WeThePeople

Political campaign for President and lack of "civility."

2012-01-26T06:53:00.000-08:00

Many in the media have said that the 2012 Presidential election campaign was shaping up to be a clash between the 99% and the 1% or Class warfare. While that surely seems to resonate with many of us who write Blogs, I would offer a more sinister look into the 2012 campaign. It looks to me like it is a reenactment of the Civil War. I would suggest to you that the plain hatred for this President and the insistence that he be a "one term President" is racially motivated and the reason why Newt Gingrich won South Carolina and why Mitt Romney won New Hampshire. To me if you peel back this onion, the presidential race seems to be about reliving the "Civil War" in the political arena. Look at the arguments on both sides of the issues. If you frame them through the prism of "Civil Rights", you can easily make the leap to that argument. That is why the "Birther" conspiracy took hold for so long. Being "civil" means being courteous or polite. And the sad truth is that there is nothing "Civil" about this election campaign season.

It is going to get much worse I fear, before this election campaign is over. Notice the language of Newt when he talks about President Obama being the "Food Stamp" president. Yes, there are many on Food Stamps today, but not just minorities are getting them. Mostly white Americans receive them today. But the racial undertones are there and the dog whistle call to the far Right gets the applause lines from the far Right. For one brief moment yesterday the Congress was able to put this war behind them and join in a tribute to Rep. Gabby Giffords of Arizona in her struggle to survive a gunshot wound to the head last year. She has given up her Congressional seat so she can focus on her rehabilitation. That's smart. A small glimpse of sanity in an otherwise anger filled political season.

January 17, 2012 Dow analysis

2012-01-17T11:21:00.001-08:00

I have been asked where do I stand since my last post, since I hadn't written anything for 10 days here. Well, the reason I haven't posted was because nothing has really changed for me to comment on. So what I have done is to put a 1 year chart up of the Dow and you can see we still have not broken above this line to have a breakout. We get closer but no real conviction. Here's the chart below:

If and when we do have a clearer picture of where we might be headed I will post something to that effect. But we could be in this never land for a while as Europe tries to straighten itself out from their Sovereign debt crisis. Greece is on the brink of succumbing to default any time now.

Where is the Dow heading?

2012-01-08T08:28:00.001-08:00

Today we look at the Dow over a period of 2 to 5 years to get a sense where we are and what we must consider as we try and manage our investments. We are at a critical point where we are either going to have a breakout to the upside or we will have a breakdown to the down side as illustrated in the charts below. First let's look at the 2 year chart for looking at the current top of resistance. It is that highest blue horizontal line.
In the chart above, the bottom red line marks a short term support line. Breaking below this line doesn't mean we have a significant breakdown, but it does mean we need to be careful. In the 5 year chart below, you will see where the next real support line is and this one we must stay above or we may go down and retest the lows again.

Much going on this week in Europe and while we begin Earnings season with Alcoa reporting its earnings, Europe may take center stage over any news here.

Job creation ain't what it used to be!

2012-01-06T07:21:00.000-08:00

With today's employment data release, I thought a trip down memory lane might be informative. My focus today is NAFTA, the North America Free Trade Act, and the Presidential run of Ross Perot in 1996. First, below is a chart posted by Chart of the Day which shows Non Farm Payroll job gains, by decade, from the 1940's. Here's the chart below:

What is significant from this chart is what has happened the past decade of the 2000's. Basically, no jobs were created. In fact jobs were lost during the Bush Presidency. Jobs have been created the past several years, but no where need the number required to sustain a good economy with low unemployment.

Now we bring in Ross Perot. If you remember when Ross Perot ran for President, he warned us all about NAFTA not being good for America. In fact, his famous quote from the Presidential campaign became, "If NAFTA passes you will hear a giant sucking sound of jobs leaving America. In 1994, NAFTA became law. I think Ross Perot has been proven to be correct after all!

2011 market investments and learnings from ETF instruments

2011-12-30T08:51:00.000-08:00

2011 was the first year I was really invested in ETF's. I learned a lot about them but the lessons took too long to get. But there were major learnings. It is a well known fact that they were designed to be used for short periods of time and not to just buy and hold like traditional stocks. However that is easier said than acted upon, especially if you bought some and the market moved in the opposite direction you had expected.

Let me give you an example using the Russell 2000 index, symbol RUT, and comparing it versus the ETF's which represent the Index, TNA, the 3x Ultra Pro ETF and TZA, the -3x Short ETF. This means that on a given day where the Russell moves up 1%, TNA should move up about 3% while TZA should be down 3% on the same day. This is all well and good in practice of a given day, but if you do not sell on that given day and lock in your profit while looking for more the next day and possibly the next day after that, then you will be surprised at the cumulative effect that will have on your portfolio.

For 2011, the Russell 2000 has lost 5%. One would expect the following. TNA should be then down 15% and TZA should be up 15%, but that's not what really happens. Let's see what you would guess the numbers should be before I reveal them? Take a guess! Well the chart below is a chart of the Russell and TZA, which one would have thought would be up 15% for the year. Here's the chart:

Now let's look at what you would have expected for TNA versus what actually occurs. In the chart below I have the Russell plotted against TNA.

The 3rd chart is a plot of only TNA versus TZA for the 1 year period.

It took me a while to realize I needed to trade these ETF;s when I made any good profits and get over trying to get back to my average purchase price, but when I did I actually made some good moves thanks to the volatility of the market during the year. My best advice is don't buy and hold these or other ETF's for long periods of time or you will eventually lose your money. I suspect many others don't understand these ETF's and it has been a painful lesson to learn. I hope these charts make it very clear and that the smae mistake is not repeated in 2012.

So what time duration seems to correlate closely or to say it another way, how long should you keep these ETF's. Here is a chart below of only 3 months comparing the Russell, symbol RUT, to TNA. During the last 3 months, RUT gained 16% and one would expect that TNA should be up 3x that amount or 48%. Well in fact, TNA gained only 39% as is seen in this chart below. So you will lose even in short a time as 3 months. Here's the chart:

The next chart is of the RUT versus TZA for the same past 3 month time period. As you might expect with a 16% gain of RUT that it would create a loss of 48% of TZA. Well as you can see the loss was greater than 48%. The loss was in fact 52%.

In summary, even a 3 month time period will cost you bigger losses or less gains than you might have come to expect. The shorter the timeframe the better the correlation.

Kim Jong Il funeral celebration

2011-12-27T09:03:00.000-08:00

North Korea to Celebrate Kim Jong Il at Funeral. The ceremony will likely mobilize hundreds of thousands of weeping participants in a display of national mourning that’s designed to portray broad public support for the regime, according to analysts.

Year End summary of German DAX Index

2011-12-27T07:43:00.000-08:00

To complement the charts I posted yesterday, I thought I would add the German DAX index over a longer history than I had before. As you can see from the chart below, this Index also has a Head and Shoulder Pattern which dominates its 40 year history.

Now Head and Shoulder patterns do not mean that this market will necessarily drop from here, but here is the definition for that pattern from Investopedia:

"The head-and-shoulders pattern is one of the most popular and reliable chart patterns in technical analysis. And as one might imagine from the name, the pattern looks like a head with two shoulders.

Head and shoulders is a reversal pattern that, when formed, signals the security is likely to move against the previous trend. There are two versions of the head-and-shoulders pattern. The head-and-shoulders top is a signal that a security's price is set to fall, once the pattern is complete, and is usually formed at the peak of an upward trend. The second version, the head-and-shoulders bottom (also known as inverse head and shoulders), signals that a security's price is set to rise and usually forms during a downward trend.

Both of these head and shoulders have a similar construction in that there are four main parts to the head-and-shoulder chart pattern: two shoulders, a head and a neckline. The patterns are confirmed when the neckline is broken, after the formation of the second shoulder.

The head and shoulders are sets of peaks and troughs. The neckline is a level of support or resistance. The head and shoulders pattern is based on Dow Theory's peak-and-trough analysis. An upward trend, for example, is seen as a period of successive rising peaks and rising troughs. A downward trend, on the other hand, is a period of falling peaks and troughs. The head-and-shoulders pattern illustrates a weakening in a trend where there is deterioration in the peaks and troughs.

Head and Shoulders Top

Again, the head-and-shoulders top signals to chart users that a security's price is likely to make a downward move, especially after it breaks below the neckline of the pattern. Due to this pattern forming mostly at the peaks of upward trends, it is considered to be a trend-reversal pattern, as the security heads down after the pattern's completion.

This pattern has four main steps for it to complete itself and signal the reversal. The first step is the formation of the left shoulder, which is formed when the security reaches a new high and retraces to a new low. The second step is the formation of the head, which occurs when the security reaches a higher high, then retraces back near the low formed in the left shoulder. The third step is the formation of the right shoulder, which is formed with a high that is lower than the high formed in the head but is again followed by a retracement back to the low of the left shoulder. The pattern is complete once the price falls below the neckline, which is a support line formed at the level of the lows reached at each of the three retracements mentioned above."

I hope this lengthly definition helps you analyze the charts yourself. For additional information on chart patterns, I find the book "Technical Analysis Explained" quite useful

Year end summary of the Dow and stock market trends

2011-12-26T10:48:00.000-08:00

This is my year end summary of the stock markets for the year and where I think what might occur in 2012. My first chart below is of thew Dow for the past 10 years on a monthly basis. As you can see below, for 2011 the Dow managed to stay between 11,000 and 12,800. Looking at the big drop in 2009, where we went all the way down to 7,000 on a monthly basis and 6440 as a low daily close.

It is interesting to notice the Volume chart for the Dow. We averaged about 600 Billion shares a month from 2002 to mid 2009. Since then we have had a significant drop to 380 Billion shares. So the rise from 7,000 was built on significantly less volume than the rise from 2002 to 2009, which was a Bull market rally. It looks to me that since 2009 we have been in a Bear Market rally, as the volume has been too low for a true Bull rally.

The key to watch on this Dow chart are the 2 red lines. We will need a breakout either to the upside or to the downside to determine longer term trends from this chart alone. However, looking at the Dow 25 year monthly chart, we get more clarity, as seen below.

I do still expect a drop below current levels during 2012. The Head and Shoulder patters or "W" pattern as I call it does point to lower lows going forward and limited upside potential.

Given the chart readings, the next thing to do is see if world events suggest a more optimistic or pessimistic view for 2012. We have a Presidential year election in November 2012 and we have had gridlock in the Congress in 2011. I don't see the gridlock easing and many issues including our own debt which must be dealt with as well as continually funding the government. The Unemployment scene isn't going to get much better because we have structural unemployment which will be around for a long time unless somehow we retrain workers in new skills to meet a more technological demand than typical blue collar workers have brought to the work environment. We also have the Supreme Court making a decision on President Obama's Health care bill legislation as to whether it is Constitutional or not.

Then we have the Sovereign Debt issues in Europe, the Arab Spring and new leadership in North Korea, a test of the government of Iraq to function without our military presence and then there is Iran's pursuit of Nuclear weapons. The Euro is in crisis and Russians are challenging Putin's grasp of the presidency there. And last but not least, we have all those who believe the world will end on Dec 21st 2012 because of the Mayan predictions.

Let's conclude with the fact that 2012 will have many volatility swings ands most likely testing the previous extremes of those swings. It is a year to be cautious with your financial assets. My belief is that we humans will do almost anything to avoid pain rather than to risk succeeding. Therefore, I believe it is wiser to be on that side of the investment strategy by being short from time to time. It is also wise to take profits sooner rather than being greedy and waiting for more profit before selling.

Good luck this coming year. Thanks for taking the time to visit my Blog. This new year marks 7 years of my blogging. I have had 79,000 visitors to my site in that period. Happy New Year!

Ever wonder why we promote the weirdest, zaniest candidates for President? The answer!

2011-12-18T07:39:00.001-08:00

As we end 2011 and begin 2012, an election year for our President, have you ever wondered how this country ever elected someone like President George W. Bush or looked to Michelle Bachman, Herman Cain, Rick Perry or Newt Gingrich to be President. Have you ever wondered what's wrong with voters that they could be that stupid, or "tupid" as one of my best friends jokingly says? Well I found the answer to those questions right here. Play this video and you'll never wonder again why we pick who we pick for President and answer a whole bunch of questions about who we are as a people. Besides you will laugh too!

Now you know! Merry Christmas and Happy New Year to you and yours and let's all pray for a smarter electorate as well. For those who don't know what the word "electorate" means, you might consider staying home this Presidential election. Only kidding! :)

Market comments for the coming week of Christmas

2011-12-17T11:46:00.000-08:00

Oh I hate to be so repetitive. As I said in my last post on Dec. 5th, "I thought it was time to post on the stock market again." The main points to make this week are that all Indexes are now below their 200 day Moving average line, shown faintly with the yellow lines on each chart below. My opinion continues that this shows the tendency is still to remain below the 200 day Moving Averages in the intermediate timeframe. While there was "hope" the Eurozone had "solved" its crisis we all know better now, don't we. Unfortunately it will take a stock market crash or a sovereign debt meltdown causing a market crash before Europe is forced to come to terms with its problems. Here are the updated charts of our major indexes.

Market comments for the coming week of Dec. 5th.

2011-12-04T08:55:00.001-08:00

I thought it was time to post on the stock market again. The main points to make this week are that all Indexes, except the Dow, are still below their 200 day Moving average line, shown faintly with the yellow lines on each chart below. The second point is that while the Dow remains above the downward sloping red line, the Russell has remained below it the most. The Dow is most likely the most manipulated Index and the Russell the least. My opinion is that this shows the tendency is still to remain below these red lines in the intermediate timeframe.

This week will have its important announcements. The biggest news item will be the European meeting, scheduled on Dec. 8th and 9th, of Finance ministers to discuss resolving the Sovereign debt issues of Greece, Italy, Spain, Portugal and others. This will be the most important meeting of the last year as it is the first since the coordinated Central Bank intervention to lower the rates banks pay to increase reserves. The Central Banks took this action because there was an immediate concern of a large bank failure in Europe. Our markets will react to what happens there, not here.

The Fed and its $7.7 Trillion secret bailout to banks

2011-12-03T07:49:00.000-08:00

This story is something that should spread like wild fire across this country so that every American understands what the Fed really did to bail out the banks with $7.7 Trillion in taxpayer money in secret. The Congress didn't know nor did many officials in government!

Click here for the Bloomberg article exposing the Fed.

Get everyone of your contacts to read this article. The 99% now have plenty of ammunition to keep their movement going. Ron Paul was right that the Fed needed to be audited and eliminated.

Ideas for the 99% Occupy movement. Idea #2

2011-12-02T09:43:00.000-08:00

Ok, here's something else that we could demand. How about every law that Congress passes also applies to Congress as well. That would eliminate the Insider trading scam Congressmen and Congresswomen portray on its citizens. It would also require Congress to have the same health Ins. plan that we all have. That would help eliminate the unbelievably lavish retirement benefits they get.

Are you for this too?

Ideas for the 99% Occupy movement. Idea #1

2011-11-27T15:45:00.000-08:00

Many have been asking what are the demands of the 99% movement protesters across the country and much has been made about the lack of a coherent message. I believe since most of us are in the 99% we must offer suggestions for what we all can do.

