While the headline numbers for today's trading on the major indices weren't all that startling, but the largely unnoticed event - an indicator which I watch like a hawk and report on daily - occurred today, as the new high - new low metrics completely reversed, with new lows taking the edge over new highs.
Of all the indicators which investment analysts cite in their mountains of research and charts, this simple indicator has proven to be the absolute best and most accurate for determining both bull and bear market direction, long term, and isn't long term what investing is supposed to be about, anyway?
The first time I made note of this simple indicator was when it turned negative in August, 2007, an innocuous time for many, but the actual beginning of the still-ongoing financial crisis. New lows took the edge from the new highs in that month and did not give up the advantage - on a day-by-day basis - until April of 2009, a span of some 20 months, a spectacular indicator, to be sure!
There were a handful of days in which there were more posted new highs than new lows, but through those 20 months, new lows led new highs nearly every trading day. When they turned over last year, with new highs surpassing new lows on a daily basis, I was slow to comprehend its meaning and power, but finally caught on in June as the markets embarked upon a truly breathtaking nine-month rally.
Today marked the second time new lows have surpassed new highs in the past two weeks. The first instance was on the day of the "flash crash" on May 6, nearly two weeks ago. Today, the move was decisive, with 167 new lows compared to only 90 new highs. It would bear to watch this indicator closely for the next ten trading sessions, to see if it continues to trend in this manner, but my gut feeling is that it has flipped and the market is heading for a renewed bout of bearishness, marked by sharp selling and equally sharp rallies off fresh bottoms.
Investors would be well advised to get out of equities as soon as possible, if not already in cash, equivalents or tools of trades as I have been suggesting for some time.
Dow 10,444.37, -66.58 (0.63%)
NASDAQ 2,298.37, -18.89 (0.82%)
S&P 500 1,115.05, -5.75 (0.51%)
NYSE Composite 6,927.21, -32.00 (0.46%)
Losing issues outstripped advancers by a colossal margin, 5030-1549, or better than 3:1, another indication of more pain to come for Bulls. Volume was also strong, indicating that the selling has not yet reached fever pitch.
NYSE Volume 7,827,840,000.00
NASDAQ Volume 2,588,426,750.00
Crude slipped to a seven-month low today before regaining its footing, adding 46 cents, to $69.87 per barrel at the close, though that gain was likely a knee-jerk reaction to the relentless selling the entire month of May which has brought the price down more than 15%.
If there was any indication of deflation, it was not only in the April CPI numbers released prior to the market's opening, which showed a decline of 0.1% (same as yesterday's PPI), but in the price of gold, which sold off considerably. The yellow metal plummeted $21.70, to $1,192.60. Silver suffered an even larger percentage loss, diving 76 cents, to $18.09.
As are all other commodities, they are trading vehicles, and while they may fare better than other asset classes, they are still not immune from the ravishes of deflation, which has been and continues to bombard global markets with price dislocations and a general lack of pricing power.
The race to the bottom is on again. Cash is king once more!
Wednesday, May 19, 2010
Tuesday, May 18, 2010
Churn, Churn, Churn: Stocks Turning to Mush
Possibly, you may have noticed a pattern developing over the past week or so.
That pattern has the unmistakable earmarks of a major downturn for equities, with all of the major indices falling below their 50-day moving averages, and, as of today, staying below them. Unlike yesterday's miraculous midday turnabout, the trading pattern on Tuesday was emblematic of typical bear market sell-offs, with stocks gaining in the morning, but, without conviction, being sold off soundly into the closing bell.
Rationale for the sustained selling might be one of many. Maybe it was the -0.1% April PPI reading (note to the uninitiated: negative PPI is usually a sound indicator of outright DEFLATION, the one word the Federal Reserve and central bankers worldwide dread). Possibly, some sellers were spooked by the dismally-low number of building permits issued nationwide: 606,000 in April, after 685,000 in March.
Neither of those seemed to weigh on markets at the opening, as both figures were released at 8:30 am, prior to the famous ringing of the bell. So, when Meredith Whitney, who has been elevated to stock goddess status after her correct calls on the 2008 financial collapse, took aim at both the Washington political crowd pondering financial regulation and the banking sector, a cadre of investors may have been taking notice.
Not only was her editorial in the Wall Street Journal a warning shot to current reform efforts and the debased credit climate, but it was after her appearance on CNBC (see below) that stocks really began to extend their slide. Whitney's advice was to avoid financial stocks "at all costs," which must have sounded an alarm, because all the major bank stocks took hits on Tuesday.
