Thanks to the rally from nowhere, based upon nothing, that materialized on Thursday, all of the major equity indices will finish with their first weekly gain in the past four weeks.
Investors were stunned prior to the opening bell on Friday with a report on May retail sales that showed Americans spending at a rate 1.2% lower than in April. The news was another disconcerting data point for the bulls, coming just a week after the unnerving non farm payroll report which quite graphically demonstrated that the "recovery" had ceased creating jobs in the private sector, if it was even creating any at all prior to May.
The little piece of news wasn't at all expected by the expert economists who track - or, apparently guess at - these kinds of things, who were looking for a gain in retail sales in the neighborhood of 0.2%. The stark difference between expectations and reality points up just how juiced the media has been with all the phony recovery talk over the past six months.
Anybody who simply lives in an average American community can see for themselves that business conditions are not optimal. Stores in retail strip malls and spaces in enclosed malls go begging for tenants, jobs are hard to come by and state and local governments are dealing with budget deficits brought on by lower tax receipts and shrinking tax revenues, all effects of the recession and the lack of a powerful recovery.
Wall Street is about the only place in the country which seems to be of the opinion that all's well in the USA and the economy, though the recent declines in the market make clear that not everyone is euphoric over future prospects. The headwinds of future taxation, continued high unemployment and a critically ill housing market are beginning to take their tolls on even the most ardent bulls.
Strains in the European Union banking complex and the continuous flow of oil from deep beneath the Gulf of Mexico - putting thousands of shrimpers, clammers and fishermen out of work - certainly aren't helping matters.
As inexplicable as Thursday's rally was, today's late-day trade was equally out-of-the-blue. The Dow, which had, along with the S&P, spent nearly the entire session in negative territory, tacked on 75 points in the final three-quarters of the hour, helping push all the indices into plus territory. Once again, organized trading by a consortium of insiders or perhaps machine-driven, stocks ran counter-trend late in the day.
Dow 10,211.07, +38.54 (0.38%)
NASDAQ 2,243.60, +24.89 (1.12%)
S&P 500 1,091.60, +4.76 (0.44%)
NYSE Composite 6,814.76, +31.25 (0.46%)
In spite of the late-session tape-painting, advancing issues finished well ahead of decliners, 4619-1830. New highs broke through above new lows, 125-76, in a temporary reversal of the trend. Volume, however, was absolutely pathetic, the lowest in months.
NYSE Volume 4,672,237,500.00
NASDAQ Volume 1,731,446,375.00
Crude oil sold off, losing $1.49, to $73.99, which made sense in light of the sour retail figures. Precious metals were split, with gold gaining $5.70, to $1,228.10, while silver dipped 12 cents, to $18.24.
Looking ahead to next week, trading decisions will be led largely by out-of-market forces, those being the situation the in Gulf, the debt contagion in Europe and the advancement of the Financial Reform bill in congress, though mid-week economic data, including PPI, CPI, industrial production, capacity utilization and housing starts may provide some surprises.
Friday, June 11, 2010
Thursday, June 10, 2010
Sucker Rally, Part Two: Rally 'Round BP
Whatever yesterday's steep sell-off was about, today's gap-up rally was about making up lost ground, in a hurry.
The Dow Jones Industrials gapped up at the open - once again shutting out all but the insider firms - 150 points, and by 10:00 am, it was up nearly 250. This kind of quick-start rally doesn't occur in a vacuum, so most of the clueless analysts attributed the rise to explosive numbers coming out of China, saying that exports increased at a rate of 48.5% year-over-year.
Suffice it to say that nobody wanted to mention that a year ago, exports were at an absolute nadir, Chinese officials were doing their best to control riotous laid-off workers and that global trading conditions were abysmal. Some comparisons, especially those which favor the bullish case, are almost always kept out of view, as was the case today.
Concerns over the sudden revitalization of stock-buying fervor were put on the back burner for the day, allowing investors to bask in the glow of at least some temporary relief to what has been a relentless decline since the beginning of May, and that's why bear market rallies are never useful barometers of market health. This one, like all others, will be soon forgotten, for it is only speculative and quite possibly just a trading phenomenon, likely linked to options expiration only a week away.
