It's official! The PC ratio reached 13 consecutive days greater than 1.00

It's official, the Total Put to Call ratio of Equities and Index Options has now exceeded 1.00 for 13 consecutive days, as of the market close yesterday. As mentioned the past 3 days, this is the first time this ratio has had this many consecutive days greater than 1.00 since June 26th, 2008.

It turns out that was the quiet period before the storm to come over the next 9 months. That was a period where we were just learning of the concerns of the Sub Prime problem affecting our economy. and by March of that next year the Dow crashed from the 11,500 level down to the 6,500 level, as is shown in the chart below.

Whether history will repeat itself this time around is anybody's guess. But with all the tampering of the monetary policy by the Fed and a weak stimulus package having little effect on job creation, God only knows where we are headed in the next year. From my vantage point it doesn't look good unless the country has the stomach and courage to do another real stimulus package for this economy like was done during the Great Depression. We need a real new WPA program. But the wealthy and their puppets in Congress want nothing to do with it. As long as they already have theirs socked away, why take the chance and invest in lower income Americans called the Middle Class, they say. I say we had better! What do you say?

Met a really nice guy last night who writes Financial books and has edited some of the classics on Trading and Technical Analysis. Had a great time talking with him. A shout out to Charles!

It's the economy stupid! Boom, Bust or Stagnation?

Many are wondering when the economy will be coming back to pre recession levels anytime soon. I gave this some thought and when you look at the math, it looks dismal. Let’s take a look at it.

First, let’s begin with the Consumer. The Consumer has been responsible for 70% of the spending in the country. The other 30% comes from the Business community buying from each other. Since nominal GDP (Gross Domestic Product) of the United States was $14.2 Trillion dollars in 2009. Assuming the Consumer contribution, of 70%, that comes to $9.94 Trillion dollars. Ok, now let’s assume that even though the numbers I presented are for 2009, let’s assume there was no recession that year. (The reason I say that was because the nominal GDP for 2007 was $13.8 Trillion dollars, not far off from 2009.)

The Unemployment rate in 2007 was only 4.6%, while today it is 9.7%, and as high as 20%, if one counts those not collecting benefits and have given up looking for work. There are about 237 Million people in the Civilian non-institutional population and the Civilian Labor Force has about 153 Million people. The officially unemployed total about 15 million people.

In 2006, total discretionary income totaled $1.7 Trillion dollars in 2006. Nearly 78% of all discretionary income is held by households earning more than $100,000. “While the percentage of households with discretionary income has risen over the past several years, purchasing power remains concentrated in the wallets of the affluent,” said Lynn Franco, director of The Conference Board Consumer Research Center.

So, if you take approximately $10 Trillion spent by Consumers, and then figure in the unemployment rate of approximately 10%, you have about $1Trillion less dollars for Consumers to spend. Add in the fact that 78% of all discretionary spending is from households earning more than $100,000, and it is even a higher number than $1 Trillion. That doesn’t include the businesses that don’t have money to spend buying other’s equipment, which represents the 30% of spending done by business. There could be another $1 Trillion less spending by business. That’s a huge hit on the economy.

If you put the $2+ Trillion out of the economy and then add in the Governments $0.8 Trillion Stimulus package, you can see we still are a long way off to making up the difference. As long as we continue to have 9-10% Unemployment rate and higher real Unemployment, we will not come out of this mess anytime soon. This implies to me not to believe the stock market will continue to rise. As a matter of fact, when these inferences become more recognized as truth, we may have a double dip recession. We will know by September/October this year whether that plays out. Oh, and by the way, conveniently, this is just before the November mid term election, where the Republican Party hopes to make much gains and take over the Congress. It will be the time when Democrats are more vulnerable to losses. Stay tuned!

Double Witching Friday: Will the stock markets hold? UPDATE

This is the question of the day and many are nervous it won't. There isn't much data to point to, to answer that question. The only data I could bring forth today, as a piece of encouragement, was that the VIX Volatility Index closed at 47.08, down 1.38, as it still stays under 50. When the Volatility Index comes down it doesn't mean that markets will go up, it just means that people aren't panicking and selling like a mob, they are much more calm about it.

This latest market drop, back to the November lows, looks well managed, in my view. The daily moves are modest and not like what it was like when we first reached the lows, back in November, when the VIX was between 70 and 80. I tend to think it is Wall Street wanting to send a message to the politicians in DC that they don't like what the Obama Administration is doing to solve the Credit crisis, the Mortgage crisis nor the Stimulus package. The problem with this point of view is all those voices have come up with no new ideas other than reducing taxes. It is the only action most right wing Republicans can come up with.

