Rally Fizzles as Quarter Ends

The major indices were all up nicely in positive territory on Friday morning, but as has been the case more often than not this month, sellers moved in and squelched any momentum and sent shares into negative territory.

As I've been noting all along, this sideways-down action is probably more healthy than continued gains, as were witnessed in April and May. A little cooling off was expected and a slow, measured selling period is preferable to a dramatic, surprise downdraft.

Dow 13,408.62 -13.66; NASDAQ 2,603.23 -5.14; S&P 500 1,503.35 -2.36; NYSE Composite 9,873.02 +7.25

The main culprit for today's decline was, again, the nasty oil futures market, which saw fit to push prices for light crude over $70.00, up $1.11 to $70.68 at the close. Inspired by low inventories at specific locations - despite US crude inventories being at 9-year highs - is the first time since August, 2006 that oil has closed above $70/barrel.

The high price of oil and it's derivative, gas, is disconcerting to US motorists, who, it's generally assumed, are not sophisticated enough to understand the vagaries of the oil supply-demand scenario. Likewise, Wall Street frowns upon the continuing hikes in crude and gas and their displeasure shows up on days like today.

Declining issues held a slim advantage of just about 200 stocks over advancers, while new highs held sway over new lows, 284-144.

Gold and silver barely budged, with gold closing at $650.90. Silver ended the week at $12.47.

Fed, Markets Stay Flat

The Federal Reserve's Open Market Committee voted - for the 8th straight time - to leave the benchmark federal funds rate at 5.25%. The markets zigged and zagged after the 2:15 announcement, eventually settling close to the flatline. As went the Fed, so went the market. The two-day Fed meeting produced mostly yawns from the investment community, as expected.

Dow 13,422.28 -5.45; NASDAQ 2,608.37 +3.02; S&P 500 1,505.71 -0.63; NYSE Composite 9,865.77 +16.86

Market internals expressed the tepid tone. Advancing issues were ahead of decliners by a slim 5-4 margin while new highs rebounded over new lows, 264-105.

Advertise on Blogs
Choose your own colors, dates and message for maximum impact.
dtmagazine.com/customtext.html

The high-low see-saw is presaging a new round of buying, which should coincide with the release of second quarter earnings reports by mid-July.

Oil ticked up 60 cents to $69.57. Gold and silver made minor moves to the positive in a vain attempt to recover some of the massive losses over the past 3 weeks. Both metals are hovering around inflection price points, but the potential for an outright price collapse is high.

With the Fed meeting a fleeting memory, investors can focus more on economic reports and earnings, the real drivers in the market.

An aside on some picks and pans. Three that I called short, Yahoo, Ebay and Google, were all down marginally. Marvel Enterprises, my one pick to move upwards, gained 7 cents and was up 19 cents in after-hours trading.

Techs Lead Rally Ahead of Fed

With the Fed's FOMC deliberating interest rates and a statement due tomorrow, investors apparently felt little reason to continue the waiting game, sending stocks soaring in the afternoon of Wednesday's session.

Led by technology stocks, the NASDAQ led all other indices in percentage gain, up 1.21% as compared to the Dow's +0.68%

Dow 13,427.73 +90.07; NASDAQ 2,605.35 +31.19; S&P 500 1,506.34 +13.45; NYSE Composite 9,848.91 +74.62

Traders may have simply seen the market in a short term oversold position, moving quickly to bolster positions and snatch up bargains. With the Fed on track to keep rates stable at 5.25%, the risk of a downturn has virtually been eliminated, so buyers got busy and a little bit of piling on ensued late in the day.

Internal indicators were mixed, as advancing issues trounced decliners by a nearly 3-1 margin, but new lows kept ahead of new highs for the second consecutive day - 240-166 - suggesting that this mini-rally may only be getting started.

The Fed, as inconsequential as this particular meeting may be, still holds some power, though that is debated vigorously by proponents on both sides of the issue. Detractors claim that the Fed is antiquated and that their interest rate adjustments are generally lagging reality by 6 months or more and do more harm than good. Adherents of Fed-policy economics see the Fed as a necessary market mechanism, providing stability in an otherwise volatile environment.

In either case, there shouldn't be much to complain about with rates in a still-accomodative range. Rate increases, even to 6%, would still be in a comfortable range, though the chances for either tightening or loosening are roughly the same - nil.

Some people who haven't yet gotten the memo are those trading oil futures, up again today by $1.20 to $68.97. Since it is summer, the oil nutjobs seem compelled to keep oil prices near historical highs. Some day, hopefully, they will get their just desserts when the world's people begin to awaken to the realities of oil politics and the truth about world reserves (hint: there's enough to last another 60 years easily).

Apparently, gold and silver traders are beginning to acquiesce to the reality that the bull market in metals and - commodities overall - is waning and likely over and done with. Both metals were down marginally, seemingly unable to rebound off recent selling sprees.

Six Reasons to Hate Google

The markets vacillated wildly across and around the flatline on Tuesday in anticipation of the Fed's Open Market Committee meeting on Wednesday and Thursday. The Fed is expected to do noting regarding interest rates, so the markets ended up mostly marking time, drifting to the downside.

Dow 13,337.66 -14.39; NASDAQ 2,574.16 -2.92; S&P 500 1,492.89 -4.85; NYSE Composite 9,774.29 -32.89

Volume was on the heavy side with plenty of money changing hands and some consequence. Losing issues outpaced gainers by a 7-5 margin. New highs rolled over and died, finally, with new lows leading, 224-142.

