Sunday, January 30, 2011

Events in Egypt and how they will affect trading on Monday

The events in Egypt continue to show no abatement of the demonstrations nor demonstrators calls for President Hosni Mubarak to step down. This will change the mindset in the Middle East. One consequence of this will be fear gripping their stock markets across the region. I expect there to be a flight to safety in market action on Monday both here, Europe and even possibly Asia. The dollar should get a boost as should the Swiss Franc. I do see our stock market with high volatility. If the events to not resolve themselves by Monday, there will be a selloff of stocks here. If things seem resolved by Monday, we could see a relief rally. Gold most likely will rise as will Silver no matter what the outcome for Monday.

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Saturday, January 29, 2011

Market commentary for the week ahead

The stock market ended Friday with the largest point loss in quite a long while for the Dow, giving up 166 points and closing at the 11,823 level. It broke below its 9 day and touched its 18 day Moving average. Volume Friday was the highest day in the week on the selloff. We hadn't had a gain or loss of this many points since Dec. 1st when the market made a big leg up.

The S&P 500 ended the week at 1276 with an amazing 23 point drop on Friday as well. It did break below the 9 day MA as well as the 18 day MA. The Nasdaq closed down to 2686 for a whopping 68 point loss for the day.It broke below not only the 9 day MA, the 18 day MA, the 27 day MA, but touched the 36 day MA at the close. It too had the highest volume day of the week in the selloff.

It seems to me that we should have a bounce on Monday but the trend down will continue, as the charts show the formation of a small slanted "W" pattern is forming for all these indexes and the final pieces are being put into place for the slow downward trend that will have most shaking their heads in disbelief. I have placed all 3 charts below. I have also added the 30 year chart of the Dow to show that this downward leg and slanted "W" pattern is part of a much larger "W" pattern, which is also slanted down. Yes, we are headed down and there is nothing Bernanke can do to stop it when it gets going. From yesterday's posts and the day before you can see where Gold started this decline phase. It is all part of a larger cycle about to show its ugly face to all. To this end I purchased ZSL as Silver is headed for a larger precipitous decline and will make the decline in gold look like a cake walk.

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Friday, January 28, 2011

Here's where Gold prices are going!

People are getting a bit nervous as they see Gold prices retreating. Today they hit another recent low down to $1319 as the rioting in Egypt continue. However this drop in Gold started back at thew beginning of January as is shown on the chart I have added below. You will also see the red line I have drawn on the chart which shows how low we are going to go in the near future.

As you can see the short term plateau is around $1275. What happens from there is anyone's guess.
The Dow Gold ratio will close even higher today and is already at 9.1 if the Dow closes at 12,000. Right now the Dow is down 44 to 11,945, so I am being conservative in my estimate.

But there is a synchronicity happening here and coincidently with the stock markets hitting their peaks. That is why I have said that Gold prices are the canary in the mine for the stock market. I know I am contrarian to most all market commentators. Time will tell who was correct in their outlook.

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Market comments for Jan. 28th

There was plenty of news in the world yesterday to get investors rattled, including riots in Egypt, but the Futures were up in pre-market. Also in business here, Ford had a bad 4th quarter, adding to the real data about the economy. Their profits plunged 79% unexpectedly, commentators said. I don't think the Consumer has been spending much money on cars and trucks so it didn't surprise me. Did it surprise you? I doubt it.

This morning more data was added on the heap of news. Advanced GDP number for the 4th Quarter came in at only 3.2%. Expectations were for 3.8%, so this validates the 4th Quarter was indeed weak. When this number gets revised, I will bet it is revised downwards. The markets have all reached their peaks recently with the Dow hitting 12,000, the S&P 500 hit 1300, the Russell 2000 has previously hit 800 and only the Nasdaq has fallen short of 2800, its high back in 2007.

Now what? How about you tell me what you think where we are now headed! You try this for a while. :) Seriously, Bernanke may want to continue to inflate the stock market as he has recently admitted to, but then it is just another bubble to deal with that will burst and hurt everyone. I can't say when it is going to burst, but when it does watch how surprised and scared everyone will be, including you if you don't take the right actions now. If you have stayed in this market for the past year and haven't taken your profit, what are you waiting for? Only greed can be driving you at this point is my guess. If you have been short this market for a while and hurting form doing so, why throw in the towel now, especially since you have already endured the pain of this manipulated market. Hang in there and you will be rewarded soon. I hope you have been buying more shorts lately to average down your costs and improve your profitability when this market turns. If you are in cash and have been in cash for a while, why are you reading this Blog? Get a life and go outdoors and enjoy the sunshine.

