Market comments for Sept. 1st

I am sorry I didn't get to this earlier today. I have much going on the next 2 days. The data released today that affected the markets the most was an unexpected increase in the ISM data. It came in at 56.5 while the prior reading was 55.5 and expectations were for the number to come in at 53.0 for August. The stock market soared on the news and the Dow is now up over 215 points. The fact the market moved up so much was a big relief to the Bulls as they have been discouraged over the month of August that they haven't been able to make any money. Now it's the Bears turn to be discouraged as expectations were of a bad Sept. in the market as is usual for September's past.

I wouldn't count on this rally if I were you. Obviously you can count me in with the Bear crowd. I see this as a tidbit of news to hang a trade on but the overwhelming news is negative out there. To prove my point, the ADP report said that jobs unexpectedly dropped -10K in August and the prior month was revised downward from creating 42K jobs to a revised 37K. Expectations were for no jobs to be created for August, not to lose 10K. But the Bulls want to focus on something positive as we start this volatile month. Bears, take a break and go fishing today. Your day will come very soon. Patience!

Latter today Auto and Truck Sales will be reported and while it is not going to move the market much, it is an indicator of the economy and how Consumers are spending their cash. The number is expected to be released at 11:00am PST. I won't be here so check other sources for this news. I will post it late afternoon as an Update. Dow up now 223 points, the Nasdaq is up 55 and the S&P is up 26 points, a heck of a start for September.

Market summary for week ending Oct. 2nd

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

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

Put to Call ratio on current market: Up!

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

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


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

Pre market outlook for May 20, 2009: More of the same ambivalence!.UPDATE

The market continues to struggle between the Bulls and the Bears. So far it is a tie. Pre Market Futures indicators show again an upward bias, although trading currently in Europe is mixed. Gold holds at $927/ounce in European trading. The Put to Call ratio was basically unchanged yesterday from Monday closing at 0.82, up from 0.78 on Monday's close. However the VIX Index closed below 30 for the first time since September at 28.80, which is not good for those wishing for volatility and wider spreads in prices during the trading day. Just ahead of summer vacations this is the kind of market that can cause markets to drift lower for the longs ahead of the Fall turbulence we have become accustomed.

There were only a few pieces of news worth commenting on this morning. First was what is going on in Japan. Here are a few news excerpts I found noteworthy.

Japan Economy Shrinks Record 15.2% as Exports, Spending Plunge. Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955. “There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.” The failure of export demand to do better than simply stabilize will probably limit the scope of Japan’s recovery.

To read more on this news item above click here.

Another news item was about HPQ ( Hewlett-Packard) and their earnings after the bell yesterday. Here are various excerpts from that story:

Hewlett-Packard Co. said Tuesday that earnings fell 17% in the second fiscal quarter as sales fell across nearly all the company's business lines, most particularly among PCs, servers and printers... -They also disclosed plans to lay off another 6,000 workers -- on top of previously announced job cuts -- as it continues to shed costs... Revenue fell across nearly all of the company's business lines during the quarter. In the earnings call, Hurd said the company is ahead of schedule integrating the EDS acquisition. The company is more than halfway through the planned workforce reduction of 25,000 employees that it outlined last year.

Hurd also said the company has found an additional $500 million in cost savings -- mostly through facilities and other real estate commitments that will be eliminated. H-P also said it will lay off an additional 2% of its workforce -- beyond the number it spelled out last year -- over the next 12 months. That equates to about 6,000 more job cuts at the company.

Many market traders said they see this as positive. I don't know why to be honest. Companies laying off more workers and cutting out costs through restructuring may all sound great but it adds to the overall unemployment rate for the country and those jobs will never be coming back. In my view the real story going on is that Corporate America may survive by cutting workers everywhere but the overall affect on the economy is going to continue to be crippling for a very long time to come. This means more foreclosures down the line, more government help and a lengthening of the time when this thing finally turns around. Markets may move up on selective companies taking dramatic actions to survive, but this is setting up a real plunge in the markets eventually in the Fall unless things change where more jobs are created. With al the talk of stimulus, I don't see it showing up on the jobs front.

Somebody please paint me a rosier picture! You Comment below and I will put it up here for all to see. I continue to hold TZA and FAZ shares.

UPDATE: 4:00PM PST

Markets closed down today. Gold closed at $938/ounce. The Put to Call ratio closed at 0.86. The VIX Index closed up at 29.03 but not until it hit a low of 26.57 earlier in the morning.

Market Outlook for May 7th and the near term (UPDATE)

It is feeling to me this rally is going to continue. When you add some apparent news on Retail, which is better than expected, and you have a real rally going on. I knew this rally was going to be for real, but I didn't know it was going to be so steady and strong, even on less volume. All my indicators show a continuation of this trend, as there doesn't seem to be bad news enough for the pullback I anticipated. But heck, maybe that is the exact moment when things are too optimistic. :)

The Put to Call ratio closed yesterday at 0.77 and the VIX Index closed at 32.45, which is thew lowest it has been since September, the beginning of the Sub Prime impact on markets. Yesterdays Volume for Dow and Nasdaq stocks hasn't been this high since April 20th. So the gain yesterday was convincing, at least to me. The Nasdaq Composite Index did end the day with a Hammer Candlestick pattern suggesting this is the end on the move up for that Index. The Dow ended the day with a Doji Cross pattern, suggesting a draw in the contest between Bulls and Bears.

