Market comments for Aug. 27th (UPDATE)

While I was waiting for the GDP numbers to be released this morning and knowing September was just around the corner, I was wondering how this Sept. markets were going to be compared to other years. Then I got the Chart of the Day from chartoftheday.com and see they have answered my question with today's chart. It isn't looking pretty is it.

The GDP number came in at +1.6% Revised from 2.4% previous estimates and they had expected the number to come in at +1.3%. Before the release of the number the Dow Futures were up +27 and after the release of the data it is at +68. There is a definite upward bias going into the open this morning. European markets are mixed with not much movement up or down at this point. Think about this for a moment. When is a 1.6% revised GDP worth it for the markets to go up? Answer: When they thought it would be much worse! That's where we really are in this economy!

Only 3 trading days left in August. As you can see from the chart above that August usually is barely over +0.2% gains for the month. The Dow closed July at 10,466, so we are significantly down form that going into today's trading. We started off the year at a Dow of 10,428, so we are definitely down for the entire year so far and I don't see any recovery in the market before the end of the year and as I have stated many times I see us going a lot lower into the next year. So hang on to your hats today as it is difficult to guess whether the market will be pumped up or trashed. VIX should be something to watch today. Yesterday it closed at 27.37 and for the past it has stayed above its 50 day Moving Average for the first time in about a month and a half.

Fed Chairman, Bernanke, will be speaking today in the Jackson Hole, WY gathering of business leaders and is expected to take questions from them. His comments will move the markets.

With the Dow set to move back up today, expect Gold to also go up so that the net Dow to Gold ratio stays low. It has been recently in an 8.1 to 8.3 range and I don't see this ratio going higher any time soon. In fact I see it going lower. The net is that when the Dow does rise, its real value as measured by Gold is less.

UPDATE: 7:00am PST
While the Fed Chairman was releasing his speech to the press, the Univ. of Michigan Consumer Sentiment number was released and it came in lower than expected at 68.9 vs an expectation of 69.6 for August. Last month the data came in at 69.6, so this is even lower and marks a number of months it has slipped.

Market outlook for July 20th: Rainy with Clouds

Well after the bell yesterday, IBM reported its earnings as did Texas Instruments. Both disappointed on top line Revenue expectations and that has set the stage for today's market action. Futures are down and Europe is down this morning. Also out this morning was Housing Starts and Building Permits. The news there was mixed. Housing starts came in at 549K for June compared to an expectation of 575K, which was worse than expected, and Building Permits came in at 586K compared to the expectation of 572K, which was better news than expected. That rallied the Futures a bit so they weren't as negative before the news came out Dow Futures were down about 100 before the Housing data, but after the data they came in at down only 75. However, currently the Dow Futures have slipped back down 93.

Expect today to show another leg down on this slowly unwinding market. I will post Updates here during the day today. So if you have read this once be sure to come back and see the Updates and commentary.

Also, news on Goldman Sachs missing expectations on their numbers also is causing some market turmoil. It is clear that the top line Revenue Growth is not there and the only way companies are making their earnings is but cutting costs. It isn't going to get better any time soon according to Pimco's Mohamed El-Erian, CEO and Co CIO who was on CNBC this morning.

I will also post today something on Silver and ZSL and that there is about to be a significant break below key supports on Silver and that this can be payed by buying ZSL or adding to previous positions. Look for tha post later this morning.

UPDATE: 9:45am PST

AS you can see from the above chart we started down about 125 for the Dow but have steadily risen up in spite of the news. Well the Dow formed a "W" pattern with the slant pointing down. We therefore should go lower from below the lowest leg of the "W" pattern. That would take us to Dow down over 100 again today.

Market outlook for July 12th

I have posted a Dow chart for the past 6 months and have underlined in red the formation of the "W" pattern which has emerged. The red line extends under the "W" pattern's bottom lowest legs. As mentioned on many earlier posts, a slanting downward "W" usually means new lower lows are coming than the lowest leg of the "W" already formed. You will also notice that there is a gold line showing the 50 day Moving average is about at 10,300. The market will not go above this line and even if it does briefly, the Dow will stay below it. We are close to the top of this short rally, which has occurred on low volume as the bottom of the chart above indicates. When price rises and volume drops, that is a very bearish sign.

So this market is bounded by resistance at 10,300 and an inevitable drop below the lowest levels so far. That is where we will stay for a while. Today starts earnings season for the second quarter. Watch for a more cautious outlook from companies going forward for the remainder of the year. The reasoning being that everyone knows the economy is soft, so why take the risk and get penalized for showing a bright future when if they miss higher expectations next quarter the market will be punishing to their stock price. So caution is the word this earnings cycle.