So I still believe we are going to hold around this current level. We may go as low as 7,200 on the Dow, When I first put the chart together projecting the lows of about 7,300 when no one thought we were ever going that low, I also said it could go to 7,200. The reason for the discrepancy was that the uptrend line which I constructed and analyzed started from about 1975 to the mid 1980's. I did not enter all the data in a spread sheet and use an equation to determine best fitting line. I used existing charts for the period of 1970 to September of 2008 and drew a line that while imprecise hit at around 7,200 to 7,300. So when I said we will hold, I really believe we will. We just need to get through today rightfully labeled "Double Witching" for this month's Options expiration. It will be a measured test not a panic drop but the shorts want to extract every penny they can from these lows. Keep the faith!

UPDATE: 8:45am PST.

Well we have gotten as low as 7,311 today and still appear to be holding, and the S&P 500 has gone as low as only 762, which is also good news. The VIX has risen to as high as 50.36 but went back below 50 again.

UPDATE: 10:00am PST.
I wanted my readers to know what I am currently doing. I have just purchased additional shares of the ETF Ultra Long of the S&P 500, symbol SSO for $18.48/share and also purchased additional shares of the other ETF I own, symbol TNA, for $17.49/share.

The VIX is now up over 51 and the Dow is down to 7260.

Market close Feb. 17, 2009

Wanted to update everyone, as I bought more shares of TNA at the close for $21.08/share. Market got nasty in last 15 -20 minutes closing at the lows of the day. Dow as off 298 to 7,552 and the S&P 500 closed at 789. This after President Obama signed the $787 Billion Stimulus package into law in Denver, Colorado.

The President, during his remarks before the signing, said that this was the beginning of the end of the loss of jobs. Buyers walked away from the stock market today but there was not panic selling. Volume was slightly higher today than there was on Friday.

The Dow did reach it's previous 52 week close which occurred in November. Major news still expected later this week and by all appearances it appears we may go lower. But I still feel confident we will not go below the 7,300 level as a close on the Dow. Can't promise obviously but it is a new day with the Obama Administration in control. No matter how bad the market appears right now, I am still thrilled we are not being led by former President Bush and the greedy Wall Street insiders and crooks of that Administration.

Who helped pass the Stimulus package in the Senate? You can thank the people of New Hampshire, Virginia, New Mexico, North Carolina, and Colorado!

Hard to believe isn't it. Yes, I am pleased at the extra praise rightfully given to Senators Susan Collins and Olympia Snow, Republicans from Maine and Arlan Spector of Pennsylvania voting for the Stimulus bill. They really do deserve the praise for standing up against the Republican leader of the Senate, Mitch McConnell of Kentucky and other Republicans but let's not also forget that if it wasn't also for new Democratic Senators elected in November the bill would never have passed. Here's the impact of your votes:

- Jeanne Shaheen new Democratic Senator of New Hampshire, who won a seat from a former Republican Senator John Sununu,
- Mark Warner, new Democratic Senator of Virginia, who also won an open seat which had been held by a Republican,
- Tom Udall new Democratic Senator of New Mexico who also defeated a Republican GOP Rep. Steve Pearce
- Kay Hagan Democratic Senator of North Carolina, who defeated Republican Elizabeth Dole and
- Mark Udall new Democratic Senator of Colorado who also defeated former GOP Rep. Bob Schaffer. Mark Udall is a cousin of Tom Udall.

So thank you my friends from New Hampshire, Virginia, New Mexico, North Carolina, and Colorado. Without you this Stimulus package would have certainly failed the final vote. And don't ever let anyone tell you again that your vote doesn't matter. The elections of 2008 changed all that forever. Just ask the soon to become Senator Al Franken, Democrat from Minnesota, who is about to defeat Republican Norm Coleman. Here's the latest on that race:

Al Franken gets boost over Norm Coleman in Senate race
Minnesota judges say Coleman hasn't shown a widespread absentee-vote problem.
Associated Press
February 14, 2009

St. Paul, Minn. -- The judges in Minnesota's U.S. Senate trial said in a preliminary ruling Friday that Republican Norm Coleman had not yet shown a widespread problem with absentee voters being denied the right to vote.

The three-judge panel ordered that rejected absentee ballots from 12 of 19 categories should not be counted in the Senate race.

Coleman, who is trying to undo Democrat Al Franken's 225-vote lead, had wanted to count ballots in all but three of the categories.

Coleman had argued that thousands of rejected absentee ballots were excluded inconsistently and should be counted, but Friday's ruling would limit the total number of ballots to be reviewed for counting.

"The facts presented thus far do not show a wholesale disenfranchisement of absentee voters in the 2008 general election," wrote judges Elizabeth Hayden, Kurt Marben and Denise Reilly.

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.

Market Outlook for week of Feb. 9th: Up & Down in a tight range until the Stimulus is passed.

