And So It Begins

On Thursday morning the market was greeted by retail sales for April and they were up less than expected.  The report said growth in consumer spending continued in spite of high fuel prices.  This is economic double talk at its highest level.  The retail sales figures include money spent on fuel !!!  Anyway, the retail sales were up 0.5% against expectations of 0.8% but if you take out the effect of fuel retail sales were only up 0.1%.

We’re not sure if that report really mattered too much but the market fell out of the starting blocks and fell most of the day.  During the middle of the day, the market sort of stabilized but couldn’t hold those levels into the late afternoon. With a minor rally at the very end of the day the Dow moved up about 20 points to close down 141 points or about 1.2%.  Meanwhile the NASDAQ Comp fell 48 points down 2%.  It just wasn’t a pretty day for the bulls.

We here at bear headquarters have enjoyed the last two days’ trading with the Fed starting the party with their little 25 bps rise in rates along with their unsure direction as to the future course of rates.  The market is now in the right time frame to go down and go down it did on Thursday but is this the start of something big?  We think so as we see the market falling for about six months pretty much in a steady fall.  This theory will be challenged at times, including maybe Friday, but in general we are confident in our positions at this point.

The big Dow loser was none other than AIG, my former employer.  AIG announced earnings on Wednesday and then promptly dropped about 5% on Thursday.  The last big market drop we remember, AIG led that fall.  Maybe history is repeating itself.  We will see.  As far as other Dow stocks go, all of them were down except JNJ (Johnson and Johnson).  

There was a lot of talk about how this drop is healthy for the market so we’ll see if the bulls can muster the strength to come back from this drubbing.  If they can, we expect a number of nonconfirmations as the NASDAQ dropped fairly hard through its 50 day SMA on decent but not strong volume.  The Dow is only a few hundred points from regaining its highest close ever but the broader market is far from its old highs.  

SELL ALL RALLIES.

Have a great weekend.  

Dow Industrials:  11,500.73  - 141.92
RYVNX:   19.44
RYAIX:  22.55
TLT:  83.34
BEGBX:  13.56  (dollar resuming its fall)