Market comments for Aug. 17th, 2011

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 June 30th

Today is the last trading day for June and the second quarter. The headline reads as follows, but is it a true reflection of the data? "Jobless Claims in U.S. Decline, Top Estimates"

More Americans than forecast filed applications for unemployment benefits last week, indicating little progress in the labor market. So is that saying that claims fell? a drop of only 1,000 is statistically indifferent from last weeks number and if they gave weight to the fact that Continuing Claims had increased too, it would have been more accurate.

It is true that Jobless claims fell by 1,000 to 428,000 in the week ended June 25, Labor Department figures showed today in Washington. And that the median forecast of economists in a Bloomberg News survey called for a drop to 420,000. So is 428K versus an expectation a big miss or not? Well it's a lot more than only a 1,000 drop is. These headlines are so misleading and manipulative, no wonder Consumer Confidence is at the lowest level in a non recession period since 1978. People just don't believe the media manipulation of the data anymore. The truth of this story is that we are still having over 400K Initial Jobless claims weekly and not below 400K weekly which we were for a stretch. As long as we continue to create so many unemployed, the economy is not going to get better and we are not going to be able to pay the debt off! That's a fact!

Oh, and on a separate note this: The Bloomberg Consumer Comfort Index rose to minus 43.9 from minus 44.9. So is this that much better? Think not as it is still minus and not plus.

Market comments for May 23rd

This morning the market broke again below the recent uptrend line as is shown in the chart below. I had said in my post yesterday that we shall see if you should "Sell in May" and it is clearly showing that others think so.

In the chart above I have drawn 2 lines numbered "1" and "2" to show that we have gone lower and broken the previous support line "1" this morning. In the chart below you can see how the pattern is very different than the March 16th chart pattern shown in the previous post.

You can see we have broken below the previous low of May 17th in this drop this morning. The market is now in a downtrend.

Market comments for April 19th on the Dow and CAT

Looking at yesterday's drop in the markets and specifically the Dow, you can see that again Caterpillar, symbol CAT, which has led the Dow rise over the past year was one of 2 stocks leading the Dow lower yesterday. I have posted 2 charts below of Dow and Caterpillar which shows the extent of CAT's move down lately. More is to come as the market goes lower, but there will be bounces up on the way down. Notice the volume to the downside for CAT yesterday. It was very high, suggesting more downside is to come.



Housing starts and Building permits data was released today and both showed better than expected numbers. While many see this as a positive for the Real Estate market, I see it as a negative because the supply of houses on the market or about to be put on the market much too high a supply. This will keep housing prices low and may drive prices even lower if this becomes a trend and continues.

Market comments for March 10th and some political comments as well

Not much has changed with respect to the stock market as a result of yesterday's action. As I said several days ago we have formed a wedge of an ever tightening range. This means we are getting closer to that breakout either to the upside (which I do not believe will happen) or to the downside, which is more likely in my view. Conditions in Libya are getting more precarious daily, as rebels are pushed back by Kaddafi's mercenaries. Today's jobless claims report rose more than expected and came in at 397K, just shy of the 400K. This set a negative tone in futures this morning.

The chart below of the S&P 500 shows that wedge and how the range tightens each day. Today the market is starting lower but it is down now almost 200 points on the Dow and may actually break below the range today. Watch for any breakout to confirm market direction going forward.

In Wisconsin, the Republican Senate stripped out the Collective bargaining section of a bill which had financial elements so the Bill could be passed with the Democrats away from the State to protest the maneuvers to kill the Unions. This issue is becoming a rallying point for Democrats who see Republicans tied to the business sector push to remove Unions from being a factor in the next election. The Unions have organized for Democrats and gotten out the vote and helped fund many a campaigns. Getting rid of Unions will allow big business with their hordes of cash to dominate the process, thus ensuring Republican candidates win. When they win they will remove all remaining regulations on Wall St. They are waging a war on the Middle Class and with this last effort, they are winning. The people must take to the streets or this illegal move will stand. These tactics are being pursued in 16 northern states,

UPDATE 7:00am
Here is the updated chart of the S&P which includes the early market trading. It clearly shows we have broken lower and outide the recent tight range!

