With the Dow’s drop of 148 on Tuesday together with much news, we thought we should at least make a few comments this evening. First of all, 148 points doesn’t get us too excited about the bear returning. Secondly, we still think there needs to be a new high in the Dow before we see a downturn. Third, with so much news on Tuesday, the likelihood of a turn is pretty low.
The news list seems to be fairly long and it starts with early earnings returns. As the quarter is now complete, earnings have started to pour in. The early reports include AA (Alcoa) and they announced a little lower revenue than expected but turned in earnings that matched estimates. In the early going, AA didn’t seem to suffer much on price.
Home Depot (HD) cut its 2007 outlook saying that the continued weakness in housing was going to hurt its annual earnings. Their estimate dropped about 15% but the price of the stock was up on the day, ok not by much but the market was down 148 and HD was one of the excuses for the drop. Sears also slashed its estimates in half but the real news was over in the real estate world…
DR Horton said orders fell over 40% with the dollar value dropping 47% and that this would lead to their first fiscal quarterly loss since it listed on the NYSE back in 1995. Chairman Donald Horton said that “Market conditions for new home sales declined in our June quarter as inventory levels of both new and existing homes remained high, and we expect the housing environment to remain challenging.” The company indicated that California saw orders fall 62% and that it will take significant asset impairments in the next few quarters.
And, if that wasn’t enough, the news about the bond rating agency, S&P, was salt in the wound. We have reported here and you probably have read in other places about the subprime problems as it relates to the securities that back the mortgages. Today S&P announced that it would be looking at the debt instruments used for these risky loans. This is a big deal because they are the ones who can Downgrade those securities. According to an article in CNN Money, the rating service said it would put many securities backed by subprime mortgages on “credit watch negative” and that it expected most of them to be downgraded soon because of high delinquency and foreclosure rates. Moody’s, another rating service, made similar announcements. The news continues to deteriorate in the housing market, even though so many are calling for a bottom.
Probably the biggest item on Tuesday was the Fed chairman’s speech. Bernanke was speaking to the National Bureau of Economic Research and did mention inflation in his speech. He was basically defending the Fed’s position that relies mainly on “core” inflation rather than total inflation. He said, “Inflation is less responsive than it used to be to changes in oil prices and other supply shocks.” Ok, that might be if you look strictly at the numbers. Our question is, “Who is calculating the numbers?” Are the inflation numbers accurately reflecting inflation or not? [We do have some bias towards deflation over the coming years but for now we think the inflation picture is muddy due to the way the numbers are massaged.] At any rate, the market seemed not to like his comments and closed on the low of the day.
This report from Bernanke gave the dollar some cold shivers as it traded a record low against the Euro and oil and gold moved up on that news. The bond market, Treasuries only, liked the housing news and put in a big up day.
We still need to be patient as this decline on Tuesday does Not feel very strong, even though there were some ugly things going on in housing related issues. News related declines rarely will follow through. We do think that the next move will be up due to the fairly weak nature of the decline on Tuesday.
Our thanks to CZ for his birthday wish. We appreciate the kind words, my friend.
Tuesday, July 10, 2007
Thursday, July 05, 2007
Slow Week
Due to the July 4th holiday, trading has been subdued and we will not post this week. We will be back next week.
Wednesday, June 27, 2007
Economy Showing Signs of Fatigue
Top Line:
The stock market showed some strength on Wednesday and should now be starting a pretty good up run into the early part of July. After we see some new highs in the Dow, we will be looking for a clear entry for getting short or getting out.
Market Action:
Since Friday morning, coinciding with the Blackstone IPO, the market has shown signs of bearishness. The Dow traded right at 13,550 on Friday morning and Wednesday morning (this morning) it traded down to near 13,250 which would be significant support. Monday and Tuesday had to shake the bulls’ confidence as the market was strong going into the lunch hour but gave way to selling going into the close. Bottom line is that 300 points isn’t really enough to scare any bull.
Economy:
The economy has shown no signs that the stock market is correct in its quest for higher prices. Wednesday morning, the durable goods orders, down 2.8%, were “surprisingly weak” according to one article we read on the subject. The durable goods orders are a fairly volatile reading but they can go down.
The housing sales were not pretty (our words) this last month either with new home sales down1.6% in May and prices were down some, too. You may recall that the April numbers were up about 12.5%, with April being the lone strength this year. Mortgage rates have risen about a half a point which is hampering sales a bit, too. Existing home sales were down as well with an annual rate of less than 6 million units and prices down year over year.
Consumer confidence, developed to measure the mode of shoppers, took a small dip last month to the lowest level since last August. This number still seems high but we don’t think it will be long before this number moves down strongly.
All in all, the economy is putting in a weak performance, not that you could tell by looking at the stock market.
The Fed:
On Wednesday, the Fed began yet another FOMC meeting to discuss the economy and the future course of interest rates. Do you remember the position of the Update? Well, let us remind you.
We have maintained a stance for some time that the Fed will no longer raise rates and will actually start lowering rates probably later this year. We say this due to the signals given by the economy but more fundamentally from the subprime mortgage situation. We see the Fed saying they are going to be tough on inflation tomorrow (Thursday) but that strong rhetoric will get a drastic change when the consumer decides to pack it in.
We believe that the consumer led recession is just now being felt across the economy. The ATM’s that people live in have gone through a metamorphosis (should we say they have morphed, that would certainly be easier) from the ATM to the debt repayment plan and people are not very happy about it.
Bill Gross published an article that is fully in line with our thinking, that being the subprime situation is still not contained. Mr. Gross presents his points in an entertaining fashion which you should enjoy. Please see Bill Gross’s July Investment Outlook at this site:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+July+2007.htm
Opinion/Analysis:
As we come to the end of the quarter/month, we should finally be seeing a rally that will extend through the Fourth of July, maybe even a little longer. This move should be the last such move that the market can muster. As this up move matures, we will offer our analysis and if it ever gets to a tipping point we may just have to go back to daily posts.
The stock market showed some strength on Wednesday and should now be starting a pretty good up run into the early part of July. After we see some new highs in the Dow, we will be looking for a clear entry for getting short or getting out.
Market Action:
Since Friday morning, coinciding with the Blackstone IPO, the market has shown signs of bearishness. The Dow traded right at 13,550 on Friday morning and Wednesday morning (this morning) it traded down to near 13,250 which would be significant support. Monday and Tuesday had to shake the bulls’ confidence as the market was strong going into the lunch hour but gave way to selling going into the close. Bottom line is that 300 points isn’t really enough to scare any bull.
Economy:
The economy has shown no signs that the stock market is correct in its quest for higher prices. Wednesday morning, the durable goods orders, down 2.8%, were “surprisingly weak” according to one article we read on the subject. The durable goods orders are a fairly volatile reading but they can go down.
The housing sales were not pretty (our words) this last month either with new home sales down1.6% in May and prices were down some, too. You may recall that the April numbers were up about 12.5%, with April being the lone strength this year. Mortgage rates have risen about a half a point which is hampering sales a bit, too. Existing home sales were down as well with an annual rate of less than 6 million units and prices down year over year.
Consumer confidence, developed to measure the mode of shoppers, took a small dip last month to the lowest level since last August. This number still seems high but we don’t think it will be long before this number moves down strongly.
All in all, the economy is putting in a weak performance, not that you could tell by looking at the stock market.
The Fed:
On Wednesday, the Fed began yet another FOMC meeting to discuss the economy and the future course of interest rates. Do you remember the position of the Update? Well, let us remind you.
We have maintained a stance for some time that the Fed will no longer raise rates and will actually start lowering rates probably later this year. We say this due to the signals given by the economy but more fundamentally from the subprime mortgage situation. We see the Fed saying they are going to be tough on inflation tomorrow (Thursday) but that strong rhetoric will get a drastic change when the consumer decides to pack it in.
We believe that the consumer led recession is just now being felt across the economy. The ATM’s that people live in have gone through a metamorphosis (should we say they have morphed, that would certainly be easier) from the ATM to the debt repayment plan and people are not very happy about it.
Bill Gross published an article that is fully in line with our thinking, that being the subprime situation is still not contained. Mr. Gross presents his points in an entertaining fashion which you should enjoy. Please see Bill Gross’s July Investment Outlook at this site:
http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+July+2007.htm
Opinion/Analysis:
As we come to the end of the quarter/month, we should finally be seeing a rally that will extend through the Fourth of July, maybe even a little longer. This move should be the last such move that the market can muster. As this up move matures, we will offer our analysis and if it ever gets to a tipping point we may just have to go back to daily posts.
Sunday, June 24, 2007
A Rare Down Friday
Just a quick post this evening due to the 185 point loss the Dow suffered last Friday. Over the last 13 weeks, Fridays have seen up days so just a down day would have brought some questions with it; but, down 185 starts to give you a sense of unease. The market has enjoyed these up Fridays in the past because Mondays have generally brought some form of buyout news.
With this type of down move, it is the Update’s responsibility to let you know if there is anything more sinister going on. Well, we don’t think so at the present time. As we write this evening, the futures are making a powerful recovery and the Asian markets are not down much.
As we have been saying, we think the Dow will eventually break the June 4th high created right after the May jobs’ report was released. As we said then, there is a slight chance that the June 4th high is the top but we don’t think that is possible given the strength seen in the NASDAQ indexes after that date.
One thing about the stock market, the big Blackstone IPO generated much enthusiasm, at least for that company. We are no less than shocked that this IPO garnered such a huge amount of cash. These are the types of things that cause markets to end their up moves.
Our position continues to be that we are close to a top but not quite there. If we see the Dow make a new high above June 4th we will start to consider the possibility of a top. That event should be related to a weak move in the broader markets but it is not necessarily required. As always, if anything significant happens we will report on it here, otherwise we will be here every Wednesday evening until something the bear really comes back. That means Thursday mornings will bring you something to read other than your emails.
There are some big news events this week, not the least of which is the FOMC meeting taking place on Wednesday and Thursday. We do not expect any interest changes from them this week but we guarantee much hype over the possibilities. Yeah. The real news continues to be the mortgage market with more and more fear about the Bear Stearns funds that are trying to actually sell these illiquid assets.
Meanwhile, this week brings us the monthly home sales, existing home sales on Monday and new home sales on Tuesday. These are the items we will be paying close attention to.
With this type of down move, it is the Update’s responsibility to let you know if there is anything more sinister going on. Well, we don’t think so at the present time. As we write this evening, the futures are making a powerful recovery and the Asian markets are not down much.
As we have been saying, we think the Dow will eventually break the June 4th high created right after the May jobs’ report was released. As we said then, there is a slight chance that the June 4th high is the top but we don’t think that is possible given the strength seen in the NASDAQ indexes after that date.
One thing about the stock market, the big Blackstone IPO generated much enthusiasm, at least for that company. We are no less than shocked that this IPO garnered such a huge amount of cash. These are the types of things that cause markets to end their up moves.
Our position continues to be that we are close to a top but not quite there. If we see the Dow make a new high above June 4th we will start to consider the possibility of a top. That event should be related to a weak move in the broader markets but it is not necessarily required. As always, if anything significant happens we will report on it here, otherwise we will be here every Wednesday evening until something the bear really comes back. That means Thursday mornings will bring you something to read other than your emails.
There are some big news events this week, not the least of which is the FOMC meeting taking place on Wednesday and Thursday. We do not expect any interest changes from them this week but we guarantee much hype over the possibilities. Yeah. The real news continues to be the mortgage market with more and more fear about the Bear Stearns funds that are trying to actually sell these illiquid assets.
Meanwhile, this week brings us the monthly home sales, existing home sales on Monday and new home sales on Tuesday. These are the items we will be paying close attention to.
Wednesday, June 20, 2007
Subprime Problems Return
Market Action:
Here we are, with the Dow down almost 150 on Wednesday. This follows a couple of days that could have been substituted by a hibernating bear; sorry for the confusing metaphor but…the market has been very dull until Wednesday’s afternoon trading. After last week Friday’s CPI news, the market did jump out of the blocks and traded a bunch of shares, partly due to options expiration (quad witch again).
Bear Stearns Auction:
Probably the biggest news of the week, in our opinion, is the blow up of two of Bear Stearns’ real estate hedge funds. Not that we are surprised that a real estate fund might be having trouble, it’s just the Way it’s trouble is being handled. We feel the need to spend some time on this topic this evening due to the significance both to the economy and to our position on the subject.
Apparently, Merrill Lynch has seized some of the funds’ assets and is trying to sell them to get themselves off the risk. According to a WSJ article, Merrill Lynch circulated “a list of about $850 million of the mostly highly-rated complex securities used as collateral for the” funds.
In Wednesday’s WSJ, a front page article on the subject (highly recommended reading) noted that the funds had $9 billion in loans which the funds’ managers were trying to get others (Goldman Sachs and Bank of America) to take over those loans. The article says that a few weeks ago, these two funds had assets of $20 billion, “most in complex securities made up of bonds backed by subprime mortgages”.
According to the article, “In recent weeks, however, the firm’s [funds] have been besieged by investors and lenders trying to recover their money as the value of the funds’ underlying bonds fell sharply.” This was after one of the funds “reported that its value fell 6.75% in April after the fund’s bets on the mortgage market went wrong. Two weeks later, it put the loss at 18%, spooking already-nervous investors and creditors and sending many of them running for the exits.”
Now, here is where the story gets interesting, and scary we might add.
The article continues, “Unlike stocks and Treasury bonds, whose prices are continually quoted and easily obtained, many of these derivative instruments trade infrequently and don’t have clear market prices. To come up with market values for these investments—a process known as ‘marking’ to market—investment funds often rely on their own valuation models.”
And, “As of March 31, the Enhanced Leverage fund had $638 million in investor capital and at least $6 billion in borrowings. It used the money to make $11.5 billion in bullish bets and $4.5 billion in bearish bets…Its sister fund had $925 million in investor money, and made $9.7 billion in bullish bets and $4 billion in bearish bets.”
Did you read that right? So, the two funds had roughly $1.5 billion in capital and nearly $30 billion in assets. That’s a 5% capital ratio, borrowing $20 for every $1 it had. These assets are valued based on their own valuation models, not what the market might have considered the value of the assets.
Near the end of the article is a quote from Janet Tavakoli, president of Tavakoli Structured Finance, a consulting firm in Chicago, “No one in the subprime business wants to ask the question of whether they need to re-mark all the assets. That would open the floodgates.”
Enter Merrill Lynch, trying to sell $850 million of their assets. Merrill said that anyone could bid on these assets at an auction that was to take place after the close on Wednesday.
We don’t need to go into the types of assets that were on the block, like CDO’s squareds, but suffice it to say that these securities are fairly complicated. A quote from Mark Adelson, who is a managing director of fixed income research at Nomura Securities, in the online WSJ this evening says that, “ CDO squareds are complicated things, and even the smartest guys can’t figure out what to bid on them in one day.”
These are clear problems in the finance world but the reason for their problems goes back to the original mortgages granted to people who Should Not have been loaned this money. Real people are getting hurt because of these exotic mortgages and underwriting practices.
Opinion/Analysis:
Wednesday’s decline in the stock market seemed like enough to declare a small victory for the bears but we certainly don’t see it that way. There continues to be the smallest possibility that the June 4th Dow highs can hold but we don’t have much confidence in that at the moment, especially since the NASDAQ indexes have made new highs since then. The several indexes we follow are not tracking with each other at the moment and for the time being we think it would be best to stand aside.
If we notice something that contradicts this position over the coming weeks we will immediately identify it here but, in the mean time, we plan to post only on Wednesday evenings and at other times of interest.
You may want to check out the True Contrarian at the link to the left. He seems to be posting once a week again.
As always, your comments are welcome. We know that the market is close to turning over but until it does, we need to stay to this weekly format.
Here we are, with the Dow down almost 150 on Wednesday. This follows a couple of days that could have been substituted by a hibernating bear; sorry for the confusing metaphor but…the market has been very dull until Wednesday’s afternoon trading. After last week Friday’s CPI news, the market did jump out of the blocks and traded a bunch of shares, partly due to options expiration (quad witch again).
Bear Stearns Auction:
Probably the biggest news of the week, in our opinion, is the blow up of two of Bear Stearns’ real estate hedge funds. Not that we are surprised that a real estate fund might be having trouble, it’s just the Way it’s trouble is being handled. We feel the need to spend some time on this topic this evening due to the significance both to the economy and to our position on the subject.
Apparently, Merrill Lynch has seized some of the funds’ assets and is trying to sell them to get themselves off the risk. According to a WSJ article, Merrill Lynch circulated “a list of about $850 million of the mostly highly-rated complex securities used as collateral for the” funds.
In Wednesday’s WSJ, a front page article on the subject (highly recommended reading) noted that the funds had $9 billion in loans which the funds’ managers were trying to get others (Goldman Sachs and Bank of America) to take over those loans. The article says that a few weeks ago, these two funds had assets of $20 billion, “most in complex securities made up of bonds backed by subprime mortgages”.
According to the article, “In recent weeks, however, the firm’s [funds] have been besieged by investors and lenders trying to recover their money as the value of the funds’ underlying bonds fell sharply.” This was after one of the funds “reported that its value fell 6.75% in April after the fund’s bets on the mortgage market went wrong. Two weeks later, it put the loss at 18%, spooking already-nervous investors and creditors and sending many of them running for the exits.”
Now, here is where the story gets interesting, and scary we might add.
The article continues, “Unlike stocks and Treasury bonds, whose prices are continually quoted and easily obtained, many of these derivative instruments trade infrequently and don’t have clear market prices. To come up with market values for these investments—a process known as ‘marking’ to market—investment funds often rely on their own valuation models.”
And, “As of March 31, the Enhanced Leverage fund had $638 million in investor capital and at least $6 billion in borrowings. It used the money to make $11.5 billion in bullish bets and $4.5 billion in bearish bets…Its sister fund had $925 million in investor money, and made $9.7 billion in bullish bets and $4 billion in bearish bets.”
Did you read that right? So, the two funds had roughly $1.5 billion in capital and nearly $30 billion in assets. That’s a 5% capital ratio, borrowing $20 for every $1 it had. These assets are valued based on their own valuation models, not what the market might have considered the value of the assets.
Near the end of the article is a quote from Janet Tavakoli, president of Tavakoli Structured Finance, a consulting firm in Chicago, “No one in the subprime business wants to ask the question of whether they need to re-mark all the assets. That would open the floodgates.”
Enter Merrill Lynch, trying to sell $850 million of their assets. Merrill said that anyone could bid on these assets at an auction that was to take place after the close on Wednesday.
We don’t need to go into the types of assets that were on the block, like CDO’s squareds, but suffice it to say that these securities are fairly complicated. A quote from Mark Adelson, who is a managing director of fixed income research at Nomura Securities, in the online WSJ this evening says that, “ CDO squareds are complicated things, and even the smartest guys can’t figure out what to bid on them in one day.”
