Just like the "flash crash" of May 6, there will be no explanation given for the reversal of fortunes today in stocks. When all of the other major global markets - Japan, China, Hong Kong, Korea, France, Great Britain, Germany, Brazil - were down anywhere from two to four per cent, and US markets initially crash, but then recover to walk away barely bruised, what does that tell you?
That we're special, somehow? That the US is in so much better shape than the rest of the world that if their economies all imploded, ours would receive hardly a scratch? Anyone who buys into such cockeyed logic should have "MORON" stamped upon their forehead.
No, what that tells anybody with any knowledge of how deeply corrupted our stock exchanges have become, is that they are a massively rigged game, and the winners are mostly insiders at banks and brokerages pushing the market in whichever ways delights their fancies and fattens their bottom lines.
Stocks fell to levels below both the 1000-point flash crash and below all preceding 2010 lows. That happened right out of the gate, within 15 minutes of the open. Stock futures had been forewarning a brutal open, with Dow futures down as much as 250 points prior to the bell-ringing. These kinds of gap opens serve only to benefit inside traders, to the detriment of individual investors and fund managers who cannot move massive amounts of stock without really rattling markets.
The average Jane or Joe who doesn't keep an eye peeled on CNBC all day long may only notice the Dow was down 20 points and be happy with that, never knowing that it was lower by 290 just 15 minutes into the session. The S&P 500 actually finished with a fractional gain, after being down by as many as 32 points.
Possibly the most egregious display of manipulation was in the NASDAQ, which was down by as many as 73 points but recovered to finish down only two points.
Did the issues which hammered all other markets simply go away by the time US markets were trading? No. Those issues were belligerent behavior by North Korea toward their neighbors to the South, a slowdown of economic activity and a potential real estate bubble in China and the continuing fiscal woes of the entire continent of Europe, though more specifically, the potential default of the governments of Greece and Spain.
What most casual observers and investors may not realize is that the markets will return to those lows. Whether they do that tomorrow, Thursday, Friday, next week or next month is immaterial. The major indices all fell below their 200-day moving averages last week and continue to mostly reside there. One day's action will not change the fact that new lows were set in place and such lows will almost always be retested. The Dow and S&P were in the throes of a triple bottom breakdown, falling below the lows of February and early May. That kind of violation of support just doesn't go away, stocks have to be handled to erase losses and fresh bottoms.
Call it whatever you like, but today set up a new bottom and one of the more severe head fakes ever seen. Downside risk is still predominant and there's a high likelihood that the final push - after 3:00 - was caused mostly by short covering. US markets should not be considered a safe haven for any investor, simply because they are so obviously rigged. They may move strongly in one direction or the other - or both, like today - without reason.
Dow 10,043.75, -22.82 (0.23%)
NASDAQ 2,210.95, -2.60 (0.12%)
S&P 500 1,074.03, +0.38 (0.04%)
NYSE Composite 6,665.83, -0.91 (0.01%)
Market internals offer much better perspective. Declining issues were dominant over advancers, 4334-2242. New lows maintained their advantage over new highs and actually expanded their edge, 369-88. Volume was heavy, owing to the fact that a lot of stock had to be moved around to erase those early losses.
NYSE Volume 8,458,538,000.00
NASDAQ Volume 2,893,359,500.00
Another indication of what really happened today in markets comes from the commodity pits, where July Crude was down $1.68, to $68.75, a fresh closing contract low. Gold finished up $4.00, to $1,197.80, though silver closed down 22 cents, at $17.76.
The deflation trade is still on, meaning one should be either in cash or equivalents, short, living in another country, or all of the above. Money at risk stays at risk, especially in markets so obviously flawed.
Please pay particular attention to anyone who tells you that 1140 on the S&P is a "bottom." You are advised to run - as quickly as possible - as far away as possible from anyone holding that point of view.
Tuesday, May 25, 2010
Monday, May 24, 2010
Still Sliding: Stocks Clobbered Once Again
Stocks continued to trade in very choppy manner, apparently awaiting the next shoe to drop for the global economy. The shock could come from Greece, Spain, Goldman Sachs, the Gulf of Mexico or any sector of any market, or from some completely unrelated area of commerce, politics or society.
Lindsay Lohan could give up drinking for a week and it might be enough for stocks to chalk down significant losses, that's how fragile world equity markets have become.
