The Commentary       Today's date September 2, 2008
The e-mail part of the commentary contains information about current trades which are rarely posted here. Hope you  enjoy the following commentaries and have a great day!!  Good trading!!

Summer is officially here being June and I have decided that with the market barely breaking a billion shares per day the doldrums could last for awhile so I’m going to move to my summer commentary times. This means they could come midday or not at all depending on how boring the market is! I am still watching and trading of course and if we do see some action I’ll be reporting it!!! I’ll also try to do a weekly commentary to cover possible movements.

Tuesday, September 2, 2008

The market popped up this morning as oil fell hard because the storm hitting the Gulf coast wasn’t as bad as expected The Dow saw quick highs of +250.00 points, S&P 500 +21.00 points and the Nasdaq Composite +60.00 points. At one point oil was off almost -$10.00 per barrel but when it came back the market started to fall. Volume was incredibly light on the upside anyhow so it wasn’t surprising. When the market went red in the final hour the selling really started and the Dow saw lows of -75.00 points, S&P 500 -11.00 points and the Nasdaq Composite -30.00 points.

At the close the Dow was down by 26.63 points to 12516.92, S&P 500 -5.28 points to 1277.55, S&P 100 -1.17 points to 589.66, and the Nasdaq Composite -18.28 to 2349.24. Oil closed closed down -$6.66 to $108.80. It appears that oil may be headed to the $100 level once again which will be interesting for the price of gas!

Now that were in the dreaded fall trading period, the bears are out with their coming doom forecasts. The Dow has finished September with gains only 35% of the time in the past 50 years. The average monthly loss for the Dow is around 1%, which isn’t that bad in actuality. Because there wasn’t the internet or computers back then, I think it’s important to look at current time periods. For example, four of the past five Septembers have been positive for the S&P 500 with 2006 seeing a +2.5% gain and last year's +3.5% rally. That is pretty good but what it also says is that we could see another great trading opportunity.

Manufacturers cut back production slightly in August, the Institute for Supply Management said. The ISM index was a bit lower to 49.9% in August from 50% in July and was unexpected. The forecast of estimates was for the index to hold steady at 50% and readings below 50% indicate contraction. Economists said the index has been sending a similar signal over the past year. There are some areas of weakness but the export sector is putting a floor underneath the index. The new orders index rose to 48.3% in August from 45% in July while the prices paid index pulled back in August.

The economic calendar gets busy by the end of the week. Tomorrow we get the latest numbers regarding July’s Construction Spending, and the August Institute for Supply Management's manufacturing index. On Wednesday, we see Factory orders and the Fed’s Beige Book. On Thursday, we get the oil inventories report, Jobless Claims and the newest Institute for Supply Management (ISM) services report. Friday ends the week with the all important Employment report.

Friday, August 29, 2008 4:05 p.m est.

The market pulled back today as oil was higher due to all of the tropical storms possibly causing some havoc in the gulf and the fact that were moving into a long weekend so volume was near nil! The Dow saw lows of -170.00 points, S&P 500 -19.00 points and the Nasdaq -60.00 points early on and hit them again in the final hour.

At the close the Dow was down -170.74 points at 11544.44, S&P 500 -17.93 points to 1282.75, S&P 100 -9.09 points to 590.75 and the Nasdaq Composite -44.12 points to 2367.52. Oil was up almost +3.00 early on but as the threat of storms became complacent it started to fall and closed down -$.13 to $115.46.

Well its the last trading day of summer! You know that its over when you go into Cosco and see all of the Christmas trees!! How depressing is that! Personally I think it hurts their sales overall as I avoid the place because I know they always try to start Christmas early! Anyhow I don’t expect much to change for the market in the fall as the election is going to be so interesting and everyone will keep going back and forth about the economy zooming ahead or headed into depression. This will be great for us as premium will decay on our trades even faster. For now the market has used up a lot of its strength in really going nowhere and is getting overbought. We are also approaching a downward sloping line that has been constructed the past few months so we could see the market pull back a bit. Have a great long weekend and let me know what color Christmas tree you buy!!!

Today it was reported that Consumer spending fell -0.4% in July and was the biggest drop since June 2004 while nominal spending rose +0.2%. Personal income fell -0.7%, the biggest drop since August 2005. Real disposable incomes fell -1.7%. This is the second straight large monthly drop since the government stimulus payments. Inflation also surged however as the core personal consumption expenditure price index rose +0.3% in July compared with June and is up +2.4% in the past year. This is the largest gain since September 2006. Economists had expected a -0.4% decline in incomes, a +0.2% gain in nominal spending and a +0.3% rise in the core PCE.

Business activity in the Chicago region picked up in August, according to a survey of corporate purchasing managers. The Chicago purchasing managers index rose slightly to 57.9% in August from 50.8% in July. Readings above 50 indicate overall business expansion. The gain was unexpected as economists forecasts were generally expecting a small decline in the index.

Yesterday it was reported that the economy expanded at a strong +3.3% annual rate in the second quarter, much faster than the +1.9% estimated a month ago and that helped to lift the market. The revisions to real gross domestic product were largely due to stronger trade sector and a faster pace of inventory buildup than first thought so you have to take it with a grain of salt. Economists were predicting a revision to about +2.7%. The core personal consumption expenditure price index rose +2.1%, unrevised from the initial estimate Despite the strong growth in April-June quarter, economists see signs that the economy is weakening. While growth is expected to rise around +2% in the third quarter, many analysts expect much weaker growth in the last quarter of the year.

Tuesday, August 26, 2008 4:05 p.m est.

The market was near the unchanged level and mixed most of the morning as it couldn’t figure out a direction. Eventually a rally started and currently the Dow is seeing +60.00 points, S&P 500 +10.00 points and the Nasdaq Composite +15.00 points. Economic data was positive which helped but oil was higher as geo-political events are kicking up all over the place with the Russia-Georgia conflict, Pakistan seeing their government become unstable after President Musharraf left his seat at the top of the government and North Korea has stopped disabling its nuclear facilities which have been in place since August 14th. The reason is that the North Koreans are accusing the U.S. of “violating a disarmament deal.” As I mentioned yesterday, we’re likely to see this all week and I think it will get worse as traders leave for the long weekend early. Actually, volume looks like they left last month which is great for us as it adds a little bit of volatility in both directions!

Consumer confidence rose in August, the second consecutive month of gains but the level remained relatively low and job concerns continued. The August consumer confidence index rose to 56.9% from a July reading of 51.9%. Economists had expected an August reading of 53%. The percentage of consumers saying jobs are “hard to get” rose to 32% from 30.2% last month. Meanwhile, the percentage of people expecting business conditions to worsen over the next six months fell to 25.8% from 32.4% which is good.

New home sales rose +2.4% in July, but large downward revisions to prior months showed a weaker home sales market than previously estimated. New-home sales rose to a seasonally adjusted annual rate of 503,000 in July but below the 521,000 pace expected by economists. The department revised down June sales to a 503,000 level compared with the previous estimate of 530,000 and is the lowest level of the economic cycle. The last time sales were lower was in September 1991. New-home sales are down -35.3% compared with a year ago. The supply of homes on the market fell to 10.1 months from 10.7 months in June. Median sales prices fell -6.3% in the past year to $230,700.

Home prices fell at a record rate in June, putting more pressure on an already-fragile financial system. The Case-Shiller index of 20 major metropolitan areas for the month fell by -15.9% from June 2007, Standard & Poor's reported today. The Case-Shiller index, which tracks multiple sales of the same homes, is considered by many observers to be the best gauge of national and metro-level real-estate values. While only slightly worse than the -15.8% decrease seen in the previous month, June’s drop represents a new record decline. The annual growth rate slowed in 11 of 20 cities in June. A separate index of 10 cities fell a record -17% in the past year. Falling house prices make it more difficult for owners to use their home equity or refinance their mortgages especially when economists are also worried about credit-card and other debt.

Monday, August 25, 2008 4:05 p.m est.

The market started the day on the downside as Friday’s move was a bit of a misnomer because there was a false story out regarding the Korea Development Bank's supposed interest that it was considering buying Lehman. This of course caused short-covering as the market was also oversold and it were in light summer trading conditions. The strong dollar Index also helped set a positive tone as Warren Buffet came out and said he has no positions against the dollar and oil was selling off. Today all of that was laid to rest as the rumors were covered and oil was higher on the day. The Dow saw lows of -260.00 points, S&P 500 -26.00 points and the Nasdaq -60.00 points over lunch and they were hit again just before the close.

At the close the Dow was down -241.73 points at 11386.33, S&P 500 -25.33 points to 1266.87, S&P 100 -11.78 points to 584.92 and the Nasdaq Composite -49.12 points to 2365.59. Oil closed down -$.34 to $115.11.

With the market moving down here its looking more and more like we’ll see a low made in the fall, if we haven’t already seen it, and then a rally start into year end. September and early October are historically the worst times to be long the market and plenty of money managers know this. Because everyone is getting so decisively bearish however, usually the opposite occurs and this is why we could see a rally start anytime. Another possibility is that we just continue this flat going nowhere type move which is perfect for us!!!!! Basically the market remains boring and until we see some real volatility don’t expect much this week.

Re-sales of single-family homes and condos rose +3.1% in July to a seasonally adjusted annual rate of 5.0 million, the National Association of Realtors said. Re-sales have fallen -13.2% in the past year but this months gain was stronger than expected as economists expected a rise to 4.91 million. Despite the increase in sales, the inventory of unsold homes on the market rose +3.9% to 4.67 million, a 11.2 month supply at the current sales pace. The median sales prices fell -7.1% in the past year to $212,400.

Tuesday, August 19, 2008 4:05 p.m est.

The market was down all day after inflation was reported much worse than expected and housing starts were once again lower. Rumors were flying once again about financials but by the end of the day they started to bounce back. Lows were hit over lunch as volume is abysmal with the Dow seeing lows of -170.00 points, S&P 500 -16.00 points and the Nasdaq -35.00 points. Oil was almost hitting $110 early on but it then turned higher to close with strong gains.

At the close the Dow was down -130.84 points at 11348.55, S&P 500 -11.91 points to 1266.69, S&P 100 -5.85 points to 583.96 and the Nasdaq Composite -32.62 points to 2384.36. Oil closed up +$1.68 to $114.53.

Home builders sharply cut the number of new homes started in July and dropped the number of new single-family permits to the lowest level in 26 years! Starts fell -11% to a seasonally adjusted annual rate of 965,000 in July, close to the 960,000 expected by economists. This is the lowest level in 17 years. June’s starts were revised higher to a 1.084 million annual pace. Housing starts are down -29.6% in the past year. Builders are frantically cutting back their production of new homes, trying to work off a massive glut of unsold inventory. Rising foreclosures on existing homes are complicating efforts to bring supply back down to meet sluggish demand. The big decline in July was largely pay back from a surge of permits and starts in June that were sparked by a new building code in New York City that provided a big incentive to rush big condo and apartment building permits through before July 1st. The number of building permits for single-family homes and condos fell -17.7% to a seasonally adjusted annual rate of 937,000, down -32.4% in the past year.

For single-family homes only, permits fell -5.2% to a 584,000 pace, the lowest since August 1982. Single-family permits have plunged -41.4% in the past year. The number of permits for single-family homes in the West fell -10.8% to the lowest level in at least 20 years! The number of single-family homes under construction in July fell -3.5% to 491,000, the lowest in 16 years. The number of single-family homes completed dropped -7.2% in July to a 791,000 annual pace, the lowest since March 1983. The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In July, for instance, the standard error for starts was plus or minus 9%. Yesterday the National Association of Home Builders said builder confidence remained at an all-time low in August, although expectations for future sales improved slightly.

Producer prices rose by a bigger than expected +1.2% in July, because of higher prices for energy, food and other products. Economists were looking for an increase of +0.3% in July. Excluding food and energy, producer prices rose +0.7% in the month, which was also higher than expected. In July, energy prices rose +3.1% and food prices climbed by +0.3%. Energy should be lower next month so that should help but inflation is still running hot but the Fed is kind of stuck to do anything right now.

Thursday, August 14, 2008 4:05 p.m est.