These are clear problems in the finance world but the reason for their problems goes back to the original mortgages granted to people who Should Not have been loaned this money. Real people are getting hurt because of these exotic mortgages and underwriting practices.
Opinion/Analysis:
Wednesday’s decline in the stock market seemed like enough to declare a small victory for the bears but we certainly don’t see it that way. There continues to be the smallest possibility that the June 4th Dow highs can hold but we don’t have much confidence in that at the moment, especially since the NASDAQ indexes have made new highs since then. The several indexes we follow are not tracking with each other at the moment and for the time being we think it would be best to stand aside.
If we notice something that contradicts this position over the coming weeks we will immediately identify it here but, in the mean time, we plan to post only on Wednesday evenings and at other times of interest.
You may want to check out the True Contrarian at the link to the left. He seems to be posting once a week again.
As always, your comments are welcome. We know that the market is close to turning over but until it does, we need to stay to this weekly format.
Wednesday, June 13, 2007
Wave C?
Market Action:
Looking back over the past few weeks of trading, the market has made some effort on the downside. The strong day on Wednesday feels like a culminating countertrend rally. With all of the downside we saw last week, this rally so far has not generated much momentum. The late afternoon move was news based so it doesn’t have as much potential as it would if it had been uninitiated.
The news in the afternoon that put the power thrusters on under stocks was the Fed’s beige book. The beige book indicated that the economy had some moderate growth in the April May period with virtually no upward pressure on inflation. With this news, there was quite a bit of interest in buying stocks. Do the players really think the market is interested in the April May period? We would say, yes, if the year was 2008 but it wasn’t.
Housing:
The bond market did manage a little bounce on Wednesday but the stock market has forgotten some of the reasons it sold off as close as Tuesday??? The rate on mortgages will push the housing market down even more but the world doesn’t seem to think this matters. The financial sector has not recognized that many mortgage backed securities have not been properly repriced. One article we read today indicated that a group of hedge funds had requested that the SEC not allow price manipulation of bond prices backed by subprime mortgages. (Bloomberg reference)
That article says that “Bondholders stand to lose as much as $75 billion on securities made of mortgages to people with poor or limited credit histories because of a rise in defaults”. And, according to Credit Suisse Group in Zurich, there are ”More than $800 billion of bonds are backed by subprime mortgages”. Does that sound like a lot of money to you? That doesn’t even count the next level up which is also in danger.
Retail Sales:
Announced on Wednesday morning, the retail sales for May were up 1.4%. We are not sure how this number can be correct except that gas prices were a bit higher in May (gas purchases are considered retail sales). Many retailers reported slowing sales after Easter so we’re a little skeptical of this number. The market didn’t really pay much attention to this number.
Upcoming News:
Thursday the PPI will be released and expectations are for an increase of 0.6%, with CPI coming on Friday on expectations for 0.2%. The PPI is a cost item to producers (name is Producer Price Index) so can they pass any increases on or not? Still the Fed doesn’t see any upward pressure on inflation.
Inflation:
As you know, we don’t see any upward pressure on inflation either. In fact, we still think the Fed will lower the Fed funds rate this year (We agree with Bill Gross of Pimco on this.) The inflation pressures are definitely not upward. Take a look at the price of Gold and also the dollar. Gold has dropped while the dollar has rallied. These two items suggest inflation is not much of a problem.
Opinion/Analysis:
The stock market showed some significant power on Wednesday afternoon but we are not impressed with the volume about the same as Tuesday. The advance/decline numbers were nearly identical in the opposite direction so the two days cancel each other out, mostly.
Normally, we would look at Wednesday’s trading and automatically suggest it is a little c wave which means that it is a culminating move and with power. Many people call this a “fill”. That means that there was a first leg (a wave) and then a deep selloff (b wave) and now we are seeing a completed move or a fill of all of the buy orders.
We are reading others who say that Wednesday was more powerful than just a c wave would indicate. Well, our opinion is that this really felt like a c wave, strong and confident with nowhere else to go. The market will tell us what it thinks in due time. The next move could be stronger than we think but we still have a finishing c wave corrective up move on our minds. This move should be over some time tomorrow with the next leg down starting directly after that.
If our interpretation is correct, we would be looking for a Dow around 13,525 for a top. This would be the 0.618 retracement of the drop from last week’s high to this week’s low. We should see that tomorrow. If the Dow gets much above that, we may have to concede in another answer. (seems to be our destiny)
Looking back over the past few weeks of trading, the market has made some effort on the downside. The strong day on Wednesday feels like a culminating countertrend rally. With all of the downside we saw last week, this rally so far has not generated much momentum. The late afternoon move was news based so it doesn’t have as much potential as it would if it had been uninitiated.
The news in the afternoon that put the power thrusters on under stocks was the Fed’s beige book. The beige book indicated that the economy had some moderate growth in the April May period with virtually no upward pressure on inflation. With this news, there was quite a bit of interest in buying stocks. Do the players really think the market is interested in the April May period? We would say, yes, if the year was 2008 but it wasn’t.
Housing:
The bond market did manage a little bounce on Wednesday but the stock market has forgotten some of the reasons it sold off as close as Tuesday??? The rate on mortgages will push the housing market down even more but the world doesn’t seem to think this matters. The financial sector has not recognized that many mortgage backed securities have not been properly repriced. One article we read today indicated that a group of hedge funds had requested that the SEC not allow price manipulation of bond prices backed by subprime mortgages. (Bloomberg reference)
That article says that “Bondholders stand to lose as much as $75 billion on securities made of mortgages to people with poor or limited credit histories because of a rise in defaults”. And, according to Credit Suisse Group in Zurich, there are ”More than $800 billion of bonds are backed by subprime mortgages”. Does that sound like a lot of money to you? That doesn’t even count the next level up which is also in danger.
Retail Sales:
Announced on Wednesday morning, the retail sales for May were up 1.4%. We are not sure how this number can be correct except that gas prices were a bit higher in May (gas purchases are considered retail sales). Many retailers reported slowing sales after Easter so we’re a little skeptical of this number. The market didn’t really pay much attention to this number.
Upcoming News:
Thursday the PPI will be released and expectations are for an increase of 0.6%, with CPI coming on Friday on expectations for 0.2%. The PPI is a cost item to producers (name is Producer Price Index) so can they pass any increases on or not? Still the Fed doesn’t see any upward pressure on inflation.
Inflation:
As you know, we don’t see any upward pressure on inflation either. In fact, we still think the Fed will lower the Fed funds rate this year (We agree with Bill Gross of Pimco on this.) The inflation pressures are definitely not upward. Take a look at the price of Gold and also the dollar. Gold has dropped while the dollar has rallied. These two items suggest inflation is not much of a problem.
Opinion/Analysis:
The stock market showed some significant power on Wednesday afternoon but we are not impressed with the volume about the same as Tuesday. The advance/decline numbers were nearly identical in the opposite direction so the two days cancel each other out, mostly.
Normally, we would look at Wednesday’s trading and automatically suggest it is a little c wave which means that it is a culminating move and with power. Many people call this a “fill”. That means that there was a first leg (a wave) and then a deep selloff (b wave) and now we are seeing a completed move or a fill of all of the buy orders.
We are reading others who say that Wednesday was more powerful than just a c wave would indicate. Well, our opinion is that this really felt like a c wave, strong and confident with nowhere else to go. The market will tell us what it thinks in due time. The next move could be stronger than we think but we still have a finishing c wave corrective up move on our minds. This move should be over some time tomorrow with the next leg down starting directly after that.
If our interpretation is correct, we would be looking for a Dow around 13,525 for a top. This would be the 0.618 retracement of the drop from last week’s high to this week’s low. We should see that tomorrow. If the Dow gets much above that, we may have to concede in another answer. (seems to be our destiny)
Tuesday, June 12, 2007
Bonds Rule
Special Edition due to the late day sell off in stocks (and bonds). Tomorrow we will post our full edition.
Market Action:
Tuesday showed some remarkable volatility and, in the end, the market lost some ground, for the Dow that was about 130 points. The market opened down slightly with the Dow losing about 60 points in a few minutes. Those losses widened to about 100 points a couple hours into the session.
From those lows, the Dow rallied back from that down 100 to up about 25 with two hours to go. From there we saw selling into the bell with the market falling on pretty high volume. Overall, the total volume on the day was not spectacular but much better than Monday’s by some 300 million shares on the NYSE.
Housing:
One news item caught our eye as foreclosures were announced to be up 90% yoy (year over year) from May to May and 19% above April. What do you think, is the housing problem bottoming out? Our opinion remains the same, more trouble in the American Dream for many.
Bonds:
In what is surely to be more bad news for housing, bonds continued their slide with 10 year Treasuries yielding nearly 5.3% (five year highs) after the quarterly refunding on Tuesday. In March this rate was just above 4.4%. The mortgage rates are closely correlated to 10 year Treasuries so you can imagine that mortgage rates are almost a percent higher than in March. This rate increase will put more pressure on an already troubled housing market.
Opinion/Analysis:
As the title says, we think that this past week, “Bonds Rule”. Higher interest rates seem to be putting the brakes on the stock market rally that we have seen for over four years. Tuesday’s momentum seems to be down with our momentum indicators near oversold levels for the first time since the February stock swoon.
This down day did have some February feel to it as the midday rally lost its footing and sellers came in going into the close. Bonds are forcing leveraged players into some tough corners, selling is the result.
Market Action:
Tuesday showed some remarkable volatility and, in the end, the market lost some ground, for the Dow that was about 130 points. The market opened down slightly with the Dow losing about 60 points in a few minutes. Those losses widened to about 100 points a couple hours into the session.
From those lows, the Dow rallied back from that down 100 to up about 25 with two hours to go. From there we saw selling into the bell with the market falling on pretty high volume. Overall, the total volume on the day was not spectacular but much better than Monday’s by some 300 million shares on the NYSE.
Housing:
One news item caught our eye as foreclosures were announced to be up 90% yoy (year over year) from May to May and 19% above April. What do you think, is the housing problem bottoming out? Our opinion remains the same, more trouble in the American Dream for many.
Bonds:
In what is surely to be more bad news for housing, bonds continued their slide with 10 year Treasuries yielding nearly 5.3% (five year highs) after the quarterly refunding on Tuesday. In March this rate was just above 4.4%. The mortgage rates are closely correlated to 10 year Treasuries so you can imagine that mortgage rates are almost a percent higher than in March. This rate increase will put more pressure on an already troubled housing market.
Opinion/Analysis:
As the title says, we think that this past week, “Bonds Rule”. Higher interest rates seem to be putting the brakes on the stock market rally that we have seen for over four years. Tuesday’s momentum seems to be down with our momentum indicators near oversold levels for the first time since the February stock swoon.
This down day did have some February feel to it as the midday rally lost its footing and sellers came in going into the close. Bonds are forcing leveraged players into some tough corners, selling is the result.
Thursday, June 07, 2007
Dow Breaks Down on Interest Rates
Market Action:
We couldn’t resist writing another post this evening due to the massive sell off in the stock market on Thursday which drove the Dow down nearly 200 points. Some of the action in the stock market was a reflection of the action in the bond market where bonds were punished as the 10 year bond moved above 5% for the first time since last July. Going back to March, the 10 year Treasury yielded 4.5% and after Thursday’s jump now yields 5.13%.
Late in the afternoon, stocks were rallying from the Dow being down 180 points to the Dow being down less than 100 points. Then the bond king, Bill Gross of PIMCO, affirmed his position that the bond market was in a bearish phase and rates may go up to 6.5%. The stock market did not like this news and promptly sold off into the close going out at the lows of the day down nearly 200 points.
Opinion/Analysis:
Other than that, not much happened on Thursday. The bond market seems to have taken the upper hand here and is now starting to dictate the stock market more. The complacency in the stock market has been aided and abetted by the low interest rates available in the market. All of the LBO’s (leveraged buyouts using borrowed money) have taken place in the idyllic interest rate environment with 10 year Treasuries under 5%, not any more. Now, they will be paying more for those deals.
Alas, higher interest rates will affect the mortgage market and should help to increase mortgage rates by a similar 60 basis points and possibly more if rates continue to move up in a bond sell off. Higher mortgage rates will squeeze even more buyers out of the housing market which will cause some additional headaches for those sellers/flippers out there. With the bond market large and in charge, stocks decided to take the opportunity to sell off.
In yesterday’s post, we mentioned a possible low being formed that might lead to another high before the whole thing fell apart. Today’s sell off confirms (again) that the market wants to go down and this was confirmed by price, breadth and volume. The volume on the NYSE was over 1.9 billion shares with breadth a whopping 280-3081 advances to declines. That’s the largest number of decliners in a day since May, 2004 when the Dow was trading right near 10K. This day was significantly bearish and brings the three day decline to over 400 points in the Dow.
Comments:
Erick asked us to compare and contrast this market with earlier markets. We will make some comments about that in future posts. Thanks for the suggestion, good idea. Any more out there?
We couldn’t resist writing another post this evening due to the massive sell off in the stock market on Thursday which drove the Dow down nearly 200 points. Some of the action in the stock market was a reflection of the action in the bond market where bonds were punished as the 10 year bond moved above 5% for the first time since last July. Going back to March, the 10 year Treasury yielded 4.5% and after Thursday’s jump now yields 5.13%.
Late in the afternoon, stocks were rallying from the Dow being down 180 points to the Dow being down less than 100 points. Then the bond king, Bill Gross of PIMCO, affirmed his position that the bond market was in a bearish phase and rates may go up to 6.5%. The stock market did not like this news and promptly sold off into the close going out at the lows of the day down nearly 200 points.
Opinion/Analysis:
Other than that, not much happened on Thursday. The bond market seems to have taken the upper hand here and is now starting to dictate the stock market more. The complacency in the stock market has been aided and abetted by the low interest rates available in the market. All of the LBO’s (leveraged buyouts using borrowed money) have taken place in the idyllic interest rate environment with 10 year Treasuries under 5%, not any more. Now, they will be paying more for those deals.
Alas, higher interest rates will affect the mortgage market and should help to increase mortgage rates by a similar 60 basis points and possibly more if rates continue to move up in a bond sell off. Higher mortgage rates will squeeze even more buyers out of the housing market which will cause some additional headaches for those sellers/flippers out there. With the bond market large and in charge, stocks decided to take the opportunity to sell off.
In yesterday’s post, we mentioned a possible low being formed that might lead to another high before the whole thing fell apart. Today’s sell off confirms (again) that the market wants to go down and this was confirmed by price, breadth and volume. The volume on the NYSE was over 1.9 billion shares with breadth a whopping 280-3081 advances to declines. That’s the largest number of decliners in a day since May, 2004 when the Dow was trading right near 10K. This day was significantly bearish and brings the three day decline to over 400 points in the Dow.
Comments:
Erick asked us to compare and contrast this market with earlier markets. We will make some comments about that in future posts. Thanks for the suggestion, good idea. Any more out there?
Wednesday, June 06, 2007
Stock Market Shows Some Weakness
Welcome to the weekly post for the Update. We have been going through withdrawal here and do miss the daily version. With the market having difficulty around these prices, daily posts may be back soon. There should be no surprise to those of you who are contrarians, like us, any wavering from that bearish position might result in a pretty solid top—oh, well. But, admit it; you missed the Update, too.
Jobs’ Report:
The May jobs’ report coincided with a new high in the Dow at 13,690.62. On Monday this high was challenged by a high trade of 13,690.21 but failed to improve on the Friday number. From Monday’s high, the Dow fell about 250 points to Wednesday’s low around 13,437.
As you may recall, we think the jobs’ report is the key report for the month for the stock market and maybe the bond market as well. The report came out last Friday after a month long difference of opinion of the bond market and the stock market. The stock market had rallied for most of the month while the bond market fell most of them month.
After the jobs’ report indicated about 157K new jobs, CNN Money proclaimed that “Solid gains in jobs, manufacturing, consumer spending offset weakness in housing; Fed seen on hold” under the title of “Economy hits the sweet spot”. The job gains are “solid” compared with some that have been under 100K but this is not “solid gains in jobs”. But, let’s look at the rest of the headline in light of this week’s news.
Tuesday’s CNN Money late day headline was “Fed rate cuts gone—a hike may be coming”. This headline doesn’t really contradict Friday’s headline but the spin is just a little different. Last Friday the market was doing ok but Tuesday started to leak a little so someone had to come up with a good reason for it.
ECB’s Rate Hike:
On Wednesday morning, in a “widely anticipated” move, the European Central Bank (ECB) raised interest rates a massive quarter point. (Clearly, we still have some sarcasm here at the Update; you missed that, too, didn’t you?) This move was not widely anticipated by market participants as many of the European bourses fell over 1%, some more than 2%. This move prompted players in the US to step back and think (well, ok, maybe they didn’t know what to think about) that maybe the Fed might raise rates, too.
In case you don’t remember, we still stand on the theory that the Fed will Not raise rates anytime soon and will in fact lower them sometime later this year due to the economy being soft ( read that, the stock market is going down to understand the Fed’s motives a little better).
Housing:
The housing market continues to disappoint those that thought maybe the turn was here already but, not to worry, the new forecast is for housing to pick up next year sometime. We wonder if those that decided to buy two or three houses to flip, can wait around for almost another year to see if that recovery happens. From our view of the housing pond, there are no quick fixes that will bring housing out of its downward spiral.
Today’s report from the National Association of Realtors indicated that the US housing market remains “soft” and they would once again lower their forecast for 2007. Meanwhile, they continued their position that prices for existing homes will fall in 2007 for the first time since they have kept records (in the late 1960’s). This group has a stake in a growing home market and is usually upbeat, as sales people need to be. So, they follow up their decline projection with a rise in 2008. There you go, no worries, mate.
Opinion/Analysis:
With the stock market having two significantly down days in a row, we thought this would be a good time to reassess the situation. We suggest that there really was no reason for the decline the last two days and offer that these are the worst kind of days for the bulls. Yes, there was sort of a cool breeze blowing over the hot market, the threat of possibly higher interest rates. But, that has been no threat for this over heated Invincible market.
The stock market may want to bounce of these lows so we are not declaring a bear victory just yet but the seeds have been planted (again). Our indicators fell off a cliff the last two days, not that they all went negative but the change was noticeable. What would be ideal would be if the market told us that it was over by rallying a bit and not getting our indicators back to where they were on Monday. Of course, we still believe in Santa Claus, but he’s not going to be here for another six months.
The market could very easily drop right now and no one would really be surprised. In fact most market analysts would announce that the market was due for a correction and it was healthy and now is a buying opportunity. We would say that you should be extremely careful in this dicey situation. In any event, there isn’t much upside left. The global markets are beginning to get some selling pressure, finally, and they could all go down together which would be a very scary event.
