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.

Monday June 7th Pre-market

Futures are down as the Nikkei plunges. Currently down almost 400 points at 8:46pm June 6th. It is going to be a follow on crazy day of market action. But it is consistent with the reality of the economic conditions facing us and Europe. European leaders seem to be bickering over the direction of monetary policy of the EU. Tim Geithner, Treasury Secretary is pleading with them to implement a Debt rescue plan, according to reports this weekend on Bloomberg.com. Check in during the day Monday for updates and intraday chart analysis.

The prognosis for the Economy and Unemployment

The Sunday news talk shows had Treasury Secretary Tim Geithner and Larry Summers as featured guests. What was most evident from both of their conversations was that we have a long time before a real recovery takes place. For example, Geithner said unemployment would "ease" in the second half of next year. Geithner also said that extending unemployment benefits again is something the administration and Congress are going to "look very carefully at as the end of this year approaches." Well, to me that means two things: First, unemployment will rise for a full year from today and with it so will unemployment benefits, not just for the additional 13 weeks being contemplated now. Currently the unemployed are eligible for a total of 79 weeks of unemployment. Add a minimum of 13 additional weeks and you get 92 weeks of paid absence from a job. My God, that is almost 2 years! And those without jobs have at least another year of looking for a job before things look better for them. Consider what these means for the possibility of even more foreclosures.

Everyone believes the Consumer is not spending today but has increased savings. This also says there is most likely systemic changes in the patterns of Consumers behaviors that may be generational in duration. I can imagine a smaller footprint spending form the Consumer and a larger footprint needed by Corporations or Government to pick up that slack to help increase GDP. I saw a formula for GDP this morning while pursuing the Blog articles which said that GDP=C+I+G+(Trade Surplus or Deficit) where C is Consumer spending, I is for investments and G is government spending. You can see from the equation that the biggest part of GDP is going to come from Government (or us) and we are borrowing from the future of our children, kids and grandchildren and dooming them to less of a life to pursue the American Dream than any other generation of the past except from the Great Depression years. How can we look ourselves in the mirror and allow this to happen, you ask? Easy, as this generation of "What's in it for me" Americans, we don't really look in the mirror much and do the self reflection thing very well. We are so focused on ourselves, we have lost morality and sold our souls to the average bidder. Boy, the last 8 plus years have surely screwed up this country so badly, we may never recover. So when you hear the "good news" on better GDP, remember it is the Government spending driving it, not business and not the Consumer for the next few years. Don't be fooled that things are looking better. Make sure you look at the Unemployment rate and keep looking at the number of Home Foreclosures and Business and personal bankruptcies.

The seeds of our destruction were sown many years ago and most likely back in the Reagan Administration, (See the chart below from ZFacts.com with a great article that goes along with the chart) where Federal Deficits had new meaning. Ever since then, we have been going out of control. Twenty out of the past 26 years since 1982 when Reagan was President, Republicans have been in control of the Presidency. You will notice on the chart below, it was Clinton who actually turned this trend around only to be reversed again by George W. Bush.

Pre market outlook for May 19, 2009: Cautious

The big news this morning was Housing Starts for April coming in at record lows and new Building Permits as well. The Futures were all showing today was going to be an up day until this news came out. Also, Home Depot beat analysts expectations on their earnings reported for the quarter, but they got there by closing stores, laying off people and cutting other costs. You can't cut your way to growth. You either have it or you don't. Revenues for Home Depot were down 10% and that is the real story in my view.

I was asked by a friend where the market was going as it has been still pointing to a continued uptrend as yesterday's market action was green in all Indexes. I said to my friend this was true but Volume was pathetic. Art Cashin on CNBC this morning also commented on this. He said that people he talks to are very divided on the direction of the market. He said about half believe this is going to continue while the other half believe not only are we going lower but they believe we will test the previous lows of 6,400 but may go lower.

I continue to use the 200 Day Moving Average as my major indicator right now as we are still below it on the Dow and S&P 500, but not on the Nasdaq. The Dow 200 day Moving average line crosses the axis now at 8,900. On the S&P 500, it crosses the axis at 942. The Nasdaq is slightly above its 200 day Moving average which crosses the axis at 1,725. We had closed yesterday at 1732. Watch this index pull back today or the next day or so and will be the clue that we will not go above the 200 day Moving Averages any time soon and it means we are closer to a pullback and correction!

One last thing Art Cashin said this morning and has been going on in my thoughts as well but hadn't heard it put that way of clarity until now. He said, There are a lot of cross currents going on right now and something, in essence, seems fishy. I have felt this too.