Besides the obvious rallying around poor, misunderstood British Petroleum (BP), financial stocks also rallies, perhaps on suspicion that congressional debate on financial regulation seems to be going the way the bankers would like, toward a watered-down bill that is nothing more than cosmetic, allowing the political class to find some cover heading into the fall election cycle.
The pols have their hands in the banks' pockets and vice versa, so don't expect anything hard-hitting to come of "FinReg," despite the inclusion of Senator Blanche Lincoln's controversial derivatives proposal, which threatens to drive as much as 30% of large bank profits overseas. The bill is in the hands of the conference committee, chaired by Barney Frank, which will reconcile differences between the Senate and House versions.
So, was this the mother of all sucker rallies, or does this mark the end of the month-long decline in equities and the beginning of a new bull run?
The jury's still out, but consider, if you will, the key numbers that will tell the story in coming days. On Friday, June 4, after the non farms payroll report showed little progress in private sector employment, stocks sank to a closing low of 9931.97 on the Dow and 1064.88 on the S&P. The follow-on sell-off Monday, June 7, saw the Dow close below the previous interim low (February 8), finishing at 9816.49. The S&P likewise closed below its previous low, ending the day at 1050.47.
Bottom pierced, any chartist with rudimentary skills would have promoted the idea that further downside risk was being telegraphed. Then came Tuesday's sharp rally, Wednesday's failed rally and today's super rally, on low volume, and on suspect news from - of all places - China. To believe that strength in Chinese markets somehow translates to good news for US firms requires a requisite leap of faith, when the obvious truth was that this rally was really all about saving the prospects of BP, the incomes of one out of seven British pensioners, and keeping the world awash in crude oil (both figuratively and, in the Gulf, literally).
For the bulls, their new targets are 11,205.03 on the Dow and 1217.28 on the S&P, somewhat of a stretch from where stocks have currently settled. Even from today's lofty closing values, a rally of 11% would be needed to return to the previous highs, whereas a decline of just 3.5% would send the two main indices back below their recently-achieved bottoms.
Sideways trading leaves us in a state of suspended animation, though investors will be mulling the news from the BP oil gusher and Europe's deteriorating debt condition over the next four weeks prior to earnings season, which could be a bellwether or a Waterloo, depending on results. Chances still seem to favor the bearish case, with much of this week's trading being perceived as mere "noise."
Dow 10,172.53, +273.28 (2.76%)
NASDAQ 2,218.71, +59.86 (2.77%)
S&P 500 1,086.84, +31.15 (2.95%)
NYSE Composite 6,783.53, +223.82 (3.41%)
As expected on such a huge upside move, advancers dominated decliners, 5550-1011, though new lows maintained their edge over new highs, 120-104. That, and low volume, are very telling signals to where the market is intended.
NYSE Volume 5,718,455,000.00
NASDAQ Volume 2,023,046,625.00
Oil gained again today, picking up $1.07, to $75.45. Gold fell for the second straight day, down $7.70, to $1,220.80, with silver up 18 cents, to $18.34. Confusing variations in the commodity space lends credence to the directionless market theory and to a resumption of the bearish case in short order.
Goldman Sachs (GS) was under pressure again today as the SEC began examining another mortgage investment for potential fraud - Hudson Mezzanine - and was hit with a $1 billion lawsuit from Basis Capital, an Australian hedge fund that invested in Timberwolf, an MBS that Goldman sold in 2007. The troubles just keep mounting on the investment bank everyone loves to hate.
The Dow Jones Industrials gapped up at the open - once again shutting out all but the insider firms - 150 points, and by 10:00 am, it was up nearly 250. This kind of quick-start rally doesn't occur in a vacuum, so most of the clueless analysts attributed the rise to explosive numbers coming out of China, saying that exports increased at a rate of 48.5% year-over-year.