A canary in the proverbial coal mine might have been Spain's CajaSur bank, which was seized by Spain's central bank. The small savings bank signaled that the debt crisis in Europe may be expanding into the private sector and well beyond the borders of the "PIIGS" nations - Portugal, Italy, Ireland, Greece and Spain.
After an initial slow start, stocks gained momentum, with the Dow Jones Industrials briefly going positive around the noon hour and again at 1:00 pm. After that, however, it was mostly selling, as no market participants appear to have any conviction whatsoever. Even a solid report from the National Assn. of Realtors on April existing home sales - up 7.6% from a month ago and 22.8% from April 2009 - was tempered by an 11.5% increase in existing homes available for sale, to 4.04 million, roughly an 8 1/2-month supply.
Stocks gathered downside momentum in the final fifteen minutes of trade, with all major indices trading within earshot of their lows for the day. The Dow stumbled to its lowest close since February 10 (10,038.38), along with the S&P. Showing strength and trading in positive territory most of the session, even the NASDAQ finished well into the red.
Either a significant upside catalyst must emerge over the next two weeks - which could be in the form or improved jobs numbers next Friday (though that's a risky bet) - or stocks will either churn sideways to lower or fall completely over the cliff. The markets are in a mid-quarter correction of a cyclical bull inside a secular bear market. In other words, upside is severely limited near term and probably out the window, longer term. The 13-month-long rally of 2009-10 is already over, and a significant retracing is underway. Since stocks have barely breached the 10% level, downside risk is exaggerated at this juncture.
Looking at current global conditions, all the earmarks of severe deflation are present. Capital formation has been at a standstill for months, the real estate market in the US and Europe are still depressed, corporations have no pricing power, thus fueling long-lasting high unemployment. Debt overhang on state and national budgets is still severe. The losses by the banks from 2007-2008 are still sitting in the Fed's balance sheet and Europe is quickly becoming a basket case. A dissolution of the EU - even the expulsion of a few member countries - or debasement of the Euro could cause massive disruptions in global commerce and a worsening of global deflation.
To the surprise of nobody, financial stocks led the market lower. Technology was the best-performing sector, though only because others were so badly harmed. Unnerving was the fact that the Dow broke a string of ten consecutive Mondays with positive finishes, a signal that the individual investor has been nearly completely spooked out of the market and mutual fund managers may be moving more into cash.
Dow 10,066.57, -126.82 (1.24%)
NASDAQ 2,213.55, -15.49 (0.69%)
S&P 500 1,073.65, -14.04 (1.29%)
NYSE Composite 6,666.74, -108.71 (1.60%)
Losing issues beat winners, 4077-2405. New lows maintained their advantage over new highs, 112-69. Volume was subdued.
NYSE Volume 5,918,380,000
NASDAQ Volume 2,075,873,625
The winners were the metals, with gold ahead by a whopping $18.10, to $1,193.80. Silver followed with a gain of 35 cents, to $17.98. July crude finished at $70.21, up a mere 17 cents. Oil is poised to fall to even lower levels, despite the usual buying into summer months. The price was overbought during the winter, an a correction back to more reasonable levels around $60/barrel would not be out of the question.
Lindsay Lohan could give up drinking for a week and it might be enough for stocks to chalk down significant losses, that's how fragile world equity markets have become.
A canary in the proverbial coal mine might have been Spain's CajaSur bank, which was seized by Spain's central bank. The small savings bank signaled that the debt crisis in Europe may be expanding into the private sector and well beyond the borders of the "PIIGS" nations - Portugal, Italy, Ireland, Greece and Spain.
After an initial slow start, stocks gained momentum, with the Dow Jones Industrials briefly going positive around the noon hour and again at 1:00 pm. After that, however, it was mostly selling, as no market participants appear to have any conviction whatsoever. Even a solid report from the National Assn. of Realtors on April existing home sales - up 7.6% from a month ago and 22.8% from April 2009 - was tempered by an 11.5% increase in existing homes available for sale, to 4.04 million, roughly an 8 1/2-month supply.
Stocks gathered downside momentum in the final fifteen minutes of trade, with all major indices trading within earshot of their lows for the day. The Dow stumbled to its lowest close since February 10 (10,038.38), along with the S&P. Showing strength and trading in positive territory most of the session, even the NASDAQ finished well into the red.
