Put to Call ratio for 2011 in focus

I thought today I would show a chart of the Put to Call ratio for all of 2011 with special focus on last week's movement. The chart below indicates this past week's movement in blue. The put to call ratio is an important indicator for me as it often indicates the best time to buy and sell stocks.

The reading on this past Tuesday of 1.15 had not been hit since March 16th, when the ratio hit a high of 1.18. You can see from the Dow chart of March 2011 below, that on March 16th the market hit a low and then then within 2 days started a rally. The data point was actually a Buy signal, if you were paying attention that day. From that point, the market rallied a minimum 7 % to this past Tuesday or if you sold a little earlier with a gain of 1000 on the Dow, you would have made a profit of 8.6%, which is very good in only a few months.

Now looking at where we are on the Dow chart below for the month of May, you will see the Dow's action for this past Tuesday the 16th, when the Put to Call reached a high of 1.15, that the chart pattern for the last 3 days May 18th-20th is different than that of March 16th in the chart above. I would look for another drop in the market this week going below the May 17th low. We shall see if the phrase "Sell in May" comes true!

Summary comments on market: Has anything really changed in my outlook?

The market closed the week today with what apparently looked like indecision. But to the contrary, today's market confirmed a reversal in all Indexes, the S&P 500 Index, the Nasdaq composite Index and finally the Dow. The Nasdaq closed down only 1 point but the Candlestick pattern was a Hammer. The S&P closed at 940, down only 2 points, but it confirmed the Hammer candlestick pattern of Wednesday's close. The Dow closed at 8,763, up about 13 points.

The Unemployment rate rose more than expected and closed up 9.4% for the month of May. Employers eliminated the fewest jobs in eight months in May, strengthening signs that the recession is easing, while a drop in wage growth offered a warning the recovery may be muted. The job losses were lower than expected but more people were added to the ranks as eligible workers, so the rate rose higher than expected. The country needs to create about 200,000 jobs a month just to be at break-even. When you add in the losses the rate goes higher quickly. Many commentators on CNBC and Bloomberg today said that there the real Unemployment rate is about 16% because many are working part-time and can't get a full time job. Also a number of the unemployed have given up filing for Government Unemployment Insurance Benefits, as either their benefits have run out or they have given up looking for work.

Nonetheless, the media and commentators are continually hyping we have turned a corner and that we should be out of the recession by the end of the year. This does not make any sense at all as it appears we are headed for another poor Christmas season with so many unemployed. Since the Consumer represents 70% of the economy, it seems delusional to think that we are going to be out of this mess anytime soon, let alone by year end. I wish it were true but the facts do not support the optimism.

Several other measures give pause regarding the Consumer's ability or willingness to stimulate or drive the economy. First that there are going to be new rules governing Credit Card issuance for younger people of college age. Secondly, this was not that widely reported but Consumer Borrowing plunged $15.7 Billion in April. That is both good and bad news. It is good because maybe people are only paying now for what they can afford and have stopped borrowing beyond their means. On the other hand, maybe they can't borrow because they can't pay the debt back easily. The category in Friday's report that includes credit card debt dropped at an annual rate of 11 percent in April, following an 11.2 percent plunge in March. And a complimentary story I reported earlier in the week, Consumers saving rate jumped to 5.7% in April.

The banks also made news today. From Bloomberg news: Bank of America Corp. and nine U.S. lenders, facing a June 8 deadline to explain their capital- raising plans to regulators, are relying on preferred-stock conversions for 22 percent of their fundraising. Collectively, the 10 banks told by regulators to raise $74.6 billion have announced plans covering $70.6 billion of the gap, with some including Bank of America expecting to “comfortably” beat its target. They’ll get about $15.4 billion from preferred stock conversions, a tactic that improves the gauges of financial health that the government is focusing on without bringing additional cash into the company. “Conversions from preferred to common don’t do anything; you can just ignore them,” said Christopher Whalen, managing director of Institutional Risk Analytics, in an interview this week. “It makes the ratios look better, but it doesn’t increase the capital in the house.”

And another related Bloomberg story about the banks: Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.

The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.