The market took a hit this morning after inflation data was higher than expected but then traders decided to concentrate more on the whatever type angle as there are more things important to do like get out in the sun and sand! The Dow saw quick lows of -75.00 points, S&P 500 -8.00 points and the Nasdaq -15.00 points and after the turnaround the Dow saw highs of +190.00 points, S&P 500 +15.00 and the Nasdaq Comp +35.00 points. As we go into expiration tomorrow its looking like another fully profitable cycle. As we move into the fall cycles, ouch I can’t believe I said that, we may see volatility kick up especially as we get into October.

At the close the Dow was up +82.97 points at 11615.93, S&P 500 +7.10 points to 1292.93, S&P 100 +3.04 points to 596.51 and the Nasdaq Composite +25.05 points to 2453.67. Oil closed down -$.85 to $115.05.

One of the reasons for the coming volatility is because things aren’t looking good for housing as there still seems to be no bottom in site. Today it was reported that the housing market saw a +8% monthly jump in foreclosures and +55% year-over-year. The problem is that there is still a huge inventory of homes owned by banks, expert says. The foreclosure juggernaut lurched forward in July as banks took back 77,295 homes, up +8% in a month and +183% in a year. Total foreclosure filings, delinquency notices, auction sale notices and bank repossessions were up +8% from June and +55% year-over-year, according to RealtyTrac, an online marketer of foreclosed homes. One of every 464 households received at least one filing during the month. “Bank repossessions, or REOs, continued to be the fastest growing segment of foreclosure activity,” said RealtyTrac's chief executive officer, James Saccacio, in a statement. “The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale.” The company says it has more than 750,000 active listings of repossessed homes for sale on its database. That represents about 17% of all the existing homes for sale as reported by the National Association of Realtors.
Foreclosure activity in Nevada, surpassing all other states, touched one in every 106 households in July, up 15% for the month and were almost double the rate of last July.

Other hard-hit states included California (one of every 182 households), Florida (one of 186) and Arizona (one of 195). For sheer volume, California led the other states with a total of 72,285 filings. An especially high percentage of the California filings were bank repossessions. There were 23,406 in all, up from just 4,444 in July 2007. The state accounted for more than a third of all such events in the nation. The number was also a big jump from June's total of 20,624 bank repossessions in the state. “The properties there, once they enter foreclosure, are making a beeline back to the banks,” said RealtyTrac's spokesman, Rick Sharga. Many of the California homes were bought during the height of the frenzy of the mid-2000s at inflated prices and now that home values have dropped, borrowers who bought at the top owe more than their homes are worth. These properties are almost impossible to refinance and are difficult to sell. A couple of Midwestern states have also been consistently among the leading foreclosure hot spots and July was no exception. Ohio was fifth in the nation for foreclosures with one for every 375 households. That includes 4,057 bank repossessions, a 33% increase since July 2007. Michigan had 3,933 repossessed homes, or 17% fewer than last July, when it recorded 4,739.

The report is bound to disappoint Washington policy makers and lending industry insiders who have stepped up their efforts to slow the massive default problem. June filings, which were down -3% from May, had been a cause for slight optimism. That decrease was helped along by rule changes in Massachusetts and Maryland that prevented lenders from issuing filings for up to an additional 90-days after borrowers first fall behind in their payments however. That significantly reduced the number of foreclosure filings in both states. In June, for example, Massachusetts recorded a 55% decrease in initial filings. Now, both states are creeping back up as the 90-day lull in Massachusetts is being followed by a whole run of properties in delinquency.

Consumer prices jumped a greater than expected +0.8% in July, marked by big increases in energy, food, clothing and cigarettes. The core consumer price index - which excludes volatile food and energy prices, rose +0.3% for the second straight month. The report was much worse than expected as economists had predicted the seasonally adjusted CPI to rise +0.5% and the core CPI to increase +0.2%. Consumer prices are up +5.6% in the past year, the biggest year over year increase since January 1991. The CPI has surged at a +10.6% annualized rate in the past three months. The core CPI has risen +2.5% in the past year, the biggest gain since January. The core rate is rising at a +3.5% annual rate in the past three months. The CPI rose +1.1% in June, with the core rate up +0.3%. This is likely to cause critics to urge the Fed to raise interest rates to stop the rise. So far, Fed officials, with a few vocal exceptions, have stuck to their forecast for inflationary pressures to moderate as the economy stagnates. fell by 10,000 in the latest week to 450,000, but the smoothed trend in new claims moved to its highest level in more than six years, the Labor Department reported Thursday.

Unemployment is also getting worse even they were down today as Jobless Claims fell -10,000 to 450,000. They may have been boosted in recent weeks by publicity about a new federal program of extended benefits that has encouraged more unemployed workers to file for claims under regular state programs. A spokesman for the Labor Department could not quantify how many people have been encouraged to apply. The new program has masked the number of new layoffs, a key gauge of labor market strength as the economy continues to lose jobs. The four-week average of new claims rose by +19,500 to 440,500, the highest since April 2002! Continuing claims rose by +114,000 to 3.42 million, the most since November 2003. The four-week average of continuing claims rose by +75,250 to 3.27 million

Tuesday, August 12, 2008 3:00 p.m est.

The market started the week quietly and remains that way with volume continuing to drop off. The market did close higher once again yesterday but lost most of the strong gains made midday. Today the market has just been down even though oil remains on the downside as Russia is attacking Georgia. I guess it was because “their bombs missed the target” or it was the fact that they just wanted to send them a warning! The Dow so far has seen lows of -130.00 points, S&P 500 -12.00 points and the Nasdaq -20.00 points and remains near there going into the final hour. Oil was off another -$1.00 nearing the $113 level looking to be destined for $110 as they are about to close for the day. The market is definitely in summer mode as it goes nowhere fast while intraday it is all over the place. I expect this to at least last until the end of this expiration cycle on Friday which is perfect for us so all of the August options can expire worthless giving us full profits!

The interesting thing about the war over in Georgia is how off the media is. They make it sound like it is something out of the blue but the facts are otherwise and that is likely why the market and oil aren’t reacting to the news. If you read the headlines, it seems as if Russia is bullying Georgia but in reality it was Georgia that first attacked the capital of its breakaway republic/territory, Osettia, so Russia is retaliating for that attack because Ossetia has aligned itself with Russia. There is plenty of history between Russia, Georgia, and Osettia as well, as the latter broke away from Georgia for political reasons. Georgia does not want to be part of what was once called the Soviet Union, while Osettia does. As a result, Georgia has become a a U.S. Ally although that may change now that they realize that the Americans aren’t getting off their butts unless they need some more snacks for the Olympics!! This is political though, as Russia is trying to reassert its will over Georgia, and took the opportunity to show them who’s really the boss!

According to Stratfor.com, Russia views its relationship with Georgia along these lines: “the Russians and Georgians have historically failed to mesh. In fact, Moscow has viewed Georgia as allied with Washington since the fall of the Soviet Union and therefore sees it as a direct threat to Russian national security. From the Russian standpoint, the West has already encroached on its doorstep in Europe; if Moscow loses its power to influence Georgia, then it loses its southern flank.” Of course then there is the oil pipeline that is running through Georgia that isn’t Russia’s and they don’t like that idea at all.

According to Debka, Israeli oil interests are very involved in the situation as: “Jerusalem owns a strong interest in Caspian oil and gas pipelines reach the Turkish terminal port of Ceyhan, rather than the Russian network. Intense negotiations are afoot between Israel Turkey, Georgia, Turkmenistan and Azarbaijan for pipelines to reach Turkey and thence to Israel’s oil terminal at Ashkelon and on to its Red Sea port of Eilat. From there, supertankers can carry the gas and oil to the Far East through the Indian Ocean. Aware of Moscow’s sensitivity on the oil question, Israel offered Russia a stake in the project but was rejected.”

In fact, according to Debka, the relationship between Georgia and Israel has been growing for some time as “Last year, the Georgian president commissioned from private Israeli security firms several hundred military advisers, estimated at up to 1,000, to train the Georgian armed forces in commando, air, sea, armored and artillery combat tactics. They also offer instruction on military intelligence and security for the central regime. Tbilisi also purchased weapons, intelligence and electronic warfare systems from Israel.” Debka reports that these advisors "were undoubtedly deeply involved in the Georgian army’s preparations to conquer the South Ossetian capital Friday.”

Tuesday, August 5, 2008 4:05 p.m est.

Well yesterday the market basically went nowhere in the end as it started lower and although it moved into positive territory for the part of the day, in the end it closed lower. Volume was pretty much non-existent. Today the market started the day strongly with +2% gains going into the Fed’s decision on interest rates. The Dow saw highs of +250.00 points, S&P 500 +25.00 points and the Nasdaq Composite +45.00 points. Oil closed down hard yesterday but it didn’t seem to help the market but today it moved below $120 and that may have helped the market today. After the Fed announced at 2:15 p.m est that it was going to leave rates unchanged and that the economy is slowing, oil fell even more down over -$3.00 at one point moving below $119 so the market made new highs with the Dow seeing highs of +340.00 points, S&P 500 +36.00 points and the Nasdaq Composite +65.00 points and held them in the final hour.

At the close the Dow was up +331.62 points at 11615.77, S&P 500 +35.86 points to 1284.87, S&P 100 +17.59 points to 596.26 and the Nasdaq Composite +64.27 points to 2349.83. Oil closed down -$2.24 to $119.17.

The market has now used up its oversold condition and is actually starting to get a bit overbought here even though it has pulled back for the past three trading sessions. Volume has been incredibly low and was terrible for such a strong move up today. Going into the final hour we hadn’t even seen a million shares traded and that is not healthy at all for such a strong day. This tells me that were likely going to see a stair step type of move here. I think the bottom is in for the time being but we could also see some sharp moves lower at the same time or days of consolidation.

The economy is much too fragile to risk raising interest rates to combat inflation, the Fed said today. As expected, the Fed left rates at at 2% and declared that the risks to the economy are evenly balanced between a recession on one hand and higher prices on the other. The Fed’s problem is that it has a credit crunch on one hand and high commodity prices on the other. “Financial markets remain under considerable stress,” the committee said, adding that “upside risks to inflation are also of significant concern.” Because of this, all the Fed can do is wait and hope that what it has already done will bring back moderate growth and moderate inflation. They believe that the massive rate cuts late last year and earlier this year and all those loans to investment banks will ultimately restore “moderate economic growth.” Everything is “highly uncertain” right now, including the Fed’s next move. But there is nothing in the statement, except the fifth dissent this year by Dallas Fed President Richard Fisher to suggest that the downturn is close to its bottom.

Friday, August 1, 2008 3:05 p.m est.

The market started the day higher after the employment report came out better than expected. The pop higher wasn’t surprising as the market fell out of bed after Allan Greenspan made some comments about how bad the economy is. The Dow saw highs of +40.00 points, S&P 500 +4.00 points and the Nasdaq Composite +5.00 points. It turned around pretty quick however falling once again with the Dow seeing lows of -110.00 points, S&P 500 -13.00 points and the Nasdaq Composite -45.00 points. Oil started to rally after being down early on after comments came out of Israel that Iran is getting far to close to finishing its nuclear ambitions meaning that they will take them out if something doesn’t change. This weekend Iran has to answer to the UN about stopping its program. As oil fell back from a +$3.00 gain the market bounced back and going into the final hour the market is nearing the unchanged level.

With all of the volatility this week we're basically finishing the week where we started which is perfect for our style of trading. I don’t expect this to change in the coming week also and as long as the market continues to hold its higher lows we should see it continue to grind higher. Volatility will likely remain however as everyone is confused right now on which way the economy, oil, geo politics are headed.

Employment fell for the seventh straight month in July while the unemployment jumped to 5.7%, a four-year high. Jobs fell by -51,000 from losses in manufacturing, construction, retail and temporary help. Since December, -463,000 jobs have been lost, the strongest indication that the economy is in a recession. Economists expected a fall of -70,000 and for the unemployment rate to rise to 5.6% from 5.5%. Employment in May and June were revised higher by +26,000. Average hourly earnings rose by 6 cents, or +0.3%, to $18.06. Average pay is up +3.4% in the past year, far less than the +5% rise in consumer prices. Total hours worked in the economy fell by -0.4% while the number of workers who held part-time jobs who wanted to work full-time increased by +5.5% in July to 5.6 million.