So here is my first suggestion. Most of us are concerned about the "Too Big to Fail" banks here in the US. There are about 6 of these institutions and here are the list of the ones I remember:

JP Morgan Chase
Bank of America
Citicorp
HSBC
Wells Fargo

Anyone who is concerned these banks are too big can withdraw all their money and put them in local banks and Credit Unions. I like Community banks myself because they loan to local merchants. If the 99% withdrew their support of these banks they would be forced into shrinking and the size of their assets would shrink dramatically.

Idea #2 is in the works. If you have any ideas, feel free to leave a comment and maybe yours will be posted.

Where are the Student Protests today? Vol. 2

2011-11-24T06:38:00.000-08:00

It was May 21st, 2005 when I wrote a Blog post titled, "Where are the Student Protests Today?". It has taken this long before some have finally demonstrated. This is the 99% Occupy Wall Street movement. Here is what I wrote back in 2005:

"As we approach June 4th , the anniversary of Tiananmen Square, and I reflect on our own history of student protests, it got me to wonder where are today's student protesters, as certainly there are many disturbing trends in America today, threatening the very fabric of our democracy as we search for bipartisanship in Congress and a more humble America in our rhetoric abroad and at home. But we still seem very arrogant as a nation with little understanding of the very cultures we are trying to change. I am not talking about Iraq here. I am talking about the "Divided" States of America, that's right, the good ole D.S.A., one nation, (partly) under God, very divisible, with liberty (until we can change those Senate Rules), and justice for (a few).

There was once a time of idealism, of standing up and being taken seriously by society, a conscience for all of us. This was the time of Student protests. Students protested the Vietnam war, the May 4th, 1970 Kent State shootings, Tiananmen Square and support for democracy in China, the outrage at the Chinese Government’s reaction to the protests and some recent protests of the Iraq war in selective cities.

As a nation, we have a lot to be angry about with our government. First there was the misleading 'intelligence' of the lead up to the Iraq invasion and then the letters of former White House General Counsel and current Attorney General, Roberto Gonzales, regarding new interpretations of what is and what is not torture. Then the pronouncements by our President that certain prisoners would not necessarily be treated in a manner consistent with the Geneva Convention. Add to this more recent assertion about additional abuse in Guantanamo and the shameless deceit to get recruits on High School campuses to enlist, and you wonder what it takes to get Student protesters engaged again. There have been some protests of the Iraq war but they fade away quickly. What captures the focus and attention of the bulk of our students today? Could it be survival, as the job market still looks bleak? Or is it just apathy? What do you think? I don’t think they care much about what the Senate is proposing in its Nuclear Option to end the filibuster and allow judicial nominations through who by the minority see as extreme in their views. Stay tuned."

I think this has merit today as well. Those brave students at UC Davis who were pepper sprayed for no reason other than they were protesting. Others on Wall Street protest as they have seen what they have gained over their lifetimes gone because of the greed on Wall Street and the Banks. Let's be thankful that the conscience of some is alive and full this Thanksgiving, even though their stomachs may be empty. Bless the 99% and be thankful for their voice and their courage. They are the best of what has made America great. Back in 2005, way before the Sub Prime problem, there was a jobs crisis (during the Bush years), but many have forgotten that. Many ill informed have blamed President Obama. Not me.

Along with your dinner today, which is a blessing in itself, maybe this will give you some extra food for thought.

Market comments for Nov. 23rd, 2011

2011-11-23T11:12:00.000-08:00

I have not posted much recently on the stock market because nothing much has changed. I have posted the chart I posted back 1 month ago, on Oct 23rd, with an update based on today's current level of the S&P 500.

Now below is today's chart as of 11:15am PST. As you can see we have gone back below the upper red line and I see that both moves above that red line were nothing but Bear traps. Bad News in Europe and the failure of our Congressional Super Committee to agree on debt reduction, has the stock markets declining world wide.

I am still on the short side of this market and prefer to be that way going into this weekend. But I also believe we are a bit oversold and so a rally may occur after the weekend.

Market comments for Nov. 18th, 2011

2011-11-18T06:15:00.001-08:00

Today is Options Expiration for November so you should see high volume both at the opening of thew market today and also at the close. Troubles today in the Eurozone seem to be taking place behind close doors rather than in the press, so the Futures markets are up some as we go into the open. The economic data this week was somewhat better than expected with Initial Jobless Claims at 388K for the first time this low in a long time. Housing starts were also higher than expected. All good signs of a slightly better economy in the US with the emphasis on the word "slightly."

We have broken below that key support level of 1220 on the S&P 500 closing at 1216, but today we may go back above it.

Merkel and Sarkozy clash

2011-11-17T07:03:00.000-08:00

There is a fight going on between Merkel of Germany and Sarkozy of France over whether to allow the ECB to, in essence, print more money like we have done here. Sarkozy would like it to get out of the Euro sovereign debt crisis and Merkel would not like that solution. Here's a picture below of the two of them. Which do you see winning the argument strictly based upon body language.

To read the article which goes with the above picture, click here.

An update and analysis of the S&P 500 chart

2011-11-16T07:30:00.000-08:00

Back on Oct. 23rd I posted this chart and commentary about the S&P 500 and where it might be headed. I think a review of that post seems appropriate as not much has changed since then. Let's see the chart and here's what I wrote then.

"I have drawn 2 red lines and 1 blue line. As you can see with the red line labeled 1, that we have broken above this level this past week. The next challenge for the Bulls is to cross over the red line 2 which crosses the axis at 1240. If it crosses above 1240, then the obvious next resistance level is at 1265. The S&P 500 closed Friday at 1238. I can't guarantee that we won't go up to test the 1265 level, so you might want to entertain the possibility, depending on the news coming out of Europe, we could surge up this week and test it. If the news is mixed from Europe, we may stay between that narrow wedge between both red lines, between 1220 and 1240. But there will be a breakout soon in one direction or the other."

At this hour today, the S&P 500 is at 1246 and the chart has been updated below. Again, not much has changed. We are still below the 200 day Moving average and that line is slanting down.

Stock market: Where are we going?

2011-11-12T09:32:00.000-08:00

I thought it would be worthwhile to look at this past week and see where we ended up. In my last Blog post, I cited the fact that the 200 day Moving averages appeared to be a significant resistance level for all major indexes. This week proved that point again as we ended the week with only the Dow above the 200 day MA. The S&P 500, the Nasdaq and the Russell 2000 all are still below their 200 day Moving averages. Until we can climb above these indexes we are stuck from going higher.

The Put to call ratio closed the week at 0.93, not exactly a buy signal. The sovereign debt issues in Greece and in Italy took center stage in the early part of the week. Then the resignation of Greece's Prime Minister and the signal that Berlusconi of Italy may resign next. ALL THESE MOVES CLOUD THE FACT THAT THE DEBT ISSUES AND AUSTERITY MEASURES NEEDED TO RESOLVE THEM HAVE YET TO BE IMPLEMENTED. Stay tuned as the volatility will continue for the next 6 months. Even if austerity measures are passed by the governments, the people will be heard on these matters in ways that will frighten many. The people have only begun to make their objections known to the world and their leaders. In true democracies, leaders can be voted out or feel enough pressure to resign. This crisis is just in its infancy.

Don't forget that there are now only 11 days left before our Super Committee must agree to cuts in spending or automatic cuts in the military will be implemented. My guess is they won't do what's necessary and the US will be downgraded again by the S&P and Moody's rating agencies.

Here are the charts promised earlier:

Market comments for Nov. 9th, 2011

2011-11-09T07:33:00.000-08:00

Sorry I haven't posted recently, I was away back east to see my Mom and when I returned I had caught a very bad cold. But I'm back now and let's get at it.

I have watched the rise of the Dow recently as well as the other indexes over the 200 day Moving averages. But todays drop of between 200 and 300 points this morning, shows the strength of the 200 day MA line as a resistance level. The market actions have not made sense given the news in Europe and the fact that our own government may get downgraded as well for a second time. Greece has not really solved its problem but they did replace their leader. Italy may replace its leader as well, but replacing the leader doesn't solve this crisis in either countries and more than it would here. The problems are similar and the pain will have an impact and it is human to avoid pain. So my guess is that these problems will unfold stubbornly over time. The only solution I can see is a breakup of the EU in some fashion. Either the countries of the south like Greece and Italy will not be part of the EU anymore and possibly Portugal, or the entire EU will eventually dissolve.

Below are the charts for the Dow, S&P 500, the Nasdaq and the Russell 2000 with their 200 day Moving Average lines. Unless the market can stay above these levels we are headed lower. Needless to say, it may be true again that the last rally we had was a bear trap. More on that over the weekend.

Occupy Wall Street and other protests: A Thought to help you!

2011-10-29T08:13:00.000-07:00

I am heartened by the Occupy Wall Street protesters who have endured terrible conditions to make their voices heard. Those of us couch potatoes in the 99%, who see you on the news or read about your bravery in the face of tear gas, police brutality and just the hardship of doing without the simple comforts of home like a bath or use of a toilet, admire you all and support your voices to be heard. We were called the Silent Majority once.

But as one who cares, I am concerned about the storm coming today and tomorrow and what certainly will be a difficult winter and want you to be safe from harm. I ask you to consider the fact that you could go home at night, if you are fortunate enough to have a home or warm place to sleep, as many don't these days. There is no shame in doing this. Come back fresh and rested each day and use that time to organize into small groups which explore possible demands you might have of the government and the 1%. Use the time to think about solutions that can right this wrong. But it does no good to get worn down and possibly sick where your voice can't be heard.

If you have some messages, I am willing to happily post them for you on my Blog. But take good care of yourselves. People in the helping profession know that they are unable to help others if they can't help themselves. So please consider going home in the evenings and take good care of yourselves. We are behind you in spirit and voice.

Markets rally strongly. What's next?

2011-10-27T15:31:00.000-07:00

Markets rallied strongly on the Euro zone deal to solve the debt crisis in Greece. It's just a fact. The Dow surged to close at 12,208, the S&P rallied to close at 1284, the Nasdaq to 2738 and finally the Russell rallied to 765. All of these Indexes, except the Russell, surged above their 200 day Moving Averages. They all made a significant breakout, which can't be denied. And they did it on stronger volume, always a good sign for Bulls. This surge makes it possible for the averages to go back to the previous recent highs. For the Dow, that would be about 12,800. For the S&P 500 that would be 1360. For the Nasdaq that would be 2870. And for the Russell it would be first getting over the 200 day MA at 790, but then going on to 860. All this now becomes possible again. As I said, it's just the facts.

We had good economic news coincidently with this market move. GDP for Q3 came in at 2.5%, healthier than some low predictions of 1.5%, but not as strong as the highest ones which were at 3.5%. Initial Jobless claims were still over 400K this week coming in at

Can the markets reverse where they are now and go down? Yes, but if they do one might consider buying on the dips. Remember when we did that long ago? I do.

I have said to watch Europe and the DAX for clues about this market as we have been following Europe. Well the DAX and France's CAC as well as other european markets also surged today.

I have placed 1 year charts of all the Indexes below.

Market comments for Oct. 26th, 2011

2011-10-26T05:54:00.000-07:00

The stock market Futures point to a positive open, as the world waits in anticipation of meeting in Europe over the debt crisis. Germany's Lower House of Parliament voted that they would support an increase to the European Stability Fund and supported Merkel to help to bail out Greece, as they will be contributing a significant share of the overall bailout from their funds. That created the bump in the Futures this morning.

Back here in the US, the data this morning on Durable Goods orders for September was not good, coming in at -0.8%, but the spin by the media focused not on this number, but rather Durable Goods-ex Transportation, which came in at 1.7%. Isn't spin wonderful.

Market comments for Oct. 25th, 2011

2011-10-25T07:15:00.001-07:00

The big news this morning really came within the US, as the Consumer Confidence number was released for October. It came in at a 39.6 reading compared to September's reading of a 45.4 reading. This is the lowest reading in a while as the chart below indicates and if it continues this low for the next few months, Christmas season for Retailers is going to be very poor.

Nothing yet settled in Europe on the Greece debt issue and bailout attempts. There is a meeting tomorrow of the group and Germany will be voting at the same time as to whether they support it or not.

Where's the S&P 500 headed?

2011-10-23T09:10:00.000-07:00

I thought I would reward those frequent visitors with a second post this weekend. Today's chart is of the S&P 500 and I have drawn some lines on this 1 year chart, as to where I believe the S&P has resistance and will be difficult to overcome. First the chart and then the commentary.

I have drawn 2 red lines and 1 blue line. As you can see with the red line labeled 1, that we have broken above this level this past week. The next challenge for the Bulls is to cross over the red line 2 which crosses the axis at 1240. If it crosses above 1240, then the obvious next resistance level is at 1265. The S&P 500 closed Friday at 1238. I can't guarantee that we won't go up to test the 1265 level, so you might want to entertain the possibility, depending on the news coming out of Europe, we could surge up this week and test it. If the news is mixed from Europe, we may stay between that narrow wedge between both red lines, between 1220 and 1240. But there will be a breakout soon in one direction or the other.

I do not see a rosy outlook in the markets unless the government would rather continue to prop them up. The day of reckoning will eventually come, both here and in Europe and when it does, it will infect the rest of the world. Much of the media's attention has been on China lately as well. This economic crisis and debt crisis, which has caused a slowdown in Europe and the US, is already affecting China. I am watching India, as I see India as the canary in the coal mine. Here are some headlines from India as of this morning to emphasize my point about India:

- States must reduce fiscal deficit since debt position has become difficult in many states: Montek
- PM wonders if 9% growth feasible. The government now expects growth of close to 8 percent this fiscal year.
- India can achieve 8-8.5 pc growth despite global crisis: PM Manmohan Singh says India can 'swim against the wind blowing from abroad'.
- Food inflation back in double digits. Inflation rises sharply to 10.6 pct for week ended Oct 8 from 9.32 pct.
- Mineral output down 5.99% in Aug. India's production of minerals was valued at Rs 13,378 crore, the government said today.
- Consumer Price Index jumps 1.2% in Sep. Expensive food, clothing and fuel pushed up the CPI by 1.25 per cent in September.

So keep your eyes and ears tuned into what is happening in India. Here's the latest piece of news about the Stock market:

Mumbai: Taking positive cues from the US markets, Indian bourses may open with gains but the mood is likely to stay cautious as the RBI meets on Tuesday to take stock of inflation and European leaders moot a solution to the eurozone debt crisis, say analysts.
The BSE benchmark Sensex last week shed 1.73 per cent on high inflation and mixed global cues with downward bias.

"Stock market will trade taking cues from day-to-day basis as this week is going to be an eventful one.

If you too would like to follow the news in India click here to India's Financial Express.

Stock market analysis and commentary Oct. 22, 2011

2011-10-22T08:07:00.000-07:00

The stock market had a surge yesterday on high volume and the Dow closed at a 11,808, bringing it near a 3 month high. Of course this was done on Options Expiration day. That explains the high volume, but not the surge up on the Dow. Yesterday also had one of the lower Put to Call ratio readings as seen in the chart below. Be sure to read my last post where I said to watch this ratio to go below 1.0 and head to a 0.7 reading.

What has dominated our stock market action has been Europe and the Greek debt crisis and impending crisis in Italy and Spain. there were some hopeful comments made that the meeting this weekend of the G-20 would yield some good results. Greece's Parliament did pass more austerity measures in the face of Union strikes and violence, all giving many hope that Eurozone countries will get past this problem and on solid footing. But Germany's Merkel has said to the effect, not to count much getting done at this meeting this weekend as it will take many more meetings and months or longer to solve these crisis. It didn't matter to the market traders as they jumped on the bandwagon of "hope" and drove stocks higher as the Shorts took it in their shorts with big hits in their portfolios.