Oil futures eased a welcome $1.41 to end the day at $67.77. The selloff in precious metals continued with gold losing $9.40 to close at $645.30. Silver lost nearly 5%, 60 cents, ending the day at $12.28.

In the absence of any meaningful market news (all will be forgiven after the Fed meeting), I give you my screeching anti-Google homily.

I generally dislike huge, multi-billion dollar companies as a rule, but Google is one over which I stumble at least a couple of times daily, and I felt it was time the Googlers at the Googleplex (there's a good reason to hate them right there - moronic nomenclature) - to be taken to task for being more hype than reality.

With the share price hovering close to all-time highs (as I write it's at 530), Google is the darling of Wall Street. No more time to waste, let's start the list:

1. Google's share price. It's too expensive to own more than maybe 100 shares for most people, self included. A solid reason to hate them being that you can't even join them to any satisfactory degree. Worse yet, nearly 25% of the shares aren't publicly traded, meaning that the company, and it's 40+ p/e ratio is even more overvalued than at first blush.


2. Valuation: Investors value Google at $165 billion. To put that in perspective, if you spent a million dollars a day, it would take you 452 years to spend all of it. Google will likely be a footnote in history books by then (circa 2469), which brings me to the next point...


3. Google and their founders, Sergey Brin and Larry Page are so filthy rich because they invented what? A supposedly better way to find web sites CREATED BY OTHER PEOPLE. Yes, their vaunted algorithm is just an overzealous channel flipper. Big deal. Lots of other companies (Yahoo, MSN, Ask.com) have created search engines, many of which work just as well as Google's. And finding - and capitalizing - on other people's work, which is how search engine companies make money, is a purely parasitical practice.


4. Google is a one-trick pony. They've got their search engine, but roughly 98% of their revenue comes from various ad schemes, serving ads on their search engine results pages (SERPs), and, again, on other people's web sites. All of that money is being made on the backs of small businesses (and some large ones).


5. Secrecy: Google keeps most of their business practices shrouded under a cloud of secrecy. How their search algorithm works is secret. How much they pay out to publishers in their Adsense program is a secret. Disclosure is cause to be banned. As a publisher, I have only myself to blame for signing on to a closed-ended contract. I don't know how much Google keeps on every click on my site, but I'm certain it's more than the usual 15-20% agency fee. Likely, it's a lot more.


6. The Don't be evil motto. This is probably the most annoying statement of anything I've ever read. Google has stepped on the toes of millions of webmasters, run afoul of copyrights in numerous instances and complied with the censorship issues of the Chinese government. Through all of this, they maintain a "good" image. The truth is they're as ruthless and profit-driven as any old-school corporation.

There are more reasons to dislike, despise or hold Google and their culture in contempt. These are but a few. A word of caution: reading this may cause you to lose PageRank. Just kidding, but, on a serious note, Google looks like the perfect short candidate at this time. In the second quarter, they eliminated a gaggle (of course, nobody knows for sure how many because that's a secret) of arbitrageurs from their AdWords/AdSense program and lost out on at least ten days worth of eBay advertising when the auction giant pulled all of their ad campaigns in response to Google's anti-eBay, pro-Google Checkout protest, planned to coincide with eBay Live.

Google backed down (yes, they're weenies, too) and eBay began running ads again, but it's estimated that eBay's annual spend is upwards of $300 million, so Google may be short about $8 million from that one source. Meeting their quarterly estimates may be a challenge this time around.

My suggestion is to buy August 480 puts at around $3.50 currently. Google announced earnings on the 19th and the options expire on the 20th, so the July puts are cutting it a little close. But should they miss, a 50-point shave could be in the offing. Happy Trading.

Markets Blink in Game of Chicken

Everything was going swimmingly on Monday, until... traders apparently remembered that this was Fed Week. All eyes on the Fed. Nothing happens until Ben Bernanke and the FOMC issues its directive.

The selling began about noon and really got rolling in earnest around 2:00, after the Dow was up more than 120 points earlier in the day.

Dow 13,352.05 -8.21; NASDAQ 2,577.08 -11.88; S&P 500 1,497.74 -4.82; NYSE Composite 9,807.18 -41.79

It's a foolish game of chicken the markets are playing with the Fed. The very worst thing the Fed could do at their Wednesday-Thursday meeting this week is raise interest rates 25 basis points (1/4%). They're not going to do it. Despite strong inflationary signals, there are also signs that the economy has slowed to a crawl.

So, what's about to occur? Nothing much. It's a week of noodling and doodling over numbers that, in the larger scheme, are rather mundane and inconsequential. Further, with Independence Day falling on Wednesday of next week, the markets will find it difficult to manage any kind of momentum.

Second quarter corporate earnings reports will begin trickling out the following week, so we could be trading in very sideways fashion for the better part of a month before any significance can be garnered from earnings and profits reports.

For the day, losers outdid gainers by a better than 2-1 margin and new lows finally got the edge on new highs, after days of closing the gap, 213-177. The margin is small, as are the chances for a heavy selloff.

To amplify just how much nothing is happening, crude oil futures rose an entire 4 cents to $69.18. More importantly, gold was off another $2.30 to $654.70 and silver is testing a multi-month low at $12.88, losing 14 cents on the day. There really is a bear in the mine.