Either a significant upside catalyst must emerge over the next two weeks - which could be in the form or improved jobs numbers next Friday (though that's a risky bet) - or stocks will either churn sideways to lower or fall completely over the cliff. The markets are in a mid-quarter correction of a cyclical bull inside a secular bear market. In other words, upside is severely limited near term and probably out the window, longer term. The 13-month-long rally of 2009-10 is already over, and a significant retracing is underway. Since stocks have barely breached the 10% level, downside risk is exaggerated at this juncture.
Looking at current global conditions, all the earmarks of severe deflation are present. Capital formation has been at a standstill for months, the real estate market in the US and Europe are still depressed, corporations have no pricing power, thus fueling long-lasting high unemployment. Debt overhang on state and national budgets is still severe. The losses by the banks from 2007-2008 are still sitting in the Fed's balance sheet and Europe is quickly becoming a basket case. A dissolution of the EU - even the expulsion of a few member countries - or debasement of the Euro could cause massive disruptions in global commerce and a worsening of global deflation.
To the surprise of nobody, financial stocks led the market lower. Technology was the best-performing sector, though only because others were so badly harmed. Unnerving was the fact that the Dow broke a string of ten consecutive Mondays with positive finishes, a signal that the individual investor has been nearly completely spooked out of the market and mutual fund managers may be moving more into cash.
Dow 10,066.57, -126.82 (1.24%)
NASDAQ 2,213.55, -15.49 (0.69%)
S&P 500 1,073.65, -14.04 (1.29%)
NYSE Composite 6,666.74, -108.71 (1.60%)
Losing issues beat winners, 4077-2405. New lows maintained their advantage over new highs, 112-69. Volume was subdued.
NYSE Volume 5,918,380,000
NASDAQ Volume 2,075,873,625
The winners were the metals, with gold ahead by a whopping $18.10, to $1,193.80. Silver followed with a gain of 35 cents, to $17.98. July crude finished at $70.21, up a mere 17 cents. Oil is poised to fall to even lower levels, despite the usual buying into summer months. The price was overbought during the winter, an a correction back to more reasonable levels around $60/barrel would not be out of the question.
Friday, May 21, 2010
Pausing to Catch a Breath; Markets Bounce to End Dismal Week
Like the punch line to the old joke, "What are 500 lawyers lying dead at the bottom of the ocean?", gaining 125 points the day after the Dow Jones Industrials had just lost nearly 400, is... well, a good start.
However, the internals don't quite match the enthusiasm some may hold for the headline numbers, and, when the indices tumbled out of bed this morning into a ditch, they set new intra-day lows. Further, the whole thrust of today's gallop higher seemed a little out of place and probably had more to do with options expiration and covering short positions than anyone wants to admit.
It was a nice end to a really bad week for equity investors. All of the major averages ended up well below where they began the year, hugging their respective 200-day moving averages, or, in the case of the S&P 500, nestled comfortably below it. Obviously, whatever market worries caused the collapse of the past four weeks, those conditions are still present, and possibly getting worse.
For instance, Europe's $1 Trillion bailout is being called TARP a la EU, likened to the US version unveiled at their height of our own crisis back in the Fall of 2008, and many are saying it isn't enough. The US economy, hailed as the best of a bad bunch, isn't doing very well with real estate markets stuck in a funk and unemployment remaining stubbornly high; China is purposely slowing their own growth (they may not have to; slack global demand may do them in), fearing inflation; oil continues to spew from the floor of the Gulf of Mexico, fouling the Southern coastline and threatening to destroy one of the great ecosystems of the fragile planet; state governments are just beginning to come to grips with austerity measures to combat their own fiscal deficits.
Is there anything good? Well, the price of gas is coming down gradually, but other than that, no, there's nothing good about a financial system teetering on the brink of implosion, the governments of nations nearing collapse, ecological disasters, politicians more focused on being re-elected than actually fixing things and the most corrupt insider game of high finance being played out on Wall Street.
Maybe the entire system needs to be flushed. Maybe an upheaval of the old guard might just lead to better days ahead. Maybe it's time for the rich and greedy to come to understand that impoverishing the entire planet isn't going to necessarily result in their own enrichment.
Today's little bump higher is, as usual, suspect, in that the rally came off an early, deep decline. Within minutes of the opening bell, the Dow was down 145 points, the other indices in a similar fix. The turnabout had all the earmarks of our old friends at the PPT, rushing to the rescue of financial markets which had apparently taken all they could handle. No matter the cause or underhandedness surrounding the Friday push to higher ground, stocks tumbled back into negative territory in the final hour. Technically, the indices made all of the day's gains in the last twenty minutes of trading, so, no, we're not buying it, nor should anybody.
