Saturday, October 31, 2009

Market outlook for the week of Nov. 2, 2009

Well, I was wrong big time on my market call on Friday, as the Dow dropped 250 points. I thought there would be more manipulation that day by market makers. I still do believe strongly we are headed lower. I said a few days ago something big was in the air and maybe it is the coming correction. The volume was much higher on Friday and that suggests more of the same is coming. Expect us to go below the 50 day Moving average and eventually the 100 day as well.

The 3 charts above are all of the Dow looking at it from different time intervals to the close of Friday's trading on Oct. 30th. You will notice that if you looked only at a 4 month chart or even a 6 month chart you would not have the context to determine where we are in the Dow cycle. It is apparent that the 3 year chart which I have been using for quite a while is a very good indicator of where the index is relative to either a breakthrough or a correction. The 3 thin lines are the 50 day, 100 day and 150 day Moving averages. The Dow closed at the 50 day Moving average line.

I also wanted to reiterate this piece of advice. Watch the Nikkei for direction of U.S. markets! back on Oct. 20th post I showed a 5 year chart of the Nikkei and showed it had broken down the uptrend line and I said back then that the Dow will follow suit.

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Thursday, October 29, 2009

Market outlook for Oct. 30, 2009: Up, but within a tight range. UPDATE

Today, the Dow surged up almost 200 points to close at 9962. With the Dow rise, the volume today was less than yesterday's volume, not exactly an impressive and convincing move. As you can see in the 3 year Dow chart above, we are actually still in that narrow wedge between the Red line and the Blue line. We could still be there in one month, which is about the time it could take to breakout either to the upside or the downside. Tomorrow is year end for the Hedge Funds and other funds as well and they want to show their customers they have made them a lot of money back this year. So it is possible again that we go back up over 10,000 tomorrow and stay there through the close. It isn't a big deal as the index is only 38 points below it now. But then next week we get the Unemployment numbers for October.

Speaking of unemployment, Shell Oil announced it was laying off 5,000 workers, US Airways announced they were laying of 1,000 more people. And there are a number of States where government workers are being let go from Wisconsin to Massachusetts to California. More and more cities, towns and Counties are having to lay off workers. many are already heralding the end of the recession, and yet, many feel it's a Depression, as they are out of work. The projected Unemployment doesn't peak according to experts until mid 2010 and it is expected we will then be at 10.5% Unemployment rate.

UPDATE: Pre-market Oct. 30th.
European markets are down in pre-market this morning and the DOW, SP500 and Nasdaq are also all down in pre-market. Oil is down to $79.32/barrel. Gold and Silver are also down slightly as well. The dollar has remained flat in pre-market and could go either way after markets open. But much data points to a lower opening this morning. In site of that, I believe the Dow will close over the 10,000 level, the S&P 500 will close over 1090 level and the Nasdaq will close over the 2100 level. I say this because many Funds use today as their year end. They will try and push the market selectively higher to get the numbers up near the close. It's all about manipulation to attract customers for these Funds and also payout bonuses. Bah, humbug!

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Market outlook for October 29, 2009: Up

Ok, here's the big news of the week out fresh this morning. First there's the GDP number. GDP was up 3.5% for 3Q. Then there was the weekly Jobless Claims. Weekly Jobless Claims came in at a loss of 530,000, which was better than expected also. Continuing Claims came in down 147,000 jobs to 5.79 Million jobs. Overall the Dow Futures surged up on the news from being up 23 to 70 in pre-market.

This seems to suggest a bounce back up today in our markets. After the surge in pre-market, the Dow has backed off a bit to now being up 58. However, European markets, which were all down before our GDP numbers were announced, are now all in the positive, which confirms to me today will be up.

When looking at the Dow chart, as you can see above, we have been here before over the past 6 months.. The market rises, then pulls back a little when we expect a correction only to reverse again and go back up. We are at another of those inflection points now. We may go back up again.

While the market may close up for the day, it will be important to watch Volume. Yesterday's Volume was stronger than Monday and so the drop was even more emphatic yesterday. If today the market is up but on lighter volume, then the move up will be less believable and I would use the day to buy some ETF Shorts. If the Volume is stronger today, I would Sell some of my ETF shares in my shorts positions.

On a final not this morning, the well respected Art Cashin this morning on CNBC said that the markets came within a hair to a complete meltdown yesterday because of the U.S. dollar rising yesterday. He believes if the U.S. Dollar can stay calm, we could be OK, but if it starts to rally up like it did yesterday, the entire house of cards can collapse and investors will be selling all asset classes, including equities, in total abandonment.