Bank of America (BAC) was off 2.45%; Goldman Sachs (GS) fell by more than 5 points, a 3.70% decline; Citigroup (C) finished the session at 3.73, its lowest close since March 8th, a decline of 3.37% on the day.
Dow 10,510.95, -114.88 (1.08%)
NASDAQ 2,317.26, -36.97 (1.57%)
S&P 500 1,120.80, -16.14 (1.42%)
NYSE Composite 6,959.21, -104.62 (1.48%
As expected, declining issues exceeded advancers by a wide margin, 4859-1705, though new highs managed to stay atop new lows for at least one more day, 166-100. Volume was on the low side, though it should pick up as the week progresses toward options expiration.
NYSE Volume 6,716,525,500.00
NASDAQ Volume 2,279,330,000.00
Crude oil, after being up nearly $2.00 in early trading, slipped to its first close below the $70 mark in 2010. Oil sold off another 67 cents, to $69.41. Keeping with the deflationary tone of the day, gold fell grandly, off $13.40, to $1,214.30. Silver managed to buck the trend, but only by throwing in 2 cents to its price per ounce, trading at $18.86.
The current conditions are ripe for a continuation of the current selloff or a radical race lower, a circumstance which could arise should the major averages fail on their tests of the 200-day moving averages. Dropping below those levels, which are not far off, could incite an all-out rout in equities as the economy still appears to be on shaky footing and companies may have trouble meeting last year's earnings results heading into the 2nd, 3rd and 4th quarters. While the upcoming spate of earnings reports in July may not be very challenging, the October and January 2011 results will be difficult, as the comparisons are to quarters in which companies had cut staff and expenses to raw bone and most cannot afford to operate in that manner for extended periods of time. The latter half of 2010 appears to be setting up as a very challenging period for the general economy and stocks overall.
That pattern has the unmistakable earmarks of a major downturn for equities, with all of the major indices falling below their 50-day moving averages, and, as of today, staying below them. Unlike yesterday's miraculous midday turnabout, the trading pattern on Tuesday was emblematic of typical bear market sell-offs, with stocks gaining in the morning, but, without conviction, being sold off soundly into the closing bell.
Rationale for the sustained selling might be one of many. Maybe it was the -0.1% April PPI reading (note to the uninitiated: negative PPI is usually a sound indicator of outright DEFLATION, the one word the Federal Reserve and central bankers worldwide dread). Possibly, some sellers were spooked by the dismally-low number of building permits issued nationwide: 606,000 in April, after 685,000 in March.
Neither of those seemed to weigh on markets at the opening, as both figures were released at 8:30 am, prior to the famous ringing of the bell. So, when Meredith Whitney, who has been elevated to stock goddess status after her correct calls on the 2008 financial collapse, took aim at both the Washington political crowd pondering financial regulation and the banking sector, a cadre of investors may have been taking notice.
Not only was her editorial in the Wall Street Journal a warning shot to current reform efforts and the debased credit climate, but it was after her appearance on CNBC (see below) that stocks really began to extend their slide. Whitney's advice was to avoid financial stocks "at all costs," which must have sounded an alarm, because all the major bank stocks took hits on Tuesday.
Bank of America (BAC) was off 2.45%; Goldman Sachs (GS) fell by more than 5 points, a 3.70% decline; Citigroup (C) finished the session at 3.73, its lowest close since March 8th, a decline of 3.37% on the day.
Dow 10,510.95, -114.88 (1.08%)
NASDAQ 2,317.26, -36.97 (1.57%)
S&P 500 1,120.80, -16.14 (1.42%)
NYSE Composite 6,959.21, -104.62 (1.48%
As expected, declining issues exceeded advancers by a wide margin, 4859-1705, though new highs managed to stay atop new lows for at least one more day, 166-100. Volume was on the low side, though it should pick up as the week progresses toward options expiration.
NYSE Volume 6,716,525,500.00
NASDAQ Volume 2,279,330,000.00
Crude oil, after being up nearly $2.00 in early trading, slipped to its first close below the $70 mark in 2010. Oil sold off another 67 cents, to $69.41. Keeping with the deflationary tone of the day, gold fell grandly, off $13.40, to $1,214.30. Silver managed to buck the trend, but only by throwing in 2 cents to its price per ounce, trading at $18.86.