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Thursday, January 27, 2011

Market comments for Jan. 27th

Sorry for not posting these past 4 days. I was in Las Vegas trying to help the economy. I didn't help it much, but I did help mine, if you know what I mean. :) Let me get now right to the news this morning. Initial Jobless Claims soared up this morning to 450K new Jobless Claims. This was not what markets expected. Expectations were for only 400K new Jobless Claims. Last week the number was 403K.

Also giving the economy a whack was Durable Goods Orders. They came in for Dec. at -2.5%. So much for the great Christmas everyone was touting in the media and that the Consumer was back. Expectations were for +1.5%.

The markets have hit their respective peaks. The Dow managed to hit and exceed 12,000 while the S&P 500 hit 1300. Many think we now are ready to take off to the upside and a new BULL MARKET. I think we are going to take off too, but not to the upside, but the DOWNSIDE. Here's the data on Gold I have been keeping track of. The first chart below is of the Daily Gold prices for all of 2010 to the close yesterday. You can see the speculative bubble is bursting there and the second chart is off the Dow/Gold ratio.

Also worth noting is the Baltic Dry Index charts below. If this isn't signaling a market decline and possibly a double dip recession, I don't know what is. The second chart compares the S&P 500 to the Baltic Dry Index. Both are on exponential Log Scale and you can see that the S&P is currently not tracking the real world commercial data of the Baltic Dry Index. That's because of speculation now in the stock market with Bernanke claiming he is doing it with QE2.

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Saturday, January 22, 2011

Remembering R. Sargent Shriver: A personal story

I am sad to see the passing of this great man. We all know he was the spear and head of the Peace Corps. We know about him from his connection to the Kennedy family having married Eunice Kennedy.We also remember him as the Vice Presidential running mate of George McGovern, whom I voted for back then. But I am going to tell you something personal about "Sarge" in how he just was a great guy and a person who just wanted to be any help to others.

Back in the 1970's and early 80's I lived in Vermont and one day I decided that I would go drive down to Hyannis Port, MA and try and find the Kennedy Compound. You see when I was a young boy, I always loved the Kennedy family and when I needed some money I would shovel snow off people sidewalks for a few dollars. One house I shoveled was that of Rose Kennedy who lived in Dorchester. That was my first and only direct connection to the Kennedy name. That was it. Not much to discuss about it. But getting back to wanting to drive down to Massachusetts to find the Kennedy Compound, I set off on my 4 hour plus drive from the Burlington VT area to find it.

When I arrived in Hyannis Port i looked all around and couldn't see where to go and so was stopped my car and was looking from side to side, a man drove up on a motor scooter and asked me if he could help me. I said yes he could if he would be so kind to tell me where was the Kennedy Compound as I wanted to see it and I quickly told him the story of my love for the Kennedy Family, especially Jack and Bobbie, and just had to see it. He said sure, I can help you. Just follow right behind me.

Well I felt so lucky that this apparent local resident would show me the way there. I followed him down the street and he headed into an apparent driveway with about 6 ft high stone barriers on either side of the driveway and dense with brush and trees so you couldn't see a thing but the path in. So I followed him in, not knowing if I should have or not, but excited anyway. Then the path opened up and I found myself on a circular driveway and the houses around it. The view of the ocean was spectacular that day, and it was a bright sunshiny day. I stopped my car and as I got out, a number of security personnel with those hearing devices in their ears came out from behind bushes from everywhere and started to engage this man who led me in. They told him he shouldn't be doing this and this man said he knew that but this was special. That man turned out to be R. Sargent Shriver. :))

I have only told one other person about this event in writing and that was his daughter Maria Shriver, former Gov. Schwarzenegger's wife.

Thanks so much, Sarge. May you rest in peace with God.

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Friday, January 21, 2011

Cross Purpose: Creating Jobs or increasing profits?

This morning President Obama was in Schechdetty, NY at a GE facility talking jobs. President Obama has tapped General Electric Chief Executive Jeffrey Immelt to head a new White House panel tasked with finding a way to grow jobs.

In an article in December on, they studied this issue and whether job growth is happening elsewhere. Here's the front of that article:

Corporate profits are up. Stock prices are up. So why isn't anyone hiring?

Actually, many American companies are just maybe not in your town. They're hiring overseas, where sales are surging and the pipeline of orders is fat.

More than half of the 15,000 people that Caterpillar Inc. has hired this year were outside the U.S. UPS is also hiring at a faster clip overseas. For both companies, sales in international markets are growing at least twice as fast as domestically.

The trend helps explain why unemployment remains high in the United States, edging up to 9.8 percent last month, even though companies are performing well: All but 4 percent of the top 500 U.S. corporations reported profits this year, and the stock market is close to its highest point since the 2008 financial meltdown.

