The Commentary       Today's date March 5, 2010
Good day, here you will find the e-mail that is sent out to subscribers and hedge fund clients during the trading week. It is being put on the website sporadically this year because Ken is busy trading during the day. This is only the e-mail part of the commentary as information about current trades are only sent out to subscribers and Hedge Fund clients.  Hope you  enjoy reading the following commentaries and have a great day and Good trading!!

Friday, March 5, 2010 4:03 p.m est.

Not surprisingly the market was up on the employment report news as the government put the result of job losses to the snow storms as they were once again negative. The Dow saw highs of +130.00 points, S&P 500 +17.00 points and the Nasdaq Composite +40.00 points in the final hour of trading. Volume was so low I think they should consider only trading once a week to get back to normal volumes that were traded ten years ago. Volatility has also sunk to lows last seen before the market started to tank last month so next week could be interesting! At the close the Dow was up about +122.00 points to 10566.00, S&P 500 +16.00 points to 1139.00, S&P 100 +6.00 points to 520.00 and the Nasdaq Composite +34.00 points to 2326.00. Oil was up of course as the dollar was down closing with a gain of about +$1.50 to around the $82.00 level.

Employment fell for the 25th time in the past 26 months, falling by -36,000 in February to 129.5 million. Job losses were concentrated in construction, schools, retail and publishing. Manufacturing jobs rose by +1,000, the second increase in a row. The unemployment rate was steady at 9.7%. Severe snow storms during the survey week may have hurt the payroll count, but the Bureau of Labor Statistics said it couldn’t confirm it. Total hours worked fell by -0.6%, likely due to weather-related shutdowns. The employment report was better than expected, as economists were forecasting a drop of -90,000 and the unemployment rate to rise to 9.8%.

Payrolls data for December and January were revised higher by +35,000. Temporary hiring was because of the Census adding +15,000 jobs. The alternative gauge of the unemployment rate, which includes discouraged workers and those forced to work part-time, rose to 16.8% from 16.5% and according to a survey of 400,000 business establishments, private-service producing industries added +42,000 jobs, concentrated in two areas: Temp help and health care.

Thursday, March 4, 2010 4:03 p.m est.

Since the start of the week the market hasn’t really gone anywhere but has had an upward bias on pathetically low volume. Generally it has been the start of the day being strong but by the close it has pulled back. Today was no different as the Dow saw highs of +60.00 points, S&P 500 +5.00 points and the Nasdaq Composite +10.00 points in the first half hour of trading. After that it sold off quickly moving slightly into the red before flattening out once again.

The final hour saw a rally back near old highs. At the close the Dow was up about +47.00 points to 10444.00, S&P 500 +4.00 points to 1123.00, S&P 100 +2.00 points to 514.00 and the Nasdaq Composite +12.00 points to 2292.00. Oil was down a little after settling over the $80 level the past couple of days, about -$.30 to around the $81.00 level once again.

The market has been nicely up the last week but the lackluster movement and low volume has burned up a lot of technical fuel. It is interesting to note that it is being led by the most economically sensitive sectors which is a bit surprising. The market is overbought and momentum indicators are running out of steam and most important, volatility has been declining almost every day over the last three weeks and is ready for a bounce. A rising VIX is usually bearish for the market. Finally the breadth of the market is also overbought. This will all be interesting as we get the all important employment report out tomorrow morning.

Yes, technically the market is quite overbought here and bullishness is getting excessive but I thought I would also like at the valuations and what is expected so we can get an idea if we could rally on here or remain flat as I’m expecting the next few months to be. Purely on valuation of an average p/e of 15 for stocks the S&P 500 is overpriced right now by a whopping 83%, ouch! I know that sounds absolutely scary but these are from numbers going all the way back to 1925 and are reported earnings not future earning. To put it in perspective, the last time the market saw an average reported earnings of around 15 was way back in the 1900’s, 1995 to be exact, just before the internet bubble caused the market to rocket higher. When we were at the bottom of the recent crash it also touched the 15 level briefly but that was before earnings started coming out.

Anyhow reported earnings can be volatile so it is better to use the Fed’s indicator of comparing the value of the 10-year bond with earnings and there we are still undervalued. The problem with it though is that the fear of the last few years has distorted the bond yield. If you also look at newly reported future earnings you get the best indication and that is where the question of flatness comes in. Assuming the operating P/E will fall to, say 15 as it has after the prior two recessions, and assuming the S&P 500 generates quarterly operating earnings per-share of the hoped for $20.73 by the end of 2010, it makes for a possible value of 1225. You get this number by taking the $20.73 per quarter, multiply it by 4 quarters to annualize it, and then multiply by the P/E ratio of 15. That would mean about a 8% increase for the year which isn’t bad, but nothing huge either. The problem is that there is little room for error or shortfalls. If you also look at the famous GAAP-based valuations that made the market look cheap in the bubble years you get really interesting numbers! Here we look at two years of data which is the model for the S&P 500 at the end of 2011. Assuming the post-recession GAAP P/E it will fall to the average of 16 by the latter part of 2011 (it reached 17.11 and 15.04 just after the mid-points of the prior two recessions), and assuming the S&P 500 generates the anticipated quarterly reported/GAAP earnings per-share of $17.40 by the end of 2011 but then you can only justify a valuation of 1114! $17.41 per quarter, multiplied by 4 quarters to annualize it, and then multiply by the P/E ratio of 16. That would mean flatness from here as were above that level now, two years from now!

So the question is which forecast should one look at? I like to go somewhere in between and that means that the old buy and hold long-term scenario is likely gone for some time to come. Earnings are getting better but still not at a screaming pace and are mostly from cost cutting not actual earnings. The economy isn’t falling apart anymore,but it isn’t taking off either. Standard & Poor’s will certainly update their expectations as time progresses which may be a good thing but just looking at it from the famous GAAP perspective you see the market is likely going to be a slow mover at best for a while which is great for our trading style.

Pending home sales fell sharply in January, dropping to the lowest seasonally adjusted level since last April. The pending home sales index fell a seasonally adjusted -7.6% in January after a revised -0.8% gain in December. The index remained +8.8% higher than in January 2009. The index tracks sales contracts signed on previously owned homes.

Jobless Claims fell by -29,000 last week to a seasonally adjusted 469,000. Initial claims had risen sharply the previous two weeks, in part because of administrative backlogs, extreme weather and the Presidents Day holiday. The decline matched expectations of economists. Initial claims in the most recent week were about 8% higher than at the beginning of the year. Economists who follow the data aren't sure if the increase reflects a weaker job market or is due primarily to non-economic factors, such as weather or backlogs. The four-week average only fell by -3,500 to 470,750. Continuing claims fell by -134,000 to a seasonally adjusted 4.5 million, the lowest in a year. More than half of the people who get state jobless benefits ultimately lose their eligibility, usually after 26 weeks, before finding a job. The number of people who've been out of work for more than six months has surged during this recession to a record 6.3 million in January, accounting for 41% of the 14.8 million people officially classified as unemployed, according to monthly data previously released.

Businesses were more productive in the second half of the year than previously reported, slashing hours by -1.3% even as they boosted their output by 2.5%, the Labor Department reported. The surge in productivity explains how the economy could grow at a +5.9% pace in the fourth quarter without creating any jobs. The report shows that slack in the labor market is a powerful deflationary force in the economy today. Unit labor costs a key inflationary gauge fell sharply in the third and fourth quarters, the Bureau of Labor Statistics said. For all of 2009, unit labor costs fell -1.7%, the most since the records were first kept in 1948. In the fourth quarter, productivity increased at a 6.9% annual rate, revised up from the 6.2% reported a month ago.

Some economists believe companies have squeezed just about all the extra work they can out of their remaining workforce and that more hours of work will have to be put in if output is to increase much more. Unit labor costs, as the name implies, measure the cost of the labor needed to produce one "unit" of output, whether it is tons of steel, or pages of legal briefs written. After undergoing a productivity boom in the late 1990s, productivity slowed heading into the recession, rising +1.8% in 2007 and 2008. But productivity soared in 2009 as the economy began to recover.

Yesterday it was reported that Private-sector firms cut -20,000 jobs in February, the 25th decline in a row, according to the ADP employment report. It was the fewest jobs lost since +22,000 jobs were added in January 2008. In January, a revised -60,000 jobs were lost, compared with the -22,000 originally reported, ADP said. The adverse weather had only a very small effect on the ADP report due to the methodology used to construct it, ADP said.

The services sectors of the economy grew at the fastest pace in two years in February, according to a survey of companies released by the Institute for Supply Management. The ISM non-manufacturing index rose to 53% from 50.5% in January. Readings over 50% indicate more firms said business was getting better than said it was worsening. Economists were looking for the index to rise to 51%. In February, nine of 18 industries were growing. The new orders index rose to 55% from 54.7% in January while the employment index rose to 48.6% in February from 44.6% in January.

Monday, March 1, 2010 4:03 p.m est.

The market continued higher today as it has in recent history but volume remains on the low side so it is hard to tell if the rally will hold. The Dow saw highs of +95.00 points, S&P 500 +11.00 points and the Nasdaq Composite +40.00 points. The final hour was mostly flat but remained near highs to finish the day. At the close the Dow was up about +79.00 points to 10404.00, S&P 500 +11.00 points to 1116.00, S&P 100 +4.00 points to 510.00 and the Nasdaq Composite +35.00 points to 2274.00. Oil was down about -$1.00 to around the $79.00 level once again.

The market once again kept its recent pattern of trading as the past few months have seen the same thing occur with Monday’s always up and by the end of the week we see a down day. The first trading day of the week, which is usually Monday reveals that the market has been up an average +.75%. The middle of the week has been flat, and the last trading day of the week has averaged a loss. It will be interesting to see how the rest of the week turns out with the employment report coming out on Friday.

Consumer spending increased a seasonally adjusted +0.3% in January to the highest level since May 2008 in a further sign of a modest economic recovery. Adjusted for inflation, real spending on goods increased +0.8%, while spending on services remained poor, rising +0.1%. After adjusting for inflation, after-tax incomes fell -0.6% in January, mostly due to large non-withholding tax payments reflecting higher incomes from investments and bonuses in 2009. With spending rising faster than incomes, the personal savings rate fell to 3.3% of disposable income from 4.2% in December and was the lowest savings rate since October 2008.

The expansion in manufacturing firms softened in February but remained very broad based, according to the Institute of Supply Management's survey. The ISM index fell to 56.5% in February from 58.4% in January, weaker than the 57.5% expected by economists. Despite the decline, a reading over 56% is consistent strong growth in manufacturing and growth in the economy of about 4.9%, ISM said. "The February ISM index provides evidence the recession is over and the increase in manufacturing activity during the first quarter is likely to be sustained at least at a moderate rate in 2010," The employment index rose to 56.1% from 53.3%, a strong indication that factories may be hiring again. It was the highest reading for the employment index since January 2005. Factory employment rose for the first time in two years in January, according to the government. "Manufacturers are seemingly willing to hire where they have orders to support higher employment." Readings over 50% in the ISM indicate that more companies said business was improving than said it was worsening. The ISM has been above 50% for seven consecutive months.

Friday, February 26, 2010 4:03 p.m est.

The market came back once again today after starting the day a bit lower with the Dow down seeing -50.00 points, S&P 500 -5.00 points and the Nasdaq Composite -20.00 points. It started to rally midday and the Dow down saw highs of +50.00 points, S&P 500 +5.00 points and the Nasdaq Composite +10.00 points. The final hour was mostly flat but with the gain the market finishes the week practically where it started. Of course that is what we love because it means premium is being eaten up!
At the close the Dow was up about +4.00 points to 10325.00, S&P 500 +1.50 points to 1105.00, S&P 100 +.75 points to 506.00 and the Nasdaq Composite +4.00 points to 2238.00. Oil was up about +$1.50 to around the $80.00 level once again. The market is likely to remain in its sideways pattern for some time to come as there is plenty of resistance just above technically and with the EU dealing with numerous troubled countries, Obama only looking at medical objectives instead of job creation, this has caused volume to be absolutely pathetic because no one wants to commit any cash. This all means the upside will likely remain limited for another week but it could be interesting to see if new monthly money inflows will have any effect at the start of the week.

Existing home sales and condos fell -7.2% in January to a seasonally adjusted annual rate of 5.05 million, the lowest in seven months, the National Association of Realtors reported. Sales of existing homes have fallen two consecutive months after rising steadily through the fall on the back of a federal subsidy for first-time home buyers. This isn’t very good news actually as there has been hope for strength. Inventories of unsold homes fell -0.5% to 3.265 million, or 7.8 months of supply at the current sales pace.

With the poor housing reports its not surprising that Consumer Sentiment was weaker in February, as people grew more impatient with the government's gridlock over efforts to stimulate jobs, or should I say not even making an effort to create jobs because getting a medical plan that no one wants is more important! While not fearful of layoffs, consumers have turned more gloomy about their job and income prospects, according to the Thomson Reuters/University of Michigan's Surveys of Consumers. “Consumers have been getting more impatient with the slow progress of the stimulus program, and confidence in the Obama administration's economic policies has begun to wane,” Richard Curtin, director of the surveys, said. The survey's overall index of consumer sentiment was at 73.6% in February, down from 74.4% in January and below the 74% forecast by analysts polled by Reuters. The preliminary February reading was 73.7%.

The gauge of current economic conditions was at 81.8% for the month, up from January's reading of 81.1%. This compares with 84.1% in the preliminary figures and 82% predicted by analysts. Consumer expectations weakened to 68.4% in February from 70.1% in January. It fell short of the 69.9% forecast by analyst but it did improve from the preliminary figure of 66.9%. The index of consumers 12-month economic outlook fell to 80% from 84% in January, but it was up from 79% in early February.

There was a bit of good news as the economy grew slightly faster than previously reported in the fourth quarter, but details of the revision to gross domestic product show final sales were actually weaker than reported a month ago. Real gross domestic product increased at a +5.9% seasonally adjusted annualized pace, revised up from +5.7% estimated last month. The revision was exactly in line with expectations. Nearly two thirds of the growth was accounted for by changes in inventories, not by final sales. Compared with the first GDP estimate, inventories were bigger, business investments were higher, and exports were higher.

Thursday, February 25, 2010 4:03 p.m est.

Yesterday the market about faced once again and closed higher but today Globex futures were under pressure over night as the dollar was stronger due to the deepening concerns of Greece’s economic woes spreading to more countries in the EU. When Jobless Claims coming in with another rise getting close to the 500,000 level instead of the hoped 400,000, they tanked. Lows were hit practically out of the gate with the Dow down seeing -190.00 points, S&P 500 -19.00 points and the Nasdaq Composite -40.00 points. The market started to rally midday and the final hour saw the most gains but the market to finished the day lower.

At the close the Dow was down about -53.00 points to 10321.00, S&P 500 -2.30 points to 1103.00, S&P 100 -2.00 points to 505.00 and the Nasdaq Composite -2.00 points to 2234.00. Oil was down closing with a loss of about -$1.75 to around the $78.25 level.

Yesterday one of the reasons the market rallied was because Fed Chair Ben Bernanke had no real surprises when he spoke about the economic recovery is still not yet on a sustainable path, but even more important that near-zero interest rates are still needed, he told members of the House Financial Services Committee in his semi-annual report to Congress on monetary policy and economic conditions. "A sustained recovery will depend on continued growth in private-sector final demand," the Fed chairman said. There are some positive signs on the outlook, he said, but the job market remains "quite weak." The good news for the market was that the Fed Funds rate is likely to remain low for an "extended period."

Jobless Claims were up by +22,000 to a seasonally adjusted 496,000 last week, reflecting poor job growth so far in 2010. Jobless claims have risen in six of the first eight weeks of this year. The recent spike in claims, a reversal from the sharp drop seen during the final months of 2009, has created new concerns that the labor market could be weakening again, although bad weather could have affected the data. You know all of that global warming in the east has caused things to get cold. Snowstorms in the Northeast created a backlog in completing paperwork for jobless claims, a Labor Department spokesman said. Economists had expected initial claims would drop to 460,000. Initial claims in the week ended February 13th was revised up by +1,000 to 474,000 which makes it hurt more. The four-week average rose +6,000 to stand at 473,750, also the highest rate in three months. Continuing claims also increased by +6,000 to a seasonally adjusted 4.62 million with the four-week moving average rising +4,250 to 4.6 million.

Orders for Durable Goods were up really strong +3% in January to a seasonally adjusted $175.7 billion on higher bookings for civilian airplanes. It makes sense as were all out there buying new planes as their so cheap! It was the biggest gain since July though. December's orders were revised sharply higher as well to a +1.9% increase compared with the +1% gain reported last month. Economists were looking for a +1.5% gain in total durable goods orders in January. Most of the strength in January came from the 126% increase in volatile civilian aircraft orders. Outside of aircraft, most industrial sectors reported lower demand in January. Excluding the +15.6% gain in transportation orders, orders fell -0.6% in January to $131 billion after rising +2% in November and December. Orders for core civilian capital equipment goods excluding aircraft fell -2.9% in January after rising more than +3% in both November and December. Machinery orders fell -9.7% in January after hefty gains in November and December. Durable goods are manufactured goods designed to last three years or longer. Movements in the data are volatile on a monthly basis, but smoothed trends are an excellent leading indicator of economic activity. The past six months show the manufacturing sector is moving from its steepest recession in 60 years, fueled by stronger demand from abroad and by the need to replenish depleted inventories.

Yesterday it was reported that sales of New Homes fell -11.2% in January to a seasonally adjusted annual rate of 309,000, the lowest rate on record dating back to 1963!! Economists forecast sales to rise slightly to 355,000, with buyers taking advantage of a new federal tax credit. Sales in December were revised higher to 348,000 from 342,000 previously reported. Sales are down -6.1% compared with January 2009's 329,000, which was the previous record-low rate. The number of homes for sale rose +0.4% to 234,000 in January. At the January sales pace, it would take 9.1 months to sell that inventory.

Tuesday, February 23, 2010 4:03 p.m est.

Yesterday the market held up for most of the day but in the end drifter slightly lower by the close. Today it looked like it was going to be a higher day with the Dow up by +30.00 points, S&P 500 +2.00 points and the Nasdaq Composite +1.00 point. When Consumer Confidence came in much worse than expected it fell quickly though with the Dow down seeing lows midday of -120.00 points, S&P 500 -16.00 points and the Nasdaq Composite -40.00 points.

Going into the final hour it looked like a rally was going to start but the market lost its steam going into the close with the Dow down about -101.00 points to 10282.00, S&P 500 -13.00 points to 1095.00, S&P 100 -6.00 points to 502.00 and the Nasdaq Composite -28.00 points to 2213.00. Oil was down closing with a loss of about -$1.25 to around the $79.00 level.

Consumer confidence fell sharply in February as people turned more pessimistic about jobs and the economy. Just a month after touching a 16-month high, the board's Consumer Confidence index fell -11 points to 46% from an upwardly revised 56.5% in January. This is the lowest reading since April 2009. Economists were looking for a slight drop to 55.5%. In a healthy economy, the index average is about 95%. It has ranged between 46% and 56% since last May, bottoming out at a record-low 25.3% in February 2009. The sharp drop in February, which follows three straight monthly gains, reflected growing concern by consumers about an economic recovery. One of the big problems of the report was that consumers aren’t expecting much of an improvement in business conditions and the job market and remains extremely pessimistic about their income prospects. The present situation index plunged to its lowest level in 27 years - to 19.4% from an upwardly revised 25.2%. The percentage of consumers who said economic conditions are good dropped to 6.2% from 8.5%, while those who say conditions are bad climbed to 46.3% from 44.7%. The percentage who say jobs are easy to get dipped to 3.6%, while the percentage saying jobs are hard to get edged up to 47.7%. The expectations index fell to 63.8% from downwardly revised 75.9%. This combination of earnings and job anxieties is likely to continue to curb spending.

The confidence number this morning isn’t signaling good times for the future and according to The New York Times: “The recession can now claim another troublesome record: state tax collections shrank at the end of 2009 for a fifth consecutive quarter, the longest period of continuing state revenue declines since at least the Great Depression, according to a new report.” “The revenue decline comes despite the tax increases imposed by many states since the recession began. With less tax money coming into state treasuries and expenses for programs like Medicaid continuing to mount, many states will probably be forced to consider further tax increases, spending cuts and layoffs, actions that some economists warn could put a drag on the nation’s fragile economic recovery.” Strangely, higher taxes and more government spending are on their way.

Even teacher layoffs may happen and that is a big thing to happen in America. According to The Washington Post: “The revenue decline comes despite the tax increases imposed by many states since the recession began. With less tax money coming into state treasuries and expenses for programs like Medicaid continuing to mount, many states will probably be forced to consider further tax increases, spending cuts and layoffs — actions that some economists warn could put a drag on the nation’s fragile economic recovery.” Once again the problem is falling tax revenues as “states and cities are considering cutting education to keep their budgets balanced.” Another problem is that the $48 billion worth of stimulus for states is running out later this year.

One tidbit to note that it could get really ugly is that if we look at commercial real estate you see a fallout if that market's fall gets worse. There are over a trillion dollars worth of commercial real estate mortgages, many of them still on the books of community banks, that are due to reset within the next three years. Many of them are already under water similar to when individual mortgages were hit, which means that the potential for default is higher than normal. If businesses continue to experience weakness and can't pay their rent, we could see the beginning of that highly predicted double dip recession occurring. According to The Washington Post: “In Washington, the number of troubled properties has multiplied at a phenomenal rate, with the value growing from only $13 million in 2007 to $40 billion now, according to CoStar Group, a Bethesda real estate research company. The region trails only South Florida and metropolitan New York in the per capita value of commercial real estate assets in foreclosure, default or delinquency, according to the research group Real Capital Analytics." “Half of commercial real estate mortgages will be underwater by the beginning of 2011.”

With a president that has a one track mind as health care reform is back in play which will create higher taxes I don’t see a bright future! One thing for sure is that businesses will likely start to lay off more employees if consumers start to re-tighten their belts.

Home prices in 20 major cities fell a not-seasonally adjusted -0.2% in December compared with November, according to the Case-Shiller home price index released by Standard & Poor's. Prices were down -3.1% in the past year. A quarterly index covering the entire nation showed home prices fell -1.1% in the fourth quarter compared with the third while national home prices were down -2.5% in the past year. Prices rose in four of 20 cities in December: Los Angeles, Phoenix, San Diego and Las Vegas. “The pace of deterioration has stabilized for now," said David Blitzer, chairman of the S&P index committee.“ However, the rate of improvement seen during the summer of 2009 has not been sustained.” For the 20 metropolitan areas in which repeat sales of homes are tracked in the Case-Shiller index, prices were down -29% from the peak in 2006 and are now back to levels seen in the summer of 2003. Prices doubled between 2000 and 2006. Falling home prices have hurt the publics wealth and in response, households have increased their savings and cut back on spending. On a seasonally adjusted basis, prices are up +3.2% in the past three months but the recent price increases are only a temporary reprieve because the market has been propped up by the tax credits most likely. Further foreclosures could be coming as prime and option adjustable-rate mortgages recast into higher payments. “While much of the impact of the sub-prime disaster on prices at the bottom end of the market may well be behind us, there is likely more pain to come further up the price spectrum,” Shapiro said.

A quarterly index covering the entire nation showed home prices fell -1.1% in the fourth quarter compared with the prior three months. On a seasonally adjusted basis, however, national prices rose +1.6% in the fourth quarter. National home prices were down -2.5% in the past year. Here's how each of the 20 cities has fared over the past year:
Las Vegas, down 20.6%; Tampa, down 11%; Detroit, down 10.3%; Miami, down 9.9%; Phoenix, down 9.2%; Seattle, down 7.9%; Chicago, down 7.2%; New York, down 6.3%; Portland, Ore., down 5.4%; Atlanta, down 4%; Charlotte, down 3.8%; Minneapolis, down 2.3%; Cleveland, down 1.2%; Los Angeles, unchanged; Boston, up 0.5%; Denver, up 1.2%; Washington, up 1.9%; San Diego, up 2.7%; Dallas, up 3%; and San Francisco, up 4.8%;

Friday, February 19, 2010 4:03 p.m est.

Lots of action overnight as Globex futures were off by more than one percent after the Fed came out and raised rates on the discount rate from .25% to a whopping .75%. This is the level at which banks borrow or swap money overnight. The Fed has made the Discount rate an overnight rate, shortening the term of the emergency loans to banks from 28 days. This is meant to encourage banks to borrow from the markets instead of from the Fed, and actually makes sense, as it's part of what is clearly a necessary process. For another, the borrowing from the Discount window has dropped significantly, from $100 billion at the apex of the crisis to $15 billion in the latest set of figures released by the Fed.

Of course due to expiration I believe, the market came back as the 1100 level loomed large for the S&P 500 so the open only saw the Dow lower by -40.00 points, S&P 500 -5.00 points and the Nasdaq Composite -15.00 points. Interesting considering the S&P 500 cash settlement came in at 1101.98. After hitting these lows within minutes the market turned up though with the Dow higher by +50.00 points, S&P 500 +6.00 points and the Nasdaq Composite +10.00 points.

At the close the Dow was up only +10.00 points to 10493.00, S&P 500 +2.40 points to 1109.00, S&P 100 +.10 points to 509.00 and the Nasdaq Composite +2.00 points to 2244.00. Oil was up again as it approached the $80 level closing with a gain of about +$.76 to around the $80.00 level.

It was interesting that the Fed raised discount interest rates after the market closed and the real question is why? Yes, they told us they would and of course we knew they would but why after the close yesterday as they’re meeting in a couple of weeks anyhow. Is this a test to see how the market would react so they can raise regular rates! Maybe they were bored and needed some action! The Fed had told the markets over the last few weeks that they were going to raise interest rates so maybe this is a shot across the bow.

They also told the markets that the discount rate and the fed funds rate were going to be relegated and that new tools were going to be used. More important, the Fed, after they raised rates has gone to great lengths to tell the markets that the discount rate hike isn't all that important. That’s interesting because that's like telling somebody that you'll only sort of beat them up.

Basically the real question is whether everything has changed now. To me it seems that it has, and that more problems may be on their way economically. It appears that the market quickly forgot what they did so maybe this will give them enough courage to actually raise rates by a quarter point at their next meeting. They would likely only see another brief sharp loss before a rebound occurs. As Marty Zweig used to say, it’s after three rate hikes you don’t want to fight the Fed as historically it takes a few rate rises to get it to sink in that they have changed directions. They may be starting to reveal that change because what’s interesting is that inflation is starting to kick up such as the Producer Price Index, released yesterday showing lots of strength but today’s CPI was within estimates. Overall though it is on the rise yet, at the same time jobless claims continue to rise more than expected. Even Wal-Mart the largest retailer in the world reported yesterday that things were slowing down over there. Tom Schoewe, chief financial officer, said that the declines did not mean Walmart was losing some of the customers it had gained during the recession, saying the “modest decline” in traffic was “not in our mind an indication of trend” but did note the cautious mood of Walmart’s largely low-income shoppers, saying there was still a high level of anxiety over unemployment. Mike Duke, Walmart chief executive, warned that the retailer expected sales to be “more challenging” in the first quarter, with improvement as the year progressed.

One thing for sure is that the days of easy money and profits are numbered for banks which could hurt that sector, thus slow any movement in the market as it still has the heaviest weighting in the S&P 500 for example. The banks long, profitable period of ultra-low rates has now come to an end. The move at least suggests that the Fed believes the nation’s banks have healed enough to withdraw some of the extraordinary support that Washington put in place during the financial crisis. And, while all those bailouts stabilized the banking industry, it was low rates from the Fed that helped the banks recover.

With shelter costs dropping sharply, core consumer prices fell a seasonally adjusted -0.1% in January, the first decline since 1982. Core prices, which exclude food and energy costs, are considered a good indicator of underlying inflationary pressures. In January, prices fell for hotel rooms, home ownership costs, new cars, airfares and clothing. Overall, the consumer price index rose a seasonally adjusted +0.2% in January for the fifth straight month. Higher energy and medical costs more than offset the largest decline in services prices since 1982. It was weaker than expected by economists who were forecasting a +0.3% increase in the overall CPI and a +0.1% gain in the core CPI. In the past year, the CPI is up +2.6%, led by higher energy costs. The core CPI is up +1.6% in the past year. Shelter costs, which account for more than 40% of the CPI, are down -0.1% in the past year, largely due to the collapse of the housing market.

The rate of mortgage delinquencies and mortgages that entered the foreclosure process dropped in the fourth quarter, possible signs that the foreclosure crisis may be starting to ease, the Mortgage Bankers Association's chief economist said. The delinquency rate for mortgages on one- to four-unit residential properties was a seasonally adjusted 9.47% of mortgages outstanding in the fourth quarter, down from 9.64% in the third quarter and up from 7.88% the fourth quarter of 2008, according to the MBA's quarterly delinquency survey. Delinquencies include mortgages that are at least one payment or more past due but not yet in foreclosure. Meanwhile, 1.20% of outstanding mortgages entered the foreclosure process in the fourth quarter, down from 1.42% in the third quarter and up from 1.08% in the fourth quarter of 2008.

Thursday, February 18, 2010 4:03 p.m est.

The market this week has been up nicely about +3% since Tuesday but it is an expiration traded week with tomorrow being the last day for February options to trade. Today the Dow saw highs of +100.00 points, S&P 500 +9.00 points and the Nasdaq Composite +20.00 points but of course on pathetic volume. At the close the Dow was up +84.00 points to 10393.00, S&P 500 +7.25 points to 1107.00, S&P 100 +3.00 points to 508.00 and the Nasdaq Composite +15.00 points to 2242.00. Oil has also been rallying all week closing with a gain of about +$1.50 to around the $79.00 level.

The S&P 500 is now trading well above its rising 160-day moving average, which is located around the 1,050.00 level where it basically bounced from last week. It is struggling around its now-declining 80-day trend line at 1100.00 though so we’ll see what happens tomorrow but this could mean that we could be in a trading range between 1,050 and 1100.00, maybe before expiration is finished tomorrow afternoon. The bulls have short covering going for them related to the expiration of the heavy open interest in put options, as put open interest around current levels is monstrous relative to call open interest.

That’s the short term but for the longer term we’re in an interesting time as there are quite a few similarities between this current time frame and the Summer-to-Autumn period of 2007. Back then, the sub-prime debt contagion was contained and not thought likely to get out of hand; which is similar to today’s thing that Greece isn’t important in the grand scheme of things even though many American banks have financed much of their debt. This being options expiration week which is generally up, its hard to get a real feel on how things are so when we get back to reality next week we’ll see.

There has been a bunch of economic reports out this week that the market has mostly ignored but this mornings data on inflation wasn’t very good and jobless claims kicked up again which did create some selling early on but being expiration it bounced back again.

Jobless Claims rose by +31,000 to a seasonally adjusted 473,000 last week, a sign that labor markets remain very weak. The four-week average of initial claims fell by -1,500 to 467,500, about +20,000 more than at the first of the year. The number of people continuing to claim was unchanged at 4.56 million. All told, in raw numbers not seasonally adjusted, 11.8 million people were collecting some type of unemployment up +281,000 from the previous week's 11.5 million.

Wholesale prices rose a seasonally adjusted +1.4% in January on double-digit increases in gas and home heating oil. Core prices which exclude food and energy goods because we don’t need them, rose +0.3%, led by higher prices for light trucks and other capital goods. The +1.4% increase in the producer price index was higher than the +0.9% gain expected by economists while the core rate of +0.3% was also higher than the +0.1% gain expected. The producer price index is up +4.6% in the past year, the largest year-over-year gain since the financial crisis began in late 2008! The core PPI is up +1% in the past year.

Manufacturing activity expanded in February for the sixth straight month in the Philadelphia area, according to a monthly survey of manufacturing companies released by the Fed’s Bank of Philadelphia. The Philly Fed index rose to 17.6% from 15.2% in January, in line with expectations. Details of the report were strong as new orders jumped to 22.7% from 3.2% in January. The shipments index rose to 19.7% from 11% in January. The employment index rose to 7.4% from 6.1% in January.

Readings over zero indicate more firms reported improvements than reported declines.

Leading economic indicators rose +0.3% in January, further evidence of a slowly strengthening economy. Leading indicators have risen 10 straight months, from an improvement in financial markets which isn’t real economic growth in my book and a manufacturing upturn, according to the Conference Board, a private research organization that analyzes a broad range of economic data. In January, five of the 10 leading indicators improved: the interest-rate spread, delivery times, average hours worked in manufacturing, stock prices, and consumer expectations. Unfortunately, real money supply, jobless claims, building permits and capital-good orders declined. New orders for consumer goods were unchanged. The coincident index edged up +0.2%, the fourth gain in the past seven months. Three of the four coincident indicators improved in January, with only payrolls declining. Most economists believe the recession ended last summer, but the committee has not issued a ruling yet.
In the past six months, the leading indicators have risen +4.8%. The coincident index is up +0.6% in the past six months, unchanged from December.