Yes, we are doomed to uncertainty for the day today and possibly the next few days as the Stimulus package is in its final stages before the approval of Congress and the signature of the President. When the market closed on Friday we thought we might have a deal Friday night in the Senate and a vote, but we didn't. In anticipation the market rose Friday about 200 points. Now we know there has been posturing again over the weekend and only 3 Republican Senators look like they will sign it. Sen. Susan Collins Republican of Maine looked frustrated with her Republican colleagues on Friday night for not joining her other two colleagues, Sen. Arlan Spector and Sen. Olympia Snow, also of Maine, in joining their bipartisan move and be willing to add their endorsement.

Pre-market reflects this dichotomy, as the Dow is down about 50 points. This evening President Obama is taking his message directly to the American people in hopes of having them flood the Congress and Senate with their voices by emailing or calling them to get support for his bill. I don't think the strategy will work as most of the Republicans are still in Republican strongholds and their seats are safe with their constituents. But President Obama feels he must try and so he will. It should be interesting as the Oval office does not allow him the live audience to give a stirring speech as he would live with 10's of thousands of people in his proximity. He will get the Bill passed so their is no doubt about that. So when all is said and done the market will rise when it does.

I forgot to mention on Friday, but I bought back into MGM, as the price was irresistible at $6.20/share. I expect this stock to go back to $10/share on a strong Bear market rally coming to a neighborhood near you soon. I will not try to buy TZA in these small moves down and try to time the market. It would be foolish to do this during this week. I will keep my TNA and SSO and will not sell them although, depending on any pullback, I would add to the shares I own with additional purchases. I currently have about 6,000 shares of TNA and 3000 shares of SSO.

The Stock Market: Week ending 2/6/09

So the summary for the week is as follows: The Dow closed the week at 8,281, which was up 280 points or 3.5% from the previous week's close. The Nasdaq closed at 1,592, which was up 116 points or 7.9% from the previous week's close.

Here's a summary of the stocks I have bought and where they stand at week's end:

TNA was purchased on January 21st at a price of $23.36 and today it closed at $27.89 for a paper gain of 19.4%. SSO was also purchased on January 21st at a price of $21.57 and today it closed at $24.25 for a paper gain of 12.4%. I also sold TZA on January 21st as well as SDS. TZA has dropped 26.7% since my selling of the stock and SDS has dropped 15.9% since the selling of the stock. It seems the strategy of buying the ETF Ultra Longs near the bottom of the range of the Dow, S&P500 and Nasdaq Indexes, is paying off.

Additionally, my purchase of Apple stock, symbol AAPL, on January 7th for $86.50 and additional shares at $78/share on January 14th, has had a nice paper gain closing today at $99.72/share. That's a paper gain of 15.3% and 27.8%, depending on which dates the stock is purchased. My average purchase price is $83.50/share.

Disappointing has been my purchase of Ford Motor Co., symbol F, with an average price of $1.90/share back on January 24th and January 28th ($1.80/share and $2.03/share).

Much depends on what happens to the vote on the Stimulus package which looks like it will occur on Sunday. If there is a semblance of bipartisanship, it would be a good thing for the country. The The Unemployment report today was an eye opener. It showed unemployment at 7.6%, with 598,000 losing jobs this past month. This may have put the necessary fire under elected officials.

Watch my post on Sunday night and Monday morning pre-market to get a sense of the upcoming week.

Where to put some Stimulus?

Everyone is talking about a stimulus package needed to create jobs. But no one has mentioned the fact that we had a huge need that has been forgotten. It was to rebuild all the infrastructure in New Orleans from Hurricane Katrina. Another major project is fixing the levees around the City of Sacramento. Another is to change city piping carrying our fresh water in all major cities. In the west, we have significant water shortages and could use better pipes to prevent loss as it is carried to our homes.

Look, there's plenty of things needing fixing. Tax cuts don't do it for mist Americans because the salaries aren't that hugh anyway. Besides the kinds of tax cuts being discussed help those making over $250,000/year and disproportionately favor the wealthiest Americans. It's time to stop that. Want to help give back confidence to investors and the American people? The pass legislation to claw back the bonuses and excessive compensation from firms getting TARP funds from the Government and the CEO's that lead them.

The Stimulus package: Today there was a shift towards compromise

Markets have reacted positively to the work of finding a compromise on the Stimulus package, led by two well respected Senators, Sen. Susan Collins (R) of Maine and Sen. Ben. Nelson (D) of Nebraska. As soon as the two of them spoke to CNN, about what they were doing, and Sen. Collins said she believed she could get it done today, the markets reversed and started to go up. The Dow now is sitting at 8,082, up 129 at 11:30am PST. Indeed, this is what all Americans want, a sense of reasonableness from their elected officials. Sen. Collins gets it, but those hard core Republican Senators and Representatives from strongholds around the country from States like Texas, Mississippi, Alabama and Kentucky, would rather feed their own egos, and help create a defeat for this new President, than to truly compromise and work with him. The Democratic far left from strong holds of people the likes of Nancy Pelosi, has its own people also who don't just get it. The world has changed and they are still playing the game of politics like everything is the same. They all need to wake up to the realities of a new day.