The market feels like it is being heavily manipulated to show an uptrend, as Volume is low. The only reason I can think of why this is going on is to try to build confidence by the public in the markets again. If this is what is going on, they should stop it as no one believes this stuff and it feels like a setup to get others to invest their remaining cash so someone can take it away again. Many of us don't believe this market rally is nothing more than a Bear market rally. There really isn't any good news out there yet.

The Put to Call ratio stays in a tight low range and closed yesterday at 0.78 while the VIX Index at 30.24 by days end. And not unrelated, Tim Geithner warned us yesterday of higher unemployment to come and more bad days ahead. As long as people are fearful of losing their jobs there will not be a recovery.

Market Outlook: Thursday March 25th and beyond (UPDATE)

Well we closed up for the day yesterday. A battle is going on between the Bulls and the Bears. Yesterday the Bulls won but it was touch and go for most of the day. We are in no mans land on the Dow and S&P 500 because it has not been determined if we are going up or going down yet, even though we closed up yesterday and back up over 800 on the S&P. The Put to Call ratio closed up yesterday to 0.86 from 0.76 on Tuesday and 0.70 on Monday.

Market is opening up but I tell you we can still go in any direction because the trend is not clear as I write this. The Weekly Jobless claims came in at 652,000 while the number of people getting weekly benefits rose to 5.5 Million recipients.

We still don't know if the banks will sell toxic assets and we won't for at least a month. So many are still in limbo as Geithner's toxic asset plan is based upon bank participation.

The auction yesterday for Treasury's did not go as well as hoped. This caused the market to drop mid-day. So skepticism remains strong and we have a less than enthusiastic investors which makes for a tight range on the Indexes. It looks like we will stay here for a while but as we approach the end of the quarter watch investors buy some bank stocks to dress up their portfolios because they moved up nicely from their lows and they want to show those having accounts with them that they owned those stocks during the quarter. It's all a game for show and after the end of the quarter they can and often sell some of these shares bought at quarters end.

I think a wise strategy is to have some cash right now and not be fully invested. When the trend becomes more clear then changes can be made to either buy stocks or raise more cash. But that's where I am currently.

UPDATE 9:45am PST

The Dow and the S&P 500 are clearly above the 50 day and now 60 day Moving average. The Dow is now at 7,839 and the S&P 500 is at 824.

UPDATE 3:00pm PST

I decided to sell my TZA at a loss today for $48.50. That was a big loss of $10/share. However my TNA shares remaining and SSO shares have made the loss in TZA as an insurance policy worth it.

Market outlook: Down at the open but more favorable going forward.(UPDATE)

I said I would like to be wrong on my market call yesterday and I was. It seems the market embraced Geithner's toxic asset plan for the banks after all. And while this did break the downtrend line on the Dow and the market may go higher, there are enough skeptics out there saying the plan won't work because banks may not sell these toxic assets. So the market will be driven even more on news of what Bank CEO's are saying and going to do than anything else right now.

I was asked by a friend if I would buy into the Bank Index FAS after this market rise. The answer is yes as it has been beaten up quite a bit and with patience these should rise. However I would buy it on a market pullback, accumulating shares as it went down in price. For the buy and hold crowd, this has good potential over time of yielding good returns. However you might also want to pick a few banks individually as well and look as to whether they are paying any dividends which may sweeten the pot.

I am still holding the shares of TZA I purchased for $58.50 and did not sell them in the sharp pullback yesterday, as the ETF got crushed. But my salvation was that I still owned far more shares of TNA which surged up unprecedentedly yesterday to more than offset the losses from TZA. While there will be profit taking at the open watch the market continue to move up since we are headed to go over the 8,000 level on the Dow. Citigroup should help that rise as well. I still own the stock.

UPDATE: 4:30pm PST
I purchased the Direxion triple play on the Bank index, symbol FAS, today for $6.20/share average price. The market ended down 115 on the Dow but after yesterday's significant gain, many expected some profit taking. President Obama speaks tonight and we will see if any news materializes from his Press Conference.

Markets and politics: Where are we going?

A review of yesterday shows the VIX closed at 43.68, showing the increased volatility I expected because of the approaching Options expiration today. The Fed took major action to buy back long term debt which caused an unprecedented increase of $60/ounce in Gold. The Put to Call ratio closed at 0.77 on Thursday, up from Wednesday's 0.65 closing level.