Yesterday it was reported that New construction of houses jumped in January with Starts rising +2.8% in January to a seasonally adjusted 591,000 annualized units. This was in line with forecasts of economists and is the highest level since July. Starts in December were also revised up to 575,000 from the previous estimate of 557,000. Starts of new single-family homes rose by +1.5% to 484,000, while starts of large apartment units rose +9.2% to 107,000. Building permits, a leading indicator of housing construction, fell -4.9% to a seasonally adjusted annual rate of 621,000.

Led by higher prices for oil and gas, the prices of goods imported jumped +1.4% in January, the sixth straight increase. Fuel prices rose +5.3% in January, including an +18.8% increase in natural gas prices. Petroleum prices rose +4.8% while prices of non-fuel imports rose +0.4% for the fifth time in the past six months, led by prices of industrial materials. Prices of imported capital goods and autos fell -0.1%. In the past 12 months, import prices have risen +11.5%. Prices of goods exported from the U.S rose +0.8% in January, and are up +3.4% in the past year. Industrial production was revised up to +0.7% rise in December from the prior estimate of a +0.6% gain. Capacity utilization a gauge of slack in the economy rose to 72.6% from 71.9% in December and is the highest level since December 2008.

On Tuesday is was reported that Manufacturing activity in the New York expanded at a faster pace in February, the New York Fed said. The bank's Empire State Manufacturing index rose to 24.9% from 15.9% in January. The index had plunged in December but has now rebounded to the highest level since October. The details of the report were mixed though with new orders slowing to 8.8% from 20.5% in the prior month. Shipments inched lower but, inventories were flat after 17 straight negative monthly readings. Employment was positive for the second straight month. The Institute for Supply Management's February national factory survey is due out in two weeks. In January, the ISM manufacturing index reached its highest level since 2004.

Friday, February 12, 2010 4:03 p.m est.

Yesterday the market was up nicely once again bringing it back to being flat for the week but today it was down pretty hard first thing with the the Dow seeing -160.00 points, S&P 500 -16.00 points and the Nasdaq Composite -30.00 points as the S&P 500 was being rebalanced and it was the final trading day before a long weekend. With Iran making threats its not surprising to take profits anyhow but the biggest reason for the fall may have been because the Euro was falling strongly due to the EU’s problem with Greece. The dollar is getting overbought though so it pulled back a bit which helped the market to come back with the Nasdaq Composite actually moving into the green.

At the close the Dow was down -42.00 points to 10,102.00, S&P 500 -2.50 points to 1076.00, S&P 100 -1.50 point to 495.00 and the Nasdaq Composite +6.00 points to 2184.00. Oil was down hard today over -$2.00 at one point closing with a loss of -$1.00 to around the $74.00 level.

With the pullback we have seen the past week sentiment has turned profoundly bearish which makes for more of a bottom than a top to me, at least for this expiration cycle. For example Investors Intelligence came out showing the bull camp falling to 34.1% from 38.9% and bears up, to 26.2% from 22.2%. Those believing we are entering a true corrective phase is now 39.8% the highest reading in 27 years! This has also been seen in other sentiment reports and the dumb money for options is also revealing that people think the market is going into the abyss. All of this means to me, is that we are stuck in a trading range, perfect!!

For the longer term though according to Bloomberg: "More than a fifth of homeowners owed more than their properties were worth in the fourth quarter as the number of houses and condominiums lost to foreclosure climbed to a record, according to Zillow.com. " The report added: "In the fourth quarter, 21.4% of owners of mortgaged homes were underwater, up from 21% in the previous three months and down from 23% in the second quarter, the Seattle-based real estate data provider said. More than one in 1,000 homes were repossessed by lenders in December, the highest rate in Zillow data dating back to 2000." Things will get worse for a while but a bottom is likely to be reached mid-year but even after that, they don't expect much price appreciation "for some time." What's more, foreclosures are setting records, and in some areas, the sale of foreclosed homes makes up the majority of the sales activity.

With that news it isn’t surprising to read that the U.S. may be so far in debt that it could be in danger of losing its status as world leader. I know this is old news but it is getting more and more frequent now. This time it sounds possible though according to The New York Times: "By President Obama’s own optimistic projections, American deficits will not return to what are widely considered sustainable levels over the next 10 years. In fact, in 2019 and 2020 — years after Mr. Obama has left the political scene, even if he serves two terms — they start rising again sharply, to more than 5% of gross domestic product. His budget draws a picture of a nation that like many American homeowners simply cannot get above water." This was astonishing as the Times is so left based so maybe something really is happening.
“Unless miraculous growth, or miraculous political compromises, creates some unforeseen change over the next decade, there is virtually no room for new domestic initiatives for Mr. Obama or his successors. Beyond that lies the possibility that the United States could begin to suffer the same thing that happened to Japan over the past decade as I have mentioned before. As debt grew more rapidly than income, that country’s influence around the world eroded." Republicans refuse to talk about tax increases and Democrats refuse to talk about cutting entitlement programs, is unsustainable. Obama thinks that the problem has to be made worse, with intense deficit spending to lower the unemployment rate, before the deficits can come down.

The Times offers an interesting analysis, noting: "The budget plan invites Republicans to join him on a bipartisan commission to cut the deficit -- a concept that the GOP has backed in prior years. It includes tax cuts for small businesses long-championed by the GOP. It proposes a domestic spending freeze that infuriates many liberal Democrats." More important, the Times suggests that the budget is a political ploy as: "Those olive branches were offered just days after Obama invited GOP cooperation in his State of the Union address and a televised give-and-take with House Republicans at a policy conference -- a remarkable shift in approach after a year of intense partisanship and the bruising loss of the Democratic-held Senate seat in Massachusetts. But those seemingly conciliatory gestures lay the ground work for Obama to thrust his party back onto the political offense: Democrats are gearing up to campaign against the GOP as the root of the budget problem and an obstacle to its solution."

Basically, the U.S. continues to spend relentlessly when the world may be starting to get ready for another downturn and the New York Times, as well as the L.A. Times are starting to question the motives and the tactics of the White House and Predisent Obama, the guy they both helped to elect. To me it's just more evidence that we are in for a market going nowhere fast with lots of volatility!

Retail rebounding strongly after a disappointing report in the prior month, up +0.5% on a seasonally adjusted basis last month, marking the third increase in the past four months. The gain was above expectations with economists looking for a +0.3% increase. Sales in November and December were revised up, adding to the sense of strength in January. November's sales were revised to a +2% gain from the +1.8% previously reported and December was revised up two-tenths of a point to a -0.1% decline.

Economists see a clear upward trend in consumer spending that began in the second quarter and many believe that this trend will be strengthened if the labor market improves going forward. There are still many other economists who worry that sales may flatten out in the second half of the year as consumers deal with high debt levels.

Retail sales are up +4.7% in the past year with rising gas prices at stations up by only +0.4% so they didn’t come from there which is good as that to me isn’t a wanted buy but a necessity.

Consumers were more pessimistic about the economy in February, according to media reports by the University of Michigan and Reuters. The UMich index fell to 73.7% in February from 74.4% in January. Consumers were more upbeat about current economic conditions, with the current index rising from 81.1% to 84.1%, the highest since March 2008. However, attitudes about the near-term deteriorated, with the expectations index falling to 66.9% in February from 70.1% in January.
Inventories fell -0.2% in December, below expectations and slower than the -0.9% increase in sales. Economists had been expecting the nation's inventories to be flat in December. The inventory-to-sales ratio, an indication of demand, fell to 1.26 in December from 1.27 in the prior month and is the lowest level since November 2007.
Yesterday, Jobless Claims fell by the largest amount since July. The number of initial claims fell -43,000 to 440,000 and was a sharper drop than expected. The consensus was for claims to drop to 460,000. They are now at their lowest level since the beginning of January. Claims had spiked in January, reversing a downward trend. Labor Department officials had pinned the increase on administrative backlogs in several states. With today's report, the official said the backlogs had been "washed out."

Friday, February 5, 2010 4:03 p.m est.

The market started the day slightly higher this morning as the employment report came out mixed but as the dollar soared over worries about what may happen in the EU over the weekend regarding Greece as it went higher the market went lower. Lows were hit midday with the Dow seeing -170.00 points, S&P 500 -19.00 points and the Nasdaq Composite -30.00 points. The final hour saw the dollar pull back a bit so buy programs hit and the market went positive once again holding on to gains finishing the day higher.

At the close the Dow held the 10,000 level up +10.00 points to 10,013.00, S&P 500 +3.00 points to 1066.00, S&P 100 +1.00 points to 491.00 and the Nasdaq Composite +16.00 points to 2141.00. Oil was hit again today closing down -$2.00 to around the $71.00 level. Wow I’m surprised how fast the bears have come out in an aggressive way saying the market is going to fall into the abyss in a matter of days. I’m sticking to the sideways pattern and looking back on history once again, after a huge move you usually see the first corrections occur right around the -10% level which was what we almost hit this morning at the lows, so the bounce going into the close maybe the start of the next rally. I know it sounds too perfect, but a perfect range for the S&P 500 just may turn out to be 1050-1150 for while to come. We’ll know more after the next rally is complete.

Employment fell by -20,000 in January while the unemployment rate fell in January to 9.7% from 10% in December. The more important household survey used to figure the unemployment rate, saw employment rise by +511,000, while unemployment fell by -430,000 and the labor force rose by +11,000. This is why the unemployment rate fell last month and the lowest since August. The so-called underemployment rate which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking fell to 16.5% from 17.3%. One good sign was that the average workweek unexpectedly rose to 33.3 hours, the highest level in a year, from 33.2 hours while total average hourly earnings increased $18.89 from $18.84 in December. Manufacturing overtime rose to 3.5 hours, the highest since September 2008.

As I mentioned yesterday economists were mixed about expectations but generally they wanted to see some type of a gain in employment so Globex futures fell initially on the news as this is disappointing. Job losses since the start of the recession in December 2007 totaled have now totaled 8.4 million and was in line with expectations. Of course there were revisions with losses of -150,000 jobs in December, compared to 85,000 previously reported, but November was revised to a gain of +64,000, up from +4,000 so maybe this is good news. A sharp increase in the number of people giving up looking for work helped to get the jobless rate down which is something the Obama administration hopefully won’t mention otherwise they will look stupid. The number of “discouraged job seekers” rose to 1.1 million in January from 734,000 a year ago and the annual benchmark update showing the economy lost -930,000 more jobs than previously estimated in the 12 months ended March 2009.

The services sector added +40,000 jobs after losing -96,000 positions. The figure included a rise in federal government employment, partly as a result of the hiring of staff for the 2010 Census. Yeah more government!!! Temporary help employment rose +52,000, maintaining a rising trend seen in the past month. Manufacturing payrolls rose +11,000 last month, the first gain since January 2007, after dropping -23,000 in December. But the construction sector, continued to struggle, losing -75,000 jobs, likely because of unusually cold weather while they fell -32,000 in December.

Thursday, February 4, 2010 4:03 p.m est.

The market was mostly flat yesterday to close slightly down on worries about the jobs report out tomorrow, politics and the overall economy. Today everything kind of hit the fan with poor economic data, Moody’s putting out their now quarterly warnings about downgrading their American credit rating, worries about Greece defaulting on their debt along with a few other EU countries and especially poor economic data indicating the jobs number tomorrow may not be very good after all. Oh ya and then there was China telling the States flatly that it will not bow to pressure to revalue its currency and that there were rumors that they too are having problems with credit.
The market continued lower all day seeing lows in the final hour with the Dow seeing -275.00 points, S&P 500 +35.00 points and the Nasdaq Composite +70.00 points. At the close the Dow was down -268.00 points to 10,002.00, S&P 500 -34.00 points to 1063.00, S&P 100 -15.00 points to 490.00 and the Nasdaq Composite -65.00 points to 2125.00. Oil was really hit today closing down -$3.80 to around the $73.00 level.

In the the shortest term the market is now incredibly oversold so we could see a sharp rally at any time and with the employment report out tomorrow that could be the catalyst at least for awhile. All indications are that we should see improvement in the numbers with the consensus anywhere from -40,000 jobs lost, to +75,000 jobs gained, according to The Wall Street Journal. Last month there were -85,000 jobs lost, while the consensus was for a rise in jobs. There will also be revisions and lots of talk about the household survey where people that run businesses from their home and work part time are counted. Everyone was looking for improvement in this report but now it looks like everyone has turned negative. Nonetheless if it even comes in decent we could see a bounce.

Jobless Claims rose +8,000 to 480,000 but economists were looking for claims to drop to 455,000! Claims in the previous week were revised to a fall of -7,000 to 472,000 compared with the initial estimate of a decrease of -8,000 to 470,000. The four-week average rose +11,750 to 468,750. Continuing claims rose a slight +2,000 to 4.60 million while the four-week moving average of continuing claims falling -51,250 to 4.62 million.

Productivity of the business sector slowed a bit in the fourth quarter as hours worked increased for the first quarter since the second quarter of 2007, the Labor Department estimated. The productivity of the business sector rose at an annual rate of 6.2% after a 7.2% gain in the third quarter. Output rose +7.2% in the final three months of the year and hours worked increased 1%. Economists were expecting productivity to rise +7.3% in the fourth quarter. Unit labor costs, a key inflationary signal fell at an annual rate of 4.4% in the fourth quarter. Real hourly compensation fell -1.9%. For the year, productivity rose at a +2.9% rate, the fastest pace since 2003. Both hours worked and output declined by record rates in 2009. Unit labor costs fell -0.9%, the biggest drop since 2002.

Yesterday it was reported that Private-sector firms eliminated -22,000 jobs in January, the 24th decline in a row, according to the ADP employment report. It was the fewest jobs lost since -22,000 jobs were added in January 2008. In December, a revised -61,000 jobs were lost, compared with the -84,000 originally reported.
Planned layoff announcements at major corporations increased 59% in January, reaching 71,482 from a nine-year low of 45,094 seen in December, according to the latest job-cut tally by Challenger Gray & Christmas. It was the first month-to-month increase since July. Layoff plans ran 70% lower than the 241,749 announced in January 2009, which was a seven-year high. Planned reductions for last month were led by retail companies, which announced 16,737 job cuts, and telecommunications companies, which cut 14,010 jobs. Challenger Gray's monthly tally covers only a small fraction of those who lose their jobs each month. Most layoffs are not announced in press releases. According to the government's most recent report, 2.05 million people lost their jobs via layoffs or terminations in November. Through the first 11 months of the 2009, the government counted 25.6 million layoffs. By Challenger Gray's count, companies announced 1.288 million job cuts during 2009.

The service sectors of the economy rebounded in January, the Institute for Supply Management reported. The ISM non-manufacturing index rose to 50.5% from 49.8% in December. Despite the improvement, the increase was below expectations. Economists were looking the index to rise to 51%. The index had been above 50 for two months in the fall but then slipped under the threshold in November and December. The closely-watched employment index rose to 44.6% in January from 43.6 in December. The employment index has been below 50 since December 2007. It hit a low of 31.1 in November 2008.

Tuesday, February 2, 2010 4:03 p.m est.

The market moved higher once again today burning up technical fuel as it went on incredibly light volume with highs set in the final hour with the Dow seeing highs of +130.00 points, S&P 500 +16.00 points and the Nasdaq Composite +25.00 points. At the close the Dow was up +111.00 points to 10296.00, S&P 500 +14.00 points to 1103.00, S&P 100 +6.00 points to 507.00 and the Nasdaq Composite +19.00 points to 2190.00. Oil rallied strongly today closing up another +$2.80 to just over the $77.00 level.

Buyers returned to the market for preowned homes in December after the federal tax credit was reinstated, according to the National Association of Realtors. The pending home sales index rose +1% after falling a huge -16.4% in November, with buyers reacting first to the expiration and then to the return of the tax credit, NAR data showed. The index is up +10.9% compared with December 2008. The gain in the pending sales index reveals a similar gain in existing home sales for January, which will be reported in three weeks. In December, existing home sales fell -16.7%.

Monday, February 1, 2010 4:03 p.m est.

The market was higher first thing this morning on positive economic data and because it is incredibly oversold with the Dow seeing highs of +120.00 points, S&P 500 +15.00 points and the Nasdaq Composite +25.00 points just after lunch. After that it just drifted for the rest of the day. The final hour saw the market get going and the market closed with slightly higher highs. The Dow was up +120.00 points to 10186.00, S&P 500 +15.00 points to 1089.00, S&P 100 +6.00 points to 501.00 and the Nasdaq Composite +24.00 points to 2171.00. Oil rallied today closing up by +$1.50 to somewhere around the $75.00 level.

The market started the year off well, with the market rallying about +1.75% by the middle of January but then it reversed sharply, and when January was all said and done, it was down about -3.5% which isn’t usually good for the rest of the year, according to the January Barometer. It is said that January sets the tone for the rest of the year, and the numbers seem to indicate that this is true. Since 1950 the 39 times that January was positive, the rest of the year averaged a return of +9.76% and was positive more than 80% of the time. If January was negative, then the average return was only +1.5%, with positive returns occurring less than half the time. A sideways we will go, yeah!!!! This basically confirms the sideways action I am expecting this year but one thing to note is that last year started off pretty poorly also, with negative returns in both January and February, but the market finished extremely well, for a gain around +30% plus. There is a likely chance that we’ll see a poor February now also but for the short term, the market is incredibly oversold so a bounce is likely and if you look at Relative Strength and Stochastics you see that it is the most oversold since the bottom in March so a bounce is likely.

People increased their spending in December at the slowest pace since September, allowing their savings rate to move to the highest level since June. Real consumer spending (that is, adjusted for inflation) rose a seasonally adjusted +0.1% in December after a +0.4% gain in November. Meanwhile, real after-tax incomes rose a seasonally adjusted +0.3% in December, helped by transfer payments, small-business profits, income from investments, and a small gain in wages. With incomes rising faster than spending, the personal savings rate rose to +4.8% of disposable incomes, the highest since June which is great sign!

The nation's manufacturing firms were also growing at a very strong pace in January, according to a closely followed survey of top executives. The Institute for Supply Management index rose to 58.4% from 54.9% in December, above the 56% expected by economists and is the highest reading since August 2004! Readings over 50% in the ISM diffusion index indicate that more firms are growing than contracting. The ISM tracks the breadth of growth across firms, asking purchasing managers if business is better this month than last. Both new orders and production rose above 60%, also the highest levels since 2004! Employment rose to its highest level since August 2006. Some analysts said this hinted to growth in payrolls in January which be will released on Friday.

January's new-orders index rose to 65.9% from 64.8% in December while the production index increased in January to 66.2% from 59.7%. The employment index increased to 53.3% from 50.2% while prices-paid rose to 70% from 61.5%. The inventories index rose to 46.5% for January, December's reading was 43% while new export orders were very strong, rising to 58.5% from 54.5% in December.

Spending on Construction projects fell at a seasonally adjusted rate of -1.2% in December, the fifth decline in the past six months and the lowest rate since August 2003. Outlays fell to a seasonally adjusted annual rate of $902.5 billion in December, down -9.9% compared with December 2008. For all of 2009, total construction spending fell -12.4% to $939.1 billion.

Friday, January 29, 2010 4:03 p.m est.

The market was underwater once again yesterday as nerves about Bernanke being reinstated got to be too much as the decision went right down to the close yesterday. He did of course win as I knew he would but it was the lowest vote ever for a Fed Chairman. This morning it popped higher once again on good earnings, economic data with the Dow seeing highs of +120.00 points, S&P 500 +12.00 points and the Nasdaq Composite +25.00 points. Of course because everyone is in a dreary mood about the overall economy it turned into the red just before lunch and remained there in the final hour with the Dow seeing lows of -80.00 points, S&P 500 -13.00 points and the Nasdaq Composite -40.00 points. There was some buying in the final few minutes but the market still closed lower with the Dow down -53.00 points to 10067.00, S&P 500 -11.00 points to 1074.00, S&P 100 -5.00 points to 495.00 and the Nasdaq Composite -32.00 points to 2147.00. After being up early on, Oil finished down by -$.85 to around the $73.00 level. The market is now at an interesting place as it is right at the bottom of a new channel that should be forming for the sideways to slightly up action I’m looking for in the next few months and it is deeply oversold so I would expect to see a bounce start next week.

Coming out of the worst recession in generations, the economy grew at the fastest pace in six years during the fourth quarter of 2009, even as consumer spending and business investment remained poor. Real gross domestic product increased at a +5.7% seasonally adjusted annual rate in the final three months of the year. About two-thirds of the growth came via the swing in inventories. The +5.7% increase was mostly in line with the +5.5% gain expected by economists. Even with healthy growth in the second half of the year, the economy fell -2.4% in 2009, the worst drop since the -10.9% decline in 1946.

Consumer Sentiment improved in January rising to its highest level in two years. The Reuters/University of Michigan consumer sentiment index rose to 74.4% in January from 72.5% in December and is the highest since January 2008. The preliminary mid-month reading was 72.8%. Economists were expecting an increase to 73% in the final numbers so this is good news. The index has been little changed in the past five months after falling to 55.3% in November 2008.

Employment costs increased +0.5% in the fourth quarter, a slightly up-tick from a +0.4% gain in the previous month. The increase in the employment cost index was slightly above expectations. According to analysts they were expecting a +0.4% gain. Benefit costs rose +0.5% in the quarter, while wages and salaries rose +0.5%. For all of 2009, the employment cost index increased a record low +1.5% so there’s still no inflation. Economists said the weak trend is not surprising given high unemployment rate.

Manufacturing activity accelerated in the Chicago region in January, the purchasing managers index for the Chicago region revealed. The Chicago purchasing managers index rose to 61.5% from 58.7% in December. Readings over 50% indicate overall business expansion. The Chicago PMI is considered a leading indicator to the national Institute for Supply Management manufacturers survey for January to be released on Monday. Economists expect the January ISM manufacturing composite to increase to 56% from a revised December reading of 54.9%.

Yesterday it was reported that Jobless Claims fell -8,000 to 470,000, much higher than expectations of drop below 450,000. The four-week average rose +9,500 to 456,250. Continuing claims fell -57,000 to 4.60 million. The four-week moving average of continuing claims fell -94,250 to 4.7 million. Overall, 11.5 million Americans received federal and state unemployment benefits and is down from 12 million in the prior week but the question always remains about it occurring because people are finding jobs or are just falling off the board.

Demand for Durable Goods rose in December for the first time since September, led by strong orders for metals, machinery and capital equipment. Orders for durable goods increased +0.3% in December to $167.9 billion after a revised -0.4% decline in November that was initially reported as a +0.2% gain. Economists were looking for a much-stronger +1.7% gain in orders in December, based on company reports showing rising orders for airplanes. The government data, however, revealed a sharp -38% decline in airplane orders. Excluding the -2% drop in often-volatile transportation sector, orders rose +0.9% in December to $130.6 billion after a +2.1% gain in November. Shipments of durable goods increased +2.9% in December to $181.9 billion after a +0.8% gain in November while inventories fell -0.2%. The increase in December confirms other indications that the manufacturing sector is coming out of its steepest recession in 60 years, fueled by stronger demand from abroad and by the need to replenish depleted inventories as demand improves. For all of 2009 compared with all of 2008, durable goods orders dropped -20.2% to $1.97 trillion, the largest percentage decline since the data began in 1992. Shipments fell -15.9% in 2009 to $2.1 trillion, while inventories fell -11.7% to $303 billion at the end of the year. Durable goods are expensive manufactured goods designed to last three years or longer.

Wednesday, January 27, 2010 2:25 p.m est.

Everything is pointed towards the middle right now as the market trades for the rest of the week. I’m writing this early but I’m sure when they announce the Fed’s decision on interest rates at 2:15 p.m est which is when I’m releasing this, that they will have the same old speech about keeping rates low,blah blah blah. Speaking of that, Bernanke “will be” reappointed later this week. This morning Geithner and Paulson’s testimonies before Congress will be rough but once again nothing will come of it. Finally with Obama’s State of the Union address tonight he won’t have much to say outside of what we already know. Of course the speech will be delivered flawlessly and will be taken much differently on both sides of the aisle but in the end we probably won’t know much more than we knew when it started. He’ll talk about cutting spending and the budget deficit and talk of reassessing health care and not giving up. There will be mentions of bipartisanship and looking out for the middle class and of course talk of better days ahead, but also warnings that the road will be bumpy and that much pain and sacrifice will be required. The one thing he won’t say though is that the Bush tax cuts will be extended, and there won’t be anything real that will lead to strength in new jobs.

The market wants to see the White House move toward the middle and that Congress will be gridlocked and I think they’ll get it. The far left isn’t going to give on anything, and neither is the far right. That means that things will stay where they are, leaving everyone with hopelessness which means frustration will grow, and apathy in the short term, but eventually anger will come at some point in the future,,,but not right now which means a sideways we will go. The market pulled back this morning but then it moved into slightly positive territory before falling back once again. Just after the Fed's announcement the market made new lows of -95.00 points, S&P 500 -9.00 points and the Nasdaq Composite -20.00 points but has once again turned around with the Nasdaq moving into the green. I'm looking for flatness going into the close....

As I say the markets all over the world are going to be capped for a while and that is being seen overseas with China pulling back as their bank loans have screeched to a halt. According to The Wall Street Journal: "Several state-run Chinese banks have ordered some branches to suspend new lending for the rest of this month, suggesting a coordinated effort by Beijing to manage state banks' torrid lending in the year's first few weeks. A person with direct knowledge of the matter said Tuesday that Industrial & Commercial Bank of China Ltd., the country's biggest lender by assets, last Friday ordered its branches in Beijing not to issue any new loans for the rest of January." Some banks have used up loan quotas already. According to The Wall Street Journal: "China Citic Bank Corp. also suspended new lending in Shanghai last week because its local operations have already used up their monthly quota for new loans in the city, a Shanghai-based official at the medium-sized bank said Tuesday. The Citic Bank official added that both the bank's own headquarters and the People's Bank of China, the country's central bank, “have told us to control the pace of lending this year.”

Sales of New Homes fell -7.6% to a seasonally adjusted annual rate of 342,000 in December from 370,000 in November after a popular tax credit for buyers was set to expire. Economists were looking for a small gain in December to about 365,000. November's estimate was revised higher to 370,000 from 355,000 previously reported. This was the lowest seasonally adjusted sales pace since March. Sales had risen modestly since earlier in the year, boosted by low mortgage rates and an $8,000 tax credit for first-time buyers. The tax credit was scheduled to end on November 30th, a deadline that pulled sales forward. In early November, Congress extended the tax credit until April and expanded it to repeat buyers so they’ll likely pick up again until it’s extended again. But the change in the law came too late to jump-start December sales. Economists expect the expanded tax credit will stimulate home sales in the first few months of the year, but what happens to the market after that is anyone's guess.

Realtors say more than 2 million people took advantage of the tax credit, although most of them likely would have purchased a home anyway, analysts say. The tax credit has boosted sales of existing-homes much more than it has for new homes. For all of 2009, sales of new homes fell -8.6% to a record-low level of 374,000, down about -23% from 2008's level. The records date back to 1963.

Over the past five months, sales have been on a 384,000 seasonally adjusted annual pace, down from 399,000 in the five months ending in November. The important part of this report is that home builders continued to slash their inventories of unsold homes. The number of unsold homes dropped -1.7% to 231,000, the lowest in 38 years. The number of homes for sale that are under construction fell to a record low. At the December sales pace, it would take 8.1 months to sell the inventory, up from 7.6 months in November. Builders have cut back on production of new homes, but still face stiff competition from unsold existing-homes as foreclosures continue to mount up. If a home isn't sold before it's finished, it's taking 13.9 months to sell it after completion, a reflection of the mismatch between the more expensive homes in the inventory and the lower priced homes that have been selling. Very expensive homes did sell better in December however, with the market share of homes costing more than $750,000 rising to 7% from 4% in November and 1% in August. Forty-three percent of sales were for less than $200,000 and 77% were for less than $300,000. The median sales price of a new home sold in December was $221,300, down -3.6% compared with a year earlier.

Tuesday, January 26, 2010 4:03 p.m est.

The market continued higher today although it started the day a bit lower. The Dow saw highs of +90.00 points, S&P 500 +8.00 points and the Nasdaq Composite +20.00 points by mid morning. The final hour saw profit taking once again and the market turned red with the Dow finishing the day down -3.00 points to 10194.00, S&P 500 -5.00 points to 1092.00, S&P 100 -2.00 points to 503.00 and the Nasdaq Composite -7.00 points to 2204.00. Oil finished mostly flat down by -$.60 to around the $75.00 level.

Home prices fell in November and were softer than expected in the latest sign that a rebound in the housing market is tenuous, according to Standard & Poor's/Case-Shiller’s index. The S&P composite index of home prices in 20 metropolitan areas fell -0.2% after a revised -0.1%, for a -5.3% annual drop. Economists had forecast a +0.1% rise. On a seasonally adjusted basis, the 20-city index rose +0.2% S&P said, after a +0.3% rise the prior month. The home price picture remains mixed despite steady annual improvement, said David M. Blitzer, chairman of the Index Committee at Standard & Poor's. “Only five of the markets saw price increases in November versus October,” he said. “What is more interesting is that four of the markets—Charlotte, Las Vegas, Seattle and Tampa—posted new low index levels as measured by the past four years.” Other markets continue to improve month over month, with Los Angeles, Phoenix, San Diego and San Francisco posting price rises for at least six consecutive months.

A little more optimism about the current economic climate sent the Consumer Confidence index to a 16-month high in January. The consumer confidence index rose to 55.9% in January from an upwardly revised 53.6% in December. Economists were looking for an increase to 53.5% from the previously reported December level of 52.9%. Still, consumer confidence remains very weak, far below the average level of 95%. The improvement in January was due mainly to better feelings about the present situation. Consumer expectations also improved. Assessments of the labor market improved marginally.

Monday, January 25, 2010 4:03 p.m est.

The market bounced back today which wasn’t that surprising as it was getting pretty oversold in the short term. It will likely remain around these levels for the rest of the week as we go into month end window dressing and may even move a bit higher. Another reason is that it remained up even though economic data wasn’t that good just after the open this morning. The Dow saw highs of +85.00 points, S&P 500 +12.00 points and the Nasdaq Composite +20.00 points first thing in the morning. As the day wore on it pulled back however with the Nasdaq going slightly negative. The final hour saw a bounce back to old highs before another pullback gong into the close. The Dow finished up +24.00 points to 10197.00, S&P 500 +5.00 points to 1097.00, S&P 100 +2.00 points to 505.00 and the Nasdaq Composite +6.00 points to 2211.00. Oil finished slightly up about $.70 to around the $75.00 level.

Existing Home Sales crashed -16.7% in December to a seasonally adjusted annual rate of 5.45 million from 6.54 million in November as a popular tax credit was set to expire, the national real estate trade group said this morning. The -16.7% percentage decline from November to December was the largest on record and was larger than the -11% drop to 5.80 million that was expected by economists. Sales in December were up +15% compared with December 2008 though. The median sales price rose to $178,300 in December, up +1.5% compared with a year earlier and is the first year-over-year increase in prices since August 2007 which is actually good news.

Friday, January 22, 2010 4:03 p.m est.

I can’t tell you how excited I am as it appears more and more that the top is in the market now because even with good earnings coming out from GE and Mcdonalds the market was still down which means sentiment is just awful. This to me is the start of the sideways action that should start at least for the next few months and a new angle of uptrend for the next few years with volatility occurring along the way which will be great for our trading style! Yes the correction could go a little further but I strongly believe that the downside will be limited as volatility just started to kick up at least for awhile.

One of the biggest reasons for the fall today was that Senators started coming out saying that they no longer supported voting Fed chairman Bernanke back in for another term. So far he still has the votes but it is getting tight! The Dow saw lows of -240.00 points, S&P 500 -27.00 points and the Nasdaq Composite -65.00 points in the final hour . At the close the Dow was down by another -213.00 points to 10390.00, S&P 500 -22.00 points to 1116.00, S&P 100 -11.00 points to 514.00 and the Nasdaq Composite -26.00 points to 2266.00. Oil was down all day once again closing down about $1.70 to around the $74.40 level.

One of the biggest reasons I believe that sideways action will occur is that President Obama remains so out of touch about what’s going on around him. Yesterday he came out and said that he miscommunicated his agenda to the public but he never acknowledged that he misjudged what people expected from him, and never suggested that he would make a move toward the center. Instead he said in a roundabout way that people maybe just didn't understand what he was trying to do. With all of the tea parties, poor consumer sentiment and his own favorable numbers falling, I think that people do understand it but they don’t like it and maybe just maybe Mr. President, this is why you can’t get as much done as you want!