The Dow trend has clearly broken above a tight range and it could have legs to go higher. I can envision a move to 12,000 is possible, but the risks to go back below 11,000 is also as strong. The 200 day moving average is at a few points below 12,000 but the line is sloping down so I don't see us going up above this level. See the 6 month chart of the Dow with the 200 day MA below:

Much will be dependent on the news from Europe. Many think that our earnings announcements will drive the market higher, but the fact is that many companies are missing their targets like Apple, The Blackstone Group, Schlumberger, Travelers Ins., Morgan Stanley ( missed w/o accounting move) and a number of other prominent companies. Remember most targets had been lowered because of the economy so even beating them is nothing really impressive with this very slow growth economy.

The best moves have been to play the wide swings in the markets due to high volatility. But this is not for amateurs. And I consider myself a amateur, as most are because we don't have the ability to execute High Frequency trade in nanoseconds like the big boys do, so we are always too early or too late for a trade to make comparable profits.

Market comments for Oct. 14th, 2011

2011-10-14T08:02:00.000-07:00

Today's focus is on the Put to Call ratio for all Equities and Indexes. The chart below shows this ratio for all of 2010 and Year to date for 2011. You can see from the chart that this ratio has been greater than 1.0 for all but 3 days since July 29th, the area under the red line. This while the stock market has rallied this past week. Many are wondering whether they should jump on this rally so they don't miss it. Some wonder whether there will be a sharp reversal and that this is a Bear trap. To answer this question, the Put to call ratio should help you decided. People believe there is a Bull market when the ratio is much lower than it is now. So one thing to watch is whether the Put to Call ratio daily readings start to consistently stay below 1.0 and start heading down to 0.7 or 0.6 or lower, but that's not where we are now. Paying attention of this data can help take out some of the anguish of trying to decide what to do.

Market comments for Oct. 12th, 2011, Columbus day

2011-10-12T08:18:00.000-07:00

Say what you like about this rally, it has surprised everyone, including me. I had to look at the chart this morning to see just how high it has climbed back up from the bottom and to see whether I think it will hold. The chart below shows it was a rise of about 8% in 7 trading days. However, when I look at the very low and dropping volume, I am very suspicious of this rally and it appears to me to be a another bear trap. Here's the chart. You decide!

Should we link a Job's Plan with Taxing Millionaires?

2011-10-08T07:07:00.000-07:00

What's wrong with a quid pro quo when it comes to a Millionaires Tax to pay for a Job's Plan? I'll tell you what's wrong with it. And I do support a Job's Plan and I support a tax on Millionaires. What I don't support is a link of a tax increase specifically implied to pay for it, rather than paying for the general expenses of the government. You see it sets a precedent. We know our taxes go to pay a piece of every government program and expense. But if we start down this path think about how many will say they don't want to pay the part of their taxes that pays for our Military or they don't want to pay for their part of the IRS or the Energy Dept., or the EPA.

I think we should get more taxes to help offset the expenses and debts we have incurred at this time in our economy. And I think those increased taxes would be best obtained from those who have had the most tax breaks and can best afford it. That means taxing the Millionaires and Billionaires a little more. And we should couch those increases as needed to help us fund the government, not just a Job's program. Fairness in taxation is a must.

What do you think? Leave a comment.

Market comments for Oct. 7th, 2011

2011-10-07T08:37:00.000-07:00

The Unemployment Rate stayed steady at 9.1% for September, as reported this morning. Non-Farm payrolls came in better than expected with a gain of 103,000 new jobs created. And on Thursday morning, Initial Jobless Claims came in at 401K for the week of 10/1.

This morning I have included several charts showing that while there is much volatility, there also is a pattern to the moves. AS you can see from the charts below, we are forming lower highs and new lower lows in this market. Will this continue? It's anybody's guess. I guess it will and while todays market looks tired with the recent gains, we may have put in the highs and are headed lower.

Also today I am posting from the Chart of the Day, which shows how slow this recovery has been compared to other recoveries.

"Today's chart puts the latest data into perspective by comparing nonfarm payrolls following the end of the latest economic recession (i.e. the Great Recession -- solid red line) to that of the prior recession (i.e. 2001 recession -- dashed gold line) to that of the average post-recession from 1954-2000 (dashed blue line). As today's chart illustrates, the current jobs recovery is much weaker than the average jobs recovery that follows the end of a recession. Today's chart also illustrates that the current jobs recovery has been slightly stronger than what occurred following the recession of 2001. However, the already modest upward trend has slowed significantly over the past five months."

R.I.P. Steve Jobs and thanks for all of it!

2011-10-06T06:02:00.000-07:00

I remember my first encounter with an Apple Mac. I had just left IBM in May of 1986 after 18 years of service and deciding it was time to leave Vermont and come to the Bay area and be part of the excitement and improved weather from the harshness of Vermont winters. The last thing I bought as an employee was the IBM Personal Computer XT, as I got it with the employee discount. To my surprise, in only a few months in San Francisco, the damn thing started falling apart. Eventually everything but the metal frame didn't work. I had to replace the computer and decided to go with my first Apple Mac. Since that moment I have never been dissatisfied with my Apple products, as you see I was converted into an Apple zealot. I have never looked back at any other equipment other than a Mac since.

As one of my early consultant gigs, I was fortunate to get Apple as a client in 1987 and I remember the excitement I felt walking into Apple and seeing groups of people working with chart paper and easels and colored markers contributing to a brainstorming exercise of new product ideas. The place vibrated and I felt privileged just to see it first hand and be a small part of it. I did a number of sessions for Apple management into 1989 and I met there what was to be one of my best clients ever. He was an IT mid level Director who was smart, cared about his people a lot, had the highest integrity and was the kind of person I was proud to know. I knew he had something special going for him and I just enjoyed his way of working with people. No, it wasn't Steve, but he was the kind of person at Apple that made it be one of the best companies in America.

It was a privilege to go into a company where you felt that excitement and knew something special was happening there. I had had that feeling only once before and that was when I worked on the development of the Heat Shield for the Apollo program, but I have never had that feeling again since Apple. Steve Jobs helped change the world and the way we look at and use technology in it. He changed my world too.

Market commentary for Oct. 4th, 2011

2011-10-03T17:38:00.000-07:00

Tuesday's charts are of a longer period than previous charts for a while. I have put together charts of the Dow, S&P and Russell 2000 each for 3 year periods. I have drawn a number of red lines showing where support is and where you can see we may be headed. First the charts and then some commentary:

The Dow broke below recent previous lows and while it barely is below those lows, the trend looks like we are going lower. The bottom of the Dow's range is 10,000, which is 655 points lower from where it closed today. We could just as easily climb above today's lows, but we should be going lower, as the news in Europe has not solved the Greek Debt crisis and Greece today said they did not reach their goals around there promised austerity targets they had committed to the EU. That was a major reason the markets ignored good news today regarding the ISM number which came in at a 51.6 reading against an expectation of only 50.0.

The S&P500 shows a larger drop against the previous lows and the Russell 2000 shows an even greater drop. By the way, Germany's DAX Index is also going lower as is the CAC40 and FTSE, but I didn't put up those charts today. News isn't mattering these days. Lowering ones risk is what is driving the world markets now!

Summary of Blog statistics for the past 6 years

2011-10-02T14:06:00.000-07:00

I have been writing a Blog now since May of 2005. In that time, I have written over 1650 Blog posts and had a total of 80,000 Visitors to my site who read 125,000 pages in total. I'm someone who never wrote anything other than an occasional letter to the editor, because I considered myself not to be a writer. So much for limiting self perceptions.

I wrote about politics for the first several years years exclusively, then a mix of financial posts and finally some stock market analysis these recent years.

Thanks all of you for visiting this site. I hope you got what you came for. I got what I wanted out of doing this, the joy of self expression and the uncensored views I hold about the subject matters i have chosen to write about.

Stock market direction? Nothing has really changed!

2011-10-01T06:14:00.000-07:00

Since the beginning of August, when the stock market had its big drop based upon the announcement of the Fed that they were going to keep Interest rates low until 2013, nothing much has really changed. We have been in a tight range that does't feel so tight because of the high volatility. One week we are just below 11,000, wondering if we are going to hold support here or go lower and the next we are back up to 11,500 wondering if we can break much above this apparent resistance level. It has been worrisome for most investors but not for day traders. The best day traders are making some money, but the rest of us watch in disbelief.

I have compiled some 1 year charts below to reiterate and reenforce previous posts where I said we are in a tight range but now we are closer to a breakout, one direction or another. I have stated many times I believe this direction is lower, so no sense repeating much more than that.

This week Germany's Lower House of Parliament approved increasing the proposed EFSF (European Financial Stability Facility) expanding the euro-area rescue fund's fire power to stem the region's debt crisis. To read more about this Fund and the politics in Germany over this issue, click here. This seemed to move their stock market higher but as the week progressed you can see in the charts below, it pulled back.

You can see I have drawn red lines showing support levels and Blue lines showing resistance levels. You will also note that since the drop in August we have stayed below the 50 day moving average consistently. This line might be a good indicator to track market direction so that you are not fooled as we many during the Bear Trap so noted on a number of charts by the blue circle covering their mistaken purchases. Use these charts as a reminder of where we are and above all remember the Fed doesn't think we are going to get better until at least 2013!

This coming week on Friday, we will get the Unemployment rate for September. This could move markets. Also on Monday be watching for the ISM Index at 10:am EST or 7:00am PST. Expectations are for a reading of 50.5 and the previous month the number was 50.6. I expect the number to come in at 50.0 or less, given the lack of business activity there was in September. Earnings also will be front and center now for the next 4 weeks. You will be hearing about "beating expectations" by companies. Remember, these predictions were lowered last time so that beating these expectations should not be difficult.

Market comments for Sept. 29, 2011: Still in a tight range!

2011-09-29T05:46:00.000-07:00

Initial Jobless Claims dropped this week to 391K, which was lower than expected. This data gave the market a boost in premarket. Also reported this morning was a revised GDP number for Q2. The final number reported GDP grew at 1.3%. Both pieces of data were better news than expected and traders are hoping to time the bottom of the market as many are venturing in the past few days. This stems form "hope" the EU has a plan for solving the sovereign debt problem for Greece and that their strategy will be a template for Italy should it be necessary. It's the same action Bernanke is taking, print more money.

A good friend of mine dropped me an email early this morning with an article from ZeroHedge worth reading. Here is the link. The article discusses Fed Chairman Bernanke's speech last night and his concerns about stemming deflation it seems at all costs. This is worth the read. The article is titled, "Goodbye Operation Twist, Hello QE X+1" and was written by Tyler Durden very early this morning.

Now that we recently retested Dow 11,000 and it held, even tough we went below 11,000 for a couple of days, it looks as though we are going to retest Dow 11,500 again for the 3rd time in several months. We seem to be more volatile lately, but we are still holding this tight range of between 11,000 and 11,500. Traders love the daily volatility, but long term investors don't and are looking for a guide to market direction.

UPDATE: 6:00am PST
Germany's lower House of Parliament has approved the expansion of the bailout fund needed for the sovereign debt crisis. Read the news by clicking here.

Crude Oil versus Gasoline prices

2011-09-26T06:42:00.000-07:00

An Anonymous reader asked in my last post on Gold and Silver, why does there appear to be such a lag in the drop in price of Crude Oil versus the cost of gasoline at the pump? I said I would check it out and report back if I found anything relevant. So this morning I have posted 2 charts. One is on Crude Oil prices over the past 2 years and the other tracks Gasoline prices over the same period. Here are the charts:

There does appear to be a longer lag time most recently as gasoline prices should be lower. I can't explain it so as my reader suggested, maybe the Oil companies are trying to gut us to improve their profits as he suggested. Another possibility is that because demand has dropped significantly with the slowdown in world GDP, the Gasoline available today was produced using higher priced Oil and that it will take more time to use this Oil up, hence the lag in Gasoline prices. You wouldn't lower the prices of something you paid higher for until you sold it and then might drop your price of that product. The same is most likely true for Gasoline as well. The real gouging may take place on the front end when Oil prices rise rapidly. They most likely feel justified to raise prices then as everyone knows Oil prices were going up, hence the rise in the cost of Gasoline. It's a psychological game played with Consumers the losers. You can bet on that.

Thanks Anonymous for the question.

Gold and Silver correction: Where are we headed and is there a historical basis for the prediction?

2011-09-24T08:49:00.001-07:00

Due to the volatility of both Gold and Silver this week I thought I would share some charts on both precious metals. I looked at the 5 year charts of both and then a chart as to what Silver did from 1912 to 1950, which covers the Stock market crashes of 1929 and 1938/1939. These were the Great Depression years and there may be clues to tell us what we might expect now.

First the current 5 year charts on Gold and Silver:

You can see the gains both had over the past 5 years as well as the recent loss from the highs recently achieved. Silver is much more volatile than Gold and with the gains that make one thrilled to own Silver, there is the extra pain of experiencing more dramatic loses as the chart shows.

Looking at the chart below on Silver from 1912 to 1950, you can see where each stock market crash precipitated a drop in Silver prices. So when the stock market drops so do Silver prices. Looking at the Gold prices during this period will not show anything because Gold prices were managed by the Gov't as to not fluctuate and many say that is the reason why we had the Great Depression because the Federal Reserve could not print money as we were tied to the Gold Standard during those years, unlike today where the Fed can just keep printing money which resulted in the price of Gold rising dramatically and pulling Silver with it.

If the past is any indication of the future, you can expect these metals to drop as long as the stock market in turn drops. If you believe we are going down much further in the stock market, expect more losses in these metals with more of a loss from Silver than Gold. If you think we are headed back up shortly in the stock market, buy Silver more than Gold and you will gain a higher percentage on your Silver holdings, if the market does indeed go up as you expect. I am still convinced the stock market will head lower over the coming weeks and months.

Market comments for Sept. 23, 2011: Another down day

2011-09-23T06:00:00.000-07:00

The stock market is going to open in 1/2 hour. The Dow Futures are down another 110 points pointing to a lower open. As a reminder of where we are now, I have included 2 charts today. One is of the Dow and the other is for Germany's DAX index. I have placed an "X" on the Dax chart to where the market is currently as its market is open. The DAX is very close to the 5000 level. The German DAX is trending clearly down from the red lines I have drawn. Our Dow chart matched the recent low and I fully expect all our Indexes will go lower. We are in the second inning of a 9 inning game and more is to come to the downside. As I have stated before, this drop will not be straight down as there will be days up. So it will look more like a zig-zag pattern. I am pretty confident the market will close down today because no one wants to buy stocks today going into an uncertain weekend. Also, yesterday's volume was heavy at 300 Million traded on the Dow.

Here are the charts:

Market comments for Sept. 22, 2011: The Battle lines are drawn

2011-09-22T06:39:00.000-07:00

With Initial Jobless Claims again high at 423K as reported this morning and the Fed action to sell short term Treasuries and buying long term Treasuries, called the Twist, and European markets still unresolved on Greece's bailout, the perfect storm has gathered.

Today there is a fight to hold above the previous lows made in August for the Dow, which was 10,719. The initial drop this morning so far has dropped over 320 points to a low of 10,803 and while we are closer to that level of 10,719, the Bulls are going to try and hold her or move up for a cushion. Inevitably the markets new low will kick in. It may not be today, but we are going lower. There is no good news out there today and none expected. YOU MAY BE SORRY YOU DIDN'T SELL TODAY WHEN YOU LOOK BACK IN HINDSIGHT!

