Put to Call ratio on current market: Up!

The market closed on Friday with the Put to Call ratio back up over 1.00 for the second of the past 3 market days. On Tuesday, the Put to Call ratio closed at a new recent high of 1.08 while on Friday it closed at 1.05 after hitting a high of 1.14 during the first 1 hour of trading.

We have been in a market rally the past 3 months after hitting a low on March 30th and I have added some dates to the chart below to show you what was happening in advance with the Put to Call ratio. I believe this is the start of the decline I have been expecting for the past 2 months but never materialized. Rather, we had been in a very tight range causing much frustration for Bulls and Bears alike.


I believe that is about to change with Bears reaping their patient reward while Bulls wonder why they didn't take their profits while they had them. This unwinding may take us until September Options Expiration the third week of September or until October's but it will materialize. As I aid in a previous post, the ETF Bear Funds should be a nice rate of return and many not owning any might consider this play as it isn't too late to buy them. There are many to choose from and you might check to my post dated May 23rd, where I list them all. I have TZA as my readers know and also some FAZ as well. Good luck and Happy 4th of July!

ETF Ultra Short of Small Caps, TZA, versus S&P 500

Since I have held on to my TZA stock these past 2 months, I wanted to show my readers 2 charts which compare TZA versus the S&P 500 to give readers an idea where I believe TZA will go now. From the first chart of the S&P you can see in the chart below the first few data points in the beginning of April, the Index was between 825 and 840. The S&P closed yesterday at 889. I believe the S&P will go back down to test the 840 level again and it will break below that on its way to 800 and then we will see if it goes back to its lows of 666. That's right 666, a fitting number for the 52 week low as it felt like devils work indeed.


Now looking at TZA below, which is an ETF based upon the Russell Small Cap index, but is a triple short of it, you will see it closed yesterday at $23.63 and from the chart below, assuming all Indexes will retrace relatively the same, down, then you can see TZA should reach between $40 and $45/share. This would be roughly an 80% gain. If it goes back to the 52 week lows on the Russell Small Cap index, TZA could go well above $70 to $80/share, whatever the comparable reverse split will be.


Now I know the ETF's are all scheduled for a reverse split on July 8th so the numbers will be different but the value of the change should be about the same. It is something to look forward to, during which this time will be agonizing for many who have not hedged their gains these past 3 months. It will be the House of Pain, as Jim Cramer, host of CNBC's Mad Money program, refers to difficult market losing periods. I am hoping it will bring me and some of my followers who also own any ETF Ultra Shorts, to the House of Gain.

Bill Gross's gloomy outlook for the economy

This story from Bloomberg news this morning caught my eye not only because of who is quoted here, Bill Gross, Co CEO of Pimco, but more importantly for what this well respected individual is saying. Of particular interest was not where he said to invest, but his prognosis for the economy going forward and if true will be extremely painful for us all. Here is the article in its entirety:

Gross Prefers Bonds, Dividend-Paying Stocks in ‘New Normal’

By Bryan Keogh

July 1 (Bloomberg) -- Investors should favor bonds and dividend-paying equities as the U.S. heads into a “new normal” of higher savings and lower consumption, said Bill Gross, manager of the world’s largest bond fund at Pacific Investment Management Co.

Higher savings, lower consumption and annual economic growth of about 2 percent, as opposed to 3.5 percent, may last a generation or more, meaning investors should “stress secure income,” Gross, who helps oversee about $756 billion as co- chief investment officer at Newport Beach, California-based Pimco, said today in his July note to clients.

“‘Non Appétit,’ not Bon Appétit, will become the apt description for the American consumer, and significant parts of the global economy, including the U.S,” he wrote. “It promises to persist for a generation at a minimum.”

Investment-grade corporate bonds returned 9.2 percent this year through June, beating Treasuries by a record 13.7 percentage points, according to Merrill Lynch & Co. indexes. The U.S. government and the Federal Reserve have pledged more than $12.8 trillion to thaw frozen credit markets in hopes of pulling the economy out of the worst recession since the 1930s.

Consumer spending rose 0.3 percent in May, the first gain in three months, while higher incomes drove the savings rate to a 15-year high.

Mini Poll summary for June: How long will the recessionl last?

From the chart above it is clear that people do not see the recession ending soon.

Below is a summary of the Mini Poll data for June as compared to December, January, February, March, April, May and June.

First the question.
How long do you believe this recession will last?