The market is nervous and so it should be as the banking rules being proposed by the president don’ make sense, which the market didn't like according to its late sell off yesterday by the way. According to The Wall Street Journal: "President Barack Obama proposed new limits on the size and activities of the nation's largest banks - With former Federal Reserve Chairman Paul Volcker at his side, Mr. Obama said he wanted to toughen existing limits on the size of financial firms and force them to choose between the protection of the government's safety net and the often-lucrative business of trading for their own accounts or owning hedge funds or private-equity funds." Yet, the Journal noted, in the same article "Administration officials said they weren't trying to resurrect the Depression-era law—known as Glass-Steagall—that strictly divided commercial banks from the business of underwriting securities. Nor would their proposals force existing financial firms to downsize."
There are too many questions right now because if you want people to commit money to the market they need to know what it is they are going to do. Force the big banks to break up or make it impossible for them to do business? Either way it seems the goal is to slow a significant sector of the economy, as they tried to do with health care and instead are just creating more of a mess with bureaucracy. It seems that they just want more control instead of just putting back the safeguards that kept neighborhood banks from becoming speculators on those strange derivatives.

So far, it's not clear and that's the problem. Obama's failure to deliver on any of his major campaign promises, the economy, spending like a mad man as well as his waffling on the wars in Iraq and Afghanistan have put him in a position of a lame President, both domestically and internationally. The main thing though is that its all about uncertainty and thats on the rise which always stops people from investing money and with the White House clearly targeting Wall Street and not in a very productive way this will keep us sideways for some time to come.

Thursday, January 21, 2010 4:03 p.m est.

Yesterday the market sold off after it was announced that Scott Brown the Republican actually won the race so the rally was obviously a buy on the rumor type event. This is a clear signal to Democrats that they need to rethink the medical issue and start looking at what the people want though! Losses by the close were cut a bit with it being down about -1% on the day. Today it sold off once again however as everyone worried about what President Obama was going to announce about bank reform and when he came out and said that that they could no longer do proprietary trading or invest in hedge funds the market sold off even more with the Dow off -230.00 points, S&P 500 -23.00 points and the Nasdaq Composite -35.00 points. There was a bit of a rally start after Barney Frank said that the process of change would take at least 3-5 years but in the end the market closed near lows.

The entire reason that the last decade was so volatile was because President Clinton repealed the Glass–Steagall Act in 1999 so banks were able to do all of those bizarre derivative deals with hedge funds and trade for themselves resulting in the explosion of the internet boom and then housing. The Glass–Steagall Act was initially created in 1932 and then changed in 1933 because of a reaction to the collapse of a large portion of the American commercial banking system in early 1933. It introduced the separation of bank types according to their business (commercial and investment banking), and it founded the Federal Deposit Insurance Corporation for insuring bank deposits but the foremost thing was conservatism, make money on the spread between deposits and loans.

The great news about this is that it will likely slow things down once again and after the initial shock is finished it will help to stabilize banks and thus the market. It will become boring once again which could last for a few years which is great for us and our style of trade. Right now however I’m sure everyone is still in shock so it may take a while to adjust to.

At the close the Dow was down by -213.00 points to 10390.00, S&P 500 -22.00 points to 1116.00, S&P 100 -11.00 points to 514.00 and the Nasdaq Composite -26.00 points to 2266.00. Oil was down all day closing down about $2.00 to around the $76.00 level.

Jobless Claims jumped unexpectedly by the largest amount in eight months up +36,000 to 482,000. The forecast was for claims to inch lower to 438,000. This is the highest level of claims since November. The four-week average rose +7,000 to 448,250 and is the first increase after 19 straight declines. Claims in the previous week were revised to an increase of +13,000 to 446,000 compared with the initial estimate of an increase of +11,000 to 444,000. The worst news was that the number of people actually collecting benefits (not seasonally adjusted) surged to a record 12 million, including extended federal benefits.

Leading economic indicators increased +1.1% in December and have risen for nine straight months, suggesting that things could pick up this spring. The rise in the index was stronger than the +0.7% increase expected by economists. Eight of the 10 leading indicators improved. The coincident index increased +0.1%, the fifth increase in the past six months. Three of the four coincident indicators improved in December, with only payrolls declining. Gains in the leading index were propelled by the wider interest-rate spread, higher building permits and fewer jobless claims. Higher stock prices, improved consumer expectations, slower vendor performance, an increase in the real money supply and a small gain capital goods orders also added to the index. The other two leading indicators - factory workweek and consumer goods orders - were steady in December.

The Philadelphia Fed said its manufacturing index slipped to 15.2% in January from 22.5% in December. The index shows shipments, new orders and employment expanded in factories in the region, but at a slower pace than in December.

Tuesday, January 19, 2010 4:03 p.m est.

The market started the day flat but as Massachusetts residents headed to the polls it turned higher and gained points as it appeared that Scott Brown a Republican could win the race, paving the way for legislative compromises that could kill the health care bill. The election is happening to fill the vacancy left by the late Democratic Sen. Edward Kennedy and this means that Democrats stand to lose their filibuster-proof 60-seat majority in the U.S. Senate if Brown wins. A defeat for the Democrats in a state as liberal as Massachusetts would also underscore the unpopularity of the health legislation and possibly lead some wavering party members to reverse their support ahead of this year's midterm elections. The Dow saw highs of +120.00 points, S&P 500 +15.00 points and the Nasdaq Composite +35.00 points. It will be interesting to see what happens if he doesn’t win now!!!

At the close the Dow was up +116.00 points to 10725.00, S&P 500 +14.00 points to 1150.00, S&P 100 +6.00 points to 530.00 and the Nasdaq Composite +32.00 points to 2320.00. Oil was down earlier on but turned around along with the market closing the day up about $1.00 to around the $79.00 level.

Friday, January 15, 2010 4:03 p.m est.

The market started the day pretty flat likely due to expiration but as economic data came out, mainly consumer sentiment, it started to fall and with lows being hit midday -150.00 points, S&P 500 -16.00 points and the Nasdaq Composite -45.00 points. Another reason for part of the selling may have been because it is a three day weekend as the market is closed for Martin Luther King day on Monday. Oil was down all day along with the market -$1.50 around the $80.00 level. The market came back a bit in the final hour with the Dow closing down -100.00 points to 10609.00, S&P 500 -12.00 points to 1136.00, S&P 100 -5.50 points to 524.00 and the Nasdaq Composite -29.00 points to 2288.00.

Despite the view of many economists that the economic water is getting warmer, U.S. consumers are not ready to jump in, according to the latest reading of consumer sentiment. The consumer sentiment index inched higher to 72.8% from 72.5% in late December, according to the Reuters/University of Michigan index. It is still the highest reading since September. Economists had been expecting a bigger gain to about 75%.

Economists now expect that the fourth quarter of 2009 enjoyed a +4.9% annual increase in gross domestic product, the strongest quarterly growth rate in three years but some worry that this expansion may be short-circuited unless consumer demand increases. The consumer sentiment report served to increase those concerns. Wage and salary income growth has gone down, credit is very tight, asset values have been cut hugely, and balance sheets are generally a wreck for companies. In January, the current-conditions index rose to 81% from 78% in the previous month and is the highest level since March. The expectations index fell to 67.5% from 68.9%. The expectations index is one of 10 leading economic indicators. Inflation expectations picked up in January, the survey said. Over the next year, consumers expect prices to rise +2.8%.

Consumer inflation was down from last month with the Consumer Price Index increasing +0.1%, after a +0.4% rise in November and was the slowest pace since July. Energy prices rose +0.2% after a +4.1% spike in November. Food prices rose +0.2% after a +0.1% gain in the prior month. The core CPI, excluding food and energy costs, was up +0.1% in after remaining flat in November. Economists were expecting the CPI to rise +0.2% and the core rate to rise +0.1%.

Manufacturing activity in New York state strengthened in early January, the New York Fed reported. The Empire State index rose to 15.9% from an upwardly revised 4.5% in December. Readings over zero indicate more firms were growing than contracting. The index has been above zero for six straight months. The new orders index increased 18 points to 20.5%, and the shipments index rose 13 points to 21.1%.

The output of the nation's factories, mines and utilities rose 0.6%% in December on a big jump in electric and gas utilities due to cold weather, the Fed said. The December increase was slightly higher than the 0.5% gain expected by economists. However, factory activity alone slipped -0.1% after rising +0.9% in November. For the fourth quarter as a whole, industrial output rose at a 7% annual rate. Capacity utilization, a gauge of slack in the economy rose to 72% in December from 71.5% in November. This is the highest level since last December.

Thursday, January 14, 2010 4:03 p.m est.

The market remained higher yesterday closing near its highs and after a poor sell off from economic data this morning it went back up again with the Dow up seeing highs of +45.00 points, S&P 500 +5.00 points and the Nasdaq Composite +20.00 points. It all seemed to have a lot to do with the dollar once again however because as it went down, the market and oil went up.

At the close the Dow was up by +30.00 points to about 10710.00, S&P 500 +3.00 points to about 1148.00, S&P 100 +2.00 points to about 529.00 and the Nasdaq Composite +9.00 points to 2317.00. Oil was pretty flat all day but when the dollar turned down, it was able to close up +$.20 around the $80.00 level. Volume was meager once again however as traders seemed to want to wait for Intel’s earnings after the bell today and JP Morgan’s tomorrow morning. This is all going to make for an exciting end to this expiration cycle!

Retail sales fell a seasonally adjusted -0.3% in December on widespread weakness across different kinds of stores. The decline was unexpected, as economists were looking for a +0.5% gain. Auto sales also disappointed, dropping -0.8% in dollar terms despite an increase in unit sales reported by the automakers. Excluding auto sales, retail sales fell -0.2%. Sales for all of 2009 fell -6.2% compared with 2008 to $4.14 trillion and was the largest decline on record, dating back to 1992. Besides that it was only the second decline on record; the other was the -0.5% drop in 2008!

Jobless claims rose in the latest week by the most in five weeks up +11,000 to 444,000. The forecast of economists was for claims to inch lower to 433,000. Claims in the previous week were revised to 433,000 down from 434,000. This is the highest level since December 19th. The four-week average of initial claims fell -9,000 to 440,750 while the number of Americans receiving state jobless benefits fell -211,000 to 4.60 million. The four-week moving average of continuing claims fell -151,500 to 4.86 million.

Import prices were unchanged in December after four months of gains. A decline in fuel prices offset gains in other sectors. Economists had expected import prices to be flat as imported oil prices had fallen in the month. Fuel import prices fell -1.4% in December after a +7.1% gain in November. Non-fuel import prices rose +0.4% for the fifth straight month. Export prices rose +0.6% in December. Excluding the farm sector, export prices were up +0.5%. For the year, export prices were up +3.4% after falling -2.9% in 2008.

Tuesday, January 12, 2010 4:03 p.m est.

The market started the day on a bad note and as it wore on it got worse and worse. As I have been saying it has been overbought and we are in an expiration traded week so volatility is likely to happen. By midday the Dow saw lows of -100.00 points, S&P 500 -15.00 points and the Nasdaq Composite -45.00 points.
The final hour saw the market come back and cut losses quite a bit At the close the Dow was down by -38.00 points to about 10627.00, S&P 500 -11.00 points to about 1136.00, S&P 100 -5.00 points to about 524.00 and the Nasdaq Composite -30.00 points to 2282.00. Oil was lower all day as it sold off on as the dollar strengthened closing off -$1.70 around the $81.00 level.

As we move into earnings season its hard to believe that companies actually couold make money. For example according to The Wall Street Journal: "The downturn that started in December 2007 delivered a body blow to U.S. workers. In two years, the economy shed 7.2 million jobs, pushing the jobless rate from 5% to 10%, according to the Labor Department. The severity of the recession is reshaping the labor market. Some lost jobs will come back. But some are gone forever, going the way of typewriter repairmen and streetcar operators." Jobs may never return in other housing boom related industries, such as manufacturing and finance.
There is a link between the education and joblessness. It's clear that the education system isn't doing its job, which is one reason why the economy is feeling the recession even worse. It's not just about filling jobs that may open. It's about creating new jobs, new enterprises, and innovation and there is a clearly a lack of inspiration coming out of this down turn as fewer people are willing to take chances, instead just giving up on looking for work. This is why 2010 earnings will be characterized by an important transition from a margin story to a revenue story within earnings. The market will be looking for the first signs of a rebound in “top line” growth this quarter as it will be so easy to beat last years results. The problem is that the economy remains extremely weak so we’ll likely only see single digit year over year growth in revenues in 2010.

Profit margins have surged back to near record highs and should lay the foundation for companies to begin spending cash on hiring and expansions though but don’t get too excited! The problem is that that as we enter the latter half of 2010 we will need to see substantial revenue growth to meet the expectations of the huge estimates and the biggest thing that I need to repeat is that earnings are “top line,” not just from cost cutting! As I have been saying I think volatility will return and with the median P/E multiple now a huge 22.2 and the degree of bullish sentiment in the latest Investor Intelligence Poll a huge 72% along with others nearly the same, it will get extremely hard for the market to move to the upside. There likely won’t be much downside however because one has to remember that the market is made up of companies that are multinational so you have to look around the globe to see if economies are slowing down all over the place. We truly are in a global economy now. For example it is said that 470 of 500 S&P 500 companies have a presence in China now! This will likely help to support the downside and until stocks become a bit cheaper, the upside will likely remain on hold also. Something to watch.....

The trade deficit widened by +9.7% in November to $36.4 billion. The trade deficit was above forecasts of economists of a deficit of $34.8 billion. Exports rose for the seventh straight month, but imports rose at a faster pace in November. The government also revised the deficit in October to $33.2 billion from $32.9 billion. As a result the deficit for the year now totals $340.6 billion, down from $654.1 billion in the same period last year. The trade deficit with China narrowed to $20.2 billion in compared with $22.7 billion in October.

Monday, January 11, 2010 4:03 p.m est.

Looks like were going back to the 1970’s! I can’t remember the exact date in the 70’s but I believe it was near the end of the decade when scientists came out and said that the world was moving into another “ice age!” I’m sure that’s what the people in the south have been thinking as its even freezing in Florida!!! The funny thing is that where I live were above freezing right now!! Anyhow, in the United Kingdom, where they are also seeing a record freeze, the press is not talking about global warming but global cooling. It seems as if global warming and cooling are at least partially influenced by a naturally occurring cycle where the temperature of the ocean 3000 feet below the surface and its oscillations are a critical part of the global cooling and heating cycle. If this theory and observations are correct, the next 30 years or so will be cooler than the last they say. The scientists who discovered this say that the hot cycle ended in 2007 and were now in a cooling phase. All I can say is that its sure a good thing we have all of this extra CO2 around to help keep us warmer otherwise it’d likely be even colder, haha! From a business point of view though those people in Copenhagen must be “shaking,” get it,,, as it could also mean that If they're right, and this winter gives them a lot of support at the moment, global warming and its trillion dollar effect on the North American taxpayer has suffered a significant set back!

The market started the day higher and it looked like it was going to be another rally day but selling suddenly took the market down with the Dow seeing lows of -40.00 points, S&P 500 -4.00 points and the Nasdaq Composite -15.00 points before turning mixed midday. The final hour saw the Dow make new highs of +60.00 points, S&P 500 up +4.00 points while the Nasdaq Composite was still down by -2.00 points. At the close the Dow was up by +46.00 points to about 10664.00, S&P 500 +2.00 points to about 1147.00, S&P 100 +1.00 points to about 529.00 and the Nasdaq Composite -5.00 points to 2312.00. Oil was lower all day but mostly unchanged around the $83.00 level.

Were now into the earnings season with Alcoa kicking it off after the bell so it will be interesting to see how this week turns out on this incredibly pathetic volume. I thought that it would pick up today if the market was up but it wasn’t which as I said last week, is very worrisome. I’m not looking for a crash but I still think were going to see a decent correction start anytime now!

Friday, January 8, 2010 4:03 p.m est.

Interesting.....According to Rasmussen Reports.com: "More voters have greater confidence in the telephone book these days than in the current Congress, and most think their national legislators are paid too much to boot. A new Rasmussen Reports national telephone survey shows that 45% of likely U.S. voters now think a group of people selected at random from the phone book would do a better job addressing the nation’s problems than the current Congress. That’s up 12 points from October 2008, just before the last congressional elections. Thirty-six percent (36%) disagree, and another 19% are not sure."

The market sold off first thing as the jobs report was much worse than expected first thing this morning with the Dow seeing lows of -55.00 points, S&P 500 -5.00 points and the Nasdaq Composite -10.00 points. It didn’t last long though as everyone decided that jobs aren’t really important especially when you can borrow money at near zero interest rates so the final hour saw the Dow up +15.00 points, S&P 500 up +4.00 points while today the Nasdaq Composite was up +20.00 points as semiconductors stocks this time were being bought.

At the close the Dow was up by +11.00 points to about 10618.00 S&P 500 +3.00 points to about 1145.00, S&P 100 +2.00 points to about 528.00 and the Nasdaq Composite +17.00 points to 2317.00. Oil was mostly unchanged around the $83.00 level.

The jobs report this morning confirms that economy is still not moving much out of the abyss that it was in last year. Business is not good, not just less bad than before. The consumer is not getting better, and especially not just less strapped than before. This seems to make it possible that we could see a double dip into recession once again. Earnings reports for last quarter start coming out next week and although they are expected to be pretty good, the question will be if they actually came from growth on the top line or just more of the same, cost cutting. There is also more odds for a major terrorist event as it seems that they are kicking it up a notch around the globe right now.

As I have been saying I expect the market to be mostly moving sideways to slightly up this year, so far we saw a nice gain for this week. With earnings coming out and it being an expiration next week we could see a correction start. While expirations weeks tend to be positive, that is not the pattern for the expirations week in January. The past 8 of the last 11 years have been down big and expiration day (Friday of next week) has been down 9 of last 11 with some big losses. The way this market has moved this week on the incredibly pathetic volume, almost worse than Christmas, it makes me very nervous about what could happen actually because you want to just give your head a shake about how it can move like this with no volume behind it.

This was a bad start to the year as job losses resumed in December by -85,000 and unemployment was 10%. There was a huge range overall from economists but they were basically looking for a positive number and an increase in the unemployment rate to 10.1%. Revisions showed payrolls rose in November for the first time in nearly two years though but was taken away as October’s numbers were revised lower. Novembers numbers were revised to a +4,000 gain after the initial -11,000 but October’s revision was lowered to -127,000 from a -111,000 number so combined there was a net -1000 job loss. During 2009, payrolls fell by -4.2 million and since the recession began two years ago, it has fallen by -7.3 million. An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to 17.3% from 17.2%. Average hourly earnings rose +3 cents or +0.2%, to $18.80. Average hourly earnings are up +2.2% in the past year.

Temporary help jobs did move up by +46,500, a leading indicator of permanent employment eventually! However, fewer industries were hiring in December than in October, and the number of discouraged workers rose by +287,000 to 929,000. The employment participation rate fell to 64.6% from 64.9%. Total hours worked in the economy were unchanged. The average workweek was unchanged at 33.2 hours.

A separate survey of households showed employment fell by a seasonally adjusted -589,000 and unemployment fell by -73,000 to 15.3 million but 661,000 people dropped out of the workforce, driving the employment participation rate down to 64.6%. The employment-population ratio dropped to 58.2%. Due to changes in seasonal adjustment factors for the household survey, the peak unemployment rate in October of 10.2% was revised to 10.1%. The number of people who've been unemployed for longer than six months rose by +229,000 to 6.13 million, representing a record 39.8% of 15.3 million who are classified as unemployed. Overall this was a very bad report for the start of 2010 and the Obama administration. Maybe they need more government jobs but even they fell by -21,000!! The goods-producing sector fell by -81,000, including -53,000 in construction and -27,000 in manufacturing. The average workweek in manufacturing was unchanged at 40.4 hours. Service-producing jobs fell by -4,000, including -10 in retail. Services had added +62,000 jobs in November but maybe that was a Christmas thing. Of 271 industries, 40% were hiring in December, down from 42.4% in November.!

Wednesday, January 6, 2010 4:03 p.m est.

Yesterday the market closed mixed as it started to think about how the employment report on Friday may look like. It continued that way today but was able to make slightly higher highs with the Dow up +25.00 points, S&P 500 +3.00 points and the Nasdaq Composite +5.00 points but still on low volume. Friday’s report could have an interesting effect on the market because if it is stronger than expected although it may be good for the economy, it basically guarantee’s that interest rates will be going up. With the market moving so much on the 0% carry trade, higher rates aren’t a good thing so a sharp correction could ensue.

At the close the Dow was up by +2.00 points to about 10574.00 S&P 500 +.65 points to about 1137.00, S&P 100 -.28 points to about 524.00 and the Nasdaq Composite -8.00 points to 2301.00. Oil remains incredibly strong up well over +$1.00 to close around the $83.00 level.

It seems that even though more and more problems come about, the market ignores it. Geo-politics are really kicking up in the middle east as Iran is completely ignoring threats about their nuclear ambitions and China has declared they won’t go along with the U.S to bring more sanctions. Yemen is now the new hotbed for al-queada, oil rices are once again over the $80 level, a record setting winter isn’t helping, a wayward Congress and an increasingly unpopular president, along with expectations of low economic growth and persisting joblessness, the market just keeps on moving higher. Volume has been pathetic but did pick up a bit yesterday. Breadth has still been good though as the advance decline line continues to confirm every new high. What I find most interesting is that the higher interest rates is failing to scare traders and that short term rates have once again turned negative. It was interesting yesterday that Pending Home sales fell -16% as that may be due to the expectation of higher rates. It was a complete surprise anyhow but didn’t move markets much after the initial shock wore off to momentum once again. The employment report will come out on Friday and it appears the market is starting to flatten as it gets closer but right now momentum is key. This of course is bad because momentum runs are great but always end badly because you can see a 5-10% start on basically anything and maybe that will be it.

At 2:00 est. it was reported that recent signs of an improving economy did not turn the Fed from the belief that the recovery would be gradual relative to past recoveries and inflation would remain flat, according to minutes of the latest policy meeting. Although the November employment report was better than expected, Fed officials observed that “more than one good report would be needed to provide convincing evidence of recovery in the labor market.” There was a sharp divide among officials about the forecast for inflation longer-term though. The argument was so intense that the discussion about the price outlook continued long after the formal vote on policy, which usually signals the end of the closed-door gatherings. There was not a lengthy discussion of the Fed's purchases of mortgage-backed securities that are scheduled to end in late March. Only a few Fed officials pushed to expand the plan and only one thought it should be scaled back. The Fed put off a discussion of “alternative approaches to implementing policy in the longer-run” until this year. The committee will next meet on January 26th-27th.

This morning it was reported that private-sector firms cut -84,000 jobs in December, according to the ADP employment report. It was the fewest jobs lost since March 2008. The private-sector has lost jobs for 23 months in a row. In November, a revised -145,000 jobs were lost, compared with the -169,000 originally reported. The ADP index does not include government jobs. The ADP jobs data come two days before the employment report comes out. Economists are looking for them to actually go up by +10,000, the first gain in two years. Compared with the regular employment report, the ADP report has indicated steeper job losses over the past seven months, with an average difference of about -100,000.

The service sectors of the economy rebounded in December, the Institute for Supply Management reported. The ISM non-manufacturing index rose to 50.1% from 48.7% in November but despite the improvement, the increase was below expectations. Economists were looking the index to rise to 51%. It has been above 50 for three months in the summer and fall but then slipped under in November. The closely-watched employment index rose to 44% from 41.6% in November. The employment index has been below 50 since May 2008 and hit a low of 31.1% in November 2008.

Yesterday it was reported that Pending home sales plunged a seasonally adjusted -16% in November as a highly popular tax credit for first-time buyers was set to expire on November 30th, the National Association of Realtors reported. The pending sales index which measures contracts signed but not closed on previously owned homes was +15.5% higher than in November 2008. October's increase was revised higher to +3.9% from +3.7% previously reported. The tax credit was ultimately extended through the first half of 2010 and expanded to repeat buyers. “The fact that pending home sales are comfortably above year-ago levels shows the market has gained sufficient momentum on its own,” said Lawrence Yun, chief economist for the lobbying group. “We expect another surge in the spring.” Yun said he expects about 2.4 million more buyers to take advantage of the subsidy from taxpayers before it expires on June 30th, in addition to 2 million who have already taken the tax credit.

The factory sector is emerging from recession as businesses stepped up their demand in November for capital equipment to expand production. Factory orders increased +1.1% in November, faster than the +0.8% expected by economists. This is the seventh increase in the past eight months. October's orders were revised higher by two-tenths of a percent to +0.8%. Orders for durable goods increased +0.2% in November, unrevised from the initial estimate released late last month. Orders for nondurable goods rose +1.8%. Inventories rose +0.2% in November for the second straight monthly gain. Inventories had been extremely lean and is a sign manufacturers want to restock shelves.

Monday, January 4, 2010 4:03 p.m est.

The market started out the New year much better than last years start opening up strong and remaining there all day. The Dow saw highs of +175.00 points, S&P 500 +19.00 points and the Nasdaq Composite +45.00 points but the unfortunate thing was that it was on incredibly low volume and that’s not good considering were coming off of a very long holiday season. The final hour saw a bit of profit taking but most of the gains were held. At the close the Dow was up by +155.00 points to about 10583.00 S&P 500 +18.00 points to about 1133.00, S&P 100 +9.00 points to about 523.00 and the Nasdaq Composite +39.00 points to 2308.00. Oil was up strong as temperatures were hitting record lows all over North America this past weekend and there are many geo-political flare ups around the middle east. It was up well over +$2.00 closing around the $81.50 level.

It does appear that things are changing as Americans are moving from being buyers to doers as a result of the recession. People are looking for experiences over the latest products or gadgets. For example, museum attendance has increased, and people are staying at home more and spending more time with family and friends. According to The New York Times: "Quietly but noticeably over the past year, Americans have rejiggered their lives to elevate experiences over things. Because of the Great Recession, a recent New York Times/CBS News poll has found, nearly half of Americans said they were spending less time buying nonessentials, and more than half are spending less money in stores and online." The Times added: "Americans are not just getting by with less. They are also doing more. Some are working longer hours, but a larger proportion, the poll shows, are spending additional time with family and friends, gardening, cooking, reading, watching television and engaging in other hobbies." What does this all mean? If you own a business this may be where you should be looking by offering activities and products that enhance it.

The manufacturing sector expanded in December for the fifth straight month, the Institute for Supply Management reported indicating that the recession is still slowing down. The ISM manufacturing index rose to 55.9% from 53.6% in November and was the highest in nearly four years. Economists were expecting a modest gain to 54.2%. Readings over 50% indicate that more manufacturing firms said business was improving than said it was worsening. In December, nine of 18 industrial sectors were growing. The new orders index rose to 65.5% from 60.3% while the employment index rose to 52% from 50.8%. The production index rose to 61.8% from 59.9%.
Construction spending fell -0.6% in November as spending on housing and public works decreased and was the seventh straight monthly decline in spending. Outlays are down -13.2% compared with a year earlier. Economists were expecting a decline of -0.7%. There was also a sharp downward revision to October spending. The government said spending fell -0.5% in October, compared with the initial estimate of no change. In November, spending on private-sector projects fell -0.7%, while public spending fell -0.4%. Private home construction fell -1.6%. Spending on nonresidential private projects inched lower for the eighth consecutive monthly decline.

Thursday, December 31, 2009 4:03 p.m est.

Well good by to 2009 and welcome to 2010. 2010 has a nice ring to it and I believe its going to be an incredibly good trading time for our style of trading as volatility will return a but movement will be little! I believe the market will continue to go mostly sideways in the coming year as it consolidates the incredible gains made this year.

The S&P 500 is up about +24% for the year and +68% from the March lows alone but it still remains in-between the highs and lows that were made 10-years ago! In2000 I felt that we could go sideways similar to the 1965-1982 period and so far that remains in place. Hope you all have a great New year celebration with well wishes and safe driving, think smart!

The market basically closed at its lows after a sell program came in the final thirty minutes of trading but again it was on the lower volume than yesterday! At the close the Dow was down by +120.00 points to about 10428.00 S&P 500 -11.00 points to about 1115.00, S&P 100 -5.00 points to about 514.00 and the Nasdaq Composite -22.00 points to 2269.00. Oil was up once again closing around the $79.50 level.

Jobless Claims fell -22,000 to a seasonally adjusted 432,000 last week, the lowest level since summer 2008. Economists expected initial claims to come in at 455,000. The four-week average dropped -5,500 to 460,250, the lowest since September 2008. The number of continuing claims, which reflects people who have been collecting state benefits for an extended period, fell -57,000 to 4.98 million. The four-week average fell -122,000 to 5.22 million, the lowest rate since last March. Its nice to have some good news going into the New Year!

Wednesday, December 30, 2009 4:03 p.m est.

The market has been virtually flat this week, being up Monday and down yesterday on the lowest volume of the year. It is obvious that traders are done for the year and won’t be coming back until 2010. By the way if your one of those people who only put cash into the market once a year because you think your an incredible market timer, you would have lost money the past decade because the Dow and especially the S&P 500 isn’t going to finish the year anywhere near where it was at the start of 2000. Oh well, maybe double down next Monday and the next ten years will be better!

At the close the Dow was up by +3.00 points to about 10548.00 S&P 500 +.00 points to about 1126.00, S&P 100 +.00 points to about 519.00 and the Nasdaq Composite +3.00 points to 2291.00. Oil has been rallying of late but it too is little changed this week remaining near the $79.00 level.

Yesterday it was reported that Consumer Confidence rose for the second straight month as more people expect the economy to improve in 2010. Its always good to be hopeful! The index climbed to 52.9% from a revised 50.6% in November. Confidence had been expected to rise to 54% though. The expectations Index jumped to 75.6% from 70.3% but the Present Situation index, a gauge of how consumers feel now, fell to 18.8% from 21.2% remaining near a 26-year low.

The market value of homes in 20 major cities was flat in October and failed to keep pace with gains so far in 2009, according to the Case-Shiller home price index. In October prices rose in just seven of 20 cities. In the past year, prices are down -7.3% in the 20 cities and lower in October 2009 than in October 2008.
Today, more businesses in the Chicago region were expanding in December than at any time in the past 16 months, based on the latest data from the Chicago purchasing managers index. The business activity index rose to 60.0% from 56.1% in November. This is the highest reading since August 2008 and was stronger than economists had forecast. The index fell as low as 31.4% in January. Readings over 50% indicate more firms said business is getting better than said it was worsening.

Thursday, December 24, 2009 3:00 p.m est.

The market has basically been up all week and with the early close today at 1:00 p.m est, it continued higher. Volume is so low you can almost count it on one hand and because of this, it has placed it in an incredibly overbought condition. Next week will be interesting as we move into year end. I likely won’t be reporting tomorrow as it’s Christmas so I’d like to take the time to wish you a very Merry Christmas!!

At the close the Dow was up by +54.00 points to about 10520.00 S&P 500 +6.00 points to about 1126.00, S&P 100 +3.00 points to about 518.00 and the Nasdaq Composite +16.00 points to 2286.00. Oil has been rallying as inventories have been lower than expected closing near the $78.00 level.

The economic shocker for the week was that Sales of New Homes fell -11.3% in November to a seasonally adjusted annual rate of 355,000 as the popular tax break for first-time homeowners was set to expire. The market decided to completely ignore the number. It was the lowest sales pace since April and followed months of steadier sales helped by the tax break that was set to expire on November 30th. Buyers would have had to sign a contract on a new home by early October at the latest in order to receive the tax credit, which was ultimately extended until June and expanded to include repeat buyers. November's sales were far weaker than the 421,000 expected by economists. October's sales pace was revised lower to 400,000 from the 430,000 earlier reported. Sales were down -9% from last November. Through the first 11 months of 2009, 349,000 homes had been sold, down -24% from the same period a year ago.

Home builders continued to cut inventories of unsold homes. The number of unsold homes dropped -2.1% to 235,000, the lowest in 38 years. The number of homes for sale that are under construction or not yet started fell to a record low. Builders have cut back on production of new homes, but still face stiff competition from unsold existing-homes as foreclosures continue to grow. At the November sales pace, it would take 7.9 months to sell the inventory, up from 7.2 months in October. Once a home is completed, it's taking 13.6 months to sell it, a reflection of the mismatch between the more expensive homes in the inventory and the lower priced homes that are selling.

The median sales price of a new home sold in November was $217,400, down -1.9% in the past year. Sales fell in three of four regions, led by a -21% drop in the South to a 19-year low, down -9% in the West and -3% in the Northwest. Sales increased +21% in the Midwest.

Today it was reported that Jobless claims fell -28,000 to 452,000 last week, hitting the lowest level since September 2008. Economists were looking for an initial claims level of 470,000. The four-week average fell -2,750 to 465,250, which also the lowest level since September 2008. Continuing claims fell -127,000 to 5.08 million, the lowest level since February. The four-week average of continuing claims fell -90,000 to 5.23 million, the lowest level since March.