Dow 10,193.39, +125.38 (1.25%)
NASDAQ 2,229.04, +25.03 (1.14%)
S&P 500 1,087.69, +16.10 (1.50%)
NYSE Composite 6,775.45, +122.45 (1.84%)
While advancing issues beat up decliners pretty handily, 4622-1938, new lows overwhelmed new highs for the third consecutive trading session, 295-87, and once that indicator flips in one direction or another, it's usually in it for a long haul, which can last anywhere from 4 to 20 months. Volume was abnormally high, owing to the idea that many shares were being parceled out of options and many short positions covered. Beisdes, it may have taken the insiders boosting stocks a bit more heft than they originally planned. Selling pressure didn't subside. It was just temporarily replaced by coordinated buying.
NYSE Volume 9,276,994,000.00
NASDAQ Volume 3,366,007,500.00
The first day of trading in the July futures contract for crude oil resulted in some price spillage, down 76 cents to the adjusted level of $70.04. Gold continued to retreat, losing $13.10, to $1,175.70, as did silver, down a relatively benign 6 cents, to $17.63.
The final week of May and all of June will be interesting to observe (meaning: do not trade this market) as investors will continue to focus on the issues in Europe, financial regulation and some potential pre-warnings from companies whose fates have turned from rosy to thorny. But, call me a tree-hugger or whatever you like, I have a feeling that the oil spill in the Gulf will dominate the news in a very ugly manner.
However, the internals don't quite match the enthusiasm some may hold for the headline numbers, and, when the indices tumbled out of bed this morning into a ditch, they set new intra-day lows. Further, the whole thrust of today's gallop higher seemed a little out of place and probably had more to do with options expiration and covering short positions than anyone wants to admit.
It was a nice end to a really bad week for equity investors. All of the major averages ended up well below where they began the year, hugging their respective 200-day moving averages, or, in the case of the S&P 500, nestled comfortably below it. Obviously, whatever market worries caused the collapse of the past four weeks, those conditions are still present, and possibly getting worse.
For instance, Europe's $1 Trillion bailout is being called TARP a la EU, likened to the US version unveiled at their height of our own crisis back in the Fall of 2008, and many are saying it isn't enough. The US economy, hailed as the best of a bad bunch, isn't doing very well with real estate markets stuck in a funk and unemployment remaining stubbornly high; China is purposely slowing their own growth (they may not have to; slack global demand may do them in), fearing inflation; oil continues to spew from the floor of the Gulf of Mexico, fouling the Southern coastline and threatening to destroy one of the great ecosystems of the fragile planet; state governments are just beginning to come to grips with austerity measures to combat their own fiscal deficits.
Is there anything good? Well, the price of gas is coming down gradually, but other than that, no, there's nothing good about a financial system teetering on the brink of implosion, the governments of nations nearing collapse, ecological disasters, politicians more focused on being re-elected than actually fixing things and the most corrupt insider game of high finance being played out on Wall Street.
Maybe the entire system needs to be flushed. Maybe an upheaval of the old guard might just lead to better days ahead. Maybe it's time for the rich and greedy to come to understand that impoverishing the entire planet isn't going to necessarily result in their own enrichment.
Today's little bump higher is, as usual, suspect, in that the rally came off an early, deep decline. Within minutes of the opening bell, the Dow was down 145 points, the other indices in a similar fix. The turnabout had all the earmarks of our old friends at the PPT, rushing to the rescue of financial markets which had apparently taken all they could handle. No matter the cause or underhandedness surrounding the Friday push to higher ground, stocks tumbled back into negative territory in the final hour. Technically, the indices made all of the day's gains in the last twenty minutes of trading, so, no, we're not buying it, nor should anybody.
Dow 10,193.39, +125.38 (1.25%)
NASDAQ 2,229.04, +25.03 (1.14%)
S&P 500 1,087.69, +16.10 (1.50%)
NYSE Composite 6,775.45, +122.45 (1.84%)
While advancing issues beat up decliners pretty handily, 4622-1938, new lows overwhelmed new highs for the third consecutive trading session, 295-87, and once that indicator flips in one direction or another, it's usually in it for a long haul, which can last anywhere from 4 to 20 months. Volume was abnormally high, owing to the idea that many shares were being parceled out of options and many short positions covered. Beisdes, it may have taken the insiders boosting stocks a bit more heft than they originally planned. Selling pressure didn't subside. It was just temporarily replaced by coordinated buying.