Data for December, then January, February, March, April, May and June:
Mid 2009 4%, 17%, 10%, 12%, 4%, 7%, 3%
End 2009 35%, 25%, 24%, 21%, 25%, 11%, 6%
Mid 2010 15%, 13%, 12%, 3%, 33%, 19%, 14%
End 2010 15%, 10%, 4%, 18%, 15%, 15%, 9%
Mid 2011 12%, 17%, 10%, 3%, 4%, 4%, 6%
End 2011 8%, 0%, 10%, 3%, 4%, 4%, 6%
Mid 2012 0%, 0%, 2%, 3%, 2%, 7%, 0%
End 2012 0%, 0%, 2%, 0%, 0%, 19%, 29%
Much Longer than the choices you have provided 0%, 0%, 10%, 12%, 0%, 11%, 14%
We are going to be in a Depression 12%, 19%, 18%, 24%, 13%, 4%, 14%

If I summarize by Year:
2009 39%, 42%, 34%, 33%, 29%, 18%, 9%
2010 30%, 23%, 16%, 21%, 48%, 34%, 23%
2011 20%, 17%, 20%, 6%, 8%, 8%, 12%
2012 0%, 0%, 4%, 3%, 2%, 26%, 29%
Depression 12%, 19%, 18%, 24%, 13%, 4%, 14%

Sample size for December was 26, for January 48 votes, for February 51 votes, for March 39 votes, for April 48 votes, for May 27 votes and June 35 votes.

Again, from the chart below, the major change seems to be the change in the year 2012 but it moved out to the end of 2012 according to the first set of data above. This validates the Consumer Confidence numbers for June, as they dropped from 54.8 in May to a 49.3 in June, as reported yesterday. The last 2 Months of my surveys show a shift in peoples feelings about the length of the recession to a much longer time, than my earlier survey results have indicated.



As Unemployment increases so does despair! Feel free to click on my comments button below this post and add some personal examples to what you see daily that has you thinking this way.

Market comment for June 30th, 2009 on recent Volume

I was scanning my usual source of articles relevant to market action of recent days and I came across a chart and this one. In summary, the volume is low, too low to believe the rally is for real. To quote the author's first paragraph, "the NYSE traded with the lowest volume since January 5. The correlation continues: low volume - market up; high volume - market plunge. Rinse. Repeat." The author of these comments is Tyler Durden. I tend to agree with Tyler. Every technical book on market analysis tells me this rally since March 30th is a Bear market rally. Many want to believe it isn't and keep hyping the idea things are getting better, there are more Green shoots. But smart people know when the market goes up on lower volume, it is a Bearish sign. These signs are flashing red if anybody is really looking. Can it continue in this way? Absolutely yes. That is why we won't know possibly until October the true consequences of this market action.

July 8th, it was announced yesterday that ETF Ultra Longs and Shorts will have a reverse split. This will affect my TZA and those of opposite holdings, TNA, as well as FAZ, FAS and SDS etc. Read the news items or check the SEC filings for news on your holdings. The net change is dollar neutral but there will be a significant reduction in the number of shares.

Savings Rate vs. Consumer Spending: What will the future bring?

Below, I have a chart of the U.S. Savings rate going all the way back to 1970 and comparing year over year growth, which I read in an article titled, "Global Growth Likely to Stagnate Through Summer". The economy has been built upon Consumer Spending contributing to 70% of our economy for at least the last 20 to 25 years. But now that trend seems to be in reverse, as is shown on the chart. If this is true for our economy, the big question is whether our exports can increase sufficiently to fuel our economic growth and take the place of our Consumer. We find ourselves in the very same place as the Japanese did in the early 1970's, which ultimately led to their lost decade of the 1990's.



No one knows what will ultimately happen here in the U.S. But we need countries like China and India to help fuel our economy and we had better get used to it. We need to build a closer economic relationship with China and that is in our national interest, or we could have our lost decade as well. It isn't going to be easy, as we are not as aligned with China because of their Human Rights record, but we need not to meddle in China's internal affairs as the way of showing our displeasure. We have learned much from the latest trouble in Iran and how technology has given them a chance to raise their collective voices in opposition to what they deem as an injustice by the Supreme Leader and government they trusted. We must let technology do its magic in China and learn to be more patient as a people. Otherwise, we and our children have a dark economic future. We can't keep spending like we have for the past 25 years. It is time to save and it looks like we may have finally learned that lesson.

Market outlook for the week ahead: June 29thth-July 3rd

I thought you might like to see the data that will be announced by day this coming week and have found the Bloomberg survey of leading indicators. On Tuesday, Options Expire for the Qtr. Here's the list to watch for:

Bloomberg Survey

================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Case Shiller Monthly YO 6/30 April -18.7% -18.8%
Case Shiller Monthly In 6/30 April 140.0 n/a
Consumer Conf Index 6/30 June 54.9 55.2
ADP Payroll ,000’s 7/1 June -532 -390
Construct Spending MOM% 7/1 May 0.8% -0.6%
ISM Manu Index 7/1 June 42.8 44.5
ISM Prices Index 7/1 June 43.5 47.0
Pending Homes MOM% 7/1 May 6.7% 0.5%
Nonfarm Payrolls ,000’s 7/2 June -345 -350
Unemploy Rate % 7/2 June 9.4% 9.6%
Manu Payrolls ,000’s 7/2 June -156 -150
Hourly Earnings MOM% 7/2 June 0.1% 0.1%
Hourly Earnings YOY% 7/2 June 3.1% 2.9%
Avg Weekly Hours 7/2 June 33.1 33.1
Initial Claims ,000’s 7/2 27-Jun 627 615
Cont. Claims ,000’s 7/2 20-Jun 6738 6740
Factory Orders MOM% 7/2 May 0.7% 0.8%
=============================================================

At the close on Friday the Put to Call ratio closed at 0.81 and the VIX closed at 25.93, the lowest value since mid September last year when all the problems with the Sub Prime loans and Banks began.