I think all in all it was a good thing the market pulled back yesterday because we were rising on a very rapid rate. Today I expect more volatility and while I can't predict today's market move, even though Futures are pointing for the market to be up today, I see the market continuing with this rally into next week and eventually over the Dow 8,000 level and the S&P 500 over 800 as well. The Dow closed yesterday at 7,400 after hitting a high during the day of 7,548 and the S&P 500 closed at 784 after reaching a high of 803 for the day. I believe this rally will end somewhere between 8,000 and 9,000 which is the range of where it has been previously. Because we went to the lows of 6,500 on the Dow I expect the rally to end between 8,000 and 8,500 and most likely not go higher until we have gone back and retested the lows.

Congressional action is the main unknown right now. The latest focus of their intellectual capital is on the AIG bonuses and outrage the voters have shown on this matter. They were caught, along with Tim Geithner, with their pants down, as in calculating which position they should take, they thought it better not to be sued over breach of contract for not paying the bonuses, than to pay them. They were all wrong. Mistake made, lesson learned and now, like adults, they all should get on with the issues on better oversight banking and insurance regulations, improving the economy, helping stabilize the banking system, managing healthcare costs, a better Energy policy which includes more Wind and Solar, as we surely have some whopper problems to solve as a country.

The message of the AIG story being lost

The issue around AIG bonuses is a relatively small one. There are several facts being lost here. First, it has been the Democrats who have tried to stop big bonuses for any company needing funds from the government. It has been the Republicans who have been outraged that the Democrats are doing this. Yes, there was a problem because Treasury Secretary, Tim Geithner, decided that it was better to pay these bonuses rather than face a possible lawsuit from recipients of those bonuses.

So what is important here is that huge bonus payments to companies receiving Government funds will stop going forward. You can thank Democrats, not Republicans. They want to blame Geithner and Sen, Chris Dodd for this embarrassment be we know their hearts have been in the right place where the Republicans have been hypocritical as they have supported these people getting their bonuses and not interfering with the Free Enterprise system.

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!

Market outlook for March 3rd, 2009: Calmer

In pre-market today, it appears that World markets are calmer after the big slide yesterday. Our Dow lost about 300 points and it closed at 6,763 while the S&P 500 closed at 700. Both Indexes closed at the lows for the day or very close to it. The Put to Call ratio closed at 1.07 yesterday and while high it did not go high enough to warrant a Buy signal as we have had a number of days at or slightly above this level. From a Candlestick pattern, the Dow's action yesterday did not create an "inverted hammer" pattern, as I had hoped. Here's a definition of an Inverted Hammer: A one day bullish reversal pattern. In a downtrend, the open is lower, then it trades higher, but closes near its open, therefore looking like an inverted lollipop. So I am not confident we will actually reverse the downtrend today however any moderation will be welcome and a relief.

The major effect on markets today will be testimony by Fed Chairman Bernanke and Treasury Secretary Geithner in Congress. It can go either way based upon Geithner's previous poor showing. My guess is there will be increased volatility as he speaks.

Also, on CNBC this morning, Larry Lindsey, former Bush Administration National Economic advisor said this morning that the Obama Budget is a "World Game Changer" and a "Downpayment on becoming a Welfare State". He said foreign governments will not want to buy our debt and that can cause our currency to devalue. How do those comments sooth your nerves. It troubles me a lot they are saying things like this.

Futures in Europe are mixed with the German DAX and France's CAC up slightly with the British FTSE down. At 5:45am PST, the Dow Futures show a Dow up about 90 points at the open.

We are in limbo land at these levels on the Dow. If we could climb back up over 7,200 on the Dow in the next few days we may prevent going lower to 6,200 on the Dow. But events are not encouraging that will happen.

Markets pull back from the Edge today

We stared into the abyss and pulled back from the most certain painful decline that we almost had today. We are not out of the woods yet but if we can string another day or two together we may be on our way to a Bear Market rally. Much anticipation as to what Treasury Secretary Tim Geithner's plan is for the Banks so that shoe is still yet to drop. But President Obama was confident and bold tonight in what he wants to be measured on regarding the success of his plans to restore the economy. You can't say he is shy about taking on responsibility. He has set a new standard just on that metric compared to all previous Presidents.

Futures are down a little this evening but it is too early to tell what will happen tomorrow. On a positive note, Ford Motor, symbol F, went up today to $2.20/share and is now profitable based upon my earlier purchase and strong belief in the stock back on January 24th with an average price of $1.90/share. My Apple stock is also back into profitability as well, from my purchase back on January 7th for $86.50/share and again on January 14th for $78.00/share. Still own all my shares of TNA and SSO.