The DAX is down over 4% today as is the CAC. In a previous post yesterday, I showed the trend of both of these indexes before today's additional drop. The path is clear for where we are headed. We are all locked into a Global dance and when the music stops, will you find a chair to sit on or will you be eliminated?

Market comments for Sept. 20, 2011

2011-09-20T05:54:00.001-07:00

Today I have a series of 3 charts to show you, but before I do a little explanation and commentary. Over the past several months now our US market has been in a relatively tight range of between 11,500 and 11,000. It has been a stated fact by many analysts that the US market is following the European markets due to the concern of a default of Greece. Even as recently as this past weekend, there was news that the governments bailing out Greece wanted to extract some guarantees that Greece was serious and they wanted to see Greece promise to layoff about 100,000 government workers. So that is the backdrop story.

I have put together a chart of Germany's DAX Index, France's CAC 40 Index and the Dow. All are 1 year in duration as of the close yesterday. First the charts and then the commentary.

As you can see from the charts above, Germany and France's Indexes are still apparently going lower and the Dow and other US Indexes seem to be not following the most recent trend as show by my red lines. To me I interpret this to mean that 2 scenarios are possible, First and to me the most likely scenario is that any more of a drop by these European markets may result in a sharper drop by the Dow. The other scenario is that we will disconnect from these European markets and stay within our tight range until our own economic results determine our separate direction. Much depends right now on the politics of the negotiations by Congress over the next few months and to whether the joint committee will be able to agree on spending cuts and revenue increases. However, be forewarned that Europe is really driving our markets and we could be setting up an alarming drop as many are not prepared for the market to go lower. I was at a party on Sunday afternoon where someone who was talking about the market stated that all indicators he has been watching have flashed a Bull market rally is about to begin. I told him I didn't know what he was watching but I think we are firmly in a Bear market and we are going much lower.

Market comments for Sept. 19, 2011

2011-09-19T06:09:00.000-07:00

We are technically still in that tight range of between 11,000 and 11,500 and not emphatically broken out of the range on either side of it. Europe is still in crisis and the group of European Finance Ministers did not listen to Treasury Secretary Tim Geithner this weekend in his plea for them to stand together and do whatever is necessary to bail out Greece, even if it means to print more Euros. This has caused our Futures markets to be down before the open. The Dow for example is down about 185 points. The European markets are down today about 3% or more and this will come here as well. Oil is down over $2/barrel. So we now make a reverse turn after Friday's Sept. Options Expiration and head back towards Dow 11,000 and retest once again.

This week the Fed plays a big role in market impact. Stay tuned to see what they have decided.

Market comments for Sept. 15th, 2011

2011-09-15T06:46:00.000-07:00

Initial Jobless Claims for the week ending 9/10 came in at 428K. Expectations were for only 410K. This number is a 2 month high. The previous week's data was also revised upward from 414K to 417K. Also released this morning was the Empire Manufacturing number. It came in at -8.8 compared to an expectation of a -4.0 reading for September. August's data was a -7.7 reading.

Industrial production came in at 0.2% for August against an expectation of 0.0% and a reading in July of 0.9%. CPI for August was reported at 0.4%, while the expectation was for 0.2%.

These bits of data do not show an economy in recovery, but quite the opposite. In spite of this, the stock market rallied at the open and the Dow was up about 100 points at 7:00am PST. So much for bad news affecting the markets.

The Stimulus plan. Did it really work to help unemployment?

2011-09-12T08:20:00.001-07:00

Much of the argument regarding the Unemployment rate and whether the stimulus plan President Obama passed after his election, boils down to how many are interpreting the data. My readers know I do technical analysis of charts for the stock market. This skill can also be used to analyze any data as most engineers know. I learned much about charting as an engineer for IBM. So let me show you how I interpret the Unemployment rate chart below. First the chart and then the discussion.

In the chart above, I have an arrow showing when President Obama actually started his job as president. It was in late January 2009. It took a few months to pass the Stimulus plan and then additional months before the effect would be felt in the economy. You can see the trajectory before President Obama took office. The steep climb in the unemployment rate was astounding. It had built up momentum and this momentum was going to continue for an additional 6 months before even a passed stimulus package could be start to be spent. Then was the lag, as the plan got implemented which then we were at the peak unemployment rate. The argument that the stimulus did not work are just ludicrous.

The only way out of the problems we have with the debt and with unemployment is to get the economy growing again so more people can pay taxes and that government plays a role in doing that, along with the private sector. The private sector is uncertain about the near term future and frozen like a deer at night looking into the headlights of an oncoming car or truck. The Jobs Stimulus Plan President Obama offered up last week is the only game out there currently that can help. If Republicans, and specifically the Tea Party, can stimulate the economy another way, have at it. Propose something, but don't just say NO! I know your number one priority is to see that President Obama doesn't get re-elected. But you own the economy now too and you haven't passed anything to help. So get on the train or get out of the way!

Remembering 9/11, then and now at the stock market.

2011-09-11T08:11:00.000-07:00

As we stop and pause and consider the events of 9/11, on this 10th anniversary, there isn't much I can say as I find myself as speechless as I was on that day, having watched it live on TV that morning. The world stops and remembers those who lost their lives, but the world does moves on, thank God.

I remembered the aftermath and the fact the stock market was closed for about a week and when it opened we took a big hit. The Dow had been as high then as 11,500, but it dropped sharply and over days and weeks went as low as 7,000.

This morning I have put together a 2 year chart of the Dow which will show the the tightening range we have been within the past month. The red lines on the chart below show this range tightening. The triangle is pointing to a further downward trend. The top red line shows that we had a trend headed down and that even though we broke to the upside, we resumed this trend over the past month as the red line was drawn to touch those peaks.

Where are we headed? Well I have drawn the blue arrow indicating where I think it's going and that is down. Could we go down as low as Dow 7,000 ? Yes and unfortunately we can go lower. Not a positive picture of things to come, but the world has changed since 9/11 and it's not been for the better.

The chart below covers June1, 2001 through Dec. 31, 2001 and shows the decline of the markets in the aftermath of 9/11.

Stock market summary and look ahead.

2011-09-10T08:18:00.000-07:00

As predicted in yesterday's post, the markets sold off. The Dow closed down 303 points to 10,992, again breaking below the 11,000 level. Looking at the 3 month chart of the Dow, it has been easier for the Dow to go below 11,000 than it has to go over 11,500. The pressure is to the down side. And all the news is to the downside as well. You can see from the chart below that the blue line of the 400 day MA is proving to be resistance as well.

A big test for the Dow is soon coming. The 52 week low is at 10,458 and this will be tested and new lows will be set, in my opinion.

I was at a Berkeley Art Gallery (ACCI) opening show for some of my wife's art and her friends last night. It was a good show. One of the artist husbands and I were discussing the big drop in the market yesterday and he suggested that the drop was because of President Obama's speech. I suggested that this was not the reason for the drop and that it was the European Central Bank's Chief Economist quitting over disagreement with the purchasing of Eurobonds by the ECB. (read yesterday's post). European turmoil will continue to lead our markets direction and I fully expect it to get worse with all markets eventually returning to test the lows of 2009. This level corresponds to 6,400 on the Dow, 675 on the S&P 500 and 1300 on the Nasdaq.

Caution is the word going forward. If you are in cash, you have no worries about the market. If you are long this market I would be protecting my assets by either selling some stocks and taking some money out of the market, or I would hedge my longs with some shorts or even buying some ETF's which go in the opposite direction of their underlying stock Index. This is no time to be taking big risks. The Put to Call ratio has been over 1.00 for the past 29 out of 31 trading days. That is extraordinary!

Market comments for Sept. 9th, 2011

2011-09-09T06:50:00.001-07:00

Many aren't sure about whether the market will close down or rally later today. You can bet that because of what's happening in Europe on the debt crisis and because it it the 9/11 10th anniversary, it will close down. Add the fact that there is a terrorist warning and you have a recipe for many to dump stocks today. The ECB has confirmed the resignation of its Chief Economist J. Stark over issues on Eurobonds. This caused markets in Europe to drop sharply. Mr. Stark, one of the ECB's most outspoken anti-inflation "hawks" had opposed the ECB's decision last month to reactivate its government bond purchase program, as did the head of Germany's central bank, Jens Weidmann. To read more on this from the Wall St. Journal Europe, click here.

In Financial news, Consumer credit increased in July according to data released yesterday. For a context, June's data showed Consumer Credit at $11.3 Billion. Expectations were for this to be down to $5.0 Billion for July. Instead July's number came in at $12.0 Billion.

Today's release of Wholesale Inventories showed an increase of 0.8%, Expectations were for a 0.7% number for July. June's data came in at 0.6%.

Fed Chairman Bernanke did not reassure markets yesterday. Many are looking for the Fed to announce a QE3, but so far they haven't.

President Obama gave his fiery job's speech last night to Congress. It was one of his best speeches on this topic of his Presidency. The real question is whether any real action will come out of the speech and get approved by this Republican controlled Congress.

Market comments and some political commentary for Sept. 8th

2011-09-08T05:48:00.000-07:00

Initial Jobless Claims released today showed an increase, as there were 414K for the week ending 9/3. The previous week's data was also revised upwards from 409K to 412K.

Yesterday the Dow climbed back above the 400 day Moving average to 11,414. The 400 day MA crosses the axis today at 11,300. We continue to play the range of between resistance at 11,500 and support at the 11,000 level. The volatility is like a yoyo, one day very high and then next day very low. Until we get a breakout from these levels we may experience this tight range continuing for a while. The 200 day MA crosses the axis at just slightly under 12,000. I do not see us going up to this level anytime soon, but I do see us going below the 11,000 level. It won't take much to do it either.

The President's much anticipate speech tonight, but preliminary reports suggest it is more of the same and little big ideas, as was hoped by many. And last night was the 1st of several Republican Presidential debates joined by the newest Republican to throw his hat in the ring, Rick Perry, Gov. of Texas. I thought Mitt Romney did a good job in the debate and I thought so did Rick Perry. I don't like Perry's ideas and I question his record in Texas as something to be proud of, but nonetheless, he did well as a candidate in presenting himself. I thought Huntsman also did a better job than he had done before and I thought Rep. Michelle Bachmann lost ground.

The Futures are down this morning. The Dow is down about 65 at 6:00am PST.

Germany in the news: Market drops over 5% (UPDATES)

2011-09-05T07:25:00.000-07:00

Big news in Europe starts off this post this Labor Day. German Chancellor Angela Merkel’s party lost weekend elections in her home state, stoking concern opposition is growing to bailouts for debt-saddled European nations. This in turn has caused the German DAX Index to tumble over 5% with only a few hours to go in trading. I will update this post after their market closes. But I do have a chart of the DAX Index for the past few years and you will clearly see that they have broken below the current lows and the implication is that our stock market will follow suit tomorrow. This would accelerate the drop and almost assure a drop below 11,000 again. Here's the chart of the DAX Index:

You can see that todays last data point is lower than the previous recent lows, implying a drop below the red line. Looking back over the years you can see this is an important level not to go below. Their lows correspond to our low of the timeframe when the Dow went to 6,400.

Again I repeat, this week is very important not just here in the US, but also in Germany as on Wednesday there is a vote as to whether they will support the bailout of the debtor nations in Europe like Greece and Italy and Spain. Then add to that news, we have the President's Jobs speech on Thursday and the markets will have a reaction to these events. Stay tuned!

UPDATE: 8:45am PST
From Reuters: "Italian economic growth is likely to fall short of the government's official forecast of 1.1 percent in 2011 and 1.3 percent in 2012, probably coming in under 1 percent, a senior government source said on Monday. "It will be very difficult for Italy to reach 1.1 percent growth this year and next," the official, who spoke on condition of anonymity, told Reuters."

Italy's stock benchmark FTSE MIB Index was down 4 percent, with UniCredit SpA (UCG) and Intesa Sanpaolo SpA (ISP), Italy’s biggest banks, dropping 5.8 and 6.2 percent, respectively. Markets are getting very rattled in Europe.

Another Update will be given when the German market and European markets close.

UPDATE: 11:05am PST
Germany's DAX Index closed at 5,246 today, down 5.3% at the close. Following Germany's lead were other European Indexes such as France's CAC Index, down 4.7%, Britain's FTSE Index down 3.6% and Italy's FTSE MIB Index which was down 4.8%. This should send ripples in Asian markets tonight and our US markets tomorrow.

Market comments for the week ahead: Germany in focus

2011-09-03T06:42:00.000-07:00

The market ended the week down. Many did not want to go into the weekend holding stocks, because any news in Europe can quickly devastate stocks here. So caution is the rule, especially in September and October, the 2 most volatile months for the stock market. This morning's charts have a new discovery for me. I have the usual 200 day Moving Average lines drawn on the chart but also have included a 400 day Moving Average line, as well. As you can see from the 4 major Indexes below, it looks like the 400 day MA is the resistance line for the market and can give someone a better gauge as to whether to believe market moves or not. The last move up proves now to be a false Bear trap as anyone now knows after buying stocks when they appeared to be breaking above the downtrend line drawn in previous posts of a week ago. Here are today's charts.

This last chart below clearly shows that the last move up was a Bear trap for those unsuspecting traders. They would be wise to stay on the sidelines and watch rather than lose their money. This zig zag pattern downtrend will continue as there is no good news coming in the world as it pertains to their economies and this coming Wednesday all eyes will be not on the Republican debate but on Germany's vote as to whether they will be bailing out other countries. Watch this news as it will move our markets more than any other news.

Germany's Merkel is vulnerable to losing control. This analysis from Berlin:
"Merkel's coalition has a comfortable 20-seat majority in the lower house of parliament. But if she is hit with dissent in her own ranks, and is forced to rely on opposition parties to pass legislation to expand the single currency bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- then her coalition could collapse, sparking early elections.

'The euro crisis entered a new phase over the past week,' influential German weekly Der Spiegel said on Sunday.

'Before the main question had been how the common currency could be saved. Now it is also about saving Merkel's chancellorship. If her coalition does not deliver a majority for the enhanced euro rescue mechanism in the autumn, people close to the chancellor say, the coalition is all but finished."

So this is what to watch on Wednesday. Good luck in the market next week and don't forget to watch President Obama's speech to Congress on Thursday evening on his Jobs program proposal.

Ending the gridlock: Market comments for Sept. 2nd

2011-09-02T05:34:00.000-07:00

It looks like a very bad day for the markets worldwide. The August Unemployment rate was unchanged at 9.1%, but the US Non-Farm Payroll number came in at 0 (zero). That was the lowest number seen since 1945. Also troubling was a decrease in Hourly earnings for workers from +0.5% in July to -0.1% for August.

The issue we have in our economy is that there is no demand for Goods and Services. Therefore the Unemployment rate has no hope of recovering until there is more demand. Cost cutting does not increase demand. Debt reduction does not create demand. Giving more money to banks does not create demand. Giving incentives to business to hire will not necessarily create demand. Decreasing taxes for the wealthiest Americans doesn't create demand.

What creates demand? Why haven't the Bush Tax cuts for the wealthiest Americans created demand, as many have argued it would? It's real simple, people who are wealthy already have pretty much what they want and desire, so there is no need. Middle Class Americans and the poor have many needs and the more disposable income they have, the more their needs would be satisfied by purchasing goods and services. We have more of a political problem right now because the Republicans and Democrats are at a logger jam and it seems the Republicans are saying no to any compromises.