Suffice it to say that nobody wanted to mention that a year ago, exports were at an absolute nadir, Chinese officials were doing their best to control riotous laid-off workers and that global trading conditions were abysmal. Some comparisons, especially those which favor the bullish case, are almost always kept out of view, as was the case today.
Concerns over the sudden revitalization of stock-buying fervor were put on the back burner for the day, allowing investors to bask in the glow of at least some temporary relief to what has been a relentless decline since the beginning of May, and that's why bear market rallies are never useful barometers of market health. This one, like all others, will be soon forgotten, for it is only speculative and quite possibly just a trading phenomenon, likely linked to options expiration only a week away.
Besides the obvious rallying around poor, misunderstood British Petroleum (BP), financial stocks also rallies, perhaps on suspicion that congressional debate on financial regulation seems to be going the way the bankers would like, toward a watered-down bill that is nothing more than cosmetic, allowing the political class to find some cover heading into the fall election cycle.
The pols have their hands in the banks' pockets and vice versa, so don't expect anything hard-hitting to come of "FinReg," despite the inclusion of Senator Blanche Lincoln's controversial derivatives proposal, which threatens to drive as much as 30% of large bank profits overseas. The bill is in the hands of the conference committee, chaired by Barney Frank, which will reconcile differences between the Senate and House versions.
So, was this the mother of all sucker rallies, or does this mark the end of the month-long decline in equities and the beginning of a new bull run?
The jury's still out, but consider, if you will, the key numbers that will tell the story in coming days. On Friday, June 4, after the non farms payroll report showed little progress in private sector employment, stocks sank to a closing low of 9931.97 on the Dow and 1064.88 on the S&P. The follow-on sell-off Monday, June 7, saw the Dow close below the previous interim low (February 8), finishing at 9816.49. The S&P likewise closed below its previous low, ending the day at 1050.47.
Bottom pierced, any chartist with rudimentary skills would have promoted the idea that further downside risk was being telegraphed. Then came Tuesday's sharp rally, Wednesday's failed rally and today's super rally, on low volume, and on suspect news from - of all places - China. To believe that strength in Chinese markets somehow translates to good news for US firms requires a requisite leap of faith, when the obvious truth was that this rally was really all about saving the prospects of BP, the incomes of one out of seven British pensioners, and keeping the world awash in crude oil (both figuratively and, in the Gulf, literally).
For the bulls, their new targets are 11,205.03 on the Dow and 1217.28 on the S&P, somewhat of a stretch from where stocks have currently settled. Even from today's lofty closing values, a rally of 11% would be needed to return to the previous highs, whereas a decline of just 3.5% would send the two main indices back below their recently-achieved bottoms.
Sideways trading leaves us in a state of suspended animation, though investors will be mulling the news from the BP oil gusher and Europe's deteriorating debt condition over the next four weeks prior to earnings season, which could be a bellwether or a Waterloo, depending on results. Chances still seem to favor the bearish case, with much of this week's trading being perceived as mere "noise."
Dow 10,172.53, +273.28 (2.76%)
NASDAQ 2,218.71, +59.86 (2.77%)
S&P 500 1,086.84, +31.15 (2.95%)
NYSE Composite 6,783.53, +223.82 (3.41%)
As expected on such a huge upside move, advancers dominated decliners, 5550-1011, though new lows maintained their edge over new highs, 120-104. That, and low volume, are very telling signals to where the market is intended.
NYSE Volume 5,718,455,000.00
NASDAQ Volume 2,023,046,625.00
Oil gained again today, picking up $1.07, to $75.45. Gold fell for the second straight day, down $7.70, to $1,220.80, with silver up 18 cents, to $18.34. Confusing variations in the commodity space lends credence to the directionless market theory and to a resumption of the bearish case in short order.
Goldman Sachs (GS) was under pressure again today as the SEC began examining another mortgage investment for potential fraud - Hudson Mezzanine - and was hit with a $1 billion lawsuit from Basis Capital, an Australian hedge fund that invested in Timberwolf, an MBS that Goldman sold in 2007. The troubles just keep mounting on the investment bank everyone loves to hate.