We are looking into the Abyss and only good will can help us now

The rancor is getting pretty bad out there over the Stimulus plan which just passed yesterday in the Congress and has already moved to the Conference Committee with the House, It also is getting bad over Treasury Secretary Tim Geithner's rescue plan for the Banks. Add to that, today the House has called hearings with some former Investment bankers and now merged Bank CEO's to testify about excessive compensation packages they received last year, and you have the beginnings of Class Warfare. This is not, I repeat NOT, a good idea when we are trying to bring the country together as it is very decisive pitting the politicians, supposedly representing us, against the wealthy. I am very concerned this will add to the troubles in the stock market and make it impossible to turn this around in a more positive tone.

Watch for intimidation of these CEO's by the Democrats in the hearings and the tone of discussions. If it starts to get ugly the market could tip. I am standing ready to sell if I need to because our next stop could be as low as 6,300 on the Dow and that is very scary. We need a bounce back off these current levels to have a little breathing room.

We don't know the details of the Geithner rescue plan, but that may be a good thing if the concept still needs tweaking.

Do you need a loan? That's what the government plan assumes as they are talking about providing up to $1 Trillion dollars in loans available for such things as car loans, home loans, school loans and other loans. But call me foolish, but I don't know if people are really going to borrow money if they have no way of paying off or are worried they may lose their job and not be able to pay the loans back. But that is part of the reasoning in the Treasury Secretary Tim Geithner's rescue plan still being worked on, and, is partially included in the Stimulus package, in Conference Committee, now in the Congress.

I know I don't need a loan, and many people I have talked to recently, don't need a loan. They want to make sure they, and their friends and family, have jobs. Tax cuts don't seem to be an answer for people worrying about their jobs but that's what 42% of the Stimulus package includes, right now.

The only thing I want is for all leaders involved in defining these details to not allow their ideology to get in the way of needed actions and compromise. That's probably what you want to.

Obama loses patience with cynics but not his temper..

President Obama's first news conference yesterday set the stage to get the support he needs for the Stimulus package directly from the American people and takes a shot at the critics. Where were they the past 8 years when the Bush Administration was spending money with no checks and balances, he chided. I think in the end he convinced those in the middle but didn't convert any zealots on the far right.

Today we will see the rescue plan for the banks announced by Treasury Secretary Tim Geithner. The Administration has kept the details of the plan under wraps so whatever is announced today will sure to be criticized again by the far right as Nationalizing Banks or some such shot at the Administration. I doubt much will be said about putting our faith in the plan, but that is what will be needed. Critics need to shut up as they are doing as much to hurt the economy further than any actions by the Obama Administration. Confidence is the issue we need to address and those who spend all day criticizing the President and the rescue package are peeling the skin off investor confidence and are now equally responsible for the mess we are in. Get behind the president and give him at least a year or two to get this problem fixed. In the mean time look at how YOU can help the economy by spending a little, instead of completely shutting down all activities and expenditures.

Update: Feb. 10th after the close of the market

Well this was predictable. Critics wanted answers now, detailed plans and "substance" fro Treasury Secretary Tim Geithner. Dow closed down 382 points. At one time it was down over 400. Congress asked many probing questions and Republican Senator Shelby was the most negative about the overview of the plan.

Story of the day: TAXES!

So 2 more people have problems not paying their taxes. The first was Geithner, now Treasury Secretary. Today there was Tom Daschle, who decided to pull his name as Health and Human Services Secretary. The other was the newly created Chief Performance Officer who was to watch performance of Gov't agencies.

Let me vent for a moment on taxes. First of all we have been screwing up these past 50 -75 years because we have been taxing income. All these years while we were consuming beyond our means, we have been taxing income, instead of taxing consumption. Now that the American people have started to save and not spend what they can't afford, watch there will be a someone pushing for a Consumption tax. That's like closing the barn door after the horse has run away. But someone will promote this idea, most likely a Republican.

There is an advantage to a consumption tax. One advantage is that it doesn't require any special paperwork, or create the type of problem Daschle had today in not reporting income as he used the services of a car and driver and said he never thought about paying the tax. With the consumption tax, you pay the tax immediately when you make the purchase, as you do now with State Sales Taxes. Over time we will see where this goes. But we are moving from a Consumption society to a Savings society because of the current economic crisis. Now would not be the time to move to Consumption taxes. But a simpler tax code surely would help.

Recommend selling the ETF Ultra Shorts now

I am selling my SDS and TZA now as the testimony by Tim Geithner, nominee for Treasury Secretary, seems to have weathered the storm and in my view the markets will reverse the trend as we are near the low of the range of the Dow from 7,300 to 9,300 currently at 7,975. There is better than a 50/50 chance the market will reverse and go more towards the high end of the range again.

You might be able to see these rise ETF Ultra Short shares gain more if we break below 7,900 but that is being greedy in my view and you may be left hanging on too long.