Market comments for Jan. 20th

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




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

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

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

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

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

Market comments for Jan. 10th

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

Another new low on Put to Call ratio

Yesterday's market close for the week showed another new low for the Put to Call ratio. It closed on Friday at 0.66 and the week before it closed at 0.69. This is yet another sell signal that we are going lower. The question you might be asking yourself is why did the market have a good day on Thursday? Simple answer, 2 factors, both related. The first factor was the GM new IPO offering, which was a good thing if you want the government out of the car business. With the IPO, the government can get the money back they invested to save the auto industry and jobs. THe saving of jobs worked and it looks like GM has a better footing to do both.


Now the second factor, which I said was related was this, the market was manipulated by the Fed to stay up, so the IPO would be seen as successful. The Fed did say it's monetary easing (manipulation of the stock market as just one manifestation of the use of that word) was working this week when Bernanke spoke abroad. With prices propped up, it was a great climate for the IPO that day. But on Friday, the market reached a more bullish extreme as puts had been dumped on Thursday and Friday causing the Put to Call ratio to go even lower than last Friday, Nov. 5th.

We may be setting up a pattern of increasingly lower lows on the Put to Call ratio, which in turn will set up larger sell-offs and possibly this is how we have have the really big one. When that happens we should see this ratio drop as low as 0.5 or lower.

Below is a 1 month chart of the Dow. As I said on Nov. 5th, the Put to Call ratio signaled the reversal in trend. Compare where we are now, with an even lower Put to Call ratio yesterday. We did not go over the 25 day Moving Average line in yellow. So I see another leg down within the next week and a half. I say a week and a half because we have a short week because of Thanksgiving. So it will take the following week for the market to drop below 11,000 on the Dow and stay there. Watch the hype about what a great shopping day the day after Thanksgiving was for Retail Sales. It will be all lies!

There won't be much to post next week and you may be traveling, so let me wish one and all a very Happy Thanksgiving. My wife and I will be local and enjoying a Turkey dinner with my friend and neighbor, his children.

Market comments for Nov. 10th

Data released this morning on Initial Jobless Claims came in at 435K as compared to an expectation of 450K. Last week the number was 459K so this is in the right direction for the unemployment rate to start coming down, but it is so small a difference it is still much too high. Remember these are Initial claims, new claims, and all to add to the Millions of Unemployed in the country.

The effect on the market was that the Dow, which was down about 12 before the announcement is now showing it will open up, about 5-10 points.

Other data released today so far was Export prices ex-agriculture was up 0.7% while Import Prices ex-Oil was up 0.3%.

The Put to call ratio has risen a bit to 0.84 at the close yesterday but as you have seen the past few days the 7th month low in this indicator I reported over the weekend did show the market was overbought and the market would most likely go down, which it has both Monday and Tuesday.

Market commentary for the week of Nov.8th

It will be a slow week regarding economic data being released. We have the usual Weekly Jobless Claims and Continuing Claims on Thursday. There is data being released on the Trade Balance and on Friday there is information being released from Michigan Sentiment and Consumer Confidence Indexes. So it is really a quiet week as far as data is concerned.

I have attached a chart showing the Put to Call ratio for all equities for 2009 and 2010. On Friday we hit a multi month low on this reading. At extremes of the top and bottom they are buy and sell signals. We are approaching the low, which often can mean a sell signal is close. The day of the low is not the actual day the market reverses but it often does within a week. I would prefer to see the Put to Call ratio down to 0.50 to 0.55 for a definitive signal, but we haven't had that low a number in a very long time. Although on Nov. 5th, we did reach a low of 0.55 in the first hour of trading and then it moderated later to close at 0.69 for the day, as you can see in the chart below.

The lowest blue point occurred on April 14th. The Dow closed that day at 11,123 and then it rose to the peak you see on May 20th. The Dow on May 20th was at 10,068, so you can clearly see that the low point was a sell signal for the Dow and other indexes. If we go any lower on the Put to Call ratio, I would say it is a Sell Signal of an anticipated market drop.