But the jobs are going elsewhere. The Economic Policy Institute, a Washington think tank, says American companies have created 1.4 million jobs overseas this year, compared with less than 1 million in the U.S. The additional 1.4 million jobs would have lowered the U.S. unemployment rate to 8.9 percent, says Robert Scott, the institute's senior international economist.

"There's a huge difference between what is good for American companies versus what is good for the American economy," says Scott.

To read the entire article, click here.

I believe that when looking at this issue one must take into account the fact that the sole purpose of corporations is to build shareholder equity (cash & other assets) and it is not to hire people to lower the unemployment rate. There is no moral directive to improve society. It's all about profits. So I am not positively disposed to think Jeff Immelt and his Business Council will do anything but figure out how the government can either lower taxes to help their profitability, or deregulate their businesses. But remember the purpose is to increase profit, not jobs. If they create some jobs that will be a side benefit, not a priority goal for business. Why do I say that? Because business is currently sitting on Trillions of dollars of cash but they are not hiring people. They are saving their cash. Until part of their purpose is to create U.S jobs with U.S. workers, the unemployment rate will remain quite high.


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Summary of Interview of David Tepper on CNBC today

This morning CNBC had David Tepper, founder of Appaloosa Management, as their guest. If you don't know who David Tepper is, and you follow the stock market, you should. I will give a little summary of his notoriety at the end of this post, but suffice to say, this morning he predicts headwinds ahead for the market and he said that we will not be back to previous employment levels for 15-20 years. He sees the new normal unemployment rate to be in the 6.5% to 7% range, that's even after we get things better.

There were a number of points made this morning and I will summarize what interested me from what he said:

1. There is a bit more downside than there was back in September.
2. Regarding the food bank, Tepper says "I'm obviously an optimist" but things aren't going to get better anytime soon in terms of the need for philanthropy.
3. He's kind of bearish on bonds and gold.

Tepper's Appaloosa Management is a $15 billion hedge fund. Tepper is famous for his positive commentary in 2010 after the US government stepped up the plate with large stimulus programs. Tepper believed that these actions nearly guaranteed the rise of the equities markets in 2010, and he was proven correct.

Tepper accurately predicted that the S&P 500 would close 2010 up 13%. His forecast came true. He predicts a much more difficult 2011, and this, understandably, has many investors worried.

Tepper's hedge fund made a killing during the crash by betting the government wouldn’t let the big banks fail and he was correct.

He said today that companies have become very "efficient" in the past year or two because top line growth has been slow. To me that means squeezing more profits without adding new hires, so that the business keeps making money. But that is not growth and our economy needs growth right now to fully recover. So there is no way we are going to solve these problems with our economy by better efficiency. This is not a good forecast for our country's future.

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Thursday, January 20, 2011

Market comments for Jan. 20th

I was asked by a close friend of mine why I didn't post about the market this morning. I said to him because nothing is any different in the market from my comments on Monday. The Put to Call ratio signaled a Sell signal on Jan 14th and I said that it may take a day or two or as much as a week, but the Dow has dropped a minimum of about 800 points when the readings of the Put to Call ratio was that low. In the charts below I have a 3 month chart of the Russell 2000, symbol RUT, and the S&P500, the nasdaq and the Dow. You will notice I have placed the charts in an order in terms of which has broken below their 9 day MA as well as the 18 day MA. So they are arranged from the order of most correction so far. Expect all the Indexes to correct and go below their 9 day and 18 day MA.

Today the Put to call ratio intraday had a high of 0.98 and a low of 0.81 and closed at 0.93 for the day.

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Arrest of Mafia members

So I was reading the headlines and an article today about arrests of 127 mafia members. Here's the news clip and then I will make a comment as I have an interest in this because I am of Sicilian decent.

"NEW YORK – Federal authorities orchestrated one of the biggest Mafia takedowns in FBI history Thursday, charging 127 suspected mobsters and associates in the Northeast with murders, extortion and other crimes spanning decades. Attorney General Eric Holder made a trip to New York to announce the operation at a news conference with the city's top law enforcement officials.

Holder called the arrests "an important and encouraging step forward in disrupting La Cosa Nostra's operations." But he and others also cautioned that the mob, while having lost some of the swagger of the John Gotti era, is known for adapting to adversity and finding new ways of making money and spreading violence.

"Members and associates of La Cosa Nostra are among the most dangerous criminals in our country," Holder said. "The very oath of allegiance sworn by these Mafia members during their initiation ceremony binds them to a life of crime."

Ok, I understand and don't have a problem with the arrest, but when is Eric Holder going to arrest those on Wall St. who created worse crimes and have ruined our economy resulting in Millions of unemployed? Wall St. didn't commit murder but amy have contributed to some suicides. They certainly are responsible for "adapting to adversity and finding new ways of making money" that caused great harm and were illegal. If Wall St. wasn't extorting, then what were they doing?