How do we get them to work together for the good of the country? They seem to only be interested in serving there Corporate donors, who donate to their political campaigns and own these folks lock, stock and barrel! There doesn't appear to be any way to get them to come to agreements for the common good. But I believe the reason for this is that they are complacent to the plight of average Americans and until they have skin in the game, they won't work together. "The real question we should be asking is, "How do we get them to get skin in the game?" I have an idea that I think would work and I want you to think about this seriously for a minute.

What if there were a sudden significant drop in the Dow, say 1000 points in a day, followed by a second day of another 750 points? Do you think it would get their attention? I can tell you this, it would get the attention of the wealthiest Americans who own most of the stock anyway. They would be demanding action, just like when the banks collapsed. It would get the President to sit with Congressional leaders and get them to take some actions for the good of the country. We need a real crisis that gets us to all come together.

This could be created by all of us selling some of our stocks and as it builds up steam others would add more in panic selling. This could do it. The Fed has tried to protect the market when it should have allowed the market to fall as it should and by now these problems would have been addressed. Instead, our problems are still ahead of us. I really believe this will happen anyway down the line, but we could help it along by selling stocks en masse. Anyone can help this along by selling their stocks, either today or early next week, especially just before the President speaks on Thursday night. Remember, if you sell your stocks, you can eventually buy them back cheaper if what I am saying will happen does happen. You can help your country right now. And tell your friends to do the same! ACT in honor of Labor Day!!

Market comments for Sept. 1st. 2011 (UPDATE)

2011-09-01T05:58:00.000-07:00

IInitial Jobless claims data released this morning showed that for the the period of 8/27 the number was 409K new claims, The previous week's number was revised from 417K to 421K. Expectations for the week of 8/27 were for 405K, so that the 409K was more than expected. These numbers have stubbornly held over 400K now for quite a long time and it shows how difficult it is to go and stay below 400K. Unless we do, the unemployed will remain unemployed, causing continued hardship for these families and our economy.

Also reported this morning was Q2 Productivity. It was revised downward from a previous reading of -0.3% to -0.7% and Unit Labor costs for Q2 was revised from 2.2% to 3.2%. Putting this data together with the Productivity data, U.S. Corporations might have run out of easy ways to make money as the costs of labor has gone up at the same time their workers productivity has gone down. This may require corporations to hire more people, which is good for the unemployed, but bad for future earnings and profitability. This should be a negative for the U.S. stock market, but we shall see. The market has not been following what I think should happen and has ignored economic data the past 6 months.

Later this morning the all important ISM Index will be reported. Expectations are for the data to come in at 48.5. Any number lower than 50.0 shows negative growth if it does. I will UPDATE this blog post when the data is released, so come back after 10:00am EST.

August Unemployment data will be released tomorrow.

The stock market chart for the Dow and S&P and other indexes has shown a rise above those resistance lines I drew on previous posted charts. Is this a true breakout or a Bear trap seems to be the question on many minds these past few trading days. I think it is another Bear trap but we won't know until after it takes palce and is evident. Sorry, I am not a crystal ball reader.

UPDATE: 7:05am PST

The ISM Manufacturing data came in at 50.6%, not below 50 which would have signified we are in a recession, but we managed to survive. Now the ISM number is lower than the previous month which came in at 50.9%. So clearly while above the magic number of 50, it is going in the wrong direction and whether we go lower next month or the following month, it is not a good number to show demand in the economy.

Consumer Confidence (or the lack thereof!)

2011-08-30T07:36:00.000-07:00

This morning Consumer Confidence data for August was released. Before I tell you what it was, you probably can guess what it was. First, July's data. It was revised from 59.5 to 59.2. Expectations for August were for it to come in at 52.0, a significant drop from July. But what was not expected was just how bad it would really be. Are you ready for it? Well it came in at 44.5! That is a huge drop.

In spite of all the hype in the stock market these past week or two that these are the time to be buying, Consumers are telling us exactly how they think this economy is doing. The Conference Board conducts a monthly survey of 5000 households to ascertain the level of consumer confidence. The report can occasionally be helpful in predicting sudden shifts in consumption patterns, though most small changes in the index are just noise. Only index changes of at least five points should be considered significant.

Below is a chart from WallStreetCheatSheets which shows this data from 1985 to May of 2011. You can see where this month's data would be on this chart as I have placed a red X on where it came in. There is also a Table which shows averages over a number of years to put this data in context.

Let's face it, anything less than 50 means that the data is measuring Consumer's Lack of Confidence. That is running at 100-44.5=55.5! Now I have some stocks I want to sell ya, as they are cheap right now, right!?

Stock market trend: Where we're headed

2011-08-27T11:47:00.000-07:00

I have a series of charts this morning, but a little different than previous charts in that each are Weekly charts instead of the usual Daily charts. The value in these charts are that it takes out some of the noise and daily volatility, which makes it more difficult to discern trends.

The charts below, with the exception of the German DAX are all weekly charts covering the past year time period. You will notice there are 100 Day & 200 Day Moving Averages on the US Charts. Oh and if you look at World stock market charts, they appear basically the same.

This last chart below is a Dow 5 year chart and I have drawn many lines showing various support and resistance lines. You can see that for our current time period I have drawn the same slanting downtrend, but now there is a larger context to see this timeframe and possible key levels which will either confirm we continue to drop or we have broken above resistance. For those who are believing we are going to go up from here, pay attention to the red line which crosses at 10,500 on the right axis. If we break below that, we go to the 10,000 level. Also see the red line which crosses at 11,500. That is the tiny box which defines either a rally or a major decline.

I think you get the idea now. The trend is down, we have not really gone much above the lows and it looks as though we are going lower in the weeks ahead. If you doubt that, then buy stocks and Call Options. There will be many willing to sell you their stocks.

Explaining the unexplainable.

2011-08-26T10:39:00.000-07:00

Market doesn't make sense until you realize it is just a casino for business people. Earlier this week the stock market in the US rallied as all Indexes climbed up from the lows of a week ago in anticipation of Ben Bernanke's speech this morning. Most talking heads on CNBC and other business news outlets suggested the market rise was because Bernanke was going to announce QE3. Then yesterday they questioned if the markets weren't setting themselves up for a big disappointment if Bernanke didn't announce QE3. Well today we got the answer. He didn't even mention QE3 or Quantitative Easing as a possibility. How have the markets responded so far? You guessed it, there is a big rally. The Dow is up 170 points right now after being down over 200. That's almost a 400 point swing.

Anyone who thinks they know how to explain these moves as rational, is crazy. Europe still has massive problems and yesterday's action in the DAX the past 2 days is worry-some to sober rationalists.

Now some are suggesting the rally is because of the Hurricane Irene. They suggest the purchasing of batteries and emergency supplies will help the economy. My God, are they suggesting we just need a disaster to solve our economic problems. We don't really have the money to repair whatever gets damaged from this storm.

Market comments for Aug. 26th 2011 (UPDATE)

2011-08-26T05:31:00.000-07:00

This morning, the second estimate for GDP for Q2 came in at 1.0%. The first estimate was 1.3%. Also, Michigan Sentiment data will be released just before Bernanke speaks at 10:00am. Expectations are for 55.8% and I will update this post at that time. Gold is up in European trading $23/ounce. All European markets are down about 1% or more at this time. Dow Futures as well as the S&P and Nasdaq are also down in premarket.

Germany’s DAX Index (DAX) ended the day yesterday with a 1.7 percent loss, recovering from an amazing 15- minute plunge of 4 percent.

Ahead of Bernanke’s speech today, traders hedged their investments by selling DAX futures, lifting volume to a quarter of the daily average within a 30- minute period. That dragged down the index, pulling equities in the U.S. and throughout Europe lower, and drove Treasuries and the dollar higher yesterday.

European markets closed yesterday, then French, Italian and Spanish stock-market regulators extended bans on short selling introduced this month. Lots of nervousness out there.

Federal Reserve Chairman Ben S. Bernanke begins a speech in Jackson Hole, Wyoming, at 10 a.m. New York time.

UPDATE 6:24am PST

The Put to call ratio has been up over 1.0 for 20 consecutive days. The last time it was below 1.0 was July 26th, one month ago to the day. To me this says that the markets have been very bearish, even though there has been rallies, and that the trend is believed to continue to be bearish and the market will go down. That's where the money is now! Where's yours?

Come back for the Michigan Sentiment data in about a half hour.

UPDATE 655am PST

Michigan Sentiment came in close to expectations. The reading was 55.7 versus an expectation of 55.8, so not much difference and much better than last month's reading which came in at a 54.9 reading.

Market comments for Aug. 25th 2011

2011-08-25T05:29:00.000-07:00

There are two major news pieces affecting the market this morning. First was the unexpected announcement that Steve Jobs had resigned as Apple's CEO. The second piece of news was that Initial Jobless Claims were up 5,000 to 417K for the past week. While Continuing Claims are down again this week, the fact may be that many people have been out of work for so long that they are no longer eligible for any unemployment benefits. Therefore they are not counted as Unemployed. Bizzaro!

On Friday, Fed Chairman Bernanke will be speaking at a Jackson Hole, Wyoming Conference. Many are looking for his announcement of QE3 in the speech.

Also Friday will be the release of Michigan Sentiment for August. Expectations are for a 55.8 reading. July's reading was miserable at 54.9, so many are expecting a move back up.

Gold continues down after yesterday's drop of about $100/ounce. In early trading it is down again $19/ounce to $1738/ounce now and down from its intraday high of just over $1900.

Market comments for Aug. 24th, 2011

2011-08-24T05:17:00.000-07:00

The news release of importance today is Durable Goods Orders. I have posted below a chart of the Durable Goods orders since 2005 so that you could compares today's released data for July. Expectations were for July to come in at +2.5% and June's data came in at -2.5%. The data released for July this morning came in at +4.0%. This number is a good number for the market but it is a look back. Futures rose from being down about 100 points to being down only 40 points. The negative Indexes are because Japan's debt got downgraded last night.

Stock market trend and prediction going into September and beyond

2011-08-20T07:20:00.000-07:00

It's the weekend and we have time to think, rather than do. So this morning I am going to put up a number of stock market charts and analysis to try and make sense of where we are and where we are headed. It has been a tumultuous few weeks and many are glad we have them behind us now. The past 2 days advance to yesterday's August Options expiration got many nervous. They thought we were on our way back up this week only to finish down, back at or near the recent lows, depending on which Index and Country's stock market Indexes you were looking at.

With that background, here are some 3 month charts of selected European Indexes, which should help you conclude that the recent drop in US stock markets isn't just about the US. But first 3 charts are of the US Indexes; the Dow, S&P and the Nasdaq. Then I have followed them with commentary and with charts of German DAX, France's CAC and finally Japan's Nikkei. All are 3 month charts and the thing to focus on is where are the indexes now, the similar patterns and whether the recent drop is slanting down or up or flat. If there is a predominance of slanting down below the other recent low points, we are going down more. Now the charts!

The Dow chart shows we are nearly flat across the low points. You will see in the S&P chart below, the same is true.

You can see the there is a biased slant down on the Nasdaq as this chart above does point a further down move.

The DAX also shows a slanted move down below earlier lows.

The CAC is flat at the lows, like the Dow and S&P.

And lastly, the Nikkei slants down significantly.

So what does this all mean? Well, I ask myself the question, Which world indexes are extremely important right now and which have been long term indicators of either prosperity or leading the way down. Those indexes have been the Nasdaq here in the US, Japan's Nikkei and Germany's DAX index. To me they all say we are headed down lower. You will have to make up your mind which tea leaf you will follow. Good luck on that.

One other important thing I look at. I look at the longer term chart. Here's the Dow going back about 30 years. You can see from the chart below, we are forming a head and Shoulder pattern over this period and it looks as though it has completed the formation of the right shoulder and it is a slanted down pattern.

This signifies we may ultimately be headed down to retest the lows of 6,400 eventually and may not hold at that level. Given world events which seem to be changing daily in a negative direction, I would not be surprised to see this scenario to play out. Anther thing to remember is this, markets tend to rise much more slowly than the speed of which they go down. This chart shows that clearly.

Looking at roughly the same period for the Dow/Gold ratio you will see the high point is at year 2000. All of these points were taken at 1/31 of each year, except the last point and that is Friday's data. So the trend for the ratio is continued down. The implications for this are that either Gold will continue to rise to get the ratio back to the 1-2 level again or the Dow will drop significantly while Gold either stays high at current levels or goes down some at the same time. For the Dow/Gold ratio to be at 2, then either the Dow must stay at 11,000 and Gold goes to $5,500/ounce. Or Gold to stay at $1800/ounce then the Dow must drop to 3,600. Neither scenario will really happen but adjustments to both are a more realistic possibility. Assume for a minute the Dow does go and retest the 6,400 level, and Gold pulls back to last years level of $1200, that would yield a Dow Gold ratio of 5.3, which is very close to where we are today!!

This last chart below is my short term read of the top limit of any dead cat bounce of the Dow. You will notice the last false bounce above the red line and decline to follow the earlier trend down. This was a bear trap. I stepped in it and had purchased some TNA Call Options thinking we were on our way up again as we did before. I was wrong, but luckily didn't buy many. Watch for more of these false moves, as I believe we are in for a steady, but jerky decline. That red trend line shows that we could still reach back up to the 11,000 level, but as the slope of that red line indicates it will be short lived.

So with European debt rising quickly and many countries unable to pay their debt, we are facing country defaults, not just company defaults. Think of Lehman Bros. when you think of market reaction and multiply that by 10 to see the implication of a country default. I wish and hope it is not so, but one must be prepared for the worse and survive it. Good luck to you. Where do you think we are headed? Comment below if you like. I screen comments only for improper language, so there may be a delay before you see your comment posted here. Thanks!

Market comments for Aug. 19th, 2011: Options Expiration for August

2011-08-19T05:42:00.000-07:00

It looks like another leg down at the open today as European markets are down 1-2% at this hour. Important day today as it is Options Expiration for August. Volume today should exceed yesterday's high volume. No other financial news here to announce this morning with the exception of J.P. Morgan's prediction lower growth of GDP in the 4th quarter of 2011 and first quarter of 2012. To quote Bloomberg news: "The U.S. economy may expand less than previously thought in the next two quarters as consumer sentiment drops and the housing market fails to gain momentum, JPMorgan Chase & Co. wrote in a report.

Gross domestic product will grow 1 percent in the fourth quarter rather than the 2.5 percent previously forecast and 0.5 percent in the first quarter of 2012 instead of 1.5 percent, Michael Feroli, JPMorgan’s chief U.S. economist in New York, said in an e-mailed note to clients today."

I have included 4 charts this morning. Three of these 3 month charts are as follows: One of the Dow, one of the S&P 500, one of the German DAX Index. The other chart is of Germany's DAX Index over a 5 year period. In this last chart I have drawn several support levels which are now possible given the recent downward trend. This chart is very similar to our Dow chart for the same period, which I did not include. But the lows happened at the same time. Our low hit 6,400 before it finally turned up again. I believe we will ultimately have to test that level on the Dow, because the economic news looking forward does not look bright for all of 2012, not only for the US but for Germany as well and much of Europe. I wish I could tell you something else, but I don't believe a different scenario will occur. Let's just get through today and see where we are. next week, but at the first signs of a further new low in the Dow or S&P, consider the probability higher for this major decline to continue for the foreseeable future.