Yesterday a big drop in volatile aircraft orders covered a broad-based increase in demand for other durable goods. Orders for durable goods rose a seasonally adjusted +0.2% in November, held back by a massive -32.6% drop in aircraft bookings. Excluding transportation goods, orders rose +2%. Orders were stronger in every major industrial category outside of transportation. Orders for core capital equipment goods, a gauge of business capital investment jumped +2.9%. Total orders were weaker than the +0.6% increase expected by economists. Orders are up in two of the past three months and are up +3.8% since June.

It was reported that Personal Incomes by +0.4% in November to an annual rate of $12.2 trillion, the biggest gain since May and in line with expectations of economists. The increase in wages and salaries was largely due to the +0.6% increase in hours worked. Income earned by owners of small businesses increased +1.2% after a +1.4% gain in October, reversing three straight quarters of declines. After inflation, after-tax disposable incomes rose +0.2% for the third straight month. Real disposable incomes had fallen for much of the recession, but are now up +2.3% compared with December 2007, with much of the increase due to tax cuts and government transfer payments. Consumer spending increased +0.5% in November to an annual rate of $10.2 trillion after a downwardly revised +0.6% gain in October. Spending was weaker than the +0.7% gain forecast by economists. It appears that consumer spending is on track to rise by around +1.5% in real terms in the fourth quarter, which, given an anticipated add to growth from a sharp slowing in inventory disinvestment, should get gross domestic product to go over +4% at an annual rate in the fourth quarter,but if its like the last quarters revisions being cut almost in half, that won’t be good.

Tuesday, December 22, 2009 2:15 p.m est.

Yeah, the sun has turned around! This is one of my favorite days as it means the sun will be up a few minutes longer, pull out the lawn chairs!!! Oh, wait a second I guess we should get through Christmas first! Last week it was all about parties at my kids school as they celebrated Christmas galore so they may have well been home on vacation and the market is identical. Outside of expirations strong volume due to rollover, the market should have closed months ago let alone this week. I’m willing to bet that we see the lowest volume ever as we move into the end of the week. Yesterday’s was incredibly pathetic. We’ll likely finish the week on the upside mind you but I don’t think it will be anything really huge.

Yesterday the market was up pretty good but pulled back by the close and today’s market didn’t react well to the ever lowering of 3rd quarter GDP as it opened pretty flat. The Dow eventually saw highs of +65.00 points, S&P 500 +7.00 points and the Nasdaq Composite +20.00 points. Once again the upper level of the trading range turned the market back once again and is currently sitting just below the highs.

The final hour saw a bit of a bounce so at the close the Dow was up by +20.00 points to about 10329.00 S&P 500 +6.00 points to about 1102.00, S&P 100 +3.00 points to about 509.00 and the Nasdaq Composite +32.00 points to 2211.00. Oil rallied today on news that Iran attacked an oil rig in Iraq and took it over. At one point it was up over +$2.00. In the end it closed up +$.40 to the $73.00 level.

The economy grew at the fastest pace in two years during the third quarter, but the revised annual growth rate of +2.2% was much slower than what the government initially reported at +3.5%. Real gross domestic product increased for the first time since the spring of 2008, boosted by higher consumer spending, especially on autos as well as a rebound in investments in homes, a slower pace of inventory reduction, more exports, and robust government spending. Before growing in the June-through-September quarter, the economy had shrunk for four straight quarters, the first time it had done so since the Great Depression so being up a little now means very little to me as you can’t go down forever! The economy contracted -0.7% in the second quarter after falling by -6.4% in the first quarter and by -5.4% in the fourth quarter of 2008. The figures are seasonally adjusted and adjusted for price changes. Real GDP has fallen -2.6% in the past year. Most economists believe the worst recession in generations ended during the third quarter, even as the nation's unemployment rose. Production and sales increased, while real incomes slipped lower but recent economic indicators have turned down again which may be trouble in the future. Consumer spending, boosted by the government's so-called cash-for-clunkers program, was the main engine of growth in the third quarter and that is bad because since it has been finished auto sales have fallen back and were not really moving forward if its the government that is creating the growth not new business ventures.

Economists are forecasting stronger growth, about +4% on an annualized basis in the fourth quarter ending December 31st. They also see annualized growth of about +3% in the first half of 2010.

Home buyers rushed to qualify for an expiring federal tax credit, increasing re-sales of homes by +7.4% to a 6.54 million. The sales pace was the highest since February 2007 and was the third straight large increase. Sales are up +28% since August. Buyers were rushing in November to finalize sales ahead of the November expiration for the tax credit. The tax credit was subsequently extended and expanded to include repeat buyers. Economists were expecting existing home sales to rise to a 6.28 million annual pace in November.

Friday, December 18, 2009 4:03 p.m est.

Well it was another interesting expiration as stocks were forced up first thing in the morning to get a decent read on the S&P 500 expiration with it settling at 1102.38 for the month. The Dow saw highs of +45.00 points, S&P 500 +6.00 points and the Nasdaq Composite +30.00 points. Right afterward though sellers showed up and the Dow saw lows of -45.00 points, S&P 500 -2.00 points but the Nasdaq Composite remained strong still up +5.00 points as Oracle had decent earnings last night.

The final hour saw a bit of a bounce so at the close the Dow was up by +20.00 points to about 10329.00 S&P 500 +6.00 points to about 1102.00, S&P 100 +3.00 points to about 509.00 and the Nasdaq Composite +32.00 points to 2211.00. Oil rallied today on news that Iran attacked an oil rig in Iraq and took it over. At one point it was up over +$2.00. In the end it closed up +$.40 to the $73.00 level.

Now that were finished the last expiration cycle of the year with full profits I still expect the market to hold up at least to year end to keep the gains that have been made this year. After that we’ll see....

Thursday, December 17, 2009 4:03 p.m est.

The market fell today on worries that Fed chairman Ben Bernanke may not get renominated and FedEx missed their earnings report and made it sound like future earnings may be lower. The Dow saw lows of -140.00 points, S&P 500 -14.00 points and the Nasdaq Composite -35.00 points. The final hour saw a bit of a bounce but at the close the Dow was down by -133.00 points to about 10308.00 S&P 500 -13.00 points to about 1096.00, S&P 100 -6.00 points to about 506.00 and the Nasdaq Composite was down -27.00 points to 2180.00. Oil closed flat after correcting over a dollar early on around the $72.50 level.

I read an interesting article this morning on the American healthcare system and thought I would let you know about it. I don’t really have much of an opinion as I live in Canada so on this subject I don’t really care but the U.S media continues to slam our program up here but the one thing that I know is that where I live the system is incredible! I do think it depends on where you live and because I live in a resort area doctors want to live here so I can see my doctor any time I want or walk into any one of the numerous medical clinics here for help. Yes if I need a new knee or hip I’ll have to wait a year but I know from experience that my friends have gotten in the next day if you need one due to complications or if your having a heart attack or bleeding out etc, you’ll be operated on immediately! For the $114 it costs per month for my entire family I think its worth it!

Anyhow as this article points out it was the Democrats that started screwing up the medical area with Clinton and guess who’s got there nose in it now!!! “As health care "reform" stalls in Congress once again, the general public should consider that if and when the package passes, the compromises are ironed out, and the president finally signs the final bill into law, the system will move on to the next crisis, the lack of well trained physicians to take care of the surging number of patients that will supposedly have access to care.

To be sure, the lack of foresight and the potential for future consequences have never been the hallmark of political decisions. Yet, this one has the potential for some huge effects in the future, especially the political future of those who enact the "reform" package.
A little known fact is that in order to save money for Medicare, the funding for physician training programs was cut in 1997. That means that today's long waits at the doctor's office, and the projected shortage of physicians over the next 15 years was fueled, at least partially by the same government that is once again tinkering with the potential health of its constituents.

At the same time that training program funds were being cut, HMOs were empowered by the Clinton administration, adding layers of bureaucracy to the system, where physicians now have to ask for permission from the insurers to perform routine procedures on patients who actually need them. Most doctor's offices now have at least one person on their staff whose sole job is often just to ask for "approval" from insurers for what most in medicine consider routine interventions in patient care. In this scribe's office, part of the daily routine is talking to insurance companies about the use of "third tier" anti-inflammatory medication for patients. That means that a dedicated nurse has to explain to the clerk on the other end of the phone why the doctor wants to use Celebrex for a patient with arthritis. If the patient hasn't tried at least three other antiinflammatory medications before, the insurer won't pay for Celebrex. What makes this even more frustrating is that in the rare occasion when we get the approval, the patient can't afford the $50 or $60 copay that is required to get the medicine.

According to Bloomberg: "To combat a nationwide shortage of doctors, medical schools in the U.S. plan to add 3,000 first- year students by 2018. It won’t be enough." Why? According to the report: "The expansion, pushed for by the Association of American Medical Colleges, is being undercut by a U.S. health-care overhaul designed to supply medical insurance to an additional 31 million Americans and a cap on government-funded physician training programs that’s been frozen in place for 12 years, said Steven Safyer, of Montefiore Medical Center."
In fact, as Bloomberg reports: "Last year, there were 16,721 fewer primary-care doctors than needed in inner city and rural areas, according to the U.S. Health and Human Services Department. Residencies, the hospital based-training doctors undergo before they can practice medicine on their own, have been capped by Congress at about 90,000 since 1997 as a way to curb rising medical costs."
Consider this. According to Bloomberg: "Even with the push for more residencies, about 1,500 have gone unused for the last three years, the medical school group’s Salsberg said. This is because some hospitals find they no longer can provide supervision or hands-on experience necessary to educate all the residents they’ve been allocated, he said." Translation: there aren't enough physicians that are willing to go into academics to teach other physicians any more because the pay for the hard work involved in teaching physicians isn't worth the trouble.

What are the alternatives? Aside from waiting a long time to see someone when you're ill, your chances of seeing a non-physician "extender," such as a nurse practitioner or a physician's assistant are likely to rise. To be sure, that's not a knock on those professionals, who are often well trained, dedicated, and capable. But, at 4:00 A.M., when your abdominal aortic aneurysm is dissecting, and you're bleeding to death, you want to know that a capable vascular surgeon is available and willing to try and give you the best chance possible at that 50% survival rate under those conditions in the best of hands.

If the current trends remain in place, there won't be one of those capable folks available everywhere. And with the number of smokers, diabetics, and non-excersisers in the population, the number of vascular emergencies and cardiac related issues is certain to rise. And that's not all. What we see on a daily basis tells us that the chronic problems, such as osteoarthritis, spine problems, and other labor and resource intensive issues will also rise.

So what's the bottom line? There are too many people that need medical care. There aren't enough doctors to take care of all of them now. The medical education system is underfunded. The health insurers don't want to pay for any treatments that aren't bare bones, whether they work or not. And, even if the system was to change for the better overnight, it would still take years for the educational system to catch up to the needs of the population.

Conclusion
We're not trying to be negative here. We're just noticing that the longer this debate goes on, the more evidence to support slowing down and thinking about what we're doing rises. Yet, Congress and the president, looking for a political prize continue to push into a potential abyss.
The system, with all its warts, still takes good care of a lot of people. But the system is fraying, at all levels, especially that precious pipeline, future physicians. And if there is no one to take care of patients, what's the use of having "reform" and "access?"
That's why we're concerned about the "don't worry be happy" stuff emanating from Capitol Hill and the White House on this issue. In other words, the golden goose is sitting on a silver platter, the oven door is opening, and the welcoming fires are waiting.”
Something to think about......
Jobless Claims were up by +7,000 to 480,000 last week from a revised 473,000 the prior week. The number of people receiving unemployment insurance was little changed in the prior week, while those getting extended payments increased. They were projected to drop to 465,000 by economists. The four-week moving average of initial claims, a less volatile measure, fell to 467,500 last week, the lowest level since September 2008, from 472,750. Continuing claims increased by +5,000 to 5.19 million. The continuing claims figure does not include the number of Americans receiving extended benefits under federal programs. The report showed the number of people who have used up their traditional benefits and are now collecting extended payments jumped by about +144,000 to 4.73 million.
The index of leading economic indicators rose for the eight straight month, pointing to an improved economy in 2010, the Conference Board said. The index increased +0.9% after a +0.3% gain in October. Six of the 10 leading indicators were positive and for the first time since December 2007, employment did not make a negative contribution to the index, potentially a good sign for future job growth, the board said.
Improvement in the manufacturing sector in the Philadelphia region continued in December, the Fed’s Bank of Philadelphia reported. The Philly Fed diffusion index rose to 20.4% from 16.7% in November and was above expectations as economists were expecting the index to rise to 17%. The index has been positive for five straight months. For the first time since 2007, more firms reported an increase in employment than reported declines.

Wednesday, December 16, 2009 4:03 p.m est.

Yesterday the market pulled back making the week pretty flat as we came into trading today. It popped higher this morning as the dollar pulled back and oil surged higher almost up $3 at one point. The Dow saw highs of +60.00 points, S&P 500 +8.00 points and the Nasdaq Composite +15.00 points. After this it turned flat as everyone awaited the Fed’s decision on interest rates at 2:15 est even though everyone knew they wouldn’t lift rates or say anything different. Bernanke made Time’s person of the year you know and you wouldn’t want to disturb that honor! After their announcement the dollar started to strengthen as the one thing they did stick to was the fact that early in the year they will be getting out of all of their extra emergency stimulus deals. None of the dates were new, but the Fed is choosing not to extend them further. This could make next year interesting as the Fed is expected to start reversing its ultra-low monetary policy also. The first rate hike could come in the summertime, many say but the bond is already starting to price it in as interest rate yields have already started to rise so at the least 0% will likely be gone. The final hour saw the market turn lower with the Dow down -25.00 points, S&P 500 +.50 points and the Nasdaq Composite +1.00 points.

At the close the Dow was down by -9.00 points to about 10442.00 S&P 500 +2.00 points to about 1109.00, S&P 100 -.07 points to about 512.00 and the Nasdaq Composite was up +6.00 points to 2207.00. Oil closed higher by +$1.80 to close around the $72.50 level.

There are lots of questions out there about the economy getting better next year. People of course have built their lifestyles based on their jobs and that's why rising joblessness has led to a significant change in behavior and a weak economy. According to the New York Times: "More than half of the nation’s unemployed workers have borrowed money from friends or relatives since losing their jobs. An equal number have cut back on doctor visits or medical treatments because they are out of work," and echoing a sentiment expressed in this space on 12-14-09 "Almost half have suffered from depression or anxiety" while "About 4 in 10 parents have noticed behavioral changes in their children that they attribute to their difficulties in finding work."

According to the report: "Roughly half of the respondents described the recession as a hardship that had caused fundamental changes in their lives. Generally, those who have been out of work longer reported experiencing more acute financial and emotional effects."
• "a quarter of those polled said they had either lost their home or been threatened with foreclosure or eviction for not paying their mortgage or rent."
• "have received food stamps" while "More than half said they had cut back on both luxuries and necessities in their spending."
• "Seven in 10 rated their family’s financial situation as fairly bad or very bad."
Yet, it's much more personal than the statistics reveal as "the impact on their lives was not limited to the difficulty in paying bills. Almost half said unemployment had led to more conflicts or arguments with family members and friends; 55 percent have suffered from insomnia."
Here’s one of the most interesting aspects of it. "There was a pervasive sense from the poll that the American dream had been upended for many. Nearly half of those polled said they felt in danger of falling out of their social class, with those out of work six months or more feeling especially vulnerable. Working-class respondents felt at risk in the greatest numbers." People are changing professions. In two worker families, the one spouse that remains employed has taken on more hours at work if possible. People are experiencing pay cuts.

Right now it seems that people are experiencing one of the most polarized periods in American history even though to me this can’t be anything close to the dirty 30’s! If you have a job, you're probably feeling a whole lot better than those who don't but you still don’t feel confident enough to go out and sell the farm so to speak. According to the results of a November poll from Gallup.com: "working Americans reported their most negative responses yet in their work environments. The Work Environment Index declined to 48.1% in October, its lowest level since measurement began in January 2008. The Work Environment Index has dropped more than five points since spiking to the high of 53.3% in October 2008, at the onset of the global economic collapse."

It’s looking as if this Christmas won’t be as cheery because there won’t be as many gifts under the tree but in the end it could be the best Christmas of all as people get back to the fundamentals of what Christmas really is, celebrating the biggest event in history with family and friends!

Yesterday it was reported that wholesale prices rose a larger-than-expected +1.8% in November after seasonable adjustments, with energy prices accounting for about three quarters of the increase, but who needs to drive anyhow so that’s not really inflationary!! The producer price index has risen +2.4% in the past year and is the first rise since November 2008. The core PPI, which excludes food and energy prices because they’re not really that important, rose +0.5%, also more than expected. Leading the advance were higher truck and cigarette prices. Okay, its fine if smokes are more expensive in my view! Core prices are up +1.2% in the past year. Economists expected a +1.0% rise in the November headline PPI and a +0.3% gain in the core rate. The PPI had risen +0.3% in October, while the core rate was down -0.6%.

Factories in the New York region unexpectedly expanded at the slowest pace in five months in December, indicating manufacturing may provide less of a thrust for the economy in coming months. The Fed’s general economic index fell to +2.6% from +23.5% in November, the bank said. Readings above zero signal manufacturing expansion in the state and parts of New Jersey and Connecticut. In October, the index jumped to +34.6%, the highest since May 2004 so this fall is looking scary. Orders, sales and employment all declined also declined with expansion in manufacturing, which led the economy out of the worst recession since the 1930s. Companies may be limiting orders to ensure the progress they’ve made in paring inventories this year. Economists thought the New York Fed’s index would increase to 24%.
This morning it was reported that inflation was again up a bit in November on the retail side as energy prices surged, although prices were flat for the month when energy and food are excluded. The consumer price index increased a seasonally adjusted +0.4% in November, buoyed by a +4.1% increase in energy prices. It was the fourth straight rise in the energy index and the biggest increase since August. Taking out energy and food prices, however, the CPI was unchanged in November, following a gain of +0.2% in October. Core CPI had risen for 10 consecutive months prior to November.

The increase in the overall CPI matched expectations of economists. Consumer prices have now risen +1.8% in the past year. November's data marked the first positive year-over-year gain for the CPI since February while the core is up +1.7%.

Housing Starts rebounded in November after dropping sharply in the previous month, up +8.9% in November to a seasonally adjusted 574,000 annualized units. This was stronger than the 563,000 pace expected by economists. October starts were revised lower to a 527,000 pace from 529,000 previously reported. There was a slight increase in starts of single-family homes. Congress extended the home buyer tax credit that had been set to expire at the end of November. Economists were left guessing whether builders would be quick to react to the extension. Starts of single-family homes rose +2.1% to a 482,000 rate, while starts of multifamily units surged 67.3% to 92,000.

In the past year, starts are down -12.4%. Starts of single-family homes are up +5.5%, while starts of apartments and condos have plunged -53.9%. Building permits rose +6% to a seasonally adjusted annual rate of 584,000. Permits for single-family homes increased +5.3% to a 473,000 rate. Many economists consider single-family permits to be the most important number in the government's release. Housing starts have stopped falling but have yet to show a sustained uptrend, economists said.
The U.S. balance of payments deficit widened sharply in the third quarter to $108 billion from $98 billion in the second quarter, but heh who cares, they lifted the debt level! The increase in the second quarter deficit was due to a larger deficit on goods. The current account deficit totaled 3% of gross domestic product, up from 2.8% in the second quarter, which was the smallest percentage since the first quarter of 1999. The deficit peaked at 6.5% of GDP in the fourth quarter of 2005. Global trade is starting to recover from the collapse in the wake of the financial crisis. As a result, further progress on the significant narrowing of the deficit is likely to be harder to achieve. However, the weaker dollar has helped exports. The current account is the broadest measure of international flows of goods, services and capital in and out of the United States. In essence, the current account measures how much Americans need to borrow from abroad to fund their consumption and investment. To make more progress, people will need to save and invest more and consume less, while Europe, Japan and emerging economies such as China will need to move away from relying on exports to the U.S. to relying on domestic demand to fuel their growth.

Monday, December 14, 2009 4:03 p.m est.

If you can believe it I’m actually going to report on a Monday but only because I’m expecting a very boring market unless there are some market moving economic reports! It started the day higher even though over the weekend the debt level of the government was lifted by almost $2 trillion even though S&P was giving warnings about credit levels. Instead traders focused on the fact that Abu Dhabi said that they would save Dubai by giving them $10 billion. The Dow saw highs of +45.00 points, S&P 500 +8.00 points and the Nasdaq Composite +30.00 points.

At the close the Dow was up by +30.00 points to about 10501.00 S&P 500 +8.00 points to about 1114.00, S&P 100 +2.00 points to about 515.00 and the Nasdaq Composite was up +22.00 points to 2212.00. Oil closed lower again down by -$.36 to the $69.51 level.

Right now with the nice gains that have ben seen traders have to choose between the positive seasonality of the Christmas holidays, or the political uncertainties of the moment. This is hard which is why the market is going nowhere. As this is the last week of expiration and 2009 we could see it remain mostly flat. The last four of the last five expiration weeks have seen positive returns but there is one interesting factor. During the past month, the S&P 500 has traded in a range between 1,085 and 1,120. The 50-day moving average is currently sitting at 1,083 so that’s likely where short-term support is while, the 1,120 area is where the recent high is. As I have been saying, this is significant because it is where the 50% re-tracement of the 2007 peak and this year's low meet. One of the biggest reason for it to remain flat for the week though is that there is huge put and call open interest in the 1100 December level which has been hit in 10 of the past 19 trading days. This means that there are plenty of sellers there so that means they don’t want the index to get to far above or below it so the most premium can be collected. Surprisingly, it is heaviest on the call side! At the least I would expect it to remain mostly flat until Wednesday as everyone should have rolled into the January options over by then.

Friday, December 11, 2009 4:03 p.m est.

The market started the day higher as economic data was positive but as bond yields rose so did the dollar which eventually pulled it back. Out of the gate the Dow saw highs of +75.00 points, S&P 500 +6.00 points and the Nasdaq Composite +15.00 points but as the dollar got stronger with oil falling under the $70 mark, the market became mixed with the Dow only up +5.00 points, S&P 500 -2.00 points and the Nasdaq Composite -15.00 points. It did turn around once again in the final hour but only the Dow made slightly new highs up +80.00 points.

At the close the Dow was up by +66.00 points to about 10471.00 S&P 500 +4.00 points to about 1106.00, S&P 100 +2.00 points to about 514.00 but the Nasdaq Composite was down -.55 points to 2190.00. Oil closed lower by -$.75 putting it below $70 to the $69.80 level.

Retail sales rose +1.3% in November, marking the third increase in the past four months and if you exclude the +1.6% rise in auto sales, sales rose +1.2%, the fastest since January. Economists expected total sales to rise +0.5% and sales excluding autos to rise +0.4%. This was the strongest sales report since August's +2.4% increase. The gains were widespread, as only clothing and furniture sales dropped in the month. The figures are seasonally adjusted but are not adjusted for inflation. Gas sales added some fuel to November sales, rising +6%, the biggest gain since June. In my view this shouldn’t even be included as it is a necessity. Excluding gasoline stations, sales rose +0.8% a more average number. Excluding both autos and gas, sales rose +0.6% closer to estimates. It is hard to say what the November sales data imply for the critical holiday shopping season. Retailers are hoping to avoid a second consecutive year of sales declines, but many reports are pointing to a lackluster season. In the past year, retail sales are up +1.9%, the first year-over-year gain since August 2008. The strong report adds to the perception that the economy is moving out of the recession in good shape. Economists caution that the economy still faces significant headwinds from the credit crunch and high unemployment rate however.

Import prices rose +1.7% in November in their largest gain since June, driven higher by fuel costs. Analysts expected a smaller rise of +1% compared to the +1.7% gain. October's gain was also revised up to +0.8% from the +0.7% previously reported.

Import prices have been steadily rising over the past year and have increased during eight of the last nine months, the Labor Department said. They also rose +3.7% from November 2008 in the first annual gain since the October 2007-2008 period.

Consumer sentiment improved a lot in early December, according to reports from the Reuters/University of Michigan index. The consumer sentiment index rose to 73.4% in early December from 67.4% in November and was larger than expected. The forecast of economists was for sentiment to rise to 69%. This is the highest level of consumer sentiment since September and the reason may be because Christmas is fast approaching.

Thursday, December 10, 2009 4:03 p.m est.

Well another boring market day, the interesting thing is that volume looks the same as just before the market started crashing last year. As I have said though I think we’ll stay higher to at least the end of the year. The market started the day higher with the Dow up +110.00 points, S&P 500 +11.00 points and the Nasdaq Composite +25.00 points. It almost turned into the red though after it was reported that the auction for the 30-year bond was outright terrible so yields jumped sharply higher along with the dollar. Higher rates mean that the Fed will have to raise rates and that means a stronger dollar and it will take more money to pay for debt, etc etc! It is hard to believe that its scary when rates are sitting around the zero level! Could you imagine what would happen if they skyrocketed all the way up to .50%!!

At the close the Dow was up by +67.00 points to about 10404.00 S&P 500 +6.00 points to about 1102.00, S&P 100 +3.00 points to about 512.00 and the Nasdaq Composite +7.00 points to 2191.00. Oil took another hit getting very close to the $70.00 level closing down about -$.15 to around the $70.50 level.

Jobless Claims rose by +17,000 to 474,000 while the total number of people claiming benefits of any kind topped 10 million, a sign of very slow hiring. This is the first time in six weeks they have risen though. Economists expected them to fall to about 450,000. Continuing claims fell by -303,000 to a seasonally adjusted 5.16 million.

The trade deficit narrowed by -7.6% in October to $32.9 billion and exports rose faster than imports in October. The narrowing of the trade gap was unexpected as economists had forecast of a deficit of $37.0 billion. One critical factor in the lower deficit was a cut in crude oil imports. The deficit for the year now totals $304 billion, down sharply from $610.8 billion in the same period one year ago. The deficit with China continued to expand, widening to $22.7 billion in October compared with $22.1 billion in September and is the highest level since last November. For the year, the deficit with China is now $188.5 billion.

The outstanding debt of companies, households and governments rose at the slowest rate on record in the third quarter, as households reduced debts for the fifth straight quarter! This is great news as people are choosing to do this instead of spending themselves into oblivion like the government would like. Non-financial debt increased at a record-low +2.8% annual rate in the third quarter to $34.6 trillion, despite the +20.6% annualized increase in government debt. Private-sector debt fell at a 2.6% annual rate, as businesses and households each reduced their outstanding debt. Meanwhile, household net worth rose by $2.67 trillion to $53.4 trillion on large gains in the stock market and a small rebound in real estate values. Net worth rose at a +22.7% annual rate in the quarter. Household assets increased by $2.6 trillion to $67.5 trillion while capital gains helped increase holdings by $2.35 trillion and liabilities fell $12 billion to $14.1 trillion. Household net worth is still down nearly -$12 trillion or 18% from the peak two years ago, reflecting the bursting of the housing bubble and the big drop in the stock market last year. Debt as a percentage of disposable personal income fell to 124% from 125% in the second quarter and 132% in 2007. The business sector reduced its debts at a record 2.6% annual rate to $11.1 trillion.

Wednesday, December 9, 2009 2:30 p.m est.

Yesterday the market once again ignored the threat from Moody’s to downgrade America from its triple +AAA reading because of the debt its piling up. This is the best you can get and when S&P downgraded Spain today Globex futures took a dip so people may actually be starting to pay attention. I think the only thing that saved the market was the fact that were nearing year end again and even though its a myth I think the PPT (plunge protection team) is out in force. Maybe it should be renamed the OGPPT, Obama, Geitner Plunge Protection Team. I’m sure that both ratings agency may have a bit more to say now that Treasury Secretary Geitner came out and said that he is extending the tarp program for another year but it will of course be paid off quickly with all of the tax receipts that will come in as business picks up! Somehow I think we may just see that rating downgrade now in our near future, like sometime after January 1st!!!

The market opened lower with the Dow seeing -50.00 points, S&P 500 -6.00 points and the Nasdaq Composite -25.00 points in the first few minutes of trading but it did turn around as the dollar started to slip with the Dow up +40.00 points, S&P 500 +3.00 points and the Nasdaq Composite +5.00 points. When oil really got clocked down over -$2.00 at one point just above the $70 .00 level the market fell back into the red again though. I'll bet were flat by the close though.

With the debt piling up and the government continuing to grow I continue to hear all kinds of stories and one out this morning was very interesting! It appears that there is another sign that were strongly tracking Japan’s fortunes and that means that we might not see those new stock market highs any time soon.

It has been talked about a lot before and is an upcoming worry as baby boomer retirement is coming, and the potential problems, especially in the current financial and political environment could have extreme consequences for investors. Statistics courtesy of Reuters and other sources, including Goldman Sachs reveal that:
• "The share of the U.S. population aged between 40 and 65, when people typically prepare for retirement by building their biggest pile of financial assets, peaks in 2010 and this ratio has shown an uncanny link with real equity prices for 40 years."
• The post World War II baby boom gave birth to 78 million Americans, from 1946 to 1964. By the mid-1980s, this demographic group earned half of the U.S. personal income.
"The proportion of the global population over 60 is set to double by 2050 to 21.8%. As birth rates fall and people live longer, ratios of retirees per worker is likely to soar."

So, according to Reuters: "the U.S. ratio of those in prime savings years to the sum of under -40s plus those 65 and over is marked by an incredible market correlation and a 2010 milestone. Goldman Sachs, points out the flat market of the 1970s coincided with a three point fall in this key ratio and a sharp 15 point rebound from 1982 to next year followed an 18-year bull market."

Right now, the portion of those who actually contribute savings to the overall picture is about to shrink as the other two extremes, the younger folks, and the aging folks are about to grow. This means that the people who could theoretically pay taxes and fund the government at the levels at which it has been accustomed to being funded is about to drop. Maybe this is why Moody’s is putting out warnings now!

According to the report, the ratio is "is set to decline once more and is forecast to sink six points over the next two decades" so now it gets scary. According to the report: "Comparison with Japan, whose aging profile is more advanced than those of western economies, packs a more ominous warning. When the prime savings age group topped out there in the early 1990s, Japan's market entered a 20-year bear market that has more than halved stock prices since then." It has basically remained down since its first fall which would be similar to our crash last year! When you consider the fact that Japan's bear market, aside from coinciding with a key change in the ratio was also the result of the bust of a major real estate bubble, the same as ours, you have to wonder and take a couple of deep breaths.

Of course it’s not clear when exactly people will choose to retire in the current climate and, unlike U.S. retirees, Japan's situation was exacerbated by the fact that workers there receive a fixed sum upon retirement that they then invest and live on. Here the current wealth crisis has seen an increase in savings, which theoretically could help a drop in the ratio. This of course depends on what the effects of policy coming out of Washington and other world capitals are, especially with regard to tax policy and public spending so in different words were not going into a slowdown, the end of the world is coming, just kidding on this last statement,,,,,,sort of.

The global economy works on two things, businesses and governments and both are funded by consumers and taxpayers. If Obama continues to get his socialistic ways through and the number of aggressive consumers and taxpayers in the world's largest economy is about to decrease significantly, then it makes sense to expect that the trend will have some significant effects which means that you've got to think that the next 20 years are almost certainly going to be different than the last 20 years!
Home loans rose to the highest level in about two months, mainly from borrowers locking in low mortgage rates by refinancing, the Mortgage Bankers Association said.

Nearly three of every four loan requests last week was for a refinancing with total mortgage applications, based on the group's seasonally adjusted market index, rose +8.5% to 665.6 last week to the highest since early October. Demand for loans to buy a home increased by +4%, while refinancing applications jumped +11.1% to 3,185.9 last week and was the highest refinance index level in about two months. Does this mean that higher interest rates are on the way soon. Average 30-year mortgage rates rose to 4.88% but haven't strayed far from all-time lows. The rate was down from 5.44% a year ago and compares with a record low of 4.61% set in March, according to the Mortgage Bankers Association. Home purchasing has been slowly accelerating as affordability improves and government incentives have broadened. Home prices have been cut about -30% on average from their 2006 peaks and starting to rise in many areas.

Potential buyers may show up in bigger numbers in the spring take advantage of a tax credit that the Obama administration extended. An $8,000 credit that was set to end November 30th for first-time buyers was extended, with contract signings now due by April 30th and loan closings by June 30th and a new $6,500 tax credit to lure move-up buyers was added. Isn’t it great how your tax dollars are being spent, it almost makes you want to walk across the street and give your neighbor some extra cash to help him out with his mortgage. Oops, sorry up here in Canada we don’t go for that, you have to have money to buy a house! And people call us a socialist state ha! Wow, that was the first American jab I’ve made in years but I mean really the public needs to stand up and get rid of this administration! The good news is that Obama has now gone from the most favored President ever to the worst and even worse than Carter!!!