The current conditions are ripe for a continuation of the current selloff or a radical race lower, a circumstance which could arise should the major averages fail on their tests of the 200-day moving averages. Dropping below those levels, which are not far off, could incite an all-out rout in equities as the economy still appears to be on shaky footing and companies may have trouble meeting last year's earnings results heading into the 2nd, 3rd and 4th quarters. While the upcoming spate of earnings reports in July may not be very challenging, the October and January 2011 results will be difficult, as the comparisons are to quarters in which companies had cut staff and expenses to raw bone and most cannot afford to operate in that manner for extended periods of time. The latter half of 2010 appears to be setting up as a very challenging period for the general economy and stocks overall.
Monday, May 17, 2010
Dow Drops 180, Finishes with Gain: Complete Scam
Let's not mince words any more. The stock market is a complete scam, engineered to maximize profits for the banks, brokerages and well-heeled investors. Period.
Individual investors have no place in this magnificently-rigged charade. Second, third and fourth quarter comparisons will be impossible for most traded companies to meet. Expect stocks to fall at least 40 percent over the next 12 months.
Dow 10,625.83, +5.67 (0.05%)
NASDAQ 2,354.23, +7.38 (0.31%)
S&P 500 1,136.94, +1.26 (0.11%)
NYSE Composite 7,063.83, -13.81 (0.20%)
Internal numbers tell the entire story of today's panicked selling and short-cover rebound into the close. Declining issues overwhelmed advancing ones, 3705-2873. New highs and new lows were almost on equal footing, with the highs taking a slim edge, 113-108. The new highs to new lows indicator is screaming for direction, and the most likely aim is down. If this indicator flips - which it almost surely will, considering the absurd gains from 2009 - a complete reversal will be unstoppable. Volume was moderate, though with options expiring this week, any movement to the upside in terms of trading volume will carry the distinct odor of burned investors.
NYSE Volume 6,799,444,500.00
NASDAQ Volume 2,416,696,250.00
Even the mainstream is calling stocks risky and overpriced, as in this Fortune/CNN Money article.
Stocks are almost certain to decline, along with almost all commodity prices, because almost everything is overvalued. Price discovery is the very first and most important aspect of market discipline. For the past 20 years at least, the equity markets have displayed less-than-rigorous pricing models, which has led to one bubble after another, to the point at which not only the global economy is at risk, but the nature of currency is being challenged. Major, catastrophic consequences, bourn out of years of market manipulation, deceit, sloppiness and fraud cannot be discounted in perpetuity. Eventually, some semblance of honest price discovery and balanced economic principles must come to bear upon all markets. For equity markets, that time is overdue.
Commodity prices continue to foretell the fate of nations. Crude oil prices continued to decline on the day, reaching a five-month low by losing another $1.53 per barrel, to $70.08. Oil's decline is symptomatic of the overall deflationary environment which has persisted since mid-2007 and has not abated, despite the massive printing of money by the world's central bankers. Gold could barely muster a bid, rising only 30 cents, to $1,227.70, itself under pressure as a traded commodity, but with the slight argument that it is a store of wealth. Silver also fell victim to both market maneuvering and selling pressure, slipping 37 cents, to $18.84 per ounce.
In an economic downturn as enormous as the one currently underway, there is no safe haven, though the metals may prove more steadfast than almost all other asset classes. Their status as commodities, and their prices being largely unavailable to the average man and woman, make them vulnerable to huge price swings, as has been the case over the past three to five years.
The breaking point is nearly upon the world's economies. Either the Euro's demise or an unanticipated collapse of oil and distillate demand (caused primarily by the swirling deflationary pressures) may prove to be too much for markets to handle.
Nobody who follows economics or markets should be surprised if a massive collapse is equities occurs at any time during the next six to twelve months. Such an event should not be viewed as a possibility, but rather a near-certainty.
Individual investors have no place in this magnificently-rigged charade. Second, third and fourth quarter comparisons will be impossible for most traded companies to meet. Expect stocks to fall at least 40 percent over the next 12 months.
Dow 10,625.83, +5.67 (0.05%)
NASDAQ 2,354.23, +7.38 (0.31%)
S&P 500 1,136.94, +1.26 (0.11%)
NYSE Composite 7,063.83, -13.81 (0.20%)
Internal numbers tell the entire story of today's panicked selling and short-cover rebound into the close. Declining issues overwhelmed advancing ones, 3705-2873. New highs and new lows were almost on equal footing, with the highs taking a slim edge, 113-108. The new highs to new lows indicator is screaming for direction, and the most likely aim is down. If this indicator flips - which it almost surely will, considering the absurd gains from 2009 - a complete reversal will be unstoppable. Volume was moderate, though with options expiring this week, any movement to the upside in terms of trading volume will carry the distinct odor of burned investors.