NYSE Volume 9,276,994,000.00
NASDAQ Volume 3,366,007,500.00
The first day of trading in the July futures contract for crude oil resulted in some price spillage, down 76 cents to the adjusted level of $70.04. Gold continued to retreat, losing $13.10, to $1,175.70, as did silver, down a relatively benign 6 cents, to $17.63.
The final week of May and all of June will be interesting to observe (meaning: do not trade this market) as investors will continue to focus on the issues in Europe, financial regulation and some potential pre-warnings from companies whose fates have turned from rosy to thorny. But, call me a tree-hugger or whatever you like, I have a feeling that the oil spill in the Gulf will dominate the news in a very ugly manner.
Thursday, May 20, 2010
Global Markets Under Severe Pressure; Stocks Pounded
The most common term being tossed around Wall Street and other financial capitols the past few days has been "de-risking," (which isn't even a real word), or use of the term, "taking off risk," which implies, correctly, that investing in stocks is generally risky business. That's why the game used to be reserved for wealthy, astute investors with money to spare, though today, the market is comprised of everybody from rich company CEOs to the average cabbie or retail worker, through mutual funds, 401k plans, options, hedges and other schemes that serve to make an already risky proposition even more so.
It doesn't take a Gordon Gecko or even a Warren Buffet to understand that when major investments firms are "taking off risk," i.e., selling stock and/or buying protection via puts or covered calls, that the average Joe or Jane should be doing precisely the same. If the big boys are scared, there's usually a very good reason (of which nobody will speak) to get out of the way, and today was a classic example of just how risky investing in stocks can be.
Days like today, and, incidentally, the past two weeks or trading, are precisely what your broker, financial planner or CNBC doesn't want you to know about. Profits can be gone in a flash - a day, a week - like tossing hard-earned money down a sink-hole. The analysts call these kinds of sell-offs "liquidity plays" or "wealth preservation," when all along anyone with half a brain screwed on properly knows that its just part of the game.
The blog you are reading, Money Daily, has been warning for weeks and months that the recovery in the US was artificial and not long-lasting. The airwaves are full of blame for congress and fear over the intricacies over proposed financial regulation, but the truth of the matter is that the financial collapse which began in August 2007, accelerated into the Fall of 2008 and the Winter of 2009, was never really resolved. Financial firms such as Bank of America, Citigroup and Wells Fargo were not liquidated as they should have been, but bailed out by government fiat, using taxpayer dollars to fund the excesses of a banking system gone wild.
Now, those problems are bubbling up under the surface, and, akin to an actual volcano, are about to spew the flotsam of mal-investment all over the markets. Stocks are wickedly overvalued, the US economy is in immediate danger of re-implosion and many parts of he global system, especially Europe, are in worse shape, so get ready for Financial Armageddon Part II, which was correctly forecast here for months and yesterday identified as the breaking point, when the number of daily new lows shot past the corresponding number of new highs, a trend which accelerated today.
All of the major indices closed the session by crashing through their respective 200-day moving averages, and all are in negative territory for the year. All are also off by more than 10% from their recent highs, the technical definition of a correction, though that small tidbit is the least of what's on people's minds. Where the slide may stop has become an open question.
Adding to the myriad of global problems besetting the markets was today's announcement that 471,000 people filed initial unemployment claims in the most recent week. The number of people seeking unemployment benefits has been growing recently, adding to the "double dip" argument, which now seems to have been the correct call after all.
Dow 10,068.01, -376.36 (3.60%)
NASDAQ 2,204.01, -94.36 (4.11%)
S&P 500 1,071.59, -43.46 (3.90%)
NYSE Composite 6,653.00, -274.21 (3.96%)
Not only was there a dearth of buyers in the marketplace, but all the major indices closed at or near their lows of the day and trading volume was spectacular as well. Advancing issues were completely overwhelmed by decliners, 5162-561; new lows superseded new highs, 312-77. The rout is on, and today's action was only the first or second round. The full force of deflation has yet to be fully comprehended or felt by market participants, though the selling in the oil futures should have provided some indication of what's to come, if the stock moves weren't already enough of an indication.