The Dow continues to hug the downtrend line which started a year ago and was shown in my post last Thursday. I expect it to continue to go down and I expect the S&P 500 to do the same. I am still invested in my ETF Ultra shorts TZA and will hold on to this until we hit back at the lows of 7,300 on the Dow or if we go and retest the low of 6,440, which many believe eventually we will need to successfully retest, before a true Bull market Rally will begin.

Special Chart for June 26, 2009 vs the Great Depression

I thought I would add another chart today. This one from Chart of the Day web site. It shows the duration of all Dow Rallies from the Great Depression as well as the magnitude of each rally and compares the Rally since March 30 this year to then. It seems clear this rally is well within the scope of those rallies.

Market summary for June 25 and chart

I know many are wondering what is going on in the stock market, as I am reporting bad news but the market is rising. It is confusing indeed. But the way to keep a proper perspective is to have an overall long term view to determine what is really going on. In that vein, I have prepared a 2 year chart of the Dow as you can see below. The most important part to focus on is the fact that even though the Dow had a 173 point rally, the closing price is still below the downtrend line and as long as that continues to be true we are headed lower. And the Dow is still below its 200 day Moving average. So I am not blowing smoke at you. Facts are facts in this world of emotions.



Volume was below Monday and Tuesday's volume today but slightly more than yesterday's volume. The VIX closed down dramatically to 26.36, down almost 10%. The Put to Call ratio closed at 0.89, so there was nothing telling with that data. I have not lost confidence that my prediction of a down market will happen, so there is no change in my views with the market rise today. There would need to be a sustained rally to a higher high on increased volume for me to change my outlook. For now I stand pat.

Market outlook for June 25, 2009

Well, the markets are headed lower again today. Several news items contributing to this. First Weekly Jobless Claims were up 15,000 to 627,000. The significance of this was that most expected a decrease in the number of claims and for the overall number to dip below 600,000. Secondly, Continuing Claims also rose an unexpected 29,000 to a total of 6.74 Million jobs.

El Erian, Co CEO of Pimco said this morning that he agreed with Warren Buffet, he was not seeing Green Shoots. He also said "it is too early to relax and it is pretty tricky out there right now."

Art Cashin on CNBC said this morning it looked like we are almost confirming a Dow Theory Sell signal and he expected several corrections each going lower over the next few months.

It looks like finally many are coming around to what I have been saying for over 2 months now. After the close yesterday on CNBC, a man from Lowry Research said we have had two Mondays where 90% of the trade for the day were all on the sell side. He said he expected us to return to the lows of 6,440 and may go below it. He based his reasoning on the fact that Volume has ben light on the rally up compared to the volume coming down to the lows in March and that not many bought into the rally as there is much cash on the sidelines. Most of these viewpoints I have posted here and is why I told many to stay with their ETF Ultra shorts, TZA and SDS and others they had and to buy more and average down the purchase price. It is why I said to sell Apple a week ago when it was near $140 and take the profits. We are headed lower and lower for a while now. Don't get sucked back in on a correction because while the market will go up some days, we are headed for a staircase pattern down for while to come.

Time to sit back and wait now to see when we go significantly lower and how much. But the signs are clearly negative now for the markets. It is not too late to buy some of these ETF Ultra shorts like DXD, SDS, TZA and others as the prices have been low for a while. TZA, for example is now about $25-$26/share but was $20/share recently.

Don't forget if you have not voted this month on my Mini poll to do so. It is on the right margin. Thanks!

UPDATE 9:10am PST

Well the market has thrown the analysts a curve ball, as the market now is up with the Dow up 150 points. Will it hold today? I have no clue!

Market outlook for June 24th, 2009

This morning in pre-market Durable Goods Orders were reported to climb again 1.8% for May, as compared to a 1.8% gain in April. It is a very small positive sign, but the market is looking for any good news these days and a gain is better than a loss. The market may rise today but not a very strong rally in my view. The bigger news being awaited by the market is the announcement by the Fed after several days of meetings. Will Fed Chairman Bernanke say he still sees the worry of deflation or will they say they see and are concerned about inflation. In my view the Bulls and Bears will each have a strong case with whatever they say as a case can be made for being Bearish or Bullish. It doesn't really matter what they say. It is more important as to what the actual data says on the economy. So far, it's pretty bleak! If you are an American, Asian or European who is watching the data and see the Unemployment rate in the U.S. is at 9.4%, in California it's at 11.5% or in Spain it's 17%, you can say we are still in a bad recession. If you are one of those who are unemployed yourself, then you feel we are in a Depression!

But in pre-market the Futures are up and in Europe trading is up as well. Those views are by those who have money to invest and are obviously employed. They don't feel the pain of job loss! Only when the market goes down do most start to feel the pain of the reality of the economic conditions in their countries. Stay tuned!