Wednesday, June 9, 2010
The Sucker Rally that Was; Bernanke Spins Congress; BP Might Mean Bankruptcy Proceedings
The sharp rally which comprised much of the past two sessions ended abruptly at 11:30 am ET today. The Dow Jones was up by 125 points on the day, and including Tuesday's sharp, 123-point gain, had added 248 points in less than one and a half sessions, typical of short-run, bear market rallies, of which this was the garden variety.
News flow had little to do with Wall Street's dithering and eventual compromise to drift prices of stocks lower. Pricing power being non-existent in almost all asset classes, going down is becoming something of a fad across all parts of the spending spectrum. From meat prices to fuel to interest rates to stocks and even what brokerages charge to buy and sell them, everything is going down - not exactly in flames, but in spurts and fits - in the essential unwinding that has been underway from the piercing of the banking and mortgage bubble in 2007.
Chairman Ben Bernanke had some nondescript comments on the economy before the House Budget Committee, saying things like, the economy is not growing "as fast as we would like," and that the Fed was prepared to counter an ill effects of the current debt and liquidity crisis overhanging the entire European continent. Berhanke's little speech and answering of various questions from house members didn't really supply much reassurance; rather, the Chairman's tone was measured and a bit downbeat. He, like many in the financial industry and government regulatory bodies, seems to have been worn down by more than two years of continuous strain. The Fed has managed itself into a box, as has congress, Wall Street and much of the macro players in the global economy.
While growth is the desired result, policy decisions have not made any noticeable dent in either the residential housing market nor the unemployment condition. Economies worldwide seem to be running in place, turning dials and lifting levers here and there, all seemingly without much effect. Such is the nature of a long, slowly-developing deflation. Monied types don't like seeing asset values decline, and resist at all levels while consumers reap the benefits of lower costs across a range of products and services.
All the trillions spent trying to maintain the status quo in the banking and political circles has come to naught. It has begun to dawn upon even people as supposedly smart as CEOs, investment bankers and even Fed chairmen that there is no quick fix - if there's even a fix at all - to a global debt blowout. The solution eventually involves winding down bad assets, notes, investments and businesses, moving to a cash basis instead of reliance on debt and generally finding a base from which to restart.
Unfortunately for Wall Street and most governments, those bottoms have not yet been plumbed. Main Street, on the other hand, has used its usual combination of savvy, street smarts and determination to make do with whatever is available, a condition largely seen among the smallest of small businesses, which are flourishing amid sour conditions.
Former employees of large corporations are striking out on their own, homeowners are weighing the relative advantages of owning a home (and paying their mortgage) or letting it go and renting at more reasonable rates. In terms of the housing market, the situation is fluid. As more homeowners default - by choice or out of necessity - the value of homes overall falls. As the value of housing declines, so do rents, though this process is somewhat artificially slowed by taxes and government subsidized rents, keeping home prices and rents anywhere from six months to two years behind the curve.
As with every economic convulsion, there are winners and losers, heroes and villains, survivors and victims. Until now, the banks, bailed out by the federal government's use of taxpayer money, seemed to have been the winners, though the tide has now turned. From here on, until this economic calamity runs its course over the next three to five years, small business, individuals and entrepreneurs with guts and courage will carry the day.
Since banks are going to do what it is they always do when they fear the worst, that being the unbridled stupidity of tightening lending standards beyond reasonable terms, and governments will do what they always do at similarly-critical times: cut payrolls and raise taxes, those who understand local markets and can initiate business without the need of bank financing will prosper.
In the long run, it is the people who will survive, not banks, nor governments, nor unscrupulous intermediaries. Everybody needs a place to live and a means of support. The failings of globalization, banking and semi-regulated markets are being exposed for all to see. Individuals will manage as best they can without paying heed to any edicts of authority, be they from government, financial institutions or media.
What the general market, guided by GDP forecasts, can most reasonably hope for, is growth in the range of one to two percent over the next four to six quarters, though the fear that another downturn (double dip) could occur has morphed from mere speculation to generalized apprehension. One percent growth should be considered a positive development; of course, wall Street will see that in an entirely different light.