Market outlook for July 9th

Hi all. Well the market is in a tight range today. The Intraday shows the Dow keeps bouncing around the unchanged line only briefly going negative. Volume is extremely low, as many appear headed out for the weekend early. I guess I should too. But wanted to give my readers a heads up, as I am traveling starting tomorrow until next Thursday. I will do some posting if events warrant but it will be less frequently until I return to home base.

Remember the overall trend is still down and that if you take a good look at a 2 or 3 month chart, you will see we are forming another "W" pattern and it is slanted lower. Happy summer.

Market outlook June 29th

Did you miss me? I took a few days respite from writing about the stock market. But here I am again. Consumer Confidence numbers just came out a few minutes ago and it wasn't good. The June Consumer Confidence came in at 52.9 versus a May reading of 62.7, which is a huge drop. Stock markets around the world are down this morning triggered by revisions downward in China of their economic data. The Dow has dropped below 10,000 and as low as 9,889. Currently it is sitting at 9,914. That's about a 200 point drop. The Nasdaq is down 66 points to 2154 and the S&P 500 dropped to 1048 down 26 points. All of these Indexes have dropped below their Intraday lowest Support levels.

It is still too early to tell from the chart above, whether the market will go lower or bounce up on technicals, but if I were a betting man, and I am, I would say we are going lower today and setting up a very bad Unemployment report due out Friday as we go into July.

You can't say that I haven't given plenty notice here that this was coming. And remember, this is just the beginning of a very painful decline. Cash will be King, so make sure you are raising Cash.

TZA Options are rising very nicely today as the stock also fairs well on this decline.

UPDATE: 7:55am PST

The Intraday chart has formed a very steep slanting downward "W" pattern. This suggests to me we have not hit the low of the day today. Keep checking back.

Update: 4:00pm PST

The markets closed earlier today and I was not surprised as we did go lower as I sated we would in my earlier comments above. As you can see in the full Intraday chart of the Dow, the low today was 9,811 but closed at 9,870. If you will notice the second red line I drew under the last "W" pattern near the close, it shows the "W" slanting down. I interpret this to mean we will most likely start down tomorrow and hit a lower low. We could test 9,800 tomorrow. We are at the low of June 8th again and most likely this level will not hold.

Market rally now looks obvious, but be aware it is only temporary.

Yesterday's reversal and return to an almost unchanged level sets up today the rally back up to about 10,500-10,600 range over the next week or so. The final leg of the last "W" pattern is being formed if you look carefully at the chart. There is no way to know for sure its length or duration, but one thing is for sure, after this leg up we are headed down to retest this support line and I believe it will fail to hold. The chart above shows 2 other things. First it shows a reason why the market didn't go lower yet. It was at a significant support level that if and when it is broken will result in a significant market drop all the way to about 7,800-8,000 level as the first major plateau of this return to a Bear Market.

The market should be heading down with the news this morning that Durable Goods Orders for April fell, compared to March's rise. Nondefense capital goods, excluding aircraft, often called core durable-goods orders, fell 2.4% in April after a 6.5% gain in March. This would be bad news and if news really drove the market, as many claim it does, then we should have been in negative territory in the Futures market, but the Dow is up 93 points and the Nasdaq is up 22 in pre-market. I hope you now get it that the news or any news does not drive the market. It is human patterns that drive the market.

The other thing it shows is that while the markets were dropping Volume increased much beyond the previous leg up of the market. Compare the volume in the last phase down, shown within the Blue arrow, and that of the previous period of March 1st to the end of April. You will also notice that the period of February the volume was also higher in the small declining period that month. This gives additional validity to the argument we are in a Bear Market Rally.

I will ride this rally up and be prepared to sell, when the market reaches my target. I will repurchase TZA Call Options simultaneously, as we approach that target.

Yesterday, I purchased TZA Put Options for October expiration for $0.90 each share. I plan to gain on these as the market rises also on the Russell 2000, along with the S&P 500. All indexes have a similar pattern with their own Support levels if you look at 1 year chart patterns of the daily closing prices. Good luck on this next leg up. But keep in mind we are about to have a significant market crash this Fall.

Click on the chart to enlarge it for better viewing.

Market outlook for the week of Nov. 2, 2009

Well, I was wrong big time on my market call on Friday, as the Dow dropped 250 points. I thought there would be more manipulation that day by market makers. I still do believe strongly we are headed lower. I said a few days ago something big was in the air and maybe it is the coming correction. The volume was much higher on Friday and that suggests more of the same is coming. Expect us to go below the 50 day Moving average and eventually the 100 day as well.