Come back over the weekend so I can show you some charts on the Dow/Gold ratio and where Gold may be headed. And also some data on the Gold/Silver Index.

Repatriating US Corporation dollars from abroad. (UPDATE)

2011-08-18T06:10:00.000-07:00

There has been a lot of recent talk about repatriating Corporate US Dollar holdings from abroad to help US Corporations stimulate the US economy. There dollars are abroad because Corporations do not want to pay higher US Taxes. One thing to consider here is that anything which pulls money out of country banks abroad will have a negative affect on those countries and especially its banks, as banks in Europe do not have enough capital to weather the debt crisis there, as they are financing debt of Greece and Ireland and now Italy and possibly Spain. So repatriating US Corp dollars from Europe could have a very big impact on world banks and countries. This point has not been discussed at all in the media. There are over $1 Trillion dollars in banks abroad held on behalf of US Corporations.

Every action has an equal and opposite reaction!

UPDATE: 7:50am PST

It has already begun as this story unfolds. Venezuelan President Hugo Chavez ordered the central bank to repatriate $11 billion of gold reserves held in developed nations’ institutions such as the Bank of England as prices for the metal rise to a record.

Venezuela, which holds 211 tons of its 365 tons of gold reserves in U.S., European, Canadian and Swiss banks, will progressively return the bars to its central bank’s vault, Chavez said yesterday. JPMorgan Chase & Co. (JPM), Barclays Plc (BARC), and Standard Chartered Plc (STAN) also hold Venezuelan gold, he said.

“We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Chavez said yesterday on state television. “It’s a healthy decision.”

Market comments for Aug. 18th, 2011: We're headed down! (2 UPDATES)

2011-08-18T05:44:00.000-07:00

Data released this morning on Initial Jobless Claims shows that we have gone back over 400K again to 408K. Expectations were for 400K. Last week's number of 395K was revised upwards to 399K.

Futures markets are down significantly but the Initial Jobless claims is not the issue causing it to be down over 225 points in the Dow Futures. Also this morning the CPI number for July was released and it is up +0.5%, which was a very inflationary number. Expectations were for only a +0.2%. These numbers when annualized show a very different picture. You see with only a +0.2% CPI, that at an annualized rate would give a2.4% inflation rate, but a +0.5% number, the annualized rate would be 6.0% inflation rate!

The Core CPI rate came in at expectations of +0.2%.

The German's DAX Index is down -227 points right now, or 3.7%, as its markets are open for trading. The UK's FTSE is down -2.5%, France's CAC 40 is down 2.9%. We are going to see a large sell-off in US Markets this morning!

Another factor of why stocks are down significantly worldwide are these comments made yesterday. This from Bloomberg news: "Federal Reserve Chairman Ben S. Bernanke’s pledge last week to keep interest rates near zero until mid-2013 was 'inappropriate policy at an inappropriate time,' Charles Plosser, president of the Fed Bank of Philadelphia, said yesterday in a Bloomberg Radio interview.

The comments from Plosser and Fisher put focus back on how committed the Fed is to the zero-interest rate policy ahead of Bernanke’s comments next week,” said Anders Eklof, a currency strategist at Swedbank in Stockholm. “The Fed has obviously been wrong about the economy, once last summer and then now."
Dallas Fed President Richard Fisher said the central bank shouldn’t enact policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement."

And lastly, here's a question for you: Where would you have made the biggest gains if you invested in Gold or Silver exactly one year ago? It's not what you expect. :) It was Silver! Silver gained over 53.8% while Gold gained 47%. Surprising isn't it!

UPDATE: 7:20am PST

Philadelphia Fed Survey data surprised investors this morning because the news was so terrible. The prior period's data came in at +3.2, while consensus was at +4.0, but the data actually came in at -30, as is shown in the chart below by Haver Analytics.

UPDATE #2: 8:45am PST

Consumer confidence in the U.S. economic outlook slumped in August to the lowest level since the recession, raising the risk that spending will dry up.
The Bloomberg Consumer Comfort Index’s monthly expectations gauge dropped to minus 34, the weakest since March 2009, from minus 22 in July. The weekly measure of current conditions was minus 48.3 for the period ended Aug. 14 compared with minus 49.1, which was the worst reading since mid-May.

Simple ideas for getting America back on track

2011-08-17T14:10:00.000-07:00

I was recently asked by a former client, what I might do to solve America's unemployment problem. I told them that I had several ideas which have not been tried. The first solution is a unique one based upon the fact that Republicans don't want to continue paying for Unemployment benefits ($$$) for the unemployed, especially the people on unemployment benefits for 99 weeks or more. And Democrats want to just help them by giving them extended benefits.

My solution is to require work from the unemployed to receive benefits. For example, many schools need painting, windows repaired or replaced, security improvements like video cams around the grounds, Teachers helpers, installing air conditioners, etc., etc., etc. I believe this would help those unemployed for so long start to feel better about themselves, have some resources to pay their bills and prevent foreclosure of their homes. We could even pay them more than the benefits might provide and we would still be ahead of the game, as this would increase some consumer spending and raise taxes somewhat in local communities that have a Sales tax.

Getting something back from giving extended benefits would help take the sting out of giving perceived handouts.

The next idea I had was to change our Educational system, by having school go year round. I would provide students a week or two vacation, but not the whole summer off. I would have them get air conditioning for schools and installed by those working above. I would then change teachers salary to reflect a full time job. We could have all teachers making $100,000 and above a year but we would be attracting more teachers with this salary level from many different backgrounds.

We need to think outside the box in tackling our issues. But it starts with a willingness to put some ideas out there and see if anyone picks them up and improves on them. I have, so where's your's?

Market comments for Aug. 17th, 2011

2011-08-17T05:45:00.000-07:00

Today I have put together a 3 month chart of the S&P 500, which shows we are battling a similar fight between the Bears and Bulls, as we are in the Dow charts. Pretty much all the Indexes have a similar pattern. What is driving our patterns is not a sector problem, specific industry issue or stock issue but rather a phase of US growth that has slowed down enough to give many investors pause as to whether they want to take on more risk right now by buying stocks of less risk by selling them. The chart below shows the S&P and its low support level at 1120 and the upper resistance level at about the 1200 level. We won't break out of this range, either lower or higher, until the news turns one direction or the other. Listening to domestic economic news is not enough. You must also listen to what is happening in Europe with its debt issues as well as China for any glimpses of a major slowdown there too.

This morning the PPI data for July was released and it showed a +0.2% reading compared to a -0.2% reading for June. Expectations were for a +0.1% reading for July.

Core PPI came in at +0.4% for July as compared to a +0.3% reading for June. This makes a rise of 7.7% year over year in Core PPI. That is inflationary. Gold has advanced in premarket and European markets are mixed this morning within a tight range.

Tomorrow Initial Jobless Claims data will be announced at 5:30am PST, along with data on CPI, Existing Home Sales, the Philadelphia Fed data and Leading Indicators. So much to digest here.

The meeting yesterday between Germany's Merkel and France's Sarkozy left many unsatisfied as expectations were high for some major announcement and there was none. They did not embrace the aggressive purchasing of Eurobonds as a solution, nor did they strongly propose the Financial Purchase tax I had spoken about yesterday. Just to show another similarity of chart patterns, the chart below is of Germany's DAX Index. Notice the similarity of the patterns most recently.

And lastly, VP Biden went to China to assure leaders we are good for our debt to them and not to worry about the downgrade of the US from AAA to AA+ rating. Good luck selling that when they are looking for some tangible reassurances. VP Biden is good with the blarney so we shall see.

Market comments for Aug. 16th (UPDATES)

2011-08-15T20:57:00.000-07:00

The Dow has been going back and forth between Dow 11,000 and 11,500 as I said it might in recent posts. It is not clear yet whether we are going to go and stay above 11,500 in order for it to become support for the Dow or whether we will test it and fall back down below and head back to test 11,000. The charts below, especially the 3 month chart shows the volume has been dropping off while we have risen from below 11,000.

Housing Starts and Building Permits data will be released at 5:30am PST and I will update the information here and make a comment or two on this and Industrial Production data, also to be released.

Watch for news coming out of Europe as a high profile meeting between Germany and France will be taking place discussing the European debt crisis and should provide a news aspect to the market.

UPDATE: 5:30am PST Aug. 16th

Futures are down significantly this morning. News from the Eurozone responsible for the decline. The Eurozone released its Q2 GDP number and it came in at almost no growth at 0.2%. This has caused the German DAX to drop over 2.3% and caused the Dow Futures to drop to -150 points. Later today Merkel and Sarkozy to announce the result of their meeting about Sovereign debt issues across Europe amd any actions they plan to take. They are going to propose a Financial transaction tax across the Eurozone.

Housing Starts data was released here and the data showed 607K starts for July. Data for June was at 629K starts and expectations for July were at 600K. Building Permits came in at down -3.2% at 597K units.

July Import Prices were up +0.3%. while Export Prices were down -0.4%.

It looks like we will not penetrate above the 11,500 resistance level today, but instead may go and retest 11,000 in the next few days. The Volatility Index should rise sharply today.

Summary of this week in the stock market and where we go from here. (UPDATE)

2011-08-13T08:43:00.000-07:00

At the end of this very volatile week in the stock market, with days up and down in a 500 points range, many are wondering whether they should sell or buy stocks. This is compounded by the facts that we are in an indecisive period right now and therefore predicting market direction is even more difficult in the short term. I have said I believe we are headed lower in the next 6-12 months, but I can't tell you when we drop further from here. We had closed below the 11,000 level this week on Monday and Wednesday, but on Thursday and Friday we closed above, closing at 11,269. I had said in my previous posts there was going to be a fight at the 11,000 level once we had broken below the 11,500 level. So, in fact, we did and, this testing of 11,000 level, may not be complete.

In the below chart, of the Dow over a 5 year period, I have added some red arrows to signify many of the significant drops in the Dow value followed by flat indecision periods, identified with blue flat lines. The purpose was to show that there is a period of time after a drop where the direction is uncertain. We are now in that period. As you can see below, it can last for about a month or so. Other factors are at play.

The news will dictate in which direction we go, and I think one could build a very strong case that markets will go down further. For example, this most recent major drop was precipitated by 2 events. The first was the concern over Italy and its debt problems and whether they were going to default, because they are such a large economy, they can't really be bailed out unless the EU started printing money like our Fed did. The second concern was from the Debt Ceiling deadline and the politics involved in almost defaulting here. This precipitated the S&P to downgrade the US from AAA to AA+ rating. Then the market tanked.

We are now in the stage where we have the Congress appointing a special committee to work out details to come to an agreement on where further cuts are going to come from. They must do this by Nov. 23rd. If they can agree on a package, there is no guarantee it will be approved by both Houses of Congress, because there will be no Amendments aloud. It will face an up or down vote.

Also, we have the 2012 Budget which must be approved by Congress by Oct. 1st. All this with the 2012 Presidential election in the background. The chances of having bipartisanship is nearly zero. That is why I see the market going down a lot more from here. As the expression goes, it is all baked in the cake. Wish it weren't so, but it is the stark reality we face. And the Fed has signaled they aren't going to do much more given the economy looks so weak. They said they will keep existing rates through until 2013, which is an unprecedented move on their part.

It took us 2 1/2 years to climb out from the low of 6,500 on the Dow. I believe it will only take a year to go down and retest that low, given the state of politics and the weakness in the Global economy, with many debt laden countries. This will also produce social unrest at levels we have not seen in my lifetime. We are starting to see the early stages of this now.

UPDATE: Monday 5:35am PST.

The Empire Manufacturing Index data was released at 5:30am this morning. The reading came in at -7.70 for August compared to an expectation of 0.0 and the previous dat of -3.76 for July. This month's data is going in the wrong direction for recovery and for a healthier stock market. The reading this morning is not having a negative effect on the Futures market and from all I can see the market will start up this morning.

At 7:00am PST the NAHB Housing data will be released for August. Expectations are for a reading of 15, which would be the same as it was for July.

Tuesday's release of July's Housing starts and Building Permits will be interesting to see. Also tomorrow's data will include Import and Export prices as well as Industrial Production for July and Capacity Utilization for July. These are all lagging indicators. The most important of these are Housing Starts, Building permits and Industrial Production.

Market comments for Aug. 12th, 2011 (UPDATE)

2011-08-12T05:11:00.000-07:00

Yesterday we did rally on the lower Initial jobless Claims data, but let's be honest here, the data was not that great for such a strong rally. Yesterday's charts give conflicting signals to me for a short term read on direction. I have put together 4 charts for today. One on the Dow, one on the S&P 500, one on the Nasdaq and finally the last one on the Russell 2000. I have drawn some lines on each chart. Some show that the trend looks down from here, others show up from here and one shows stagnant and staying at this level. So we will need more days of data for clarity. Here are the various charts:

From these charts above you can see that the long steep downward move hit a bottom, rose back up a bit dropped again and then rose up again. This second move up did not convincingly go much higher than than the first bounce. In fact, depending on which index you look at, the Dow actually came in below the first bounce. I will need today and tomorrow's market action to get a better sense of near term direction. The Volume though has been extraordinary for a summer month.

Also, of interest from yesterday's Volume was the chart below of the Dow in 1/2 hour increments and the Cumulative volume up to that time. In the last 1/2 hour yesterday, the Dow traded 146 Million shares!

Retail Sales data released this morning for July was +0.5%. Expectations were for +1.0% and the data from June was only +0.1%.

Michigan Consumer sentiment data will be released in 1 1/2 hours and I will post it as an update. Futures initially responded slightly up from the release of the Retail Sales data.

UPDATE: 7:01am PST

Consumer Confidence came in at 54.9, which was the lowest reading since May 1980!! When the data was released it reversed, from being up 140 points on the Dow to being up only 50 points. This is a contributing factor to why the Fed most likely thought they needed to keep interest rates very low through to 2013. To put today's number into perspective, last month Consumer Confidence came in at 63.7 for July.

Market comments for Aug. 11, 2011 (UPDATE)

2011-08-10T20:03:00.000-07:00

It's a big day for data release at 5:30am PST for Initial Jobless Claims. In addition, we broke below of 11,000 on the Dow. So far we have not held above 11,000 and so as each day goes by, one must conclude the market is at risk to test Dow 10,000 eventually.

From the Dow charts below, you will see we did rebound after the sharp decline and then the rebound followed by the retreat to a lower low. The Dow closed Wednesday at 10,719. The low for the day was at 10,686.

Volume was high again with a 520 point drop. If you look at the chart below, I took readings on volume for the Dow starting around 11:30am PST and recorded the reading of the Dow at the same time as I recorded the Volume. From the intraday Volume/Dow chart below it is clear that as Volume increased the Dow drop accelerated. So there was a lot of selling behind this market again Wednesday.

My expectation for Thursday is that if the Initial Jobless Claims shows a sharp increase to say 420K or more, the market may sell-off again! However, if the Initial Jobless claims come in at 400K or less, we may have a rally and retest the 11,000 level. Remember there is a predisposition for the market to decline rather than recover right now.

But let me be clear here, we are headed lower, as I have stated many time here, this past week. Just check my previous Blog posts for the last 7 days.