Dow 9,899.25, -40.73 (0.41%)
NASDAQ 2,158.85, -11.72 (0.54%)
S&P 500 1,055.69, -6.31 (0.59%)
NYSE Composite 6,559.71, -36.41 (0.55%)
Advancing issues beat decliners by the slimmest of margins, 3244-3210, though new lows exceeded new highs once again, 187-94, a trend which should continue for some time, as year-ago comparisons off the March, 2009 bottom are not favorable to breakouts in the upper range. Volume was flat as downside risk re-emerged.
NYSE Volume 7,101,356,500
NASDAQ Volume 2,146,749,250
Crude oil was just about the only winner on the day, gaining 2.39, to $74.38. Gold slipped $15.70 on profit-taking, to 1,229.90, while silver was not as badly damaged, losing 19 cents, to $18.19.
British Petroleum (BP) was under pressure once again, amid speculation the the company may seek bankruptcy protection and/or suspend its dividend payable in late July. The stock lost another 15% in value, dropping to a 14-year low.
News flow had little to do with Wall Street's dithering and eventual compromise to drift prices of stocks lower. Pricing power being non-existent in almost all asset classes, going down is becoming something of a fad across all parts of the spending spectrum. From meat prices to fuel to interest rates to stocks and even what brokerages charge to buy and sell them, everything is going down - not exactly in flames, but in spurts and fits - in the essential unwinding that has been underway from the piercing of the banking and mortgage bubble in 2007.
Chairman Ben Bernanke had some nondescript comments on the economy before the House Budget Committee, saying things like, the economy is not growing "as fast as we would like," and that the Fed was prepared to counter an ill effects of the current debt and liquidity crisis overhanging the entire European continent. Berhanke's little speech and answering of various questions from house members didn't really supply much reassurance; rather, the Chairman's tone was measured and a bit downbeat. He, like many in the financial industry and government regulatory bodies, seems to have been worn down by more than two years of continuous strain. The Fed has managed itself into a box, as has congress, Wall Street and much of the macro players in the global economy.
While growth is the desired result, policy decisions have not made any noticeable dent in either the residential housing market nor the unemployment condition. Economies worldwide seem to be running in place, turning dials and lifting levers here and there, all seemingly without much effect. Such is the nature of a long, slowly-developing deflation. Monied types don't like seeing asset values decline, and resist at all levels while consumers reap the benefits of lower costs across a range of products and services.
All the trillions spent trying to maintain the status quo in the banking and political circles has come to naught. It has begun to dawn upon even people as supposedly smart as CEOs, investment bankers and even Fed chairmen that there is no quick fix - if there's even a fix at all - to a global debt blowout. The solution eventually involves winding down bad assets, notes, investments and businesses, moving to a cash basis instead of reliance on debt and generally finding a base from which to restart.
Unfortunately for Wall Street and most governments, those bottoms have not yet been plumbed. Main Street, on the other hand, has used its usual combination of savvy, street smarts and determination to make do with whatever is available, a condition largely seen among the smallest of small businesses, which are flourishing amid sour conditions.
Former employees of large corporations are striking out on their own, homeowners are weighing the relative advantages of owning a home (and paying their mortgage) or letting it go and renting at more reasonable rates. In terms of the housing market, the situation is fluid. As more homeowners default - by choice or out of necessity - the value of homes overall falls. As the value of housing declines, so do rents, though this process is somewhat artificially slowed by taxes and government subsidized rents, keeping home prices and rents anywhere from six months to two years behind the curve.
As with every economic convulsion, there are winners and losers, heroes and villains, survivors and victims. Until now, the banks, bailed out by the federal government's use of taxpayer money, seemed to have been the winners, though the tide has now turned. From here on, until this economic calamity runs its course over the next three to five years, small business, individuals and entrepreneurs with guts and courage will carry the day.
Since banks are going to do what it is they always do when they fear the worst, that being the unbridled stupidity of tightening lending standards beyond reasonable terms, and governments will do what they always do at similarly-critical times: cut payrolls and raise taxes, those who understand local markets and can initiate business without the need of bank financing will prosper.