The 3 charts above are all of the Dow looking at it from different time intervals to the close of Friday's trading on Oct. 30th. You will notice that if you looked only at a 4 month chart or even a 6 month chart you would not have the context to determine where we are in the Dow cycle. It is apparent that the 3 year chart which I have been using for quite a while is a very good indicator of where the index is relative to either a breakthrough or a correction. The 3 thin lines are the 50 day, 100 day and 150 day Moving averages. The Dow closed at the 50 day Moving average line.

I also wanted to reiterate this piece of advice. Watch the Nikkei for direction of U.S. markets! back on Oct. 20th post I showed a 5 year chart of the Nikkei and showed it had broken down the uptrend line and I said back then that the Dow will follow suit.

Oct. 20 Market outlook: Skeptical!

A moment ago CNBC interviewed Art Cashin of UBS Warburg. When Mark Haines asked Art where he was in his market outlook, Art replied "skeptical". Well I am too as we have not had the breakout above the downtrend line and the wedge gets narrower and narrower. We can continue in this tight range for at least a week or two but a breakout is inevitable to either the upside or the downside. I am with Art here. I believe if it looks to good to be true to move more to the upside, it probably is.

Market update week ending Oct. 9, 2009

I decided to put some charts up today to give you a perspective on what I have been saying vs. what the charts are showing as we approach the 3rd week of October and Options expiration on Friday, Oct. 16th. The first chart is a 3 year chart of the Dow which was posted on August 8th. At that time I described what I thought the market might do going forward.

I quote, "For the Dow it says that we will not go over 10,000 and on the S&P 500 we will not go over 1090, but there is still the possibility of some good gains in the meantime.... But let me be clear here, there is more pain ahead short term for short positions and those wanting to get out should."

From the second chart, not much has changed since then as shown in the Updated 3 year Dow chart. We are staying below 10,000. Those who were short did experience more pain as the Dow did continue to go up from that first chart date of Aug. 8th but it seems to be hitting up against the resistance line of 10,000. Will we have a correction by this coming Friday, Oct. 16th. Well based upon everything I see reported and people I listen to, we may pull back just enough to complete a "W" pattern, but I do not believe it will be the sharp drop off many, including myself, have expected. We may continue to go sideways staying under 10,000 for another 4-5 weeks until after Thanksgiving when we get indications about this year's Christmas Retail Sales projections.

A bit longer term into January and February I do not see us going and staying over Dow 10,000, as the economy should really bottom at that time, with an increase in Commercial Real estate foreclosures become more apparent and the Unemployment rate goes over 10.3%. This will have even more consequences for the Democratic Party as it faces few months to show any meaningful employment before Congressional mid term elections next year. Much can go wrong between now and then as currency concerns over the dollar provide more pressure on the Obama Administration to do something about it at a time when we are most vulnerable to a double dip recession, which by the way I believe we are going to have. Commodities will rise even more sharply hitting continued highs and then drop again as we go back into the recession.

I must stop now as I feel like I have been channeling some spirit who has guided my fingers on these keys of my computer. I don't know if it is a good spirit looking out for us or a bad one. I guess time will tell! :)

Both short and long term stock market outlook: Successful retest of the lows and then a Bull market rally

As today closes the week of the stock market, I was influenced in posting what I did today by a commentary yesterday on CNBC by a technical analyst who had a chart of the World stock market Index which showed all markets had started to drop in the May and June timeframe. This drop was consistent across the world and was not particular to the U.S. stock market. He said it implied this drop is a world phenomena and therefore it will take the world to solve it.

I have been following the Nikkei 225 stock market Index for some time but have never posted it and the Dow as 2 separate charts on my site until now. The main thing to compare is how quickly the Nikkei showed the downturn coming before the Dow has but both charts are similar when looking at a 3 year history. Below, in the first chart, the Nikkei 225 shows they have had a double bottom which was down to about 6,500 and if we return they will have put in a triple bottom. Usually triple bottoms are solid enough of a support level foe the possible beginnings of a real Bull market rally. This is what I will be looking for as the months going into the Fall will tell if this plays out.