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Wednesday, October 28, 2009

Market outlook Oct. 28, 2009: Down

Durable Goods orders for Sept. were up only 1% as reported this morning. This was not encouraging news for those wanting to see a better recovery. Dow Futures as well as the S&P Futures went down on the news. European markets are down this morning and the Nikkei Was also down in overnight trading. It looks like the correction will continue today with the markets in retreat away from the Dow 10,000 level and continue below the S&P 500 level highs of 1,100. I believe when the day is done we will have tested the 9,800 level and gone below it on the Dow. We should also get closer to testing the 1,050 level on the S&P 500.

On another note, Goldman Sachs has reduced its forecast for 3Q GDP growth from 3.0% to 2.7%. This should also help drive the market lower today and for the rest of the week.

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Monday, October 26, 2009

Market summary for Oct. 26th: Validation of an earlier prediction

Well the data is in and Friday's prediction was correct. The Dow did drop to a lower level as predicted by the 2nd "W" pattern, as shown in the charts above. So, today we closed the Dow at 9867, breaking below the 9900 level. While it looks like the Dow may recover some tomorrow, it has started the correction. The only question is how low will this correction go. As I mentioned in the previous post, earnings are being announced as well as several key indicators. I believe Consumer Confidence is important this week but GDP and the Jobless Claims numbers will have the most effect on the market.

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Sunday, October 25, 2009

Coming week Stock Market: What to look for?

There is news coming out this week which most likely will move the market. Scheduled to be released are the following new items listed by potentially creating the most market impact:

Third Qtr GDP numbers - Thursday. (Analysts expect 3.1% GDP)
Weekly jobless Claims - Thursday.
Consumer Confidence for October - Tuesday
Durable Goods Orders for October - Tuesday

Many S&P companies will report this week and a partial list is noted below:

Verizon - on Monday
Corning - on Monday
Visa - on Tuesday
U.S. Steel - on Tuesday
Coca-Cola - on Wednesday
GlaxoSmithKline - on Wednesday
Exxon Mobile - on Thursday
Proctor & Gamble - on Thursday
Kellogg - on Thursday
Colgate-Palmolive - on Thursday
Deutsche Bank - on Thursday
Sony - on Friday
Panasonic - on Friday
Duke Energy - on Friday
Cummins Engine - on Friday
Chevron - on Friday

A little mentioned poll by CNN came out last week that I thought should have gotten more press but didn't because there are many advocates for keeping one's head in the sand so you can't see that the recovery isn't recovering as the Fed and Bernanke has said. You look at the data and tell me if you think it is going in the right direction. Here's the poll question:

People were asked if they agreed with this statement: "Economic conditions are very poor."

Here's the response over time they asked the question:

Oct. 42%
Aug. 35%
Jun. 41%
Mar. 48%
Dec. 66%

The poll was conducted by CNN's Opinion Research group and has a plus or minus 3% sampling error.

Looks to me that we have taken a step backwards with 42%.

And here's something on a personal note. If you have a First Aid kit for emergencies, make sure you buy this new product and add it to your kit. It's called "QuikClot and is made by Z-Medica. It is a Gauze which stops the bleeding on very bad wounds. The military uses it and it has helped saved many lives. Here's a link to their web site. I have no financial interest in the company or the product but you know if you have been reading here for a while that I am CERT trained and a first responder so this is placed here as a public service announcement. Thanks

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Saturday, October 24, 2009

"W" patterns as a way to help decide trading decisions

I decided to add one more Dow intraday chart from yesterday with analysis to help my readers see what if anything there is to predict for Monday's market action. In the chart above, I have drawn another 2 "W" patterns. The first is the larger "W" pattern which was shown in yesterday's posting. Then in the last 2 hours of trading another minor one was formed. You will notice that this pattern is also a slanted down "W" pattern. This gives a clue that on Monday, the market may complete this pattern by at least going lower sometime near the open. It does not mean that the market will not rise. But it may complete this pattern before it does. Again Volume was higher yesterday than on Thursday and that is not typical. When you look at Volume over multiple years on a daily basis, a usual pattern is that Monday is the lowest volume and then it picks up each day through Thursday and Friday volume drops off. This pattern holds true except when the Friday is Options expiration, which was a week ago Friday on Oct. 16th. As you can see from the chart below, it too had the largest volume day of the week. Yesterday's volume was also the highest of the week, which means to me the drop down had some momentum to it.

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Friday, October 23, 2009

Oct. 23, 2009 Mid day market update.

I was looking at the Dow and the Intraday pattern as the market went up initially but then has pulled back. Looking at the chart above, you can clearly see a "w" pattern. Notice the second leg of the "w" is lower than the first leg. This usually means the movement will be lower yet. Watch to see if the market closes close to the low's of the day at 9949 as it would then close lower than it did the end of last week. And right now with 2 hours left before the market closes there are two things to pay attention to. First is the Volume. It look ahead of yesterday's volume. Secondly, look at the dollar. Right now it is up. If it stays up the market will close lower. If the dollar appreciation moves up more steeply in the final hour, from where it is now, there will be a selloff of equities.