UPDATE: 5:31am PST Aug 11th

Of particular note this morning is that France's CAC 40 Index has slipped below 3,000 while Britain's FTSE is now below the important 5,000 level as we awaited our Initial Jobless Claims data. Our Nasdaq Index is getting to testing the 2,400 level as well, after its decline yesterday. All of these are major psychological levels for investors. Our Dow Futures have been down about 140 points since our premarket opened at 5:00am. Gold Futures Margin requirements have been raised by the CME (CME is the world's leading and most diverse derivatives marketplace).

The Initial Jobless Claims number came in at 395K for week ending 8/6. That's down 7,000 from the previous week. It is a better number, but only slightly. The question is now whether the market will rally on the news. Our Trade Deficit came in at $53.0 Billion in June compared to $50.8 in May.

And finally, leaders of the Senate and the House have selected their representatives to form the Committee, which is charged with the task to come up with Spending cuts and any revenue (tax) increases by November 23rd. Many point to the fact that none of these people chosen in the Senate were members of the Gang of Six, who worked for 10 months and came up with many recommendations for spending cuts and tax increases in a bipartisan way. They knew where the money was as they studied much detail in the budget numbers and were quite familiar with where to get the money from. So there doesn't look like much hope these members will come to an agreement in time.

Market comments for Aug. 10th, 2011 (UPDATE)

2011-08-09T20:25:00.000-07:00

Yesterday's market did rise as a result of the Fed's announcement to maintain low interest rates until 2013. Great, just what we need, more people borrowing cheap money with most likely no hope of paying it back because they don't have a job.

The Dow closed above the 11,000 level to finish at 11,239 for a 439 point gain. It seems to me now that the 11,000 level becomes now support level and 11,500 now becomes the resistance level.

Looking at the chart below, you can see that the move up was impressive if it wasn't that we've had so many large declines lately. Still, an impressive move nonetheless. I am expecting a move up to test the 11,500 level, then a pullback to test 11,000 again. Looks like we will be testing 11,000 support first based on a slightly negative Futures level. You see the news about low interest rates for as far as one can think right was the same as having very low interest rates these past several years. It didn't seem to do much for the economy, so I am doubtful this will have much of an effect on the market. It is still a very slow to negligible recovery. This market sold off for different reasons and those reasons are still relevant, hence the feeling we are still going to go down in these markets worldwide.

I am going to be plenty busy the next few days but I will try to post when I can. Thursday's Initial Jobless Claims is an important data point on Thursday morning.

UODATE: 5:45am PST

The Dow Futures are down this morning at -152, the S&P is at -17 and the Nasdaq is at -37 with all in a negative trend and deteriorating by the moment. Oil is up almost $3/barrel. Jim Cramer said this morning on CNBC that the "machines" are moving markets too rapidly for the average trader to participate. The "machines" he is talking about are the super fast computers which use algorithms to do its trading in the blink of an eye. This type of trading has been called High Frequency trading. Before the average trader can put an order in to Buy or Sell, these super computers have made thousands of trades. They have a definite significant advantage, as the Gatling Gun does over the Bow and Arrow.

Market comments for Aug. 9th, 2011

2011-08-09T05:58:00.000-07:00

The Futures this morning look like we will start with a positive gain of about 130 points on the Dow. Europe is up slightly this morning as well, all less than 0.5% gains. So if you are feeling good this morning that the worse may be over, don't count your chickens just yet. I believe we will have a rally from here and go back over the 11,000 level in the next day or two and maybe test 11,500 eventually again, but soon there after, we will continue the downward trend again going below the lows of yesterday's close at 10,809. This is a good interim time to make adjustments to your portfolio and prepare yourself for more pain to come.

The thinking behind this is Elliott Wave Theory. We have concluded Wave 1 down of a 5 Wave pattern. Wave 2 should be a bounce up and it is impossible to predict its stopping point but I have given you an idea above. Wave 3 will be a down Wave and it will far exceed the lows of Wave 1 and possibly take us down as low as the 9,000 level. I hope I am wrong in my prediction here, for those who get extremely stressed when the market drops like it has.

Productivity data was released this morning and it came in at -0.3% for Q2. The prior quarter was revised down from +1.8% to -0.6%.

The stock market: Where's the short term bottom?

2011-08-08T18:45:00.000-07:00

Here we are with another day of opportunities or crisis. The Nikkei is down tonight 420 points at this hour to 8700 on the Nikkei 225 and the Hang Seng is down over 1200 points to 19,128. The big question is this, where is the bottom for our market and when will it bounce up a bit and stabilize. Based upon Asia, I would say we are going to go down more than where we are now on Tuesday. The chart below is where I see a stand taking place between the Bulls and the Bears, with the Bears winning the momentum game at the moment. The blue horizontal line at 11,000 now becomes the resistance level for the Dow, if the market does turn up. The red line at the 10,000 level is support for this market. It should make a stand between these 2 lines and stay between theses 2 levels until direction of the economy and the actions taken by the G-7 and G-20 becomes more clear. Italy's debt is still a major market concern, even though we tend to focus on our markets and economy right now.

If you haven't read the posts of the past few days, it would be worth your time. Thanks for visiting.

Historical perspective on the Stock market and what's ahead. (UPDATE #3)

2011-08-08T05:52:00.000-07:00

I know many of you are nervous today, quite expectedly, I might add. The downgrading of US Debt by S&P and Italy's debt crisis gives one pause. So please allow me the liberty to say that a major crisis has been expected for the past year. I am going to repost one of my blogs here and then add a CHART SHOWING FRIDAY'S CLOSE at the end with some additional comments. Here's what I posted October 16, 2010:

"I have been thinking about this post for a while. It was triggered by friends who see the stock market in diametrically opposed positions. It appears to look like a Bull versus Bear argument but it's really not. It is the difference between those who use Fundamental Analysis and those who use Technical analysis to make decisions about market direction and trading decisions and whether to Buy, Hold or Sell. In order to get at this problem, I must first explain the difference between both analysis techniques. For that I will use the 4th Edition book by Martin Pring titled, Technical Analysis Explained. It is considered the bible for those interested in Technical Analysis. I will not make this too lengthly, but it is important to lay this foundation before I get into where the market is going to go and why the opposing positions have the positions they do. I will conclude with a number of charts and some support for the idea that while the disparity will continue between these two positions, one position is going to lead the way into the future as it is doing right now behind the scenes.

Ok, here we go. "Technical Analysis in nothing more than a tool", says Martin Pring. But a very good tool I might add. "Technical Analysis is based on the assumption that people will continue to make the same mistakes they have made in the past." According to Investopedia.com, "At the most basic level, a technical analyst approaches a security from the charts, while a fundamental analyst starts with the financial statements. By looking at the balance sheet, cash flow statement and income statement, a fundamental analyst tries to determine a company's value. In financial terms, an analyst attempts to measure a company's intrinsic value. If the price of a stock trades below its intrinsic value, it's a good investment.

Technical traders, on the other hand, believe there is no reason to analyze a company's fundamentals because these are all accounted for in the stock's price. Technicians believe that all the information they need about a stock can be found in its charts.

So currently the argument, for those using Fundamental Analysis, goes something like this. The S&P 500, based on historic terms is trading at about 21 times trailing price-earnings ratio and therefore is cheap as an investment today. That compares to the historical average of 16.4 since 1881 and is at the top end of the range pre-2000. The S&P 500 is expensive on a long-term basis, but and this is the big but, inexpensive compared to the past ten years. (Source: Prieur du Plessis)

Technical Analysts say, "Look at the charts! We are ready to drop significantly!" What do they base that argument on? A Head and Shoulder chart pattern. Let's take a look at several charts and explanations of the Head and Should pattern from several sources. The first chart shows a Head and Shoulder pattern looking at Oil prices back in time with an explanation on how to read the chart information.

This second chart shows a classic head and Shoulder pattern on a usual uptrend similar to the latest market movement this past few years.

This 3rd chart depicts more closely, the current market trend of the past 20 or so years and how to determine how far it should drop, and shows the neckline to measure the amount of the expected drop.

And the last 2 charts show the Dow and S&P 500 for the past 30 years and the big Head and Shoulder pattern we are starring at as Technical Analysts. It explains why many from this camp are very worried about the future.

One other very important relevant piece of information, High Frequency Trading now controls about 70% of the market volume traded in a single day (Source, 60 Minutes broadcast of Oct. 10th). It has also been determined by the SEC, that the single one day crash on May 6th where the market dropped over 600 points in 15 minutes was caused by the High Frequency trades made. It was caused by an algorithm (a set of rules to be followed in calculations and problem solving by a computer). Since May 6th, the SEC has instituted trading curbs, which stop the trading in any security which drops 10% in a short amount of time. Since the trading curbs have been in place a number of times the market has had to be stopped because of similar algorithms by other firms had glitches. The market is not being run by the individual investor, it is being run right now by computers, which were set up by humans, who tend to repeat the same mistakes, as I stated in the beginning of this piece. This is why I like Technical Analysis. You know we humans are going to panic at some point in the very near future. What will be the trigger is anyone's guess. But I think any rational person would agree we are going to panic and we are all just waiting like deer frozen in the headlights.

It has been painful staying on the short side of this market recently, but it will pass. I wish it weren't so, but I am worried many are going to feel some really bad pain and they are going to say it was unforeseen. The Fed will be the first to use that excuse when it happens. Just watch!"

Now allow me to post a chart of the Dow from Friday and see how this played out as well as where we are now. I want you to look at what really transpired since I had written this post in October. The formation of the right shoulder and my pronouncement was premature. (See the label "Premature Call" on the chart) The shoulder had dropped some but then continued to rise as can be clearly seen to about 12,800 on the Dow. But we have now dropped down to approximately 11,300 and look like we may even test the 11,000 level today or within the next couple of days. This makes the October 2010 post more relevant now, if we indeed completely formed the Right Shoulder and are now headed down to break that neckline. It will take tome for this to happen, as it will happen with sharp drops and rebounds forming a zig-zag pattern, but I strongly believe it will. I was premature in my pronouncements on the decline in October, as I was in the run up in 1999 when I said the market was going to drop and suggested people might want to raise cash then. You know what happened in 2000. That was the Head formation.

I believe this market will start down but may end up before the day is over. So be careful out there.

Please remember one major, important point. That is, no one can time the market! It has as much to do with Social Mood as anything else. This should give you a clue as to what eventually needs to change here in America: Our collective Social Mood! Don't blame any Party for that and don't blame the President. It's all about you and me! Leave a comment if you like. Thanks for coming on this day particularly.

UPDATE: 8:45am PST

The Dow has dropped over 380 points but then came back some, but not less than losing 250 points. European markets also tanked today but the most significant data comes near the close for the DAX, Germany's stock market index. It accelerated its losses at the close and closed down over 4.5% by the close to close below the 6,000 level finally ending at 5.951. That will affect our close today. I now expect our market to accelerate the drop near the close today. It is now possible to go below 11,000 today, even while the G7 and G 20 are trying to assure nervous investors that they will do what necessary to stabilize the markets.

UPDATE 2: 10:33am PST

It appears that we will be testing the 11,000 level before the close today. While the Dow is down 335 points at this hour, that's about a 3% drop, the Nasdaq is down 4% and the Russell is down 5% at this hour. The S&P is also down 4% so far, so you can see the Dow is lagging the drop and if we do close like the other Indexes are currently at, we will break below 11.000, substantially. Of special note is that the volume is very high so far today at 229 Million shares traded with 2 hours still left to go in trading. Now the President speaks with Dow down 400 points.

UPDATE 3: 11:50am PST

After the President spoke the Dow closed down about 385, but in the last hour it has accelerated now to the Dow's new low today of down 605 points so far, which broke below the 11,000 level significantly to 10,839. Volume is now up to 285 Million so far.

Dow chart and market prediction. (UPDATE 2)

2011-08-05T04:45:00.000-07:00

I have had many readers ask me where is the market headed? Of course, I have no clue, nor does anyone else, as it is all a guess. The more correct answer is that it depends how much manipulation various governments want to use in this crisis. In my humble view, most government leaders are risk averse. They don't want to go it alone, so they try coordinating actions with other world leaders. This crisis hasn't yet allowed the space for this to occur, but I expect some meeting will be held so that various Finance ministers can coordinate an action to calm nervous investors worldwide. But in the meantime, we could have a continued free fall.

In early trading this morning, it is evident this is happening in Europe again today. After the CAC, DAX and FTSE were all down over 3% yesterday, they are down again today another 2% roughly. All eyes are now firmly in place watching us and what the numbers are for our Unemployment rate for July, which comes out in about 30 minutes, as I write this. (Suggest you read yesterday's previous post to see what various numbers should do to the markets this morning) The Dow Futures were down about 50 at about 4:00am PST but have adjusted to now being down only 15 points in anticipation of about a 9.2% Unemployment number coming out in a half hour.

The chart below is of the Dow for 10 years. I have taken the liberty to draw a number of Support levels which show when we go through one, which level is next. You see it is possible in a world where fear becomes to take hold, we could go down and retest the 6,400 level on the Dow which was reached in 2008. I won't go into any theory why this level is important, but a short version is that this level was never retested and many of us thought back then that we could go much lower to say 4,000 on the Dow. So for now, if you save this chart, you should know when we turn back up as one of these levels would hold and the bounce back would come from that point and the previous support level would become resistance on the way back up.

Come back later during the day today as I may update this post several times, depending on today's market action. Thanks for visiting now.

UPDATE #1: 5:35am PST
The Unemployment rate for July came in unexpectedly at 9.1%. Revisions were made to previous months as well, showing more job creation than expected. While very good news for today and the market, longer term the jobs created were relatively meager in the scheme of things. Our economy needs more than 117,000 Non Farm Payroll jobs created. July's job growth came in Healthcare. The Private sector added 154,000 jobs for July. The average work week remained the same at 34.3 hours/week. Average hourly earnings were up 0.4%. The Dow Futures were up 125 points immediately after the news but have pulled back to being up 75 now.

UPDATE: #2 11:05am PST
Well, there have been wild swings all morning, some based on the Unemployment report and some from the problems with Italy's debt and then a rumor floated by the news media, that the European Central Bank will be buying debt directly. What to make of this news is that it is some rumor, some fact, because the ECB has said they are considering this action.

The thing I would pay attention to is the close today on the Dow. Remember yesterday we broke below the 11,500 support level. So it is important to see where we close. Do we have a rally and close over 11,500 on convincing volume or do we close below that level. Right now, there is a battle going on between the Bears and the Bulls. Longer term, I believe the Bears will win this battle and the markets will go down significantly.

Market comments for Aug. 5th

2011-08-04T21:23:00.000-07:00

Friday will be a very impotent day for several reasons. First, we had such a huge sell-off today, that I had no idea when I wrote my last post, that the Dow would test the 11,500 level Thursday. That was a very large drop today and we clearly went below that support level. As far as I am concerned, we have more downward pressure to go. I will post some charts tomorrow for you to digest over the weekend.

But the Unemployment rate report Friday will set the stage for whether we decline strongly or briefly rally. A 9.2% Unemployment rate ,while not good, will calm the market somewhat. But a 9.3%, or worse, 9.4%, will drive the market much lower because it will show an accelerating trend that will unhinge traders. Stay tuned for the Unemployment number and charts to follow for the weekend.

Happy 50th Birthday Mr. President!

Market comments for August 4th.

2011-08-04T05:40:00.000-07:00

Weekly Initial Jobless Claims numbers were released this morning amidst an environment of a negative Futures market. Initial Jobless Claims for July 30th came in at exactly 400K and the previous week's data of 398K was revised to 401K. Continuing claims came in at 3.730 Million.