The Dow chart below shows we did not have a double bottom yet and that is part of the reason I am quite confident we will retest the low of 6440 on the Dow, by this Fall and certainly by October Options Expiration, which occurs on Friday, October 16th this year. This could signal the moment of an attempt of a return to the beginning of a Bull market rally, which would go above the previous high end of the range of 9,300 on the Dow. This time the S&P 500 could go back above 1000 and it will be the time when I am buying heavily at hopefully the market lows. Time will tell if this scenario plays out as much is unknown as to the outcome of the crisis in the economy. But it certainly would set the stage for 2010 and hopefully a more optimistic outlook as the peak of the unemployment should give hope things are going to turn around mid to end 2010.

Call Options: From 10/21/03 to 6/9/09

I would like you to consider the state of the stock market now, as compared to all the years from October of 2003. My last post showed an unusually high number of Calls in the past couple of months compared to all of 2008. I decided to go back and look as far as 2003. The chart above represents the Number of all Call Options from October 2003 to the close of the market today. As you can see the sheer volume is staggering compared to all the years and there appears a significant trend up with a rising slope. Does this make sense to you given where this economy is right now? You will see the lows in the Fall of 2008 and then again in March but then the rise.

I'm just trying to make some sense of the apparent non sensical current market. I have not yet.

Pre-Market outlook for May 18th and more! UPDATE

European markets are up in oversees markets going inot the open this morning. The Nikkei however lost over 200 points in overnight trading. Dow, Nasdaq and S&P Futures are pointing to an up market at the open helped along by several pieces of news. One piece of news is about India. The election win, of the party of the Prime Minister Singh's Congress Party, has resulted in the biggest gain in India's stock market. It gained 17% and the Rupee gained 3.6% while the Bond market declined sharply, as many Indians see more continued growth and prosperity under the ruling party, going forward. Trading was halted in their stock market because of the sharp surge in the Sensitive Index or Sensex. According to these news reports, markets are euphoric.

The other news is about 3 Month LIBOR rates. It is at the lowest level in a long time. According to news reports, "LIBOR has dropped more than two basis points for the past four days. The last time it fell so much was in the four days through Jan. 13.

Some measures show financial institutions are still wary of lending after banks racked up more than $1.4 trillion of writedowns and losses since the start of 2007."

Also reported in the same article was this little nugget of related news: "The drop in Libor has less to do with rising confidence among financial institutions than it does with surging customer deposits, Jim Vogel, an analyst at FTN Financial said last week. Deposits at U.S. banks jumped by almost $400 billion in the past six months, contributing to reduced demand for loans in the interbank market".

So it looks like the American Consumer has finally decided to save rather than spend. It is my view that this is a once in a generation shift in the mindset of Americans and this trend will not change for a very long time, just as it had affected the generation who lived through the Great Depression and Crash of 1929 and the 1930's. So don't be looking to Consumers to just go out and spend anytime soon. It is also worth noting that the Consumer is responsible for 70% of the growth in the economy. If there were ever something to worry about, this news tidbit is it.

The market may rise at the open today, because of the India news, but believe me this will be short lived. Today after the Bell, Lowe's reports earnings and tomorrow Home Depot. As Jim Cramer, of CNBC's Mad Money, has pointed out on his show last week, they are both over weighted in their footprints in Florida and California and will give a read on the two States economies. Heck, I can tell you things are bad in California and the State especially manifests these troubles as unless the Ballot measures approved by State Legislatures is approved by Voters in a Special Election tomorrow, the State will have to lay off thousands of teachers, sell prime property assets to private investors, and release tens of thousands of prisoners from jails, as it can't afford to keep them jailed.

Bad times are almost a given here in California as it has exemplified the Sub Prime problem in State government by always borrowing to help someone without thinking of how to pay for it. The latest read on the Special Election Ballot measures is that they will be defeated and the State will face draconian measures under Governor Arnold Schwarzenegger.

UPDATE: 8:15am PST

Market opened higher as expected. Lowe's announced earnings and they beat analysts expectations but Revenues were down over 6%. And while the stock is up $1.17/share to $19.62, there are concerns that they have not reduced their inventory fast enough to keep up with falling demand. So the question is will this be just a 1 or 2 day rally for the stock.

Market Outlook for week of May 4th

I keep saying I need a clear signal to tell market direction and the question on your mind is, Did I find any? Before I answer that here's a summary of how I look at the past week and where we find ourselves, going into the week of May 4th.

The Dow closed the week at 8,212 and this was a gain of 136 points, or 1.7% for the week. The Nasdaq closed the week at 1719 and that was a gain of 25 points, or 1.5% for the week. Those aren't big gains for the week by any measure. It felt like we were up a lot more given each day the indexes seemed to be up. Again, it feels like a smoke screen to me. The big question is how was the corresponding Volume of trading for the week. It was down again this week. So for the past 3 weeks Volume has declined steadily each week in the Dow stocks and the NYSE. However, the Tech sector Nasdaq maintained a bright spot with steady volume these past weeks with the index rising. This is the bright spot in the market to me and points to the Tech's going to lead us out of the recent big market decline from the Fall.