Manufacturing activity was flat in July, the Institute for Supply Management said when its ISM manufacturing index fell from 50.2% in June to 50% in July, indicating an equal number of firms said business was growing as said it was slowing. The ISM has been near 50% for 10 straight months, as strong export growth has offset weakness in the auto sector. Economists were looking for the index to fall to 49.5%. Six of 18 industries were expanding in July, led by computers, petroleum and food. The new-orders index fell to 45% from 49.6%, indicating fewer orders ahead. The production index rose to 52.9% from 51.5%. The employment index rose to 51.9% from 43.7%, a sign of stronger hiring despite the report that -51,000 jobs were lost. Inflation continued to be a problem but the prices-paid index fell to 88.5% from 91.5% which is good.

Construction Spending fell by -0.4% in June, pulled lower by weaker starts on housing and state and local construction. Economists were expecting construction spending to decline by -0.3%. Year over year, construction spending is down by -5.9%. Private residential construction fell by -1.8% in June, continuing a long decline that reflects the weak housing market. State and local construction spending declined by -0.4%.

Tuesday, July 22, 2008 4:05 p.m est.

***Good day, until I decide to send out the upside Program Numbers and unless there is a surprise out there I'm going to take the rest of the week off writing as I still haven't had any real vacation time.***

The market looked like it was going to be down big today after Apple and Wachovia bank had poor earnings last night among others. Lows were hit early on with the Dow seeing -80.00 points, S&P 500 -10.00 points and the Nasdaq Composite -30.00 points. It didn’t last long though as oil suddenly fell over -$5.00 and the market turned around with the Dow seeing highs just before the close of +160.00 points, S&P 500 +18.00 points and the Nasdaq Composite up +30.00 points. At the close the Dow was up +135.16 points at 11602.50, S&P 500 +17.00 points to 1277.00, S&P 100 +9.38 points to 588.69 and the Nasdaq Composite +24.43 points to 2303.96. Oil closed down -$3.09 to $127.95.

For now it looks like the market has turned a corner but the question of course is was that the bottom! At the lows last week the high S&P 500 volume and the volatility spike make a nice case for a bottom. We also have the summer 2006 double-bottom as a logical place for a bottom to form. There is also enough bearish sentiment to justify a bottom, and two other things that occurred that could provide an “event bottom.” First, the SEC targeted short sellers in 19 different financial companies and are threatening to bring back the uptick rule for shorting and Fed chief Ben Bernanke told Congress that he isn't looking to raise interest rates anytime soon.

I think we also saw the CPT (Crash Prevention Team) act, but that is pure speculation. There were also other things that helped such as the president's lifting of the executive prohibition of off-shore drilling, and oil prices dropping to $130. While the volume for the rally has been good, and many indicators are very oversold it may not mean that the upside is unlimited however. A crash was averted this week, and the potential for a new medium-term rally has developed and that is the one reason I want to wait at least this week before putting on upside trades.

Monday, July 21, 2008 4:05 p.m est.

The market was pretty much flat today as volume disappeared. The Dow saw highs early on of +50.00 points and lows of -70.00 points, S&P 500 +5.00 points and -5.00 points and the Nasdaq Composite up +10.00 points and -15.00 points. At the close the Dow was down by -28.99 points at 11467.58, S&P 500 -.68 points to 1260.00, S&P 100 -1.27 points to 579.30 and the Nasdaq Composite -3.25 points to 2279.53. Oil closed up $2.16 to $131.04 as nothing really came about with the nuke talks with Iran and there is a tropical storm headed toward the Gulf of Mexico. I’ll have more out tomorrow but so far its looking like this sideways action may end up sticking around all week.

Friday, July 18, 2008 4:05 p.m est.

Well after a very volatile week the market is ending it quietly which is surprising considering it is expiration! The good news is that although it seemed as if the market was going into the abyss on Tuesday it actually held onto gains giving us great profits for this expiration cycle! The market was up, down and all around today. The Dow saw highs of +60.00 points and early lows of -70.00 points, S&P 500 +3.00 points and -8.00 points but the Nasdaq Composite never saw gains with lows of -40.00 points.

At the close the Dow was up by +48.53 points at 11495.84, S&P 500 +.30 points to 1260.60, S&P 100 +.57 points to 580.58 and the Nasdaq Composite +29.52 points to 2282.78. Oil was up earlier on but fell at its close off -$.41 to $128.88.

The market was looking to be ugly this morning as Google had poor earnings along with micorsoft and AMD last night. Merrill Lynch was also poor so futures were strongly down all night but when Citigroups earnings came out early this morning and better than expected, they jumped into positive territory. Financial stocks have seen pretty good earnings this week and since the bottom on Tuesday, the sector has rallied over +30%! Next week will be key to knowing if the rally is going to continue though as expiration will be out of the way. More over the weekend....

Thursday, July 17, 2008 4:05 p.m est.

Wow, what happened to the end of the world rhetoric! It appears that someone was listening to me when I said that even in bear markets the market will go up and this one took off the past two days. After an initial spike this morning from some decent bank earnings and overall earnings reports, it looked like the market was going to fall as it turned into negative territory but when oil started to sell off once again it started to rally. The Dow saw highs of +200.00, S&P 500 +18.00 points and the Nasdaq Composite +40.00 points.

In the final hour the market fell back but still held onto decent gains. At the close the Dow was up by +207.38 points at 11446.66, S&P 500 +14.96 points to 1260.32, S&P 100 +6.72 points to 580.01 and the Nasdaq Composite +27.45 points to 2312.30. Oil sold off again making it a three day downturn of -11% closing down by -$5.31 to $129.29.

Housing Starts fell -5.3% to a fresh 17-year low in June, while a change in data collection procedures for multifamily units in New York City pushed up total starts by +9.1%. That’s where they count one built house as five because things are slowing down! A flood of multifamily building permits was filed in New York following adoption of the new rules which skewed the overall data for both building permits and housing starts.

Excluding multifamily starts in the Northeast, housing starts fell -4%. The new rules affected only multifamily construction in New York City. Including the New York apartments and condos, total starts rose +9.1% to a seasonally adjusted annual rate of 1.066 million. Economists, apparently unaware of the impact of the new rules, expected starts to fall about -2% to a 959,000 annual rate. In June, starts of single-family homes fell dropped -5.3% to a seasonally adjusted annual rate of 647,000, the lowest in 17 years. Building permits rose +11.6% to a seasonally adjusted annual rate of 1.09 million, helped by the new regulations. Excluding Northeast multifamily units, building permits rose +0.7%.

Still there are no real signs of recovery in the home building industry. Home builders are cutting back on production in an attempt to bring supply back into balance with falling demand. In the past year, total housing starts are down -27%. Single-family starts are down -43%. Building permits are down -24% in the past year, while single-family permits are down -40%. Regionally, starts surged +103% in the Northeast, fell -11% in the Midwest, fell -8.2% in the West and rose +0.4% in the South. Housing completions rose +1.2% in June to a seasonally adjusted annual rate of 1.17 million. Home builders are trying to work off their excess inventories, but still have too many homes in the pipeline for the number of sales.

Jobless Claims rose +18,000 to 366,000 while the four-week average fell -4,500 to 376,500. Continuing claims fell -81,000 to 3.12 million. The four-week average of continuing claims rose +16,500 to 3.14 million the highest level since February 2004.

Wednesday, July 16, 2008 4:05 p.m est.

The market started the day down once again as inflation was a bit hotter than expected but Industrial Production was okay so the open wasn’t too bad. There was also positive bank stock earnings and Intel had good earnings last night. When your in depression mode however all you do is sell so the Dow saw quick lows of -40.00 points, S&P 500 -3.00 points and the Nasdaq Composite -10.00 points. When it seemed that the bulls were going to make a stand the market turned around and when the oil inventory data came out at 10:30 a.m est. indicating that there was a gain instead of a shortage oil almost instantly saw a -$6.00 loss and the Dow went into triple digit gain territory. The Dow saw highs of +280.00, S&P 500 +32.00 points and the Nasdaq Composite +75.00 points in the final hour. The past three days has seen new highs made but then selling took hold in the final 45-minutes but today was different as the gains held even after the Fed’s minutes were released revealing that there is a push on to raise interest rates now.

At the close the Dow was up by +276.74 points at 11239.28, S&P 500 +30.45 points to 1245.36, S&P 100 +15.30 points to 571.29 and the Nasdaq Composite +69.14 points to 2284.85. Oil sold off again on the poor inventory data and closed down -$4.14 to $134.60.

Double-digit increases in gas prices helped push up the Consumer Price Index +1.1% in June, the fastest rate in 26 years. The unexpectedly large rise in the CPI was led by a +6.6% increase in energy prices and a +0.8% increase in food prices. Excluding food and energy prices, the core CPI rose +0.3%, the biggest increase since January. Excluding energy prices alone, the CPI rose +0.4% in June. With prices rising so fast, real inflation-adjusted weekly earnings fell -0.9% in June, the biggest decline in 22 years.

The output of factories, mines and utilities rose +0.5% in June after two straight monthly declines. Factory output rose +0.2% and was helped by a +5.4% jump in the output of cars and trucks. This gain was not a sign of renewed strength in the sector. Instead, it represents a technical bounce following the end of a strike at one of the key suppliers to GM. Output of business equipment rose +0.2%. Capacity utilization, a gauge of inflationary pressures, rose to 79.9% from a revised 79.6% in May. Output was stronger than forecasts for output to rise +0.3%. However, industrial output was down at a 3.1% annual rate in the second quarter.

The home builders sentiment index fell two points in July to record-low 16%, with all three components of the survey also dropping to historic lows, the National Association of Home Builders reported. At 16%, the NAHB/Wells Fargo housing market index shows that only one-in-six home builders has a positive view of the market! New subdivisions have become ghost towns, with current sales dropping off and with the traffic of prospective buyers drying up in recent months. Few builders anticipate any improvement in sales in the next six months. The index for current sales fell from 17% to 16%; the index for anticipated sales really fell from 27% to 23%; and the index for traffic of prospective buyers tumbled from 16% to 12%. Economists were expecting the index to remain at 18% in July.

“Many prospective buyers have simply returned to the sidelines until conditions improve,” said David Seiders, chief economist for the builders trade group, which has been surveying its members every month since 1985. Builders again pleaded with Congress to approve pending housing legislation to stimulate the housing and mortgage industries. The legislation would include a tax credit for first-time home buyers, and would provide $300 billion for mortgages backed by the Federal Housing Administration.

“The worsening housing slump and the near-meltdown in financial markets last week makes it even more urgent for Congress to complete action on the housing bill now, a move that will help stabilize and restore confidence in housing and the economy,” said NAHB President Sandy Dunn, a home builder from Point Pleasant, W.Va. Regionally, sentiment fell to a record-low 10% in the Midwest, and sank to a record-low 13% in the West. The index fell one point to 20% in the South, the largest region for home building. It improved to 14% in the Northeast, the smallest region. The home builders index has been in free fall for three years. It peaked at 72% in June 2005; a year ago the index was at 24%. It has been below 50% for 27 straight months.

Some Fed officials argued at the closed door meeting last month that the central bank should hike interest rates “very soon,” according to a summary of the meeting released this afternoon. Some members said the Fed had aggressively cut rates to 2% to guard against downside risks to growth and now that these risks had “diminished” that “some firming in policy would be appropriate very soon.” Other Fed members said financial conditions were still too fragile and borrowing costs were higher for consumers than before the Fed starting cutting rates last fall. The minutes are starting to show a clear divide between one camp that favored a rate hike and others who believed the outlook was still uncertain at best. One Fed member, Dallas Fed Bank President Richard Fisher, voted for a rate hike. In general, the minutes were a bit more hawkish than Fed chief Ben Bernanke was in his two days of testimony before Congress.

Tuesday, July 15, 2008 4:05 p.m est.

