDAQ with a 4.7% drop.
The main catalyst for the wild swings in the market seem to have been two-fold. First, the date, October 30, marking the last trading day of the month, also was the final reporting day for many mutual funds, so profits were being locked in with wholesale selling of weak hands. Second, the dollar was very strong against the Euro in particular, and whenever that set-up has been present, stocks have been whacked. The entire rally from March through today has been fueled by a declining dollar, making commodities and US equities more attractive.
Dow 9,712.73, -249.85 (2.51%)
Nasdaq 2,045.11, -52.44 (2.50%)
S&P 500 1,036.18, -29.93 (2.81%)
NYSE Composite 6,739.45, -215.86 (3.10%)
Losers overwhelmed gainers, 5359-1162 (nearly 5-1), and underscoring the lack of direction, new lows scored over new lows by the narrow margin of 3, 89-86. Volume was again above the norm, though reading too much into the volume scenario may be risky. Both of the big down days - Wednesday and Friday - saw increased volume, though it bears notice that Wednesday was the day before the much-feared 3rd quarter GDP report, and Friday, as mentioned above, was the end of the year for many funds. Thus, these outliers may have overtly influenced the general direction and volume of trade.
NYSE Volume 7,883,697,500
Nasdaq Volume 2,512,938,000
As expected with the strong dollar scenario, commodity prices could not be maintained. Oil was slammed the hardest, it being the de facto favorite of the speculative groups, losing $2.87, to $77.00. Gold dipped $6.70, to finish the week at $1,040.40, while silver shed 40 cents, to close at $16.26.
Whether or not the closing figures are some kind of pivot point upon which one can trade one way or another is a matter for the chartists. The NASDAQ made an intra-day double-bottom at 1040, last touched on October 2, at the start of a brisk rally. The Dow is sitting right on its 50-day moving average, while the S&P has crossed over its 50-day MA three times in the last three sessions, is above support at 1019, but broke below the previous support line at 1039 on Friday.
It's a pivot point all right, the question is still which way?
The answer to that is probably more psychological than technical. Traditionally, a strong dollar was good for stocks, though in this situation, the liquidity trade is working the other way. At some point, the leadership of banks, materials and technology will have to give way, though technology will probably still stand up better through whatever short term condition is presented. Longer term, the dollar will decline, but as the Fed hints at raising rates - and then actually does - a change in attitude must attend if stocks are to continue to advance.
There is almost certainly going to be a period of pause, and we are likely in the middle of that right now. Another 4-7% decline on the major indices should be forthcoming while the market sorts out what to do with the absence of easy money. If there is no solution, stocks will continue to decline, at least until people think they're really cheap enough.
Much has been made of the huge amount of cash still sitting out the dance, and this may present those wallflowers with ample opportunity to put some of their money to work. Not a wholesale dive in, but at least sticking a toe in the water would suffice. That could spark another rally before the end of they year, but there's also a very good chance that the highs for 2009 have already been met.
Therefore, heading into next week, pay particular attention to the dollar, financials and basic materials or commodities, and be on the lookout for a divergence from the established trend. If the dollar is higher and stocks do not sell off, look for new leadership in the other sectors. If the dollar trades lower, expect the same trade, which does nobody any good, since we've already determined that it is flawed. A weak dollar cannot support a true recovery.
Best case scenario is another drift lower, or, maybe a swift downdraft for another week before volatility settles down. It doesn't mean that one should stop trading, only that one needs to buy protection and remain nimble.
The Dow was down more than 100 points three days, culminating in the biggest move of the week on Friday (-249.85), and up nearly 200 points on just one day - Thursday - after the government announced the preliminary reading on 3rd quarter GDP at a positive 3.5%. Only Tuesday was tame, with the index up a mere 14 points.
For the week, the Dow lost 260 points, one of the larger weekly declines of the year, but shallow by percentage comparison, at 2.8%. The NASDAQ gave back 109 points, and was the worst performer on a percentage basis, with a loss of 5% for the five days just ended. 43 points were disgorged from the S&P 500, a 4.5% decline. The NYSE Composite was down 327 points, nearly matching the NASDAQ with a 4.7% drop.
The main catalyst for the wild swings in the market seem to have been two-fold. First, the date, October 30, marking the last trading day of the month, also was the final reporting day for many mutual funds, so profits were being locked in with wholesale selling of weak hands. Second, the dollar was very strong against the Euro in particular, and whenever that set-up has been present, stocks have been whacked. The entire rally from March through today has been fueled by a declining dollar, making commodities and US equities more attractive.
Dow 9,712.73, -249.85 (2.51%)
Nasdaq 2,045.11, -52.44 (2.50%)
S&P 500 1,036.18, -29.93 (2.81%)
NYSE Composite 6,739.45, -215.86 (3.10%)
Losers overwhelmed gainers, 5359-1162 (nearly 5-1), and underscoring the lack of direction, new lows scored over new lows by the narrow margin of 3, 89-86. Volume was again above the norm, though reading too much into the volume scenario may be risky. Both of the big down days - Wednesday and Friday - saw increased volume, though it bears notice that Wednesday was the day before the much-feared 3rd quarter GDP report, and Friday, as mentioned above, was the end of the year for many funds. Thus, these outliers may have overtly influenced the general direction and volume of trade.
NYSE Volume 7,883,697,500
Nasdaq Volume 2,512,938,000
As expected with the strong dollar scenario, commodity prices could not be maintained. Oil was slammed the hardest, it being the de facto favorite of the speculative groups, losing $2.87, to $77.00. Gold dipped $6.70, to finish the week at $1,040.40, while silver shed 40 cents, to close at $16.26.
Whether or not the closing figures are some kind of pivot point upon which one can trade one way or another is a matter for the chartists. The NASDAQ made an intra-day double-bottom at 1040, last touched on October 2, at the start of a brisk rally. The Dow is sitting right on its 50-day moving average, while the S&P has crossed over its 50-day MA three times in the last three sessions, is above support at 1019, but broke below the previous support line at 1039 on Friday.
It's a pivot point all right, the question is still which way?
The answer to that is probably more psychological than technical. Traditionally, a strong dollar was good for stocks, though in this situation, the liquidity trade is working the other way. At some point, the leadership of banks, materials and technology will have to give way, though technology will probably still stand up better through whatever short term condition is presented. Longer term, the dollar will decline, but as the Fed hints at raising rates - and then actually does - a change in attitude must attend if stocks are to continue to advance.
There is almost certainly going to be a period of pause, and we are likely in the middle of that right now. Another 4-7% decline on the major indices should be forthcoming while the market sorts out what to do with the absence of easy money. If there is no solution, stocks will continue to decline, at least until people think they're really cheap enough.
Much has been made of the huge amount of cash still sitting out the dance, and this may present those wallflowers with ample opportunity to put some of their money to work. Not a wholesale dive in, but at least sticking a toe in the water would suffice. That could spark another rally before the end of they year, but there's also a very good chance that the highs for 2009 have already been met.
Therefore, heading into next week, pay particular attention to the dollar, financials and basic materials or commodities, and be on the lookout for a divergence from the established trend. If the dollar is higher and stocks do not sell off, look for new leadership in the other sectors. If the dollar trades lower, expect the same trade, which does nobody any good, since we've already determined that it is flawed. A weak dollar cannot support a true recovery.
Best case scenario is another drift lower, or, maybe a swift downdraft for another week before volatility settles down. It doesn't mean that one should stop trading, only that one needs to buy protection and remain nimble.
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