I have put several 6 month charts ahead of this post, worth clicking on. The first chart is of just the Dow to show the decline in Volume the past week. The second is a comparison of the Nasdaq Composite Index as compared to the Dow and the third is a comparison of the Nasdaq Composite Index as compared to the SP500. The gains of Technology seem to indicate this might be where to have been invested.

The signal I am looking for is Volume. If Volume spikes up, it won't matter what direction as direction will be clearer. Right now it is a rally lacking conviction. Now this can be a good thing as well. Many are skeptical, including yours truly, that the gains are real and many believe that we are not in a Bull Market Rally, but instead are in a Bear Market Rally. If the market can stay the course, as it has since the lows, it will eventually convert the Bears to cover their shorts and we will be on our way to a real Bull Market. But we are clearly not there yet.

The Put to Call ratio closed at 0.82, not low enough to give a sell signal but not high enough for a convincing Buy signal. To me the Put to Call would need to get over 1.05-1.20 to convince me to Buy. And it would have to get as low as 0.55-0.60 to Sell, or buy more Shorts. Some news will spark both this move and the Volume spike, but we still wait for clarity.

The news of this coming week regarding the Unemployment Rate for April has already been discounted. It will show a higher rate but a slowing of the decline over previous months. It is my opinion it will be reported at 9% or higher, getting ever closer to the 10% double digit rate most pessimistic scenarios had surmised. I do not expect this to tank the markets and do expect them to take the number in stride. More questionable will be the market's reaction to the Stress Test results expected to be released on May 7th, the day before the release of the Unemployment numbers.

If you look at the drop in Volume of the Dow index, and look at the Volume of Citigroup dropping this week, you can see a correlation. many banks had weaker Volume this week over the previous week. This can easily be seen by looking at a 6 month Chart of the volume of the Financial ETF, FAS. When they announced earlier this week that there are rebuttals by the Banks to the Treasury's Stress Test data, it quieted trading for both FAS and the short FAZ.

Add to the mix, Warren Buffet's latest comments on Real Estate and it provides an interesting back drop for the coming week. Here's what Buffet said, "There’s no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing,” said Buffett, 78, in a Bloomberg Television interview before the Omaha, Nebraska-based company’s annual shareholder meeting today. “You never know for sure, even if there’s a leveling off, which way the next move will be.”

So I leave you hopefully convinced that the market direction is still not clear, even while the Dow and S&P goes a bit higher. The only real good news is that Technology seems to be the bright spot and this is substantiated with good solid Volume. So if you believe this rally is for real, make sure you own some good tech companies in your portfolio or at least some dogs that show some life. But remember my overall advice, no matter what, preserve capital!

Bloomberg Survey

================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Construct Spending MOM% 5/4 March -0.9% -1.6%
Pending Homes MOM% 5/4 March 2.1% 0.0%
ISM NonManu Index 5/5 April 40.8 42.0
Initial Claims ,000’s 5/7 2-May 631 635
Cont. Claims ,000’s 5/7 25-Apr 6271 6350
Productivity QOQ% 5/7 4Q -0.4% 0.8%
Labor Costs QOQ% 5/7 4Q P 5.7% 2.8%
Cons. Credit $ Blns 5/7 March -7.5 -4.5
Nonfarm Payrolls ,000’s 5/8 April -663 -600
Unemploy Rate % 5/8 April 8.5% 8.9%
Manu Payrolls ,000’s 5/8 April -161 -157
Hourly Earnings MOM% 5/8 April 0.2% 0.2%
Hourly Earnings YOY% 5/8 April 3.4% 3.3%
Avg Weekly Hours 5/8 April 33.2 33.2
Whlsale Inv. MOM% 5/8 March -1.5% -1.0%
================================================================

Market Outlook for May 1st and beyond

Friends and visitors, I wrote a note to a close friend tonight and thought I should post this here about my view of the market today and what I expect in the next week or so. Here's what I told him.

"I have been watching the Put to Call ratio and it has been relatively low which means higher probability of correction than a market advance. It closed today at 0.85 and opened at 0.65. I put a chart on the Blog on April 18th showing the recent year and a half range and when the number approaches the low of the range it is a sell signal and if it is at the top it is a buy signal.