Don't forget to vote in the Mini Poll on the right margin if you haven't voted this month. There is only 1 week left before I summarize June's data.

Market summary for June 22, 2009 and comments

Today the market dropped on the Dow 202 points closing at 8,339, while the Nasdaq closed down 61 to finish the day at 1766 and the S&P 500 closed below 900 for the first time since May 27th, closing at 893. The Volatility Index closed at 31.17 after hitting a high of 32.05 earlier today. The Put to Call ratio closed at 0.92 while Gold closed at 923, down 12 dollars/ounce. The signs have been there for weeks since the Candlestick pattern on June 5th showed the first sign of market reversal, and then was confirmed again on June 15th, as I wrote in my post on both days. Both the Dow and the S&P 500 are now below the 200 day Moving Average again.

Meanwhile, contributing to the market decline today was this little tidbit: World Bank Says Global Economic Recession to Deepen from Bloomberg news. And I quote, "The world economy will contract 2.9 percent, compared with a previous forecast of a 1.7 percent decline, the Washington- based lender said in a report today. Growth will be 2 percent next year, down from a 2.3 percent prediction the bank said."

Also in the article was this: "The World Bank cut its forecast for the U.S. this year, calling for a 3 percent drop in the world’s biggest economy, after predicting a 2.4 percent contraction in March.

Japan’s gross domestic product will shrink 6.8 percent, more than the previous prediction of a 5.3 percent decline, the lender said. The euro area’s economy may shrink 4.5 percent, compared with the previous estimate of a 2.7 percent contraction.

Global trade may drop by 9.7 percent, compared with a March forecast of a 6.1 percent decline.

I do expect the Dow to go below 8,000 and the S&P 500 to go below 840 as well. Options Expiration for the Quarter in June 30th and I do not know what the effect of that will be on the market.

One other piece of news I thought was relevant was this gem: "Insiders Exit Shares at the Fastest Pace in Two Years." I have been saying this was one of the reasons I thought the market was headed down and wrote so on many occasions. I receive 2 reports daily on Insider Buying and selling from J3SG.com and for months it has shown the dollar amount of Insider Selling far exceeded the dollar amount of Buying for any given day. I had posted the theory, how can things be really getting better in the economy if so many Insiders who have most likely lost money like the rest of us, are selling their company stock. If they saw Green Shoots and recovery wouldn't it make sense to be buying more shares of their company stock? Anyway, read the "Insider Exit shares at the Fastest Pace in Two Years" article and conclude what you will. I am still holding my ETF Ultra Shorts Triple pay of the Small Caps, symbol TZA, as well as the Ultra Short Triple lay of the Financials, symbol FAZ.

The market should just be in the beginning phases of a eventual retreat to 7,300 lows or lower by the end of October.

Market outlook: Entering the most critical period

The market ended with mixed results for this past week. I have summarized several charts which help give a clearer picture of where we are headed. I will discuss each chart and cite some comments from a prominent business leader to help support my conclusions. In summary, we have reached the top of this recent rally.

The first chart below is a 5 Year chart of the Dow.



The top part of the chart is the actual closing value of the Dow, while the bottom area shows the Volume. It is clear from the Blue lines that we hit resistance and have not been able to go above it. It is also clear, if this is true resistance we are headed lower. We have not tested the lows. If we ever get above resistance the second blue horizontal line crosses at 10,000. You will also notice that the Volume climbed as it approached the major market drop to the 6,400 low. and while the volume of the rally from the low had good volume it declined until it is most recently well below what was needed to sustain this rally. I therefore conclude we will go lower now, rather than continuing to 9,300, the high of the range from the market bottom.

This next chart below is of the S&P 500. It shows a very similar pattern. There is no Volume data available for the S&P 500.



I draw the same conclusion here as I did with the Dow. We are headed lower.

Now let me string together a series of comments from the Vice Chairman of General Electric, John Rice, in an interview yesterday. He said, "I have not seen it (Green Shoots), in our order patterns yet. At the macro level, there may be statistics suggesting the economy is starting to turn. I am not seeing it yet. We see a world where good companies and good consumers can’t get all the credit we would like. Companies with lots of cash on their balance sheet are worried about whether they will get what they need for working capital and are cutting spending. Until that changes I don’t think you will see a significant rebound, We are preparing for 12 or 18 months of tough sledding.”

I recommend you read the entire article to put all of his words into context by clicking here. But it infers that many companies are struggling to make a profit and are cutting costs as their chief tool.

This does not bode well for the market as, in a few weeks, we go into earnings season for the 2nd Quarter. If you are short the market you should do well. Or if are considering jumping into the market, I would suggest against it. Keep your powder dry and preserve capital. The next month will have many shaking their heads about this market.

Market Update: Friday June 19th (UPDATE)

Pre-market indicators are up today. European markets are also up at this time and Asian markets were also up in overnight trading. Today is Options Expiration for Equities for the month of June and this month Quadruple Witching. All indications from pre-market are that we should finish up today, but the volume did not convince me yesterday, as trading will be most dramatic in the last half hour, so anything can happen. Don't bet on a higher finish.