The market got smacked this morning after inflationary economic data was stronger than expected and it seemed that Bernanke and Paulson only had negative news in their prepared statements before Congress. It also seemed that it wanted to go down anyhow to get that volatility spike that everyone has been waiting for. The Dow saw lows of -230.00 points, S&P 500 -28.00 points and the Nasdaq Composite -55.00 points. After hitting lows the market turned around on good answers from the two during the question period, President Bush talking about drilling for oil over here and SEC Chairman Cox saying that the SEC was going to put new regulations on to limit so-called “naked” short selling of shares in Fannie Mae, Freddie Mac and other big brokerage firms. The SEC will issue an emergency order stating that all short sales of shares in these companies will be subject to a “pre-borrow” requirement. This will last for 30 days, Cox said. The SEC is also planning more rule-making focused on short selling in the broader market he said. This means that we’ll likely see the old sell on the uptick rule comeback which they took out last year by the way. Why they took it back I’ll never know! This may have been part of the reason for the turnaround as we are currently seeing record short interest that needs to be bought back some time.

The final hour saw another buy program come in and the Dow saw new highs of +70.00, S&P 500 +6.00 points and the Nasdaq Composite +40.00 points in the final hour. At the close however the financials got sold again with the market closing mixed. The Dow was down by -92.65 points at 10962.54, S&P 500 -13.39 points to 1214.91, S&P 100 -5.85 points to 555.99 and the Nasdaq Composite +2.84 points to 2215.71. At one point oil was off almost -$9 as there was a rumor out that bank stocks were selling their oil stocks to get some cash and that retail sales for gas purchases were much lower. It closed down -$6.44 to $138.74.

Wholesale prices rose +1.8% in June, after seasonable adjustments, with energy prices gaining +6% and food prices rising +1.5%. Economists had expected the producer price index to rise +1.4%. In the past year, the PPI gained +9.2%, the largest change since June 1981, ouch! The core PPI, which excludes food and energy prices rose +0.2%, while economists had expected a +0.3% rise. In the past year, core prices rose +3%.
Retail sales rose a poor +0.1% in June despite nearly $50 billion in stimulus checks for consumers. Sales were boosted by higher prices for gasoline, food and other consumer goods. The figures are seasonally adjusted but are not adjusted for inflation. It was the weakest sales since February’s -0.2% fall. Sales in June were held back by the biggest drop in auto sales in more than two years. By contrast, sales at the malls and shopping centers were relatively healthy, stimulated by the tax rebate checks. Excluding the -3.3% drop in auto sales, sales rose +0.8%, the slowest in three months. Excluding the +3.3% rise in gas, sales fell -0.5%, the biggest drop since December. Excluding both autos and gas, sales rose +0.2%. Economists expected total sales to rise +0.3% and sales excluding autos to rise +1.1%. Sales in April and May were revised lower by a total of -0.4%. In the past year, retail sales are up +3%. Sales in the second quarter rose +2.6% from the same period last year. The weak report adds to the feeling that the economy is at or near a recession, with significant headwinds from falling asset prices, rising energy prices and the screwed up financial sector.

Manufacturing activity in the New York area contracted for the third straight month in July, the Fed’s Bank of New York said. The bank's Empire State Manufacturing index rose slightly, to a negative -4.9% in July from a negative -8.7% in June. The index has been in negative territory for a third consecutive month and now has languished there for five out of the last six months. The prices-paid index rose to a new record high in July, the data showed. The Empire State index is of interest to investors and economists primarily because it's seen as an early indicator of what the Institute for Supply Management's July national factory survey due out in two weeks may show. In June, the ISM manufacturing index rose to above 50 for the first time since January.

Monday, July 14, 2008 4:05 p.m est.

The market popped higher this morning as the government announced more bailouts for Fannie and Freddie Mac yesterday and oil was slightly down. The Dow saw highs in the first five minutes of trading up +140.00, S&P 500 +14.00 points and the Nasdaq Composite +30.00 points. Unfortunately whenever you see a pop like that at an open in either direction you usually see the market come back at least to where it started and today was no different. Just after lunch selling took hold once again with the Dow seeing lows of -100.00 points, S&P 500 -14.00 points and the Nasdaq Composite -35.00 points. The President came out and announced that he wanted to open up offshore drilling and it barely had an effect on the price of oil or the market. Of course with Congress making its rebuttal blaming the speculators and big oil, why should it fall.

The final hour saw another attempt at a rally with the Dow getting back to the +30.00 point level and the S&P 500 -1.00 point, Nasdaq -5.00 points as Smart traders seem to be moving in the final hour the past few days, but it fell back once again as traders got skittish about what inflation may be reported at tomorrow morning. At the close the Dow was down by -45.35 points at 11055.19, S&P 500 -11.20 points to 1228.29, S&P 100 -4.98 points to 561.83 and the Nasdaq Composite -26.21 points to 2212.87. Oil closed up +$.10 to $145.18.

After the initial moves today the tape looked like the bulls were really trying to make a stand or at the least the bears were deciding that enough is enough for now. The market has been down now for six straight weeks and that is a rarity. I’m almost glad that the gap up didn’t hold this morning but we are pressing Program Levels here so I don’t want to see much more downside for this cycle. Because we saw another weekly lower move when we do get a pop it will likely be a doozy as traders are wound up pretty tightly!

I was looking at all of the numbers over the weekend and I am shocked at how oversold the market is compared to previous declines. Many indicators are even worse than then and sentiment is abysmal. Numbers from Investor’s intelligence last week for example were a bearish 47.7%. This may not seem very high, but it is the highest figure since September of 1998. This was the bottom of that bear market for that year and 10 months later the S&P was 48% higher.

It is also rare for the Summation index to get below -2000 and it is hitting -2400 now! A search back to 1967 reveals that this has only happened seven times and in all case after turning up it has lead to intermediate term rallies. Some of these rallies lasted over two years,1970 and 1987 for example. The shortest rally was from early 2000 that lasted about a month or so. Most rallies though last several months. The catch of course is that the Summation index has to turn up. It appears an intermediate term rally may not be far off.

Everyone is also screaming that were in a bear market now that we have hit the -20% level on the S&P but that’s not always the case. Nonetheless the average bear markets over the last 100 years have lasted an average of 14 months. This bear market has been underway for 9 months, as measured from the market’s peak last October. If we are in an average bear market then, such analysis says the bear market has five more months to go. Over the last 40 years the Dow’s average decline in a bear market has been -32.6% but because this is so public now I’m willing to bet were closer to the bottom.

If we are in an average bear market though the Dow could fall approximately another 1,740 points to 9,545, -32.6% below its peak of last October, over the next 5 months, and it would all be over in November. I wish it was that easy!! Averages are hugely misleading because although the average bear the last 100 years lasted an average of 14 months, the 1987 bear lasted just two months while the 1990 bear market lasted just 3 months. At the other end of the spectrum, the 1973-74 bear market lasted 23 months, almost two years, while the 2000-2002 bear lasted 33 months, close to three years. In the 1981-82 bear market the Dow lost only -24.1%, and in the 1990 bear it lost only -21.2% but in the 1973-74 bear market the Dow lost -45% of its value. In the 2000-2002 bear the S&P 500 declined -49%, while the Nasdaq lost -78% of its value so its all a waste of time to look for an end until your well on your way back up! This is why I like our style of trading because we only have to look out one month and like I say the market never goes straight to those bear market lows.

Monday, July 7, 2008 4:05 p.m est.

The market popped higher this morning as oil was off about -$6.00 after the rumors about Iran and Israel cooled because there were new ideas put forth about Iran talking to mediators about their nuclear program. The Dow saw highs of +110.00 points, S&P 500 +11.00 points and the Nasdaq Composite +35.00 points early on. Unfortunately when rumors about poor earnings, a rule change on mortgages came out causing Fannie Mae and Freddie Mac to drop -20% and San Francisco Fed President Janet Yellen said that interest rate policy is “nearing a crossroads” now that worst-case scenarios for growth have been skirted by the Fed’s aggressive string of rate cuts, the market fell. The Dow saw lows of -175.00 points, S&P 500 -23.00 points and the Nasdaq Composite -35.00 points. Buying came back in the final hour though actually into positive territory but selling took hold in the final thirty minutes to bring the market back into the red.

At the close the Dow was down by -56.58 points at 11231.96, S&P 500 -10.59 points to 1252.31, S&P 100 -4.37 points to 573.76 and the Nasdaq Composite -2.06 points to 2243.32. Oil closed down -$3.92 to $141.37 currently at the market close.

I was hoping to continue on with my vacation this week but I'm having to be glued to my computer once again as the market remains volatile! It must be another sign that a bottom is near! It’s now quite incredible how oversold this market is! We’re actually seeing levels on many indicators that are equal to what we saw during the week after 9/11, a great buying time! We’re also getting the proverbial signs of a possible turn as the cover on Barron’s this weekend was, the “Bear is back,” with the cute little grizzly ready to rip your head off! There were also many analysts out saying that the market is headed even lower with the worst saying that the S&P 500 is going to 500! All I have to say about that is maybe it will but the one thing I know is that it won’t be a straight line and I know that it won’t be in the next 10-trading days! I’ll just recalculate my Program Numbers as we go down each expiration cycle until we hit that level! We are just now starting to hit my initial Program Number levels so we’ll see if we bounce from here and I’m thinking we will as we move further into the week!

This is a pretty quiet week for economic data as it starts off tomorrow with the latest numbers on Pending Home sales. Wednesday has the usual oil inventories report. On Thursday Jobless Claims are out while Friday has the University of Michigan Consumer Sentiment Index and the Trade Balance figures.

Thursday, July 3, 2008 4:05 p.m est.

Interesting start to the day. The European Union raised interest rates by a quarter point and employment was worse than expected but the market opened higher this morning. I always laugh when you see big sell or buy on the rumor type of days! The sell off at the close of the day yesterday had sell on the rumor all over it which doesn’t surprise me because this is the most anticipated long weekend of the year! It’s easier for traders to sell and head for the lake and buy back afterward. Maybe this is why today has almost always been an up day in the end.

The market started the day higher but it was too much of a pop and selling took hold almost right away. The Dow saw lows of -60.00 points, S&P 500 -10.00 points and the Nasdaq Composite -30.00 points. Buying came back though and new highs were made in the Dow and S&P 500 with the Dow seeing highs of +110.00 points, S&P 500 +9.00 points and the Nasdaq Composite +15.00 points earlier on.

At the close the Dow was up by +73.03 points at 11288.54, S&P 500 +1.37 points to 1262.89, S&P 100 +2.75 points to 578.12 and the Nasdaq Composite -6.08 points to 2245.38. Oil actually popped over $145 per barrel this morning before pulling back to a gain of +$.88 to $144.47 currently at the market close.

One of the reasons we may have seen a decent start to the day was that European Central Bank president Jean-Claude Trichet said that there is "no bias" for future rate hikes. The EU had lifted their key interest rate by a quarter-point to 4.25% earlier in the day. That’s the first move since a quarter-point hike in June 2007. In their statement Trichet toned it down a bit after their stock markets fell on the news initially. Asked about the lack of language highlighting either "heightened alertness" or "strong vigilance" on inflation pressures, Trichet said the ECB's message was clear and that the governing council would strive to communicate with the markets in "a clear fashion that will allow us to be as predictable in the future as we have been in the past."

The rate hike came after Trichet repeatedly sounded warnings that commodity-led inflation pressures raised the danger of feeding a wage-price spiral. After June's policy meeting, Trichet said the governing council was in a state of "heightened alertness," and that a small July rate rise was possible. Trichet said the decision was unanimous and that the governing council believed the move would allow the central bank to achieve its price-stability goals.

It was reported this morning that the economy lost -62,000 jobs in June while the unemployment rate unexpectedly remained at a four-year high of 5.5%. Employment has now fallen in all six months this year for a total job loss of -438,000, the strongest evidence that the economy fell into a recession in the first half of the year. The numbers were worse than the -50,000 expected by economists but in-line with what the ADP said yesterday. The unemployment rate was expected to fall to 5.4%. Job losses in April and May were also revised down to show -52,000 more jobs lost in those months. Total hours worked fell by -0.1% in June. Average hourly earnings rose by +6 cents, or +0.3%, in June. In the past year, average hourly earnings are up +3.4%, while consumer prices are up +4.2%. Most analysts expect unemployment to continue to rise this year as the economy gets worse. Rising oil prices, falling home and stock prices, and the severe credit crunch will keep the economy weak, and sentiment will continue to get worse. One thing to note is that the market always starts moving before things get better or at the worst has some sharp rallies because you can’t be dismal every day.