UPDATE 12:45pm PST

With only 15 minutes to go in today's market we were at the lows of the day and the dollar gain has held. The "W" pattern, above did predict this move lower from the chart above and as you can see from the chart below it did drop lower. That is how to read a "w" pattern on any chart. You can see the "W" as I have outlined it with red lines below. The 1st Black line connected to the "W" pattern shows the slant of the pattern so that the second leg is lower than the first. The 2nd Black line I drew was to show that the pattern did show a lower point was actually reached as predicted by the chart. If you are still confused get a book on Technical Analysis Explained by Martin Pring. It's one of the best out there. It can be quite useful to help in trading.

On the earnings front, Honeywell International, symbol HON, reported it beat earnings estimates, but it too had less Revenue than last year at this time.

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Markets in limbo. UPDATE

The stock market still has not made its direction clear going forward. We are still in that narrow range that continues to butt up against the Resistance line of about 10,100. It is obvious that the data from 3Q companies which have reported earnings that it is a mixed bag. This morning MSFT reported and they exceeded earnings expectations. Analysts had expected $0.32/share and MSFT delivered $0.40/share in earnings. Their Revenue numbers were slightly better than last year but nevertheless must be recorded as better. at $12.93 Billion vs last year at $12.8 Billion. While not much of an increase it was still an increase of 1%.

While yesterday we saw a rise in all 3 indexes, the Dow volume was less than Wednesday's volume. In my comments yesterday I had said that the dollar was up in pre-market and that usually meant the market was going to go down. Well the dollar gain evaporated during the day and the dollar fell to a new low. In pre-market this morning the dollar is up again but only slightly and the Indexes are set for a gain at the open. We should see whether MSFT will drive the market higher. It should unless the Revenue gain of 1% wasn't enough of a motivator to buy stocks today. Of course they released their newest update of Windows yesterday and I haven't seen the consumer reviews on it. Hmmm, why would I, we own only Mac's. :)

I will be updating my charts over the weekend so come back and see what they look like in helping point the direction of the market going forward. Have a nice weekend too. Don't forget if you haven't voted in my Mini poll this month to add your opinion. Vote only once please in a month.

UPDATE: 8:30am PST

Burlington Northern Santa Fe railroad reported Quarterly freight revenues were $3.49 billion, which included a decrease in fuel surcharges of $725 million. This Compared to third-quarter 2008 freight revenues of $4.77 billion. You can see here is another company reporting lower Revenue than for the same period in 2008.

According to CNBC this morning, 60% of companies reporting 3Q results have shown higher revenues this period compared to 2008. The problem with that spin is that even if they reported only a $0.1 Million increase or less in revenue, it is counted in the 60% of companies with "higher" revenues. I am not impressed. Clearly the Burlington Northern Sante Fe railroad company, which does ship freight, is hurting and a better measure of the economy than many other companies.

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Thursday, October 22, 2009

More companies report 3Q results. Jobless claims rise. UPDATED

This morning the big news in reporting earnings came from McDonalds. They beat estimates for earnings per share by a few pennies, but did not get top line growth in Revenue. As a matter of fact, they said that informal dining out has dropped globally. Two other companies reported this morning, Merck and AT&T. Both of them also did not have top line Revenue growth. Without top line Revenue growth we are very vulnerable for a double dip recession. More companies to report today after the bell. Stay tuned on that front.

The Dow had difficulty again staying over the 10,000 level as it retreated to 9949 and the S&P 500 dropped back to 1081. Weekly Jobless Claims gained 11,000 to 531,000 from 520,000 last week. The four week moving average for jobless claims is at 532,250.

European markets are down again this morning and the dollar is up. The Dow Futures is up in pre-market but with the dollar up, I see the Dow headed down for the day. The S&P and the Nadaq are both down in premarket and should begin that way as well following the dollar's gain.

UPDATE: 7:20am PST

UPS reported lower earnings and lower top line Revenue than last year. 3M reports better earnings AND top line growth in revenue.

UPDATE: 2:00pm PST

Xerox says Sales fell 16 percent to $3.68 billion.


JUNIPER Sales for the third quarter ended last month were $823.9 million compared to $946.9 million revenue booked in the year-ago period. That's another company not growing Sales from last years results.

U.S. Airways total revenues in the third quarter were down 16.6 percent versus the third quarter of 2008. And another company has less revenue than 2008.

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Wednesday, October 21, 2009

Companies reporting earnings but not top line Revenue growth! We are still in a recession.

I have been watching the earnings reports come in this week and last and specifically looking at the revenue numbers of each company. Even though many companies are beating EPS (Earnings per Share) compared to last year, the real story is that most companies are reporting less Revenue this year than last year, say but a few. Th companies defying that trend are the Pharmaceuticals. Both Pfizer and Elli Lilly saw good gains in Revenue. Lilly reported this morning a 7% gain in top line Revenue as compared to last year.