In the long run, it is the people who will survive, not banks, nor governments, nor unscrupulous intermediaries. Everybody needs a place to live and a means of support. The failings of globalization, banking and semi-regulated markets are being exposed for all to see. Individuals will manage as best they can without paying heed to any edicts of authority, be they from government, financial institutions or media.
What the general market, guided by GDP forecasts, can most reasonably hope for, is growth in the range of one to two percent over the next four to six quarters, though the fear that another downturn (double dip) could occur has morphed from mere speculation to generalized apprehension. One percent growth should be considered a positive development; of course, wall Street will see that in an entirely different light.
Dow 9,899.25, -40.73 (0.41%)
NASDAQ 2,158.85, -11.72 (0.54%)
S&P 500 1,055.69, -6.31 (0.59%)
NYSE Composite 6,559.71, -36.41 (0.55%)
Advancing issues beat decliners by the slimmest of margins, 3244-3210, though new lows exceeded new highs once again, 187-94, a trend which should continue for some time, as year-ago comparisons off the March, 2009 bottom are not favorable to breakouts in the upper range. Volume was flat as downside risk re-emerged.
NYSE Volume 7,101,356,500
NASDAQ Volume 2,146,749,250
Crude oil was just about the only winner on the day, gaining 2.39, to $74.38. Gold slipped $15.70 on profit-taking, to 1,229.90, while silver was not as badly damaged, losing 19 cents, to $18.19.
British Petroleum (BP) was under pressure once again, amid speculation the the company may seek bankruptcy protection and/or suspend its dividend payable in late July. The stock lost another 15% in value, dropping to a 14-year low.
Tuesday, June 8, 2010
Stocks Gain in Late Day Trade on Technical Bounce
After taking the deepest extended dive in over a year, there's little surprise that a few days like today would eventually emerge. After all, nothing moves in straight lines, as much as we'd like them to, so the orderly evaporation of wealth requires the occasional speculative upside trade and the covering of shorts.
There was no good news upon which the market could hang a hat today; indeed, there was little to no news whatsoever. Thus, the strong gains of Tuesday cna be seen clearly for what they are: a purely technical response to very short-term oversold conditions. In layman's terms, today was the bounce that failed to materialize on Monday.
Dow 9,939.98, +123.49 (1.26%)
NASDAQ 2,170.57, -3.33 (0.15%)
S&P 500 1,062.00, +11.53 (1.10%)
NYSE Composite 6,596.12, +83.70 (1.29%)
Advancing issues took back the advantage over decliners, though narrowly, 3389-3114. More important to the direction going forward was the revealing win for new lows over new highs, 345-81. Both the A/D line and Low-high figures tell us in no uncertain terms that bias is still strongly negative and that short term bearish condition remain intact. Volume was strong, that being the only indicator to somewhat counter the general trend against the headline.
NYSE Volume 7,335,040,500.00
NASDAQ Volume 2,660,945,000.00
Crude oil posted a reasonable gain of 55 cents, closing at $71.99, still stuck in a range between $67 and $76, where it has generally been found for the past ten months. There's little to suggest movement of oil in either direction, unless widespread economic slowdown dramatically reduced demand, and thus, price.
Gold reached all-time intra-day and closing highs, finishing at $1,244.00, up $4.70. Silver gained as well, adding 32 cents, to $18.47, though that is still well below the 2008 all-time high. Silver continues to lag gold, as the latter is in a more favorable position as an alternative to fiat money.
Some of the most interesting action is currently in bonds and currencies, both markets the province of specialists and professionals, hardly the place for individuals, despite what aggressive ad campaigns may be touting. US Treasuries and German Bunds have become safe-havens for those fearful of the future of equity markets, while denominations in anything but Euros seems to have become the most-favored trade in the currency community.