Numbers:
We have decided that while we are writing weekly posts, that the numbers are not going to be reported. As we looked back on the posts to contemplate a new format, the items in our list were not very well known and we didn’t mention them much in the text so you could follow along. There are a few that we do really like and one of them is the VIX, which is the volatility index. The VIX jumped a little on Wednesday to a two month high, showing a little fear among the option players.
Your Input:
If you’re so inclined, please post a comment or check out one of the links to the left. We would be happy to give our opinion or discuss topics of interest to you. All you need to do is mention it in the comments and we will make sure we mention it. You don’t even need to sign your name although you certainly can, if you like.
Take care and we will be back at least by next Wednesday, sooner if conditions in the stock market deteriorate much further.
Jobs’ Report:
The May jobs’ report coincided with a new high in the Dow at 13,690.62. On Monday this high was challenged by a high trade of 13,690.21 but failed to improve on the Friday number. From Monday’s high, the Dow fell about 250 points to Wednesday’s low around 13,437.
As you may recall, we think the jobs’ report is the key report for the month for the stock market and maybe the bond market as well. The report came out last Friday after a month long difference of opinion of the bond market and the stock market. The stock market had rallied for most of the month while the bond market fell most of them month.
After the jobs’ report indicated about 157K new jobs, CNN Money proclaimed that “Solid gains in jobs, manufacturing, consumer spending offset weakness in housing; Fed seen on hold” under the title of “Economy hits the sweet spot”. The job gains are “solid” compared with some that have been under 100K but this is not “solid gains in jobs”. But, let’s look at the rest of the headline in light of this week’s news.
Tuesday’s CNN Money late day headline was “Fed rate cuts gone—a hike may be coming”. This headline doesn’t really contradict Friday’s headline but the spin is just a little different. Last Friday the market was doing ok but Tuesday started to leak a little so someone had to come up with a good reason for it.
ECB’s Rate Hike:
On Wednesday morning, in a “widely anticipated” move, the European Central Bank (ECB) raised interest rates a massive quarter point. (Clearly, we still have some sarcasm here at the Update; you missed that, too, didn’t you?) This move was not widely anticipated by market participants as many of the European bourses fell over 1%, some more than 2%. This move prompted players in the US to step back and think (well, ok, maybe they didn’t know what to think about) that maybe the Fed might raise rates, too.
In case you don’t remember, we still stand on the theory that the Fed will Not raise rates anytime soon and will in fact lower them sometime later this year due to the economy being soft ( read that, the stock market is going down to understand the Fed’s motives a little better).
Housing:
The housing market continues to disappoint those that thought maybe the turn was here already but, not to worry, the new forecast is for housing to pick up next year sometime. We wonder if those that decided to buy two or three houses to flip, can wait around for almost another year to see if that recovery happens. From our view of the housing pond, there are no quick fixes that will bring housing out of its downward spiral.
Today’s report from the National Association of Realtors indicated that the US housing market remains “soft” and they would once again lower their forecast for 2007. Meanwhile, they continued their position that prices for existing homes will fall in 2007 for the first time since they have kept records (in the late 1960’s). This group has a stake in a growing home market and is usually upbeat, as sales people need to be. So, they follow up their decline projection with a rise in 2008. There you go, no worries, mate.
Opinion/Analysis:
With the stock market having two significantly down days in a row, we thought this would be a good time to reassess the situation. We suggest that there really was no reason for the decline the last two days and offer that these are the worst kind of days for the bulls. Yes, there was sort of a cool breeze blowing over the hot market, the threat of possibly higher interest rates. But, that has been no threat for this over heated Invincible market.
The stock market may want to bounce of these lows so we are not declaring a bear victory just yet but the seeds have been planted (again). Our indicators fell off a cliff the last two days, not that they all went negative but the change was noticeable. What would be ideal would be if the market told us that it was over by rallying a bit and not getting our indicators back to where they were on Monday. Of course, we still believe in Santa Claus, but he’s not going to be here for another six months.
The market could very easily drop right now and no one would really be surprised. In fact most market analysts would announce that the market was due for a correction and it was healthy and now is a buying opportunity. We would say that you should be extremely careful in this dicey situation. In any event, there isn’t much upside left. The global markets are beginning to get some selling pressure, finally, and they could all go down together which would be a very scary event.
Numbers:
We have decided that while we are writing weekly posts, that the numbers are not going to be reported. As we looked back on the posts to contemplate a new format, the items in our list were not very well known and we didn’t mention them much in the text so you could follow along. There are a few that we do really like and one of them is the VIX, which is the volatility index. The VIX jumped a little on Wednesday to a two month high, showing a little fear among the option players.
Your Input:
If you’re so inclined, please post a comment or check out one of the links to the left. We would be happy to give our opinion or discuss topics of interest to you. All you need to do is mention it in the comments and we will make sure we mention it. You don’t even need to sign your name although you certainly can, if you like.
Take care and we will be back at least by next Wednesday, sooner if conditions in the stock market deteriorate much further.
Wednesday, May 30, 2007
China Down Again This Evening
[Editor’s note: This is the final daily market post. The blog will continue to be published on a weekly basis for now until either we get a market break, when the blog would go daily again, or we stop writing it all together. Thank you.]
Our report on China was somewhat inaccurate last night so we want to clear it up this evening. The change in the trading was an increase in the trading “tax”, they call it a stamp tax. Apparently, the government slaps each trade with a 0.1% charge and now that cost is rising to 0.3%.
The Chinese market was down over 6% last night and tonight is down another 3% so the change may have done something but will it last?
Market Action:
Before the US markets opened for trade there was some overhang from the Chinese market but right after the market opened, down about 0.5%, the buyers came in and struggled to move it higher. Once the averages went green, there was a concerted effort to buy ‘em and all of our three major indexes closed at either new record highs or new relative highs.
Opinion/Analysis:
The minutes from the last Fed meeting were published today and they indicate that the Fed is still concerned about inflation and that the economy will pick up some steam later in the year. You would think that since the market has built some rate cuts into the prices, that a blow to the “lower interest rates now” theme would have taken a toll on the market. But, that didn’t happen, in fact after that news, the market bolted higher to put the Dow and the SP 500 at new record close.
Attitude:
This action puts our analysis in a particularly bad light and would seem to suggest that the market has not topped. The month of May has seen a good up move during which we have been short and this is something that we can no longer tolerate. There are two elements to this thinking, one, we don’t like to lose money and, two, we detest being wrong. You may not mind that we’re wrong as long as you haven’t followed our advice.
We do believe that the market is overbought and when it finally does turn there will be some very fast selling and prices will drop. But, we can not in good conscience continue to be short, and we are leveraged short so we are losing money at twice the speed the market is going up. The rally from last summer has been extremely difficult for us to call and we are not sure why that is.
Our guess is that there is so much money available for trading by the various large parties that there is no other way to go but up. We have maintained that the residential mortgage market would prevent retail customers from continuing to purchase stocks and we are probably somewhat correct in this assessment. However, there are still many automatic 401(k) purchases that could still be coming from the retail side. Ultimately, we still think the residential real estate will drive the economy and the stock market down. The WSJ had a front page article on the Subprime mess and we urge you to read it. Pay particular attention to the map that shows just how much money poured into these Detroit neighborhoods. No wonder people could afford to pretend they were doing ok. For a while...
Our favorite paragraph is: "This has stripped us of our whole pride," says April Williams, 47 years old, who has until August to pay off her mortgage or vacate the two-story Colonial at 5170, where she and her husband have lived for 11 years. "There's going to be no people left in Detroit if they keep doing this to them."
In any event, we have decided to abandon the shorts we are in and step back from this market and wait until something becomes clear to us. Along with this decision, we want to reduce our commitment to this blog, maybe all together, but at least limit the time we spend on it, until we feel that the market is going down. When that time arrives and we feel that we can be of the best service to you, then we may go back to daily posts.
Right now, the market is way too overpriced to be committing new funds to it but at the same time it is shredding those of us in leverage shorts. To that end, we are going to eliminate our short positions and reduce this blog to Wednesday evenings going forward. We would write a commentary on Wednesday evening like we used to in our email version. That way you would have something to read on Thursday mornings.
We want to thank those of you who have been faithfully reading the blog. We have an idea how many hits we get here (you can see the site meter) and decided that we would continue to write as long as we had 30 hits a week. That doesn’t sound like much but it was enough to keep us writing. And, we have had more than 30 hits a week almost every week, some of which are ours, but it has been enough for us to write.
Our goal has always been to provide some level of contrary thinking with opportunities for profits. We know that has not been happening for quite some time and for that we apology to all of you.
We have been writing a daily post for over two years and this decision has not been made in haste. We have enjoyed writing most every day and will miss it.
Dow Industrials: 13,633.08 +111.78 ( new record high)
VIX: 12.83
HUI: 322.52
QQQQ: 47.19
QQQRS: 0.12 bid
QQQRT: 0.24 bid
RYVNX: 14.87
RYAIX: 20.26
RYCWX: 30.33
TLT: 86.54
BEGBX: 13.72
Our report on China was somewhat inaccurate last night so we want to clear it up this evening. The change in the trading was an increase in the trading “tax”, they call it a stamp tax. Apparently, the government slaps each trade with a 0.1% charge and now that cost is rising to 0.3%.
The Chinese market was down over 6% last night and tonight is down another 3% so the change may have done something but will it last?
Market Action:
Before the US markets opened for trade there was some overhang from the Chinese market but right after the market opened, down about 0.5%, the buyers came in and struggled to move it higher. Once the averages went green, there was a concerted effort to buy ‘em and all of our three major indexes closed at either new record highs or new relative highs.
Opinion/Analysis:
The minutes from the last Fed meeting were published today and they indicate that the Fed is still concerned about inflation and that the economy will pick up some steam later in the year. You would think that since the market has built some rate cuts into the prices, that a blow to the “lower interest rates now” theme would have taken a toll on the market. But, that didn’t happen, in fact after that news, the market bolted higher to put the Dow and the SP 500 at new record close.
Attitude:
This action puts our analysis in a particularly bad light and would seem to suggest that the market has not topped. The month of May has seen a good up move during which we have been short and this is something that we can no longer tolerate. There are two elements to this thinking, one, we don’t like to lose money and, two, we detest being wrong. You may not mind that we’re wrong as long as you haven’t followed our advice.
We do believe that the market is overbought and when it finally does turn there will be some very fast selling and prices will drop. But, we can not in good conscience continue to be short, and we are leveraged short so we are losing money at twice the speed the market is going up. The rally from last summer has been extremely difficult for us to call and we are not sure why that is.
Our guess is that there is so much money available for trading by the various large parties that there is no other way to go but up. We have maintained that the residential mortgage market would prevent retail customers from continuing to purchase stocks and we are probably somewhat correct in this assessment. However, there are still many automatic 401(k) purchases that could still be coming from the retail side. Ultimately, we still think the residential real estate will drive the economy and the stock market down. The WSJ had a front page article on the Subprime mess and we urge you to read it. Pay particular attention to the map that shows just how much money poured into these Detroit neighborhoods. No wonder people could afford to pretend they were doing ok. For a while...
Our favorite paragraph is: "This has stripped us of our whole pride," says April Williams, 47 years old, who has until August to pay off her mortgage or vacate the two-story Colonial at 5170, where she and her husband have lived for 11 years. "There's going to be no people left in Detroit if they keep doing this to them."
In any event, we have decided to abandon the shorts we are in and step back from this market and wait until something becomes clear to us. Along with this decision, we want to reduce our commitment to this blog, maybe all together, but at least limit the time we spend on it, until we feel that the market is going down. When that time arrives and we feel that we can be of the best service to you, then we may go back to daily posts.
Right now, the market is way too overpriced to be committing new funds to it but at the same time it is shredding those of us in leverage shorts. To that end, we are going to eliminate our short positions and reduce this blog to Wednesday evenings going forward. We would write a commentary on Wednesday evening like we used to in our email version. That way you would have something to read on Thursday mornings.
We want to thank those of you who have been faithfully reading the blog. We have an idea how many hits we get here (you can see the site meter) and decided that we would continue to write as long as we had 30 hits a week. That doesn’t sound like much but it was enough to keep us writing. And, we have had more than 30 hits a week almost every week, some of which are ours, but it has been enough for us to write.
Our goal has always been to provide some level of contrary thinking with opportunities for profits. We know that has not been happening for quite some time and for that we apology to all of you.
We have been writing a daily post for over two years and this decision has not been made in haste. We have enjoyed writing most every day and will miss it.
Dow Industrials: 13,633.08 +111.78 ( new record high)
VIX: 12.83
HUI: 322.52
QQQQ: 47.19
QQQRS: 0.12 bid
QQQRT: 0.24 bid
RYVNX: 14.87
RYAIX: 20.26
RYCWX: 30.33
TLT: 86.54
BEGBX: 13.72
Tuesday, May 29, 2007
Homebuilder Pulte Announces 16% Layoffs
Late Breaking News:
The Chinese decided to raise the tax on stock market trading profits. As you might gather, this did not provide a strong backdrop to trading in China overnight. Their market opened down hard but recovered quite a bit in the early going (sound familar?) but now a few hours into the trading day the index is down over 6% and the rest of the Asian market is having some trouble, too. Our stock futures are trading down ever so slightly this evening but that could change by morning if China's market drops much further.
From earlier this evening:
Market Action:
After a long holiday weekend, the bulls were particularly anxious to start buying on Tuesday, especially the NASDAQ type stocks (and the RUT, Russell 2000). In fact, the buying actually spilled over to the blue chips and the Dow was sporting a 60 point pop about a half hour into the session. From those highs the market drifted lower the rest of the morning with the Dow sinking 35 points into negative territory. From there, the buyers came in to run the prices back up into the closing bell. The NASDAQ Comp ended with about a 0.5% move while the blue chips were only up slightly.
Opinion/Analysis:
Still, the market did rally on Tuesday. The move doesn’t really say much because the prices stayed below last week’s highs. Those highs are not very far away so we keep a close eye on them for signs that the market will try to move back to them. We would think there is significant resistance at least in the NASDAQ. The Dow may try for another high which would not surprise anyone, but we would again like to see the other indexes fall short of relative highs to provide more evidence against a further rally.
This is the end of the month period when stocks are generally stronger. The jobs’ report is looming large on Friday as the start of June brings a weaker seasonal period, remember the “sell in May and go away” mantra.
Housing:
The fourth largest homebuilder announced that it had not laid off enough workers over the past year and had painfully decided to lay off another 16% of its workforce, taking a $40 to $50 million charge. This news follows the 25% reduction that has happened already. The CEO said that “The homebuilding environment remains difficult and our current overhead levels are structured for a business that is larger than the market presently allows.” That doesn’t make it sound like a bottom is going to be in place any time soon.
Deflation Part Four:
To recap from last week, the current credit expansion has provided for the great asset inflation era with the price of homes and stocks moving up. Since this type of inflation does not warrant the Fed’s attention, it also goes unpunished. We think that asset inflation is the most difficult because it normally has the ability to drive the price of everything up. This includes the asset inflation itself because liquidity naturally flows to an asset because it’s going up.
Credit expansion has occurred simply because it has been easy to come by. You read about the mortgage loans that were being issued over the past year or so, with little or no documentation. In order for the residential real estate market to boom the way it did, there had to be a catalyst for it and the 1% Fed funds rate provided for low mortgage rates.
A credit expansion can only sustain itself with more and more credit and at some point it just can’t be done. This is the point at which we now find ourselves in, with the mortgage money getting tighter by the day. We know there is still plenty of money floating around to buy houses but the subprime and so called Alt-A money is slowly fading.
As you know, there is another driver of credit expansion and that is the government. The budget deficit has created a large amount of money that has been subsidized by many foreign governments. With the US trade deficit being what it is, very large indeed, these foreign governments have a lot of dollars flowing into their countries. The natural thing to do has been to send those dollars back to the US in the form of buying US Treasury bonds or actual US assets.
We believe this flow of funds may start having a different effect as our economy fades a little and the trade deficit begins to shrink. You are thinking that the Americans will continue to buy no matter what. Well, we think the contraction in the real estate market will hinder them in trying to purchase anything they want.
The other issue is if foreign central banks, or OPEC for that matter, decided that they may not want to deal in dollars. This is starting to occur already even without a reduction in the trade deficit but if the trade deficit started to shrink, there would be even less reason for these parties to continue to pursue dollar or dollar based assets.
The complacency on this issue is not a comforting thought but we do want to situate ourselves properly as we watch the US stock market drift along. The discussion is all about global warming, something that might be a problem in 50 years. Where is the discussion about the financial problems facing the US and its markets?
Dow Industrials: 13,521.34 +14.06
VIX: 13.53
HUI: 321.56
QQQQ: 46.81
QQQRS: 0.18 bid
QQQRT: 0.36 bid
RYVNX: 15.16
RYAIX: 20.45
RYCWX: 30.84
TLT: 86.36
BEGBX: 13.74
The Chinese decided to raise the tax on stock market trading profits. As you might gather, this did not provide a strong backdrop to trading in China overnight. Their market opened down hard but recovered quite a bit in the early going (sound familar?) but now a few hours into the trading day the index is down over 6% and the rest of the Asian market is having some trouble, too. Our stock futures are trading down ever so slightly this evening but that could change by morning if China's market drops much further.
From earlier this evening:
Market Action:
After a long holiday weekend, the bulls were particularly anxious to start buying on Tuesday, especially the NASDAQ type stocks (and the RUT, Russell 2000). In fact, the buying actually spilled over to the blue chips and the Dow was sporting a 60 point pop about a half hour into the session. From those highs the market drifted lower the rest of the morning with the Dow sinking 35 points into negative territory. From there, the buyers came in to run the prices back up into the closing bell. The NASDAQ Comp ended with about a 0.5% move while the blue chips were only up slightly.
Opinion/Analysis:
Still, the market did rally on Tuesday. The move doesn’t really say much because the prices stayed below last week’s highs. Those highs are not very far away so we keep a close eye on them for signs that the market will try to move back to them. We would think there is significant resistance at least in the NASDAQ. The Dow may try for another high which would not surprise anyone, but we would again like to see the other indexes fall short of relative highs to provide more evidence against a further rally.
This is the end of the month period when stocks are generally stronger. The jobs’ report is looming large on Friday as the start of June brings a weaker seasonal period, remember the “sell in May and go away” mantra.
Housing:
The fourth largest homebuilder announced that it had not laid off enough workers over the past year and had painfully decided to lay off another 16% of its workforce, taking a $40 to $50 million charge. This news follows the 25% reduction that has happened already. The CEO said that “The homebuilding environment remains difficult and our current overhead levels are structured for a business that is larger than the market presently allows.” That doesn’t make it sound like a bottom is going to be in place any time soon.