Still don't think we need major heath care reform?!

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Tuesday, October 20, 2009

Want to know where our stock market is going? Watch the Nikkei!

I thought I would take a look at where the Nikkei stock market Index was currently and specifically how the long term chart looks compared to the current wedge pattern we are in and waiting for a breakout either to the upside or downside. What I found in the chart was most intriguing. As you look at the similarities from the Dow chart, you will see the similarities are uncanny. But more importantly, there is a clue as to where the Dow may be headed. It may break below the support level line, just as the Nikkei has recently! You may need to click on each chart and enlarge them to see what I am talking about, but it is worth the look.

The Nikkei chart suggests we will not break out to the upside but may well drop shortly and break the Dow's support line.

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Monday, October 19, 2009

Dow hits a new level, marking a 52 week high. So what!

I'm sure many of you didn't notice this today unless you follow the market daily. But I said last week that this was going to happen and today it did. All 3 Indexes, the Dow, the Nasdaq Composite and the S&P 500 all made 52 week highs today. Over the next few months, you may her that these indexes hit new 52 week highs. But don't fall for the hype as we would have a long way to go in each index to reach new highs. For example, the Dow hit an all time high of 14,164 on Oct. 9th, 2007. The S&P 500 hit an all time high of 1565 on the same day. So closing of the Dow of 10,097 and the SP500 at 1097 have a long way to go before we set a new record. And chances are better than 50% that we will go down to 9,000 before we go to 11,000.

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Oct. 20 Market outlook: Skeptical!

A moment ago CNBC interviewed Art Cashin of UBS Warburg. When Mark Haines asked Art where he was in his market outlook, Art replied "skeptical". Well I am too as we have not had the breakout above the downtrend line and the wedge gets narrower and narrower. We can continue in this tight range for at least a week or two but a breakout is inevitable to either the upside or the downside. I am with Art here. I believe if it looks to good to be true to move more to the upside, it probably is.

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Saturday, October 17, 2009

Oct. 17th Market outlook and recent news

Well the stock market closed just under the 10,000 level on the Dow Friday, after the Bulls tried to have it close in the positive. But it was Options Expiration for October and that was a mighty tall order. The Unemployment Rate came out yesterday for California and it reached a record 12.2%, which is a full 2.5% higher than the National average. And another Wall St. leader was arrested by the FBI for suspected Insider Trading violations, a very serious claim. They say they had wire taps and certain proof of the charges against billionaire Raj Rajaratnam, founder of hedge fund firm Galleon Group. This should help the Obama Administration and Congress get some backbone finally to pass some tough regulations on Wall Street, although this guy broke laws already on the books and was blatant. I say, if found guilty, with tongue in cheek, "Hang em!" as an example to others. Main Street is in much pain while these thieves are robbing the coffers of investors and their firms, blind! Let's now look at the charts of the stock market .

As I look at the S&P 500 2 month chart (above) and the Nasdaq 2 month chart pattern, I see that the day's close yesterday produced a candlestick Hammer pattern. These markets have done this 2 other times over the past 2 months and each time it had, those markets dropped for about 3-4 days below the close of the Hammer pattern. I expect the same will be true this time. The real question is how far down will the markets go this time. We have gotten the October Options expiration completed, so now maybe the markets will finally have the correction we have been waiting for. Even with a correction, it would correct to only 9,000 on the Dow or 900 on the S&P 500. I must add here that when I looked at the chart of the Dow and observed yesterday's Candlestick pattern it too was a Hammer. But when I looked this morning on it wasn't that Hammer pattern. What's going on here? I don't have a clue but it is noteworthy. I am not the only one who saw the same Hammer pattern yesterday, Try and look up under Indexes the Dow pattern for yesterday. I am convinced all 3 indexes showed a Hammer pattern and that most always signifies a reversal in trend. Stay tuned as next weeks action on Monday through to Wednesday should show this reversal with the market going down. Can't say how much as it doesn't reveal that to me. It's just a reversal. I found this chart from an article by Seeking Alpha's Trader Mark and an article you might want to read by clicking here.

Adding another piece of data to this move down the next few days was the high Volume traded yesterday on the Dow, but this was not the same for the Nasdaq. The Nasdaq market has been relatively strong and with Google's terrific earnings and Revenue numbers this week, many are hoping for a resurgence in Technology to help us out of this jobless recovery. Technology companies have gotten us back on our feet before and can do it again, but the Consumer would need to participate as well, and there has been a generational shift in spending patterns of U.S. Consumers as a result of unusually high unemployment and the record foreclosure levels experienced this year and last.