Tuesday, December 8, 2009 4:03 p.m est.

Welcome to Christmas trading! It’s surprising that its this early but after great gains for the year you can see why. I kind of understand it because it seems that everything is going faster. For the first time ever we had our house and outdoor decorated before December 1st this year! We normally don’t start to even look at it until the fifteenth! I also noticed that all of the houses around have their lights up and everyone is talking about last minute shopping etc! It’s almost like Christmas is already gone! Anyhow I think this may be why the market has been stuck in its trading range and will likely remain that way till the end of the year. When you look at the volume you see that fund managers have been packing it in before year end, as they don’t seem to want to buy stocks right now at these levels. Analysis of option activity certainly suggests that this is the case. Yesterday the market closed mixed but today selling took hold as Dubai reported some very poor 1st quarter losses. The Dow saw lows of -140.00 points, S&P 500 -14.00 points and the Nasdaq Composite -25.00 points.

At the close the Dow was down by -104.00 points to about 10286.00 S&P 500 -11.00 points to about 1092.00, S&P 100 -5.00 points to about 507.00 and the Nasdaq Composite -17.00 points to 2173.00. Oil continues to fall now approaching that $70 level closing around the $73.00 level.

Technically wise, Friday’s high was only a couple points shy of the 1,121.00 level on the S&P 500, which is a 50% re-tracement of the October 2007 peak and March low. In 2004, the 50% re-tracement area acted as major resistance for months and this may be the case now. Support however isn’t to far down though around the 1075 level. This all tells me that this is going to likely be a very boring week where the market goes nowhere fast!

Friday, December 4, 2009 4:03 p.m est.

It looks like santa claus came early for the market this morning after an unusually better than expected jobs report came out which I’m suspect of. Once again it appears that the market is at an interesting place. On Wednesday it closed mixed after being volatile in both directions and yesterday it made new yearly highs even though early retail sales were pretty poor for upcoming Christmas sales and the fact that the White House came out and said that when the employment report comes out tomorrow there is a strong possibility that the unemployment rate “might tick upward.” The market did sell off at the close but what a strange statement considering they must have had a look at the number. This makes me wonder if there wasn’t some manipulation there. I’m not a conspiracy theorist however so take it for what’s its worth. One reason it may have been so good today though was because so many people have fallen off the board. CNBC did report that as in other recessions, those out of work often look to retrain in new areas. “Many of America's 17-plus million jobless are going back to school to learn new skills and improve their chances of rejoining the workforce when the economy rebounds.” Among the most popular trades include plumbing, and hair styling.

This morning it was reported that the labor market improved a lot in November, with the unemployment rate falling back to 10% and job losses shrinking to the lowest level in nearly two years, down only -11,000, the fewest since December 2007. The report was much better than expected by economists who were looking for -110,000 fewer jobs and a steady 10.2% unemployment rate. September and October were also better revised lower by a total of -159,000. Average hourly earnings rose 1 cent or 0.1%, to $18.74 and are up +2.2% in the past year.

The smaller-than-expected decline in payrolls was accompanied by gains in hours worked, wages and staffing at temporary employment agencies, signs companies may soon begin to hire full-time workers. One thing that may have helped the numbers so much is the number of temporary workers increasing +52,000 in November, the biggest since October 2004 and the fourth straight rise and this may be just for the Christmas season. There are a lot of santa clauses needed you know!! The average work week grew to 33.2 hours, the highest since February, while average weekly earnings rose to $622.17. Factory workers lost -41,000 jobs after decreasing -51,000 in the prior month. Builders lost -27,000 after falling -56,000 last month. Financial firms lost -10,000 for a second month. Service industries, which include banks, insurance companies, restaurants and retailers, added +58,000 workers after adding +2,000 last month. Interestingly, retail fell by -14,500 after a -44,200 drop last month. Of course you also have to thank the government as they added +7,000 jobs after a +46,000 rise in the prior month.

One of the most important numbers which I think is more important is the so called unemployment rate which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking fell to 17.2% percent from 17.5% so it’s still bad out there in my book! The Households number showed employment rose by a seasonally adjusted +227,000 in November and unemployment fell by -325,000 to 15.4 million but about -100,000 people dropped out of the workforce. All of this means that the alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, only fell to 17.2% from 17.5%.

Of course the market popped higher on the news with the Dow seeing highs of +160.00 points, S&P 500 +20.00 points and the Nasdaq Composite +45.00 points which seemed unusual because the dollar was also rallying and at first it looked like finally the trend had changed but when reality finally hit with Fed funds starting to price in higher interest rates in the first quarter the dollar really started to rally and the market fell into the red. Higher rates means a stronger dollar and right now that’s bad as it indicates the free money for the banks may be over soon and this could slow the recovery in the end. The Dow saw lows of -60.00 points, S&P 500 -3.00 points and the Nasdaq Composite -5.00 points. The good news for the S&P 500 is that the 20-day moving average again provided support for the index and that means barring a major break in the market the sideways action will continue. As I have been saying, most money managers have done well this year and by the indications of the volume it appears they are considering taking the rest of the year off. Right now historically we see a strong market but because the supposedly weak September to October was strong it could mean that we see a weaker market now. That certainly seems to be the case as we’ve seen pathetic volume with the market going nowhere fast the last few weeks.

At the close the Dow was up by +22.00 points to about 10388.00 S&P 500 +6.00 points to about 1106.00, S&P 100 +2.00 points to about 514.00 and the Nasdaq Composite +21.00 points to 2194.00. Oil continues to threaten that $75.00 as it closed around there once again after being higher earlier on.

The biggest thing to understand is that even if we do flatten out here on job losses that doesn’t necessarily mean that were in expansion mode once again. For example, high-net-worth individuals showed the biggest decline in economic confidence in November, according to a monthly survey by credit-card issuer Discover Financial Services. Overall, 59% of consumers graded the economy as poor, up from 56% in October, while 55% of upper-income consumers rated the economy as poor. November was the first month since July that a majority of that group rated the economy as poor, and the percentage jumped 8 points from October. "With spending among upper-income consumers as a key indicator in determining the success of a holiday shopping season, this may be a concern to retailers who were hoping this income group could improve their holiday sales from a year ago," Discover said.

Even the Fed this week said that the economy only “improved modestly” in late October and November, with moderate gains in consumer spending, manufacturing and housing offsetting "dismal" conditions in commercial real estate, the Fed said Wednesday in its Beige Book report on the economy. Eight of 12 Fed regions reported the economy had picked up since mid-October, while conditions were little changed or mixed in the four bank regions stretching from Ohio and Pennsylvania to the south. Labor markets remained weak, "with further layoffs, sluggish hiring and high levels of unemployment." Business contacts told the Fed that there was little or no upward pressure on wages or consumer prices.

Besides that the service sectors of the economy contracted in November after two months of expansion, the Institute for Supply Management said. The ISM's non-manufacturing index fell to 48.7% from 50.6% in October and readings under 50% indicate more firms said business was worsening than said it was improving. Economists were expecting the index to rise to 51.5%. Only six of 18 industries were expanding in November, the ISM said. The employment index rose to 41.6% from 41.1% while new orders fell to 55.1% from 55.6%. The production index dropped sharply to 49.6% from 55.2%.

Tuesday, December 1, 2009 4:03 p.m est.

Well after the Dubai fiasco the market has continued higher and why not, there is always someone to bail you out and by the looks of it, until we get to the very last lender of last resort, the market will take it as a positive. We’re also moving into the last month of the year and as I have been mentioning, money managers don’t want to lose all of the strong gains of the year they have made so they’ll likely do anything to keep it up. There is a ton of resistance levels to contend with though as we approach year end with one of the most important being very close to current levels. Looking at the S&P 500 we find that 1,121 is a 50% re-tracement of the entire bear market, and these can serve as trouble. This area is also close to a trend line connecting recent peaks. On the other side of it at least until year-end I don’t think we’ll see much downside either with the 1050 level providing pretty strong support.

Yesterday although higher the market wasn’t up much but today the Dow saw highs of +160.00 points, S&P 500 +17.00 points and the Nasdaq Composite +40.00 points. At the close the Dow was up by +127.00 points to about 10472.00 S&P 500 +13.00 points to about 1109.00, S&P 100 +6.00 points to about 516.00 and the Nasdaq Composite +31.00 points to 2176.00. Oil of course popped back closing around the $78.00 level.

One thing that didn’t help the market was that consumers shopped more for bargains at this past weekend but they spent significantly less than a year ago, according to early data released on Sunday. Consumers said they will have spent nearly -8% less on average, or about $343 per person compared to $372 last year, over the weekend that includes U.S. Thanksgiving Day, Black Friday and runs through Sunday, according to the National Retail Federation. While traffic to stores and retail websites rose to 195 million people from 172 million in 2008, the early data represents a worrisome sign for retailers, who had braced for weak sales and sought ways to protect margins. Data released by Shopper-Trak on Saturday showed that sales rose a minimal +0.5% on Black Friday, which is often the single busiest day of the holiday shopping season.

“Shoppers proved this weekend that they were willing to open their wallets for a bargain,” NRF Chief Executive Tracy Mullin said. Retail chains “know they have their work cut out for them to keep people coming back through Christmas.” The NRF has forecast a -1% decline in holiday sales this year, which would mark an unprecedented drop for two straight years after a global financial crisis erupted in 2008. Retailers had warned investors they would take a conservative view of holiday sales and have cut inventory and reduced expenses to compensate.

Pending home sales contracts on existing homes rose for the ninth straight month in October, up a seasonally adjusted +3.7% in October from September, the National Association of Realtors reported. The index is up +31.8% compared with last October.

The index tracks sales contracts on pre-owned homes and typically, it takes a month or two after the contract is signed for the sale to close. At that point, the sale is booked in the NAR's existing-home sales report. The pending-home sales index has been running ahead of the existing-home sales figures, likely because tight credit conditions and tougher rules on appraisals are killing some deals before they close. Compared with a year ago, existing-home sales are up +23% to a seasonally adjusted annual rate of 6.1 million. The government's first-time home-buyer tax credit could have led to more deals in October as the tax credit has now been extended, but buyers in October thought it would expire on November 30th. Lawrence Yun, the chief economist for the real estate advocacy and lobbying group, said the increase in pending home sales wasn't entirely due to the tax credit. "Based on the demographics of our growing population, existing-home sales should be in the range of 5.5 million to 6.0 million annually," he said.

For 2010, the real estate agents expect sales of existing homes to rise +10.8% to 5.7 million compared with 5.15 million in 2009. New-home sales are projected to rise +42% in 2010 to 561,000 from 394,000 in 2009. Home prices are expected to rise about +4%, according to Yun's forecast.

Manufacturing firms said business improved in November for the fourth straight month, but at a slower pace than in October, the Institute for Supply Management reported. The ISM manufacturing index fell to 53.6% from 55.7% in October. Readings over 50% indicate more firms said they were growing than said they were contracting. In November, 12 of 18 industries were expanding. Economists were looking for the index to pull back to 55% in November. "While the rate of growth slowed when compared to October, the signs are still encouraging for continuing growth as both new orders and production are still at very positive levels, and the prices index fell 10 points, signaling less inflationary pressure on manufacturers' costs," said Norbert Ore, head of the ISM's survey committee. "Overall, the recovery in manufacturing is continuing, but many are still struggling based on their comments." The new orders index rose to 60.3% from 58.5% while the the production index fell to 59.9% from 63.3%. The employment index fell to 50.8% from 53.1% while the inventories index fell to 41.3% from 46.9% showing faster reduction in inventories. The prices-paid index fell to 55% from 65%.

Construction projects were flat in October as a gain in spending on housing was offset by a drop in spending on public works. Outlays in September were revised to a -1.6% drop, the largest since January, from the earlier estimate of a +0.8% gain. Construction spending has not risen since April. Outlays are down -14.4% compared with a year earlier. Economists were expecting a decline of -0.5% in October. Spending on private-sector projects rose +0.3%, while public spending fell -0.4%. One strong note was that spending on private housing projects increased +4.4%, the biggest gain since March 1998 and spending on nonresidential private projects fell -2.5%.

Friday, November 27, 2009 4:03 p.m est.

Well I wasn’t going to say anything today but with the market falling I thought I’d at least send out a note. Yesterday overseas markets were down hard on news that Dubai said that two flagship firms planned to delay repaying billions of dollars in debt which brought back nightmares of defaults happening once again. The two interesting things about this was that this actually came out on Wednesday when the market closed higher! I guess no one took them seriously or something! The other is that gold, a traditional safe haven, has also been sold because the dollar seems to be the safe haven. No matter what this will be a blow to sentiment, serving as a reminder that potential trouble spots remain in the world economy. Government-owned Dubai World is a conglomerate with interests in real estate, ports and the leisure industry. The firm carries around $60 billion in liabilities. Credit agencies Moody's Investors Service and Standard & Poor's downgraded the debt of a range of government-related firms, including DP World, after the restructuring announcement, news reports said. The developments sent the cost of insuring the emirate's sovereign debt against default soaring for a second day. The reason we may be seeing the late reaction in markets is because margin calls might be playing a part here, particularly for Middle Eastern investors.

Although we did see a sell off today, it really wasn’t that bad and its kind of hard to tell how things will really turn out until everyone is back from the holiday on Monday.

The Dow saw quick lows within minutes of the open off -230.00 points, S&P 500 -24.00 points and the Nasdaq Composite -65.00 points but losses were almost cut in half pretty quick. At the early close the Dow was down by -154.00 points to about 10311.00 S&P 500 -19.00 points to about 1091.00, S&P 100 -9.00 points to about 509.00 and the Nasdaq Composite -38.00 points to 2138.00. Oil took a huge hit at one time being down over -$4.00 at one point below the $75.00 level but also turned around to close around the $76.00 level.

Wednesday, November 25, 2009 4:03 p.m est.

Yesterday the market didn’t do much and basically was unchanged at the close and today it was pretty flat considering how low the dollar was and that finally Jobless Claims fell under 500,000. At the open it was a bit lower but eventually the Dow saw highs of +50.00 points, S&P 500 +5.00 points and the Nasdaq Composite +20.00 points. Of course it was on low volume but it was a holiday so for once it had an excuse! By the way this will be my last post until next Tuesday as the market is closed tomorrow and has an early close on Friday.

At the close the Dow was up by +30.00 points to about 10464.00 S&P 500 +5.00 points to about 1110.00, S&P 100 +1.00 points to about 517.00 and the Nasdaq Composite +7.00 points to 2176.00. Oil was getting close to $75 but turned around on inventory data this morning closing just below the $78.00 level.
Did you know that the number of distressed banks rose to the highest level in sixteen years in the third quarter, and the insurance fund used to protect bank depositors swung to a negative balance, according to a report released by the Federal Deposit Insurance Corporation earlier this week. Even home buyers who thought they were getting a bargain are now finding themselves underwater. The News Hub panel discusses a mortgage crisis that has left millions owing more than their homes are worth. The number of troubled banks rose to 552 at the end of September from 416 at the end of June and 305 at the end of March, the FDIC said in its third-quarter report and is the largest number of banks on its "problem list" since the end of 1993. “While bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance.” “Today's report shows that, while bank and thrift earnings have improved, the effects of the recession continue to be reflected in their financial performance,” said FDIC Chairwoman Sheila Bair.

The FDIC's Deposit Insurance Fund, which is used to protect depositors, swung to an -$8.2 billion loss in the third quarter. The FDIC has not yet accessed $500 billion it has available to it from Treasury to fund the insurance. It also is collecting three years of assessments on banks in advance at the end of 2009, which should bring in roughly $45 billion of capital to the fund. The good news though is that banks insured by the FDIC swung to a total quarterly profit of $2.8 billion at the end of September, more than three times the $879 million they earned during the same period last year and significantly better than their combined $4.3 billion net loss in the second quarter of 2009. Unfortunately, more than 26% of all insured institutions reported a net loss in the third quarter, between July and September, compared with 24.6% of all insured banks a year ago. Last quarter 28% of all insured institutions reported a net loss. The amount of problem loans on insured banks balance sheets rose by $34.7 billion, a +10.5% rise in the third quarter, to $366.6 billion. That amount represents 4.94% of all loans on the bank's balance sheet. Between July and September an additional 50 banks failed. On Friday, Commerce Bank of Southwest Florida failed, bringing the total number of failed institutions for the year to 124.

To add to the problem despite the rise in home sales there is still plenty of trouble in the housing market. According to the Wall Street Journal +23% of homeowners "owe more on their mortgages than the properties are worth," a situation that sets up the potential for more trouble ahead and threatens the recovery in housing. Nearly 11 million households are under water, raising the potential for foreclosure which would then once again flood the market with low priced competition to new homes, and likely refuel another round of flipping. According to the Journal, citing a report from First American CoreLogic, a real-estate information company based in Santa Ana, California: "Home prices have fallen so far that 5.3 million households are tied to mortgages that are at least +20% higher than their home's value" while "more than 520,000 of these borrowers have received a notice of default."

The interesting thing about this is that “Mortgage troubles are not limited to the unemployed. About 588,000 borrowers defaulted on mortgages last year even though they could afford to pay, more than double the number in 2007, according to a study by Experian and consulting firm Oliver Wyman.” The reason is likely because of how high debt levels are still. The news that existing home sales had risen by +10% in October contributed to Monday’s rally but there is plenty of evidence that makes the real data make you scratch your head in why did it move up. This is just like the days before the sub-prime crisis as sales and profits for sub-prime mortgage lenders were soaring and everyone was having fun but then reality hit, and boom, it all blew up!

Home prices rose for the fifth straight month and posted the second quarterly increase, but the pace of appreciation in September slowed and was less than expected, according to Standard & Poor's/Case-Shiller indexes. The S&P composite index of home prices in 20 metropolitan areas rose +0.3% in September from August after a +1.2% rise the prior month, below the +0.8% rise forecast. The 20-city index had an annual decline of -9.4%. The national index for the third quarter increased +3.1% from the prior quarter, the same as in the second quarter, resulting in an +8.9% annual drop. That was a significant improvement from the -14.7% annual downturn reported in the prior quarter and -19% slump in the first quarter.

In other news the Conference Board reported modestly higher consumer confidence in November. The New York-based research organization's confidence index came to 49.5%, up from a revised 48.7% for October. “The moderate improvement in the short-term outlook was the result of a decrease in the percent of consumers expecting business and labor market conditions to worsen,” noted Lynn Franco, the Conference Board's director of consumer research. “Income expectations remain very pessimistic and consumers are entering the holiday season in a very frugal mood.” Confidence had been expected to fall to 45.5% as opposed to October’s original reading of 47.7%, according to a survey of economists. The Conference Board commissions a monthly survey based on a representative sample of 5,000 households. The index is compared against a 1985 benchmark of 100.

As consumer spending gained the economy expanded at a +2.8% annualized rate in the third quarter, compared with a fall of -0.7% in the prior quarter. The +2.8% growth rate is below the government's first estimate of +3.5% due to downward revisions in consumer spending and business investment in nonresidential structures, as well as changes to imports and exports. Compared with a year ago, real GDP is down -2.5%. Economists had expected the third-quarter result to be revised to growth of +2.8%.

Today it was reported that Jobless Claims fell -35,000 to 466,000 last week from a revised 501,000 in the prior week. This was the fourth consecutive week of declines in seasonally adjusted claims, and marked a steady march lower from a recent peak of 674,000 in late March. Analysts say claims must fall below 400,000 to signal payrolls growth, which would be a critical indicator of recovery from the worst recession since the 1930’s. Analysts were expecting a more modest fall to 500,000 claims from the previously reported 505,000. The four-week moving average for new claims fell -16,500 to 496,500 in the latest week, the lowest since November last year and the 12th consecutive weekly decline. Continuing claims fell an even greater-than-expected -190,000 to 5.42 million, the lowest level since February. Analysts were expecting 5.59 million.

Durable goods orders dropped -0.6% after rising by an upwardly revised +2% in September. New orders in September were previously reported to have increased +1.4%. Analysts forecast orders rising +0.5%. Durable goods orders are a leading indicator of manufacturing activity, which in turn provides a good measure for overall business health. Meanwhile, consumers got back in the buying mood in October as their incomes grew modestly, an encouraging sign for the budding economic recovery.

Consumer Spending rose a strong +0.7% last month, following a pullback in September when spending plunged by 0.6%. It was the best showing since a big +1.3% jump in August when the government's now-defunct Cash for Clunkers programs enticed people to buy cars.

New home sales rose +6.2% in October on strong results in the South. The rise in new-home sales to a seasonally adjusted annual rate of 430,000 was well above the 390,000 pace expected by economists. Sales rose +23.2% in the South while they fell -20% in the Midwest, and -5.1% in both the Northeast and the West. The pace of new-home sales in September was revised slightly higher to a level of 405,000. New-home sales are up +5.1% compared with a year ago. The supply of homes on the market fell to 239,000 in October, representing a 6.7-month supply but there are still too many. The median sales price in October hit $212,200, compared with $213,200 in the prior year.

Consumer sentiment in November rose to 67.4% from an earlier reading of 66%, said the University of Michigan and Reuters. Economists were expecting a reading of 67%. The November report is a drop from 70.6% in October, marking the survey's second straight monthly drop though.

Monday, November 23, 2009 4:03 p.m est.

The market started the week strongly on the upside as the dollar was selling off likely because of all the negative comments over the weekend from the Fed and President Obama. The Dow saw early highs of +180.00 points, S&P 500 +22.00 points and the Nasdaq Composite +45.00 points. It was on low volume though and from The final hour saw the market come back a bit and the good news is that we saw full profits on all trades this expiration cycle!

At the close the Dow was up by +132.00 points to about 10500.00 S&P 500 +15.00 points to about 1106.00, S&P 100 +7.00 points to about 516.00 and the Nasdaq Composite +30.00 points to 2176.00. Oil was up strongly early on over +$2 but by midday was in negative territory once again. At the close it was up just below the $78.00 level.

Volatility is becoming the watch word as last weeks selling was made up in the first hour of trading. The market remains overbought in the short term though and even though this week is likely to be up it likely won’t be much in the end. Economic data could be a factor as tomorrow we get the preliminary third-quarter gross domestic product (GDP), September's S&P/Case-Shiller Home Price Index, Consumer Confidence index, and the Federal Housing Finance Agency's (FHFA) September home price index The market is closed for the Thanksgiving holiday on Thursday and will close early on Friday.

Existing home sales increased +10.1% to a seasonally adjusted annual rate of 6.10 million, the National Association of Realtors estimated. The increase to a 6.10 million pace was larger than the forecasts of economists, which looked for a smaller gain to a 5.74 million annual rate from a revised 5.57 million in September. "Many buyers have been rushing to beat the deadline for the first-time buyer tax credit that was scheduled to expire at the end of this month," NAR economist Lawrence Yun said. "With such a sale spike, a measurable decline should be anticipated in December and early next year before another surge in spring and early summer." The median sale price for all housing types was $173,100 last month, down -7.1% from October 2008, according to the report. By comparison, the median sales price for September fell to $174,900, down -8.5% from the same period last year. Existing condominium and co-op sales also increased, up +13.2% to a seasonally adjusted annual rate of of 770,0000 units in October from September's pace of 680,000.

The National Association for Business Economics released its annual survey of business economists finding that "The Great Recession is over." According to the survey, the vast majority of business economists believe that the recession has ended but that they believe the economic recovery is likely to be more moderate than past recoveries experienced following steep declines. Large increases in federal debt and high unemployment, which is expected to remain very high through 2010, are key areas of concern, according to the survey. "The good news is that this deep and long recession appears to be over, and with improving credit markets, the economy can return to solid growth next year without worry about rising inflation," according to the report. Oh, oh, I always get nervous when you read things like the recession is over when many people are still feeling the pain so it could be interesting in the end. I think this is going to be a telling Christmas sales period.

Friday, November 20, 2009 4:03 p.m est.

It looks like expiration was done earlier in the week as it was very quiet today. The market was down once again though after bouncing back a bit yesterday at the close. The Dow was off -65.00 points, S&P 500 -9.00 points and the Nasdaq Composite -25.00 points as the dollar was stronger once again. The final hour saw the market come back a bit and the good news is that we saw full profits on all trades this expiration cycle!

At the close the Dow was down by -14.00 points to about 10318.00 S&P 500 -4.00 points to about 1091.00, S&P 100 -2.00 points to about 509.00 and the Nasdaq Composite -12.00 points to 2146.00. Oil was down again closing just below the $77.00 level.

Thursday, November 19, 2009 2:40 p.m est.

Yesterday the market continued its sideways action on falling volume and at the close was little changed. Today economic data pulled the market lower and as it came out worse and worse it sold off more and more. Interestingly although the dollar was stronger it wasn’t by that much but declines were pretty strong which tells me that today was more expiration related. The Dow was off -170.00 points, S&P 500 -22.00 points and the Nasdaq Composite -55.00 points. It has bounced off that level since then and going into the final hour is looking to round the wagons a bit more.

The housing market appears to be taking a turn for the worse once again as data out yesterday and today reveal that people are pulling in their purse strings once again. Because of this Fannie Mae and Freddie Mac continue to sink. According to The Wall Street Journal: "The firms, which together have taken more than $110 billion in capital infusions from the Treasury, stepped up their lending for apartment buildings as the commercial real-estate market peaked, and they are now facing rapidly rising loan losses. Fannie faces the biggest problems with its delinquency rate, or loans that were 60 days or more past due, stood at 0.62% at the end of September, up from 0.16% a year ago. This is terrible and one troubling sign was that one-quarter of the $180 billion of apartment-building loans on Fannie’s books were originated near the top of the market in 2007 and those loans account for nearly half of all its commercial-loan delinquencies." The bottom line seems to be that more taxpayer money will be needed to support the two companies. The alternative is to let the whole thing implode, a move which could lead to an implosion of the financial markets and another leg down in the recession. The way its looking that may just be the result, 2010 will be an interesting year!
New construction of houses fell sharply in October to the lowest level in six months as they fell -10.6% in October to a seasonally adjusted 529,000 annualized units weaker than the 590,000 pace expected by economists and is the lowest level since April. Starts of new single-family homes fell by -6.8% to 476,000 in October, while starts of large apartment units fell -34.6% to 53,000. Building permits, a leading indicator of housing construction, fell -4% to a seasonally adjusted annual rate of 552,000 and is the lowest level of permits since May.

Besides that if this doesn’t make you think that housing is turning again take a look at today’s mortgage applications as they fell once again last week for the sixth straight time! This is a 12-year low even as interest rates on 30-year loans fell to their lowest level in six months. This trend does not bode well for the housing market, which has been showing signs of stabilization after a three-year slump. The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, decreased -2.5% to 611.7.

The number of loans 90 days or more past due or in foreclosure is about 4 million,. That compares with 3.9 million new and previously occupied homes now for sale. There is likely overlap between the numbers. The delinquency rate for mortgage loans on one- to four-unit residential properties rose to a seasonally adjusted 9.64% of all loans outstanding at the end of the third quarter, up from 9.24% in the second quarter and 6.99% a year ago, according to the MBA's quarterly delinquency survey. That is the highest level of delinquencies since the survey began in 1972. Also breaking a record was the percentage of loans in the foreclosure process: The percentage of loans in the foreclosure process at the end of the third quarter was 4.47%, up from 4.3% in the second quarter and 2.97% a year ago. Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures. Also continuing to deteriorate is the performance of prime adjustable-rate mortgages, including pay-option ARMs, he said. Meanwhile, foreclosures on subprime fixed-rate and subprime adjustable rate loans actually decreased. Four states continue to drive the national foreclosure rate up: Florida, California, Arizona and Nevada had 43% of all foreclosures started in the third quarter, down just slightly from 44% the previous quarter, according to the report.

The Obama administration recently extended an $8,000 first-time buyer credit that had been due to expire at the end of this month, added a $6,500 credit for home owners buying a new residence, and increased income limits. Eligible borrowers must sign contracts by April 30th and close loans by June 30th. Fixed 15-year mortgage rates averaged 4.32%, down from 4.33% the previous week. Rates on one-year ARMs decreased to 6.82% from 6.85%.

Yesterday it was reported that Consumer prices rose a seasonally adjusted +0.3% in October as energy prices increased for the fifh time in six months to offset another rare decline in rents. The consumer price index has fallen -0.2% in the past year while the core CPI which excludes food and energy prices because its not important to eat or drive, rose +0.2%, led by higher prices for cars and trucks, due in part to the unwinding of the government’s cash-for-clunkers deal. New car prices rose +1.6%, the most in 28 years while used car prices increased +3.4%, the most in 29 years. The core CPI is up +1.7% in the past year. The CPI and the core CPI were each a tenth of a percentage point higher than forecast by economists. This indicates that although there is little inflationary pressure in the economy it is still growing and this isn’t good as the massive fiscal and monetary stimulus being pumped into the economy threatens to really unleash inflation. The government will have to be quick to remove the stimulus at the right time.

Today it was also reported that Jobless Claims were flat at 505,000 last week. Economists expected them to drop to 500,000. The four-week average dropped -6,500 to 514,000. Continuing claims dropped -39,000 to 5.61 million.

The index of Leading Economic Indicators rose for the seventh consecutive month in October, showing that a recovery is "unfolding" in the economy, the private Conference Board said. The leading indicators rose +0.3% in October after a +1% gain in September, the private research group said. Six of the 10 indicators were positive. Economists expected the leading index to rise +0.4%. The index is up at a 10.2% annual pace in the last six months. The index of coincident indicators was unchanged after a -0.1% decline in September. The coincident index has been essentially flat since June.

Manufacturing activity expanded for the fourth consecutive month in the Philadelphia region in November, the Fed’s Bank of Philadelphia reported. The Philly Fed index improved to a seasonally adjusted 16.7% from 11.5% and is the highest reading since June 2007. During the depths of the recession, the Philly Fed index fell to as low as negative -41.3%. Economists expected the index to rise to 14%. Any reading over zero indicates more companies reported improving conditions compared with last month than reported things were getting worse. In November, 28.5% of firms said business improved, while 11.8% said business got worse. The new orders index improved to 14.8%, also the highest since June 2007 while the shipments index rose to 15.7%, the highest since July 2007. The employment index increased to negative -0.5%, showing continued, but smaller job losses. The six-month expectations index fell to 36.8% from 39.8%.

Tuesday, November 17, 2009 4:03 p.m est

Yesterday I was thinking about writing about the market but the rally was so boring due to the lack of volume I figured I may as well wait. The last two weeks have seen the market move to new highs on no economic data but this week has lots so it could be market moving. Yesterday’s data wasn’t good news so the market concentrated on the lower dollar instead. The new mantra is, low dollar market up, poor economic data, look at the dollar, good economic data, market up ignore higher dollar! At the moment it doesn’t seem to matter as the market continues to fight for more upside. The two things that are happening though is that volume continues to fall as it’s forming a rolling top and most importantly, Smart Money continues to dump stocks and that never ends well.

Anyhow, yesterday at its highs the Dow was up +170.00 points, S&P 500 +21.00 points and the Nasdaq Composite +45.00 points. From there it floated around as the dollar moved back and forth but after Meredith Whitney came out and said that financial stocks are overvalued and the market overall is in the worst shape she has seen in a year, gains were almost cut in half. Today, economic data and earnings weren’t that great so it fell back with the Dow off -45.00 points, S&P 500 -7.00 points and the Nasdaq Composite -15.00 points, oh and I forgot to mention the dollar was up! Even though the dollar remained strong by midday the market turned around once again with the Dow up +35.00 points, S&P 500 +2.00 points and the Nasdaq Composite +7.00 points.

At the close the Dow was up by +30.00 points to about 10437.00 S&P 500 +1.00 points to about 1110.00, S&P 100 +1.00 points to about 516.00 and the Nasdaq Composite +6.00 points to 2204.00. Oil closed up around the $79.00 level.

According to The Wall Street Journal: "A record number of companies beat earnings expectations in the third quarter, but a big portion of their profits came from cost-cutting, disappointing investors who were hoping for boosts in revenue." In fact, the proof is that productivity was a record high last month, surging to an over +9% improvement, as more people are doing double and even triple duty in order to keep their jobs. Sales mean revenues and when there are no sales, as when the parking lot of a popular hotel in a small town is 3/4 empty, revenues also fall. In fact, of the 32% of S & P 500 companies that actually beat revenues expectations, these surprises "were heavily concentrated among health-care and technology companies, and more broadly among "intermediary" companies that make products, such as semiconductors, rather than companies that sell finished goods or services to consumers."