So best to just sit and be as patient as one can right now, until we get a clear signal. The Volume today was a little ahead of yesterday and the market closed down, not up. When volume increases and the price drops, it is a >u>bearish sign. One other thing. I have been tracking Insider Trading and I can tell you as fact, Insiders are selling more than buying, and the amount of cash raised by selling is much more significant a Dollar amount. It has been that way since the market dropped last Fall and nothing has changed that. If Insiders saw a better picture of the economy going forward, they would be buying, not selling."

As I wrote in the previous post, the Stress Test results for the 19 largest banks are not going to be released until the end of May. Banks are most likely under capitalized as we have heard this past week by as much as $1 Trillion. These bank assets need to be dealt with by either creating good vs bad banks or something like Chapter 11 bankruptcy to wipe out shareholders, instead of using more government money. But then we are back to a lack of confidence in the banking system, a possible run on the banks or complete collapse of the banking system and President Obama isn't going to allow that to happen while he is in charge. Toxic assets are still on the books and no lipstick is going to make that Pig look any better and that is the problem!

Speaking of Swine Flu, it seems to me that current technological advances in communications using the internet, cell phones and television, has allowed healthcare officials to get a very quick handle on this outbreak, which has the effect of minimizing its affect on humanity. Contrast that to 1918, where it took weeks and months to realize what was going on and to mobilize precautionary measures for use by the public. It was too late then and I lost my Mom's parent during that period, but now, everyone in the world knows to wash their hands frequently, cover their mouths when coughing and avoid large gatherings or enclosed spaces. VP Joe Biden got himself into trouble today, for saying what everyone knows was the truth. There is something very refreshing about having a VP that is wired to just say the truth and can't help himself. You got to love him!

The Markets in review and outlook for week ahead

Many were surprised at this week's market action. I know I was! I had predicted a market pullback last week going into this one and had also said mid week that the range of the Dow and S&P 500 has gotten much tighter and I did not thing we were going to go to higher than 8,500. This tightened this new range on the Dow from 7,500 to 8,500. I also said we had come to almost 8,200 and to me it was riskier to stay bullish then it was to believe we should go down from here. So where did we end up now that we have the advantage of hindsight?

First ask yourself this question. Did the market go up steadily this week? Don't look it up just think how you felt about the week. Ok, here's how it ended. The Dow was up only 48 points for the entire week, closing at 8,131 compared to a week ago Friday when it closed at 8,083. But didn't it "feel" like it was going up all week? How could it move up so slowly to only a 48 point gain for the week? To me it was a very controlled market. By controlled I mean the big Institutions controlled the market action this week very tightly. Why, you wonder? Because everyone who could fund and IRA or Retirement account did so, and the inflows, although less than other year's funding, because of the more unemployed, still represented new money. They did not want to scare you just yet as they want this new money to be invested into the market so they can go short and take it without causing much more harm to the overall market. They just want your money.

What was the play in my mind this week. It was raising cash by selling and/or buying ETF Ultra Short TZA or SDS or any of those instruments which are Short the market. From here ahead, I don't see a precipitous drop back down to the 6,440 low on the Dow and corresponding other indexes like the S&P 500 or Russell 2000. But I do see us meandering lower now that the psychology seems to have changed around to this recession is going to end and things are looking better or there is a "glimmer of hope" out there. That means you can buy these ETF's near their lows now and watch them rise as the market pulls back.

I purchased the ETF ULtra Short, TZA, this week several times building a very decent position with the shares. My last purchase was at $31.97, which is very near the new low for the ETF of $31.66/share yesterday. I expect to make at least $15-$20/share on this ETF before long. Remember back in the beginning of March, this ETF was at a high of about $112 and at the end of November was above $150/share. So there is plenty of opportunity here to make some very high profits. The risk is that the market is now going to continue to climb back up to 9,000 and things are going to be much better in the economy. Either way it goes, we win in a sense, don't we.

You will notice there are 2 charts I posted this week. One is a chart of the Put to Call ratio (if you click on it it will enlarge and then go back a page to come back here). You will notice that in my view there are new Buy and Sell levels to consider in using the Put to Call ratio as a tool. Any movement outside the last set of red bands signal either a Buy or Sell. If it drops low, Sell and if it goes above the upper red band Buy. You can see there has been a shift down on November 19th and 20th, the last clear buy signal at 1.40 and 1.31 respectively. This was when the Dow hit 7,500 and then went back up to over 9,000 the first week in January. There was a Sell signal on February 9th when the Put to Call ratio hit a low of 0.67, which began the descent of the Dow from about 8,000 to the low of 6,440 culminating on March 6th and 7th. You will notice the signals from the Put to Call ratio come a day or two ahead of the market move.