The report is likely to have little impact on the Fed’s debate about interest rates. Few analysts expect the Fed to raise or lower interest rates in the next few months but Fed fund futures are indicating two rate hikes by the end of the year. The Fed has expected the economy to weaken, which should bring down troublesome inflation rates but so far with oil now moving over $145 and staple food prices almost doubling, it sure doesn’t look like it. The Fed will have one more jobs report before its next policy meeting on August 5th.

Construction, manufacturing and temporary help services reported heavy job losses in June. Construction fell by -43,000, factory payrolls fell by -33,000, and temp agency employment fell by -30,000. Retail jobs fell -7,500, while financial services lost -10,000 jobs. Hiring remained strong in the usual places: Health-care adding +15,000 jobs while the government added +29,000 workers and food services added +16,000 jobs. Of 274 industries, 46.9% were hiring in June, up from 45.6% in May while of 84 manufacturing industries, 33.3% were hiring, down from 41.7% in May. In the separate survey of households used to figure the unemployment rate, the government reported employment fell by -155,000, while unemployment rose by +12,000. The labor force fell by -144,000. The labor-force participation rate fell by a tenth of a percentage point to 66.1%.

Meanwhile, Jobless Claim rose by +16,000 last week to 404,000, only the second time in this cycle that initial claims have been above 400,000, the Labor Department reported . The four-week average was up +10,250 to 390,500, the highest level since October 2005! Layoffs have gone through levels typically associated with recessions. Meanwhile, the smoothed average of continuing claims rose to a fresh four-year high of 3.11 million, further evidence that jobs are increasingly hard to find. Continuing claims fell by -19,000 to 3.12 million.

The Non-manufacturing sectors of the economy pulled back in June, the Institute for Supply Management said as its ISM nonmanufacturing index fell to 48.2% from 51.7% in May. The decrease was below forecasts as economists were looking for the index to move to 51%. Inflation pressures got worse though too as the price index rose to 84.5% from 77.0% in the previous month. The employment index fell to 43.8% from 48.7% in the previous month.

Tuesday, July 1, 2008 4:05 p.m est.

The market turned back down today as oil spiked higher as the rumors about Israel attacking Iran continued to grow. Of course the rhetoric coming from both sides makes it sound like a tea party but it is serious. Unfortunately if the media is actually trying to time it, it isn’t going to happen, especially when the rumors about President Bush’s exact attack plans are coming out! The market started the day lower but after some very positive economic data came out it bounced back to see the Dow see highs of +20.00 points, S&P 500 +3.00 points and the Nasdaq Composite +5.00 points. When Iran’s comments about a attack came out saying that Israel would see an even worse retaliation if they did attack,,, wow now that;s a surprise,,, the market fell again. The Dow saw lows of -170.00 points, S&P 500 -21.00 points and the Nasdaq Composite -40.00 points. After some car makers came out with decent sales for last month the market bounced again and the last hour saw new highs in the market and were mostly held into the close. Interestingly, volume continued to expand so maybe the shorts are getting nervous!

At the close the Dow was up by +32.25 points at 11382.26, S&P 500 +4.91 points to 1284.91, S&P 100 +2.86 points to 583.95 and the Nasdaq Composite +11.99 points to 2304.97. Oil closed higher up +$.97 to $140.97.

The nation's manufacturers increased production in June for the first time since January, the Institute for Supply Management reported. The ISM index inched higher to 50.2% in June from 49.6% in May and the rise was unexpected as economists looked for 48.5%. Readings below 50 indicate contraction so this is great. Nine of 18 industries were growing in June, including paper, petroleum, metals and chemicals. The new orders index slipped to 49.6% from 49.7% in May while the production index rose to 51.5% from 51.2% in the previous month. The employment index fell to 43.7% from 45.5% while the prices paid index rose to 91.5% from 87% which isn’t good news, the highest since 1979. Inventories inched higher to 51.2% from 48% in May while customer inventories jumped to 55% from 47%. This is a troubling sign as it means that they may not increase their orders soon. Backlogs of orders also trended higher to 47.5% from 46% in the previous month.

Construction Spending fell -0.4% in May as outlays on private residential construction took another fall. Economists were looking for a decline of -0.6% though. On a year-over-year basis, construction spending was down -6%. Spending on private residential construction declined -1.6% in May, following a decline of -1.7% in the prior month. Spending in May on overall private construction declined -0.7% while spending on public construction rose +0.4%.

Monday, June 30, 2008 4:05 p.m est.

The market saw a mixed start to this shortened trading week and almost looked like it was going to be down quite a bit after oil hit $143 per barrel. The Dow saw lows of -50.00 points, S&P 500 -4.00 points and the Nasdaq Composite -25.00 points. It was able to get it together though and had a decent bounce with the Dow seeing highs of +95.00 points, S&P 500 +12.00 points and the Nasdaq Composite +15.00 points. From there it pulled back again as tech stocks were sold. The final hour saw more selling and at the close the Dow was up by only +3.50 points at 11350.01, S&P 500 +1.60 points to 1280.00, S&P 100 +1.45 points to 581.09 and the Nasdaq Composite -22.65 points to 2292.98. Oil closed lower after $143.67 down -$.21 to $140.00.

The market remains incredibly oversold but still over the weekend I kept hearing that everyone is fixated on the declining volatility index. With the big sell off on Thursday the VIX barely moved higher as no one seemed all that worried but I think it has more to do with the lack of volume which interestingly almost jumped 100% on Friday which may mean a short term bottom may be in! I think this week will continue to see volatility fall at least until Thursday when we get the all important employment report out and the European Union decides about interest rates. Even then with no volume though we could see a lackluster kind of day.

Consumer confidence has only fallen below 55%, 10-times in the last 40-years and every time the market has been up 10-15% in the next 12 months. Another factor that is interesting about the S&P 500 is that it has now fallen -10% from its May 19th closing high. It has done this seven times this decade and only one time in the next 10-days was the S&P lower and that was only by -0.8% so that is a great set up for us this expiration cycle.

There was nothing out today but tomorrow we get Construction Spending and the June Institute for Supply Management's manufacturing index. Wednesday has the usual oil inventories report and news from the ADP Employment report. Thursday gets very important as Jobless Claims and the Employment report are out. The market is closed on Friday for Independence Day.

Friday, June 27, 2008 4:05 p.m est.

The market attempted a bounce this morning with the Dow seeing highs of +40.00 points, S&P 500 +4.00 points and the Nasdaq Composite +5.00 points as economic data was pretty good. It didn’t last long though and by midday the Dow was back into triple digit losses as oil set new record highs. I almost wish it would hit $150 and get it over with! The problem is that volume is getting smaller and smaller and that always means the end is near when your reaching the stratosphere. At its lows the Dow off -160.00 points, S&P 500 -12.00 points and the Nasdaq Composite -35.00 points.

The market came back but at the close the Dow was down again by -106.91 points at 11346.51, S&P 500 -4.77 points to 1278.38, S&P 100 -3.76 points to 579.62 and the Nasdaq Composite -5.74 points to 2315.63. Oil closed with another gain of +$.57 to $140.21 after hitting highs of $142.99 earlier on.

So far its looking like this is going to be the worst June for the market since the great depression! Yesterday GM stocks hit its lowest level since 1955! Things are looking ugly out there however the interesting thing was that volume expanded dramatically today which I believe is the Smart Money gobbling up cheap stock. I’m even thinking about buying some stocks as I see them so cheap coming across the ticker! Things are looking incredibly gloomy and I’m sure I’m going to be reading a lot about the end of the world this weekend so next week should hopefully be better in the end...

Incomes, Spending and even savings were strong in May after the government sent out $48 billion in tax rebate checks to stimulate the economy. Personal incomes rose +1.9% in May, the largest gain since September 2005, when insurance payments from hurricane Katrina damage flooded into bank accounts. The increase was close to the +1.5% gain expected by economists. Real disposable incomes after-taxes and adjusted for inflation increased +5.3%, the biggest increase since 1975. Excluding the impact of the rebates and inflation, real disposable incomes were flat. Consumer spending rose +0.8% in May, the most since November, compared with the +0.6% expected. After adjusting for the +0.4% rise in consumer prices, real spending rose +0.4%, the most in nine months.

Core inflation rose +0.1% in May and is up +2.1% in the past year. Economists expected it which excludes food and energy goods to rise +0.2% in May. Overall, consumer prices are up +3.1% in the past year, the lowest year-over-year inflation since October. Personal savings soared to more than $550 billion at an annual rate, the largest level in the 49-year history of the government data which is incredible! Savings aren't really that high, of course, because the government accounting assumes the windfall in May is something that will continue each month. The tax rebate checks began showing up in mailboxes and bank accounts in late April and will peter out by mid-July and will total $107 billion this fiscal year in stimulus. Private economists expect about 40% of the money to be spent, with the remainder going into savings and into paying off debts.
Consumers grew even more pessimistic in June, according to the University of Michigan and Reuters. Their consumer sentiment index fell to 56.4% from 59.6% in May and 56.6% in mid-June. It’s the lowest since 1980 and the third-lowest reading in the 56-year history of the survey!

More consumers said their own finances had worsened than ever before. Nine of 10 said the economy was in recession, citing high energy prices, lost jobs, slow growth and the credit crunch. Two-thirds expect the slump to last several years. Consumers' expectations for inflation over the next year climbed to the highest level in more than 20 years.

Thursday, June 26, 2008 4:05 p.m est.

I guess I shouldn’t have mentioned that I wouldn’t write if there was a surprise today because there was! It was an ugly start to the day as the market started the day steeply lower after Goldman Sachs out of the blue downgraded brokers and GM, three days before the quarter ends. There were also cautious outlooks from Research In Motion, Nike and Oracle and oil hitting a new record of $140.39 per barrel. The market moved down all day seeing lows in the final hour with the Dow off -360.00 points, S&P 500 +40.00 points and the Nasdaq Composite +85.00 points.
At the close the Dow was slaughtered by -358.41 points at 11453.42, S&P 500 -38.82 points to 1283.15, S&P 100 -18.07 points to 583.38 and the Nasdaq Composite -79.89 points to 2321.37. Oil closed with a gain of +$5.09 to $139.64.

Although this was an ugly day with a very poor advance/decline and new lows on high/low readings, volume and volatility readings remained incredibly low which is most important. I think it is because we are seeing a bottom being built. Smart money has been in buying as sentiment has gotten continually worse and very surprisingly with a -3% down day there were only 1.4 billion shares traded. People just aren’t interested in the market but with these levels it is getting incredibly cheap. The Dow has also now broken to new yearly lows but other indices haven’t and so at the least we should see a rally start anytime back up to the upper downtrend line as we are far below moving averages. We'll then see what it looks like. One thing for sure is that I’m sure glad I’m not trying to time this market though as longs would have gotten killed today trying to time the bottom.

It was reported this morning that Existing Home Sales were a bit higher in May but prices continued to fall, the National Association of Realtors reported. Re-sales of houses and condos rose +2% to a seasonally adjusted annualized rate of 4.99 million in May from 4.89 million in April. This is the highest sales pace since February. Economists expected sales to rise to 5 million. Re-sales have fallen -15.9% in the past year and are down =31% from the peak in 2005. The median sales price was down -6.3% compared with a year earlier. Inventories of unsold homes fell -1.4% on a not-seasonally adjusted basis to 4.49 million, still a much to big 10.9-month supply.

Gross Domestic Product for the first quarter was revised to +1.0% annualized from the earlier estimate of +0.9%. Economists expected it to be revised up to +1.1%. A key measure of inflation was revised higher also as core prices increased +2.3% up from +2.1% reported earlier or if you go by real numbers it was likely +12.3%! I’m just kidding by the way but it is the fastest pace of core inflation since the third quarter of 2006. Corporate profits were revised to show a drop of -0.3% quarter-to-quarter, compared with the previous estimate of a +0.3% gain. Corporate profits have now dropped over the past three quarters.