With Euro contagion spreading like wildfire from Greece to Spain to Turkey to Ireland, many question the overall validity of the 12-year-old currency experiment which aimed to become a unified force to counteract the willful US Dollar. The value of the Euro vis-a-vis the US Dollar is now roughly where it began back in 1998, right around the $1.18 mark. Highlighting the situation in Europe was a Sunday Telegraph article over the weekend that saw a majority of British economists express an opinion that the Euro would cease to exist within the next five years, quite a dire prediction and one that just months ago would have been considered lunacy.
Joining the lunacy-to-reality progression is British Petroleum (BP), now on the hook for billions of dollars in damages stemming from the continuous leakage of oil into the Gulf of Mexico. BP was added to our Death Spiral Watch List last week.
The latest salvo in the reality check department comes from oil expert Matthew Simmons, who appeared on CNBC's Fast Money Tuesday afternoon, saying that he'd be surprised if BP lasted the summer as a going concern.
Simmons also appeared on MSNBC's Dylan Ratigan Show. Here is the segment of video in which he outlines various doomsday-like outcomes.
BP closed down 2.08 today, at 34.68.
Joining BP on the Death Spiral Watch List from last week was eBay, an unlikely choice to some, though obvious to those in the know. Prior to full implementation of the latest of CEO John Donahoe's "disruptive innovations", eBay closed the trading session of March 25 at 27.56. Despite a small gain on the day, eBay ended today at 21.69, representing a 21% haircut in about 2 1/2 months' time.
Price targets on both companies are actually ZERO, though for the sake of argument, we put an expected price of $4 on ebay and $6 on BP. We expect both to go under within 6-18 months.
There was no good news upon which the market could hang a hat today; indeed, there was little to no news whatsoever. Thus, the strong gains of Tuesday cna be seen clearly for what they are: a purely technical response to very short-term oversold conditions. In layman's terms, today was the bounce that failed to materialize on Monday.
Dow 9,939.98, +123.49 (1.26%)
NASDAQ 2,170.57, -3.33 (0.15%)
S&P 500 1,062.00, +11.53 (1.10%)
NYSE Composite 6,596.12, +83.70 (1.29%)
Advancing issues took back the advantage over decliners, though narrowly, 3389-3114. More important to the direction going forward was the revealing win for new lows over new highs, 345-81. Both the A/D line and Low-high figures tell us in no uncertain terms that bias is still strongly negative and that short term bearish condition remain intact. Volume was strong, that being the only indicator to somewhat counter the general trend against the headline.
NYSE Volume 7,335,040,500.00
NASDAQ Volume 2,660,945,000.00
Crude oil posted a reasonable gain of 55 cents, closing at $71.99, still stuck in a range between $67 and $76, where it has generally been found for the past ten months. There's little to suggest movement of oil in either direction, unless widespread economic slowdown dramatically reduced demand, and thus, price.
Gold reached all-time intra-day and closing highs, finishing at $1,244.00, up $4.70. Silver gained as well, adding 32 cents, to $18.47, though that is still well below the 2008 all-time high. Silver continues to lag gold, as the latter is in a more favorable position as an alternative to fiat money.
Some of the most interesting action is currently in bonds and currencies, both markets the province of specialists and professionals, hardly the place for individuals, despite what aggressive ad campaigns may be touting. US Treasuries and German Bunds have become safe-havens for those fearful of the future of equity markets, while denominations in anything but Euros seems to have become the most-favored trade in the currency community.
With Euro contagion spreading like wildfire from Greece to Spain to Turkey to Ireland, many question the overall validity of the 12-year-old currency experiment which aimed to become a unified force to counteract the willful US Dollar. The value of the Euro vis-a-vis the US Dollar is now roughly where it began back in 1998, right around the $1.18 mark. Highlighting the situation in Europe was a Sunday Telegraph article over the weekend that saw a majority of British economists express an opinion that the Euro would cease to exist within the next five years, quite a dire prediction and one that just months ago would have been considered lunacy.
Joining the lunacy-to-reality progression is British Petroleum (BP), now on the hook for billions of dollars in damages stemming from the continuous leakage of oil into the Gulf of Mexico. BP was added to our Death Spiral Watch List last week.