We have not broken up through the Resistance line (see post Thursday, Oct. 15th) and so I am seeing this resistance line as being very strong. This tells me we are not ready yet to go over Dow 10,000 and stay above this resistance line yet nor are we ready to advance over a similar line for the S&P 500 which crosses at 1100. Therefore one must conclude we are still set for a major market pullback.

My own action of the past week was to buy more shares of Exxon, symbol XOM, for $70.21/share to add to an old position I have maintained in the stock, as well as to buy TBT, ProShares UltraShort 20+ year Treasuries. I bought these shares as I do expect the fear of inflation to be just around the corner as government spending continues to worry many. Price paid was $45.40/share. I still own my TZA shares, in case you were wondering. I have taken a beating on these shares and continue to await a correction to be able to gain some losses back.

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Friday, October 16, 2009

Consumer Confidence for October

The latest Michigan Consumer Confidence numbers came out a few minutes ago for the month of October and the number was 69.4 compared to 73.5 in September. This is not in the right direction, is it? With more and more people unemployed and not able to find work, these numbers are not expected to get much better for a long time. But that's not the stock market as it seems to go up no matter what is happening to people. It's all about earnings!

Company earnings were reported yesterday for Google and IBM, as well as GE. Google beat all expectations so the clicking of ads seems to be continuing and thriving. But IBM disappointed analysts because their Service side of the business appears weak even, though the hardware side is good. GE disappointed as well, as many who are making their earnings numbers are not doing it by growing revenue but rather by managing costs. That is disappointing. Speaking of disappointing Bank of America reported and they lost 1 Billion for the quarter. Ken Lewis is now gone and the Gov't pay Czar said he shouldn't take his salary nor bonus as BAC didn't do at all well even with Gov't help. I agree!


Thursday, October 15, 2009

Dow closes at 10,000:What's up now?

The big question of the day is whether a Dow over 10,000 is a sustainable level. As I look at the chart above, I see it will not last. If you click on the chart and make it larger, you will notice the downtrend red line crosses just above 10,000 on the Dow. So technically, we have not broken through this resistance level but we are about as close as it gets.

Earnings are still coming out and we aren't even 1/3 of the way through reporting. Today, Google reports as does IBM and AMD. Thee is definitely a fight for direction here between the Bulls, who appear to have unlimited government funding to firms like Goldman Sachs, and the Bears, who appear to be fighting on a much smaller scale. Unemployment claims dropped a bit this week to 515,000 lost jobs. Everyone hails this as good news as it isn't as bad as it has been. But I'm sorry, we aren't adding new jobs, we're still losing them at a clip of over 500,000 a week. Someone think that is good?

I will not proclaim we are going higher until I see the data. That would be a solid breakthrough of the red resistance line on my chart. If we move only slightly up and then pullback and stay below the line, we will have that healthy correction we need. Stay tuned!

Still think everything is much better because the Dow is over 10,000? Then read this on foreclosures from Yahoo news: WASHINGTON – The number of households caught up in the foreclosure crisis rose more than 5 percent from summer to fall as a federal effort to assist struggling borrowers was overwhelmed by a flood of defaults among people who lost their jobs.
The foreclosure crisis affected nearly 938,000 properties in the July-September quarter, compared with about 890,000 in the prior three months, according to a report released Thursday by RealtyTrac Inc. That puts foreclosure-related filings on a pace to hit about 3.5 million this year, up from more than 2.3 million last year.
Unemployment is the main reason homeowners are falling into trouble. While the economy is likely out of recession, the unemployment rate — now at a 26-year high of 9.8 percent — isn't expected to peak until the middle of next year.

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Saturday, October 10, 2009

Market update week ending Oct. 9, 2009

I decided to put some charts up today to give you a perspective on what I have been saying vs. what the charts are showing as we approach the 3rd week of October and Options expiration on Friday, Oct. 16th. The first chart is a 3 year chart of the Dow which was posted on August 8th. At that time I described what I thought the market might do going forward.

I quote, "For the Dow it says that we will not go over 10,000 and on the S&P 500 we will not go over 1090, but there is still the possibility of some good gains in the meantime.... But let me be clear here, there is more pain ahead short term for short positions and those wanting to get out should."

From the second chart, not much has changed since then as shown in the Updated 3 year Dow chart. We are staying below 10,000. Those who were short did experience more pain as the Dow did continue to go up from that first chart date of Aug. 8th but it seems to be hitting up against the resistance line of 10,000. Will we have a correction by this coming Friday, Oct. 16th. Well based upon everything I see reported and people I listen to, we may pull back just enough to complete a "W" pattern, but I do not believe it will be the sharp drop off many, including myself, have expected. We may continue to go sideways staying under 10,000 for another 4-5 weeks until after Thanksgiving when we get indications about this year's Christmas Retail Sales projections.