The chart above is from Chart of the Day looking at the Dow from 1925 to now, inflation adjusted, except that I have added a red line with an arrow which shows where there is resistance. That line crosses at about 7,500 on the Dow. However if you look at the lows from history, the Dow fears are that it could go as low as 4,000 according to chartists. That was the fear when we hit the low of 6,440 on the Dow. many worried if we didn't low we were going as low as 4,000. But we did hold and managed to rally 40% from there.

I don't want to be a broken record as to repeating where the market will go before the end of October, as you all know my views. If you don't just read some of my recent posts this month.

I wanted to add several points this morning. I told a friend a few days ago to sell Home Depot (HD) as I see it going lower, and buy instead Lowes (L). I suggest any holding Home Depot do likewise. I also have asked a number of businesses in my local community in Marin County how business is and they said awful. In a local Mall yesterday where there were several hundred people, they seemed to be there to relax and eat some lunch in a few local restaurants but I noticed only 3 people carrying any packages from shopping. I also noticed a number of stores with huge Sales trying to attract customers, but there were few buyers or shoppers in their stores. Marin County is one of the wealthiest counties in California and the nation. Retail Space is very available as I see many For Lease signs. It does not look good for the economy here so I can't imagine how it is good for other not so wealthy communities.

The Put to Call ratio closed at 0.95 yesterday, down from the previous 2 days. Volume was less for the Dow and the Nasdaq and not convincing of the move up. The Dow remains below its 200 day Moving average.

UPDATE: 9:45am

The Dow was up about 60 points earlier this morning. However the Dow is now negative at down 15 points. Volume is high and already at the Moving average and will significantly exceed today. The Nasdaq is also ahead in volume today but it is still positive for the day. The S&P 500 is barely positive right now, up 1 point.

Market outlook for June 18, 2009

Here are some headlines setting the stage for the market today. This from Bloomberg news and it gives good reason for another down market today. European and emerging-market stocks fell for the fifth day, the longest losing streak since January, as an unexpected drop in U.K. retail sales and downgrades of U.S. banks by Standard & Poor’s fanned concern the global economic recovery will falter. “We could see a pullback in risk appetite in the near term and a more material correction lower in stocks,” said Adam Cole, head of global currency strategy at Royal Bank of Canada Europe Ltd. in London. To me this says that our exports to Europe will continue to slow

John Bogle of Vanguard said this morning on CNBC that considerable unwinding leveraged positions is going to continue over a number of years. He also said we are in for an "L" shaped recovery and we are going to stay where we are for quite a while. I have stated clearly here that I thought we were headed for an "L" shaped recovery and this is why I have continued to be bearish.

Jobless Claims came in up 3,000 to 608,000, while Continuing Claims came in down 148,000 to 6.69 Million jobs lost.

As we approach the quarter end, I believe we are going to continue to retreat in the market. So we have about 2 weeks more of declines, in my view. Quarter endings are inflection points as the chart of the Dow shows. Look at the arrows as they represent 3 weeks before each quarter's ending. Not in all cases but many they were trend reversals.

I continue to like Bear ETF's and will continue to hold my TZA. Those still owning Apple stock, I would sell the shares now as I see it has topped out and is most likely headed lower. I also believe anyone holding E-Bay should also sell right now, as looking at the 2 year chart, I think we are headed lower in that stock as well. Apple closed yesterday at $135.58 and E-Bay closed at $17.09/share.

Market summary for June 17, 2009

The Market closed mixed today and the change was insignificant in all three Indexes. However, the big news to me today was that the Put to Call ratio closed at 1.13 which is the highest it has been in a long time. As a matter of fact, within the first 1/2 hour, the Put to Call ratio hit a high of 1.41. From the chart above you can see where that would have been, if it closed there. But still, 1.13 is getting up there.

I expect this to go higher before the market closes on Friday as Options are expiring each day. Today, VIX, VXN, RVX Options all have expired. Tomorrow morning settled index options cease trading. And on Friday, Expiring equity, P.M. settled index options and treasury/interest rate option classes cease trading. Expiring cash-settled currency options cease trading at 12:00 p.m. EST. The Quarterly Options Expiration doesn't occur until June 30th.

The volume for the Dow today was still significantly lower than the Moving average, but it was equal to yesterday's. The Nasdaq seems to have equal volume to its moving average. The Nasdaq gained 11 points today, the Dow lost 8 points and the S&P500 lost 2 points. The trend is still down for 2 out of 3 Indexes and the Dow has now fallen back below its 200 day Moving average. The S&P 500 is still above its 200 day MA but it is very close to going back below it again. The Nasdaq still has plenty of room above its 200 day MA.

Volatility was somewhat lighter today as the VIX closed at 31.54 today, down slightly from 32.68, which was yesterday's close.