Yesterday it was amazing that the market was even up after it was reported that the economy still faces considerable challenges, but the most likely outcome is moderate economic growth with subdued inflation, Fed Chairman Ben Bernanke said; “I expect moderate economic growth to continue next year," in remarks to the Economic Club of New York. "Final demand shows signs of strengthening, supported by the broad improvement in financial conditions." However, "significant economic challenges remain," he said. "The flow of credit remains constrained, economic activity weak, and unemployment much too high. Future setbacks are possible." Unfortunately, economic growth probably won't be strong enough to significantly reduce the unemployment rate. Basically he made it sound like next year is going to be very slow which isn’t good news!

Retail sales increased a seasonally adjusted +1.4% in October, led by a rebound in auto sales. Excluding the +7.4% increase in auto sales, retail sales rose +0.2% in October. Sales excluding autos have risen three months in a row and in five of the past six months. Auto sales had fallen -14.3% in September after the expiration of the government's cash-for-clunkers program. The rise in auto sales in October indicates that the cash-for-clunkers subsidy didn't capture all of the pent-up demand for cars for this year. Economists are predicting that consumer spending will add to growth again in the fourth quarter, despite significant obstacles, such as the weak job market and the desire by consumers to save more and borrow less. Compared with last October, retail sales were down -1.7% to $347.5 billion, while sales excluding autos were down -2.6% to 288.5 billion. This looks like there could be another lowering of gross domestic product when third quarter numbers are revised next week. Ahead of the retail sales report, economists were looking for GDP to be revised down to about +3.2% from +3.5% originally.

After hitting a five year high in the previous month, manufacturing activity in the New York expanded at a slower pace in November, the New York Fed said. The bank's Empire State Manufacturing index fell to 23.5% in November from 34.6% in October. The indexes for new orders and shipments posted similar declines. The employment index also fell and remained barely positive. The 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 October national factory survey due out in two weeks may show. In October, the ISM manufacturing index advanced to 55.7%, the highest reading since April 2006.

Businesses reduced their inventories for the 13th consecutive month in September, but business sales also declined, stalling the progress companies had made toward normalizing their stockpiles. Inventories fell -0.4% in September, while sales fell -0.3%. The inventory-sales ratio for all businesses remained at 1.32 in September. The stalling out in inventory reduction was confined to the auto retail sector, which rebuilt inventories by the government's cash-for-clunkers program. Manufacturing companies and wholesalers continued to slash inventories amid higher sales. Retailers excluding auto dealers also cut inventories while sales climbed.

Today it was reported that Producer Prices rose a seasonally adjusted +0.3% on higher food and energy costs. Excluding volatile food and energy goods, the core producer price index fell -0.6%, the biggest decline in three years. Falling prices for light trucks and cars led the way lower. The producer price index has fallen -1.9% in the past year, while the core PPI has risen +0.7%. Inflation at the wholesale level was lower than forecast by economists who looked for a +0.5% increase in the headline PPI and a +0.1% gain in the core. The PPI report showed little inflationary pressures outside of commodities. The pace at which people fell behind on their mortgages slowed during the summer for the third consecutive quarter, but the overall delinquency rate hit another record. For the three months ended September 30th, 6.25% of mortgage loans were 60 or more days past due, according to credit reporting agency TransUnion. That's up +58% from 3.96% a year ago. Being two months behind is considered a first step toward foreclosure, because it's so hard to catch up with payments at that point. The rate was up +7.6% from the second quarter. That's a much smaller jump than the +11.3% rise in the second quarter from the first, and the +14% leap seen in the quarter before that.
While the slowing growth rate is a positive sign, the increase shows there's still a lot of mortgages in trouble out there. Two things must get better before mortgage delinquency rates start reversing themselves, home values and unemployment. In Nevada, the rate reached 14.5%, up from 7.7% a year ago. Florida, the rate was 13.3% up from 7.8% last year. In Arizona, the rate hit 10.4%, up from 5.5% in 2008. In California, the rate jumped to 10.2%, from 5.8% last year. The average mortgage debt per borrower nationwide edged up to $193,121 in the third quarter, from $192,287 last year.

The output of the nation's factories, mines and utilities rose +0.1% in October, the Fed said. The gain was due almost entirely to a big jump in utility output. Every other sector except material production was flat or down. The October increase was less than expected by economists. Analysts had been expecting a +0.4% gain. Capacity utilization, a gauge of slack in the economy rose to 70.7% in October from 70.5% in September.

Tuesday, November 10, 2009 4:03 p.m est.

This week has little out for economic data and with Remembrance day tomorrow and the fact that my entire family has now been hit with the swine flu this may be my last posting till Friday. I can never understand why the bond market gets closed tomorrow but stocks aren’t! The Almighty dollar must flow I suppose! Anyhow I just want to put out my gratitude to all of those that are protecting our rights and freedoms so we can sit back and belly ache about how long its taking to get our starbucks coffee because I know in other parts of the world people are starving to death or aren’t even allowed to go to school!

The market pulled back first thing this morning but die hard buyers came in to take it up to new weekly highs and yearly highs for the Dow with it up +40.00 points, S&P 500 +4.00 points and the Nasdaq Composite +10.00 points. It didn’t hold though and the market fell back with the Dow seeing lows of -60.00 points, S&P 500 -6.00 points and the Nasdaq Composite -15.00 points. In the end though as the dollar pulled back once again to that nice round number of 75.00 it came back once again.

At the close the Dow was up by +20.00 points to about 100247.00 S&P 500 -.10 points to about 1093.00, S&P 100 +.50 points to about 507.00 and the Nasdaq Composite -3.00 points to 2151.00. Once again oil was all over the place today being down almost -$2.00 at one point today. It closed down around -$.50 remaining around the $79.00 level.

Monday, November 9, 2009 4:03 p.m est.

The market was up all day once again as there was no news out except that another 5 banks went under over the weekend. That seems to becoming a trend yet so far we have only seen about 140 banks go under this year. In comparison, the late 90’s banking fiasco saw well over 300 go under. The Dow saw highs of +210.00 points, S&P 500 +24.00 points and the Nasdaq Composite +45.00 points on the lowest volume of the year it seemed. Full on bull you know.... Actually I noticed over the weekend that Smart Money is dumping now which is always a sign that the end may be near.

At the close the Dow was up by +205.00 points to about 100227.00 S&P 500 +24.00 points to about 1093.00, S&P 100 +11.00 points to about 507.00 and the Nasdaq Composite +42.00 points to 2154.00 on less than 1 billion shares traded today, yep that’s sure bullish! Oil was up buy lost a lot of its earlier gain up around the +$2.00 it lost on Friday closing near the $80.00 level.

Speaking of banks it was reported last week that Fannie Mae asked for another $15 billion in aid after posting a $19.8 billion third quarter loss which means the taxpayer bill from the housing market bust will keep rising. The government-controlled company continued to see a dramatic surge of borrowers fall behind as the unemployment rate climbs. At the end of last month, about 4.7% of Fannie Mae's borrowers had missed at least three payments and that’s nearly triple last year's level.

Seized by federal regulators 14 months ago, the problems at Fannie Mae and sibling company Freddie Mac have proven far worse than most experts had foreseen. Fannie Mae's request will bring the total for rescuing both companies to about $111 billion. The government has promised up to $400 billion in assistance. They also said that: "We do not expect to operate profitably in the foreseeable future." They do play a vital role in the mortgage market by purchasing loans from banks and selling them to investors.

Together, Fannie and Freddie own or guarantee almost 31 million home loans worth about $5.5 trillion which is about half of all mortgages! The two companies lowered their standards for borrowers during the real estate boom and are reeling from the consequences, thank you Barney Frank! High-risk loans, now defaulting at a record pace, have come back to haunt the companies. Worse still, the recession is causing formerly reliable homeowners with good credit to default.

Friday, November 6, 2009 4:03 p.m est.

10.2% Wow was President right or what! He said that employment was going to get worse and he was right, maybe even he doesn’t think his programs are working! Anyhow the jobs report came in worse than expected so the market sold off at the open with the Dow seeing lows of -75.00 points, S&P 500 -8.00 points and the Nasdaq Composite -20.00 points. Of course the market decided that it was more important to look at the revisions of less losses in the past two months so it rallied with the Dow seeing highs of +40.00 points, S&P 500 +5.00 points and the Nasdaq Composite +15.00 points. After that it became mixed though until the public credit report came out at 2:15 est. which was actually good news as consumer credit fell at a -7.2% annual rate in September, the eighth consecutive decline, the Fed said! Now that’s good news but it didn’t seem to do much.

At the close the Dow was up by +17.00 points to about 10023.00 S&P 500 +3.00 points to about 1069.00, S&P 100 +1.50 points to about 496.00 and the Nasdaq Composite +7.00 points to 2112.00 on less than 1 billion shares traded today, yep that’s sure bullish! Once again oil took a big hit as it responded to the employment picture off over -$2.00 to around the $77.50 level.

Today’s report should have killed the market but because the Fed has stated that they will keep rates low for an extended amount of time it seems that this report confirmed their statement, the dollar started to fall and remained weak so of course the market held it together. This is really looking more and more like we could be tracing the exact pattern of the start of the 1982 long term bull market. The last time we saw the unemployment rate this high was in 1983 but the S&P 500 had rallied 72% going into 1983, hmmmm at the current high the S&P has seen +65%. After the market hit that +72% mark though it moved sideways to down for a year! With the markets lackluster response to this terrible jobs report I still believe that were going to see this sideways action at least until the end of the year but because of seasonality we could possibly see slightly higher prices by year end.

Now we know why President Obama for the fourth time this year is signing a bill to extend Jobless benefits to now being extended to 99 weeks in some States! At the worst of the 70’s recession they were only extended 65 weeks! This is just not good as it’s starting to sound more like welfare! The unemployment rate climbed to 10.2% in October, topping the 10% mark for the first time in 26-years or since April 1983. Employment dropped by -190,000, bringing the total number of jobs lost in the recession to 7.3 million. This was the 22nd straight decline in payrolls with large losses seen in manufacturing, construction and retail. Health care and temporary-help agencies added jobs but that’s likely Christmas and Swine flu reasons.

The report was worse than expected as economists were forecasting a rise in the unemployment rate to 10%, with only -150,000 lost payroll jobs. Unemployment rose by +558,000 to 15.7 million. Of those, 5.6 million had been out of work longer than six months, representing a record 35.6% of the unemployed. An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to +17.5%, the highest on record dating to 1995. In its survey of 400,000 business establishments, the government found that private-sector employment fell by -190,000 to 130.8 million in October. Government employment was unchanged.

Total hours worked in the economy fell -0.2% but the average workweek was steady at a record-low 33 hours. Average hourly earnings rose +5 cents or +0.3%, to $18.72. Average hourly earnings are up +2.4% in the past year. Of course the market ignored all of that and instead looked at the revisions from August and September being lowered by losses of -91,000, yeah!!

Employment in the goods-producing sector fell by -129,000, including -62,000 in construction and -61,000 in manufacturing. The average workweek in manufacturing rose to 40 hours from 39.9, the highest in 11 months. Service-producing jobs fell by -61,000, including -40,000 in retail. The only major sectors adding jobs were health care and education up +45,000 and professional and business services up +18,000. Temp-help agencies - a key leading indicator - added +34,000 jobs, the first significant increase since the recession began 22 months ago which is good news but they are temporary! Of 271 industries, 33.8% were hiring in October, down from 37.5% in September.

Thursday, November 5, 2009 4:03 p.m est.

The market almost lost all of its gains yesterday in the end as traders just didn’t seem to like what the Fed had to say in the end or as I have been saying were in a sideways mode here. Today the market ramped up again after Cisco had decent earnings but it was on even weaker volume with the Dow seeing highs of +215.00 points, S&P 500 +20.00 points and the Nasdaq Composite +50.00 points.

At the close the Dow was up by +205.00 points to about 10006.00 S&P 500 +20.00 points to about 1066.00, S&P 100 +9.00 points to about 495.00 and the Nasdaq Composite +50.00 points to 2105.00. Interestingly, oil was down all day closing around the $80.00 level.

Jobless claims fell by -20,000 to a seasonally adjusted 512,000 last week, the lowest since January. Initial jobless claims have been above 500,000 for 51 straight weeks now. To see real job growth we need to see claims under 400,000. Economists expected initial claims to fall to about 520,000. Continuing claims fell by -68,000 to a seasonally adjusted 5.75 million, the lowest since March but once again the question is, did they find jobs or did they just fall off the board.

Companies increased their output in the third quarter as they slashed working hours, driving productivity up at a +9.5% annual rate in the quarter. Unit labor costs, a key measure of inflation dropped at a -5.2% annual rate in the quarter. Productivity is output divided by hours worked. Output rose +4% annualized, while hours worked plunged -5%. Real hourly compensation increased at a +0.2% annual rate. With productivity high and real compensation low, companies captured the lion's share of the benefits of higher productivity in the form of profits. Inflationary pressures remained very low. The huge increase in productivity explains why the economy could grow at a 3.5% annual rate in the third quarter even as jobs were being lost at a rapid pace but some economists believe companies have squeezed just about all the extra work they can out of their remaining workforce and that more hours of work will have to be put in if output is to increase much more.

Wednesday, November 4, 2009 2:35 p.m est.

The market was up today as employment wasn’t as bad as expected and thats the only reason you need to rally nowadays. The Dow saw highs of +150.00 points, S&P 500 +16.00 points and the Nasdaq Composite +25.00 points. It pulled back from there as the Fed’s announcement on their decision about interest rates was to be released at 2:15 est. It wasn’t too much though as everyone expected them to say the exact same things they have been saying for the past year. After it was released the market fumbled around and currently are pulling back more, cutting earlier highs in half.

The Fed made only small changes to the policy statement, holding policy steady and repeating it expects to hold interest rates low for an extended period. As expected, the Fed kept its target for its federal funds rate set at a range of zero to 0.25%. The Fed repeated that it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed said it would purchase less debt from federal housing agencies and said it would buy $175 billion of agency debt, down from prior plans to purchase $200 billion.

Here is the exact statement; http://www.marketwatch.com/story/text-of-fomc-statement-2009-11-04

The employment situation doesn’t look like its getting better but heh, according to the market its okay to lose less jobs now! Private-sector companies cut -203,000 jobs in October, according to the ADP employment report. It was the fewest jobs lost since July 2008 mind you but negative is negative in my view! In September, a revised -227,000 jobs were lost compared with the -254,000 originally reported. Goods-producing jobs fell by -117,000, including -65,000 in manufacturing and -51,000 in construction while services-producing jobs fell by -86,000, not a good sign for the upcoming Christmas retail period!

Planned job reductions at major corporations also declined for the third month in a row in October, falling to the lowest level since March 2008, according to a monthly tally compiled by outplacement firm Challenger Gray & Christmas. Planned layoffs fell to -55,679 last month, down -16% compared with September and down -51% compared with October 2008. "The pace of downsizing has slowed steadily throughout the year after reaching a seven-year peak of 241,749 in January," said John Challenger, CEO of the company. So far in 2009, a total of -1.19 million layoffs have been announced, up +36% from the same period in 2008. In October, the sector cutting the most jobs was automotive with -13,420, bringing the yearly total for the auto industry to 164,440, the most of any industry. The government and nonprofit sector has announced -160,434 layoffs this year. The Challenger survey counts only a small fraction of the jobs lost each month. For example, in August, the most recent month for which data are available, 2.3 million workers were let go, according to the Bureau of Labor Statistics.
The report comes two days before the actual employment report comes out on the October situation. Economists are looking for them to fall by -150,000, the fewest since July 2008, and for the unemployment rate to rise to 9.9%, the highest in 26 years!

Business conditions improved in October across a narrower group of companies in the non-manufacturing sectors, according to the Institute for Supply Management index. The ISM non-manufacturing index fell to 50.6% from 50.9% in September. Readings above 50% indicate expansion. More companies said business is improving than said it's worsening. This is the second straight month above 50% after 11 months of contraction. Economists were expecting the ISM non-manufacturing index to rise to 51.5%. The new orders index rose to 55.6% from 54.2% while the production index rose to 55.2% from 55.1%. The employment index fell to 41.1% from 44.3% which is bad news.

Tuesday, November 3, 2009 4:03 p.m est.

Yesterday the market proved that it is now in a conciliatory mood because even with great economic news it still sold off and why do you ask, the dollar once again! The market started the day higher but when some economic data came out thirty minutes into trading that was above expectations it took off with the Dow up +150.00 points, S&P 500 +16.00 points and the Nasdaq Composite +20.00 points. The Dow saw lows of -290.00 points, S&P 500 -33.00 points and the Nasdaq Composite -60.00 points but by the close it was higher. Today it was down again though first thing in the morning with the Dow seeing lows of -85.00 points, S&P 500 -8.00 points and the Nasdaq Composite -25.00 points but once again came back with the market mixed and remained that way right into the close.
At the close the Dow was down by -18.00 points to about 9712.00 S&P 500 +3.00 points to about 1045.00, S&P 100 -.25 points to about 485.00 and the Nasdaq Composite +8.00 points to 2057.00. Oil closed up about +$1.00 closing around the $79.00 level.

Yesterday Pending Home sales of existing homes rose a seasonally adjusted +6.1% in September, the eighth consecutive increase, the National Association of Realtors reported. They are up +19.8% compared with September 2008 and is the highest since December 2006. It seemed that buyers were rushing to beat the expiration of the$8,000 federal tax credit for first-time buyers. Sales must be finalized by Nov. 30th to qualify for the credit, although the Congress may extend or expand the tax break through April. It takes about one to two months after a sales contract is signed to close the sale. The pending home sales index tracks contract signings. If and when the sale is closed, it's reported in the NAR's existing home sales indicator. The real estate group has complained that many pending sales are delayed or never closed because of new rules that require an independent appraisal of the home’s value. Existing home sales have risen in five of the past months on a seasonally adjusted basis and up +9.2% compared with September 2008. Sales rose in three of four regions: +10.2% in the West, +8.1% in the Midwest, and +4.9% in the South and fell -2% in the Northeast.

Conditions for the nation's manufacturers in October improved strongly, the Institute for Supply Management reported. The ISM index jumped to 55.7% in October from 52.6% in September, well above forecasts. The forecast of estimates was for the index to rise to 53%. Readings above 50 indicate expansion. Below the headline, the report, the key employment index improved to 53.1% in October from 46.2% in the prior month.

Today it was reported that Orders for manufactured goods increased a seasonally adjusted +0.9% in September on gains in machinery, autos, defense goods and chemicals. Factory orders have risen in five of the past six months, but are down -13.9% in the first nine months of 2009 compared with the same period a year ago. September’s +0.9% gain was stronger than the +0.6% increase expected by economists. Orders for durable goods increased an upwardly revised +1.4% in September, compared with the +1% gain estimated last week. Orders and shipments for nondurable goods increased +0.6% while inventories fell -1%, the 13th consecutive decline.

Friday, October 30, 2009 4:03 p.m est.

Well I think its finally over, that is the straight up move we have seen since March. I was almost believing that with the move yesterday making up all of Tuesday’s decline that we are on our way back up. Rationality has finally taken hold as the key today was that everyone is now realizing that things aren’t so rosy and sunglasses have come off! The market started the day lower on the fact that consumers just don’t seem to be cooperating with that go out and buy buy buy thing and because of this overall sentiment is remaining low! The Dow saw lows of -290.00 points, S&P 500 -33.00 points and the Nasdaq Composite -60.00 points.
At the close the Dow was down by -250.00 points to about 9712.00 S&P 500 -30.00 points to about 1036.00, S&P 100 -14.00 points to about 482.00 and the Nasdaq Composite -52.00 points to 2045.00. Of course the dollar rallied on of this news and so oil was crushed lower about -$3.00 closing around the $77.00 level.
Consumer spending fell sharply in September after the government's cash-for-clunkers program ended, down by -0.6% real (inflation-adjusted) after a +1% gain in August. Real disposable incomes fell a seasonally adjusted -0.1%, the fourth decline in a row. In current-dollar terms (not inflation-adjusted), spending fell -0.5%. Personal incomes were flat. Economists expected nominal spending to fall -0.4% and incomes to fall -0.1%. With spending falling faster than incomes, the personal savings rate rose to +3.3% of disposable income from +2.8% in August, yea!!

There was also bad news in the employment cost index, a broad measure of wage and benefit costs in private industry, rose at the smallest annual rate on record in the third quarter unfortunately. On a year-on-year basis, the employment cost index rose +1.5%, the smallest gain since the government began tracking the information in 1982. Wages increased +1.5% over the prior year and benefits costs rose +1.6%, both record lows. In the three months ended September, employment costs increased +0.4%, the same rate as in the prior quarter. The increase in the employment cost index in the third quarter was in line with expectations of economists. It is just above the record low +0.3% gain set in the first quarter. Benefit costs rose +0.4% in the third quarter, while wages and salaries rose +0.4%.

There was some good news as manufacturing activity improved alot in the Chicago region in October. The Chicago purchasing managers index rose to 54.2% from 46.1% in September, according to a survey of corporate purchasing managers. Readings over 50% indicate overall business expansion. Both new orders and production moved sharply higher in October. The Chicago PMI is considered a leading indicator to the national Institute for Supply Management manufacturers' survey for October to be released on Monday. The median forecast for the October ISM manufacturing composite is for an increase to 52.8% from a September reading of 52.6%. The one problem with the report is that employment was little changed!

Consumer sentiment improved in late October, according to the Reuters/University of Michigan index. The consumer sentiment index jumped to 70.6% in late October from 69.4% earlier in the month but was still lower than the 73.5% level set in September though. The increase was slightly above expectations of economists had expected sentiment to rise to 70.5%.

Thursday, October 29, 2009 4:03 p.m est.

The market was up all day on a stronger GDP report that revealed that the government really knows how to spend money! Highs were hit in the final hour on lower and lower volume each hour with the Dow seeing highs of +210.00 points, S&P 500 +25.00 points and the Nasdaq Composite +45.00 points. One of the main reasons for the move though was because the dollar sold off strongly because of the GDP report. I remember when the dollar would rally on strong economic reports which is another indication about how its really all all about psychology.

At the close the Dow was up by +200.00 points to about 9961.00 S&P 500 +23.00 points to about 1066.00, S&P 100 +10.00 points to about 496.00 and the Nasdaq Composite +38.00 points to 2098.00. Oil of course tracked the dollar to a tee once again closing higher by over +$2.00 closing around the $80.00 level.
Today it was reported that the economy expanded at a +3.5% annual pace in the third quarter, as massive government stimulus brought the economy out of the longest and deepest recession since the 1930’s, at least for now. Wow I guess that means that everything is all clear now heh, people should return to their spend thrift ways, living off of credit once again, etc, etc etc! Well, I think not as I have mentioned many times that I was worried when we started to lower interest rates over a year ago that we were turning into Japan and when we actually hit 0% lending, it seemed like a sure thing. With the way the dollar is trading now it sure seems like it. The American market is now the carry trade because believe or not, Japan has higher rates now! Todays report was great news but when the Nikkei peaked out in December of 1989 at 37,000 and then bottomed at 7604 in 2004, outside of 1998 their GDP was positive and sometimes well into the +3% range. Good news yes but are we going back to 2007 with the economy and skyrocketing house prices, I don’t think so.

The important thing to note is that this is really all about psychology. It just so happens that we have close ties to the Japanese with many friends so it’s interesting to talk to them about how they feel about things over there. They used to spend spend spend but ever since their real estate and stock market crashed they are always more negative than positive and never wanting to go crazy with their spending, always saying the same thing, jobs are hard to get and cash is tight. The interesting thing is that as their kids have grown and have had no problem getting jobs, they still talk the same! That is what a once in a century crash will do to you! Remember your grand parents, do you ever see them spend more than what they had, never! Why, I believe its because of what happened back in the 29 crash, everyone knew that things could change on a dime so they figured that they better have some savings for a rainy day just in case it happens again! Of course it never did but one thing to note is that savings in North America have skyrocketed this past year! It will be very interesting to see how retail sales are this Christmas!

The Japanese are more technologically advanced and they do have their cool toys though. I wanted to mention that because you hear some analysts saying that things must be fine because the Apple stores are still full! It’s true though, if you ever want to get the latest camera you’d be smart to buy one in Japan as they are about a year ahead of us and sometimes a decade. I saw the first Panasonic LCD tv there in 1994 and for 13 inches it would have cost $10,000 to buy! I remember telling myself that I’ll wait 4 years and buy a 40 inch for $4000. I was off about 6 years but I got mine even cheaper and bigger than that so.....
The important thing is how will this all affect the market, I think that it will remain mostly flat however as I do believe that it will have more and more support now as our large companies such as GE, Catepillar and Coke for example are now all over the world and that will help their earnings. If we do see another global slowdown that could change but it did take the Japanese market a looooong time to hit its lows! This is a new flat world, and we have billions of people around the world that are gradually becoming consumers for the first time. This is what John Templeton meant in November 1989 when he said “The Fall of the Berlin Wall is the third most important event in the history of the Civilized World.”

GDP saw the first increase in real gross domestic product in a year and it was the strongest growth in two years. The +3.5% increase matched estimates of economists. In the past year, the economy has contracted -2.3%, -0.7% annualized in the second quarter and -6.4% in the first quarter. Growth was broad-based in the third quarter, with final sales rising at a +3% annual pace, the fastest in more than three years. Third-quarter growth was due to higher consumer spending, a slowdown in the reduction of inventories, an increase in residential investments, and massive government spending. Really, should that really count, that’s the question....

Jobless Claims were a bit lower falling -1,000 to 531,000. The forecast was for claims to fall to 524,000. The four-week average of initial claims fell -6,000 to 526 ,250 to the lowest level since early January. Meanwhile, continuing claims fell -148,000 to 5.80 million and is the lowest level since late March. The four-week moving average of continuing claims fell -78,750 to 5.96 million, the lowest level since mid-April.

Tuesday, October 27, 2009 4:03 p.m est.

The market bounced again this morning on hopes of good news in the economy but when the data came out just after the open and was very poor, it tanked. It did bounce back though as the dollar once again became the market mover pulled back and IBM announced that they were going to further their buyback program. The Dow saw highs of +80.00 points, S&P 500 +6.00 points and the Nasdaq Composite +10.00 points. Once again it couldn’t hold though as the dollar strengthened again so it fell to new lows of -50.00 points, S&P 500 -9.00 points and the Nasdaq Composite -35.00 points. The final hour saw Dow stocks strengthen but tech stocks seemed to remain weak so the S&PP 500 didn’t bounce much so by the close everything was mixed.

At the close the Dow was up by +14.00 points to about 9882.00 S&P 500 -4.00 points to about 1063.00, S&P 100 -.05 points to about 494.00 and the Nasdaq Composite -26.00 points to 2116.00. Oil tracked the dollar to a tee and closed a bit higher closing around the $79.00 level once again.

Earnings have come out in force this week and it seems that the financial media continues to mislead investors by ignoring the part of the reports that show earnings declines, claiming instead that the reports are great because they are beating estimates. Well duh, if you lower them enough of course their going to beat! For example, the other day Verizon beat estimates but no one mentioned that actual earnings fell -10%! Retailer, Radio Shack, reported its 3rd quarter sales and earnings fell by -5% and -16%% but of course beat estimates that they would be worse so everything is fine. This continues to be case over and over so it will be interesting to see what happens when companies can’t cut anymore and comparisons from this years earnings reveal that overall their not pulling in that much money!

A scary thing for the market right now is that while public investors are excited about the continuing market rally, since September corporate insider sales to purchases ratio has been running 40 to 1. That means that insiders have sold $40 worth of their company’s stock for every $1 of purchases! This is the highest ratio since the last bull market ended in October, 2007. According to another data source, Insider Score, insiders at S&P 500 companies have been the most bearish, and in the 3rd quarter sold $62 of stock for every $1 they purchased, unloading $1.7 billion of their stock in their companies into the investor buying. They are usually able to buy it back at significantly lower prices, which is why institutional investors keep a close watch on insider activity. Of course then you get some surprises such IBM this morning but take note that was IBM has become a service leader in the sector and should do well all of the time as we all now use computers etc for business purposes. Gone are the days of pen and paper although I know of one retail store that all of their invoices are hand written still!
Today may indicate a big shift in the economy as we are about to enter the Christmas shopping period as consumers doubt that the much talked about economic recovery is under way, according to the latest report on Consumer Confidence! The consumer confidence index fell for the second straight month, as the assessment of present-day conditions fell to its lowest level in 26 years!! The Conference Board's consumer confidence index fell to 47.7% from an upwardly revised 53.4% in September, according to the survey of 5,000 households. Economists expected the index to stay steady at around 53.2%. The present situation index fell to 20.7% from 23% in September, the lowest since the early 1980’s! The percentage of consumers who said jobs were "hard to get" increased in October to 49.6% from 47%, while the percentage who said jobs were "plentiful" fell to 3.4% from 3.6%. The net jobs plentiful number worsened to -46.2% in October from -43.4% in the prior month. The outlook over the next six months has also grown more negative as expectations fell from 73.7% last month to 65.7% in October. The outlook for jobs was also more negative as the percentage of consumers expecting more jobs in the months ahead fell to 16.3% in October from 18% in the previous month. The proportion of consumers expecting an increase in their incomes dropped to 10.3% from 11.2% in September. This all points to a slowdown in spending during the Christmas holidays.

The good news was that the market value of homes in 20 major cities rose by +1.2% compared with July, the fourth monthly increase in a row, according to the Case-Shiller home price index. In August prices rose in 17 of 20 cities and in the past year, prices are down -11.3% in the 20 cities. Prices are down -29.3% from the peak. Prices in all 20 cities were lower in August 2009 than in August 2008 but the figures are not seasonally adjusted.

Monday, October 26, 2009 4:03 p.m est.

The market was looking to bounce back from Friday’s sell off as it took off to the upside with the Dow seeing highs of +100.00 points, S&P 500 +12.00 points and the Nasdaq Composite +30.00 points but it didn’t last long and it seemed that right after Barney Frank could release a possible bill to allow the government to take over many of these failing institutions and force creditors to take major hits on their investments. Besides that there was talk about the public option being put back in the health care bill and rumors about a tax on stock purchases that would really hurt banking profits. All of this seemed to really help the dollar as it rallied strongly which nowadays means it would kill any rally so the Dow saw lows of -120.00 points, S&P 500 -15.00 points and the Nasdaq Composite -20.00 points in the final hour. That is a huge swing and indicates at the least that volatility may be around for awhile.

At the close the Dow was down by -104.00 points to about 9868.00 S&P 500 -13.00 points to about 1067.00, S&P 100 -6.00 points to about 494.00 and the Nasdaq Composite -13.00 points to 2141.00. Oil fell of course because of the falling dollar off about -$2.00 to close around the $78.50 level once again.

Friday, October 23, 2009 4:03 p.m est.

It was an interesting day as microsoft provided great earnings along with Amazon. It seemed like we were back to the good old days as Intel and Mr. smoothie were back in action to lift the market. For some reason it didn’t seem right to someone however as the expected higher open turned out to be meager and when microsoft came out and said that there entire years earnings were going to be lower the market started to sell off. The Dow saw lows of -150.00 points, S&P 500 -18.00 points and the Nasdaq Composite -20.00 points. Volatility is sure getting pronounced right now which is another indicator of a possible short term top.
At the close the Dow was down by -108.00 points to about 9973.00 S&P 500 -13.00 points to about 1080.00, S&P 100 -5.00 points to about 500.00 and the Nasdaq Composite -11.00 points to 2154.00. Oil lost a bit more than $1.00 to close around the $80.00 level once again.

This morning we got Existing Home sales up +9.4% as people were getting in before the $8000 tax credit expires next month but If you think home prices are bottoming out, you may be wrong as they're expected to head a lot lower. Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate price. Overall, the national median home price is predicted to drop -11.3% by June 30th, 2010, according to Fiserv, a financial information and analysis firm. I’m sure that its actually give or take a few days of course but I’m sure the percentage loss is bang on! For the following year, the firm anticipates some stabilization with prices rising +3.6% In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years, though it did underestimate how bad it would be. Mark Zandi, chief economist with Moody's Economy.com, agreed with Fiserv's current assessments. “I think more price declines are coming because the foreclosure crisis is not over” he said. In fact, those areas with high concentrations of foreclosure sales will experience the steepest drops, according to Fiserv. Miami, for example, is expected to be the biggest loser. Prices are forecast to crash -29.9% by next June, after having already fallen a whopping -48% during the past three years.

As I mentioned above, re-sales of houses jumped +9.4% in September to a seasonally adjusted annual rate of 5.57 million, the highest in more than two years, the National Association of Realtors estimated. Sales as tracked by the NAR are up +24% from January's bottom, and are up +9.2% compared with a year ago. The median forecast by economists looked for a smaller gain to a 5.38 million annual rate from a downwardly revised 5.09 million in August. The median price fell to $174,900, down -8.5% from a year ago and the smallest decrease in 13 months but still poor. The number of previously owned homes on the market dropped -7.5% to 3.63 million in September. At the current sales pace, it would take 7.8 months to sell those houses, the lowest level since March 2007 and a seven month supply is usually consistent with stabilization in prices, NAR chief economist Lawerene Yun said in recent months.