I also have said to watch Gold prices as a tell of market direction. I had expected the price to go back up over $900/ounce this week and stay there but it didn't, as the market did rise instead of drop. As you can see from the other chart both Gold and Silver dropped in price this week. Both metals are used not only as a currency play but is used in manufacturing. If you look at how both Platinum and Palladium acted this past week and over this 3 month period for each of these charts, the prices have steadily risen. Something must correct here. Either Platinum and Palladium are going to have a significant pullback, which I doubt, or Gold and Silver prices are going to start to reverse course and increase again. I think that is a more likely outcome given we have set in place prices of all commodities to rise as inflation rises due to the stimulus efforts of countries around the world. Inflation is the major concern of world leaders going forward.

I realize this is a much longer post than usual about the market, but I felt it was necessary to get people to be grounded again in reality. Things are still very bad. The unemployment rate will get worse. Foreclosures will rise both in Residential and now Commercial Real Estate, not only because of the increase in the ranks of the unemployed, but also because more loans will be re written with higher interest rates than many had during the Sub-prime lending years. Those mortgages are set to move to higher interest rates throughout the remainder of this year and next year, compounding the present housing problems We are far from being over this problem. Invest with an eye to taking profits when available. The mantra should be preserve Capital for the next year. On a final thought, today's San Francisco headline is that the Unemployment rate for California for March is now 11.2%, the highest in 68 years.

I also invite you to take the mini poll on the right margin if you have not done so this month. I have data back to December from this poll and I am trying to see any trends in people's view of the recession. Thanks for the visit and come back when you can. You can also subscribe to this site by clicking on the Orange RSS logo. You will be notified via email every time I post anything new. Thanks!

Market review and outlook for week of April 6th, 2009

The market is down at the time I am writing this today. However, given the Unemployment rate rose to 8.5% for March the markets are taking the news remarkably in stride. The Dow yesterday went over 8,000 for a brief time and closed at 7,978 while the S&P closed at 834.

As I stated last week on March 28th, and I quote, "So what's ahead for the week of March 30th? I am overall still optimistic on the market. Many see this as a Bear Market rally and can't see the Dow and S&P 500 going much higher. While I agree that this is still a Bear Market rally, I do believe we can go as high as 9,000 on the Dow before we pull way back again." I also said this, "I am hopeful this coming week of staying above the 50 day Moving average, but as I have cautioned before, if you are trading, pay attention as this market can go in either direction very quickly. One indicator next week will be the Unemployment rate and we already know it won't be good. But it is a look backwards..." It seems this latter statement regarding the Unemployment was close to what has transpired today. I don't see any change from that view.

The Put to Call ratio went to a high for the week of 1.14 on Monday, but since has dropped to about 0.72 today. The VIX Index is also quiet now at about 40. It seems to me that shortly those who are Short on this market are going to wake up and see the markets rise and finally have to cover giving the market its next surge back up to stay well above 8,200 on the Dow and 850 on the S&P 500. The markets are not going to sprint to above 9,000 anytime soon. But we will steadily gain a few percentage points at a time over a week's duration. It will help return some confidence to markets and to the Consumer eventually.

I believe this uptrend will take us into the summer months and we will remain within the range of 8,000 to up to 9,300 until September and October when we all will know if the strategy to get the Banking system and economy back on it's feet. If we haven't by then, the markets will retreat and retest the lows at the 6,400 level. So if you think we are going to eventually make it, then it is time to start buying back into this market with fresh funds, as watching from the sidelines is going to feel like a huge missed opportunity.

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 for week of March 23rd (UPDATE Monday rally))

Well Friday had me scrambling as Options expiration occurred Friday on what was called Quadruple Witching Day. I was hoping for a rise up on Friday but it wasn't to be had. We did finish 2 full weeks up on the Dow, S&P 50 and Nasdaq but as you can see from the chart above I believe now we will have a better than 50% chance of pulling back and retesting the lows. I would like to be wrong here as we would all make more money. But this rally stalled in my mind and the news of the AIG bonuses added a negative tone to the news. President Obama is trying to reassert his focus on his agenda but the AIG sidetracked it and it is going to be difficult to reagin positive momentum as many are finding bonus issues with J.P. Morgan and other Banks as well and this will keep the story front and center for a while.