Data announced in pre-market today was the CPI (Cost of Living Index). Many investors have been discussing perceived inflation concerns. But today, the CPI index came in at +0.1%, hardly inflationary. Yet many worry that eventually the heavy spending by the Treasury and the Fed flooding the market by printing as many dollars as the presses can turn out. I am sure eventually we will need to worry about inflation, but every sign I see is that we are still in a deflationary period. Everyone is dropping prices in hopes to gain more volume and sustain profits. But the Consumer is deaf to these announcements and continue to save cash rather than spend. As long as this continues, this economy is not going to recover anytime soon. You may not believe this but the best way of testing this premise is to ask yourself the question, Am I spending as much now as I did a year ago and am I going to be spending more over the next 6 months? Anyone want to respond, click on the word Comments and add your opinion as to how you are answering this question. Please also leave the name of the State you are living in currently.

Also, please don't forget to take the Mini Poll on how long you think the recession will last. Thanks!

Market summary of June 16, 2009

The market closed down today reaffirming the trend reversal signaled last week. The Dow closed down 107 points to 8,505, while the Nasdaq closed down below 1,800 to 1,796. The S&P 500 closed down 12 points to close at 912 for the day. Market volatility, as measured by the VIX Index, closed at 32.68, which is at the highest level since May 26th.

An interesting piece of data today is the Put to Call ratio. It reached a closing high today of 1.01 and this level has not been reached since the lows of the market on March 30th, when the Put to Call ratio reached 1.14 on that close.

We are still only 2 days into Options Expiration week and the volatility will continue to rise, but it is difficult to say whether the market will continue to sell off the rest of the week. We have not yet gained momentum enough to drop more significantly.

The volume traded today was about equal to yesterday, however, it is below the trend line moving average. With light volume this market could keep drifting lower. Shares of TZA closed at $23.80 after reaching a high of 24.01 during the day. The last 2 days of TZA had higher volume than the previous day. What tomorrow brings should be down again, but I am learning to respect the market has a mind and will of its own.

Healthcare: Ultimate outcomes

Today President Barack Obama addressed the AMA (American Medical Association) to talk about our broken healthcare system in the belly of the beast. Whay do I say the belly of the beast? Because the members of the AMA have opposed President Obama's call for the types of reforms the country need. He did a great job today with his speech. I listened to the whole thing live and recommend others listen to it as well.

I was thinking about medical outcomes as a result of his speech. He talked about unnecessary tests being done which drive costs up and don't really improve the outcome for the patient. Many have criticized the idea of a public option for Americans. They say this is nothing more than an attempt to have a Single Payer system. The critics talk about long waits for medical care and cite Canada as an example, as well as other countries which have national healthcare. Michael Moore addressed some of the critics in his last movie, Sicko". This is another movie worth seeing. So I gave more thought about what outcome is the most important outcomes to evaluate these different systems. I came up with Life Expectancy data. After all isn't that what we are all trying to do, live as long as we can and as healthy as we can? So here is some interesting data you might not be aware of.

Where do you think the US ranks in Life expectancy compared to other countries and where does counties like Canada rank? Here's the data based upon UN member Countries:

1. Japan (82.6 years)
2. Hong Kong
3. Iceland
4. Switzerland
5. Australia
6. Spain
7. Sweden
8. Israel
9. Macau
10. France
11. Canada * (80.7 years)
12. Italy
13 New Zealand * (80.2 years)
14. Norway
15. Singapore
16. Austria
17. Netherlands
18. Martinique
19. Greece
20. Belgium
21. Malta
22. United Kingdom* (79.4 years)
23. Germany
24. U.S. Virgin Islands
25. Finland
26. Guadeloupe
27. Channel Islands
28. Cyprus
29. Ireland
30. Costa Rica * (78.8 years)
31. Puerto Rico
32. Luxembourg
33. United Arab Emirates
34. South Korea
35. Chile * (78.6 years)
36. Denmark
37. Cuba * (78.3 years)
38. United States (78.2 years)

* Countries with National Healthcare or Single Payer systems

If you want the rest, click on this link.

So the question seems to be this, Is our medical system really as good as it should be? Looking at the data, countries which have Single payer systems, seem to outlive us.

Market summary for June 15, 2009

The markets were down today for the entire day. The Candlestick patterns for all 3 Indexes confirmed the reversal form last week. All 3 Indexes, the Dow, Nasdaq and S&P 500, closed with a Hammer pattern. The pre-market started off with the Empire State Manufacturing Index for June continued to deteriorate to -9.41 compared to May's data of-4.55 for state of the manufacturing sector. This was not good news for those hoping for a recovery.

I expect tomorrow to be a repeat of today and the market to go lower. Remember this is Options Expiration week for most Options. Refer to the schedule in the previous posting to know what expires each day for the rest of the month.

TZA shares gained today closing at #22.64, up 8% for the day. As predicted the VIX index closed at 30.81 after reaching a high of 31.09 in light volume.

Your Options Expiration Calendar for week of June 15th

So here's the lineup for Options Expiration this week by each day pf the week.