NYSE Volume 6,799,444,500.00
NASDAQ Volume 2,416,696,250.00
Even the mainstream is calling stocks risky and overpriced, as in this Fortune/CNN Money article.
Stocks are almost certain to decline, along with almost all commodity prices, because almost everything is overvalued. Price discovery is the very first and most important aspect of market discipline. For the past 20 years at least, the equity markets have displayed less-than-rigorous pricing models, which has led to one bubble after another, to the point at which not only the global economy is at risk, but the nature of currency is being challenged. Major, catastrophic consequences, bourn out of years of market manipulation, deceit, sloppiness and fraud cannot be discounted in perpetuity. Eventually, some semblance of honest price discovery and balanced economic principles must come to bear upon all markets. For equity markets, that time is overdue.
Commodity prices continue to foretell the fate of nations. Crude oil prices continued to decline on the day, reaching a five-month low by losing another $1.53 per barrel, to $70.08. Oil's decline is symptomatic of the overall deflationary environment which has persisted since mid-2007 and has not abated, despite the massive printing of money by the world's central bankers. Gold could barely muster a bid, rising only 30 cents, to $1,227.70, itself under pressure as a traded commodity, but with the slight argument that it is a store of wealth. Silver also fell victim to both market maneuvering and selling pressure, slipping 37 cents, to $18.84 per ounce.
In an economic downturn as enormous as the one currently underway, there is no safe haven, though the metals may prove more steadfast than almost all other asset classes. Their status as commodities, and their prices being largely unavailable to the average man and woman, make them vulnerable to huge price swings, as has been the case over the past three to five years.
The breaking point is nearly upon the world's economies. Either the Euro's demise or an unanticipated collapse of oil and distillate demand (caused primarily by the swirling deflationary pressures) may prove to be too much for markets to handle.
Nobody who follows economics or markets should be surprised if a massive collapse is equities occurs at any time during the next six to twelve months. Such an event should not be viewed as a possibility, but rather a near-certainty.
Friday, May 14, 2010
So, I Was Right About the Fraud, Right?
OK, I hae stated my case all week. The case of the skeptic, of the cynic, of the personwho believes those who run big firms and those who execute trades for those big firms are among the most dishonest, corrupt, incorrigible people to ever set foot upon the planet, and it is they who are responsible (in cahoots with certain government agents) for the "flash crash" of last Thursday and much of the subsequent market action afterwards.
You can look back over the past six days of posts and my story doesn't vary. Insidious insiders caused the meltdown and bounce last Thursday, May 6, 2010, walked stocks further down on Friday, May 7, and knew full well that the EU would not only bail out Greece, but that they would approve a nearly $1 Trillion rescue package over the weekend.
When the market spiked 400 points at the open on Monday, it was they who benefited and it again is the very same people who have been selling at ridiculous short-term profits all week.
Here, for your reading and dancing pleasure are the numbers:
Thursday, May 6: Right around 2:30 in the afternoon, the Dow plummets suddenly, about 600 points, for a total downdraft of almost 1000 points, finally bouncing off 9,787.17. Just as quickly as the market fell, it rebounded. Traders and individuals are stunned. The Dow closes at 10,520.32.
Friday, May 7: Already confused and afraid, market participants sell out of fear that there are nefarious forces at work and they are correct. Dow closes at 10,380.43, a 10-week low.
Monday, May 10: EU approves monstrous bailout for member nations nearing default. Market gaps up 400 points at the open, benefiting only those who bought in on Thursday or Friday. Dow closes at 10,785.14.
Tuesday, May 11: Stocks moderate as insiders quietly begin selling shares. Dow closes at 10,748.26.
Wednesday, May 12: In what looked very much like a short squeeze, insiders maximize profits by boosting the Dow another nearly-200 points. Dow closes at 10,896.91.
Thursday, May 13: Selling now commences in earnest as insiders ramp up trading. Dow closes down 114 points, at 10,782.95.
Friday, May 14: More vigorous selling, with a bottom intra-day at 10,537.25. Dow closes down another 162 points, at 10,620.16.