So while we hear things are getting better and that they see more "Green Chutes" there does not seem to be fact based data to support the market hype. Bill Gross, of Pimco, has started to raise the alarm as has Fed Chairman Bernanke in his recent testimony before Congress. I would listen to Bernanke and Gross as they have a front seat to what is happening here. I don't see a "V" shaped recovery but that is what the stock market movement is implying. I see more of an L shaped recovery. If that does prove to be the chart outlook, then we will retest the lows and stay in a tight range for the next 6 months to a year. This a a longer outlook than I have stated here in the past but the good news in this scenario is that we aren't going to go below the lows and are going to eventually recover. I think it is a good thing that many are saving now. It took many a lifetime to learn this lesson. But we have been affected permanently and spending patterns have changed for the foreseeable future. It may bring families closer together as well and learning new ways of being present with loved ones, without the distraction of material things. When i grew up my family would play games at home almost every Friday and Saturday evening. Looking back, those were some of the best times I spent in my youth with my family.

Mini Poll results for May 2009: How Long recession will last.

Mini Poll survey summary for April: How long the recession will last

Here is a summary of the Mini Poll data for May as compared to December, January, February, March and April.

First the question.
How long do you believe this recession will last?

Data for December, then January, February, March, April and May:
Mid 2009 4%, 17%, 10%, 12%, 4%, 7%
End 2009 35%, 25%, 24%, 21%, 25%, 11%
Mid 2010 15%, 13%, 12%, 3%, 33%, 19%
End 2010 15%, 10%, 4%, 18%, 15%, 15%
Mid 2011 12%, 17%, 10%, 3%, 4%, 4%
End 2011 8%, 0%, 10%, 3%, 4%, 4%
Mid 2012 0%, 0%, 2%, 3%, 2%, 7%
End 2012 0%, 0%, 2%, 0%, 0%, 19%
Much Longer than the choices you have provided 0%, 0%, 10%, 12%, 0%, 11%
We are going to be in a Depression 12%, 19%, 18%, 24%, 13%, 4%

If I summarize by Year:
2009 39%, 42%, 34%, 33%, 29%, 18%
2010 30%, 23%, 16%, 21%, 48%, 34%
2011 20%, 17%, 20%, 6%, 8%, 8%
2012 0%, 0%, 4%, 3%, 2%, 26%
Depression 12%, 19%, 18%, 24%, 13%, 4%

Sample size for December was 26, for January 48 votes, for February 51 votes, for March 39 votes, for April 48 votes and for May 27 votes.

The major change seems to be the change in the year 2012 gaining to 26% from single digits for all previous months and the percentage seeing the likelihood of a Depression has dropped to the lowest reading of 4%. This validates the Consumer Confidence numbers for May were better going up to 68.1 from 65 in April.

Reporting of U.S. Fatalities for May keeps rising even though it's June! What's up?

Are games being played reporting of U.S. Fatalities in Iraq by DOD? I seriously think something is amiss here. Back on Friday, June 1st, it was reported that there were 122 Fatalities. The next day, it crept up and then on Sunday it crept up again. Today the numbers for May have been revised again and we are now looking at 127 U.S. Fatalities for the Month of May.

I think this reporting is suspicious in light of the fact that the news was already bleak looking at May's numbers. But here we are 4 days into June and the official numbers for June are off the chart at 17 U.S Fatalities and a week hasn't even lapsed. If you add in the numbers added from last month we should be at 21 minimum for this month, another month of a record pace.

In the first week of March we had 24 fatalities
In the first week of April we had 28 fatalities
In the first week of May w had 27 fatalities
In the first week of June so far we have 22 fatalities with 3 plus days remaining in the week.

May's 2 week total fatalities in Iraq

U.S. Military fatalities for the Iraq war in the first 2 weeks of May totaled 50. For the entire month of May 2006 there was a total of 69 fatalities. For the first 2 weeks of April, 2007 there were 51 fatalities so we are on our way for another record month for fatalities.

There are also 3 soldiers who are missing in operations in Iraq. I pray for all our soldiers and their families.

Bring the troops home!

U.S. Fatalities for the first week in May

U.S. Military fatalities for the Iraq war in the first week in May totaled 27. April had 28 fatalities for the same period. This is at a pace equal for a month of over 100 fatalities again, to be exact a pace of 108 for the month.

For the entire month of May 2006 there was a total of 69 fatalities, again showing the increase in fatalities, while the supposed "surge" is touted by Bush as the answer to the situation we find ourselves in Iraq.