Monday June 15th: 2010 Equity LEAPS® conversion
Tuesday June 16th: SPL converts to SPX
Wednesday June 17th: VIX, VXN, RVX expiration date
Thursday June 18th: A.M. settled index options cease trading
Friday June 19th: Expiring equity, P.M. settled index options and treasury/interest rate option classes cease trading. Expiring cash-settled currency options cease trading at 12:00 p.m. EST.
Saturday June 20th: Equity, index, cash-settled currency and treasury/interest rate options expiration date
Thursday June 24th: New SPL series added
Tuesday June 30th: Quarterly expiration date

You will notice the end of the Quarter Options expiration does not Expire this week but rather of June 30th.

Violence is a method of choice by Republican extreme Right Wing elements. What should be done to minimize this type of violence?

I have been watching and listening to some news stories showing some real crazy points of view. The nut jobs views are expressed by people like Rush Limbaugh, Bill O'Reilly and even some comments from our former Vice President, Dick Cheney. These crazy views include some who believe President Obama was not born in the United States but in Kenya or some other place. This was the view of the killer, James Von Brunn, who killed the guard, Stephen T. Johns, at the entrance of the Holocaust Museum. We have seen Right Wing extremists front and center during the 2008 Presidential campaign, if you remember. And if you don't let me refresh your memory.

According to news reports back on October 10, 2008 one supporter of Sen. John McCain claimed candidate Barack Obama was a Muslim and an Arab. Senator McCain corrected the woman and said Obama was not a Muslim, nor Arab, and was a "decent person." “Come on, John!” one audience member yelled out as the Republican crowd expressed dismay at their nominee for trying to minimize the emotions of supporters. Others yelled "liar," and "terrorist," referring to Obama. Fearing the raw and, at times, angry emotions of his supporters, may damage his campaign, John McCain urged them to tone down their increasingly personal denunciations of Barack Obama. "I have to tell you. Sen. Obama is a decent person and a person you don’t have to be scared of as president of the United States," McCain told a supporter at a town hall meeting in Minnesota who said he was “scared” of the prospect of an Obama presidency and of who the Democrat would appoint to the Supreme Court.

If you remember earlier, there were threats to then candidate Barack Obama after he announced he was running for President and then the Secret Service had to increase their security of the candidate during the Democratic Primary process. My point of raising all this is that it is the very Right Wing of the Republican Party, which is supportive of the NRA, which promotes gun ownership over everything else, and has done more to facilitate violence in American society than any other organization of the past 40 years. Yes, this group took away many of the other Constitutional rights of Americans by endorsing Wire Tapping of Americans, deceiving the Country about Iraq and Weapons of Mass Destruction and the build up of the war and authorizing the use of torture. Democrats who were appalled by the actions of President Bush and Vice President Cheney never did any acts of murder based upon ideology. It is clear that the Republican Party has lost control of its more radical members and their language does not try and stop it and they need to denounce the extreme rhetoric, as well as that of Rush Limbaugh, Bill O'Reilly of Fox and others. Then President Bush and Vice president Cheney did all they can to scare the heck out of every citizen just before going into Iraq and then continuing it throughout their term in office. As Bill Maher said last night, "They tried to scare us all of the Boogey man and it worked.

It was never Democrats and Independents turning violent these past 8 years of the Bush/Cheney Administration. They had plenty to be violent about as their Constitutional rights were trashed by Bush and Cheney. But they didn't. They obeyed the laws most of the times and only did peaceful Civil disobedience and protests. It says something about Independents and Democrats and yes it says something about the gun loving Republican extreme Right Wing nut jobs as well.

So to answer the question posed in the title, "What should be done to minimize this violence?" Well just maybe we should have their worse fears come true. Maybe we should take away their guns by a more contemporary interpretation of what the Second Amendment really means. We don't have a well regulated militia today, other than the National Guard. so I don't mind them having arms, but that's it! But that is going to take some new Supreme Court Justices. I don't know much about Judge Sonia Sotomayor. I hope she is as good as the press is on her. Besides, the Bush Administration, and especially Dick Cheney, had no problem suspending parts of the Constitution they didn't like, such as Habeas Corpus, Privacy (approved wire tapping of U.S. Citizens without approval of the FISA Court) and other parts which support our treaties and things like the Geneva Convention. They redefined what torture is, to suit their ideology and their cause, when it suited them. It suits me just fine to have a legal view by the Obama Administration General Counsel, which says that common citizens do not have the right to bear arms, unless they are in the National Guard or other Police or Military jobs requiring it. The government could outlaw assault rifles like the AK-47 and go as far as they like to protect us. How's that Extreme Right Wing nut jobs!?

Market Summary for the week and a look ahead

The stock market hype was high again this week. many comments about how things were looking better, but the actual data showed we stood still this week. The spin masters were out in full force as economic data was released earlier in the week and there was no shortage of spin. Here are some examples. Consumer Confidence numbers released this week came in at 69.0 versus last month at 68.7 but to hear the headlines you would think the Consumer is doing a lot better. First of all the data increase is not statistically significant of a real move up. Secondly, when they announced Retail sales up 0.5% for May, many put the 2 pieces of data together like Larry Kudlow of CNBC and said Consumers are Buying again! The truth is the reason that Retail sales were up was due to increased purchase of Energy as Energy costs, especially Oil and Gasoline, have soared again recently. Anyone filling their cars knows this. Actual sales of things like Electronics, Furniture and Appliances, so called discretionary spending, was down in May!