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Wednesday, January 19, 2011

China and the U.S.relations, as seen through a narrow lens

I thought I would step up the conversation about the two countries and how we view each other. I was listening to the various news reports today, regarding the visit of Chinese President Hu Jintao. One announcer was citing China's significant spending on their Defense Budget and how it has been steadily increasing. They asked the Chinese Defense Minister why China was building an Aircraft Carrier. He replied, "We don't have any. The real question is why you have so many?" I realized that many people in the US view China with fear and apprehension and that therefore they must have ambitions beyond their sphere of influence now and want to expand it across the world. I don't know if this is true and neither does anyone else really. This did force me to look at our relationship with China not our viewpoint, but from their viewpoint.

First, let me state that I am totally aware of China's expansion into Tibet, Macau, Hong Kong and their claims on Taiwan. I especially didn't and don't like what they did to the gentle people of Tibet and their right to practice their religious beliefs and preserve their culture and traditions. And every time the Dali Lama is acknowledged and/or received by our President, there is an outcry from the Chinese government.

But if my history of China is at all representative and accurate, let's take a look at the comparisons of our two countries:
- The Chinese have never started a war. They are not a warlike people. Their military strategy is based upon the book, The Art of War by Sun Tzu. In this book the following principles are at the heart of the approach of the Chinese military thinking:
The importance of intelligence.
The importance of manoeuvring so your enemy is hit in his weakened spot.s
The importance of morale.
How to conduct diplomacy so that you gain more allies and the enemy lose allies.
Having the moral advantage.
The importance of national unity.
All warfare is based on deception.
The importance of logistics.
The proper relationship between the ruler and the general. Sun Tzu holds the ruler should not interfere in military affairs.
Difference between Strategic and Tactical strategy.
No country has benefited from a prolonged war.
Subduing an enemy without using force is best.

This explains much of how the Chinese have behaved these past 50 years. Now let's look at he contrast.

- We seem to have a predisposition of starting wars and invading others, although we don't like to stay in those countries as an occupying force and run them. i.e. Vietnam, Iraq and Afghanistan
- We even are a warlike and belligerent people as measured by the fact that people here have more guns than any other country in the world by far.
- We seem to exist and view the world from a place of fear, rather than from a place of something to embrace and appreciate others differences. Just listen to all the fear language about our government. Many say things like, "We need to take back our government!". We seem to see the "bogey man" everywhere. Some even see fear from our President. Some may not be able to accept the idea of a Black man as president and hope he is thrown out of office and legitimized. That's partly what's at play with the Republican controlled Congress now wanting to investigate everything this Administration has done.

I could go on but you get the picture. America is full of fear and as a result is causing fear from a country like China. They don't understand us while still admiring what we have accomplished in a short 20 plus years. I do understand their fears and why they are doing some of the things they are doing. It is protectionism and a cautionary reaction to us. We are the ones who have ships over in Asia patrolling the waters off China and the rest of Asia. We are the ones who told many we will protect them, like Japan, Taiwan and others. We think we are protecting them from China. But China is looking at us as interfering in their general area of influence. How do we report news that China is building a relationship with Venezuela, Cuba and other southern hemisphere countries? Think about it. This is similar to how we offended Russia when we were going to put a missile defense system into Eastern Europe. Wisely, President Obama saw the Russians concerns and decided not to embark on that course and he said he would not deploy the system.

Since that decision, we have approved the Start treaty with Russia and Russia has been helping us with Iran and North Korea. If we just weren't so afraid, defensive and belligerent, maybe we would find more friends in the world. I'm willing to try a little honey to warm relations vs a slap in the face. If the Congress passes any legislation calling out China for currency issues, it will be a slap in the face. They move slower than we do and maybe that's a good thing. Maybe we should continue the approach of making peace with China and seeing them as a partner.

Facts about the 2 countries:

Size: U.S. 9,826,675 sq km, China 9,596,961 sq km (roughly the same size)
Population: U.S. 310 Million, China 1,330 Million (10 times more people for China)
GDP: U.S. $14.7 Trillion, China $9.8 Trillion (40% more for U.S.)
Per Capita GDP: U.S. $47,500, China $7,400 (almost 7 times more for US)

What do you think? What is the best way to think about them and us, with paranoia or courage?

Here's a video supplied by my friend Kirk of NBC's Saturday Night Live which was timely and appropriate as a way to see our mindset about our partner, China.


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Monday, January 17, 2011

The Put to Call Ratio warns again. Are you listening this time?

It should be a quiet day today as the Banks and Stock Markets are closed here in the U.S. for observance of Martin Luther King Day. For those missing market action I decided to recap where we are and what data, if any, was noteworthy from Friday. Well, I found one small piece. It was the Put to Call ratio at the close on Friday. It came in at a 0.57 reading. I thought you would need a context for that reading and so I have included 3 charts below. The first is the Put to Call ratio from Oct. of 2003 to the close on Friday.