A bit longer term into January and February I do not see us going and staying over Dow 10,000, as the economy should really bottom at that time, with an increase in Commercial Real estate foreclosures become more apparent and the Unemployment rate goes over 10.3%. This will have even more consequences for the Democratic Party as it faces few months to show any meaningful employment before Congressional mid term elections next year. Much can go wrong between now and then as currency concerns over the dollar provide more pressure on the Obama Administration to do something about it at a time when we are most vulnerable to a double dip recession, which by the way I believe we are going to have. Commodities will rise even more sharply hitting continued highs and then drop again as we go back into the recession.

I must stop now as I feel like I have been channeling some spirit who has guided my fingers on these keys of my computer. I don't know if it is a good spirit looking out for us or a bad one. I guess time will tell! :)

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Thursday, October 08, 2009

Stock market action for Oct. 8, 2009

It looks as though no determination has been made yet as to which direction the breakout will make on the Dow. Yesterday the Dow closed at 9725, down only 5 points. This was not enough to make a comment. Today the market is poised to go up because of upbeat earnings report from Alcoa. Retail Sales also came in down but not as bad as analysts said they expected. That surely will aid in the pop up today. And finally weekly jobless claims were down again as was Continuing claims, which was at 6.09 Million jobs. Now pay no attention that these numbers are in fact not true because those not filing claims as they give up looking or don't file as their benefits have run out, but the data shows a decline and that's all that counts. So the "W" pattern has not yet had a breakout either down or up. It may take until the end of next week for the answer as Options expiration for October occurs then.

The chart above shows I have added a second Blue line which depicts the tighter range we need first to break out of and then the second lower Blue line which will signal a correction. This is determined by the Dow closings above the resistance level of 10,000 or lower than the top Blue line and above the lower Blue line, we will have no determination of direction for the market unless we break below the bottom Blue line or above the Red line.

On a related topic about whether the stock market is reflecting where the economy is headed, I was at a town hall CITY COUNCIL Meeting last night where the topic was on housing requirements looking forward to 2014 and the town was projecting a certain number of new homes needed to be built for the expected growth the town calculated they would need. The conversation lasted about an hour before it was open to Public comments and one person got up and asked the question about the elephant in the room. It was this: "Has anyone looked recently at current predictions about economic growth or lack of it over the next 5 years? People are leaving California and businesses are closing. Do you really think in 5 years this is all going to be solved?" There was a hush in the room as many finally got it. The same is true about the economy and the stock market. No one is listening to the comments in those areas about the elephant in those rooms/

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Wednesday, October 07, 2009

Mini Poll Rules

I like people to vote in the Mini Poll, but you can only vote 1 times in a Month. I get a report of the IP address regarding who votes and if I find more than one vote for the same IP address, I delete it. Sorry but them be the rules. Those who haven't voted this month feel free to anytime. I keep the data summarized by month and post it here on the first day of the month. Thanks for your support.


Market outlook Oct. 7th, 2009

Yesterday's rise in the Dow to close at 9731 set up the middle high point of the "W" pattern and sets up the next leg down to form the 2nd bottom point of the "W" pattern. If the next leg down does not go below 9,500, we most likely will see another rise above recent highs and quite possibly hit the 10,000 level. If it goes below 9,500, it will have broken the uptrend line which started at the low around March 10th on a 1 year chart. So these next few days are pivotal in determining where we are going in the market. The dollar is set to rise today and so the market is set to drop. Also, my guess is that today's volume will be more than yesterday's and the market will drop on this higher volume. Stay tuned. I will do a complete analysis of the charts this weekend.

You will notice that the Blue support line is converging to the Red resistance line and as it pinches together there will be some breakout here, either to the upside or the downside. My guess is to the downside, as it fits my prediction made back in late August. Today is the start of earnings season, as Alcoa reports after the bell. Be sure to come back to see this story unfold!

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Monday, October 05, 2009

Stock market action Oct. 5th

Well all the Indexes closed up and the Dow was up 112 to close at 9599.75, close enough to 9600. This on the heals of pre-market comments by Noriel Roubini, where he said we are not going to have a "V" shaped recovery, but more like a "U" shaped recovery. Roubini, you may remember, was the economist who predicted the economiccollapse we faced last year from the Sub Prime loan problem and the Derivatives market, a whole year in advance. You would think with this pronouncement today that the market would have gone down, especially on the heels of the Unemployment rate for September at 9.8%, which came out Friday. But you would have been wrong. You forgot the Fed, through it's ability to print paper faster than we can spend it, is funding this market rise at the cost of keeping the dollar low.

As I look at the chart of the Dow tonight, today's gain could be setting up a "W" pattern. If that comes to pass, if the 2nd bottom leg of the "W" pattern is lower than the first leg, it means the market most likely will head down and we will have our correction. If the second leg of the "W" pattern is above the 1st leg, we are headed higher and rallying over the 10,000 level. As you know if you have been reading here, I believe we will get the long anticipated correction.