The latest salvo in the reality check department comes from oil expert Matthew Simmons, who appeared on CNBC's Fast Money Tuesday afternoon, saying that he'd be surprised if BP lasted the summer as a going concern.
Simmons also appeared on MSNBC's Dylan Ratigan Show. Here is the segment of video in which he outlines various doomsday-like outcomes.
BP closed down 2.08 today, at 34.68.
Joining BP on the Death Spiral Watch List from last week was eBay, an unlikely choice to some, though obvious to those in the know. Prior to full implementation of the latest of CEO John Donahoe's "disruptive innovations", eBay closed the trading session of March 25 at 27.56. Despite a small gain on the day, eBay ended today at 21.69, representing a 21% haircut in about 2 1/2 months' time.
Price targets on both companies are actually ZERO, though for the sake of argument, we put an expected price of $4 on ebay and $6 on BP. We expect both to go under within 6-18 months.
Monday, June 7, 2010
This Cat Can't Bounce
Editor's Note: It's just a few minutes before 2:00 pm on the East Coast, and with markets little changed from their opening levels, I'm confident in my title for this post. After Friday's jobs report post-mortem, this market is due to fall at least another 10% from here, though it's unlikely to do so today. Owing to commitments (Monday golf league), Monday's edition of Money Daily will be delayed until about 9:00 pm EDT from today until mid-October.
Dow 9,816.49 115.48 (1.16%)
NASDAQ 2,173.90 45.27 (2.04%)
S&P 500 1,050.47 14.41 (1.35%)
NYSE Compos 6,512.42 87.85 (1.33%)
Declining issues overwhelmed advancers, 5032-1552. New lows trounced new highs, 268-76. Volume was higher than most of the last two weeks, though hardly overdone. The clear signal is that selling continues, or, the next wave of selling has begun.
NYSE Volume 6,385,006,500
NASDAQ Volume 2,222,428,000
Oil dipped an ever-so-slight four cents, to $71.44. Gold rocketed higher by $23.10, to $1,239.30, approaching all-time highs. Silver exploded higher by 5%, to $18.15, a gain of 86 cents.
Without a doubt, investors are nervous and unwilling to hold anything but gilded assets, though few are available. The major averages are at their lows of the year, having pierced support levels long ago and again today in grand fashion. A full resumption of the bear market is upon us. Equities should be disposed of as quickly as possible, if you're actually stuid enough to be holding any. Valuations are out the window as risk has resurfaced in every conceivable manner.
Cash, land, and tools of trades are all that should comprise a proper portfolio.
My golf game is poor (55 for 9 holes, bordering on embarrassing), but it shines in comparison to every technical and fundamental measure of global equity markets. Stocks today are generally overvalued or mispriced.
Dow 9,816.49 115.48 (1.16%)
NASDAQ 2,173.90 45.27 (2.04%)
S&P 500 1,050.47 14.41 (1.35%)
NYSE Compos 6,512.42 87.85 (1.33%)
Declining issues overwhelmed advancers, 5032-1552. New lows trounced new highs, 268-76. Volume was higher than most of the last two weeks, though hardly overdone. The clear signal is that selling continues, or, the next wave of selling has begun.
NYSE Volume 6,385,006,500
NASDAQ Volume 2,222,428,000
Oil dipped an ever-so-slight four cents, to $71.44. Gold rocketed higher by $23.10, to $1,239.30, approaching all-time highs. Silver exploded higher by 5%, to $18.15, a gain of 86 cents.
Without a doubt, investors are nervous and unwilling to hold anything but gilded assets, though few are available. The major averages are at their lows of the year, having pierced support levels long ago and again today in grand fashion. A full resumption of the bear market is upon us. Equities should be disposed of as quickly as possible, if you're actually stuid enough to be holding any. Valuations are out the window as risk has resurfaced in every conceivable manner.
Cash, land, and tools of trades are all that should comprise a proper portfolio.
My golf game is poor (55 for 9 holes, bordering on embarrassing), but it shines in comparison to every technical and fundamental measure of global equity markets. Stocks today are generally overvalued or mispriced.
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