Deflation Part Four:
To recap from last week, the current credit expansion has provided for the great asset inflation era with the price of homes and stocks moving up. Since this type of inflation does not warrant the Fed’s attention, it also goes unpunished. We think that asset inflation is the most difficult because it normally has the ability to drive the price of everything up. This includes the asset inflation itself because liquidity naturally flows to an asset because it’s going up.
Credit expansion has occurred simply because it has been easy to come by. You read about the mortgage loans that were being issued over the past year or so, with little or no documentation. In order for the residential real estate market to boom the way it did, there had to be a catalyst for it and the 1% Fed funds rate provided for low mortgage rates.
A credit expansion can only sustain itself with more and more credit and at some point it just can’t be done. This is the point at which we now find ourselves in, with the mortgage money getting tighter by the day. We know there is still plenty of money floating around to buy houses but the subprime and so called Alt-A money is slowly fading.
As you know, there is another driver of credit expansion and that is the government. The budget deficit has created a large amount of money that has been subsidized by many foreign governments. With the US trade deficit being what it is, very large indeed, these foreign governments have a lot of dollars flowing into their countries. The natural thing to do has been to send those dollars back to the US in the form of buying US Treasury bonds or actual US assets.
We believe this flow of funds may start having a different effect as our economy fades a little and the trade deficit begins to shrink. You are thinking that the Americans will continue to buy no matter what. Well, we think the contraction in the real estate market will hinder them in trying to purchase anything they want.
The other issue is if foreign central banks, or OPEC for that matter, decided that they may not want to deal in dollars. This is starting to occur already even without a reduction in the trade deficit but if the trade deficit started to shrink, there would be even less reason for these parties to continue to pursue dollar or dollar based assets.
The complacency on this issue is not a comforting thought but we do want to situate ourselves properly as we watch the US stock market drift along. The discussion is all about global warming, something that might be a problem in 50 years. Where is the discussion about the financial problems facing the US and its markets?
Dow Industrials: 13,521.34 +14.06
VIX: 13.53
HUI: 321.56
QQQQ: 46.81
QQQRS: 0.18 bid
QQQRT: 0.36 bid
RYVNX: 15.16
RYAIX: 20.45
RYCWX: 30.84
TLT: 86.36
BEGBX: 13.74
Monday, May 28, 2007
Technically Weak Friday
[We would like to say thanks for a good time this past weekend in Evansville. We appreciate the hospitality we were shown when we were there and it was good to see you.]
Market Action:
The stock market decided to move up after Thursday’s strong down move. We figure that there are still enough people out there who are looking for “bargains” after the mini fire sale the day before. By the end of the day the Dow was sporting a pretty nice gain while the other major indexes were making modest recoveries from the day before. The Dow recovered nearly 80% of its Thursday loss, while the NASDAQ Comp and the SP 500 gained back about half.
Granted, Friday was the day before a long holiday weekend and the Friday before a Memorial Day holiday has has a strong upward bias in years past. (Last year’s Dow point move was up 67.56 compared to this year’s 66.15 up move.) We stress that very little can be taken from this day due to the technical factors surrounding the day, such as very light volume.
Opinion/Analysis:
In fact the volume was the lightest of the year so far.
The technical condition of the market is again precarious. We look at the recovery of the Dow on Friday and try to imagine how that can affect trading over the Next few days. As we said earlier, we can not gain much from Friday’s trading.
Our take on the position of the market is based on the NASDAQ 100, NDX. Starting on Thursday afternoon, the NDX dropped into a low near Thursday’s close and this drop was from a new relative high. It was a strong down move and could be the start of a fairly large down move. So far, the corrective rally has not taken much of the decline back. In fact, the retracement has been nearly a perfect 38.2% move.
If we see some follow through to the downside over the next few days, we might just conclude that the decline is for real. The Dow doesn’t have quite the same pattern but could be coaxed into it if the market could hold the high from last week. We did manage to have a down week last week in the three major indexes we follow. We now need some good follow through.
News for the Upcoming Week:
As we go into the new week, a short trading week, there are a few items of note, most of them being on Friday, especially the May jobs’ report:
This week—Maybe some more deflation talk from the Update
Tuesday—Consumer confidence
Thursday—First quarter GDP, second guess (first guess was 1.3%)
Thursday—Chicago Purchasing Managers Index (PMI)
Friday—Jobs’ report (commonly known as non-farm payrolls)
Friday—Personal income and spending (with PCE inflation)
Friday—May ISM Index
Friday—Pending home sales for April
Dow Industrials: 13,507.28 +66.15
VIX: 13.34
HUI: 322.25
QQQQ: 46.45
QQQRS: 0.24 bid
QQQRT: 0.49 bid
RYVNX: 15.32
RYAIX: 20.56
RYCWX: 30.88
TLT: 86.37
BEGBX: 13.75
Market Action:
The stock market decided to move up after Thursday’s strong down move. We figure that there are still enough people out there who are looking for “bargains” after the mini fire sale the day before. By the end of the day the Dow was sporting a pretty nice gain while the other major indexes were making modest recoveries from the day before. The Dow recovered nearly 80% of its Thursday loss, while the NASDAQ Comp and the SP 500 gained back about half.
Granted, Friday was the day before a long holiday weekend and the Friday before a Memorial Day holiday has has a strong upward bias in years past. (Last year’s Dow point move was up 67.56 compared to this year’s 66.15 up move.) We stress that very little can be taken from this day due to the technical factors surrounding the day, such as very light volume.
Opinion/Analysis:
In fact the volume was the lightest of the year so far.
The technical condition of the market is again precarious. We look at the recovery of the Dow on Friday and try to imagine how that can affect trading over the Next few days. As we said earlier, we can not gain much from Friday’s trading.
Our take on the position of the market is based on the NASDAQ 100, NDX. Starting on Thursday afternoon, the NDX dropped into a low near Thursday’s close and this drop was from a new relative high. It was a strong down move and could be the start of a fairly large down move. So far, the corrective rally has not taken much of the decline back. In fact, the retracement has been nearly a perfect 38.2% move.
If we see some follow through to the downside over the next few days, we might just conclude that the decline is for real. The Dow doesn’t have quite the same pattern but could be coaxed into it if the market could hold the high from last week. We did manage to have a down week last week in the three major indexes we follow. We now need some good follow through.
News for the Upcoming Week:
As we go into the new week, a short trading week, there are a few items of note, most of them being on Friday, especially the May jobs’ report:
This week—Maybe some more deflation talk from the Update
Tuesday—Consumer confidence
Thursday—First quarter GDP, second guess (first guess was 1.3%)
Thursday—Chicago Purchasing Managers Index (PMI)
Friday—Jobs’ report (commonly known as non-farm payrolls)
Friday—Personal income and spending (with PCE inflation)
Friday—May ISM Index
Friday—Pending home sales for April
Dow Industrials: 13,507.28 +66.15
VIX: 13.34
HUI: 322.25
QQQQ: 46.45
QQQRS: 0.24 bid
QQQRT: 0.49 bid
RYVNX: 15.32
RYAIX: 20.56
RYCWX: 30.88
TLT: 86.37
BEGBX: 13.75
Thursday, May 24, 2007
A Good Down Day for a Change
Market Action:
Before the market opened, we found out that durable goods orders were up a little less than expected but last month's number was revised higher. This news did not seem to get much attention but the pre-market trading was stronger. The Dow got off to a strong start in the morning up about 45 points or so.
Then new home sales were reported to be up about 16% last month. The prices were another story as they fell about 10% from last month and some considered that the pop in sales might have been due to the drop in prices. As this report was released the Dow popped again and traded up around 100 points to trade at a new high, but its friends didn’t feel like joining in. It is true they were up early but nothing quite like the Dow. Even the SP 500 didn’t get to a new high. Other indexes were struggling to stay up in the morning but just couldn’t hold the gains. One by one, they all fell into negative territory.
After the Dow’s bolt up to a new high with a 100 point gain, it quickly lost that 100 points and then bled another 100 by the end of the day. It did manage to get a little bounce at the close but still closed down 84 points, or about 0.62%. The SP 500 was down nearly 1% and the NASDAQ Comp was down 1.5% so this was a day of strong downside action.
The volume on the NYSE was a strong 1.7 billion shares and this on a strong down day, with declining stocks exceeding advancers by about 2000. This is some confirmation of a turn in the market. The outside down day in the Dow is another.
Opinion/Analysis:
We want to reserve judgment on this market until we see a bit more downside but this is a good start to a down move if there is going to be one now. The prices fell through the upward trend line support on Wednesday and in last night’s post we said that a break in trend support should give “us a little instantaneous move in the opposite direction, which we got on Wednesday” and this move continued on Thursday.
In our opinion, there is much hot air to come out of the overpriced market but we can’t be sure this is the move until we see more follow through. We remain bearish with bearish positions and welcome a day like Thursday. The nagging question is can this market now go down or is it another in a long series of fake outs.
The Dow made a very strong reversal move today going up 100 and down 200 and for now, this is a good start. We will examine the moves it can make over the next few trading days and maybe we can get a better idea what its intentions are.
The market is closed on Monday for Memorial Day and we will return Monday evening for your reading pleasure on Tuesday morning. We will abandon the Deflation talk this evening but will resume that next week, especially if the market decides to get dull again. Have a happy and safe holiday.
Dow Industrials: 13,441.13 -84.52 (four down days in a row)
VIX: 14.08
HUI: 318.74 (down 10.67)
QQQQ: 46.16
QQQRS: 0.33 bid
QQQRT: 0.63 bid
RYVNX: 15.55
RYAIX: 20.70
RYCWX: 31.15
TLT: 86.57
BEGBX: 13.77
Before the market opened, we found out that durable goods orders were up a little less than expected but last month's number was revised higher. This news did not seem to get much attention but the pre-market trading was stronger. The Dow got off to a strong start in the morning up about 45 points or so.
Then new home sales were reported to be up about 16% last month. The prices were another story as they fell about 10% from last month and some considered that the pop in sales might have been due to the drop in prices. As this report was released the Dow popped again and traded up around 100 points to trade at a new high, but its friends didn’t feel like joining in. It is true they were up early but nothing quite like the Dow. Even the SP 500 didn’t get to a new high. Other indexes were struggling to stay up in the morning but just couldn’t hold the gains. One by one, they all fell into negative territory.
After the Dow’s bolt up to a new high with a 100 point gain, it quickly lost that 100 points and then bled another 100 by the end of the day. It did manage to get a little bounce at the close but still closed down 84 points, or about 0.62%. The SP 500 was down nearly 1% and the NASDAQ Comp was down 1.5% so this was a day of strong downside action.
The volume on the NYSE was a strong 1.7 billion shares and this on a strong down day, with declining stocks exceeding advancers by about 2000. This is some confirmation of a turn in the market. The outside down day in the Dow is another.
Opinion/Analysis:
We want to reserve judgment on this market until we see a bit more downside but this is a good start to a down move if there is going to be one now. The prices fell through the upward trend line support on Wednesday and in last night’s post we said that a break in trend support should give “us a little instantaneous move in the opposite direction, which we got on Wednesday” and this move continued on Thursday.
In our opinion, there is much hot air to come out of the overpriced market but we can’t be sure this is the move until we see more follow through. We remain bearish with bearish positions and welcome a day like Thursday. The nagging question is can this market now go down or is it another in a long series of fake outs.
The Dow made a very strong reversal move today going up 100 and down 200 and for now, this is a good start. We will examine the moves it can make over the next few trading days and maybe we can get a better idea what its intentions are.
The market is closed on Monday for Memorial Day and we will return Monday evening for your reading pleasure on Tuesday morning. We will abandon the Deflation talk this evening but will resume that next week, especially if the market decides to get dull again. Have a happy and safe holiday.
Dow Industrials: 13,441.13 -84.52 (four down days in a row)
VIX: 14.08
HUI: 318.74 (down 10.67)
QQQQ: 46.16
QQQRS: 0.33 bid
QQQRT: 0.63 bid
RYVNX: 15.55
RYAIX: 20.70
RYCWX: 31.15
TLT: 86.57
BEGBX: 13.77
Wednesday, May 23, 2007
Three Down Days in a Row
Market Action:
Wednesday did provide some market action that seems worthy to present here. Let us recall that the Dow has now been down three days in a row and four out of five days. While the down price is not very much, the price break could still be important.
For whatever reason, and that could be just because it was Wednesday, the stock futures were up before the opening bell. The trading in the first hour pushed the Dow up about 70 points to a new record trading high. And, for the first time in this run, the SP 500 managed to trade above its 2000 high. But, both indexes closed down on the day.
With about two hours to go in the trading day, the market sold off, taking the NASDAQ 100 down 12 points on the day but 20 points down from the highs. So, here we are in the middle of the week and we have another signal from the market that all is not so well. The up trend line that was in place for about a week has been broken and with it, stock prices are now in a questionable place.
Opinion/Analysis:
Normally, breaking the trend line gives us a little instantaneous move in the opposite direction, which we got on Wednesday. Now, the question is, “Does this break set us up for the next move down?”
We have been patiently waiting for the market to turn down and each time we think there has been a signal from the market, we get an upside reversal. On Wednesday, the market gave us this new direction that may last or may not. Some follow through would give us some more confirmation that the market is ready to go down.
With the voices in the news so bullish, and our technical indicators so weak, we can’t say that we would be surprised with a down move since we have been expecting it for the last several weeks. But, it would make us feel better about our analysis.
We continue to hold our bearish positions, with great pain, but we think that any other course would lead to bigger problems.
Deflation Part Three:
Since the market did provide some entertainment on Wednesday we will keep this section brief this evening.
In Part Two we discussed the global liquidity madness and tonight we would like to provide a little more information. As the US expanded its debt and its trade deficit there was an unintended consequence, world wide credit expansion. With a number of countries tying their currency to the US currency, they had a need to follow the US in the expansion of their own currency.
If you look at the dollar value from its recent high in 2001 to its low in 2005, it dropped approximately 1/3 in value from 120 to 80. This happened to be the same period of time that the Fed was lowering rates to 1% which as we have been reporting is one of the reasons for the dollar’s fall.
Importantly, the currencies that were/are pegged to the dollar had to follow suit and match their currency expansion to the dollar at least somewhat which helped increase credit expansion in those countries as well. Eventually, it seems the whole world has been expanding credit and all manner of assets have been going up except for the dollar of all things.
It remains our position that the dollar will now find some way to rally as it will again be sought after and this will be the start of the great deflation that we have been expecting ever since the housing market started to fade.
Dow Industrials: 13,525.65 -14.30
VIX: 13.24
HUI: 329.41
QQQQ: 46.83
QQQRS: 0.21 bid
QQQRT: 0.39 bid
RYVNX: 15.07
RYAIX: 20.38
RYCWX: 30.77
TLT: 86.49
BEGBX: 13.78
Wednesday did provide some market action that seems worthy to present here. Let us recall that the Dow has now been down three days in a row and four out of five days. While the down price is not very much, the price break could still be important.
For whatever reason, and that could be just because it was Wednesday, the stock futures were up before the opening bell. The trading in the first hour pushed the Dow up about 70 points to a new record trading high. And, for the first time in this run, the SP 500 managed to trade above its 2000 high. But, both indexes closed down on the day.
With about two hours to go in the trading day, the market sold off, taking the NASDAQ 100 down 12 points on the day but 20 points down from the highs. So, here we are in the middle of the week and we have another signal from the market that all is not so well. The up trend line that was in place for about a week has been broken and with it, stock prices are now in a questionable place.
Opinion/Analysis:
Normally, breaking the trend line gives us a little instantaneous move in the opposite direction, which we got on Wednesday. Now, the question is, “Does this break set us up for the next move down?”
We have been patiently waiting for the market to turn down and each time we think there has been a signal from the market, we get an upside reversal. On Wednesday, the market gave us this new direction that may last or may not. Some follow through would give us some more confirmation that the market is ready to go down.
With the voices in the news so bullish, and our technical indicators so weak, we can’t say that we would be surprised with a down move since we have been expecting it for the last several weeks. But, it would make us feel better about our analysis.
We continue to hold our bearish positions, with great pain, but we think that any other course would lead to bigger problems.
Deflation Part Three:
Since the market did provide some entertainment on Wednesday we will keep this section brief this evening.
In Part Two we discussed the global liquidity madness and tonight we would like to provide a little more information. As the US expanded its debt and its trade deficit there was an unintended consequence, world wide credit expansion. With a number of countries tying their currency to the US currency, they had a need to follow the US in the expansion of their own currency.
If you look at the dollar value from its recent high in 2001 to its low in 2005, it dropped approximately 1/3 in value from 120 to 80. This happened to be the same period of time that the Fed was lowering rates to 1% which as we have been reporting is one of the reasons for the dollar’s fall.
Importantly, the currencies that were/are pegged to the dollar had to follow suit and match their currency expansion to the dollar at least somewhat which helped increase credit expansion in those countries as well. Eventually, it seems the whole world has been expanding credit and all manner of assets have been going up except for the dollar of all things.
It remains our position that the dollar will now find some way to rally as it will again be sought after and this will be the start of the great deflation that we have been expecting ever since the housing market started to fade.
Dow Industrials: 13,525.65 -14.30
VIX: 13.24
HUI: 329.41
QQQQ: 46.83
QQQRS: 0.21 bid
QQQRT: 0.39 bid
RYVNX: 15.07
RYAIX: 20.38
RYCWX: 30.77
TLT: 86.49
BEGBX: 13.78
Tuesday, May 22, 2007
Deflation Part Two
Market Action:
Not much movement of any kind on Tuesday.
Opinion/Analysis:
Nothing to report on the market except it didn’t do much and didn’t give us much to comment on.
Deflation Part Two:
The current global liquidity madness is brought to you mostly by the credit hungry US government and its citizens. As credit, more appropriately called Debt, continues to expand, inflation has no where to go but up. The calculators of the CPI factors are doing their best to make sure the actual inflation doesn’t come through. Some of this is due to the need to contain Social Security payments because the increases in monthly Social Security are tied directly to the CPI.
The main ingredient of a credit expansion that exudes inflation is the creation of money through various means. The one we are concerned with is the mortgage market and how it gets its funding. Much of the funding there comes in the form of securitization which means that the various mortgage pools are sold to investors.
Some, well, a lot, of the mortgage pools are packaged into CMO’s that slice and dice the payments from this pool into cash flows for various pieces, called tranches. The interesting thing that we don’t fully know is who would buy the riskier tranches.
What we do know is that some of the subprime mortgages have failed to provide for some of those risky classes. Someone has taken a huge loss in them and we know that they are still showing losses in some of the later pools.
Our natural answer to the question of money expansion is that the Fed stands in the background and buys Treasury securities to provide general liquidity to the planet. The government spends more money than in takes in and sells bonds to whoever will buy them. This has recently been overseas countries. So, as we purchase goods from them, they have an excess of dollars which they use to buy our government bonds. From there the cycle continues; but, where is the Fed in this maze?