As you can see from the above chart, a reading of 0.57 is on the rare side and falls outside the normal range of data with a 95% confidence level. I have identified various dates when a reading this low or lower occurred. Why is this reading important? Well, it is because often it is a sell signal for stocks. I said here, often, not always. The other two charts below are of the Dow. The same dates have been identified on those two charts. The first chart is the Dow plotted linearly and the second chart is the same data plotted on Log scale. Log scale shows a more dramatic change than a linear scale does. Here are those 2 charts.

I think it is quite clear that in all cases in subsequent days following the readings the markets dropped. Some times, like Mar. 16, 2006, it was a small drop of about 800 points and other times it was the massive selloff we experienced where the Dow dropped almost 8,000 points.

We may still rise a few days or a couple of weeks, but we are in store for another correction of at least that 800 points but we could also be at that tipping point of thousands of points again. According to Elliott Wave Theory, we are in for a doozie of a correction all the way to the depths of hell by the time it is complete. These things don't happen in a matter of days months or year. It can take years to unfold but one thing is for sure, when they do come they bring sizable pain. I am not expecting the same levels of depth as does Elliott wave Theory prognosticators, but I do see a drop of at least 5,000 points for the Dow coming and a retest of 6,400 low registered in 2009, which I believe will fail as well in the end. Even the Fed won't be able to stop it when it starts. Not only won't Bernanke be able to stop it but all the Kings horses and all the Kings men won't be able to put Humpty Dumpty back together again!

The real important question to ask yourself is this. What if what I am saying does happen? What actions will you take? Will you start to buy on the dips as the market starts dropping and be buying too prematurely, only to see you selling the stocks you bought and repurchasing them again a bit lower? Or will you just Hold on to your stocks in hopes of a quick turnaround? Or will you be like a Deer in your headlights and be frozen into no action at all? These questions are worth asking yourself. You see they can be grouped in categories like these: Reactive, Responsive and Proactive. Which strategy will be best for you and what does that actually mean? As I learned as a Boy Scout: Be Prepared!

Now for a little light humor. You might call this post today in honor of Dr. Martin Luther King: I have had a Bad Dream!

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Saturday, January 15, 2011

What's happening to the Middle Class lately? They're being squeezed!

I thought today instead of discussing the stock market or politics, I would put up a piece on the current plight and squeeze of the Middle Class. I start with a look at their Personal Savings Rate over the past years, to where we are today, as a result of the stresses of the deepest Recession in history. Then I will look at what has happened to them the past 6 months as they are squeezed to save less and spend more on Commodities and the increase in the cost of Oil and therefore gasoline. The first chart below shows the Personal savings rate from 2000 to 2011. The data comes from the U.S. Dept. of Commerce.

Before the Recession, from about 2001 to 2005, the Personal Savings rate was about 3.5%. In 2005 and 2006 it dropped down to about 1.5%, and then moved to 2.0% and stayed there until the Sub Prime scare in 2008 and the beginning of the recession. But from 2008 to mid 2009, it reached a peak of 8.0%. Then it started to drop and settle in at between 5.0 and 6.0%. In the last 6 months, you will notice that in mid 2010 where it had reached back to 6.2%, it has steadily dropped back down to 5.0%. That's an absolute 1.2% drop. What has caused this sudden drop in their savings rate? We have been told that the economy has improved and that there is no inflation by the Fed, the government, and the media. But the data suggests otherwise. In the chart below, Crude Oil Prices have risen these past 6 months, gasoline prices have been accordingly rising and now are taking a bigger bite of our income. See the red arrow of the prices the past 6 months.

The next chart is on the Commodity Price Index from 1989 to 2011. You will notice the high peak in 2008 and that we are now back above that level now and have had a sharp increase mid 2010 to now. This coincides with the jump in Oil and the Gold price surge in the latter part of 2010.

There is no doubt that the Middle Class is being squeezed again and that it is affecting their savings rate. Many would like to pay down debt but as long as they are being squeezed, it is going to be more and more difficult.

By the way, President Obama and his Administration define Middle Class as anyone making up to $250,000/year. However they also were considering the legislation for the tax cuts up to $1 Million/year and that might be the upper limits today of where the Middle Class ends and the wealthy begin. I don't know if one can arbitrarily draw a line where one class ends and another begins, but it helps to define at least what group of people are being affected the most. If you feel empathy for the difficulties the Middle Class is facing, consider how the poor must be doing. You see it is often the Middle Class who does the heavy lifting to assist the poor by small donations to those less fortunate.