The share of homes sold as foreclosures or otherwise distressed properties was 29% from 31% in August. Sales of condominiums and cooperatives increased +9.7% to a 680,000 rate and purchases increased in all four regions, led by a +13% surge in the West. Purchases climbed +9.6% in the Midwest, +9% in the South and +4.4% in the Northeast. Purchases of previously owned homes, which make up more than 90% of the market, are tabulated when sales close and therefore reflect contracts signed a month or two earlier. Sales of newly built residences, which make up the rest, are counted when a contract is signed, and may therefore slow months before the tax credit expires. Buyers must close before the Nov. 30th deadline to be eligible for the tax credit.

Thursday, October 22, 2009 4:03 p.m est.

Yesterday I had to leave for an appointment but I figured I didn’t need to worry as the market was pretty flat but after Rochdale Securities analyst Richard Bove downgraded shares of Wells Fargo to a Sell, despite beating their earning, the market tanked along with financials in the final hour with the Dow closing down by -92.00 points, S&P 500 -10.00 points and the Nasdaq -13.00 points. He is concerned by the positive impact mortgage hedges have had on Wells' recent results, which "keep coming through for the company whenever it needs to bolster earnings," but are a nightmare for investors who shouldn't look at such activity as generating predictable or repeatable profits. Bove also called the portfolio Wells acquired from Wachovia cancerous.

At the same time I noticed that just before I left that President Obama announced that he was now going to help small business owners and it came also out that the TARP rescued institutions wre going to see their 2009 salaries get cut, courtesy of the government. According to The Wall Street Journal: "The U.S. pay czar will slash in half the average compensation for 175 employees at Wall Street firms receiving large sums of federal aid" and this is another thing that I believe hurt the market. Welcome to doing business with the government!! The biggest bailout recipients are Citigroup, Bank of America, AIG, GM, Chrysler, GMAC and Chrysler Financial. The plan targets the 25 top earners at each company, who will see their compensation decline this year by about 50%, while bonus payments will be slashed by up to 90%, to be replaced by stock that they'll be restricted from immediately selling.

On top of that there was also news that the U.S. could lose its triple AAA rating if it fails to reduce its deficit over the next 3-4 years, Moody's said. Steven Hess, Moody's lead analyst for the U.S., acknowledges reducing the gap won't be easy: "Raising taxes is never popular and difficult politically, so we have to see if the government can do that or cut expenditures." Earlier this year, markets took a hit after S&P cut its outlook on Britain to Negative from Stable.

Today economic indicators came in worse than expected so selling took hold with the Dow seeing lows of -20.00 points, S&P 500 -6.00 points and the Nasdaq Composite -20.00 points but it didn’t last long as the bulls wanted to put up a fight so the Dow saw highs of +160.00 points, S&P 500 +14.00 points and the Nasdaq Composite only +20.00 points but on guess what, sinking volume!

At the close the Dow was up by -132.00 points to about 10081.00 S&P 500 +12.00 points to about 1093.00, S&P 100 +5.00 points to about 505 and the Nasdaq Composite +15.00 points to 2165.00. Oil popped higher yesterday over the $80 level and closed today around the $81.00 level.

There have now been five consecutive negative divergences on the 60-minute time frame charts which is basically unheard of. If you add in the overbought stochastics on the daily charts, overbought weekly charts, Smart Money selling etc etc, the market is hanging on by its thumbs. Because of this there is a possibility that we have seen a short term top around the 1101 level on the S&P 500. At the least we could see another one of those -5% corrections happen quickly but now that we are well above the 1000 level, it could even be a bit worse and still look pretty good. If 1040 on the S&P 500, and 9600 Dow are broken we could see 1000 but it wouldn’t likely be in this cycle.

Jobless claims rose +11,000 to 531,000 in the latest week after back-to-back declines. This is the highest level since the week ended Sept. 26th. Claims had fallen - 34,000 in the prior two weeks. The claims were a bit higher than expected but most economists had expected an up-tick in claims. The four-week average inched lower by -750 to 532,250 and is the lowest level since mid-January. Meanwhile, continuing claims fell -98,000 to 5.92 million and is the lowest level since the end of March. The four-week moving average of continuing claims fell -59.250 to 6.03 million.

Leading economic indicators rose +1% in September, the sixth straight increase and a strong signal that a "recovery is developing," the Conference Board thinks. Eight of the 10 indicators were positive in September. Over the past six months, the index of leading indicator has risen +5.7%, the fastest increase since 1983. The index of coincident indicators was flat in September after two small increases in July and August.

After rising for three months, Home prices fell -0.3% in August compared with the month before, the Federal Housing Finance Agency reported. Prices were down -3.6% in the past year, and were down -10.7% from the peak. Prices rose in four of nine regions, fell in four and were flat in the other. The biggest gains came in the Pacific region up +1.2% and Mountain region up +0.8%, where the housing bubble was the most intense. The largest declines in August were in the South Atlantic down -1.6% and New England, down -1.1%.

Small and scattered improvements are taking place in the economy throughout the country, according to the latest Fed’s “beige book” report released yesterday. Leading the way are the residential real estate market and the manufacturing sector, the report said. Commercial real estate was the weakest sector. Banking continued to falter, with weak loan demand and eroding credit quality. Most districts reported little or no increase to either wage or prices pressures and there were even reports of downward price pressures.

Tuesday, October 20, 2009 4:03 p.m est.

Yesterday the market rallied all day for no real reason except to go up but once again it was on incredibly low volume as it barely broke a billion shares. Yep, that’s bull market action but does it really matter, its way up you know it will “never” go down again! I know I’ve heard that somewhere before but I can’t quite remember where! Anyhow, the Dow closed with gains of +100 points, S&P 500 +10 and the Nasdaq +20 points. Today it looked as if it was going see a really nice start to the day as Apple had incredible earnings along with Caterpillar but instead it only opened slightly higher and then turned down hard with the Dow seeing lows of -120.00 points, S&P 500 -12.00 points and the Nasdaq Composite -30.00 points.

At the close the Dow was down by -51.00 points to about 10041.00 S&P 500 -7.00 points to about 1091.00, S&P 100 -2.00 points to about 505 and the Nasdaq Composite -13.00 points to 2163.00. Oil has been clipping the $80 levexl but closed lower today by -$.50 around the $79.00 level.

Very interesting moves today as earnings were exceptional in Apple and even Caterpillar had good earnings and said that 2010 was going to be pretty good. Strangely however, the market pulled back. Could it be the future isn’t that great or maybe all of these earnings have been priced in already? Earnings may continue to be good but you can only cut so far so they may flatten out in the end. According to The Wall Street Journal: "Companies across the economy are holding off on hiring even as the profit outlook improves, amid economic uncertainty and their own success at raising productivity in rough waters." This makes send as it has been tough but as the Journal points out "the outlook this time is worse," as "most forecasters now expect a prolonged period of high unemployment, even though the government is expected to report next week that the economy grew in the third quarter, after four quarters of contraction. That is sure to frustrate the jobless and could be a problem for the Obama administration." "There are several major factors behind the trend, which is coming on top of sharper-than-expected job cuts in the recession. Many businesses have nagging doubts about the durability of the upturn, attributing much of the recent growth in orders to a move by their customers to rebuild inventories and to government stimulus spending, rather than underlying strength in their markets." "Businesses also face uncertainty about the potential costs of regulatory moves, such as an expansion of health care and climate legislation, that could drive up costs. And many employers have learned how to produce more with a smaller number of people than they previously thought possible."

A good example of this is D'Addario strings, a leading guitar string manufacturer downsizing because of the recession earlier this year. What they did was get workers to inspect their own work so they laid off 7 of their 17 inspectors. Now that demand has picked up they don’t have plans to rehire the ones it laid off. They're not alone as according to The Journal: "The same story is being repeated across the economy, in factories, hotels and banks. The average workweek is now down to 33 hours, the lowest since records started in the 1960s. Productivity, or output per hour of work, grew at a 6.6% annual rate in the second quarter, as employers shed workers faster than they cut output. It was the largest increase in any quarter since 2003. Productivity grew at a 2.5% pace from 2000 through 2008."

Some businesses have started rehiring but what’s interesting is that according to The Journal: "The U.S. has shed 7.2 million jobs since the recession began in December 2007, the deepest contraction since the Great Depression. Even if the job market started spitting out jobs as fast as it did during the 1990s boom, adding 2.15 million private-sector jobs a year, the U.S. wouldn't get back to a 5% unemployment rate until late 2017!"

Home builders turned more pessimistic again in October as the National Association of Home Builders/Wells Fargo sentiment index fell to 18% from 19% in September and was the first decline since June. The index bottomed at a record-low 8 in January but to take it into perspective, the index peaked at 72% more than four years ago. Economists expected the index to rise to 20%. All three components of the index fell for the first time in nearly a year. At 18, the home-builders' index shows that only about one in six builders has a positive view of the housing market. Over time, the index is highly correlated with the government's data on starts on single-family homes.

The builders put all their hopes on Congress passing an extension or expansion of the program that gives first-time buyers up to $8,000 toward the purchase of a home but buyers need to close the sale on a home before December 1st to qualify. The expiration of the refundable tax credit "could derail the fragile recovery in housing just as it is starting to take shape," said Joe Robson, a builder from Tulsa, Okla., who is chairman of the contractors' trade group. Not only are builders facing tough times getting financing to build or complete homes, he added, but also they're burdened by new, tougher rules for appraisals that require an independent view of home prices before mortgages can be underwritten. Congress is considering legislation that would extend the tax credit though as the Senate Banking Committee and the House Ways and Means Committee will hold hearings on the topic this week. There are several approaches being considered; the most likely is a bill in the Senate that would simply extend the current program through June 30th. Democratic leaders in both the House and Senate favor extending the subsidy, while the White House has neither pushed the idea nor is fighting it. Critics of the tax credit say it is poorly targeted and wasteful, because many buyers who get the subsidy would have bought a home without it.

New construction was essentially flat in September at a seasonally adjusted annual rate of 590,000, as a big drop in multifamily units was offset by an increase in starts of single-family homes. August's starts were revised lower to a 587,000 pace from 598,000 previously reported. Economists were expecting starts to rise to a 607,000 rate. In the past year, starts are down -28.2% while building permits this month fell -1.2% to a seasonally adjusted annual rate of 573,000 in September. Building permits for single-family homes dropped -3% to a 450,000 rate.

Lower costs for energy pushed the Producer Price index to drop -0.6% in September, much lower than analysts expectations as analysts had predicted a fall of -0.3% for the month. Core producer prices, excluding volatile food and energy inputs, fell -0.1%, also lower than the -0.1% increase expected. Wholesale prices have fallen in two of the past three months. Economists generally agreed that the report showed inflation is a non-issue and should cheer the majority at the Fed who believe excess capacity allows the central bank to maintain focus on growth. In the 12 months through September, producer prices have fallen -4.8%, as opposed to an annualized drop of -4.3% in August. The index was up +9.8% last July. Minus food and energy, those prices have climbed +1.8%, the smallest year-over-year gain since July 2007. The core rate peaked at +4.7% last October. Energy prices fell -2.4% at the wholesale level in September, the data show while home heating oil fell -9.8%. Gasoline prices fell -5.4% while wholesale food prices fell -0.1% last month. Prices for fresh and dry vegetables were down -0.4%. The core index was pushed lower by a -1.4% decline in light motor trucks and a -1.4% drop in pet food, the biggest decline since October 1994.

Friday, October 16, 2009 4:03 p.m est.

This is interesting and may be the new trend in Washington: CEO’s work pro bono if the “Pay Czar” says so. In what may be the most upsetting decision of the decade, Bank of America's CEO has been stripped of his salary by the government. To be sure, Mr. Lewis is in a difficult to define spot. And many things about his circumstances and the allegations against him are not known. Yet, at face value the current decision seems to set a very bad precedent. According to Bloomberg: "Bank of America Corp. Chief Executive Officer Kenneth Lewis won’t receive a salary or bonus for 2009, a decision based on advice from pay supervisor Kenneth Feinberg." Mr. Lewis, according to the Bloomberg report felt as if getting in a fight with Mr. Feinberg wouldn't be in the best interest of the company. According to the report: "The CEO had a base salary of $1.5 million for the past three years and must return wages already received in 2009, Stickler said. He declined to comment on whether Feinberg is seeking to reduce Lewis’s approximately $125 million of retirement benefits accumulated in 40 years at the company."

Will the Fed’s be telling “you” how much your worth eventually? Although I believe that all of these CEO’s who are getting paid all of these massive amounts even though their stocks are sliding is ridiculous but at the same time I still believe that it should be up to the shareholders or public to determine how to deal with it. A good example is Apple, as Steve Jobs salary is $1 per year but he has a ton of stock options so if the company does well, he does really well.

The market fell out of bed this morning because of poor earnings from financial companies and especially the Bank of America. IBM’s earnings were also below standings so that dragged it down even more. When it was announced just after the open that Raj Rajaratnam, the founder of Galleon, a leading technology-focused hedge fund with more than $4 billion in assets under management was charged with insider trading that also hurt stocks. The Dow saw lows of -130.00 points, S&P 500 -16.00 points and the Nasdaq Composite -35.00 points. Of course once again the bulls would have nothing to do with it so the market bounced back a bit.

At the close the Dow was down by -67.00 points to about 9996.00 S&P 500 -9.00 points to about 1088.00, S&P 100 -4.00 points to about 503 and the Nasdaq Composite -16.00 points to 2157.00. Oil continued higher to end the week up by +$1.00 around the $78.50 level.

Earlier this week Goldman Sachs delivered great earnings but the financial sector, seemed to forget about it and actually traded lower. The lack of a big positive move after Goldman had such great earnings is worth noting, as it could mean that the market has now factored in a great deal of good news. This has also been confirmed from BofA’s sell off today. Two things are possible. The whole market is about to pullback or as I have been talking about the angle of ascent is coming down to normal levels!

Interesting news out late yesterday afternoon! Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter. “They were the worst three months of all time,” said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes. During that time, 937,840 homes received a foreclosure letter, whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 homes were in foreclosure, which is a +5% increase from the second quarter and a +23% jump over the third quarter of 2008. Nevada continued to be the worst-hit state with one filing for every 23 households. But even Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly +170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state the best record in the country.

The report also put out results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down -4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders. That deluge contributed significantly to the quarter's record 237,052 repossessions, a +21% jump from the previous three months. So far this year lenders have taken back 623,852 homes. Most disturbing is that all foreclosures not just repossessions are rampant despite efforts to stop them.

A study of the trend by the Chicago Booth School of Business and the Kellogg School of Management determined that when home price declines drop home values -10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments.

Unfortunately this may be why there is no end in sight. “The fastest growing area is in the 180 days late-plus category, the most seriously delinquent borrowers,” Sharga said and "it's going to be a lingering problem." Plus, the RealtyTrac statistics may understate the depth of the foreclosure mess because lender and government actions have delayed many filings. As a result, some delinquencies have not been counted on the foreclosure tallies so that means it will continue to drag out and because there are so many delinquent borrowers, Sharga predicts the banks will be slow to take back their properties and put the repossessed homes back on the market. “It's hard to envision [the banks] putting millions on properties up for sale and cratering prices,” he said. “Recovery will be slow and gradual and I don't see home prices getting much better until 2013.”

Led by a rebound in autos, metals, and high-tech, Industrial Production increased at an annual rate of +5.2% in the third quarter, the fastest growth in four years and the first quarterly increase since the recession began in late 2007, the Fed reported. Output of the nation's factories, mines and utilities rose +0.7% in September after an upwardly revised +1.2% gain in August and a +0.9% increase in July, the Fed said. The +0.7% increase in output in September was stronger than the +0.4% gain expected by economists. Manufacturing output rose +0.9% in September. Capacity utilization rose to 70.5% in September from a revised 69.9% in August which is also a good sign.

You would think that Consumer sentiment would be better but it pulled back in early October, according to the Reuters/University of Michigan index. The consumer sentiment index fell to 69.4% from 73.5% in September. The decrease was sharper than expected as forecasts were for sentiment to slip to 72%. Sentiment had jumped by 8 points last month to its highest level since January 2008. Many economists thought the gain was unsustainable given the tough economic climate and some retreat would occur. The long-term average of the sentiment index is in the high 80’s.

Thursday, October 15, 2009 4:03 p.m est.

Oh, oh, I’m sure this isn’t going to go over well! Medicare premiums to rise by +25% next year. According to The Wall Street Journal: "Premiums that seniors pay for Medicare Advantage plans will increase an average of 25% next year, largely because insurers, in response to new federal requirements, are canceling many plans that carry no premiums, a top Medicare official said. The average premium will increase to $39 a month for all Medicare private plans from about $32 this year, said Timothy Hill, deputy director for the Center for Drug and Health Plan Choice at the federal agency that manages Medicare. Medicare Advantage, unlike traditional Medicare, is subsidized by the federal government and offered by insurance companies." I love this one as it should happen! Madoff victims to sue SEC. According to Reuters: "Two victims of Bernard Madoff's Ponzi scheme filed a federal lawsuit against the Securities and Exchange Commission, seeking at least the $2.4 million they lost in the fraud. The victims, believed to be the first to sue the SEC over the $65 billion fraud, said in court papers the agency was negligent and breached its duties by failing to investigate Madoff, despite numerous warnings and tips."

Well were at Dow 10,000 once again as the media has been reporting non-stop the past 24-hours. Of course they forget to add that after the Dow last closed above 10,000 last October, it fell -18% in the next five days, almost 2,000 points! Besides that cheery news the first time 10,000 was seen was way back in 1999, 10-years ago! Does it really matter, this time around I don’t think so because it was at 14,000 not that long ago its just another number! With unemployment sitting around 10% with millions of people still out of work, factories remaining shut and the number of people worldwide who have gone hungry rose by 100 million in the last year, according to the United Nations, it also speaks of little hurrah! President Obama may have slipped up on this one also because when he was asked about what he thought, he mentioned that it was because of the stimulus package. He had better hope it really starts kicking in sooner than later!

The most interesting thing is that the Dow is now flirting with a +53% gain and the S&P 500 +64% since March! What is interesting about both of these levels is that the Dow is just above where the rally ended after the 1929 crash and the S&P 500 is now approaching levels that peaked as the 1982 bull market got going. The only difference is that it has done it faster than ever before! After hitting these levels it flattened out for a year so this could be interesting. The S&P 500 level to watch there is 1135 or +70% and interestingly that is just above where the downtrend line is currently sitting from the 2007 top at 1120. As I have been mentioning of late it finally appears that at the least were going to see the angle of ascent move from straight up to a more normal rise that will be good for our style of trading!

The market started the day lower as earnings estimates were a bit to exuberant for some financial stocks and Nokia missed outright. The Dow saw lows of -40.00 points, S&P 500 -6.00 points and the Nasdaq Composite -15.00 points. Of course it didn’t stay down to long before it started up again with the Dow seeing gains of +50.00 points, S&P 500 +5.00 points and the Nasdaq Composite +1.00 point.

At the close the Dow was up by +47.00 points to about 10063.00 S&P 500 +4.50 points to about 1097.00, S&P 100 +5.00 points to about 507 and the Nasdaq Composite +1.00 points to 2173. Oil really popped higher today by +$2.30 clearing the $75.00 level finishing the day around the $77.50 level. Since it has broken this level there is now a good chance that it could hit $80 pretty quick.
Jobless Claims fell by -10,000 to a seasonally adjusted 514,000 last week. It was the fifth decline in the past six weeks. Economists expected claims to fall to about 510,000. Continuing claims fell by -75,000 to a seasonally adjusted 5.99 million, the lowest since March. Including federal programs, the number of people claiming benefits of any kind was 9.24 million, not seasonally adjusted, down -127,000 from 9.36 million in the previous week. Right now the jobless numbers are skewed as the government continues to extend benefits.

Consumer prices drifted higher in September, led by higher prices for cars, energy and medical care that offset the first declines ever recorded in residential rents and home ownership costs. The consumer price index rose a seasonally adjusted +0.2% in September while the core CPI which excludes volatile food and energy prices also increased +0.2% on a seasonally adjusted basis. The increases were a tenth of a percentage point higher than expected by economists. In the past year, the CPI has fallen -1.3%, while the core rate has risen +1.5%. Prices for food fell -0.2% in the past year, the first decline in more than 40 years.
Manufacturing activity in the New York rose to its highest level in five years in October, the New York Fed said. The bank's Empire State Manufacturing index rose to 34.6% from 18.9% in September. The new orders index climbed in October, while shipments shot up 30 points. The employment index was positive for the first time in more than a year. The 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 October national factory survey due out in two weeks may show. In September, the ISM manufacturing index slipped to 52.6% from 52.9% in the previous month.

On the other end manufacturing activity in the Philalphia region expanded at a weaker pace in October than in September, the Fed’s Bank of Philadelphia reported. The Philly Fed index fell to +11.5% from +14.1% in September. The index has indicated expansion in the factory sector in the region for three consecutive months. Economists expected a pullback to about +12.2%. The new orders index rose to +6.2% from +3.3%, while the employment index rose to negative -6.8 from negative -14.3. Readings over zero indicate more firms reported improvements compared with the previous month.

Wednesday, October 14, 2009 2:05 p.m est.

The market popped this morning on a good earnings report from Intel last night and JP Morgan this morning. The media pulled out the 10,000 hats once again for the first time in nine years but unfortunately the pop in Globex futures didn’t last and the Dow didn’t see it right at the open. Of course thats all they talked about for the rest of the day until it finally hit it just after 1:00 p.m est and held it for at least three seconds before falling back once again. The Dow saw highs of +130.00 points, S&P 500 +15.00 points and the Nasdaq Composite +30.00 points. Oil was trading around the $75 now up about one dollar. After the Fed released their minutes at 2:00 p.m the Dow remained just below the 10,000 level so it will be interesting to see how we finish the day as chip stocks seem to be pulling back quite a bit now.

The minutes of the Fed’s meeting reflect the disputes that have been going on in public since the closed-door meeting ended on September 23rd. The wide range of opinions about the economic outlook and the Fed's unprecedented policies had been expected by Fed watchers given the "cacophony" heard from officials in their public remarks. While most Fed officials agreed that a recovery had started, there was little agreement about the strength of the expected upturn. There was a "range of views" expressed about the Fed's unprecedented credit-easing policies. Some Fed officials wanted to boost the size of the Fed's purchase of mortgage securities, while one wanted to end the program early. There was no appetite for raising rates because "the cost of the economy turning out to be weaker than anticipated could be relatively high," the minutes said. The Fed decided to extend its purchase of MBS and asset-backed securities into the first quarter to smooth them out and avoid any sudden end that might jolt markets. One thing that has happened is that different Fed officials have come out quite strongly to rein in liquidity and raise rates now.

So far even with the nice move today I still continue to have serious concerns about the tone of the advance. Trading volume has been in a pronounced contraction for months and last week, and even yesterday saw stocks move higher even as trading volume has dried up. If you take out program trading, which accounts for as much as 30% or more of total NYSE volume on any given day, you’ll see the market truly is running on fumes. Under healthy conditions, the market advances in an increase in trading activity.

I remember way back in the 1900’s whenever microsoft and Intel would report great Intel’s report, with better than expected revenues, earnings, and guidance is a sign that the chip area is starting to come to life, as a new upgrade and replacement cycle is under way. This could mean that more people may be buying new computers, laptops and handheld devices. At the least chip equipment manufacturers are likely to benefit s they have been suffering of late. Interestingly, Intel has been moving higher of late and so today’s response may be a signal that the move may be over as the initial pop in the stock was over $1.00 but then it faded cutting gains in half as the day went on.

This report could also mean that the economy may actually be stumbling forward or at least the technology part of it. But really, when hasn’t tech done well, look at Apple, even when it seemed we were going into a depression, sales were still strong! Boys and their toys you know! If it is recovering it could mean that maybe there is some new life stirring in businesses of all kinds or at the very least, it confirms that the end of the recession may actually have passed and that some sort of easing process is happening. This could be good for President Obama because if the economy does start to improve his higher tax based programs may have a better chance to pass and his agenda to turn America into a socialist country would be easier to achieve. By the way I don’t base that on an opinion, I base that on being an outsider (Canadian) and able to look at things unbiased so I only look at the facts!

Retail sales dropped -1.5% in September after the government's cash-for-clunkers subsidy ended, while sales excluding autos rose at a whopping +0.5%. It was the largest decline in seasonally adjusted retail sales since December. In September, sales of motor vehicles dropped -10.4%, the largest decline in four years, more than reversing a +7.3% gain in August. The results were better than expected by economists who were forecasting a -2.3% decline in overall sales and a +0.3% gain in sales excluding autos. Higher non-fuel prices drove import prices up by +0.1% in September, the sixth increase in the past seven months. Import prices have risen +7.3% so far in 2009 but are down -12% over the past 12 months. Prices of non-fuel imports into the United States rose +0.6% in September, the largest gain since July 2008. Economists say the weaker dollar is behind the increase. Imported fuel prices fell -1.8% in September, and are down -34.4% in the past 12 months. Economists were expecting import prices to rise +0.3% in September. Import prices in August were revised to a +1.6% gain, down from the initial estimate of a +2.0% increase. Prices of exports fell -0.3%.

Businesses reduced their inventories at the fastest pace on record in August even as sales were higher. Paced by a large draw-down in autos, business inventories fell -1.5%, matching the largest percentage decline ever recorded in the 17-year history of the data. Inventories also fell -1.5% in December 2008 and in October 2001 and was the 12th consecutive month of falling inventories. Economists were expecting a -1% drop in inventories. Meanwhile, sales increased +1% in August, which were also helped by the government's cash-for-clunkers deal. The figures are not adjusted for price changes, but are adjusted for seasonal variations. Inflation-adjusted business sales are one of four key indicators used to determine if the economy is in recession or expansion. The others are employment, personal incomes, and industrial production.

The inventory-to-sales ratio fell to 1.33 in August from 1.36 in July, an indication that businesses are continuing to reduce the overstocks that have hampered the economy for the past year. The inventory-to-sales ratio averaged about 1.28 before the recession. Once businesses reduce their inventories to desired levels, any increase in sales will have to come from new production, which would increase both job growth and imports.

The inventory report typically receives little attention from investors, but the pace of inventory reduction will be key to any economic recovery this year. Most economists believe inventories could begin to add to growth as early as the third quarter. Falling inventories subtracted 1.42 percentage points from growth in the second quarter.

Tuesday, October 13, 2009 4:03 p.m est.

It’s interesting how the most unbiased news organization is now being attacked by the White House. According to The Seattle Post Intelligencer: "The Obama administration says it's treating Fox News Channel as a political opponent, and executives at the top-rated cable news network are responding that the White House can't tell straight reporting from opinion. White House communications director Anita Dunn recently told Time magazine that she thinks the channel offers "opinion journalism masquerading as news," and kept up the criticism on CNN's Reliable Sources Sunday and in The New York Times Monday." The unfortunate thing is that they are the only network that actually reveals the entire story on things and actually has people interviewed that have both opinions unlike all of the others who are centered to the left!

Even late night TV comics are turning on Obama now as his polls continue to fall. According to TV Guide.com, Jay Leno and John Stewart have turned their rhetoric negatively toward President Obama. Leno making fun of the now infamous Noble Peace Price, and Stewart suggested that the president needs to start doing things, such as fulfilling promises that he made during the presidential campaign. There is almost nothing worse than a late night comedian going against you as their jokes usually end up on Youtube for millions to see.

What’s interesting about this is that this is basically the rising feeling in the country. According to the report: "Those old enough to remember Watergate might recall that it took Johnny Carson awhile to start making jokes about President Richard Nixon and his connection to the break-in. But once the Tonight show host did, it felt like the beginning of the end for the U.S. leader who eventually resigned." According to Rasmussen Reports.com: "Only 31% of likely voters say the United States is heading in the right direction," and "latest national telephone survey shows that 83% now view government ethics and corruption as very important, placing it just ahead of the economy on a list of 10 key electoral issues regularly tracked by Rasmussen Reports. Eighty-two percent (82%) of voters see the economy as very important." 43% of voters say the president is doing a poor job addressing government ethics and reducing corruption, up five points from early September and the highest level measured since he took office. Forty percent (40%) now give the president good or excellent ratings on his handling of the issue."

Yesterday was a semi holiday as Canada was celebrating Thanksgiving and America had the Columbus day holiday where the bond market was closed. Did you know that the reason Canada has their Thanksgiving earlier than America is because they took their harvest in earlier as they are further North!
Nonetheless it was another boring day in the market as it had a strong start but as the day wore on it lost most of it to see the Dow finish with a +21 point gain, S&P 500 +5.00 points and the Nasdaq actually closed down a little. Today, selling took hold as Johnson and Johnson had less than expected earnings and Fed speak was negative about the economy and interest rates. The Dow saw lows of -70.00 points, S&P 500 -9.00 points and the Nasdaq Composite -10.00 points. Of course the bulls were able to pull it back up as volume remains anemic with the Dow seeing highs of +10.00 points, S&P 500 -1.00 points and the Nasdaq +10.00points before it fell back in the red once again.

At the close the Dow was down by -14.00 points to about 9871 S&P 500 -3.00 points to about 1073.00, S&P 100 -1.00 points to about 496 and the Nasdaq Composite +1.00 points to 2140. Oil was mostly flat closing around the $72.00 level. The worst thing about this move is that the market is now incredibly overbought because volume is coming in so low. I think this is going to end badly or at least another -5% decline before it heads higher once again but it will be interesting to see how this week turns out as it is expiration this Friday and the past couple of years have seen this week in the positive zone. The low volume may be indicating that everyone has already shifted to next month early though so we’ll see.

Friday, October 9, 2009 4:03 p.m est.

Well what an absolutely pathetic day of trading as volume was practically going negative it was so low yet the Dow saw highs of +80.00 points, S&P 500 +7.00 points and the Nasdaq Composite +20.00 points. At the close the Dow was up by +78.00 points to about 9865 S&P 500 +6.00 points to about 1071.00, S&P 100 +3.00 points to about 495 and the Nasdaq Composite +15.00 points to 2139. I can't believe that people get excited about this as we closed under a billion shares today. I think everyone is just sitting back and waiting for an excuse to really start dumping stocks and that's to bad as I was almost thinking that people are starting to get rational! Oil was mostly flat closing around the $72.00 level.

The trade gap unexpectedly narrowed in August to $30.7 billion on a big drop in imports of oil. The trade gap is the difference between exports and imports of goods and services. After a big increase in trade in July, volumes dropped back in August, a sign of fits and starts in the U.S. and global economic recoveries. Imports fell by -$913 million, or -0.6%, to $158.9 billion in August, as imports of crude oil fell by -$1.28 billion.

Exports rose by $228 million, or -0.2%, to $128.2 billion, the highest since December. Exports were led by autos, metals and soybeans. Exports of capital goods fell to the lowest level in four years. Imports and exports were increased by increased trade in autos and auto parts to the highest level this year. Economists expected the trade gap to widen to $33.6 billion in August, based on higher prices for crude oil however, the volume of imported oil dropped by 9.4%. The July trade deficit was revised lower to $31.9 billion from $32 billion, based on more complete data. Imports from China, Canada and Mexico rose on a not-seasonally adjusted basis.

Thursday, October 8, 2009 4:03 p.m est.

Tidbits:
According to The Wall Street Journal, consumer credit continues to contract, having fallen by over 20 billion in July to $2.47 trillion of outstanding debt. Consumers are the backbone of the economy and less credit suggests less buying, which leads to lower retail sales and a weaker recovery for the economy but heh does that really matter. According to The Journal: "A decline for August would mark the first time consumer credit has contracted seven months in a row since 1991. Credit hasn't contracted for eight months in a row since the Fed started tracking it in 1943. And, size-wise, this stretch already is worse than in 1991. That fall saw credit contract by -1.2%; this time we have already seen a contraction of -3.6%, about $92 billion."

Did you know that here is no apparent supply problem in housing and sales have been okay but the reason why is that the foreclosure rates for homes remains high. According to Reuters, 6600 homes are foreclosed per day, one every 13 seconds, with 2 million foreclosure filings already for for 2009 as "foreclosures, which started with sub-prime borrowers, have now moved on to the much bigger prime loan market on the back of mounting unemployment."
In commercial real estate rents are falling and vacancy rates are also rising. This means that the bad news could be on the verge of getting really bad for a very sensitive area of the economy, a fact that could be made worse by the retrenchment in consumer credit and a tight small business loan market. According to Bloomberg, office vacancy rates rose to 16.5% "as job losses deepened and employers abandoned space in the recession." "The three months ended Sept. 30th marked the seventh straight quarter in which landlords reported a net loss in the amount of space occupied by tenants. About 19.6 million more square feet were vacant than in the previous quarter."

