Uh Oh

Well, well, well, every dog has his day.  Today the stock market took a little shot, the NASDAQ a little more than the Dow, but both had negative days.  Not only that, the precious metals sector was on fire with the HUI up almost 5%.  Nice day indeed.  The NASDAQ had a very bad day breaking its up trend line solidly today.  This is not a bullish sign for the near term.  Our bearish stance, on tech and financials, was solidified greatly today.  But, like normal, the futures are up over night.  Go figure.

As speculated here last night, two big airlines declared bankruptcy today, one right after the other, Delta and Northwest.  I don’t follow DAL but have followed NWAC.  I live here in Apple Valley and their headquarters are in Eagan which is right next to us.  I have some friends that work there, both in the air and at their corporate headquarters in Eagan.  And, I fly NWA all the time.  Anyway, NWAC has not performed very well over the last several years, particularly after 9-11.  After peaking around 65 in the late 90’s, NWAC dropped to around 30 and then near 20 just before 9-11.  Then it dropped to about 10 before rallying to around 20.  From there it has mostly been on a down hill slide.  

Yesterday NWAC traded most of the early part of the day right around 3.25 before realizing that news on the bankruptcy was imminent. The stock traded 100 million shares on Tuesday and most of that in the last hour and a half.  Today it traded almost 80 million shares during the day and almost 15 million after the bell right after the news actually hit the wires.

The other news of the day was Retail Sales dropping 2.1%, the largest drop since November, 2001.  Does that date sound familiar, right after 9-11?  Of course, all of the talk was about how car sales were depressing the number.  This was Before Katrina and During the giant employee discount period.  But there was a bright shining moment if you take out car sales—why not take them out?  If you take cars out of the comparisons, retail sales were up 1.0% so not to worry.

But, an even better spin story is this(and I’m not using sarcasm here in case you can’t recognize when I am or not):  The Fed watches retail sales figures and Greenspan will probably be knitting his brow as to what to do with interest rates next week.  We have said for several months that the Fed would stop sometime and may even start to lower given a weak economy.

As Bill Fleckenstein says, the Fed runs monetary policy based on the applause meter.  If the stock market is ok, then monetary policy must be ok.  We still think they have to raise another quarter point next week when they meet but that may well be the last if we don’t start seeing stronger numbers from the economy.  We are going into the fall here and Christmas Holiday sales are key to the retail market.

We are somewhat impressed by the comeback in the precious metals sector today.  Yes, gold was up about $4 but the HUI was up over 10 which gives us some breathing room to the upside.  We do see a little resistance on the chart up around 240 and we need to think about lightening up on our positions when we hit that number.  The HUI is about 225 tonight so we haven’t got too far to go to get to 240.  We are watching this market very carefully.  (We are very happy that we picked this up near the low in May.)

Dow Industrials:  10,544.90  -52.54  (still in the 10,500’s, how long?)
BGEIX:  12.55 (new relative high, in at 9.70)