Market outlook for Feb 5th and 6th: Update 2

Took a good look at the charts for the past 3 weeks for the Dow and the S&P 500. Looks to me we formed that "W" pattern but the second leg of the "W" pattern is lower than the first leg. It suggests to me the markets most likely will go down now the next several days. How low we go depends on the results of the Jobs report tomorrow. If they are bad showing at least as bad as last month, we will drop and possibly retest the previous lows on the Dow of 7,392 and 750 on the S&P 500. If the results are better than expected we will have a short rally up. However the news that will determine where we are going is the Stimulus Bill and how it gets through the Senate. It is how the process is perceived and how the President manages the news about this and how he uses the Bully pulpit. Time will tell, but we should know by a week from now.

My choices are going to be these. First, if the market drops down to retest the lows, I will purchase additional shares of the ETF's TNA and SSO. I will add shares of Ford, symbol F, and also Apple, symbol AAPL, continuing to add shares. I will not try to gain a little on the drop by buying TZA nor SDS as we are at the low of the range for these Indexes and I can't time the next leg up.

UPDATE: 5:30am PST

Jobs data out shows an increase of 41,000 jobs lost last week bringing weekly claims to 626,000 jobs lost. Productivity is up 3.2% and Continuing Claims have now reached 4.78 Million jobs.

UPDATE #2 8:08am PST

I purchased additional shares of Ford at $1.90/share, more shares of TNA for $24.90/share and more shares of Apple at $93.99/share

Market action Feb. 3rd, 2009: A waiting game

Markets are quiet, volume is low and volatility has decreased. All eyes are awaiting 2 important bits of information. First, what happens on the Stimulus package in the Senate will be very important as not only is it affecting the market but will have an impact on how President Obama's Administration was successful or not in his jawboning Republicans and Democrats to get a Bill passed. The other information will come out on Friday and it is the Jobs report for January. Until these two independent variables are known, the market will be dullsville.

The economy: Lest we forget how scared we were just a few months ago.

Yes, it hasn't been that long ago when we were having a run on banks and Lehman Bros. went bankrupt, AIG, the insurance giant, also faced failure and we all saw the sky falling. As a matter of fact it was Sept. 15th to be exact. But here we are this morning with a new President who wants to change the politics of the past and get a more bipartisan spirit going in the country and both Party's haven't gotten the message, as the House bill on the stimulus passed with not one single Republican vote. In addition, today the Michigan Consumer Confidence number for January came in at 61.2%, up from a December number of 60.1%. GDP for the 4th Quarter was down 3.8%, the biggest drop in over 25 years and the stock market doesn't know which way to go. It was up at the open about 35 points and now is down 55 points but it is anyone's guess where it is going to wind up today. So what's going on?

In my view, we aren't as afraid as we were back in September and October. Call it the Obama Effect or just fatigue, but there is less fear today than there has been. This is compounding President Obama's effort to get everyone behind the much needed stimulus and may be partially the reason why so many Wall Street Exec's got big bonuses which Obama is all upset about. Would they have dared do this if fear was the dominant emotion. Unfortunately greed returned. In order for president Obama to really get the country behind him in solidarity, there must be a higher degree of fear present than there is today. That means more pain may be needed for all of us.

It certainly would shut the Republicans up, as everyone would be clamoring for President Obama to act, just as they did with President Bush and former Treasury Secretary Paulson and even the Democrats led that fight in a bipartisan way. Again it was the Republicans complaining about Bush's actions and being idealogues rather than offering better suggestions than just let everything fail as that is the Free Enterprise market. If they had done that everything would have been lost and we would have been entering a worldwide Depression instead of a bad recession.

Stimulus package? "What's the hurry" Senators tell America

Well we got our answer today regarding the stimulus package a President Obama was expected to have ready to sign on Inauguration day, Jan. 20th. According to Sen. Harry Reid and his Republican counterpart, Sen. Mitch McConnell of KY, they will most likely need to call hearings on proposals as the Republicans and some Democrats are a acting a bit cautious about giving a blank check to President Obama. The Democrats just don't have the votes to get something passed and won't unless they can get it to look more bipartisan.

I think the markets will react more negatively to this news, especially as we get closer and closer to Inauguration day without an approved stimulus package. Most economists believe we need a package now and we can't wait a minute longer than necessary. This is going to negatively affect investor psychology.