If you look at the charts I posted on the previous Blog post dated Oct. 2nd, you will see that we don't have a lot of room between where the top Blue line crosses 10,000 and the top red line 10,000 Resistance level. These lines are being pinched together so we are approaching a breakout sometime in the next 2 weeks. This would be on schedule from my earlier prediction in August. Today's volume was not convincing as it was less than the past 3 trading days and below the average volume. I will need convincing on strong volume.

So I will either be correct and we will have the correction or I will have egg on my face. Either way, it's not a long wait.

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Friday, October 02, 2009

Market summary for week ending Oct. 2nd

Well the stock market closed the week down for the Dow, Nasdaq and S&P 500. I have provided 2 charts. The first is from week ending Sept. 26th and the second is this weeks. You can see that while we have dropped this week, we by no means dropped enough to show any new predictions. We stayed between the 2 blue lines going closer to the one on the bottom of the range. You can see it is going to take yet another week or two before any clear determination can be made as to future direction. The Bears were celebrating after the higher Unemployment numbers came out today following lower ISM numbers earlier in this week. But their celebration was short lived as the market surprised most and was actually in the green for a significant portion of the day before closing down.

I had said back in August that the correction would come by the 3rd Friday of the month and this could be when we really know what is going to be the trend. And with each passing day the trend line from the highs of a 3 year chart of the Dow keeps butting up against the upper blue trend line. On the Uptrend line, the lower Blue line, if we break below that line we most likely will correct down to the 7,800-8,000 level. Now we just wait and see what the future will be. There isn't much news coming this week to bolster the Bulls case. And there is always the possibility of a negative surprise moving the markets lower. It doesn't have to be news from America but from anywhere in the world. Have a nice weekend.

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Olympic hopeful city, Chicago, looses its bid for 2016. And the winner is.....

All the fuss over the Chicago push to get the 2016 Olympic and Mayor Daily asking President Barack Obama and his wife Michelle to help by making the pitch in Copenhagen, Denmark. Well the word came this morning that both Chicago and Tokyo lost their bid for the Games. I'm not sure it is net positive for a country to host the Olympics as the costs are always over run and the hassle of security is daunting. I was so impressed with China's Olympic Games that the Olympic Committee should have given it to China again, but that isn't going to happen. What a waste of investment dollars at a time when the world is trying to get their financial houses in order. Sorry Chicago and Tokyo. It looks like Madrid, Spain or Rio De Janeiro, Brazil will be the victor or loser depending on what you think of the financial burden. The city selected was Rio.

I refer you to this article from NPR yesterday titled, "Olympic Caveats: Host Cities Risk Debt, Scandal" by Howard Berkes, and in the article is this quote, "There has never been an Olympic Games that has made a profit," says Robert Barney, director of the International Centre for Olympic Studies at the University of Western Ontario. Barney is also co-author of Selling the Five Rings: The International Olympic Committee and the Rise of Olympic Commercialism.

Mini Poll Summary for the month of September: How long will the recession last?

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

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

Data for December, then January, February, March, April, May, June, July, August and September:
Mid 2009 4%, 17%, 10%, 12%, 4%, 7%, 3%, 2%, - (Date passed)
End 2009 35%, 25%, 24%, 21%, 25%, 11%, 6%, 14%, 9%, 11%
Mid 2010 15%, 13%, 12%, 3%, 33%, 19%, 14%, 7%, 9%, 8%
End 2010 15%, 10%, 4%, 18%, 15%, 15%, 9%, 12%, 7%, 11%
Mid 2011 12%, 17%, 10%, 3%, 4%, 4%, 6%, 2%, 2%, 6%
End 2011 8%, 0%, 10%, 3%, 4%, 4%, 6%, 7%, 0%, 6%
Mid 2012 0%, 0%, 2%, 3%, 2%, 7%, 0%, 0%, 0%, 8%
End 2012 0%, 0%, 2%, 0%, 0%, 19%, 29%, 33%, 46% 3%
Much Longer than the choices you have provided 0%, 0%, 10%, 12%, 0%, 11%, 14%, 12%, 11%, 39%
We are going to be in a Depression 12%, 19%, 18%, 24%, 13%, 4%, 14%, 10%, 18%, 8%

If I summarize by Year:
2009 39%, 42%, 34%, 33%, 29%, 18%, 9%, 16%, 9%, 11%
2010 30%, 23%, 16%, 21%, 48%, 34%, 23%, 19%, 16%, 19%
2011 20%, 17%, 20%, 6%, 8%, 8%, 12%, 9%, 2%, 12%
2012 0%, 0%, 4%, 3%, 2%, 26%, 29%, 33%, 46%, 11%
Much Longer than the choices you have provided 0%, 0%, 10%, 12%, 0%, 11%, 14%, 12%, 11%, 39%
Depression 12%, 19%, 18%, 24%, 13%, 4%, 14%, 10%, 18%, 8%

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, June 35 votes, for July 42 votes, for August 57 votes and for September 36 votes.

