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.
Friday, May 21, 2010
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!
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.
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