There is an expression my Uncle uses in times like this, "don't fight the tape". I think it is appropriate at this juncture of the market, and I did fight it all the way. I should sometime listen to my own advice which I made about this rally back in mid March, this rally is for real and many may regret not having stocks in their portfolio becasue there will be some good gains."

FAZ shows a clear confirmation of a Sell Confirmed signal at the close yesterday by AmericanBull.com, so I may sell my few shares in it today. Regarding my shares of TZA, currently at $26.12/share, AmericanBull.com suggests a Buy If signal at the close yesterday. I am going to continue to hold these shares and may buy more to average down my costs on the shares. The market will eventually pull back and we are closer to the top of the range now, not the bottom, with the Dow closing yesterday at 8,567. I had said the top of this range is 9,200 and the bottom of this range is 7,300, so we are clearly nearer the top. The 200 day Moving Average crosses the Dow now at 9,000, so I do not see us going over this level.

When you compare where we are now, relative to 9,000, we are set for a pullback very soon. So I am holding on to my TZA shares and may take some profits now on some recent gainers and not try to time the top. This rally is not a call to Buy and Hold, but to trade it. These markets will not return to Dow 10,000 any time soon. So trading for profit is the only wise play going forward. If you can't do that, better keep your assets in cash.

UPDATE: 9:30am PST

It looks like the Nasdaq hammer Candlestick pattern was correct, the market has pulled back. Volume on both the Nasdaq and Dow are ahead of yesterday's good volume, so this downside move has more to go and may start a real reversal in trend. Gold is up to $914/ounce.

Hope we can believe in.

As the day begins, there is more hope for reaching a bipartisan agreement on the stimulus package before the Senate today. I would estimate that a few days ago there was only a 35-40% confidence by the public, the media and the Congress that there would be a compromise within the Senate deliberations of the stimulus package. The needle has moved now to about a 55-60% confidence that there will be compromise and a good bill that most can live with.

The Unemployment rate (just announced) is 7.6%, as we had 598,000 jobs lost this past month. These two forces will result in some higher volatility in the market today (as measured by the VIX). Based upon the realities on the ground on the negotiations, I believe the Bulls have the edge over the Bears in this market. Being on the Short side right now is very dangerous as this market can snap up in a heartbeat. I do not have any Short positions nor do I currently have any ETF Ultra Short Funds like TZA, DXD or SDS and if I did have them I would sell them at the first opportunity today.

I did add to all of the shares I have mentioned here. Added yesterday to TNA, SSO, F, and AAPL and feeling very confident these will rise in the next 30 days. When the Stimulus package gets passed by the Senate today and a compromise worked out with the House of Representatives during the next week, hopefully President Obama will be signing the bill by Friday the 13th or more preferably by Feb. 12th, President Lincoln's birthday. And the President will be credited with bringing a different kind of politic to Washington, thereby increasing his popularity with the American people.

Pre-market outlook Jan. 14 2009: Retail Sales numbers are terrible!

Today's pre-market is focused on Retail Sales and how to get the consumer to go out and shop again. Retail experts on CNBC thought it was a significant change in the psychology of Americans that needed to change and while many don't want to shop, retailers needed to think of creative ways to get them into the stores again by inventing new and better products that made people feel good about themselves, the experts thought. Actual Sales numbers were worse than expected at down 2.7% and terrible. December year on year Import prices are lowest drop on record at 4.0%

I hate to tell them this but shopping is the last thing on their minds. Survival is at the top of their list and takes precedent over anything else. In pre-market all 3 indexes are down and you can expect the day should be down as well. Yesterday's action was a failed attempt to turn the week around by Bulls, but clearly the Bears are in charge this week. In pre-market Apple, symbol AAPL, is down over another $1 to $86.65 and is we are close to a price where buying should start ($86.25). I would put in an order today for 1/3 of the shares you want to own and if the price drops down to go below $86/share I would put in another order $85.50 and wait to purchase any remaining shares until the market is at the lows. Apple is in the retail business so that is why they are getting hit today but they have a following that will capture more market share over time as people turn away from PC's and embrace their computers as they continue to invent new products and applications for their iPhone and iPods.

Keep your ETF Ultra Shorts SDS and TZA as they will continue to gain momentum this week and next.

One month from today is Valentine's Day so don't forget your sweetheart.

UPDATE: 8:00am PST.
Dow dropped as much as 300 points and all 3 indexes are doing poorly. ETF Ultra Short SDS is now up to $80.30 or 5% and TZA is up to $59.70 or 12% so far today. Keep holding them and do not sell as there are more gains to be had on these 2 over the next week or so.

I also took my own advice and bought more Apple shares at $85.80/share a few minutes ago.