It looks as though the biggest change, which coincides with lower Consumer Confidence numbers for September, was that the majority now see that the recession will last Much longer than the choices I have provided!

As I said the last several month, as Unemployment increases so does despair! We get September Unemployment numbers and they came in at 9.8%. Last month came in at 9.7%. 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 how the economy is doing. Thanks for voting.

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Thursday, October 01, 2009

McCarthyism in 2009

Republican tactics against our first Black President reminds me of the Republican tactics of the 50’s. Back then it was called McCarthyism. It was then Republican Senator Joe McCarthy who accused many Democrats of being Communists. Today they call President Obama a Nazi and his policy Socialism. McCarthyism is the politically motivated practice of making accusations of disloyalty, subversion, or treason without proper regard for evidence. Accusations from the Birther movement, that this President was not born on U.S. soil and therefore is not a legitimate President, are subversive to our country, would fall under that description. Not only did they not have evidence, they provided false birth certificates saying he was born in Kenya. Most of the Birthers are far right wing Republicans, but many leaders in the Republican Party took up their banner and cause as for them it seemed like good politics.

The negativity against President Barack Obama spills into every issue. First, Right Wing Republicans started against him for the Bailout of the Banks, even though President Bush started the practice. Then they attacked the bailout of AIG and other Banks. Then they attacked the Stimulus plan and every Republican voted against it. Never mind it was deregulation of the Banking system in late 1999 that allowed Wall Street to invent special derivative instruments to make money. Today there are $209 Trillion dollars in derivative instruments held by the top Banks in the United States. You might remember another name for these derivatives, Toxic Assets!

And this from Wikipedia: One focus of popular McCarthyism concerned the provision of public health services, particularly vaccination, mental health care services and fluoridation, all of which were deemed by some to be communist plots to poison or brainwash the American people. This viewpoint led to major collisions between McCarthyite radicals and supporters of public health programs.

Right-wing intellectuals found the decisiveness of McCarthyism refreshing. William F. Buckley, Jr., the founder of the influential conservative political magazine National Review, wrote a defense of McCarthy, McCarthy and his Enemies, in which he asserted that "McCarthyism ... is a movement around which men of good will and stern morality can close ranks." Does this sound familiar?

So McCarthyism is alive and well and lives in the far Right Wing of the Republican Party, as it was in the 1950’s. All the yelling and screaming in Town Hall meetings, not based on facts, but just to disrupt open dialogue. When you see these antics, remember McCarthyism. It was one of the darkest times in America, as many lives were trashed or changed forever, unnecessarily.

UPDATE: Oct. 2nd 5:55am

Here is a related article just out today and sent to me by a close friend. The title is: The Wizard of Beck. By DAVID BROOKS of the NY Times, a Republican. Click here to read it..

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Are there new worries in the markets as we begin October?

There has been a host of new data out the past 3 days that fly in the face of the Fed's Bernanke comments that the recession is over and the economy is recovering. For one, Consumer Confidence dropped for the month of September from 54.5 to 53.1. Next, the PPI also dropped for Sept. and foreclosures increased. The ISM number came out this morning too and it was also down for Sept. showing a contracting economic condition is still with us. The stock market, however, roared and had one of the best months in 11 years, counter to the economic news. Now comes this astronomical figure I had never heard before. It was the size of the Bank derivative market. Here is the headline news item followed by an excerpt from the article. (Click on the title to see the entire article.):

"Beware the Current Bull Market in Derivatives
September 30, 2009 by Matthew Goldstein

The Dow is near 10,000 again. The business press is full of stories about the resurgence in mergers, IPOs and even so-called blank check companies.

There’s one statistic, however, that should give investors pause: the growth in the total dollar value of derivative contracts at the top too-big-to-fail banks in the United States.

In the second quarter of this year, the notional value of derivatives contracts at JPMorgan Chase (JPM), Goldman Sachs (GS), Bank of America (BAC) and Citigroup (C) increased by $1.92 trillion, to $191 trillion. Shockingly, Citi is responsible for most of that gain from the end of the first quarter.
Overall, the total dollar value of outstanding derivatives transactions at the top 25 U.S. commercial banks was $203 trillion, according to the Office of the Comptroller of the Currency, meaning that the nation’s four biggest banks account for 94 percent of the industry’s total exposure to derivatives."

If this article doesn't scare you, I don't know what will. The net to me with this large a derivative market is that the true value of our currency is zero! The phrase, "It isn't worth the paper it is printed on" comes to mind!

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