Consequently, the stock market did not really advance for the week as the chart of the Dow above shows. In fact there is much to be concerned with looking at that chart. Notice the Dow over the 2 past weeks is higher than the previous period for this one month chart. Also notice the Volume on the lower section has decreased significantly as the red line shows average volume for the previous month. When price goes up and volume declines it is a sure Bearish sign.

I am still holding my TZA shares which are Shorts of the Small Cap. I also purchased 10,000 shares of Capstone, symbol CPST, for $1.15/share yesterday. I plan to add to my position in these shares going forward. The maker of mini Turbine engines successfully completed a test by Ford in the UK in their Ford S-Max 7 passenger car. This engine is 50% less weight than a standard engine, which increases both the miles per gallons achieved and also reduces significantly emissions and harmful Carbon dioxide in the environment. If you wish to see a 42 second video clip on the car click on this Capstone link.

Now looking ahead what does that mean for the market? Well we are going into Options Expiration week. Not only will this be an expiration of Options for the Month but also the Quarter, Most likely Triple Witching Options expiration will happen on Friday, June 19th. I expect increased volatility this coming week. Currently the VIX Index, a measure of volatility, closed Friday at 28.15 and I expect this number to go up during the upcoming week. The Put to Call ratio for all Options closed at 0.86, however the Index only Put to Call ratio is at 1.27 as of Friday's close. I do believe we will see a leg down to retest the lows as I have said many times in the face of a market that just goes up or stays flat, as it did this past week. I just believe that reality of the economic conditions are eventually going to set back in to the markets and a selloff is inevitable. Having said that, the market could break through resistance this week and we could end higher. But I do not believe we will go above the previous range of 9,300 on the Dow.

My Beacon Power shares, symbol BCON, did well this week, closing Friday at $1.02/share. back on March 4th, this stock was at $0.34/share. This is a gain of 200% from there. This stock should rise to well over $2-$3/share in the coming year, as they get entrenched in building out their manufacturing capabilities for the Grid. If you would like to see a short video clip on their Flywheel technology and facility click on this Beacon Power link. When you go to their site be sure to click on each of the orange/gold rectangular boxes for each of the short video clips. It's well worth your time and the company is a good investment for any who believe in Green Technology and President Obama's Energy initiatives.

How long is this recession compared to all the others? See the Chart

From Chart of the Day, the following tidbit of information on the length of this recession:

Chart of the Day

While the stock market has rallied nicely since bottoming on March 9th, the economy continues to struggle. For some perspective on the current economic recession, today's chart illustrates the duration of all US recessions since 1900. As today's chart illustrates, the five longest recessions all began prior to 1930. The length of the current recession (now in its 18th month) is above average and the longest recession since the Great Depression.

Market update for June 11, 2009

Weekly jobless claims came in at 601,000 which was down 24,000. Continuing Claims were at 6.816 Million jobs. Retail Sales were up 0.5% compared to last month being down. However if you look behind the overall Retail Sales number, the reason it was up was because of Commodities and Energy price increases. The more important numbers for sales of Electronics, Furniture, Appliances and other Consumer discretionary spending items, were all down. The Consumer has stopped spending in all but the absolutely necessary items. This does not bode well for Retailers. We are heading into the months they consider placing orders for Christmas that require long lead times to manufacture. Look for Coal in this Christmas's stocking.

The so called Green Chutes don't look so green today even while the market is trying to go higher. By the way, when you read other articles talking about "Green Shoots", notice they are misspelling it. I'm not a good speller as writing on flip charts over the years has taken its toll from speed over accuracy.:)

The Futures today are pointed only slightly down, while they were slightly up earlier before the Retail Sales and Weekly Jobless Claims were announced. European markets are down currently so it is a good bet today will be down as well. I am still consistent with my outlook that the markets will head lower and not continue to rise. We are in a range which only goes as high as 9,300 and as low as 7,800 but we will test the lows at the 7,200 and possibly go to the low of 6,440 on the Dow by Options Expiration near the end of October.

There was also an article today titled Option ARMs Threaten U.S. Housing Rebound as 2011 Resets Peak from Bloomberg news and the Housing market. One excerpt worth noting was this:

About 1 million option ARMs are estimated to reset higher in the next four years, according to real estate data firm First American CoreLogic of Santa Ana, California. About three quarters of those loans will adjust next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, the data show.

Option ARM borrowers hit with unaffordable monthly payments are another threat to the housing recovery and the economy, said Susan Wachter, a professor of real estate finance at the University of Pennsylvania’s Wharton School in Philadelphia. Owners who surrender properties to the bank rather than make higher payments for homes that have plummeted in value will further depress real estate prices and add to the inventory of properties on the market, she said.

“The option ARM recasts will drive up the foreclosure supply, undermining the recovery in the housing market,” Wachter said in an interview. “The option ARMs will be part of the reason that the path to recovery will be long and slow.”