Jobless claims were unchanged at 384,000 last week while the four-week average of those claims rose to 378,250, the highest since October 2005. Both figures are above levels signaling a weak labor market. Continuing claims rose to 3.14 million in the latest week and the four-week average of continuing claims hit 3.10 million.

Wednesday, June 25, 2008 4:05 p.m est.

The market continued higher this morning after oil inventories saw another rise as it fell over -$4.00 per barrel. Highs were made early on and then traders went into drift mode waiting for the Fed’s decision on interest rates. After it came out with them talking more about inflation the market spiked to higher highs with the Dow up +120.00 points, S&P 500 +23.00 points and the Nasdaq Composite +55.00 points. After that it fell back once again into drift mode and the final hour saw selling come in with the Dow touching negative territory while the S&P and Nasdaq held onto decent gains.

At the close the Dow was up by +4.40 points at 11811.83, S&P 500 +7.68 points to 1321.97, S&P 100 +3.84 points to 601.45 and the Nasdaq Composite +32.98 points to 2401.26. Oil closed with a loss of -$2.45 to $134.55.

The market continues to get oversold actually and should be very near an interim bottom. Now that the Fed is out of the way the only thing to think about is the next employment report and money managers should be coming in to dress up their portfolios. I’ll see you on Friday unless something exciting happens tomorrow.

The Fed as expected, held interest rates steady but at the same time I seemed to focus on inflation. In its policy statement, the Fed said that downside risks to growth had diminished since its last meeting, but the upside risks to inflation have increased. Dallas Fed president Richard Fisher also dissented in favor of a rate hike. The Fed said the economy was continuing to expand and that there had been some firming in household spending. "The upside risks to inflation and inflation expectations have increased," according to the Fed's statement Wednesday. At the same time, downside risks to growth "appear to have diminished somewhat." "Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending," according to the Fed. "However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters."

Durable Goods orders were unchanged in May, as higher orders for airplanes and defense goods offset weaker sales of machinery and metals. Excluding the +2.6% rise in transportation orders, durable goods fell -0.9%, matching expectations in the market. Excluding the +10.9% rise in defense orders, total orders fell -0.6%. The overall report was stronger than the -1% decline forecast by economists. Strong export growth has been keeping factories busier than they would normally be during a period of falling domestic demand.

Sales of New Homes fell -2.5% in May to a seasonally adjusted annual rate of 512,000 as sales in the West fell to a 26-year low. The decline nearly matched economists expectations for a decline to a 510,000 rate from April's revised 525,000. It was the lowest sales pace since the 501,000 rate in March. New-home sales were down -40.3% compared with a year earlier. Builders continued to slash their prices to sell homes.

The median sales price in May was $231,000, down -5.7% from a year earlier. The market share for the very cheapest homes and for the most expensive each rose sharply in May. Builders were also making progress on reducing the number of homes for sale as the number of homes on the market fell to a three-year low of 453,000 but there is still a 10.9-month supply at the May's sales pace, up from 10.7 months in April.

The number of completed homes for sale fell the fourth straight month, but the length of time a completed home sat on the market before sale rose to an average of 8.5 months, double the time it took in 2006. In all of 2007, 776,000 new homes were sold, down from 1.05 million in 2006. Regionally, sales crashed -11.6% in the West to 114,000 annualized, the lowest sales pace since 1982! Sales fell -7.9% in the Northeast to 35,000. Sales rose +5.1% in the Midwest to 82,000 and rose +0.4% in the South to 281,000.

Tuesday, June 24, 2008 4:05 p.m est.

Yesterday the market ended the day quietly with lots of intraday volatility. Today the market sunk on poor economic data and oil approaching $140 once again. The Dow saw lows of -110.00 points, S&P 500 -14.00 points and the Nasdaq Composite -30.00 points after Consumer confidence reported its fifth worst reading ever. Interestingly, financials turned around midday strongly and oil started to fall so the market followed along with the Dow seeing highs of +60.00 points, S&P 500 +8.00 points and the Nasdaq Composite +5.00 points. The final hour saw selling once again however so at the close the Dow was down by -34.93 points at 11807.43, S&P 500 -3.72 points to 1314.28, S&P 100 +.33 points to 597.61 and the Nasdaq Composite -17.46 points to 2406.09. Oil closed with a slight gain of +$.26 to $137.00.

Home prices in 20 major cities have dropped -15.3% in the past year, according to the Case-Shiller home price index. Prices were down -16.3% in a smaller subset of 10 homes that have been tracked over a longer period. Home prices fell in 12 of 20 cities in April compared with March, but are down in all 20 cities compared with a year earlier. Prices are now down -17.8% from the peak two years ago. The Case-Shiller index tracks sales of the same homes over time, so it's not influenced by the mix of homes sold in a period.

Consumer Confidence plunged in June to reach its fifth lowest reading ever, the Conference Board reported, as expectations reached a record low. The June consumer confidence index fell to 50.4% from a May reading that was revised to 58.1% from a prior estimate of 57.2%. Economists had expected a June reading of 56%. The percentage of consumers saying jobs are “hard to get” rose to 30.5% in June from 28.3% in May.

For the rest of the week, tomorrow we get the May Durable Orders and New Home Sales, as well as the usual oil inventories report. Everyone will also be awaiting the Fed’s policy statement set for release at 2:15 p.m. EST. So far everyone is hoping that they will have a strong statement about inflation and unbelievably this could move the market higher. Interesting what a few months will do! Thursday has the latest Jobless Claims stats, as well as May's Existing Home Sales data. Finally, Friday brings us May's Personal Income and Spending reports, as well as the PCE Core Inflation results.

Friday, June 20, 2008 4:05 p.m est.

What an exciting day to end the week and this expiration cycle. It looks like the up expiration week pattern is dead and the usual up June cycle was down overall. Nonetheless it was still a profitable cycle overall which is always great! The market was mostly down today I believe due to the line up of this expiration and the fact that oil was up on news that Israel had been practicing the way it was going to take out Iran’s nuclear facilities! There was also the threat out of there of Standard and Poor’s possible credit downgrade on the big three automakers. Volume was still incredibly light for an expiration with the Dow seeing lows of -250.00 points, S&P 500 -29.00 points and the Nasdaq Composite -70.00 points.

At the close the Dow was down by -221.14 points at 11841.95, S&P 500 -24.99 points to 1317.84, S&P 100 -11.73 points to 597.08 and the Nasdaq Composite -55.97 points to 2406.09. Interestingly although up, oil closed with only a gain of +$2.69 to $134.62. I still believe that oil has moved into the speculation zone and one of these days were going to see something like a -$15 day. Then we’ll know that the top is in. Of course that could come from here or $150, I just know it can’t keep climbing like it has.

Personally I loved this shakeout as I’m sure sentiment is going to be extremely bearish this weekend and all technical indicators are going to be very oversold so at least a bounce is likely to start. I’m also hearing so much negativity about the economy, housing going to zero, credit worries, possible wars, possible terrorist attacks, the sun never coming out again! I mean everything is bad right now and you know what that usually means,,,,the bottom is near....

Thursday, June 19, 2008 4:05 p.m est.

Can you tell were in expiration mode, the market was really volatile today. News that China is raising its gas prices helped to lower oil prices but when Citibank made some poor announcements the market turned lower. The market started the day and with the Nasdaq leading the way with the Dow up +40.00 points, S&P 500 +3.00 points and the Nasdaq Composite +30.00 points. After Citi’s news the banking sector fell pretty hard and the Dow saw 11,000 level once again with lows of -50.00 points, S&P 500 -6.00 points and the Nasdaq Composite -15.00 points. Citigroup's chief financial officer told a conference call that the financial services giant is likely to take “substantial” additional markdowns if current trends prevail. After oil started to really sell off almost -$5.00, the market took off and the Dow saw highs of +80.00 points, S&P 500 +9.00 points and the Nasdaq Composite +40.00 points in the final hour of trading.

At the close the Dow was up by +34.03 points at 12063.09, S&P 500 +5.02 points to 1342.83, S&P 100 +1.47 points to 608.81 and the Nasdaq Composite +32.36 points to 2462.07. Oil closed down by -$4.75 to 131.93.

Manufacturing in the Philadelphia region fell more than forecast in June as orders and sales weakened. The Fed’s Bank of Philadelphia general economic index dropped to minus -17.1%, a seventh month of contraction, from minus -15.6% in May. Readings less than zero signal a decline. It had averaged +5.1% in 2007. The worst housing slowdown in 17 years has cut production of construction equipment, pickup trucks and appliances as business and spending slows. The report showed a gauge of raw material expenses jumped to the highest level in almost 28 years, signaling soaring costs are hurting profits and contributing to the decline in manufacturing. Economists had forecast the Phiily manufacturing index would improve to minus -10%.

Although the Fed’s report was bad there may be better times ahead, an economist with the Conference Board said as the index of Leading Economic Indicators rose slightly in May for a second straight month. The index, which attempts to forecast turning points in the economy, rose +0.1% in May, matching April's gain. “Latest data suggest the economy has not fallen into a contraction and may not undergo one in the second half of the year,” said Ken Goldstein, labor economist at the Conference Board. “In fact, the economy might even begin to turn a corner early next year.”

This could be but unlikely even though Jobless Claims also dropped by -5,000 to 381,000 last week, a two-week low. The four-week average rose by +3,250 to 375,250 while continuing claims fell to 3.06 million, the lowest since April, but still well above the year-ago level of 2.52 million. The big problem is that no one believes any of the economic reports unless they’re negative of course. The key thing is that inflation is rising on what we need most, food and gas while house prices continue to fall. One thing to note though is that your average middle class person is still way up in overall wealth as there has been well over two trillion dollars gained in the past decade outside of housing. This is positive and is a support overall.

Wednesday, June 18, 2008 4:05 p.m est.

The market started the day on the downside after FedEx announced a fourth-quarter loss from a year-earlier profit. It said that it was the acquisition of Kinko's and the surge in fuel prices and the weak economy that caused it. This of course took other transportation stocks down with it. Oil was pretty much flat and actually turned lower after President Bush once again pushed congress to release off shore and regular drilling, ending its 27-year moratorium. Oil started to rally however after it was announced that Nicaragua said that tensions are rising there once again. This is case in point why we need to look to our own country for oil so we don’t have to worry about getting it from all of these rogue states! Anyhow the Dow actually saw the 11,000 level once again with lows of -170.00 points, S&P 500 -18.00 points and the Nasdaq Composite -40.00 points. Going into the final 30-minutes of trading the market has cut losses almost in half. As we are now moving into the final two days of trading for this expiration cycle I wouldn’t be surprised to see it turn higher now. Oil closed up +$2.67 to 136.68.

Tuesday, June 17, 2008 4:05 p.m est.

And the volatility continues. The market was higher this morning with the Dow seeing highs of +50.00 points, S&P 500 +5.00 points and the Nasdaq Composite +10.00 points but selling in the final hour going into the close has the Dow near lows of -120.00 points, S&P 500 -11.00 points and the Nasdaq Composite -20.00 points. At the close the Dow was down by -108.78 points at 12160.30, S&P 500 -9.21 points to 1350.93, S&P 100 -4.20 points to 613.86 and the Nasdaq Composite -17.05 points to 2457.73. Oil closed down -.60 to 134.01

Wholesale prices rose +1.4% in May, after seasonable adjustments, with energy prices gaining +4.9% and food prices rising +0.8%. Economists had expected the PPI to rise +0.9%. In the past year, the PPI has gained +7.2% which is unbelievable. May’s core PPI, which excludes the unimportant food and energy prices, rose +0.2%, matching expectations. Core prices are still up +3% in the past year.

Housing starts fell -3.3% to a seasonally adjusted annual rate of 975,000 in May, the lowest level since March 1991! Starts of single-family homes fell -1% to an annual rate of 674,000, also the lowest in 17 years. Builders reduced the number of building permits they've filed for by -1.3% in May to a seasonally adjusted annual rate of 969,000 and for single-family homes -4% to a 623,000 rate. It looks like the crisis continues...