We are experiencing a Class Warfare right now unprecedented in our history. I have no idea if and when it will end, but I don't think we are going to like how it is finally resolved. These things end in other countries with revolutions and a rising up of the poorer classes. I have heard that buying a gun is easy these days and gun sales have risen very rapidly in the past decade. But they say try buying ammunition. You can't as it is all sold out! Why do you suppose so many are buying guns and ammunition is unavailable? Kind of scary, isn't it.

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Friday, January 14, 2011

The reality of the economy and the irrationality of the Fed and Wall St.

Yes my friends, new data released today defies the logic of the markets. First piece of news was that Michigan Sentiment came in lower than expected for December at 72.7. The prior months reading was 74.5 and the expectation for Dec. was 75.5. So much for that "good news"!

Then the Retail Sales number was reported at 0.6% for Dec. Expectations were for 1.0% for Dec. Nov. came in at 0.8%. So this clearly is in the wrong direction and includes the Christmas shopping data. Remember how they said it was a great season? Hmmmm.

The CPI came in at +0.5% for Dec. Expectations were for +0.3%, so that's in the wrong direction but Core CPI came in at only +0.1%, which excludes Oil for some reason. You don't need gasoline or heating Oil, right? That isn't a "cost" to you, right?

So how's the market reaction to this news? Well the markets were down before the news came out and now they are up! Go figure, it's QE2 at work distorting reality of the economy. Thanks Fed Chairman Bernanke!

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Thursday, January 13, 2011

Market comments for Jan. 13th: Higher Initial Jobless Claims!

The Initial Jobless Claims numbers this morning was a surprise to many because they rose to 445,000. If you remember the spin over the last 2 weeks was that these numbers were coming down and the recovery was getting stronger. I argued at the time (Dec. 30th) that these numbers were actually larger than one would expect given the shortened work weeks for Christmas and New Years. Well now we have "clean numbers and while the seasonally adjusted increase was more 35,000 jobs lost from the previous week, the unadjusted number is actually 109,000 additional jobs lost this week, said Rick Santelli, of CNBC. This is the biggest jump in 6 months.

Yesterday's surge in the market was not believable, as to me it occurred on lower volume than the previous day. All three indexes, the Dow, S&P 500, and Nasdaq all peaked simultaneously yesterday, with the Russell 2000 also hitting 800. The stars are aligned now but will the market roll over as I have been exclaiming it will now for many months? I don't know.

Two phrases, often used with respect to the market, are very true you. One is "You can't time the market!" and the other is, "Don't fight the Fed!" I have trying to do both unsuccessfully. However, as far as the Fed is concerned, they have never gotten it right yet. They didn't prevent the bubbles nor the crashes and I don't see them getting any better at preventing real pain for all of us, anytime soon. Secondly, I may not be able to time the market, but I wouldn't be a buyer of stocks with this market so overbought with Investor sentiment running so optimistically. Both are a recipe for a major market drop. And remember this, when the market drops it is much quicker than when it is going up. It happens suddenly and precipitously and scars the heck out of you.

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Monday, January 10, 2011

Market comments for Jan. 10th

This morning, the Dow broke below its recent uptrend line which has been in effect since the beginning of December. If the market volume is stronger than Friday's, it would be a confirming sign that the uptrend line has begun its long anticipated trend reversal, as you can see from the chart below. It is going to be interesting times!

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Saturday, January 08, 2011

Britain's gun laws and what we could have learned from them

I know the U.S. is a different country than Great Britain, but they are our closest of allies and once in a while we might consider that we don't have the best answers as to how to live in a peaceful society. Sometimes we can learn from others. It is too late to roll back the clock, but it is worthwhile to look at the gun laws in Britain. This from Wikipedia:

Gun politics in the United Kingdom

"Gun politics in the United Kingdom generally places its main considerations on how best to ensure public safety and how deaths involving firearms can most effectively be prevented. Despite its largely urbanised population, the United Kingdom has one of the lowest rates of gun homicides in the world. Its police officers do not routinely carry a firearm, and both the public and the police prefer this to continue. Gun ownership levels have traditionally been low. This was the case even before the imposition of modern firearm legislation. Hunting with firearms was always a relatively elite activity and 'gun sports' relatively uncommon. Recent mass shootings by persons with licenced rifles and hand guns have led to what is believed to be some of the strictest firearms legislation in the world.

In Scotland, since power to legislate on firearms was reserved to the UK Parliament under the Scotland Act 1998 that established a Scottish Parliament, this has led to tensions between Westminster and Holyrood with the Scottish Government wanting to enact still stricter laws."

Maybe its time we do something and pass some gun restriction laws with teeth and get the guns off the streets! What do you think?