There you have it. From Friday's close of 10,380.43, after all the obfuscation and hoopla, the Dow bottoms a week later at 10,537.25, a minuscule 157-point move, with plenty of action (for thieves, crooks and criminals) in between.
I've said it before, but the action of the past week confirms that Wall Street is no place for individual investors. There are far too many sharks in the waters to ensure safe swimming.
Dow 10,620.16. -162.79 (1.51%)
NASDAQ 2,346.85, -47.51 (1.98%)
S&P 500 1,135.68, -21.75 (1.88%)
NYSE Composite 7,077.64, -156.73 (2.17%
Decliners beat advancers, 5600-989. New highs barely edged now lows, 101-87. Volume improved a bit over Thursday's levels, though with the market pointing down, that's an ill-boding omen.
NYSE Volume 6,872,919,000.00
NASDAQ Volume 2,596,956,000.00
Oil was splattered all over the trading pits, losing $2.79 on the session, to $71.61, a 12% decline in a month, though gas prices are still at or above the levels they were two weeks ago, when crude was $86/barrel. Motorists are neither stupid nor amused at this non-conforming development.
Even the metals settled down, with gold losing $1.40, to $1,227.40 and silver off 27 cents, to $19.20.
A wild week, unless you were paying attention at the end of the prior week. Then you saw the raw greed and corruption that is part and parcel of today's trading environment.
It stinks. People should be going to jail. Unfortunately, the government is likely in on the game.
You can look back over the past six days of posts and my story doesn't vary. Insidious insiders caused the meltdown and bounce last Thursday, May 6, 2010, walked stocks further down on Friday, May 7, and knew full well that the EU would not only bail out Greece, but that they would approve a nearly $1 Trillion rescue package over the weekend.
When the market spiked 400 points at the open on Monday, it was they who benefited and it again is the very same people who have been selling at ridiculous short-term profits all week.
Here, for your reading and dancing pleasure are the numbers:
Thursday, May 6: Right around 2:30 in the afternoon, the Dow plummets suddenly, about 600 points, for a total downdraft of almost 1000 points, finally bouncing off 9,787.17. Just as quickly as the market fell, it rebounded. Traders and individuals are stunned. The Dow closes at 10,520.32.
Friday, May 7: Already confused and afraid, market participants sell out of fear that there are nefarious forces at work and they are correct. Dow closes at 10,380.43, a 10-week low.
Monday, May 10: EU approves monstrous bailout for member nations nearing default. Market gaps up 400 points at the open, benefiting only those who bought in on Thursday or Friday. Dow closes at 10,785.14.
Tuesday, May 11: Stocks moderate as insiders quietly begin selling shares. Dow closes at 10,748.26.
Wednesday, May 12: In what looked very much like a short squeeze, insiders maximize profits by boosting the Dow another nearly-200 points. Dow closes at 10,896.91.
Thursday, May 13: Selling now commences in earnest as insiders ramp up trading. Dow closes down 114 points, at 10,782.95.
Friday, May 14: More vigorous selling, with a bottom intra-day at 10,537.25. Dow closes down another 162 points, at 10,620.16.
There you have it. From Friday's close of 10,380.43, after all the obfuscation and hoopla, the Dow bottoms a week later at 10,537.25, a minuscule 157-point move, with plenty of action (for thieves, crooks and criminals) in between.
I've said it before, but the action of the past week confirms that Wall Street is no place for individual investors. There are far too many sharks in the waters to ensure safe swimming.
Dow 10,620.16. -162.79 (1.51%)
NASDAQ 2,346.85, -47.51 (1.98%)
S&P 500 1,135.68, -21.75 (1.88%)
NYSE Composite 7,077.64, -156.73 (2.17%
Decliners beat advancers, 5600-989. New highs barely edged now lows, 101-87. Volume improved a bit over Thursday's levels, though with the market pointing down, that's an ill-boding omen.
NYSE Volume 6,872,919,000.00
NASDAQ Volume 2,596,956,000.00
Oil was splattered all over the trading pits, losing $2.79 on the session, to $71.61, a 12% decline in a month, though gas prices are still at or above the levels they were two weeks ago, when crude was $86/barrel. Motorists are neither stupid nor amused at this non-conforming development.
Even the metals settled down, with gold losing $1.40, to $1,227.40 and silver off 27 cents, to $19.20.
A wild week, unless you were paying attention at the end of the prior week. Then you saw the raw greed and corruption that is part and parcel of today's trading environment.