The output of the nation's factories, mines and utilities fell -0.2% in May, the Fed said. This is the third drop in the past four months. The figures were weaker than forecast by economists as they were looking for output to be unchanged. Industrial output is down -0.1% in the past year. Utility output fell -1.8% in May, dragging the index lower. Factory output and output of business equipment were flat. Capacity utilization, a gauge of inflationary pressures fell to 79.4% from 79.6% in the previous month which means inflation could get worse. This is the lowest level since November 2004.

The current account deficit widened to $176.4 billion in the first three months of the year from $167.2 billion in the fourth quarter. The current account deficit was 5% of gross domestic product. The increase was largely due to lower income earned by Americans overseas. Net financial flows into the U.S fell to $124.3 billion from $213.4 billion.

Monday, June 16, 2008 4:05 p.m est.

Thank you to those who gave me the birthday wishes on Saturday! I’m always surprised and love the well wishes! Although this is an expiration traded week the market seemed to remain in weekend trading mode as volume was incredibly low. There was some volatility as oil suddenly started to rally and came within cents of $140. This cause the market to sell off and the Dow saw lows of -90.00 points, S&P 500 -9.00 points and the Nasdaq Composite -15.00 points. As the day wore on and oil turned lower the market turned back up with the Dow seeing highs of +30.00 points, S&P 500 +5.00 points and the Nasdaq Composite +30.00 points.

At the close the Dow was down by -38.27 points at 12269.08, S&P 500 +.10 points to 1360.13, S&P 100 -.80 points to 618.06 and the Nasdaq Composite +20.28 points to 2474.78. Oil closed down -.25 to 134.61

The past couple of years have seen expiration traded weeks have a positive bias quite consistently and this week is likely to be the same as the market is still oversold. With volume being this low however we could see volatility. Either way its looking like it will be another winning expiration cycle.

Manufacturing activity in the New York area got worse in June, the New York Fed said. The bank's Empire State Manufacturing index fell to -8.7% from -3.2% in May. The index has been in negative territory in four out of the last five months. The subindexes for new orders, shipments, and unfilled orders were also negative and below their May levels. The prices-paid index declined slightly but was still near last month's record high. A separate survey found that many manufacturers plan to restrain their capital spending going forward which isn’t good for the future.

For the rest of the week, tomorrow we get the Current Account Gap and the important May Producer Price Index although I’m sure it will be okay as there is no inflation out there according to the government. Also out are Housing Starts, May Industrial Production and Capacity Utilization. Thursday has Jobless Claims, May Leading Indicators. Finally the Philly Fed Business Index comes out on Thursday to end the week.

Friday, June 13, 2008 12:45 p.m est.
Weekend trading is here as today the market is going nowhere fast. It popped higher originally on okay economic data and oil being down so the Dow saw highs of +150.00 points, S&P 500 +17.00 points and the Nasdaq Composite +50.00 points. Since then the market has started to drift lower but will likely hold onto gains going into the weekend.

Consumer prices rose at the fastest pace in six months in May, mostly because of the surging energy prices. The seasonally adjusted consumer price index rose +0.6% in May, worse than the +0.5% gain expected by economists. The insanely much more important core CPI, which excludes food and energy prices because who needs those totally unimportant and useless measures, rose +0.2% as expected. In May, energy prices rose +4.4% after seasonal adjustments, the biggest gain since November. Food prices rose +0.3%. The CPI is up +4.2% in the past year and has risen at a +4.9% annual pace over the past three months. Inflation has overtaken weak growth as the top concern for financial markets and for some officials at the Fed. Will we see a rate rise though I highly doubt it!

Consumer sentiment in June hit 56.7%, the lowest reading since 1980 according to the University of Michigan/Reuters. Economists had expected a June reading of 59.5%. Consumer sentiment has declined in recent months because of high gas and food costs, and falling house prices. The current economic conditions index fell to 68.7% from 73.3%. It appears that the rebate checks aren’t shifting their attitudes. That’s surprising because a few hundred bucks could maybe fill an SUV gas tank a grand total of two times! Obviously consumers are not fooled by money in the mail! One-year inflation expectations fell to 5.1% from a 26-year high of 5.2% in the prior month. Five-year inflation expectations remained at 3.4%.

Thursday, June 12, 2008 4:05 p.m est.
Volatility is alive and well today! The market ended up staying down yesterday as it closed just below lows that were made yesterday. Of course today it popped higher as oil was lower and even though it was announced that Lehman was firing its CFF and COO it decided to move up. If that would have happened a year ago the market would have tanked right out of the gate. Positive economic data also helped. The Dow saw highs of +190.00 points, S&P 500 +18.00 points and the Nasdaq Composite +45.00 points. At one point oil was off over -$4.00 but as it came back the market seemed to pullback also. Oil ended up closing higher by +$.58 to $36.96. Traders also changed their mind about Lehman and started to sell so the final hour saw the Dow see lows of -10.00 points, S&P 500 -5.00 points and the Nasdaq Composite -10.00 points. At the close the Dow was up +57.81 points at 12141.58, S&P 500 +4.38 points to 1339.87, S&P 100 +1.73 points to 610.39 and the Nasdaq Composite +10.34 points to 2404.35.
I

t was interesting to see the buy programs come in the final hour. We’re about to move into the rollover period for options as expiration is next week and it is a quadruple witch. Generally expiration trading weeks are positive and with the market being so oversold and we are at our regular Program Numbers for the S&P 100, it wouldn’t be surprising to see some type of bounce.

Jump-started by an infusion of nearly $50 billion in stimulus checks from the government, Retail Sales rose a surprising +1% in May, the fastest increase in six months. Unfortunately, sales were mainly increased because of higher gas and food prices which in the end is bad. At least it means that people are still eating and driving though! One interesting thing was the gains in building materials stores and furniture stores. Even vehicle sales rose +0.3% in dollar terms, despite a decline in unit sales reported by the automakers. Excluding autos, sales rose +1.2%, also the biggest gain in six months. Excluding the +2.6% rise in gas station sales, sales increased +0.8%, the biggest gain in a year.

Jobless Claims jumped by +25,000 to 384,000 last week while the four-week average rose by +2,500 to 371,500. Continuing claims had a gain of +58,000, pushing the number up to 3.14 million. The four-week average of continuing claims rose by +16,500 to 3.09 million in the latest week.
Prices of goods imported rose +2.3% because of higher oil and natural gas prices. Excluding all fuels, import prices rose only +0.5% in May. Economists expected import prices to rise by+ 2.7% so this is good. Prices for imported oil stuff rose by +7.8% in May while prices for natural gas made their eighth consecutive increase, rising by +5.4% in May.

Business sales rose at the fastest pace in five months in April, outpacing the growth of inventories, and leaving most businesses with low stockpiles of unsold goods. Total sales increased +1.4% in April, the fastest growth since November. Inventories increased a slower +0.5%, dropping the inventory-sales ratio to 1.25, a bit higher than the record low of 1.24 set in November. The typical company has about 38 days of sales on hand in the back room, perfectly positioned for a climate of weak demand. Economists were expecting inventories to rise +0.3%. Sales and inventory figures in the April report are not adjusted for price changes. The big increases seen in food and energy prices would show up as higher sales and inventories. Lean inventories are one reason many economists have confidence that any recession would be mild. Recessions are typically set in motion by manufacturers laying off large numbers of workers as massive inventories throughout the supply chain are worked off. In the current economy, the only sectors with an inventory problem are housing and, to a lesser extent, autos. It is hard to tell however nowadays because technology has changed the way inventories are built. With the speed of delivery and tracking if a product is sold off the shelf it is automatically reported to the warehouse and the manufacturer to be replaced.

\Wednesday, June 11, 2008 11:55 a.m est.

Ah the rumor mill is alive and well this morning. Rumors that Goldman Sachs may have to do another write down and oil spiking higher after another decrease in inventories saw the market start to tank. It had started the day pretty much flat but the Dow saw lows of -190.00 points, S&P 500 -19.00 points and the Nasdaq Composite -40.00 points in the first hour of trading. After spiking up over $6.00 per barrel, the price of oil did pullback below pre inventory levels so the market also bounced. This helped to cut losses almost in half until the Fed’s vice president Kohn came out and basically said that the Fed can’t really do anything right now to fight inflation and that it is best to just leave things alone and let higher employment and inflation fix themselves. This caused the market to fall back near lows once again.

Things are getting pretty dismal out there, Higher gas prices are causing much less driving, higher inflation for goods so people aren’t spending much and were now back into the quagmire of the election rhetoric. This has caused sentiment overall to become terrible. According to the Investor's Business Daily: “The IBD/TIPP Economic Optimism Index fell -2.9 points, or -7.2%, reaching 37.4% versus 40.3% in May. June’s number is the lowest reading for the Index and only the second time it has broken below 40 in its 89-month history!! June's reading puts the index 14.7 points, or -28%, below its all time average of 52.1%, and 7.6, or -17%, below its 12-month average of 45%.” Readings above 50 are signs of optimism. Readings below 50 are signs of pessimism.

Generally all readings on sentiment are incredibly poor right now. You would think that that would mean the market is going to go to zero. Like I always say, the market doesn’t go up forever and it doesn’t go down forever and usually when things are looking poorly it is usually when we will see the market start to move higher, especially when the rumor mill starts, or we start to see magazines with bears on them. At the least I think with how oversold the market is getting here a bounce could start anytime now. For now though as we go into lunch hour were near lows of the day, the question is how will we end the day....

Tuesday, June 10, 2008 4:05 p.m est.

The market tanked once again this morning because Fed Chief Ben Bernanke made it clear after the market closed that he believes that sluggish growth will hold down inflation even though were seeing higher inflation costs with food and gas. “Future developments in this regard will bear close attention,” Bernanke said. “Moreover, the latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations,” he said. Oil was also rallying over +$3.00 per barrel once again and this caused the Dow to see quick lows of -80.00 points, S&P 500 -9.00 points and the Nasdaq Composite -30.00 points. Interestingly, financial stocks finally started to turn around and oil started to fall strongly once again down over -$3.00 per barrel so this led the market back up with the Dow up +70.00 points, S&P 500 +2.00 points and the Nasdaq Composite +1.00 point.

The final hour saw it turn mixed and at the close the Dow was up +9.44 points to 12289.76, S&P 500 -3.32 points to 1358.44, S&P 100 -.37 points to 618.99 and the Nasdaq Composite -10.52 points to 2448.94. Oil had a huge spread today being up so much and then falling so much. More and more it looks like a top is being built but so far the bulls are still in charge. Once the bears really get a grip on the situation we’ll likely see a huge correction. It closed down down by -$3.04 to 131.31.

So far all of this volatility this week has the market little changed and is great for us as June premium is eroding fast as the market continues to build its oversold condition with less than 10-days to expiration.

Monday, June 9, 2008 4:05 p.m est.

Of course the market bounced today starting out strong with highs hit almost right away with the Dow up +120.00 points, S&P 500 +9.00 points and the Nasdaq Composite +10.00 points. Whenever the market spikes higher the day after a big sell off it usually fails and today was no different. The Dow saw lows of -15.00 points, S&P 500 -11.00 points and the Nasdaq Composite -50.00 points. Tech stocks have been hit harder because it has had a much stronger run. The final hour saw an attempt at a comeback with the Dow the strongest. At the close the Dow was up +70.51 points to 12280.32, S&P 500 +1.09 points to 1361.77, S&P 100 +.10 points to 619.36 and the Nasdaq Composite -15.10 points to 2459.46. Oil took a hit today not surprising down by -$4.19 to 134.35. The market may build a base this week as it has been hit pretty hard the past week and there is little to move it in either direction anyway. Volume continues to contract so the bears may be running out of steam but what is most important is that the slide on Friday saw the Smart Money in there buying.