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Shooting of Rep. Gabrielle Giffords of Tucson, Arizona: What a sad day

This is a sad day, indeed. I am furious! This is all a result of the inflammatory language during the last campaign. Anyone who contributed to this language is responsible for this terrible deed today. Language like "2nd Amendment Remedies" from the likes of Sharon Angle, Sarah Palin, AZ Gov. Jan Brewer and others like Glenn Beck are responsible for this. It's that language of hate and intolerance this country has been having to deal with for its 200 plus year past. It's sickening and we had better wake up as a country and stop this stuff in its tracks. Watch who condemns it and who doesn't. Listen to Fox news surrogates in how they characterize Rep. Giffords or the person who did this.

It boils my blood! I am so sorry for the loss of life and for the 18 individuals who were shot and anyone else who was innocently affected. They now report 6 dead so far. What a tragedy. What a disgrace! Anyone who is surprised that this happened has had their head in the sand, these past 9 months. With the bigotry and hate speech by politicians in Arizona, you could have predicted this. The crazies ran in the last election and covered themselves with the Flag and with Guns. They brought guns to political rallies and said they had the right. They have abused that right. Time to revisit laws that restrict the right to bear arms! And don't tell me it wasn't the guns fault, it was the person who had it. What a ridiculous argument by those espousing it, like the NRA, who show their ignorance every time they speak this nonsense.

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Friday, January 07, 2011

The real story about jobs: There are fewer and fewer being created!

This from Chart of the Day today. The chart below illustrates the percent increase in the number of jobs for every decade since the 1940s (the data goes back to 1939). It is definitely a shock to see the chart and to contemplate what it means to Americans unemployed and those that worry about their current jobs. Today's chart illustrates that up until this millennium, the number of jobs at the end of a decade has always been at least 20% greater than 10 years prior. During the last decade, not only was that 20% plus growth not achieved, the decade actually ended with less jobs than when it began. This negative job growth is particularly noteworthy due to the fact that the US population had increased by 10% in addition to a significant increase in global wealth during the same time frame. With one year down in the current decade (see gray column), today's chart illustrates that job growth is positive albeit only slightly so. If job growth during the current decade were to increase at the same pace as what occurred during the first year of this decade, the decade would end with an 8.7% gain in jobs (see gray dot). This is certainly better than the decade just passed, however, it is well off the 20% plus pace of decades past.
Let's be clear here, these were the Bush/Cheney years for the most part. They ruined this country for a long time and will go down in history as the worst President and Vice President in the history of the U.S. I am really glad they are gone. But the effects of what they have done to us will last for decades.

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Thursday, January 06, 2011

America leads the world in "Spin"

Don't you just love how good our government officials, Wall St. and the media have become in the "spin" business. An example is today's Initial Jobless Claims numbers. Here are the facts first. Initial Jobless Clams came in at 410,000. Last week the data came in at 388,000. Expectations were for 405,000 and these expectations were published a week ago. I know as I check. One might therefore conclude that the numbers disappointed. In fact the stock market dropped on the news. So here is a article on the announcement. See if you can spot the spin. It isn't that difficult.

"Fewer Americans Filed Jobless Claims Over Past Month (Update2)
Share Business ExchangeTwitterFacebook| Email | Print | A A A
By Shobhana Chandra

Jan. 6 (Bloomberg) -- Fewer Americans filed claims for unemployment insurance payments over the past month, indicating the labor market is improving.

The average number of applications for jobless benefits over the past four weeks dropped to 410,750, the lowest level since July 2008, Labor Department figures showed today in Washington. Claims for the week ended Jan. 1 rose by 18,000 to 409,000, in line with the median forecast of economists surveyed by Bloomberg News.

Firings have been waning in recent weeks, a necessary step toward gains in hiring that will help boost consumer spending, which accounts for 70 percent of the economy. A report tomorrow is projected to show employers added to payrolls in December for a third month as the U.S. expansion gained speed.

“The recovery in the labor market is continuing to move along at a gradual pace,” said Omair Sharif, an economist at RBS Securities Inc. in Stamford, Connecticut, who forecast claims would rise to 410,000. “Employers are getting to the point where they are becoming a little more confident about the strength of the recovery.”

You be the decider!

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Wednesday, January 05, 2011

Dow Gold ratio hits new recent high today

The often watched Dow/Gold ratio today hit 8.6 and it has not been this high since August 11th, 2010. Everyone has been focused on the recent rise of the Dow, but few have been commenting on the corresponding drop in Gold prices. Today Gold closed at $1368/ounce after a recent high was reached of $1421 on Nov. 9th and $1420 again on Dec. 7th. But since Dec. 7th the speculative Gold market has been selling off slowly. That's about a 3.7% drop in Gold prices, while from Dec. 7th the Dow has gone up 369 points or 3.2%.

