Market comments for Sept. 19, 2011

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 Aug. 26th 2011 (UPDATE)

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. 9th, 2011

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%.

Market comments for August 4th.

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.

2nd Quarter GDP really disappoints!

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.

Market comments for March 15th UPDATE

Japanese stocks overnight had a terrible day dropping over 1000 points. The Futures are showing a drop in all US Indexes of about 1.5% to 2.3%. The continuing explosions at the Nuclear Reactors are causing concerns all over the world where Nuclear Reactors are used. Many lessons will be learned here in the next few years but for now panic is settling in all countries, including the U.S. It's hard not to see a connection to the Japanese stock market and the troubles in Japan as the cause of our market drop. But our market started to drop much before the Earthquake in Japan.

I expect the market to drop again and then have a rise but the rise will be a lower high than before and we will continue to make lower lows as I have stated here for a number of weeks. If you don't want to sell your stocks, then buy a hedge like some Ultra Short ETFs like TZA, SOS, FAZ and any others that go inverse of the Indexes they represent. It will help cushion your losses. But again, think if this is a longer drop, it might be better to sell now and take some profit and repurchase much later when stocks are cheap. The chart below is my best guess at Tuesday's action in the Dow. Notice the constant slide of the Dow drop.

UPDATE 5:40pm PST

Here is the actual chart of the Dow after the close today.

Market comments for Oct. 14th, 2010

Data released this morning shows that Initial Jobless Claims were higher at 462,000. Expectations were of 450,000. Last week the numbers reported were only 450,000, so this spike is in the wrong direction. However, as usual, they adjusted the prior week's data up from 445,000 to 449,000. Continuing Claims came in at 4.399 Million vs 4.511 Million the prior week. But the 4 week moving average is up to 459,000. When you really think about it, Americans are losing jobs to the tune of greater than 450,000 a week and have been doing so for a very long time! How sad for American workers and their families. This is not a good report for President Obama going into the elections in a few weeks.

On another note, the PPI came in at +0.4%. This was the same data as reported for August. The Core PPI, year over year increase, is up only 1.6%. The Trade deficit came in at -$46 Billion versus -$43 Billion last month. Expectations were for improvement to being down to -$40 Billion, so this too was in the wrong direction. With China's currency resisting world pressure to appreciate because they have an unfair advantage I believe they will continue to defy the world and will keep their currency as low as they can. Why not, they are in the drivers seat and they know it. Even if the whole world dropped their currencies they couldn't get it low enough to match where China's currency is because their population works for under a $1 a day. We just can't compete with them nor can anyone else.

Foreclosures reached a record 100,000 last month, and the background story, which emerged a week ago, was that an investigation of Banks and their foreclosure process is being conducted. Bank of America had stopped all foreclosure processes in 50 States pending an investigation by them.

Futures are close to unchanged or slightly lower after the release of the data.

It is now clear that with the sizable debt this country has, that the way we are dealing with it is to devalue our currency so that the value is half of what it was so we can pay the debt off in cheaper dollars to China, who holds our debt, as does Japan. That is why Japan is trying to lower its currency as well so they get paid eventually relatively equivalent dollars and why China will not inflate its currency. The major world powers are in a Currency war right now. This game is going to end very badly as wealth is being transfered out of the United States.

But we are all happy now because the stock market appears to be rising, right?! How naive the American public is. That is the price we all pay for a poor education of our kids who someday grow up and are fooled by the talking heads in Washington and vote against one's own personal interest.. Education is the one answer to get this country back on track and we haven't even begun to get serious about improving education yet. That is why we get the Government we deserve.

May Retail Sales

May retails Sales numbers released a few minutes ago were disappointing to investors. May's retail Sales were down 1.2% compared to being up 0.6% in April. The Futures are down. The May drop is the biggest in 8 months. Even when you take out Auto's from the data, the numbers are lower. It will be interesting to watch to see how much of yesterday's gains are going to be taken away today. Any bets?

Market update for June 11, 2009

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

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

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

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

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

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

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

Pre-Market outlook March 18th: Cautious (UPDATE)

It's a good feeling to be able to guess correctly the markets direction over a number of days. I wanted people to see their 401K's and retirement accounts grow a little as it has been painful for many. The Dow closed today within a few points of 7,400 and the S&P 500 closed at 778. The VIX Index closed at 40, which a long way from the 50 level we had experienced for such a long time. The Put to Call ratio closed yesterday at 0.78 or just slightly down from 0.80 level on Monday. Gold ended the day yesterday at $916/ounce and in pre-market is at 902.

The news of the day yesterday was the level of bipartisanship surrounding the outrage of the bonuses to the AIG employees from the Division who were responsible for the collapse of AIG and required subsequent bailout by taxpayers. These contracts for these bonuses were in place during the Bush Administration and were known about apparently by former Treasury Secretary Hank Paulson, according to news reports. But the outrage from both sides of the aisle enjoined Democrats and Republicans for the first time since President Obama took office. Many are speculating that Tim Geithner, Treasury Secretary, may have his own job at risk for not stopping these bonuses from being paid. We shall see.

Again, the news seems to be favorable enough, or not negative, to continue with this uptrend. However, we are now approaching the final few days before Friday's Options Expiration and anything can happen in Options week. Yesterday I purchased additional shares of Citigroup to add to my original position which I bought at $1.73/share. Today's purchase was made at $2.41/share.

The Futures point down this morning as the CPI Index came in at up 0.4%, which was higher than expected and may foretell of a rise in inflation. Also, today is day 2 of the FOMC meeting of the Federal Reserve and investors are nervous as to what they may say later today. My guess is that the market will open down and stay down most of the day. Having said that I am hoping for a reversal in the final hour or so to have an up day.

UPDATE: 8:15am

Dow has been down all morning from -135 to -89 points where it is now. The Dow seems to keep trying to climb back up and over the 7.300 level. However, Citigroup has surged today making my purchase at $2.41/share yesterday look brilliant as it has hit a high of $3.30 and currently is sitting at $3.19/share. I predict this stock is going to go to $5/share or higher, if the market continues its climb back to over 8,000. This also is worth mentioning. I had to sell my Apple shares at $96.35/share and it was a difficult decision as the stock was still going up. Today the stock is at $100/share so I left $3.70/share on the table when I sold it or a 3.5% potential gain. But I used the money to buy Citigroup and today alone it is up over 25% and 30% from my purchase at $2.41/share. The moral of this story is this. Be willing to move a portion of your money to a faster or more rapid growing stock you have researched or discussed with your financial advisor. It opens more opportunities for you but also adds more risk. I saw Citi with less risk than most other stocks, including Apple, because the government is backing Citi and owns about 40% of the company. The government is making money on Citi right now, why shouldn't you!