Pending sales contracts on previously owned homes rose +6.3% in April from the prior month, the National Association of Realtors reported this morning. The index, which is considered a leading indicator of existing home sales, was down -13.1% from the April 2007 level. By region, sales fell only in the Northeast, with a -1.9% decline. The index rose +13% in the Midwest, +8.3% in the West and +4.6% in the South. Many analysts believe it is due to bargain hunters.

Friday, June 6, 2008 4:05 p.m est.

What an interesting couple of days of trading. Yesterday the Dow was up +214.00 points, S&P 500 +27.00 points and the Nasdaq Composite +47.00 points for no real reason. The interesting thing was that oil closed up over +$5.00. Today however the employment report came out much worse than expected so the market started to sell off and when an Israeli cabinet minister mentioned that there was no way Israel would allow Iran to get nuclear production happening, oil spiked and at one point was over +$11.00 per barrel hitting a new record high. The Dow saw lows just before the close of -415.00 points, S&P 500 -45.00 points and the Nasdaq Composite -76.00 points. It’s kind of looking like yesterday’s move was just a discounting mechanism. At the close the Dow was off -403.03 points to 12201.42, S&P 500 -43.61 points to 1360.44, S&P 100 -20.09 points to 619.06 and the Nasdaq Composite +75.38 points to 2474.56. Oil closed up by +$10.75 to 138.54.

The sell off today sounds bad but when you put the two days together it wasn’t that bad and once again volume was still poor. Considering the market was down this much you would have thought we would have seen at least 1.5 billion shares traded. Normally on this type of sell off you see no less than 2 billion! It does appear however that oil has entered its blow off stage moving up this much. The Israeli comments will move oil up but there have been numerous comments that could have done it so today’s action is a bit off. I wouldn’t be surprised if we don’t hear about some type of action made to cool oil bulls and calm market emotions over the weekend. I’m also sure the bears will be coming out in droves to say the market is falling into the abyss which always means your closer to the end than the start of a sharp run lower.

The unemployment rate jumped by a half percentage point to 5.5% in May on the biggest increase in seasonally adjusted unemployment in 33 years, the Labor Department reported this morning. Employment fell by -49,000, the fifth consecutive decrease and in line with expectations of economists. The economy has lost -324,000 jobs so far this year. The ugly part of the report showed that unemployment rose by +861,000 to 8.5 million. The +0.5% increase in the unemployment rate was a shock, as economists expected a much smaller +0.1%gain to 5.1%. The jobless rate is the highest since October 2004 and it was the biggest percentage point gain in unemployment since 1986. Job losses were in construction, manufacturing, retail and temporary-help jobs. Construction jobs fell by -34,000, while factory jobs fell by -26,000, retail by -27,000 and temporary jobs dropped -30,000. There were a few bright spots though as health care added +34,000 jobs, and government helped to spend more money by hiring +17,000 people. The number of people who've been out of work longer than 26 weeks rose by +197,000 to 1.55 million. Average hourly earnings rose +5 cents, or +0.3%, to $17.94. Average wages were up +3.5% in the past year, falling short of the increase in consumer prices. The average work week last month was unchanged at 33.7 hours while total hours worked dropped by -0.1%.

Wednesday, June 4, 2008 4:05 p.m est.

The market had been under pressure once again yesterday after Ben Bernanke basically said that there won’t be any more lowering of interest rates. A speech by Fed Chairman Ben Bernanke helped boost the U.S dollar as he highlighted upside inflation risks for the economy, and expressed a hawkish tone as he signaled that the central bank will keep interest rates on hold. He also acknowledged the negative repercussion effects that the weak dollar has had on inflation expectations, and went onto say that the stability and strength of the greenback has become a major concern for the Fed and so it should be with the rising cost of gas and food.

What was more interesting though was when it was announced that Hilary Clinton was going to suggest her candidacy for vice president because it looked like Obama was going to get enough delegates for a sure win. The market tanked and stayed there for the rest of the day. Today it started down but didn’t stay there long with the Dow seeing highs of +100 points, S&P 500 +11.00 points and the Nasdaq Composite +40.00 points. It started to fall again however after it was reported that Moody’s Investors Service said it may downgrade the Aaa insurance financial strength ratings of MBIA and Ambac Financial. The Dow saw lows of -70.00 points, S&P 500 -6.00 points but the Nasdaq Composite was able to hold double digit gains.

At the close the Dow was off -13.51 points to 12389.34, S&P 500 -.53 points to 1377.12, S&P 100 -.46 points to 626.96 and the Nasdaq Composite +22.66 points to 2503.14. Oil sold off today as gas demand continues to fall according to today’s oil report. It was down by -$2.01 to 122.30, still to high mind you.

The market continues to move sideways and isn’t really overbought or oversold anymore. I think we’ll continue this sideways movement till Friday when the very important employment report comes out. We need to see employment growing otherwise the higher inflation were seeing could make things look even more bleak. The economy so far has remained positive but every month it seems another piece of support is taken out so were hovering near the abyss. What will it be is the question, so this employment report may mark the start of a new rally in the market or more sideways to down action. See you then...

Companies in the private sector added +40,000 jobs in May, according to the ADP employment report released this morning. The report comes two days before the Labor Department reports on employment for May. Adding in about +20,000 jobs typically created by government, the ADP report suggests that it could be up by about +60,000, compared to a drop of -50,000 expected by economists. The ADP data has been wrong on forecasts in recent months however.

The productivity of businesses was revised just a bit higher in the fourth quarter than previously estimated. Productivity, defined as output per hour worked rose at a +2.6% annual rate in the quarter, revised up from +2.3% in the earlier estimate a month ago. Unit labor costs rose +2.2%, revised down from +2.3%. The estimates were largely in line with expectations by economists.

Monday, June 2, 2008 4:05 p.m est.

Summer is officially here being June and I have decided that with the market barely breaking a billion shares per day the doldrums could last for awhile so I’m going to move to my summer commentary times. This means they could come midday or not at all depending on how boring the market is! I am still watching and trading of course and if we do see some action I’ll be reporting it!!! I’ll also try to do a weekly commentary to cover possible movements.

The market had a bad start to the day and it continued to get worse as it went along. Lows were hit during lunch with the Dow down by -220.00 points, S&P 500 -22.00 points and the Nasdaq Composite -55.00 points. It did try to bounce but in the end it was still negative at the close with the Dow off -134.18 points to 12504.14, S&P 500 -14.71 points to 1385.67, S&P 100 -7.23 points to 631.92 and the Nasdaq Composite -31.13 points to 2491.53. Oil was lower to start the day but it turned around closing higher by +$.41 to 127.76.

Not surprisingly the market tanked today because there was so much energy used up to push it up last week to help make it look good. Usually the last few days of the month the market rises due to decorating and then the first few days of the month as mutual funds put their monthly deposits to work. It looks like today that wasn’t the case but it can’t work every month. By the way, cash levels at mutual funds remain near record lows which in the long run isn’t good news because if redemption's come in they will have to sell to meet them.

Although the market did move higher last week it remains on the lower end of being oversold so the downside should be limited and I think it will likely be mostly flat to down until Friday’s report on employment anyhow. Volume continues to indicate a complete disinterest for stocks anyhow and this should also help to hold volatility in check. One interesting aspect is that the banking sector is hitting yearly lows for the third time so if it breaks here we’ll likely see lower prices for sure but it could also be a triple bottom and the market could start its summer advance. Something to watch...

Economic data didn’t really help or hurt the market this morning. Manufacturers continued to cut back production but at a slower rate than over the past three months, the Institute for Supply Management reported. The ISM index inched higher to 49.6%from 48.6% in April. This is the fourth straight month the index has been below 50%. The size of the rise was unexpected however as estimates were for the index to inch higher to 48.7%. Readings below 50% indicate contraction. The index was last over 50% in January. Economists say export industries are keeping the sector from weakening significantly.

For the rest of the week we get Factory Orders tomorrow. Wednesday, we'll hear the latest numbers from the ADP employment report and the Oil inventories report. On Thursday we’’ see Jobless Claims. Finally, on Friday, we'll see the all important employment report.

Thursday, May 29, 2008 4:05 p.m est.

Globex futures had been higher overnight but after economic data came out and appeared weaker the market started the day lower. As volume has been dwindling of late, lows weren’t that strong and the Dow was only down by -40.00 points, S&P 500 -3.00 points and the Nasdaq Composite -5.00 points. Of course the market turned around and the Dow is currently seeing highs of +530.00 points, S&P 500 +14.00 points and the Nasdaq Composite +40.00 points as oil has corrected after moving up early on from a weak oil inventory report. One of the reasons for the pop may be related to end of the month window dressing also.

The market went negative after it was reported that the FDIC said that banks are holding cash at their lowest level since 1993 because of non current loans, people 90 days or more late on payments. Banks in the watch list has also increased from 76 to 90 plus but they aren’t big banks so everyone ignored that number. One thing to note though is that there are over 460 publicly traded banks that are still overexposed to construction and development loans of over 200 billion! There are also now more banks having more problems with loans that are 90 days late or more which has now reached the same levels of the late 80’s-90’s S&L crisis. You would think that you would hear more about this in the media but so far the financial markets barely even mentioned it. You would also think that it would sink stocks but the market moved back to highs once again after it was digested.

What did hit the market for a while was that oil spiked back up after the inventory report revealed a massive drawdown. Oil inventories dropped by -8.8 million barrels to 311.6 million for last week according to the Energy Department. The drop was due to temporary delays in crude-oil tanker off-loadings on the Gulf Coast, the report said. Motor gasoline supplies fell -3.2 million barrels to 206.2 million barrels while distillate stocks were up +1.6 million barrels at 109.4 million barrels. Refinery utilization was unchanged at 87.9 % of capacity. Following the news, July oil moved from being down -$3.00 to up almost +$2.00. This sank the market once again for a brief moment but once again the market has come back.

I have been talking about stock trading volume of late and after doing some research I have found that it has fallen to a 7-year low. This quarter alone it has fallen -26%, the lowest since 2001. The NYSE's share of the total value of stocks traded fell to 52% in the first three months of 2008 from more than 70% in 1990, according to the World Federation of Exchanges. Trading on the NYSE fell to 1.05 billion shares on May 12th, the lowest this year. The average over the last 30 days dropped to 1.26 billion shares, the fewest since October 2004. The 30-day average on the Nasdaq declined to 834 million shares on March 14th, the lowest since October 2004. Part of the reason may be because there are so many other ways to trade. Option volume for example has skyrocketed and there is more and more index trading occurring. There is also an increasing use of automated strategies or electronic trading through different exchanges being done.

The new venues make it more difficult for technical analysts, who use exchange data to measure demand for stocks so the only thing they can take from it is that a rally in the S&P 500 Index without an increase in volume may keep it in a trading range which is great for us! For example the weak rebound last year in the S&P 500 during September came with the lowest volume in four months. We’re definitely in a period of indecision in the market with investors debating whether the recent rebound in the market is a bear trap or not. The S&P 500 has rallied about +10% since March 10th, boosted by the Fed’s support for the bailout of Bear Stearns and the steepest interest-rate cuts in two decades. Unfortunately, average volume during the advance was 1.41 billion shares a day, 9.5% below the same period last year.

It was reported this morning that the economy grew at a sluggish pace in the first quarter of the year, held back by the biggest slump in housing in 26 years and the first decline in final domestic sales in 17 years. Real gross domestic product increased at a +0.9% annual rate in the first three months of the year, slightly faster than the +0.6% rate originally estimated a month ago. The revision matched expectations of economists and showed a better mix of growth.

Jobless claims rose by +4,000 to 372,000 while the four-week average which measures the underlying trend of claims, fell by -2,500 to 370,500. Continuing claims rose by +36,000 to 3.10 million and are at their highest level since February 2004. The four-week average of continuing claims rose by +18,500 to 3.06 million.

Wednesday, May 28, 2008 4:05 p.m est.

The market continued higher this morning but selling took hold midday with the Dow down by -50.00 points, S&P 500 -7.00 points but the Nasdaq Composite -15.00 points as oil once again turned higher. The final hour saw some buying as oil was now closed and the Dow saw highs of +60.00 points, S&P 500 +7.00 points and the Nasdaq Composite +15.00 points in the final hour. At the close, the Dow was up by +45.