This may not appear as significant but if the speculation on Gold has turned, can the stock market speculation end be far away? I don't know but this market, with the Fed's help has maintained a rally and I believe it is in its final gasps to surge one last time before exhaustion settles in. I have been wrong before and I might be wrong again here but I am telling you I believe we are all in for a rude awakening when this market starts to drop to levels which scare people again. It is coming and each day the market rises, we are one step closer.

The chart below is a daily chart I have kept on the Dow/Gold ratio for all of 2010 and the first few days of 2011. I plan to continue to keep this data base going and from time to time I will post them here. Remember the other significant point I call your attention to is the Sell Signal the Put to Call ratio flashed in the first hour of trading 2 days ago when it had a 0.37 reading. We are just so overbought it is pathetic.

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Tuesday, January 04, 2011

Texas Black Man freed through DNA evidence

Cornelius Dupree Jr. was found innocent after serving 30 years for a crime he did not commit. This was proven using the DNA evidence from the case which was saved these past 30 years. He had been sentenced to 75 years in prison for rape charges he did not commit. Thank God for DNA testing. Otherwise this poor man would have spent the rest of his life in prison.

Dupree, now 51, will receive a well deserved $2.4 million as compensation for the wrongful imprisonment. That State has a terrible track record when it comes to justice for Blacks. It's a disgrace. According to the Huffington Post, Watkins, the DA, has cooperated with innocence groups in reviewing hundreds of requests by inmates for DNA testing. Watkins, the first black district attorney in Texas history, has also pointed to what he calls "a convict-at-all-costs mentality" that he says permeated his office before he arrived in 2007.

Texas has freed 41 wrongly convicted inmates through DNA since 2001 – more than any other state.

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Put to Call ratio hits SELL signal low.

The Put to Call ratio has just hit a new recent low of 0.37 at 7:00am PST. This is flashing a SELL signal for anyone willing to pay attention to it. The stock markets are so overbought right now that, in my view, you buy stocks at your own peril. The last time I have seen it this low on a close for the day was when the Bubble burst. Be alert and flexible. This Bubble is about to burst!

I will post the Put to call ratio during the day as the data is available, as I did yesterday:

7:00am PST 0.37
7:30am PST 0.49
8:00am PST 0.57
8:30am PST 0.60
9:00am PST 0.57
9:30am PST 0.61
10:00am PST 0.62
10:30am PST 0.62
11:00am PST 0.63
11:30am PST 0.64
12:00pm PST 0.65
12:30pm PST
1:00pm PST

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Monday, January 03, 2011

Jan. 3rd mid morning comments on the stock market

As the Put to Call ratio had indicated last Friday, 12/31/10, the ratio came in at 1.37 and was a Buy signal. This morning the market surged up 125 points by 8:00am PST and the Put to Call ratio has now backed off to 0.59, which is almost a Sell signal. Look for the Put to Call ratio to be as low as 0.54 or lower to signal a Sell. This looks like very high volatility coming over the next few weeks.

Update: 9:00am PST
Here is the data on Put to Call this morning 1/2 hour at a time. I will update it for the whole day as the data comes in.

7:00am PST 0.73
7:30am PST 0.68
8:00am PST 0.59
8:30am PST 0.61
9:00am PST 0.60
9:30am PST 0.61
10:00am PST 0.59
10:30am PST 0.60
11:00am PST 0.64
11:30am PST 0.65
12:00pm PST 0.62
12:30pm PST 0.63
1:00pm PST 0.64

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Sunday, January 02, 2011

Summary of yearend 2010 and looking at 2011 in the stock market indexes

One thing from 2010 to report on the last day of Trading. In the first 1/2 hour to 1 1/2 hour, the Put to Call ratio was extreme at 1.33 to 1.37 as reposted by the CBOE. That was actually a buy signal in the morning and that followed through as the Put to Call ratio closed at about 0.99 for 2010 in the final minutes. The last time it was that high was Nov. 29th. The Dow closed at 11,557 for 2010, the S&P500 closed at 1257, while the Nasdaq Comp. closed at 2652. Watch the markets rise again in the morning.

The 52 week high for the Dow was 11,625.
The 52 week for the S&P 500 was 1262.
and the 52 week high of the Nasdaq was 2675.

As you can see from the 52 week highs, we closed near the highs on all 3 Indexes. The best way to see where the market is headed is to keep track of the 9 day Moving averages. For example, as you can see from the chart below, the Dow & S&P 500 have managed to stay above the 9 day MA for the entire month of Dec. Any cracks in trend will show up here first. The Nasdaq was the only index during December, of the 3 Indexes, to go below the 9 day MA and that happened only on Friday. The markets will keep breaking below more Moving Averages if we are headed down. But if we break below them and manage to rise back above in a day or two, we won't be going down yet.

Let the Games begin for 2011. Good luck to all.

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