We think they have been very supportive in this endeavor but other foreign central banks have aided and abetted them. As we purchase goods from all over the world, those central banks can provide more liquidity than they would have otherwise. In fact China has been booming for several years based mainly on the trade surplus they have with the US.
We see this as Part One, that is, the credit expansion phase. Next comes the credit contraction phase which the Fed knows is coming but is trying to put it off as long as possible. This is not a good thing.
Dow Industrials: 13,539.95 -2.93 (down?)
VIX: 13.06
HUI: 324.85
QQQQ: 47.05?
QQQRS: 0.17 bid
QQQRT: 0.32 bid
RYVNX: 14.88
RYAIX: 20.25
RYCWX: 30.68
TLT: 86.74
BEGBX: 13.80
Not much movement of any kind on Tuesday.
Opinion/Analysis:
Nothing to report on the market except it didn’t do much and didn’t give us much to comment on.
Deflation Part Two:
The current global liquidity madness is brought to you mostly by the credit hungry US government and its citizens. As credit, more appropriately called Debt, continues to expand, inflation has no where to go but up. The calculators of the CPI factors are doing their best to make sure the actual inflation doesn’t come through. Some of this is due to the need to contain Social Security payments because the increases in monthly Social Security are tied directly to the CPI.
The main ingredient of a credit expansion that exudes inflation is the creation of money through various means. The one we are concerned with is the mortgage market and how it gets its funding. Much of the funding there comes in the form of securitization which means that the various mortgage pools are sold to investors.
Some, well, a lot, of the mortgage pools are packaged into CMO’s that slice and dice the payments from this pool into cash flows for various pieces, called tranches. The interesting thing that we don’t fully know is who would buy the riskier tranches.
What we do know is that some of the subprime mortgages have failed to provide for some of those risky classes. Someone has taken a huge loss in them and we know that they are still showing losses in some of the later pools.
Our natural answer to the question of money expansion is that the Fed stands in the background and buys Treasury securities to provide general liquidity to the planet. The government spends more money than in takes in and sells bonds to whoever will buy them. This has recently been overseas countries. So, as we purchase goods from them, they have an excess of dollars which they use to buy our government bonds. From there the cycle continues; but, where is the Fed in this maze?
We think they have been very supportive in this endeavor but other foreign central banks have aided and abetted them. As we purchase goods from all over the world, those central banks can provide more liquidity than they would have otherwise. In fact China has been booming for several years based mainly on the trade surplus they have with the US.
We see this as Part One, that is, the credit expansion phase. Next comes the credit contraction phase which the Fed knows is coming but is trying to put it off as long as possible. This is not a good thing.
Dow Industrials: 13,539.95 -2.93 (down?)
VIX: 13.06
HUI: 324.85
QQQQ: 47.05?
QQQRS: 0.17 bid
QQQRT: 0.32 bid
RYVNX: 14.88
RYAIX: 20.25
RYCWX: 30.68
TLT: 86.74
BEGBX: 13.80
Monday, May 21, 2007
Deflation Part One
Market Action:
The market unceremoniously traded higher on this Monday morning charging to new relative highs in all the major indexes we follow. With about an hour to go, someone pushed a sell button somewhere and brought the averages down off the mountain top.
Opinion/Analysis:
We have nothing to say about the market this evening so we have decided to give you the day off. This is a holiday week and volume will probably be light again unless for some reason we find some sellers out there.
Deflation Part One:
As the stock market continues its heavenly journey, we must find something else to pass the time so the topic of the week will be Deflation. Looking back over the past few years, as the residential housing market has faded, we have seen very little in terms of headline inflation. As the media focuses on “core” inflation and the market waits for “good” news on the “core” inflation, there are real inflation forces at work that can not be denied even with the modest “core” inflation figures.
Our premise rests in the residential real estate market being the key to the economy and ultimately the stock market. The reason the consumer hasn’t been “tired” in the last five years is their ability to extract cash from their houses that have “appreciated”. The economists are at least recognizing that the consumer might be having some trouble but it’s because of the higher gas prices, not home price depreciation. The economists say that the economy won’t be affected by the consumers’ lack of funds.
Plus, the real estate market seems to be doing ok in the media but for some reason home builders and the home improvement stores are having difficulty. We even see ads for low teaser interest rates on homes, like get $500,000 for your mortgage and pay under $1500 a month. So, even though subprime mortgage companies are having trouble, there doesn’t seem to be any shortage of funds for mortgages in general.
We’ll be discussing deflation this week, unless something better comes along.
Dow Industrials: 13,542.88 -13.65
VIX: 13.30
HUI: 330.77
QQQQ: 47.01
QQQRS: 0.18 bid
QQQRT: 0.35 bid
RYVNX: 14.95
RYAIX: 20.30
RYCWX: 30.66
TLT: 8719
BEGBX: 13.81
The market unceremoniously traded higher on this Monday morning charging to new relative highs in all the major indexes we follow. With about an hour to go, someone pushed a sell button somewhere and brought the averages down off the mountain top.
Opinion/Analysis:
We have nothing to say about the market this evening so we have decided to give you the day off. This is a holiday week and volume will probably be light again unless for some reason we find some sellers out there.
Deflation Part One:
As the stock market continues its heavenly journey, we must find something else to pass the time so the topic of the week will be Deflation. Looking back over the past few years, as the residential housing market has faded, we have seen very little in terms of headline inflation. As the media focuses on “core” inflation and the market waits for “good” news on the “core” inflation, there are real inflation forces at work that can not be denied even with the modest “core” inflation figures.
Our premise rests in the residential real estate market being the key to the economy and ultimately the stock market. The reason the consumer hasn’t been “tired” in the last five years is their ability to extract cash from their houses that have “appreciated”. The economists are at least recognizing that the consumer might be having some trouble but it’s because of the higher gas prices, not home price depreciation. The economists say that the economy won’t be affected by the consumers’ lack of funds.
Plus, the real estate market seems to be doing ok in the media but for some reason home builders and the home improvement stores are having difficulty. We even see ads for low teaser interest rates on homes, like get $500,000 for your mortgage and pay under $1500 a month. So, even though subprime mortgage companies are having trouble, there doesn’t seem to be any shortage of funds for mortgages in general.
We’ll be discussing deflation this week, unless something better comes along.
Dow Industrials: 13,542.88 -13.65
VIX: 13.30
HUI: 330.77
QQQQ: 47.01
QQQRS: 0.18 bid
QQQRT: 0.35 bid
RYVNX: 14.95
RYAIX: 20.30
RYCWX: 30.66
TLT: 8719
BEGBX: 13.81
Sunday, May 20, 2007
Can We Have a Down Week?
Market Action:
Friday happened to be options expiration so there seemed to be some buyers out early and the tone of the market was, yet again, bullish. Volume was stronger, most likely due to options expiration, but not as strong as we saw on May 1st when there was 130 million more shares traded on the NYSE than last Friday.
Opinion/Analysis:
By many measures, the stock market is getting tired or at least showing signs of fatigue. The main ingredients are the soldiers are not following the lead of the generals, meaning the smaller stocks are not going up anymore.
Last week, which the media has let everyone know, the Dow was up for the seventh straight week and there was nothing out there that could derail this freight train in the upcoming week. At the same time, the NASDAQ Comp, the NASDAQ 100 and the RUT (Russell 2000) were all down. The semi-conductors were down 3% last week.
A further market rally seems to be a foregone conclusion by most pundits, except for a few of us. As you well know, this market has gone up in spite of our analysis to the contrary. This is the kind of rally that deserves to go down, and go down hard, but for some reason the media can imagine a market that may never go down again. This is simply not true and it is so not true when this kind of thinking is going on. We think there will come a day very soon that the market will just drop for no reason at all, and then keep dropping because of the leverage of the hedge funds or for some other reason.
An article in the WSJ caught our eye this evening, “Economy May Revive Without Consumers”, talking about how, yes, the consumers did pull in their horns a bit in April but not to worry because the other areas of the economy would be able to pick up the slack. Since we haven’t had a consumer led recession in so long, there won’t be one. We beg to differ on this score. The consumer will lead this recession as they stop buying, mostly, houses, but other things as well. If the consumer won’t buy things, why would they be made in the first place?
News for the Upcoming Week:
This week—The Update will tackle the deflation topic.
Tuesday—Redbook sales index
Thursday—April durable goods orders
Thursday—April new home sales
Friday—April existing home sales
Dow Industrials: 13,556.53 +79.81
VIX: 12.76
HUI: 328.59
QQQQ: 46
QQQRS: 0.25 bid
QQQRT: 0.45 bid
RYVNX: 15.17
RYAIX: 20.44
RYCWX: 30.34
TLT: 86.93
BEGBX: 13.84
Friday happened to be options expiration so there seemed to be some buyers out early and the tone of the market was, yet again, bullish. Volume was stronger, most likely due to options expiration, but not as strong as we saw on May 1st when there was 130 million more shares traded on the NYSE than last Friday.
Opinion/Analysis:
By many measures, the stock market is getting tired or at least showing signs of fatigue. The main ingredients are the soldiers are not following the lead of the generals, meaning the smaller stocks are not going up anymore.
Last week, which the media has let everyone know, the Dow was up for the seventh straight week and there was nothing out there that could derail this freight train in the upcoming week. At the same time, the NASDAQ Comp, the NASDAQ 100 and the RUT (Russell 2000) were all down. The semi-conductors were down 3% last week.
A further market rally seems to be a foregone conclusion by most pundits, except for a few of us. As you well know, this market has gone up in spite of our analysis to the contrary. This is the kind of rally that deserves to go down, and go down hard, but for some reason the media can imagine a market that may never go down again. This is simply not true and it is so not true when this kind of thinking is going on. We think there will come a day very soon that the market will just drop for no reason at all, and then keep dropping because of the leverage of the hedge funds or for some other reason.
An article in the WSJ caught our eye this evening, “Economy May Revive Without Consumers”, talking about how, yes, the consumers did pull in their horns a bit in April but not to worry because the other areas of the economy would be able to pick up the slack. Since we haven’t had a consumer led recession in so long, there won’t be one. We beg to differ on this score. The consumer will lead this recession as they stop buying, mostly, houses, but other things as well. If the consumer won’t buy things, why would they be made in the first place?
News for the Upcoming Week:
This week—The Update will tackle the deflation topic.
Tuesday—Redbook sales index
Thursday—April durable goods orders
Thursday—April new home sales
Friday—April existing home sales
Dow Industrials: 13,556.53 +79.81
VIX: 12.76
HUI: 328.59
QQQQ: 46
QQQRS: 0.25 bid
QQQRT: 0.45 bid
RYVNX: 15.17
RYAIX: 20.44
RYCWX: 30.34
TLT: 86.93
BEGBX: 13.84
Thursday, May 17, 2007
Did the Market Have a Pulse Thursday?
Market Action:
With options expiration due on Friday, we figured there would be some volatility this week and through Wednesday that was the case. We’re not sure if the market was actually open on Thursday since it traded in such a narrow range and on light volume.
Even with the release of the LEI, leading economic indicators, there wasn’t much stirring but, of course, that number was not worth stirring over. We had thought that with the stock market up strongly in April that the LEI would get a good boost in the arm. That wasn’t the case as stock prices were one of only two of the ten indicators showing gains, the other was the real money supply. (To make a statement about that, we would have to say that those are not the best two to be showing gains especially if the others are showing losses.) Seven others were down.
The actual number was down 0.5%, but last month’s number was revised up from 0.1% to 0.6% which is exactly 0.5%. With all of these big month late modifications in the number, the value of the LEI seems to be going down and the stock market did not care one bit about them. There was no pulse at all in stocks.
Opinion/Analysis:
Thursday’s trading didn’t add much to the stock picture and we figure we should leave you alone this evening. There were some comments that Bernanke made about the housing market which didn’t sound like a bail out, but something like that will be tried. We’re not sure how effective it will be, especially since so many people have lost their homes due to foreclosure already. Anyway, Bernanke still thinks that the housing, what word should we use, oh yes, “problem” really isn’t too bad. “…the financial system will absorb the losses from the subprime mortgage problems without serious problems.” Oh, maybe we should have said Problem twice like he did.
Anyway, have a good weekend and we will try again next week.
Dow Industrials: 13,476.72 -10.81
VIX: 13.51
HUI: 322.59 (gold weaker)
QQQQ: 46.33
QQQRS: 0.34 bid
QQQRT: 0.61 bid
RYVNX: 15.36
RYAIX: 20.57
RYCWX: 30.93
TLT: 87.51
BEGBX: 13.84 (dollar stronger)
With options expiration due on Friday, we figured there would be some volatility this week and through Wednesday that was the case. We’re not sure if the market was actually open on Thursday since it traded in such a narrow range and on light volume.
Even with the release of the LEI, leading economic indicators, there wasn’t much stirring but, of course, that number was not worth stirring over. We had thought that with the stock market up strongly in April that the LEI would get a good boost in the arm. That wasn’t the case as stock prices were one of only two of the ten indicators showing gains, the other was the real money supply. (To make a statement about that, we would have to say that those are not the best two to be showing gains especially if the others are showing losses.) Seven others were down.
The actual number was down 0.5%, but last month’s number was revised up from 0.1% to 0.6% which is exactly 0.5%. With all of these big month late modifications in the number, the value of the LEI seems to be going down and the stock market did not care one bit about them. There was no pulse at all in stocks.
Opinion/Analysis:
Thursday’s trading didn’t add much to the stock picture and we figure we should leave you alone this evening. There were some comments that Bernanke made about the housing market which didn’t sound like a bail out, but something like that will be tried. We’re not sure how effective it will be, especially since so many people have lost their homes due to foreclosure already. Anyway, Bernanke still thinks that the housing, what word should we use, oh yes, “problem” really isn’t too bad. “…the financial system will absorb the losses from the subprime mortgage problems without serious problems.” Oh, maybe we should have said Problem twice like he did.
Anyway, have a good weekend and we will try again next week.
Dow Industrials: 13,476.72 -10.81
VIX: 13.51
HUI: 322.59 (gold weaker)
QQQQ: 46.33
QQQRS: 0.34 bid
QQQRT: 0.61 bid
RYVNX: 15.36
RYAIX: 20.57
RYCWX: 30.93
TLT: 87.51
BEGBX: 13.84 (dollar stronger)
Wednesday, May 16, 2007
Back to the Same Old, Same Old
Market Action:
You already know what happened on Wednesday, a new Dow record high, but we will painfully push through some of the happenings. As we mentioned in our last post, volatility would pick up a bit this week and on Wednesday there was some movement. Early morning strength derived from mixed housing reports, something for everyone, particularly suited to the neo-bulls.
The actual housing starts were up (???) for the month of April, while building permits were down. Therefore, the stocks could rally for whatever reason they liked, stronger starts is positive and weaker permits allows the Fed to lower rates, or something like that.
All was well for about an hour and a half and then, out of no where a wave of selling came in taking the major averages down for about a half hour. From there though it was up the rest of the day with the Dow closing at another record high and basically closing at the highest ever, 13,487.
Opinion/Analysis:
Maybe we should have stuck with our favorite sector, the semi-conductors, which happened not to participate in the rally on Wednesday. However, they have been on a run the last month, but remain below the highs of early 2006.
The SP 500 joined the Dow on Wednesday by moving to new relative highs for the move. This same thing can Not be said for the other indexes we follow. We are going to include coverage of the RUT (Russell 2000) more frequently in these pages, since it has been one of the leading indexes in the market since 2003. Looking at a ten day intraday chart for the Dow and RUT, they go in the opposite directions.
(For a picture of this, please use BigCharts in the links to the left and use the advanced charts. If you enter the RUT in the symbol space and use the time of 10 days and frequency of 5 minutes and then click the compare to box and click on DJIA, you will see the divergence of the two indexes.)
Right now, we feel like the technical indicators are the only thing we can watch. The media is so bullish that it can’t present an unbiased opinion on the market. Yeah, we know, what else is new?
Some of the items we noticed as we put together our numbers were the volume was lighter on Wednesday than Thursday and the new 52 week highs were less also. With these items starting to glare out from the market, other people should begin to see them too.
What was Down on Wednesday? That would be gold and silver and oil, along with the Euro, since the dollar was up again and the aforementioned semi-conductor index.
What will Thursday bring?
Dow Industrials: 13,487.53 +103.69 (yes, a record)
VIX: 13.50
HUI: 325.44
QQQQ: 46.55
QQQRS: 0.29 bid
QQQRT: 0.54 bid
RYVNX: 15.24
RYAIX: 20.49
RYCWX: 30.87
TLT: 87.87
BEGBX: 13.88 (dollar is moving up)
You already know what happened on Wednesday, a new Dow record high, but we will painfully push through some of the happenings. As we mentioned in our last post, volatility would pick up a bit this week and on Wednesday there was some movement. Early morning strength derived from mixed housing reports, something for everyone, particularly suited to the neo-bulls.
The actual housing starts were up (???) for the month of April, while building permits were down. Therefore, the stocks could rally for whatever reason they liked, stronger starts is positive and weaker permits allows the Fed to lower rates, or something like that.
All was well for about an hour and a half and then, out of no where a wave of selling came in taking the major averages down for about a half hour. From there though it was up the rest of the day with the Dow closing at another record high and basically closing at the highest ever, 13,487.
Opinion/Analysis:
Maybe we should have stuck with our favorite sector, the semi-conductors, which happened not to participate in the rally on Wednesday. However, they have been on a run the last month, but remain below the highs of early 2006.
The SP 500 joined the Dow on Wednesday by moving to new relative highs for the move. This same thing can Not be said for the other indexes we follow. We are going to include coverage of the RUT (Russell 2000) more frequently in these pages, since it has been one of the leading indexes in the market since 2003. Looking at a ten day intraday chart for the Dow and RUT, they go in the opposite directions.
(For a picture of this, please use BigCharts in the links to the left and use the advanced charts. If you enter the RUT in the symbol space and use the time of 10 days and frequency of 5 minutes and then click the compare to box and click on DJIA, you will see the divergence of the two indexes.)
Right now, we feel like the technical indicators are the only thing we can watch. The media is so bullish that it can’t present an unbiased opinion on the market. Yeah, we know, what else is new?
Some of the items we noticed as we put together our numbers were the volume was lighter on Wednesday than Thursday and the new 52 week highs were less also. With these items starting to glare out from the market, other people should begin to see them too.
What was Down on Wednesday? That would be gold and silver and oil, along with the Euro, since the dollar was up again and the aforementioned semi-conductor index.
What will Thursday bring?