It stinks. People should be going to jail. Unfortunately, the government is likely in on the game.
Thursday, May 13, 2010
All About Today's Reversal, And Why It Matters
The downturn in equity markets today should not have come as a surprise to anybody who understands charts and amrket dynamics.
A nice chart of the Dow covering the past six months reveals the condition. The market is sitting right on its 50-day moving average with no clear direction, though lower seems to be the most likely move as days progress.
Recall the events of the past 5 trading days: After the "flash crash" (thanks to the geniuses at CNBC for giving it a nickname) of last Thursday, the Dow sank on Friday, had a sharp opening gap up and maintained that stature on Monday, dipped a bit on Tuesday, rallied above the 50-day moving average on Wednesday, and today closed below that important measuring stick.
Now, there's an easier way to look at these events, especially if you're a cynical observer such as I. After scooping up shares at the bottom on Thursday and Friday, the power players behind the scenes made fast cash on Monday, sold a little more on Tuesday, sucked in more late-comers on Wednesday and now are selling in earnest. The moves are being made in conjunction with various and many stock option plays, the May variety which expire on Friday, the 21st, being the most active.
Depending on how badly these power players - the same group likely behind the flash crash and other recent organized selling - want to hit the little guys on the other end of trades - and how soon - this little episode could take on some very interesting dimensions. They might be over-weighted on the long end, or they could be itching for another downdraft. The latter would make more sense from a chartist's perspective. Once a market breaks through a key level - like the 50-day MA - the corresponding next moves are usually more of the same, and this move was one of significantly violent quality, so the downside appears to be the more obvious choice.
Of course, these insiders are a savvy bunch and they've likely already discounted the idea that the market should behave in patterned ways, so they just might keep stocks chugging along, mirroring the 50-day until options expire. The cynical view is that they bought close to the bottom and are slowly selling at fat profits presently, though, and that patten should continue.
At the end of today's trading, there was a rush for the exits. Stocks closed at their lows of the session, which is one of the more profound daily indicators one can find. It indicates a real reluctance to maintain positions and even less commitment to any new purchases.
Dow 10,782.95, -113.96 (1.05%)
NASDAQ 2,394.36, -30.66 (1.26%)
S&P 500 1,157.43, -14.24 (1.22%)
NYSE Composite 7,234.37, -81.99 (1.12%)
On the day, decliners took the advantage over advancing issues, 4193-2349. There were 192 new highs to a paltry 53 new lows. This is an interesting development. The market is holding judgement in abeyance, perhaps awaiting some catalyst, or just marking time until the next move lower. Volume was down for the third consecutive day, another indication that the markets are poised to head even lower, likely back to test the Friday intra-day low of 10,221.50.
NYSE Volume 5,477,719,500.00
NASDAQ Volume 2,321,865,500.00
Commodity prices continued to cool. Crude oil maintained its relentless slide, losing another $1.25 per barrel, to $74.40. Even gold bugs were either spooked or taking profits, sending the price down by $13.90 per ounce, to $1,228.80. Silver also ran down 16 cents, to $19.48.
Much of today's selling was blamed on some interesting and disturbing comments from mainstream retailer Kohl's, which issued 2nd quarter fiscal 2010 guidance that fell short of expectations and noted that the average amount per transaction was down in the most recent quarter. Macy's also cited the same metric, days ago. With retailers cautious about consumer spending, they are acting as the canaries in the coal mine, warning that the current recovery - if one exists at all - may not be sustained. If they're right, stocks will find no bottom in the near term and the remainder of the year may be a wipeout for many corporations.
It's interesting to note that the January indicator predicted that 2010 would be a down year for stocks and maintains a solid record of correctly predicting the future economy, somewhere in the range of 85% accurate. Since the major indices are right about where they began the year, that long-ago (4 months) indicator overhangs the market like the sword of Damocles.
While Wall Street pondered its own fate, oil continues to surge from beneath the ocean into the Gulf of Mexico. With the disaster now entering its 4th week without resolution, the slick continues to grow and the oil continues to flow. That oil will go somewhere, eventually, but the drama is playing out in what appears to be a slow-motion nightmare on Bourbon Street.
At the end of it all, expect to see the end of the rig company, Transocean, drowned in a sea of lawsuits. The CEO of BP, Tony Hayward, almost certainly will be sacked, if the company even survives. As for Halliburton, the love-child of former US VP, that company seems to be born under a lucky star. The damage to the Gulf waters, the shorelands and the wetlands may be unbearable and unresolved for years to come.