Also, one important fact not to be thought of lightly is the planned elimination of the Bush tax cuts as of January 1st. The Congress is creating uncertainty, as to whether the lame duck Congress will approve extending the Bush tax cuts for another year for everyone, or just those making up to $250,000/year. That means many may choose not to take a chance that Congress will approve the tax cuts and, instead, sell their stocks to lock in their profits for 2010 in the lower tax bracket. So there are many moving parts. Instead of the market rising as it usually does in anticipation of the Christmas shopping season, we actually may have pressure to sell stock before years end. So paying attention to this Put to Call ratio and the activities of Congress are most important! Stay tuned! Oh, and don't forget to take the mini poll on the right margin of this page. Thanks.

Market comments for Oct. 19th

Today's economic data was released on Housing Starts and Building Permits, after the earnings data from IBM and Apple had already driven the markets down after hours yesterday on disappointing forward expectations by both companies. Today's data isn't important to offset this decline nor add much to it because it isn't as important as other numbers being released later this week on Initial Jobless Claims. Housing Starts data released this morning for September came in at 610K, compared to an expectation of 579K. Last month's data was revised upwards from 598K Starts to 608K Starts. Building Permits for September were down to 539K Permits versus an expectation of 565K. August's data was revised from 569K to 571K Permits.

If you haven't read my post from Saturday on Fundamental Analysis versus Technical Analysis be sure to do so as it explains much of what is going on in the market discord between both type of analysis and the conclusions each draws.

A special Birthday wish to my friend in Massachusetts this morning. He and I were in Carmel many years ago on the day back in the 1987 when the market crashed. We survived that one but not sure if we will on the next one. A very Happy Birthday, Lad.

Market comments for Oct. 7th

Initial Jobless Claims were down 11,000 to 445K Claims for the week of Oct. 2nd. Expectations were for 450K. Continuing Claims were at 4.462 Million vs. an expectation of 4.450 Million. So the numbers were basically in line with what folks expected and basically unchanged for the past several months at this level of around 450K. This, while not good made the market Futures jump because it wasn't worse. That's a sad state of affairs isn't it.

Everyone waits now for tomorrow's Unemployment rate for SEPT. Will the number be the same and stay at 9.7% or will it tick up to 9.8%? Will this number drive the markets up or down? Give me a break. It isn't good for sure, and one I know would ask, "But is it Bad?" There is no real difference in the numbers, unless you are one of those unemployed. It is bad for America.

Two year notes hit a record low and 10 year Treasuries are now yielding 2.39%. The dollar continues to drop while many work today to make some dollars, even though their purchasing power is less today than yesterday. Gold hit another new high today at $1360/ounce.

European markets are up as are Dow and S&P Futures. We should cross over 11,000 today and are now closer to the 11,200 market top I had predicted back on Sept 21st. This rise in the market is confounding many, who don't understand the relationship of stock market assets in equities and the drop in the dollar and the rise in Gold. There is no real net change in the purchasing power, but it makes people feel better. That's the play right now. Hard assets like commodities are rising because no one wants to hold paper, except those in retirement who are finding it more difficult to survive.

I do eventually see Home prices will rise as these are also hard assets and the price of these assets will have to gain and prices rise before foreign buyers invade us to buy Commercial jewels across the U.S.

Market commentary Oct. 5th (UPDATE)

There has been little news to comment on with respect to Economic data released this week. Yesterday, Factory Orders for August came in down -0.5%, compared to +0.5% in July. July's data was revised up from +0.1% to +0.5%, so the orders are down.

The stock market closed down yesterday, with the Dow closing down -79 points. Again, within a half hour of the close, it was down -95 points but then the Volume surged in the last 15 minutes to end the day only -79 points. Volume spiked about 30-40 million shares in the final 15 minutes. Now the Futures market today is up +70 points on the Dow. So it appears that the Bulls are recouping yesterday's loss.

The charts look the same. On all indexes they are completing the right shoulder of a Head and Shoulders pattern, so until it does, this market will stay up and still may go to the high of 11,200 on the Dow, as I predicted on Sept. 21st.

The big news of the week will be Thursday with Initial Jobless Claims and Consumer Credit and on Friday with the Unemployment report for the month of September. Also on Friday, Hourly Earnings, Wholesale Inventories for Aug. and Non Farm Payrolls.

UPDATE 7:00am PST

The ISM Services data for Sept. was released and came in at 53.2, while expectations were for 51.0. The prior month data was 51.5.