Dow Industrials: 13,487.53 +103.69 (yes, a record)
VIX: 13.50
HUI: 325.44
QQQQ: 46.55
QQQRS: 0.29 bid
QQQRT: 0.54 bid
RYVNX: 15.24
RYAIX: 20.49
RYCWX: 30.87
TLT: 87.87
BEGBX: 13.88 (dollar is moving up)
Tuesday, May 15, 2007
Something Different
Market Action:
The “core” CPI, you know the one, without food and energy, was up 0.2% last month, just like we expected in our last post. (By the way, we didn’t guess the number; we expected the number to be the maximum allowable by the market.) With this news the market, having been “worried” about the CPI, turned around before the opening bell so the Dow jumped about 35 points with the other indexes up a bit, too.
From there, the market fell back until about a half hour into the session. (Prepare yourself for some sarcasm.) With the market in need of some good news so it could trade higher, voila, a news item hit the wire that satisfied the bill: Home prices dropped for a third straight quarter. The logic is twisted but, if you have been following the homage paid to the Fed’s ability to move the market higher with its little wave of the interest rate wand, you would no doubt understand that the Fed would be looking at that particular piece of data and resolve to lower rates at its earliest convenience. (It makes so little sense to us.)
That little piece of news vaulted the market higher, nearly 100 points on the Dow inside of about 15 minutes. Then, after a modest pullback, the Dow continued up until it was up about 135 around midday.
At the same time the broader market didn’t quite react the same way. Yes, the broad market moved up powerfully with the housing news but then when it tried to rally after that pull back there was a muted up move that didn’t even get back to that earlier high, except for the SP 500 and the Dow. This was something different than we have seen before. We think different is good.
From the Dow highs of the day, up around 135, there was a slow leak in the market that lasted the rest of the day. The Dow itself managed to stay positive but all the other indexes we follow were down on the day with the NASDAQ Comp and 100 as well as the RUT (Russell 2000) down about 1% on the day.
Opinion/Analysis:
The stock market staged a dramatic reversal on Tuesday on some heavier volume than we’ve seen for a few weeks. This nascent down move still needs to make more progress in order for it to get some respect but the pattern is in place for a strong down move.
The SP 500 did manage to make a new relative high in the midday rally, along with the Dow, but it reversed just like all of the indexes.
We actually think the Dow closing up on the day, to an all time high, is poetic. We think of it as the general leading the troops to battle and then looking back to see that the soldiers have actually abandoned the fight.
This is options expiration week and with it we normally see some volatility but this week could see more than a normal amount due to the position of the market. The volatility index, VIX, moved up slightly on Tuesday but could move dramatically higher if you look at the chart (see BigCharts link at the left).
There is a new wind blowing across Wall Street and we think it is in the southerly direction.
China Update:
We mentioned China in our last post and note that is traded down about 3.5% after we finished. Apparently, a 3.5% down move is not worthy to mention when we have such good CPI news to enchant the US stock market. This is something to watch very carefully and we plan to add it to our watch list this week—we will report any developments.
Dow Industrials: 13,383.84 +37.06 (another record high)
VIX: 14.01
HUI: 329.39
QQQQ: 46.10
QQQRS: 0.42 bid
QQQRT: 0.73 bid
RYVNX: 15.56
RYAIX: 20.70
RYCWX: 31.38
TLT: 87.93
BEGBX: 13.94
The “core” CPI, you know the one, without food and energy, was up 0.2% last month, just like we expected in our last post. (By the way, we didn’t guess the number; we expected the number to be the maximum allowable by the market.) With this news the market, having been “worried” about the CPI, turned around before the opening bell so the Dow jumped about 35 points with the other indexes up a bit, too.
From there, the market fell back until about a half hour into the session. (Prepare yourself for some sarcasm.) With the market in need of some good news so it could trade higher, voila, a news item hit the wire that satisfied the bill: Home prices dropped for a third straight quarter. The logic is twisted but, if you have been following the homage paid to the Fed’s ability to move the market higher with its little wave of the interest rate wand, you would no doubt understand that the Fed would be looking at that particular piece of data and resolve to lower rates at its earliest convenience. (It makes so little sense to us.)
That little piece of news vaulted the market higher, nearly 100 points on the Dow inside of about 15 minutes. Then, after a modest pullback, the Dow continued up until it was up about 135 around midday.
At the same time the broader market didn’t quite react the same way. Yes, the broad market moved up powerfully with the housing news but then when it tried to rally after that pull back there was a muted up move that didn’t even get back to that earlier high, except for the SP 500 and the Dow. This was something different than we have seen before. We think different is good.
From the Dow highs of the day, up around 135, there was a slow leak in the market that lasted the rest of the day. The Dow itself managed to stay positive but all the other indexes we follow were down on the day with the NASDAQ Comp and 100 as well as the RUT (Russell 2000) down about 1% on the day.
Opinion/Analysis:
The stock market staged a dramatic reversal on Tuesday on some heavier volume than we’ve seen for a few weeks. This nascent down move still needs to make more progress in order for it to get some respect but the pattern is in place for a strong down move.
The SP 500 did manage to make a new relative high in the midday rally, along with the Dow, but it reversed just like all of the indexes.
We actually think the Dow closing up on the day, to an all time high, is poetic. We think of it as the general leading the troops to battle and then looking back to see that the soldiers have actually abandoned the fight.
This is options expiration week and with it we normally see some volatility but this week could see more than a normal amount due to the position of the market. The volatility index, VIX, moved up slightly on Tuesday but could move dramatically higher if you look at the chart (see BigCharts link at the left).
There is a new wind blowing across Wall Street and we think it is in the southerly direction.
China Update:
We mentioned China in our last post and note that is traded down about 3.5% after we finished. Apparently, a 3.5% down move is not worthy to mention when we have such good CPI news to enchant the US stock market. This is something to watch very carefully and we plan to add it to our watch list this week—we will report any developments.
Dow Industrials: 13,383.84 +37.06 (another record high)
VIX: 14.01
HUI: 329.39
QQQQ: 46.10
QQQRS: 0.42 bid
QQQRT: 0.73 bid
RYVNX: 15.56
RYAIX: 20.70
RYCWX: 31.38
TLT: 87.93
BEGBX: 13.94
Monday, May 14, 2007
Can you say “Non-Confirmation”?
Market Action:
As the market opened on Monday, the traders seemed happy to bid up the prices in the early going only to lose their resolve over the course of the day. Most of the broader indexes were down on the day while the Dow stood alone with a positive close. In fact the Dow managed to score a new high in the early minutes of trading. The blue chips managed to stay positive for the day after just a few minutes in the red late in the afternoon.
Opinion/Analysis:
Jumping to our opinion section, there is a chance that the market showed us a very important non-confirmation on Monday, with the Dow making a trading high without any other indexes doing the same. Is it possible that the subtle top is in as of Monday morning? Well, the first test of this theory, a theory that the market has just espoused, comes on Tuesday morning when we see the CPI for April. We will have to wait and see but while we do here are few items for consideration…
The SP 500 index seems to have peaked on May 9th at 1513.80. Monday’s close at 1503.15 is about 10 points below that peak: did not confirm Dow’s move to a new high on Monday.
The NASDAQ Comp index seems to have peaked on May 7th at 2580.06 with Monday’s close of 2546.44 about 33 points lower. Comp did not confirm Dow’s new high.
NDX (NASDAQ 100) seems to have peaked on May 9th at 1909.30 about 20 points above Monday’s close of 1888.08. NDX failed to confirm Dow’s new high.
Furthermore, RUT (Russell 2000) seems to have peaked on May 9th at 836.99 which is 14 points above Monday’s close of 822.33. Not only that, the RUT has been the leader in this market for several years, and on Monday it closed below its February highs. This index has been substantially weaker than the others over the course of this last three months. RUT has failed to confirm the Dow’s Monday high.
You may recall our post on the evening of May 9th titled "Rally May Be Done".
There is one other item for your pleasure. One of the main reasons the Dow dropped so much back in February, you remember, over 400 points, was that the Chinese market had dropped about 9%. That day the Chinese index dropped from 284 to 259. As we write this tonight, the Chinese index is trading around 408. Doing the math, the move from 259 to 408 is roughly 57%.
So, one of the world’s major markets has climbed 57% in about three months. We consider that to be just a bit speculative, maybe a house of cards would be a better description. The Chinese market has the capability of stumbling very badly leading to another world wide collapse in stock prices over the next several months. We do not feel the need to stand in the way of that.
CPI:
Before we go, let’s talk about the CPI. For the most part the market has signaled a high is in place so now we have to see whether or not it is paying attention to itself.
The world has learned that the “CORE” CPI is the only number that matters to the market when it comes to inflation. We note that a 0.2% upward move in that number has been accepted as tolerable to the market. The market would need to see something much higher than that in order to sell off on the news, because that would signal the Fed had the leeway to raise rates…
We are not in the inflation camp even though gas prices have gone through the roof recently. We stand firm on our position that the housing market will wring out any inflation that is out there. We stand in the camp of those who see a rate cut coming from the Fed sometime this year because the economy will evoke that kind of response by the Fed. The market may actually not like a rate cut when it comes because it might be too small or, as they say, too little, too late. But that is for another day.
This day, Tuesday, the market is at an important cross road in our opinion. The CPI figure stands to be greeted with a new market, one that may not take kindly to any number that is published. We expect the CPI to be contained at the “core” level to the 0.2% increase amount but now we await the market’s response. This should be interesting.
Dow Industrials: 13,346.78 +20.56
VIX: 13.96
HUI: 331.00
QQQQ: 46.46
QQQRS: 0.37 bid
QQQRT: 0.64 bid
RYVNX: 15.29
RYAIX: 20.52
RYCWX: 31.54
TLT: 87.96
BEGBX: 13.91
As the market opened on Monday, the traders seemed happy to bid up the prices in the early going only to lose their resolve over the course of the day. Most of the broader indexes were down on the day while the Dow stood alone with a positive close. In fact the Dow managed to score a new high in the early minutes of trading. The blue chips managed to stay positive for the day after just a few minutes in the red late in the afternoon.
Opinion/Analysis:
Jumping to our opinion section, there is a chance that the market showed us a very important non-confirmation on Monday, with the Dow making a trading high without any other indexes doing the same. Is it possible that the subtle top is in as of Monday morning? Well, the first test of this theory, a theory that the market has just espoused, comes on Tuesday morning when we see the CPI for April. We will have to wait and see but while we do here are few items for consideration…
The SP 500 index seems to have peaked on May 9th at 1513.80. Monday’s close at 1503.15 is about 10 points below that peak: did not confirm Dow’s move to a new high on Monday.
The NASDAQ Comp index seems to have peaked on May 7th at 2580.06 with Monday’s close of 2546.44 about 33 points lower. Comp did not confirm Dow’s new high.
NDX (NASDAQ 100) seems to have peaked on May 9th at 1909.30 about 20 points above Monday’s close of 1888.08. NDX failed to confirm Dow’s new high.
Furthermore, RUT (Russell 2000) seems to have peaked on May 9th at 836.99 which is 14 points above Monday’s close of 822.33. Not only that, the RUT has been the leader in this market for several years, and on Monday it closed below its February highs. This index has been substantially weaker than the others over the course of this last three months. RUT has failed to confirm the Dow’s Monday high.
You may recall our post on the evening of May 9th titled "Rally May Be Done".
There is one other item for your pleasure. One of the main reasons the Dow dropped so much back in February, you remember, over 400 points, was that the Chinese market had dropped about 9%. That day the Chinese index dropped from 284 to 259. As we write this tonight, the Chinese index is trading around 408. Doing the math, the move from 259 to 408 is roughly 57%.
So, one of the world’s major markets has climbed 57% in about three months. We consider that to be just a bit speculative, maybe a house of cards would be a better description. The Chinese market has the capability of stumbling very badly leading to another world wide collapse in stock prices over the next several months. We do not feel the need to stand in the way of that.
CPI:
Before we go, let’s talk about the CPI. For the most part the market has signaled a high is in place so now we have to see whether or not it is paying attention to itself.
The world has learned that the “CORE” CPI is the only number that matters to the market when it comes to inflation. We note that a 0.2% upward move in that number has been accepted as tolerable to the market. The market would need to see something much higher than that in order to sell off on the news, because that would signal the Fed had the leeway to raise rates…
We are not in the inflation camp even though gas prices have gone through the roof recently. We stand firm on our position that the housing market will wring out any inflation that is out there. We stand in the camp of those who see a rate cut coming from the Fed sometime this year because the economy will evoke that kind of response by the Fed. The market may actually not like a rate cut when it comes because it might be too small or, as they say, too little, too late. But that is for another day.
This day, Tuesday, the market is at an important cross road in our opinion. The CPI figure stands to be greeted with a new market, one that may not take kindly to any number that is published. We expect the CPI to be contained at the “core” level to the 0.2% increase amount but now we await the market’s response. This should be interesting.
Dow Industrials: 13,346.78 +20.56
VIX: 13.96
HUI: 331.00
QQQQ: 46.46
QQQRS: 0.37 bid
QQQRT: 0.64 bid
RYVNX: 15.29
RYAIX: 20.52
RYCWX: 31.54
TLT: 87.96
BEGBX: 13.91
Sunday, May 13, 2007
Flat PPI Leads to Market Rally
Market Action:
Stock traders thought about what the Fed had said on Wednesday about inflation being the biggest concern on their minds and with the flat PPI decided that it was time to buy (this report was for "core" PPI with expectation of a 0.2% increase). After all, the correction was over, you remember, the one on Thursday. On top of that, retail sales were disappointing which should also be considered a bullish thing, just because the Fed can maybe, just maybe, lower rates soon.
Whatever the reason for the early up in stocks, it managed to carry for the day as the market went out on its highs for the day even though it didn’t manage to totally erase Thursday’s losses. That job looks to be for Monday morning based on the futures this evening, not to mention the huge move in Asia; Hong Kong is up over 2%.
Opinion/Analysis:
Our opinion section has a hole in it this evening—there is not much to say about the market this evening. Monday’s trade will be important as we watch to see if last Wednesday’s highs can be broken to the upside. We obviously do not prefer that outcome based on our leveraged short position but it could happen. The market remains overbought and sentiment is running so bullish that no one can believe there will ever be a market correction again—huh?
News for the Upcoming week:
Tuesday—CPI
Wednesday—housing starts and building permits
Thursday—LEI, leading economic indicators
(This includes the stock market, so could be stronger than expected.)
Earnings news—Wal-Mart on Tuesday
Dow Industrials: 13,326.22 +111.09
VIX: 12.95
HUI: 337.84
QQQQ: 46.78
QQQRS: 0.30 bid
QQQRT: 0.51 bid
RYVNX: 15.12
RYAIX: 20.40
RYCWX: 31.61
TLT: 88.19
BEGBX: 13.94
Stock traders thought about what the Fed had said on Wednesday about inflation being the biggest concern on their minds and with the flat PPI decided that it was time to buy (this report was for "core" PPI with expectation of a 0.2% increase). After all, the correction was over, you remember, the one on Thursday. On top of that, retail sales were disappointing which should also be considered a bullish thing, just because the Fed can maybe, just maybe, lower rates soon.
Whatever the reason for the early up in stocks, it managed to carry for the day as the market went out on its highs for the day even though it didn’t manage to totally erase Thursday’s losses. That job looks to be for Monday morning based on the futures this evening, not to mention the huge move in Asia; Hong Kong is up over 2%.
Opinion/Analysis:
Our opinion section has a hole in it this evening—there is not much to say about the market this evening. Monday’s trade will be important as we watch to see if last Wednesday’s highs can be broken to the upside. We obviously do not prefer that outcome based on our leveraged short position but it could happen. The market remains overbought and sentiment is running so bullish that no one can believe there will ever be a market correction again—huh?
News for the Upcoming week:
Tuesday—CPI
Wednesday—housing starts and building permits
Thursday—LEI, leading economic indicators
(This includes the stock market, so could be stronger than expected.)
Earnings news—Wal-Mart on Tuesday
Dow Industrials: 13,326.22 +111.09
VIX: 12.95
HUI: 337.84
QQQQ: 46.78
QQQRS: 0.30 bid
QQQRT: 0.51 bid
RYVNX: 15.12
RYAIX: 20.40
RYCWX: 31.61
TLT: 88.19
BEGBX: 13.94
Thursday, May 10, 2007
Down: Day 1
Market Action:
The stock market opened weaker, Tried to rally, but failed in that effort. The Dow dropped about 75 points in the first 15 minutes of trading only to be followed by buyers coming in to rally it. This rally only took the Dow back up a little ways such that the Dow was only down about 30 points an hour into the day.
From there, though, the market felt a little selling pressure and spent the next hour and a half dropping about 100 points. The Dow stabilized for the next few hours but sold off in the last hour to close about on the low of the day.
The reason for the early morning sell off? That would be reports out of some of the retail stores reporting much lower sales than expected, stores like Wal-Mart, JC Penney, and Kohl’s.
Another report on the trade deficit showed a larger increase there than was expected. We remind people (and economists) that the trade deficit is pretty easy to predict. Take the number of real days in the month and compare it to the days in the prior month. The number of days in March was 22 compared with February’s 20. That would be a 10% increase and we don’t know much about anything, except the price of oil is about the same over the period. How much was the increase??? 10.4%
Opinion/Analysis:
Finally, a trading day that qualifies as not bullish, dare we say bearish, even.
One of the ideas we wanted to mention this week was the phenomenon of the day traders. They are called day traders because the only trade during the day, meaning when the market closes, they have no positions. If someone holds positions overnight, they are called swing traders and normally this is not the preferred strategy among “day traders”.
So, when there is an event of any kind that causes the market to gap down at the open, the day traders have little choice but to buy stocks for an eventual up move. On Thursday we saw something different. There was a wave of selling that came in right after the “day traders” got into their positions. No matter what a day trader needs to get out of whatever position they are in, so they became sellers during the day, too.
You can pretty much figure out where we stand on the market. We think this is a tell tale day that will lead to more selling. The market broke some key support but, yes, there are several more below us since the prices have gotten so high over the past month. We contend that those support areas will be broken.
We realize that Thursday’s move could be a day in the life of a big bull run but we think that this run is now more than just a little tired. Plus, Friday brings us the PPI which the market should be paying very close attention to, since the Fed doesn’t seem too concerned about the slowing economy but they are concerned about inflation. The expectations are for the loaded PPI (you know, the one with all the data included) to be up 0.6% and the PPI lite (the “core” PPI without food and energy, please) is only supposed to be up 0.2%.
We are not concerned about inflation here at the Update but we know the market is suddenly unsure of what is going on. That is where all of this will play out. The market will go down for what seems to be no reason at all, and in our minds that’s just the way it went up.
Gold/Mining Stocks:
Before we close our post this evening, we need to mention the precious metals complex. We have suggested that gold would drop into the $450 range with silver and mining stocks going down as well. Thursday marks a pretty strong break in this complex, with gold dropping about $15, leading us to conclude that the move down in probably official. This move comes in combination of the dollar going up for a while.
The HUI, a gold mining index we follow, dropped to 332 and we think it has the potential to drop another 20%. If this happens, we will have some great opportunities to buy the precious metals complex. Patience, as always.