The Dow ended the week at 7,278, the S&P 500 at 768 and both indexes could not get over and stay above their 40 day Moving average. They got above it on Wednesday but pulled back. The Nasdaq closed at 1,457 and closed just above its 40 day Moving Average but just barely and I expect it to pullback below it as well. We must go above the red downtrend line to start this move up and we made an unsuccessful attempt at that, on Friday.

This is why I am seeing the possibility of a retest. This last leg up from the lows may be setting up a double bottom or a "W" pattern and if that is true we have about a month or two before we move up from this range of 6,440 to 7,600. This is why I ventured in to buy the ETF Ultra Short, TZA, again and take some profits. I don't know what is going to really happen and neither does anyone else for that matter. It's all an educated guess based upon a host of facts one puts together to tell a story, first to oneself, and then to others. I try to get a better record than just a 50/50 flip of a coin. You be the judge as to how I'm doing. It's all here for you to see and comment on if you so choose. I'm just happy you took the time to come here and read this. So thanks and hope you are not disappointed.

UPDATE: 4:45am PST March 23rd.

Today Futures are up significantly on the expectation of Treasury Secretary Tim Geithner's plan for toxic assets the banks have. The Dow is up over 200 in premartket and European stocks are all up. But remember this, much is riding on this plan and the market could be down 300-400 today, if the plan is not accepted by Wall Street. Watch to see if we have a significant breakout above the Red downtrend line today. It could be a barn burner in either direction.

To break the downtrend line we would have to cross above 8,000 on the Dow and over 805 on the S&P 500.

UPDATE 9:00AM PST

The market has rallied on the Geithner plan and the Dow is up 308 points to 7.595 while the S&P500 gas crossed over 800 to 802. So far so good.

Pre-Market March 11th 2009: Quiet but up

Market looks quiet this morning but the trend and Dow futures point up. One surprise this morning is that the 3 Month LIBOR rate has been creeping up from a 1.09% to now at 1.33%. Hopefully this will not go higher as it can freeze credit more if it does.

Put to Call ratio yesterday closed at 0.73 and on Monday it closed at 0.74. The VIX Index closed yesterday at 44.37 which is substantially lower than the latest highs in the mid 50's. Markets in Germany and France, while the UK FTSE is down slightly. The Nikkei rallied last night, rallying for a gain of 321 points and closing at 7,376. Gold is up only about $2/ounce in pre-market and is just below $900. All in all, I believe the markets will still rise and the rally continue the rest of this week.

Market outlook for March 6 and the week ahead

Friends, the more we think things couldn't get worse they do. Today the Dow hit a new low closing at 6,594 and the S&P 500 closed at 682. I have been looking at where we are and the mood of Wall Street and Main Street. Too much bad news surrounding the banks and the entire banking system. There are many stories I could place in this post but all it would do is to scare you even more than you already are. If we were united to overcome these problems I would feel better but unfortunately we continue to be divided by the Republicans wanting to see President Obama and his Administration fail. The problem with that approach is that it is taking down all of America at the same time.

I am no prophet and I can't really predict what will happen here. I still have a view that for every reaction there is an equal and opposite reaction. I believe in a world of abundance when others see scarcity, hope when others see despair. Think for a moment how must those who lived through the Great Depression were feeling for a number of years. It didn't affect everyone but enough so that you couldn't hide from it. Here we are facing an environment where assets are dropping at an alarming rate. There is one way to stop it if you are invested in stocks; sell all of them. You may have lost any chance to regain losses but you will preserve what you currently have. If you do that, my belief is that you are exchanging fear for the illusion of comfort as you will have dollars that are depreciating in value and that is nothing you can do anything about. You could convert your cash into precious metals like Gold or Silver, but have you ever tried to buy groceries with them?

No my friends, I think you need to have enough cash to live for at least 6 months to a year and you should weather this downturn. If you don't do your best to accumulate it through working more hours if possible, getting a second job part time or selling some assets. We will rebound, but when we do, many will be skeptics and will watch the markets rise while staying in cash. If you own some stocks and the market does rise, you should benefit. It will turn when some larger investors believe the market is really going up and greed will drive it further.

If the stress of the markets is getting to you, don't look at it for a while. Take a break from watching it, go on a short trip, do something good for yourself and settle down. I wish you the best.

UPDATE 5:30am PST March 6th
Jobs report came out a minute ago. First remember that this is a look backwards over the past month and doesn't necessarily predict the future. So the Unemployment rate for February was 8.1% versus 7.6% for January. February Non Farm Payroll was down 651,000 jobs. Previous months Non Farm payrolls were revised downward. Worst data since 1982.