NYSE Volume 9,629,935,000
NASDAQ Volume 3,258,398,750
Crude oil tumbled to fresh, 10-month lows, as the June futures contracted expired and traders were bolting from it like it was the plague. Crude dropped $1.96, to $68.01, though the contract traded as low as the $65 range. Gold slipped $4.80, to $1,187.80, and silver fell another 40 cents, to $17.69, as investors scrambled into cash positions.
There isn't much more to add to today's monstrosity other than it was entirely expected and astute individuals should be already fully in cash or equivalents, tools of trades or illiquid assets of tangible value because this is only the beginning of what may turn out to be a final reckoning for the likes of zombie banks such as Bank of America, Citigroup and Wells Fargo.
It doesn't take a Gordon Gecko or even a Warren Buffet to understand that when major investments firms are "taking off risk," i.e., selling stock and/or buying protection via puts or covered calls, that the average Joe or Jane should be doing precisely the same. If the big boys are scared, there's usually a very good reason (of which nobody will speak) to get out of the way, and today was a classic example of just how risky investing in stocks can be.
Days like today, and, incidentally, the past two weeks or trading, are precisely what your broker, financial planner or CNBC doesn't want you to know about. Profits can be gone in a flash - a day, a week - like tossing hard-earned money down a sink-hole. The analysts call these kinds of sell-offs "liquidity plays" or "wealth preservation," when all along anyone with half a brain screwed on properly knows that its just part of the game.
The blog you are reading, Money Daily, has been warning for weeks and months that the recovery in the US was artificial and not long-lasting. The airwaves are full of blame for congress and fear over the intricacies over proposed financial regulation, but the truth of the matter is that the financial collapse which began in August 2007, accelerated into the Fall of 2008 and the Winter of 2009, was never really resolved. Financial firms such as Bank of America, Citigroup and Wells Fargo were not liquidated as they should have been, but bailed out by government fiat, using taxpayer dollars to fund the excesses of a banking system gone wild.
Now, those problems are bubbling up under the surface, and, akin to an actual volcano, are about to spew the flotsam of mal-investment all over the markets. Stocks are wickedly overvalued, the US economy is in immediate danger of re-implosion and many parts of he global system, especially Europe, are in worse shape, so get ready for Financial Armageddon Part II, which was correctly forecast here for months and yesterday identified as the breaking point, when the number of daily new lows shot past the corresponding number of new highs, a trend which accelerated today.
All of the major indices closed the session by crashing through their respective 200-day moving averages, and all are in negative territory for the year. All are also off by more than 10% from their recent highs, the technical definition of a correction, though that small tidbit is the least of what's on people's minds. Where the slide may stop has become an open question.
Adding to the myriad of global problems besetting the markets was today's announcement that 471,000 people filed initial unemployment claims in the most recent week. The number of people seeking unemployment benefits has been growing recently, adding to the "double dip" argument, which now seems to have been the correct call after all.
Dow 10,068.01, -376.36 (3.60%)
NASDAQ 2,204.01, -94.36 (4.11%)
S&P 500 1,071.59, -43.46 (3.90%)
NYSE Composite 6,653.00, -274.21 (3.96%)
Not only was there a dearth of buyers in the marketplace, but all the major indices closed at or near their lows of the day and trading volume was spectacular as well. Advancing issues were completely overwhelmed by decliners, 5162-561; new lows superseded new highs, 312-77. The rout is on, and today's action was only the first or second round. The full force of deflation has yet to be fully comprehended or felt by market participants, though the selling in the oil futures should have provided some indication of what's to come, if the stock moves weren't already enough of an indication.
NYSE Volume 9,629,935,000
NASDAQ Volume 3,258,398,750
Crude oil tumbled to fresh, 10-month lows, as the June futures contracted expired and traders were bolting from it like it was the plague. Crude dropped $1.96, to $68.01, though the contract traded as low as the $65 range. Gold slipped $4.80, to $1,187.80, and silver fell another 40 cents, to $17.69, as investors scrambled into cash positions.
There isn't much more to add to today's monstrosity other than it was entirely expected and astute individuals should be already fully in cash or equivalents, tools of trades or illiquid assets of tangible value because this is only the beginning of what may turn out to be a final reckoning for the likes of zombie banks such as Bank of America, Citigroup and Wells Fargo.
Wednesday, May 19, 2010
Today, the Collapse Began; Cash Reigns Supreme
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!
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!
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