A nice chart of the Dow covering the past six months reveals the condition. The market is sitting right on its 50-day moving average with no clear direction, though lower seems to be the most likely move as days progress.
Recall the events of the past 5 trading days: After the "flash crash" (thanks to the geniuses at CNBC for giving it a nickname) of last Thursday, the Dow sank on Friday, had a sharp opening gap up and maintained that stature on Monday, dipped a bit on Tuesday, rallied above the 50-day moving average on Wednesday, and today closed below that important measuring stick.
Now, there's an easier way to look at these events, especially if you're a cynical observer such as I. After scooping up shares at the bottom on Thursday and Friday, the power players behind the scenes made fast cash on Monday, sold a little more on Tuesday, sucked in more late-comers on Wednesday and now are selling in earnest. The moves are being made in conjunction with various and many stock option plays, the May variety which expire on Friday, the 21st, being the most active.
Depending on how badly these power players - the same group likely behind the flash crash and other recent organized selling - want to hit the little guys on the other end of trades - and how soon - this little episode could take on some very interesting dimensions. They might be over-weighted on the long end, or they could be itching for another downdraft. The latter would make more sense from a chartist's perspective. Once a market breaks through a key level - like the 50-day MA - the corresponding next moves are usually more of the same, and this move was one of significantly violent quality, so the downside appears to be the more obvious choice.
Of course, these insiders are a savvy bunch and they've likely already discounted the idea that the market should behave in patterned ways, so they just might keep stocks chugging along, mirroring the 50-day until options expire. The cynical view is that they bought close to the bottom and are slowly selling at fat profits presently, though, and that patten should continue.
At the end of today's trading, there was a rush for the exits. Stocks closed at their lows of the session, which is one of the more profound daily indicators one can find. It indicates a real reluctance to maintain positions and even less commitment to any new purchases.
Dow 10,782.95, -113.96 (1.05%)
NASDAQ 2,394.36, -30.66 (1.26%)
S&P 500 1,157.43, -14.24 (1.22%)
NYSE Composite 7,234.37, -81.99 (1.12%)
On the day, decliners took the advantage over advancing issues, 4193-2349. There were 192 new highs to a paltry 53 new lows. This is an interesting development. The market is holding judgement in abeyance, perhaps awaiting some catalyst, or just marking time until the next move lower. Volume was down for the third consecutive day, another indication that the markets are poised to head even lower, likely back to test the Friday intra-day low of 10,221.50.
NYSE Volume 5,477,719,500.00
NASDAQ Volume 2,321,865,500.00
Commodity prices continued to cool. Crude oil maintained its relentless slide, losing another $1.25 per barrel, to $74.40. Even gold bugs were either spooked or taking profits, sending the price down by $13.90 per ounce, to $1,228.80. Silver also ran down 16 cents, to $19.48.
Much of today's selling was blamed on some interesting and disturbing comments from mainstream retailer Kohl's, which issued 2nd quarter fiscal 2010 guidance that fell short of expectations and noted that the average amount per transaction was down in the most recent quarter. Macy's also cited the same metric, days ago. With retailers cautious about consumer spending, they are acting as the canaries in the coal mine, warning that the current recovery - if one exists at all - may not be sustained. If they're right, stocks will find no bottom in the near term and the remainder of the year may be a wipeout for many corporations.
It's interesting to note that the January indicator predicted that 2010 would be a down year for stocks and maintains a solid record of correctly predicting the future economy, somewhere in the range of 85% accurate. Since the major indices are right about where they began the year, that long-ago (4 months) indicator overhangs the market like the sword of Damocles.
While Wall Street pondered its own fate, oil continues to surge from beneath the ocean into the Gulf of Mexico. With the disaster now entering its 4th week without resolution, the slick continues to grow and the oil continues to flow. That oil will go somewhere, eventually, but the drama is playing out in what appears to be a slow-motion nightmare on Bourbon Street.
At the end of it all, expect to see the end of the rig company, Transocean, drowned in a sea of lawsuits. The CEO of BP, Tony Hayward, almost certainly will be sacked, if the company even survives. As for Halliburton, the love-child of former US VP, that company seems to be born under a lucky star. The damage to the Gulf waters, the shorelands and the wetlands may be unbearable and unresolved for years to come.
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