Market comments for Sept. 7th

It's a quiet day today, with low volume, but the VIX is up almost 10% in early trading. No news on economic data is to be released today but the main 2 pieces of data to pay attention to this week is the Initial Jobless Claims on Thursday as well as the Trade Balance and on Friday the release of Wholesale Inventories for July. The Trade Balance and Wholesale Inventories data are both backward looking data and therefore not as relevant in our concerns. But the Initial Jobless Claims is relevant as it is current data.

There are only 11 days remaining before Options Expiration for Sept. on Sept. 17th.

Market comments for Aug. 31st. (Update)

I'll let the numbers say it all this morning on the release of PMI and comments from Forex. Here's the data:

Chicago PMI comes in at 56.7 Weaker than expectations
Written August 31, 2010 at 9:45 AM EST by Greg Michalowski

Chicago PMI 56.7
Business barometer 56.7 vs 62.3
Prices paid 57.2 vs 58.1 last month
Production 57.6 vs 65.0 last month
New orders 55.0 vs 64.6 last month
Order backlogs 56.2 vs 57.6 last month
Inventories 46.5 vs 50.8 last month
Employment 55.5 vs 56.6 last month
Supplier deliveries 61.2 vs 59.4 last month

So all the numbers are weaker than expected. What's amazing still is that the market rallied on the data as it was down about 44 on the Dow before the release of the numbers and after they are now in positive territory. I don't expect this to last and do expect a deterioration in markets. Much will hinge on the Consumer Confidence number which will also be worse than expected in my view. Come back shortly and see it as an Update.

UPDATE: 7"00am PST

Consumer Confidence up to 53.5 from an expected drop. It was expected to come in at 49.5 and in the prior period it came in at 50.4, so this is better than expected. It is amazing how they are spinning this on CNBC as a big positive.

Market comments for Aug. 24th (Update)

The day was positive but closed negative before all was said and done. Tuesday economic data will drive the market as Existing Home Sales gets released at 10:00am EST or 7:00am PST. Last month June's data came in at 5.37 Million homes sold. We had the tax credit then but no more. Expectations for July are to come in at only 460 Million Home Sales. We all expect a lower number so if the number surprises at all to the up side the market will rally. If it is lower than expected say around 450 Million Homes or less, we may see another sell-off. Also, the Richmond Fed will be announcing their data as well at 10:00am EST. The Philly Fed was negative last report, so many eyes will be trained on these numbers to see if the Richmond Fed is also negative.

In any event, Wednesday we will see Durable Goods Orders for July and New Home Sales. Durable Goods Orders are expected to come in at +2.5% for July. June's numbers came in at -1.2%. If Durable Goods orders come in again with a minus number, the market will sell-off in a big way. We all know it has been slow in the economy but now we are getting just how slow it has been.

Thursday is Initial Jobless Claims. Expectations are for 475K for the week. Remember last week many were shocked with the reported 500K. Lastly Friday we will see the fudged GDP number for Q2. Expectations are for 1.3%. Think about that for a moment. That's almost no growth at all. Last quarter the number came in at 2.4% and I expect that number to be revised down to 1.7% or less.

The S&P 500 closed Monday with an inverted Hammer pattern. Usually this would mean that the trend will be reversed, but it is possible to have a number of days with such patterns before a reversal comes about. And when it does, that reversal could be short lived.

Today I purchased additional shares of TZA at $36.50, and was pleased to see it close higher at $38.70/share, even if just for today. I believe these shares will rise during Sept. and October and surprise many who think the recovery is still ongoing, admittedly while slowing somewhat.

Futures are all down and all European markets are also down about 1.0%-1.3% this morning. Oil is down to about $72.50/barrel and isn't that far from the low of $70/barrel for all of 2010.

One last thing, the Put to Call ratio dropped at the close yesterday to 0.71 which we haven't seen since July 19th. I have posted above, the chart of the Put to Call ratio I had posted a few days ago and you can see the spike down we had back then.

UPDATE: 7:00am PST

Existing Home Sales were down 27.2% for July. Expectations were for 460 Million Home Sales and the actual came in at 383 Million Home Sales. That is a very big disappointment.