The Dow Futures was down about 120 before the data was released due to worldwide jitters on economies across Europe and an attempt to lower currencies to increase exports to the US. The US Dollar is rallying against all major currencies today.

Tomorrow we will get the Unemployment data for the month of July. Much of the data is already known, because we have had 4 weeks of 400K claims or more and the only factor in the Unemployment data will be the seasonal adjustments made to it by the government. WE also know about 4000 FAA employees are having to claim unemployment insurance due to Congress not passing legislation before recess to fund the agency. We also know about 70,000 Construction workers had to stop work at airports across the country because of lack of funding by Congress. So if anything is clear, there is a higher chance the unemployment number will go up instead of down or it will remain at least at 9.2%. If seasonal factors have a larger factor than expected, the Unemployment rate could rise to not just 9.3%, but 9.4%. Stay tuned for this important number tomorrow.

It is clear the markets have broken the 200 day MA's as well as broken through previous support levels. Therefore I believe we still have a way to go before a reversal to the upside happens. There just isn't any good news out there right now except higher earnings reported for the second quarter for many companies. But this is hollow news for the average person who is just trying to survive.

Yesterday I sold my TZA Call Options for Oct. (at a Strike price of $41) for $7.00 each. I paid $2.69 and $2.81 for these, just 2 weeks ago. TZA had risen to $44.95/share yesterday for a high, but then closed at $41.02 on very high volume.

The chart below shows the Dow for the past year and I have drawn a support line where I think the Dow must go before a significant bounce up. As you can see it is at 11,500. That will be the first support level which must be tested. So we still have about 350 points to drop on the Dow.

Several US Indexes drop below 200 day Moving Average. (UPDATE)

2011-08-02T06:37:00.000-07:00

Many US Indexes are now below their 200 day Moving Averages. These include the S&P 500, the Russell 2000. The Dow's 200 day MA is currently at 11,995, so we aren't far from it now. The Nasdaq 200 day MA is at 2710 and we are not far from that as well. So look for these 2 indexes to get there this week. Whether the 200 day MA proves to be a strong resistance to climb back above will have to be seen. Much depends on the outlook for GDP for this 3rd quarter. But the trend now is not good and it appears the market and the Dow will not have its expected strong rally to 14,000 any time soon.

UPDATE: 10:50am PST

The Dow and Nasdaq have both now gone below their 200 day Moving Averages. The Dow has hit a low at 11961 while the Nasdaq has gone as low as 2696, which means all major US Indexes are below their 200 Day moving average.

Market comments for Aug. 2nd

2011-08-02T06:04:00.000-07:00

First, an apology for not posting the past few days during our Debt Ceiling crisis. My computer crashed 4 days ago and I had it looked at and found out I had a bad Video card and board. It is in repair being replaced. Normally it would cost $1,000 to fix, but because it is a manufacturers problem, I am getting it fixed for free! Hooray! Thank you Apple! The last post I made was from my cell phone.

I wanted to comment about yesterday's low ISM Manufacturing number at -0.2% and today's Personal Spending number at -0.2%. Both of these numbers show a trend that is not good and plays off the 2nd quarter GDP number, which was very low coming in at a 1.3% reading. Also disturbing was the revision to 1st quarter at a 0.4% reading. So that was 1/2 of the year with an average GDP of 0.6%. What makes this important is that it shows we are standing still in this economy, at best, and may be slipping back into a recession. The low ISM adds more evidence as does a low Personal Spending. And we evaluate the level of debt we have in terms of a percentage of GDP. So if GDP goes down, our debt level looks worse.

WE will be getting a read on the July Unemployment rate at the end of the week and it doesn't look good for a reduction in the Unemployment rate as we had 4 weeks above 400K Initial Jobless Claims. Yes, we are going to have the Debt Ceiling raised but what a mess it was to watch. And it proved we are so divided as a country now, there is little hope for a bipartisan plan for future reductions.

Who's to blame now for the uncertainty in raising the Debt Ceiling by Aug. 2nd?

2011-07-30T07:59:00.000-07:00

Okay, this is the bottom line on who's to blame in this Debt Ceiling crisis. Senator Mitch McConnell, the same Mitch McConnell who said his number one priority is to ensure President Obama is a one term President, yesterday told the American people he and Senate Republicans were going to require 60 votes to pass Senator Harry Reid's plan to raise the debt ceiling! McConnell decided to Fillibuster instead of compromise! That's who's to blame! Remember, if we can't get the debt ceiling raised by August 2nd, and we default, you know who you should blame.

The House plan by Speaker Boehner only needed a simple majority to pass. They just got 218 votes for his plan. 24 Republicans voted against it and no Democrats voted for it.

2nd Quarter GDP really disappoints!

2011-07-29T05:57:00.000-07:00

This morning the Commerce Department released its numbers on the economy. Gross domestic product rose at a 1.3% annual rate in the second quarter following a 0.4% gain in the prior quarter that was less than previously estimated. What's even more striking to me than the 2nd quarter low number of 1.3% is the revision to 1st Quarter numbers. The 1st quarter numbers previously reported were 1.9% and now have been revised downward to 0.4%. That's a very large difference. In fact, for all practical purposes that's basically close to negative growth and if this quarter gets revised downward by Sept, it may have shown we are in a Recession right now.The official definition of a Recession is 2 consecutive quarters of negative growth.

If it smells like a recession, feels like a recession, and speaks like a recession, it most likely IS a recession!

In the mean time, the Futures markets are predicting today to be a significant stock market drop again. Hold on to your hats!

Consumer Sentiment data for July was also released and came in at a 63.7, which compares to a 63.8 reading for June. Again, not in the right direction for a recovery.

Watch the rise in those TZA Call Options today for October Expiration at a Strike price of $41. I said we could see $6.00 for those which you could have bought for $2.69 just last week.

UPDATE: 6:53am PST

The Chicago PMI came in at 58.8 this morning for July. The month of June came in previously at a 61.1 reading.

Stock market at a critical point

2011-07-28T20:06:00.000-07:00

The debt ceiling crisis impasse resumes again tonight with Speaker Boehner not getting the votes he needed from his own Party. We are now getting close to the point of no return. As you can see from the 2 charts below, we are headed down. The Dow and Russell 2000 are below their respective 50 day and 100 day Moving averages. Tomorrow will be an interesting day and Monday even more interesting and volatile.

I recently purchased TZA Call Options at $2.69 and $2.81 for October expiration at a Strike price of $41. Those call options have increased in value now to $4.80 and I expect it to go to at least $6.00 before the debt ceiling issue is resolved.

Initial Jobless Claims improved.

2011-07-28T06:09:00.000-07:00

Expectations were that we would actually have 440K Initial Jobless Claims when the data was released this morning for the previous week, but instead, the data released showed only 398K were in fact what was recorded. That is the first time we have been below 400K in almost 2 months. However, it should be noted tha the week before this data's release was revised upwards from 418K to 422K. Still, today's release showed an improvement and at least is in the right direction.

Meantime, the debt ceiling standoff is approaching a critical moment for the Congress and the markets. Stay Tuned.

Tomorrow an important piece of data will be released, which may have a major impact on markets, a first look at 2nd quarter GDP, as well as the Chicago PMI and Michigan Sentiment.

Durable Goods Orders for June 2011

2011-07-27T05:32:00.000-07:00

Data released at 5:30am PST for Durable Goods Orders for June came in at -2.1% reading. This compares to a reading of +1.9% for May. See the chart below of Durable Goods Orders by Month going back to 2008 Monthly, from Financial Sense web site. The Monthly data on the chart is in grey bars on the chart and I have included today's reading with a red X. You will notice the yearly trend is going down, not up, as you would expect with an economy recovering from a recession.

UPDATE: 8:06am PST
Haver Analytics has posted a chart of Durable Goods orders which go back further in time, which I have posted below. Notice that we have only gone below the zero point one other time since the 2008-2009 recession.

California Post Offices possibly slated for closing

2011-07-26T16:37:00.000-07:00

If you follow this link you will see a list of Post Office possible closings released today for California buy the USPS. If you change the state in the URL you can get it for any state.

I'm back! Here's my take on the Debt Ceiling crisis

2011-07-26T11:26:00.000-07:00

I've been away on vacation for about 10 days so I apologize for not posting during that time, but you know that there are some remote places where there is no internet access. But I'm back now and ready to comment on this debt ceiling crisis.

I think there is now a 50% chance that both Parties in the Congress and the President will not come to an agreement to raise the Debt ceiling by Aug. 2nd. You know how this will affect the country in a negative way so I won't waste your time with those details. It seems obvious to me that President Obama has boxed himself into a corner as have both Republicans and Democrats over this issue. It seems to me the only thing left is for this President to make the unprecedented move to raise the Debt Ceiling using the 14th Amendment of the Constitution as the reason for this. This is what the 14th Amendment says:

""The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." Many read this to say the President has the authority to guarantee payment since the Treasury of the United States reports to the President and is a Cabinet position.

I think that this President needs to consider the possibility that this may be the only way to guarantee the debt ceiling is raised in time. Politically he most likely would not want to make this choice, but he might just have to because it is clear to even the most casual observer that the House Republicans are demanding things that can't pass the Senate and the Senate are demanding what the House Republicans won't pass. So we have an impasse. This issue has held government hostage unnecessarily and never before in history have we ever come to this point. If you are into the blame game, you can either blame or praise the Tea party Republicans for where we find ourselves today. Those praising their stance on this, I hope you still feel this good when government spending is significantly reduced at a time where spending is required to keep this economy from relapsing into a Great Recession of worst, Unemployment rises, the cost of borrowing increases significantly and causes the housing crisis to get worse. This Republican Party with its Tea party activists will more than own the economic problems and crisis going forward, because in their zeal to ensure President Obama is a one term President, as Sen. Mitch McConnell has repeatedly said. God help us all.

GDP: Are we in decline and, if so, who's to blame?

2011-07-16T07:09:00.000-07:00

I have wondered, as many of my readers have, about the apparent decline of our economy in recent years. Many, especially the far right in the Republican Party, have blamed President Obama for this and many on the left have blamed George Bush for this. Are these points of view true? Let's look at the facts over time. The fact is that our economy has been in decline now for many years. The first chart below shows GDP for the period of 1960 to 2011. I have drawn red lines at the top GDP levels after eliminating the highest value for each line segment. So for the period of 1960 to 1979, I did not draw the line at the one highest point of 15%, but rather of the several lower ones at 10%. Imagine that, a several quarters of 10% GDP or greater. back then we were just like China today!

You can see from the 3 red lines that we have steadily dropped in GDP and that the years from 2000 to 2011 are the lowest GDP periods in the past 50 years. In fact the lower GDP period has mostly been for all of the years of the Presidency of George W. Bush and the years with President Obama. The facts are still unknown whether President Obama will be any better or worse than President George Bush was. Right now they look the same to me, but there isn't enough data to be conclusive. Let's look a little closer at the years from 2000 to 2011 and see more closely where we are. The next chart below shows this period. I'll let you interpret what you are observing here. But before you look, be aware that your point of view will determine what you see! Be honest with yourself here, as it is a great learning point.

What have you learned? Can you be honest with yourself and be an objective observer or are you biased to your original point of view. I say this to both Republicans and Democrats. Dare to make a comment on your learning? I invite you to make a comment below. But let us know if you are a Republican or Democrat in those comments. It makes the comment so much richer and interesting.

One last chart. below, I just had to post and this one is of GDP since 1947. It is similar to the chart from 1960. Charts constructed from data fromTradingEconomics.com.

Thanks! And while you are at it, take my Mini poll on the right margin.

Market comments for July 15th UPDATE

2011-07-15T05:31:00.000-07:00

The CPI data came in at -0.2% in June, compared to +0.2% in May. Core CPI came in at +0.3% in June and was up +0.3% in May. This is showing that core prices are really rising as many feared. This economy is sounding more like we are in "stagflation". These CPI Core numbers are in line with what is happening with what has happened to the Core PPI numbers as well. In June Core PPI rose to +0.3% from a May reading of +0.2%.

The Empire State Index came in at -3.76 in July versus in June it was -7.96. Expectations for July were for the number to be 0.0, so this is not a good number and indicates a slowing business climate. That's hard to imagine given the business climate has felt like it has almost stopped the past 3 months. This data is in line with the Inventories data which is also rising and showing that Manufacturing is slowing down even further. This data is feeding into fears a double dip recession is going to occur.

Later this morning, Industrial Production data will be released for June, as well as Capacity Utilization and Michigan Sentiment data for July. Here's what to watch for Industrial Production came in in May at +0.1% and expectations for June are for a +0.3% reading. I expect the number to disappoint. Capacity Utilization came in last month at 76.7% and expectations are for a reading of 77%, indicating more usage of existing capacity. I think this number will disappoint as well and be below 77%. And lastly, Michigan Sentiment in June came in at 71.5, and expectations are for it to be 70.0% reading. I believe this number will be somewhere between 71.5% and 70.0% and will not be off by much, resonating with the general feelings in the country of negativity, partly based upon the politics of the moment on the issue of whether the Congress is going to raise the debt ceiling and also the higher Unemployment numbers this month. The trends are not good and we may be very close to going back officially into a recession.

Bah, humbug! The Futures look positive this morning in advance of this data. The Dow Futures indicated +44 before the CPI data came out and the Empire State Index. Now the Dow Futures indicate a +43 reading, so nothing has really changed with respect to the Futures.

Today is Options Expiration for July so expect high volume today.

UPDATE: 6:55am PST

Industrial Production came in at +0.2%, not +0.3% as expected. But the huge news is that the Michigan Sentiment came in at only 63.8 vs an expectation of 70.0 and a reading last month of 71.5!!! This is a huge disappointment but a realistic data point on how people are really feeling.

Capacity Utilization came in at 76.7%, same as last month and not the 77.0% expected.

Market comments for July 14th

2011-07-14T05:29:00.000-07:00

Initial Jobless Claims data was released this morning and came in at 405K. This is a reduction of 22,000 from the previous week, but still over 400K. Expectations were for only 370K this week. The data from the previous week, however, was revised upwards from 418K to 427K Initial Jobless Claims, so again, not in the right direction for a recovery.

The PPI came in at -0.4%, while expectations were for -0.2%. This shows deflationary, not inflationary pressures are building, as the Fed is worried most about.

Retail sales for June came in at +0.1%, which is not much, but expectations were for a -0.3% number. Retail Sales Ex-Auto came in unchanged from the prior month. Thus, we have stagnation in Retail Sales.

The Dow Futures are up about 26 points at this hour, but I have a difficult time being convinced the market will rise today, given the way the issue of raising the debt ceiling has taken over most news commentary as a gloomy outlook. But in a market manipulated by the Fed, anything is possible. And with Moody's threatening a downgrade of the U.S., this is indeed a major game of chicken being played out nationally.

Sarah Palin: Is she running?

2011-07-11T09:13:00.000-07:00

So she spoke yesterday and had people wondering again if she is going to run for President. Did she give a deliberate clue or was there an error in the use of her language? You see she said "I can win!" responding to questions from reporters. She didn't say, "I could win". There is a difference in meaning. The question is though did she make a deliberate statement of intention of running or did she mean she "could" win if she ran, and hasn't made up her mind.

I think it was an unconscious reflection of her intention. How would you interpret her use of can versus could?