Dow Industrials: 13,215.13 -147.74 (seriously?)
VIX: 13.60
HUI: 332.04 (down 10.17)
QQQQ: 46.19
QQQRS: 0.47 bid
QQQRT: 0.78 bid
RYVNX: 15.50
RYAIX: 20.64
RYCWX: 32.15
TLT: 88.50
BEGBX: 13.89
The stock market opened weaker, Tried to rally, but failed in that effort. The Dow dropped about 75 points in the first 15 minutes of trading only to be followed by buyers coming in to rally it. This rally only took the Dow back up a little ways such that the Dow was only down about 30 points an hour into the day.
From there, though, the market felt a little selling pressure and spent the next hour and a half dropping about 100 points. The Dow stabilized for the next few hours but sold off in the last hour to close about on the low of the day.
The reason for the early morning sell off? That would be reports out of some of the retail stores reporting much lower sales than expected, stores like Wal-Mart, JC Penney, and Kohl’s.
Another report on the trade deficit showed a larger increase there than was expected. We remind people (and economists) that the trade deficit is pretty easy to predict. Take the number of real days in the month and compare it to the days in the prior month. The number of days in March was 22 compared with February’s 20. That would be a 10% increase and we don’t know much about anything, except the price of oil is about the same over the period. How much was the increase??? 10.4%
Opinion/Analysis:
Finally, a trading day that qualifies as not bullish, dare we say bearish, even.
One of the ideas we wanted to mention this week was the phenomenon of the day traders. They are called day traders because the only trade during the day, meaning when the market closes, they have no positions. If someone holds positions overnight, they are called swing traders and normally this is not the preferred strategy among “day traders”.
So, when there is an event of any kind that causes the market to gap down at the open, the day traders have little choice but to buy stocks for an eventual up move. On Thursday we saw something different. There was a wave of selling that came in right after the “day traders” got into their positions. No matter what a day trader needs to get out of whatever position they are in, so they became sellers during the day, too.
You can pretty much figure out where we stand on the market. We think this is a tell tale day that will lead to more selling. The market broke some key support but, yes, there are several more below us since the prices have gotten so high over the past month. We contend that those support areas will be broken.
We realize that Thursday’s move could be a day in the life of a big bull run but we think that this run is now more than just a little tired. Plus, Friday brings us the PPI which the market should be paying very close attention to, since the Fed doesn’t seem too concerned about the slowing economy but they are concerned about inflation. The expectations are for the loaded PPI (you know, the one with all the data included) to be up 0.6% and the PPI lite (the “core” PPI without food and energy, please) is only supposed to be up 0.2%.
We are not concerned about inflation here at the Update but we know the market is suddenly unsure of what is going on. That is where all of this will play out. The market will go down for what seems to be no reason at all, and in our minds that’s just the way it went up.
Gold/Mining Stocks:
Before we close our post this evening, we need to mention the precious metals complex. We have suggested that gold would drop into the $450 range with silver and mining stocks going down as well. Thursday marks a pretty strong break in this complex, with gold dropping about $15, leading us to conclude that the move down in probably official. This move comes in combination of the dollar going up for a while.
The HUI, a gold mining index we follow, dropped to 332 and we think it has the potential to drop another 20%. If this happens, we will have some great opportunities to buy the precious metals complex. Patience, as always.
Dow Industrials: 13,215.13 -147.74 (seriously?)
VIX: 13.60
HUI: 332.04 (down 10.17)
QQQQ: 46.19
QQQRS: 0.47 bid
QQQRT: 0.78 bid
RYVNX: 15.50
RYAIX: 20.64
RYCWX: 32.15
TLT: 88.50
BEGBX: 13.89
Wednesday, May 09, 2007
Rally May Be Done
Market Action:
CSCO was the headline for the opening on Wednesday as that stock started the market on a poor footing. To balance the negative CSCO news, an analyst upgraded IBM and that gave the bulls some fuel to hold prices fairly level for the Dow, but…
There was one other news item, that from TOL, Toll Brothers home builders. TOL said that it faces difficult conditions in most markets and they had to reduce their most recent forecasts. The Chief Executive Robert Toll said “Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets”. Of course, as you know, Wall Street doesn’t hear news like that because they have already decided the housing problem is behind us.
The NASDAQ indexes started down and of course gradually worked their way back to even before the Fed’s announcement. From there, Wednesday’s action was dominated by the aftermath of the Fed’s non-decision on interest rates.
At first some selling came in but that lasted only about 5 minutes and then there was some nervous trading for about a half hour with the market moving around to find some place to trade. About a half hour after the decision, the market leaped ahead and closed up, not much, but up on the day.
Opinion/Analysis:
You’re probably sick of hearing this but Wednesday’s action felt pretty weak to us. The volume was not out of the ordinary and we know that most traders were “worried” about the Fed’s decision and couldn’t really trade until after the announcement (are they kidding us?). But, given that we have come so far, so fast, we are more convinced than ever that the market is about to suffer some down days and they will occur very soon if not on Thursday.
One of the items is the way the VIX traded. When the index drops like it did today (it didn’t drop much) it means that options traders are moving away from put options meaning they have less fear of a drop in the market. We note that the VIX closed at 12.88 here at nearly 13,400 in the Dow and back in February, just before the big drop in the Dow, it was trading around 10. Back in those days, long ago, the Dow was down around 12,700 (did we say Down).
Our momentum indicators are telling us that the move has lost some strength. Looking at momentum indicators on any standard charting service (check BigCharts in the links on the left) at least shows a flattening of momentum which should lead to a roll over and down.
We have become so numb to this never ending up beat of the market that we have almost succumbed to these up days as being a way of life forever. It reminds us of the Minnesota winter that seemed to drag on and on, but even that came to an end and we had temps around 80 degrees here today. So to, the market will turn over and go down. We think the time is here and the time is now.
When the market turns, there will be a rush to the exits and prices will drop quickly. One of the biggest problems is that hedge funds have continued to buy up this market just because it is going up. They are mostly long and leveraged. With a downturn that lasts more than one day, they could easily all decide to get out. They don’t worry about what a company’s long term outlook is and they certainly don’t fall in love with their stocks and hold them till they die; they are only concerned about if the price is going up.
This is not the time to be investing in stocks. “Sell in May and Go Away.” This May brings you some of the highest prices ever, especially in large blue chip companies.
Dow Industrials: 13,362.87 +53.80 (record high)
VIX: 12.88
HUI: 342.21
QQQQ: 46.84
QQQRS: 0.32 bid
QQQRT: 0.53 bid
RYVNX: 15.01
RYAIX: 20.32
RYCWX: 31.46
TLT: 88.29
BEGBX: 13.95
CSCO was the headline for the opening on Wednesday as that stock started the market on a poor footing. To balance the negative CSCO news, an analyst upgraded IBM and that gave the bulls some fuel to hold prices fairly level for the Dow, but…
There was one other news item, that from TOL, Toll Brothers home builders. TOL said that it faces difficult conditions in most markets and they had to reduce their most recent forecasts. The Chief Executive Robert Toll said “Twenty months into this housing downturn, we continue to face difficult conditions in most of our markets”. Of course, as you know, Wall Street doesn’t hear news like that because they have already decided the housing problem is behind us.
The NASDAQ indexes started down and of course gradually worked their way back to even before the Fed’s announcement. From there, Wednesday’s action was dominated by the aftermath of the Fed’s non-decision on interest rates.
At first some selling came in but that lasted only about 5 minutes and then there was some nervous trading for about a half hour with the market moving around to find some place to trade. About a half hour after the decision, the market leaped ahead and closed up, not much, but up on the day.
Opinion/Analysis:
You’re probably sick of hearing this but Wednesday’s action felt pretty weak to us. The volume was not out of the ordinary and we know that most traders were “worried” about the Fed’s decision and couldn’t really trade until after the announcement (are they kidding us?). But, given that we have come so far, so fast, we are more convinced than ever that the market is about to suffer some down days and they will occur very soon if not on Thursday.
One of the items is the way the VIX traded. When the index drops like it did today (it didn’t drop much) it means that options traders are moving away from put options meaning they have less fear of a drop in the market. We note that the VIX closed at 12.88 here at nearly 13,400 in the Dow and back in February, just before the big drop in the Dow, it was trading around 10. Back in those days, long ago, the Dow was down around 12,700 (did we say Down).
Our momentum indicators are telling us that the move has lost some strength. Looking at momentum indicators on any standard charting service (check BigCharts in the links on the left) at least shows a flattening of momentum which should lead to a roll over and down.
We have become so numb to this never ending up beat of the market that we have almost succumbed to these up days as being a way of life forever. It reminds us of the Minnesota winter that seemed to drag on and on, but even that came to an end and we had temps around 80 degrees here today. So to, the market will turn over and go down. We think the time is here and the time is now.
When the market turns, there will be a rush to the exits and prices will drop quickly. One of the biggest problems is that hedge funds have continued to buy up this market just because it is going up. They are mostly long and leveraged. With a downturn that lasts more than one day, they could easily all decide to get out. They don’t worry about what a company’s long term outlook is and they certainly don’t fall in love with their stocks and hold them till they die; they are only concerned about if the price is going up.
This is not the time to be investing in stocks. “Sell in May and Go Away.” This May brings you some of the highest prices ever, especially in large blue chip companies.
Dow Industrials: 13,362.87 +53.80 (record high)
VIX: 12.88
HUI: 342.21
QQQQ: 46.84
QQQRS: 0.32 bid
QQQRT: 0.53 bid
RYVNX: 15.01
RYAIX: 20.32
RYCWX: 31.46
TLT: 88.29
BEGBX: 13.95
Tuesday, May 08, 2007
Record Streak Ends on a Down 3 Point Day
Market Action:
The market opened lower on Tuesday as the overnight futures were down somewhat going into the session. HPQ, Hewlett Packard, decided to announce their earnings a bit early due to an error, they had inadvertently sent the news to a third party and thought they should get it to the rest of the world, too. The real earnings will be coming out next week so they’ll have a chance to move up on the news twice (oh that sarcasm). The news was pretty much in line with expectations but the stock moved up in early trading. After falling back with the broader market in the first hour, HPQ managed to rally to close slightly above where it opened, up about 2.75%.
The Dow actually traded down about 75 points in the early going but that was the low for the day. From there the rally started up again such that by the end of the day, the Dow could have closed up again but failed and ended down just 3 points.
CSCO brought its news to the market right after the closing bell and, while the news wasn’t great, it really wasn’t bad either. CSCO’s guidance for the next quarter wasn’t as strong as the company had said earlier and the stock didn’t trade well after that news. By the end of the after hours session, CSCO was down nearly 6%, pulling down the overnight NASDAQ 100 futures. We’ll see if that means anything when stocks open on Wednesday. There is that pesky little news from the Fed that everyone is concerned about.
Opinion/Analysis:
The Fed news has caught the market’s attention and we expect that the news we get shortly after lunch will be “no change” and this will give the market cause for joy. Ok, maybe we’re a little cynical after this incredible run but we do think the market still wants to rally even though it is extremely tired and in need of a rest.
The news will not change the landscape of the market. We have seen this market go up for no reason at all and it will go down for the same reasons, just because it will. The mere fact that there has been virtually no selling for over a month, gives the market a good enough reason to trade down a little. You may think that a little drop of 75 points can take care of the current over bought condition. This is just simply not true. Anyone who wants to sell has been rewarded for not selling and those that don’t want to sell are even more complacent than ever—although our friend, the VIX, has not gone down much in this rally.
With the CSCO news now out and the Fed news coming out on Wednesday and with most of the earnings news out, there is little reason for the market to trade down this week. However, this is exactly the time that it can and probably will go down, at least a little. We hold to our contention that you should “sell in May and go away”.
[Editor’s note: We recommend a re-read of our last post, especially the real estate section.]
Dow Industrials: 13,309.07 -3.90 (really?)
VIX: 13.21
HUI: 341.39
QQQQ: 46.73
QQQRS: 0.39 bid
QQQRT: 0.64 bid
RYVNX: 15.10
RYAIX: 20.37
RYCWX: 31.73
TLT: 88.64
BEGBX: 13.97
The market opened lower on Tuesday as the overnight futures were down somewhat going into the session. HPQ, Hewlett Packard, decided to announce their earnings a bit early due to an error, they had inadvertently sent the news to a third party and thought they should get it to the rest of the world, too. The real earnings will be coming out next week so they’ll have a chance to move up on the news twice (oh that sarcasm). The news was pretty much in line with expectations but the stock moved up in early trading. After falling back with the broader market in the first hour, HPQ managed to rally to close slightly above where it opened, up about 2.75%.
The Dow actually traded down about 75 points in the early going but that was the low for the day. From there the rally started up again such that by the end of the day, the Dow could have closed up again but failed and ended down just 3 points.
CSCO brought its news to the market right after the closing bell and, while the news wasn’t great, it really wasn’t bad either. CSCO’s guidance for the next quarter wasn’t as strong as the company had said earlier and the stock didn’t trade well after that news. By the end of the after hours session, CSCO was down nearly 6%, pulling down the overnight NASDAQ 100 futures. We’ll see if that means anything when stocks open on Wednesday. There is that pesky little news from the Fed that everyone is concerned about.
Opinion/Analysis:
The Fed news has caught the market’s attention and we expect that the news we get shortly after lunch will be “no change” and this will give the market cause for joy. Ok, maybe we’re a little cynical after this incredible run but we do think the market still wants to rally even though it is extremely tired and in need of a rest.
The news will not change the landscape of the market. We have seen this market go up for no reason at all and it will go down for the same reasons, just because it will. The mere fact that there has been virtually no selling for over a month, gives the market a good enough reason to trade down a little. You may think that a little drop of 75 points can take care of the current over bought condition. This is just simply not true. Anyone who wants to sell has been rewarded for not selling and those that don’t want to sell are even more complacent than ever—although our friend, the VIX, has not gone down much in this rally.
With the CSCO news now out and the Fed news coming out on Wednesday and with most of the earnings news out, there is little reason for the market to trade down this week. However, this is exactly the time that it can and probably will go down, at least a little. We hold to our contention that you should “sell in May and go away”.
[Editor’s note: We recommend a re-read of our last post, especially the real estate section.]
Dow Industrials: 13,309.07 -3.90 (really?)
VIX: 13.21
HUI: 341.39
QQQQ: 46.73
QQQRS: 0.39 bid
QQQRT: 0.64 bid
RYVNX: 15.10
RYAIX: 20.37
RYCWX: 31.73
TLT: 88.64
BEGBX: 13.97
Monday, May 07, 2007
Vacant Houses
Market Action:
The market probably shouldn’t have opened today, except for Alcoa (AA), the company that is buying another aluminum company, Alcan. Normally, this kind of move would put a bid under the company being bought, which it did, but it’s not supposed to put a bid under the company buying, but it did that. AA was up over 8% on the day and by itself giving the Dow nearly 25 points, about half of the total move. The trading for the rest of the market was pretty dull and the volume was light again, too.
Opinion/Analysis:
The market seemed to be waiting for something on Monday and we think there are a few items it may be doing that. One is the earnings news expected out of CSCO on Tuesday and the other is the news out of the Fed on Wednesday. We think these two items are basically already known but the market is anticipating something else may happen, therefore the slowdown in trading on Monday.
There may be one other thing that the market is paying attention to and that is all of these big buyouts. Monday, AA proposed a buyout of Alcan and over the past few weeks we’ve seen some rather large companies in the news, like Dow Jones being bought out by Rupert Murdoch. Then this past weekend, Warren Buffet said he wants to buy a large company, in the neighborhood of $40 to $60 billion. We think all of this large company buyout talk is one reason for the Dow to be moving up, people anticipating which company will be bought out next.
As far as the Dow making yet another record high Monday, we continue to be amazed at the absence of sellers. We did note that not all stocks participated in Monday’s Dow advance. The NASDAQ Comp was down (the 100 was just slightly positive) and the RUT, the Russell 2000, ended lower. We realize that the market has done this type of thing before but we do think there is some reason for watching these signals.
The underlying strength of the market continues to wane and we keep watching it to see when the prices wane. We have held our breath far too long.
Real Estate, An ugly mess in housing:
We saw an article on CNN Money.com that gave us pause to reflect on what is going on in housing. The name of the article is “The ugly face of foreclosure” and maybe you saw it, too. The article mentioned the city of Cleveland and one of the neighborhoods, the Slavic Village—600 vacant and boarded up houses out of about 11,000. On some Pittsburg streets, every fifth or sixth house is boarded up. The article went on to say that some vacant houses are broken into and the copper plumbing is stolen and sometimes the aluminum siding is striped, both to be sold.
More from the article: Cities are having trouble fighting off problems because foreclosures cause tax collections to suffer. Now with home prices declining, home owners are requesting changes to their assessments, reducing them, so that tax collections are lower. This reduces the cities’ revenues and their ability to help these neighborhoods.
This real estate problem is not going away and is only getting worse. The economy will not be able to withstand the ultimate price that housing will extract from it without a recession or more. We admit that the timing of the effect on the market has eluded us but the event has only gotten closer, and the market advance has Not diminished it.
When someone says the government should bail out the poor people who have been taken advantage of by the subprime brokers or appraisers or bankers, we wonder why this was allowed to happen in the first place. If we can assess this problem building in front of our eyes, why did the Fed let this happen? Our simple answer is they were afraid to have a recession. They have tried to convince us, and maybe even themselves, that the business cycle is dead, meaning that we didn’t really have to have recessions anymore.
Easy credit is a way to postpone a recession and that’s exactly what has happened. Look what’s happened to the easy credit—foreclosures and the destruction of several neighborhoods in the country. What they have done is set us up for this devastating depression that is going on in the neighborhoods of many cities in the country.
This is not going to end pleasantly.
Dow Industrials: 13,312.97 +48.35
VIX: 13.15
HUI: 346.24
QQQQ: 46.63
QQQRS: 0.39 bid
QQQRT: 0.64 bid
RYVNX: 15.16
RYAIX: 20.41
RYCWX: 31.73
TLT: 88.84
BEGBX: 13.99
The market probably shouldn’t have opened today, except for Alcoa (AA), the company that is buying another aluminum company, Alcan. Normally, this kind of move would put a bid under the company being bought, which it did, but it’s not supposed to put a bid under the company buying, but it did that. AA was up over 8% on the day and by itself giving the Dow nearly 25 points, about half of the total move. The trading for the rest of the market was pretty dull and the volume was light again, too.
Opinion/Analysis:
The market seemed to be waiting for something on Monday and we think there are a few items it may be doing that. One is the earnings news expected out of CSCO on Tuesday and the other is the news out of the Fed on Wednesday. We think these two items are basically already known but the market is anticipating something else may happen, therefore the slowdown in trading on Monday.
There may be one other thing that the market is paying attention to and that is all of these big buyouts. Monday, AA proposed a buyout of Alcan and over the past few weeks we’ve seen some rather large companies in the news, like Dow Jones being bought out by Rupert Murdoch. Then this past weekend, Warren Buffet said he wants to buy a large company, in the neighborhood of $40 to $60 billion. We think all of this large company buyout talk is one reason for the Dow to be moving up, people anticipating which company will be bought out next.
As far as the Dow making yet another record high Monday, we continue to be amazed at the absence of sellers. We did note that not all stocks participated in Monday’s Dow advance. The NASDAQ Comp was down (the 100 was just slightly positive) and the RUT, the Russell 2000, ended lower. We realize that the market has done this type of thing before but we do think there is some reason for watching these signals.
The underlying strength of the market continues to wane and we keep watching it to see when the prices wane. We have held our breath far too long.
Real Estate, An ugly mess in housing:
We saw an article on CNN Money.com that gave us pause to reflect on what is going on in housing. The name of the article is “The ugly face of foreclosure” and maybe you saw it, too. The article mentioned the city of Cleveland and one of the neighborhoods, the Slavic Village—600 vacant and boarded up houses out of about 11,000. On some Pittsburg streets, every fifth or sixth house is boarded up. The article went on to say that some vacant houses are broken into and the copper plumbing is stolen and sometimes the aluminum siding is striped, both to be sold.
More from the article: Cities are having trouble fighting off problems because foreclosures cause tax collections to suffer. Now with home prices declining, home owners are requesting changes to their assessments, reducing them, so that tax collections are lower. This reduces the cities’ revenues and their ability to help these neighborhoods.
This real estate problem is not going away and is only getting worse. The economy will not be able to withstand the ultimate price that housing will extract from it without a recession or more. We admit that the timing of the effect on the market has eluded us but the event has only gotten closer, and the market advance has Not diminished it.
When someone says the government should bail out the poor people who have been taken advantage of by the subprime brokers or appraisers or bankers, we wonder why this was allowed to happen in the first place. If we can assess this problem building in front of our eyes, why did the Fed let this happen? Our simple answer is they were afraid to have a recession. They have tried to convince us, and maybe even themselves, that the business cycle is dead, meaning that we didn’t really have to have recessions anymore.
Easy credit is a way to postpone a recession and that’s exactly what has happened. Look what’s happened to the easy credit—foreclosures and the destruction of several neighborhoods in the country. What they have done is set us up for this devastating depression that is going on in the neighborhoods of many cities in the country.
This is not going to end pleasantly.
Dow Industrials: 13,312.97 +48.35
VIX: 13.15
HUI: 346.24
QQQQ: 46.63
QQQRS: 0.39 bid
QQQRT: 0.64 bid
RYVNX: 15.16
RYAIX: 20.41
RYCWX: 31.73
TLT: 88.84
BEGBX: 13.99
Sunday, May 06, 2007
April Jobs' Report Produces a Yawn
April Jobs’ Report:
The jobs’ report showed a low 88K jobs added compared to an expected, also low, 100K. This is the lowest increase in over two years and, to us, represents the underlying weakness in the economy coupled with the weak housing market.
March’s jobs’ number was revised slightly down by 3K at 177K. February’s number was right around the 90K mark so now we have had two months with jobs growth less than 100K this year. Don’t forget there is the other factor, the CES birth/death model, which tries to estimate the number of new jobs created by newly established firms (births). For April that number happened to be 317K which may be completely accurate but it does make one question the 88K number that was published.
This Week’s Fed Meeting:
The market certainly had a little thought in the back of its mind that the weak jobs’ report may encourage the Fed to be more giving, sooner rather than later, on the interest rate front. The jury is Not really out on this week’s interest rate move verdict. We are pretty convinced there will be no change in the fed funds interest rate this week.
Market Action:
The market’s reaction to the weak April jobs’ report was, as you might surmise, to buy stocks. The bond market seemed pleased with the modest job growth.
As the morning progressed, the major indexes we follow made new highs, which we have been expecting for about a week now. From the early Friday morning highs, the market sold off but not in the fashion we were looking for. And, there was the inevitable low created and then a little buying going into the close.
Opinion/Analysis:
The Dow has now made 10 new record highs in the last 13 trading sessions. We are not exactly jumping for joy on this news. The market seems to have no trouble going up even with the underlying technicals not confirming the move.
News for the Upcoming Week:
Tuesday—Semiannual ISM forecast
Wednesday—FOMC meeting with interest rate decision
Thursday—Trade balance
Friday—PPI
Friday—Retail sales
Plus, first quarter earnings reports are still rolling in
Dow Industrials: 13,264.62 +23.24
VIX: 12.91
HUI: 345.91
QQQQ: 46.63
QQQRS: 0.40 bid
QQQRT: 0.65
RYVNX: 15.16
RYAIX: 20.41
RYCWX: 31.94
TLT: 88.60
BEGBX: 13.99
The jobs’ report showed a low 88K jobs added compared to an expected, also low, 100K. This is the lowest increase in over two years and, to us, represents the underlying weakness in the economy coupled with the weak housing market.
March’s jobs’ number was revised slightly down by 3K at 177K. February’s number was right around the 90K mark so now we have had two months with jobs growth less than 100K this year. Don’t forget there is the other factor, the CES birth/death model, which tries to estimate the number of new jobs created by newly established firms (births). For April that number happened to be 317K which may be completely accurate but it does make one question the 88K number that was published.
This Week’s Fed Meeting:
The market certainly had a little thought in the back of its mind that the weak jobs’ report may encourage the Fed to be more giving, sooner rather than later, on the interest rate front. The jury is Not really out on this week’s interest rate move verdict. We are pretty convinced there will be no change in the fed funds interest rate this week.
Market Action:
The market’s reaction to the weak April jobs’ report was, as you might surmise, to buy stocks. The bond market seemed pleased with the modest job growth.
As the morning progressed, the major indexes we follow made new highs, which we have been expecting for about a week now. From the early Friday morning highs, the market sold off but not in the fashion we were looking for. And, there was the inevitable low created and then a little buying going into the close.
Opinion/Analysis:
The Dow has now made 10 new record highs in the last 13 trading sessions. We are not exactly jumping for joy on this news. The market seems to have no trouble going up even with the underlying technicals not confirming the move.
News for the Upcoming Week:
Tuesday—Semiannual ISM forecast
Wednesday—FOMC meeting with interest rate decision
Thursday—Trade balance
Friday—PPI
Friday—Retail sales
Plus, first quarter earnings reports are still rolling in
Dow Industrials: 13,264.62 +23.24
VIX: 12.91
HUI: 345.91
QQQQ: 46.63
QQQRS: 0.40 bid
QQQRT: 0.65
RYVNX: 15.16
RYAIX: 20.41
RYCWX: 31.94
TLT: 88.60
BEGBX: 13.99
Thursday, May 03, 2007
Is This Pamplona?
Market Action:
Up another day and that’s even with the questionable earnings report from GM. Before the bell, GM reported that it had a 90% decline in first quarter profit, the reason? That would be mostly due to “housing market weakness”.
GM has a 49% stake in GMAC and that dragged down GM’s earnings. GM said it reflected a net loss of $115 million due to GMAC. Meanwhile GMAC announced a net loss of $305 million versus a profit of $495 million in the year ago period.
As you know, the market thinks the news is specific only to GM and that any housing related issues have already been discounted, to which we reply, fat chance. GM opened down on the day and just sold off the whole day, opening at 31.76 down from Wednesday’s close of 32.44, and closing down at 30.69, down over 5%.
Opinion/Analysis:
Friday could be a make or break day for the Update. We have considered whether the market has a rational bone in its body and we need only to go back a couple of months to see a severe drop. It is the Update’s opinion that the stock market is ready to turn down and we have picked Friday morning’s jobs’ report to be the point of inflection.
With 22 of the last 25 days having up closings for the Dow, there is just a little bullishness, complacency and a huge amount of over bought. Yes, as the peaks fell back over the past month, it didn’t take long for buyers to come back in and push prices back up. Right now, we want to remind you of how the bottom fell out of the market only two months ago. There was little warning the day of the “subprime” meltdown. The rally we have been in currently has mesmerized the vast majority of traders but we think when the market turns, it will turn on a dime, much like it did back in late February.
We think that day is here and that Friday is it. The advance the last few days, with attendant Record Dow closes, met some sellers and has the potential to have run out of buyers. This is a drop kind of scenario with the major players, the hedge funds with all of their leverage (read that, borrowed money), ready to sell at a moment’s notice because they don’t fall in love with their positions, they trade them.
So, as we close for this Thursday and week, we are solemnly cautious and realize that the bulls could run Pamplona but on Friday they could easily be stopped by the bears. Time will be upon us very soon—good luck to all of you.
Dow Industrials: 13,241.38 +29.50
VIX: 13.09
HUI: 345.20
QQQQ: 46.59
QQQRS: 0.44
QQQRT: 0.68
RYVNX: 15.14
RYAIX: 20.40
RYCWX: 32.02
TLT: 88.24
BEGBX: 13.94
Up another day and that’s even with the questionable earnings report from GM. Before the bell, GM reported that it had a 90% decline in first quarter profit, the reason? That would be mostly due to “housing market weakness”.
GM has a 49% stake in GMAC and that dragged down GM’s earnings. GM said it reflected a net loss of $115 million due to GMAC. Meanwhile GMAC announced a net loss of $305 million versus a profit of $495 million in the year ago period.
As you know, the market thinks the news is specific only to GM and that any housing related issues have already been discounted, to which we reply, fat chance. GM opened down on the day and just sold off the whole day, opening at 31.76 down from Wednesday’s close of 32.44, and closing down at 30.69, down over 5%.
Opinion/Analysis:
Friday could be a make or break day for the Update. We have considered whether the market has a rational bone in its body and we need only to go back a couple of months to see a severe drop. It is the Update’s opinion that the stock market is ready to turn down and we have picked Friday morning’s jobs’ report to be the point of inflection.
With 22 of the last 25 days having up closings for the Dow, there is just a little bullishness, complacency and a huge amount of over bought. Yes, as the peaks fell back over the past month, it didn’t take long for buyers to come back in and push prices back up. Right now, we want to remind you of how the bottom fell out of the market only two months ago. There was little warning the day of the “subprime” meltdown. The rally we have been in currently has mesmerized the vast majority of traders but we think when the market turns, it will turn on a dime, much like it did back in late February.
We think that day is here and that Friday is it. The advance the last few days, with attendant Record Dow closes, met some sellers and has the potential to have run out of buyers. This is a drop kind of scenario with the major players, the hedge funds with all of their leverage (read that, borrowed money), ready to sell at a moment’s notice because they don’t fall in love with their positions, they trade them.
So, as we close for this Thursday and week, we are solemnly cautious and realize that the bulls could run Pamplona but on Friday they could easily be stopped by the bears. Time will be upon us very soon—good luck to all of you.
Dow Industrials: 13,241.38 +29.50
VIX: 13.09
HUI: 345.20
QQQQ: 46.59
QQQRS: 0.44
QQQRT: 0.68
RYVNX: 15.14
RYAIX: 20.40
RYCWX: 32.02
TLT: 88.24
BEGBX: 13.94
Wednesday, May 02, 2007
Subprime Downgraded?
Market Action:
The stock market jumped at the opening based on nothing that we could find???, as Fleck says, just because the market was open. Here again the Dow jumped to a new closing high and a new trading high during the day but the NASDAQ Comp and the SP 500 struggled to eke out just a bit higher close.
Opinion/ Analysis:
We’re not going to bore you tonight with details on how the market will trade over the next few days because we stand in amazement of the tenacity of this rally. We do think there is a chance that the jobs’ report can provide some structure to the top of this rally. For this info, though, we must wait.
The trading pattern of the past couple of days could indicate that a top is now in at today’s highs but we need to see some confirmation of this by having the Dow actually go down and break some of the support it has generated. We believe, but we have No official info on this, the bulls that are buying at the moment are mostly over leveraged hedge funds that can turn on a dime and go the other way and/or short sellers who are in need of covering. So, there is buying going on but are these long term stock holders???
So, we leave you this evening with our fingers crossed that the market has finally made a lasting high or will in the next couple of days going into the jobs’ report. The momentum has waned but the bullish sentiment continues and, to us, this is a recipe for an about face.
Real Estate:
We notice this evening that the WSJ has an article on the Subprime mortgage market. If you can find the article in Thursday’s paper, it is good reading for those of us that still feel that the real estate market will ultimately tip over the stock market. Anyway, the article, written by Serena Ng, talks about how in the last two weeks Moody’s has cut credit ratings on 30 bonds issued in 2006 that are backed by subprime mortgages.
The article says that more than half of the original ratings on the bonds were investment grade but have now been cut to junk status. When a bond is rated investment grade there is minimal expected risk The article says this:
"It's embarrassing for a ratings company to downgrade bonds so quickly" after the bonds were issued, said Paul Ullman, chief executive of HFH Group, a New York hedge fund active in the mortgage market. "It reflects poorly on all parties in the underwriting process and their judgment of the credit-worthiness of the bonds." May 3, 2007
We say, this real estate problem is Not over.
Dow Industrials: 13,211.88 +75.74 (yes, a new record)
VIX: 13.08
HUI: 341.76
QQQQ: 46.42
QQQRS: 0.47 bid
QQQRT: 0.73 bid
RYVNX: 15.23
RYAIX: 20.46
RYCWX: 32.18
TLT: 88.44
BEGBX: 13.99
The stock market jumped at the opening based on nothing that we could find???, as Fleck says, just because the market was open. Here again the Dow jumped to a new closing high and a new trading high during the day but the NASDAQ Comp and the SP 500 struggled to eke out just a bit higher close.
Opinion/ Analysis:
We’re not going to bore you tonight with details on how the market will trade over the next few days because we stand in amazement of the tenacity of this rally. We do think there is a chance that the jobs’ report can provide some structure to the top of this rally. For this info, though, we must wait.
The trading pattern of the past couple of days could indicate that a top is now in at today’s highs but we need to see some confirmation of this by having the Dow actually go down and break some of the support it has generated. We believe, but we have No official info on this, the bulls that are buying at the moment are mostly over leveraged hedge funds that can turn on a dime and go the other way and/or short sellers who are in need of covering. So, there is buying going on but are these long term stock holders???
So, we leave you this evening with our fingers crossed that the market has finally made a lasting high or will in the next couple of days going into the jobs’ report. The momentum has waned but the bullish sentiment continues and, to us, this is a recipe for an about face.
Real Estate:
We notice this evening that the WSJ has an article on the Subprime mortgage market. If you can find the article in Thursday’s paper, it is good reading for those of us that still feel that the real estate market will ultimately tip over the stock market. Anyway, the article, written by Serena Ng, talks about how in the last two weeks Moody’s has cut credit ratings on 30 bonds issued in 2006 that are backed by subprime mortgages.
The article says that more than half of the original ratings on the bonds were investment grade but have now been cut to junk status. When a bond is rated investment grade there is minimal expected risk The article says this:
"It's embarrassing for a ratings company to downgrade bonds so quickly" after the bonds were issued, said Paul Ullman, chief executive of HFH Group, a New York hedge fund active in the mortgage market. "It reflects poorly on all parties in the underwriting process and their judgment of the credit-worthiness of the bonds." May 3, 2007
We say, this real estate problem is Not over.
Dow Industrials: 13,211.88 +75.74 (yes, a new record)
VIX: 13.08
HUI: 341.76
QQQQ: 46.42
QQQRS: 0.47 bid
QQQRT: 0.73 bid
RYVNX: 15.23
RYAIX: 20.46
RYCWX: 32.18
TLT: 88.44
BEGBX: 13.99
Tuesday, May 01, 2007
Dow Shows Some Muscle
Market Action:
The indestructible Industrials, the Dow, that is, seems to have more energy in it as it continued its winning ways on Tuesday with another record closing high. The Dow component PG, Procter Gamble, reported strong earnings and guidance early and happened to be one of the few Dow stocks down on Tuesday. Go figure.
The broader market failed to enjoy the out performance of the Dow. The markets all had a good couple of hours to end the day higher but the Dow showed its independent strength. Even the Dow failed to best its high from Monday…
Opinion/Analysis:
The position of the indexes is extremely important this evening and we are going to be cautious as the week progresses, as we look to that all important jobs’ report on Friday.
The volume was surprisingly strong on Tuesday which brings in our final requirement for a high. We like to see supply meeting demand at the top, heavy volume means there are buyers there but the sellers have decided to keep the lid on prices. Both trading days in May have exceeded 1.7 billion shares on the NYSE and the only day in April that had higher volume than these two days was options expiration Friday.
The market is in a highly critical point right now and it has Not resolved itself as of tonight and we are going to have to wait until it does.
Real Estate News:
On Tuesday pending homes sales were announced at down 4.9% which continues to show weak housing numbers. While the market seems to have deemed the real estate Problem to be behind us, it keeps nipping at our heels.
Dow Industrials: 13,136.14 +73.23 (new record closing high)
VIX: 13.51
HUI: 337.07
QQQQ: 46.12
QQQRS: 0.56 bid
QQQRT: 0.88 bid
RYVNX: 15.90
RYAIX: 20.63
RYCWX: 32.54
TLT: 88.49
BEGBX: 14.06
The indestructible Industrials, the Dow, that is, seems to have more energy in it as it continued its winning ways on Tuesday with another record closing high. The Dow component PG, Procter Gamble, reported strong earnings and guidance early and happened to be one of the few Dow stocks down on Tuesday. Go figure.
The broader market failed to enjoy the out performance of the Dow. The markets all had a good couple of hours to end the day higher but the Dow showed its independent strength. Even the Dow failed to best its high from Monday…
Opinion/Analysis:
The position of the indexes is extremely important this evening and we are going to be cautious as the week progresses, as we look to that all important jobs’ report on Friday.
The volume was surprisingly strong on Tuesday which brings in our final requirement for a high. We like to see supply meeting demand at the top, heavy volume means there are buyers there but the sellers have decided to keep the lid on prices. Both trading days in May have exceeded 1.7 billion shares on the NYSE and the only day in April that had higher volume than these two days was options expiration Friday.
The market is in a highly critical point right now and it has Not resolved itself as of tonight and we are going to have to wait until it does.
Real Estate News:
On Tuesday pending homes sales were announced at down 4.9% which continues to show weak housing numbers. While the market seems to have deemed the real estate Problem to be behind us, it keeps nipping at our heels.
Dow Industrials: 13,136.14 +73.23 (new record closing high)
VIX: 13.51
HUI: 337.07
QQQQ: 46.12
QQQRS: 0.56 bid
QQQRT: 0.88 bid
RYVNX: 15.90
RYAIX: 20.63
RYCWX: 32.54
TLT: 88.49
BEGBX: 14.06
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