Meanwhile, the Fed has lots to worry about. According to Costar.com: "In a speech Monday assessing the state of the U.S. economic recovery, Federal Reserve Bank of New York President and CEO William Dudley said he expects that "more pain lies ahead" for the commercial real estate sector and for banks with heavy exposure to CRE loans." Dudley further noted that "the fundamentals of the sector have deteriorated sharply and because the sector is highly dependent upon bank lending." The new thing is that banks would rather issue zero interest rate credit cards instead of making traditional loans which could make the situation worse in the end.

Yesterday, the market continued higher earlier on but ended up closing mixed with the Dow down and the S&P 500 and Nasdaq up minimally. The 3rd quarter earnings reporting period is now underway, and the traditionally first Dow stock to report, Alcoa, reported its earnings after the close yesterday, and sent S&P 500 futures up overnight. Alcoa reported earnings of 8 cents a share, a -71% plunge from its 3rd quarter earnings a year ago, and the company will have a significant loss for the year but the minute small profit came after a string of quarterly losses but of course it beat lowered estimates of a -9 cent a share loss. Behind the numbers, much of the improvement came from cost-cutting once again. The company said there are signs that aluminum demand will get stronger in China, but cautioned that demand in the rest of the world is likely to remain sluggish. The thing that traders seem to be avoiding is that they “think” they will get better in China before the actual fact but I guess what the heck you can always sell later and just hope your not the last one out if your wrong!

Today the Dow saw highs of +110.00 points, S&P 500 +13.00 points and the Nasdaq Composite +35.00 points. At the close the Dow was up by +61.00 points to about 9787 S&P 500 +8.00 points to about 1065.00, S&P 100 +3.00 points to about 493 and the Nasdaq Composite +14.00 points to 2124. Yesterday oil was lower once again below $70 but today it rallied over +$2 finishing the day around the $72.00 level.

The rally so far this week has been based purely on liquidity and momentum with volume continuing to shrink and like most momentum markets, it could end badly. Of course you hear daily that there is boat loads of cash on the sidelines that has to get into the market which seems interesting when you only see a billion shares traded per day. Summer vacations are gone, yesterday was mid week and all we got was barely over 1 billion shares where as in 2005 the average volume was 2 billion plus yet the market continues to chug upward based mainly on a falling dollar. I can see why as most of the big cap companies are globally based and as they say; “as long as it is an orderly decline, its okay,” but the question is what will happen if it cascades lower or because its so oversold that it has another sharp rally upwards. This would kill the stock rally in a second. In the end, I can't see any of this finishing well but who knows when it will happen so for now I’ll stick to the new upward channel were seeing building until just like the momentum trade, it ends.

Jobless claims fell by -33,000 to a seasonally adjusted 521,000 last week, the fewest initial claims since the first week of January. The number of people continuing to claim fell by -72,000 to 6.04 million but he question is as it because of new jobs or they fall off the board as the number of people collecting extended federal benefits rose by +68,000 to 3.79 million. Including those federal programs, the number of people claiming benefits of any kind was down from 9.42 million in the previous week.

Tuesday, October 6, 2009 4:03 p.m est.

Tidbits:
Post American Trend Gathers Steam: Death of Dollar Ahead? The hurting U.S. dollar is about to run into another possible crisis. According to the U.K.'s Independent, and as seen on the Drudge Report: "Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar."
According to the report things are already underway, as "Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars. The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices. "Yet, according to Reuters: "Saudi and Russian authorities denied a report saying Gulf Arab states were considering using currencies other than the dollar to trade oil." Opec has claimed since this came out that it wasn’t true.

Australia raised interest rates last night. Australia is the first G-20 country to raise rates so it will be interesting to see who follows. Some analysts expect other Asian countries to follow suit, given the apparent strength of the recovery in the region.

Pay cuts ahead: In what may turn out to be more talk than anything, the Obama administration's pay czar is about to make his move. According to The Wall Street Journal: "The U.S. pay czar is planning to clamp down on compensation at firms receiving large sums of government aid by cutting cash salaries for top earners and shifting a chunk of their salaries into stock." This totally makes sense in reality as a person shouldn’t be paid unless they’re actually producing something at least but for some reason it still smells of control.

Yesterday the market bounced mostly on a short term oversold bounce but once again it seemed to be mostly because of dollar weakness once again. The Dow finished up about +112.00 points to about 9597 S&P 500 +15.00 points to about 1040.00, S&P 100 +6.00 points to about 482 and the Nasdaq Composite +20.00 points to 2068. This morning the dollar was very weak and even though Australia raised interest rates the market still rallied. The Dow saw highs of +180.00 points, S&P 500 +21.00 points and the Nasdaq Composite +45.00 points. At the close the Dow was up by +132.00 points to about 9731 S&P 500 +14.00 points to about 1055.00, S&P 100 +6.00 points to about 488 and the Nasdaq Composite +35.00 points to 2103. Oil continues to remain in a range finishing the day down around the $71.00 level.

The bounce the past couple of days has been strong enough to get the market back to overbought conditions and is also bumping up against the start of a possible downtrend line if the correction continues. At the least its looking like a more reasonable upside range may be forming as the market has also bounced off of new lower trend lines which means that we may continue up but at a more reasonable pace. The biggest problem with the bounce the past couple of days is how pathetic volume has once gotten. History has always shown that bull markets are based on increasing volume not decreasing, but then again does that matter now that the 21st century has been based on bubbles!

Friday, October 2, 2009 4:03 p.m est.

Tidbits:
Chip sales rise for the fifth consecutive month. Throwing a wrench into the already complex bevy of economic indicators, chip sales are on the rise. According to The Wall Street Journal: "Global semiconductor sales rose 5% in August from the previous month, the sixth-straight month of sequential gains, according to the Semiconductor Industry Association, as the year-on-year rate of decline continued to abate. In addition, month-to-month sales increased in every region in August, led by 5.4% growth in the Americas, followed closely by a 5.3% climb in the Asia Pacific region, which accounts for about half of global sales."

According to the report, the credit for the improvement goes to "recovery in consumer spending, especially spurred by incentive programs for energy-efficient products" as well as increasing sales of cheaper laptop computers. Sales are still down significantly, though. The Journal reported: "Global chip sales were $19.1 billion in August, down 16% from a year earlier. On that basis, Asia Pacific sales fell 14%. The Americas had the best sales performance here as well, with a decline of only 2.3%. Europe had the biggest drop at 30%, followed by 20% decline in Japan."

Insurance penalties softened. In yet another sign that despite public opposition to a new health care plan, the senate continues to "soften" some of what is known to be in a key bill. According to The New York Times: "The Senate Finance Committee voted Thursday to soften the impact of financial penalties that would be imposed on people who did not obtain insurance under sweeping health care legislation." The Times added: "Members of the committee changed the bill to exempt an estimated two million people who would face financial burdens in buying even the cheapest insurance available. Lawmakers delayed and reduced the penalties for others."

More trouble for business ahead. According to Reuters: "An "avalanche" of large businesses will need to be restructured over the next year and a half, according to the head of the GE division that provides bankruptcy financing."

The market started the day down again as employment came in much worse than expected with the Dow seeing lows -85.00 points, S&P 500 -11.00 points and the Nasdaq Composite -20.00 points. Did you know that if 571,000 people didn’t actually leave the labor force, the unemployment rate would have hit 10.2%! After the dollar started to take a hit the market bounced back though seeing gains with the Dow up +20.00 points, S&P 500 +1.00 point and the Nasdaq Composite +5.00 points.

It couldn’t hold though in the final hour and at the close the Dow finished down by -22.00 points to about 9487 S&P 500 -5.00 points to about 1025.00, S&P 100 -1.00 points to about 475 and the Nasdaq Composite -9.00 points to 2048. Oil took a hit as a slower economy means less driving. It finished the day down around the $70.00 level.

Employment fell as -263,000 payroll jobs were lost and the unemployment rate rose a tenth to a 26-year high of 9.8%. This is now the 21st consecutive month of job losses. Since the recession began in December 2007, -7.2 million jobs have been lost. Details of the report were almost universally dismal, with the number of unemployed rising by +214,000 to 15.1 million. An alternative gauge of unemployment, which includes discouraged workers and those forced to work part-time, rose to +17%. Total hours worked in the economy fell by -0.5% while the average workweek fell to an all-time low of 33 hours. Average hourly earnings rose just +1 cent, or +0.1%, to $18.67. Economists had been looking for a smaller payroll loss of -165,000. They also had expected the unemployment rate to rise to 9.8%. In August, payrolls fell by a revised -201,000, and the unemployment rate was 9.7%. Payroll losses in July and August were revised lower by -13,000. The government announced that it would likely lower total employment by about -824,000, or -0.6%, in its annual benchmark revision in January. Such a revision, based on tax records, is about three times the normal revision of -0.2%. The large error came during the early part of 2009, when large numbers of businesses were failing. If the benchmark is close to the preliminary estimate, the cumulative job loss since the recession began would rise to about 8 million.

One thing that was interesting was that In its survey of 400,000 business establishments, the government found that private-sector employment fell by -210,000 to stand at 130.9 million positions in September which for the first time is opposite of what has been having. Government employment fell by -53,000, Employment in the goods-producing sector fell by -116,000 last month, including -64,000 in construction and -51,000 in manufacturing. Service-producing jobs also fell, down by -147,000 including -39,000 in retail. The only major sector showing a greater number of jobs was health care and education, which added just +3,000. Of 271 industries, about 32% were hiring in September, down from 35% in August, the data showed. In its survey of 60,000 households, the government found that employment fell by -785,000. The unemployment rate for adult men rose to 10.3% and the rate for adult women rose to 7.8%.

Foreign businesses slowed their demand in August for capital equipment to expand production, the Commerce Department reported Friday. Factory orders fell -0.8% in August, slower than the -0.5% fall expected by economists. Orders for durable goods decreased -2.6% in August, revised down from -2.4% estimated a week ago. This is the biggest drop since January. Orders for nondurable goods rose +0.8%. Core capital equipment orders fell -0.9% in August, revised up from +1.9% estimated a week ago, the government said.

Thursday, October 1, 2009 4:03 p.m est.

Tidbits:
Did you know that that each dollar of growth in GDP from 1982-2000 came as a result of $3.21 in increased debt. But in the eight quarters before GDP turned down in 3Q’08, each dollar of improved GDP required $7.16 in increased debt! Despite the easiest money policy of our lifetimes and three-quarters of a trillion dollars in stimulus, the best we may see for the third quarter is GDP at 1% annualized and perhaps no more than that for the fourth quarter.

Iran nuclear talks under way. According to The Wall Street Journal: "U.N. Security Council members and Germany began a key meeting with Iran aimed at reining in Tehran's nuclear-fuel program."

Green jobs get black eye. According to Reuters: "U.S. companies that import solar panels to the United States are facing up to $70 million in unexpected tariffs, The New York Times reported on Wednesday." The tariffs could hurt foreign solar panel makers and foreign and American distributors, and strain trade relations between the United States and China, the newspaper reported."

Reuters added: "According to the article, U.S. customs decided early this year that because the panels contain a basic electronic device for safety and energy efficiency, they would be treated as electric generators, subject to a duty of 2.5 percent. The decision is legally binding on most solar panels imported into the United States, the newspaper reported, noting that no one in the industry became aware of it until the last few weeks." Go figure this one out. The government wants to go green and then puts the kabosh on the industry.

The market fell out of bed today on poor economic data and never really recovered all day. Many times the market hit lows and once again in the final hour the Dow saw -220.00 points, S&P 500 -28.00 points and the Nasdaq Composite -70.00 points. At the close the Dow finished down by -200.00 points to about 9510 S&P 500 -27.00 points to about 1030.00, S&P 100 -12.00 points to about 477 and the Nasdaq Composite -65.00 points to 2058. Oil finished the day down after being up strongly yesterday around the $70.50 level.

When the market started to rally began in the spring it was in reaction to the worst oversold condition since the crash’s of 1929 and 87 and lingered as liquidity drove players to participate. M2 money supply growth was +7.8% from August 2008 to August 2009 but has turned negative by –2.3% in the three months from May to August so liquidity is no longer a driver for the market. A few days ago, Rydex assets in bull and sector funds were more than five times those in bear funds, a huge sentiment extreme and assets in bear funds are the lowest they have been since the latter part of 2002! Sounds like the correction were seeing is overdue!

I think that what started it today was the most important economic indicator of the day. Strapped for cash, consumers have been falling behind on their debt payments in record numbers, the American Banker's Association said. Delinquency rates were at record highs on home-equity loans, home-equity lines of credit and bank cards for the second quarter. The composite ratio, which tracks eight closed-end installment loan categories, also hit a high at 3.35% of all accounts, seasonally adjusted, compared with the first quarter's 3.23%. Analysts said that it was the total effect of the longest recession since the depression. Yesterday, Moody’s reported that U.S. credit card defaults had also risen to a new record in August, up by nearly a full point from July to 11.49%! The “credit card charge-off index” measures credit card loans that banks do not expect to be repaid, but you certainly would not guess that by looking at the charts of bank stocks!
It is getting more and more apparent that economic data is making a break to the downside once again or at the least staying flat even with government stimulus. This keeps me thinking that were not going to see any type of robust recovery and that were still looking like were going to repeat how the Japanese market has acted for the past twenty years. The boom that we have had all started in 1995 with the Internet and was helped along after the crash and 9/11 with Bush's low taxes keeping the economy in better shape than it would have been. Of course that was until the housing bubble burst. Now the question still remains about what could possibly be the next big bubble because you have to have a bubble you know, you can’t just live a happy fulfilled life with family and friends unless you already have all of the toys you can possibly buy! Oh ya, everyone does have all the toys and debt to prove it! Will it really be the greening of the world, I think not, especially with the fact that it is clear that the Obama administration has anti-growth policies as he wants everyone to be equal which is a great idea however I think he doesn’t realize that the top 10% of earners in America pay 90% of the taxes so if you take away their incentive to grow, this economy will remain dead in the water!

Low interest rates and government programs have kept the economy from imploding but from the way indicators are looking we could still see the demise of the economy and the stock market as the Fed and government also sound like they are pulling out as the main driver of economic action. According to The Wall Street Journal: "this recession is taking a particularly heavy toll on business creation, as sources of small-business funding dry up and would-be entrepreneurs become more risk-averse. When entrepreneurs do launch businesses, they are hiring fewer employees on average. The trends threaten to dampen growth in jobs and economic output for years." So how important are new businesses, ideas, and the trends they generate? According to The Journal: "Businesses in their first 90 days of life accounted for 14% of hiring in the U.S. between 1993 and 2008, according to the Bureau of Labor Statistics."
This recession has hit quite hard and the recovery is minor at best. According to The Journal: "Business starts fell -14% from the third quarter of 2007 to the third quarter of 2008; the 187,000 businesses launched in that quarter were the fewest in a quarter since 1995! The number ticked up slightly in the fourth quarter, the latest data available. But those new establishments created only +794,000 jobs, the fewest since the government began tracking the data in 1993." Even traditional risk takers are out of the game, or have reduced their participation. According to The Journal: "Venture-capital investment in U.S. companies fell -44% in the first half of 2009 from a year earlier, to $9.27 billion. Other major sources of small-business funding, personal savings and home equity also have declined."

So the question is whether this time is different, or whether this is the way it will go now. During past similar periods it has taken at least two years before the end of the recession to the time that the statistics show some kind of improvement so that means it will be somewhere near 2011 before we start to really see improvement,if we do. During the emergence from the Carter malaise, the Reagan administration helped with supply side economics but was mostly helped by technological advances with the Walkman getting both manufacturing and the music business going which was helped with MTV changing the world. Concert tours moved out of small clubs into arenas, which in turn led to more construction and updating of stadiums. People were going out, eating at restaurants so new jobs were created, and so on and so on. With Clinton it was the same basic dynamic as the internet boom led not just to the development of the on line world, but again to construction, as server farms and offices had to be created. More computers were needed in order to run businesses and store data. Technology advanced beyond cyberspace, as more advanced graphics were visible everywhere, from automobiles to billboards, and so on.

Now, all we hear about is global warming, green jobs, the mortgage crisis, and how this is the new thing. That could be but through the ages it has always been someone’s innovation that has started it all, not the government. In all of history the government has never been successful in doing business and so far its looking the same. Until the public gets back to normal again in their living standards and someone comes up with the next new thing, I think we'll be at this for years. People that want to work can't find work and those who want to start new businesses can't get funding.

It almost seems like the government wants to kill any enthusiasm that an entrepreneur may have because it almost seems to uncool to succeed because your likely to get taxed or regulated. That means that this generation’s Iphone or whatever will likely be something more modest, like the greatest ever solar panel! Instead of thinking big, people are subscribing to real estate schemes of how they can make millions, well maybe not in the end! Every single decline in the economy has always needed a "Big Thing" to propel its recovery and so far this one doesn't have one and there isn't one that's even close to being visible and besides that the current policies coming from Washington are stifling, not stimulating businesses. Until something changes, we're going to be stuck in neutral. This will be great for our type of trading but the stock market still has to figure out that its not 1995!

Jobless claims rose for the first time in four weeks up +17,000 to 551,000. This is the highest level since before the Labor Day holiday. The forecast of economists was for claims to move up to 531,000. The four-week average of initial claims fell -6,250 to 548,000. Continuing claims fell -70,000 to 6.09 million which is the lowest level since the week ended April 4th. The four-week moving average of continuing claims fell -39,250 to 6.15 million, the lowest level since April 18th.
Encouraged by government subsidies to buy cars, consumer spending soared +1.3% in August, the fastest increase since the post-9/11 shopping binge eight years ago, but after car manufacturers sales came out for last month that were abysmal you can see that this number will likely be lower next month. Spending on durable goods rose +5.3% in August as auto sales surged on the government's cash-for-clunkers program. The clunkers program accounted for most of the increase in August, the government said. The program ended in August, and most analysts expect that the increase in spending was a one-time event. After adjusting for inflation, real consumer spending rose +0.9%, also the biggest gain since October 2001, when automakers slashed prices after the terror attacks. Consumer prices rose +0.3% in the month and were down -0.5% in the past year. Prices excluding food and energy rose +0.1%. In the past year, these so-called core prices are up +1.3%, the slowest core inflation rate since September 2001.

Meanwhile, personal incomes edged higher by +0.2%. After taxes and after adjusting for higher prices, real disposable incomes fell -0.2%, the third decline in a row. Economists were looking for incomes to rise +0.1% and spending to rise +1%.
In July, nominal incomes rose +0.2%, revised up from no change. Nominal spending rose +0.3% in July, unrevised. With spending rising much faster than incomes, the savings rate fell back to 3% of disposable income in August, the lowest since October 2008.

Pending home sales index rose +6.4% in August to the highest level since March 2007, the National Association of Realtors reported. The index which tracks sales contracts signed on existing homes has risen seven months in a row for the first time since the index was established in 2001, the industry trade group said. The pending-home sales index has been much stronger than existing-home sales, which are recorded at the closing of the sale, usually a month or two after the sales contract is signed. The pending sales index has risen +19% since December, while closed sales are up about +8%, according to data from the real estate group. "The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules," said Lawrence Yun, chief economist for the real estate agents. It is "No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month," Yun said. "Sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession," Yun said. "Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit." First-time buyers accounted for about 43% of buyers in August, according to a survey conducted by Campbell Communications.

Conditions for the nation's manufacturers in September cooled off just a bit, the Institute for Supply Management reported as the ISM index moved lower to 52.6% in September from 52.9% in August and the drop was unexpected. The consensus forecast of estimates was for the index to rise to 54%. Readings above 50 indicate expansion. The index rose above 50 for the first time in 19 months in August. Below the headlines, the report was tepid as both production and new orders came off last month's highs. Employment and exports also moved lower.

Yesterday it was reported that more companies in the Chicago area reported business worsened in September, according to the Chicago-NAPM. The Chicago purchasing managers index fell to 46.1% in September from 50.0% in August, the trade group said. Economists were expecting an increase to 52%. The new orders index backtracked to 46.3% from 52.5% in August. The employment index was essentially unchanged at 38.8%. Readings under 50% indicate more firms said business was worsening than said it was improving.

Private-sector firms in the United States cut -254,000 jobs in September, according to the ADP employment report released Wednesday. It's the fewest positions lost since July 2008. In August, a revised -277,000 jobs were lost, ADP said. Goods-producing jobs fell by -151,000, including -71,000 in manufacturing. Services-producing jobs fell by -103,000. Economists are expecting a decline of -167,000 in employment when the Bureau of Labor Statistics reports on its September estimate tomorrow.

Mortgage applications fell a seasonally adjusted -2.8% last week compared with the week before, despite more favorable mortgage rates, the Mortgage Bankers Association reported. Applications were down an unadjusted -44.3% for the week. Refinancing eased -0.8% on a week-to-week basis as filings for mortgages to purchase homes dropped -6.2%, but the four-week moving average was up a seasonally adjusted +3.9%.

Applications to refinance existing home loans accounted for 65.3% of all activity last week, up from 63.8% the week before. Adjustable-rate mortgages made up 6.2%, down from 6.7%. The interest rate charged on 30-year fixed-rate mortgages averaged 4.94% last week, down from 4.97% the previous week. It was a similar story for 15-year fixed-rate mortgages, the average rate for which fell to 4.34% from 4.41%. And one-year ARMs carried an average rate of 6.40%, down from 6.52%. To obtain the rates, the 30-year fixed-rate mortgage required payment of an average 0.94 point, the 15-year fixed-rate mortgage required an average 1.01 points and the one-year ARM required an average 0.29 point. A point is 1% of the mortgage amount, charged as prepaid interest.

Wednesday, September 30, 2009 2:30 p.m est.

The market was looking to go higher today on another greenshoots indicator not looking bad with the final number for GDP coming in down -0.7% so the Dow saw quick highs of of +30.00 points, S&P 500 +3.00 points and the Nasdaq Composite +15.00 points but when the Chicago Purchasing Managers came out falling below the 50% level once again indicating that at least that part of the country is contracting again, the market fell. The Dow saw lows of -140.00 points, S&P 500 -14.00 points and the Nasdaq Composite -35.00 points. Of course this is the last day of the month and quarter end so traders decided that they wanted to hold onto those record gains they have made the last three months so it was bought up again taking the Dow to new highs of +40.00 points, S&P 500 +3.00 points and the Nasdaq Composite +15.00 points. It will be interesting to see if we hold these gains going into the close as volume has fallen off once again.

Tuesday, September 29, 2009 4:03 p.m est.

Interesting Tidbits:
There is getting to be more and more discussion from Fed officials the Wall St. Journal is quoting; saying that the Fed will be as tough on the way out because of no political control over the deficit as on the way in. This indicates that we could see a strong dollar and may be why we saw it bottom and turn up last week while stocks went down. There are still problems with housing; commercial woes; hotel defaults; and all the other issues including the renewed decline in housing and the economy turning lower so as I have said the market will likely struggle to make its gains here for awhile. The data suggests that Wall Street may be betting on a recovery that may not be as robust as warranted by the 60% rally from the March bottom. Wow what a shocker! The fact that the news that supports that notion is starting to dribble in may be the reason for the sudden trouble in the markets. As more news of this kind starts to come out, especially if the upcoming earnings season is not as good as many expect, we could see more trouble ahead.

Cancer vaccine associated with U.K. teen death. According to The Wall Street Journal: "U.K. health authorities launched an investigation Tuesday into the death of a 14-year-old girl who had just received a vaccine for cervical cancer. Natalie Morton died in a hospital Monday, a few hours after being the given the Cervarix vaccine, which protects against two strains of the human papilloma virus that causes cervical cancer. She was vaccinated at her school in Coventry in central England. Ms. Morton appeared to be healthy before being given the jab."

GE’s Jeffrey Immelt says that the recovery that is expected may not be that great and a poll just out said that 40% of all CEO’s said they plan on laying off employee’s in the next six months.

The market shot out of the gates yesterday and remained strong all day finishing up around the +2% level which appeared to be month end positioning because volume was atrocious! Today the market continued up seeing early highs on the Dow of +50.00 points, S&P 500 +7.00 points and the Nasdaq Composite +15.00 points. It didn’t last long though as economic data wasn’t very good once again carrying forward from last week. The Dow saw quick lows of -50.00 points, S&P 500 -6.00 points and the Nasdaq Composite -10.00 points. The final hour saw an attempt at a rally but it failed and the market closed lower.

At the close the Dow finished down by -46.00 points to about 9743 S&P 500 -3.00 points to about 1067.00, S&P 100 -2.00 points to about 490 and the Nasdaq Composite -7.00 points to 2124. Oil finished the day down very little around the $67.00 level.

The Consumer confidence index fell in September as Americans grew more concerned about the economy, their job prospects and their incomes, the Conference Board reported. The consumer confidence index fell to 53.1% from 54.5% in August, reversing part of August’s nearly 7-point gain. “Consumers remain quite apprehensive about the short-term outlook and their incomes," said Lynn Franco, head of the consumer research group at the private research organization." With the holiday season quickly approaching, this is not very encouraging news." Economists were expecting the index to rise to 57%.

The market value of homes in 20 major cities rose by +1.6% in July compared with June, the third monthly increase in a row, according to the Case-Shiller home price index. In July, prices rose in 18 of 20 cities. Only Seattle and Las Vegas recorded lower prices in July than in June. In the past year, prices are down -13.3% in the 20 cities. and down -32.6% from the peak, and are now at levels seen in late 2003. Prices in all 20 cities were lower in July 2009 than in July 2008. The figures are not seasonally adjusted. Prices typically rise in the summer months when demand is stronger.

The figures indicate a "stabilization in national real estate values," said David Blitzer of S&P, who cautioned that the expiration of the first-time home buyer tax credit and increased foreclosures could put more downward pressure on prices.
Falling home values had been a factor contributing to the global economy plunging into chaos because financial institutions made too many bad bets that American home prices would never fall but homeowners have lost trillions of dollars of wealth.
Millions of homeowners have found themselves owing more on their house than it is worth so they can’t sell for what they owe, and they cannot refinance their home loans and most importantly no one can borrow against their home to finance their consumption levels. Then you’ve got rising unemployment now driving foreclosures and there is another wave of foreclosures from interest-payment only mortgages coming up soon.
The Case-Shiller 20-city index tracks repeat sales on the same properties over time, but it closely tracks only 20 cities, not the whole country. The price changes in each of the 20 cities over the past year, based on the Case-Shiller data for July are:
Las Vegas, down -31.4%; Phoenix, down -28.5%; Detroit, down -24.6%; Miami, down -21.2%; Tampa, down -18.4%; San Francisco, down -17.9%; Minneapolis, down -17.3%; Seattle, down -15.3% Los Angeles, down -14.9%; Chicago, down -14.2%; Portland, down -13.9%; San Diego, down -12.3%; Atlanta, down -11.9%; New York, down -10.3%; Washington, down -9.8%; Charlotte, down -9%; Boston, down -4.9%; Denver, down -2.9%; Dallas, down -1.6%; and Cleveland, down -1.3%;.

Last week I was talking about how it seemed that the economy seems to be turning back down again and this week has a very heavy schedule of potential market moving economic reports coming out. These included the Case-Shiller Housing Price Index, the ADP and Challenger Jobs Report, another 2nd quarter GDP revision, the ISM Manufacturing Index, Pending Home Sales, and culminating in the most important one, the Employment Report for September on Friday. It was interesting to note that over the weekend it was reported that the unemployment rate for younger people is over 52% now!

Friday, September 25, 2009 4:03 p.m est.

The market was pretty quiet today as it moved back and forth from positive to negative at the start of the day but as it wore on it remained steadfast in the red with the Dow seeing lows of -70.00 points, S&P 500 -10.00 points and the Nasdaq Composite -30.00 points. It seems that now that economic data is revealing that the greenshoots aren’t growing, the market is realizing that the weed like earnings it expects may be only greenshoots in the end! Doesn’t that sound like the perfect Obama administration analogy! The final hour saw an attempt at another rally

At the close the Dow finished down by -40.00 points to about 9667 S&P 500 -6.00 points to about 1044.00, S&P 100 -3.00 points to about 484 and the Nasdaq Composite -17.00 points to 2090. Oil finished the day flat around the $66.00 level.

The recovery in the manufacturing sector stumbled in August, as a big decline in orders for new airplanes pushed total durable goods orders down -2.4%, the largest decline since January. The -42% drop in orders for civilian aircraft accounted for most of the decline. Weaker demand wasn't confined to the aircraft sector, however as a -9.3% drop in transportation orders kept the number flat. Economists were anticipating a +0.7% gain in total orders.

Despite a record drop in prices, sales of new homes flattened out in August after four months of increases. Sales of new homes rose a statistically insignificant +0.7% in August to a seasonally adjusted annual rate of 429,000 from a downwardly revised 426,000 in July. Sales were down -3.4% from a year earlier, and are up 30% from the low in January. Sales were weaker than the 440,000 annual pace expected by economists. The median sales price fell a record -9.5% from July to August. Inventories of unsold homes continued to fall in August, dropping -3% to 262,000, the fewest in 17 years. This is good news as that will help to find a bottom.

Consumer sentiment improved in late September, helped by a sense that the recession is finally over, according to the University of Michigan and Reuters. Sentiment rose to a revised 73.5% from a reading of 70.2% in early September, coming in well above the August reading of 65.7%. Economists had been looking for consumer sentiment to rise, albeit slightly, to 70.5%. It is now the highest level since early 2008. On the one hand, researchers said consumers now believe the recession has ended but on the other, consumers complained about the state of their household finances. Indeed, a record number of consumers reported income declines in September. Both the current conditions and expectations readings jumped in September with expectations rising to 73.5% from 65% in August and is the highest level since September 2007. Current conditions number jumped to 73.4% from 66.6% in August and is the highest level since September 2008. The number of consumers planning to buy a new car fell to a six-month low in September as the "cash for clunkers" program ended. Consumers also said that it was a good time to buy a home but a lousy time to sell one. As a result, most people aren’t in the housing market.

Thursday, September 24, 2009 4:03 p.m est.

Tidbit of the day: by the way, let me know if you like these....According to Reuters: "The credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody's Investors Service said yesterday. This provides yet another sign consumers remain under stress. The Moody's credit card charge-off index, which measures credit card loans that banks do not expect to be repaid, rose to 11.49% in August from 10.52% in July."

Once again the market attempted to bounce today with the Dow seeing quick highs of +55.00 points, S&P 500 +5.00 points and the Nasdaq Composite +10.00 points but it couldn’t hold especially after housing data came in much worse than expected. The Dow saw lows of -90.00 points, S&P 500 -15.00 points and the Nasdaq Composite -35.00 points. The final hour saw an attempt at a comeback but the bears kept them down so at the close the Dow finished down by -45.00 points to about 9705 S&P 500 -10.00 points to about 1050.00, S&P 100 -4.00 points to about 485 and the Nasdaq Composite -24.00 points to 2108. Oil closed down another -$3.00 to around the $66.00 level and now analysts are saying $55 may be the target.

Existing Home sales dropped -2.7% in August to a seasonally adjusted annual rate of 5.10 million, the first decline in five months, the National Association of Realtors reported but the problem was that they were expecting an increase of +2% with a small gain to a 5.40 million annual rate from 5.25 million in July. Inventories declined by -10.8% to 3.62 million which is good but it still represents an 8.5-month supply at the August sales pace, the lowest since April 2007.
Jobless claims fell to their lowest level since July in the latest week, falling -21,000 to 530,000. This is the lowest level since July 11th. You know that summer has ended when you get the feeling that that was a long time ago! The forecast was for claims to rise to to 550,000. Claims in the previous week were revised to a decrease of -6,000 to 551,000 compared with the initial estimate of a drop of -12,000 to 545,000. The four-week average of initial claims fell -11,000 to 553,500. This is the lowest level since late January. Economists were hoping for a "clean" reading on claims but a Labor Department official said the shift in the timing of Labor Day was still impacting the data. Meanwhile, continuing claims fell -123,000 to 6.14 million but guess what they’ve been extended again. The four-week moving average of continuing claims fell -1,250 to 6.19 million.

Wednesday, September 23, 2009 4:03 p.m est.

Here are some interesting tidbits for the day. According to Gallup.com: "Americans are more likely today than in the recent past to believe that government is taking on too much responsibility for solving the nation's problems and is over-regulating business. New Gallup data show that 57% of Americans say the government is trying to do too many things that should be left to businesses and individuals, and 45% say there is too much government regulation of business. Both reflect the highest such readings in more than a decade" and according to Rasmussen Reports.com: "Fifty-nine percent (59%) of voters believe that the current level of political anger in the country is higher than it was when George W. Bush was president." That one I find very interesting because there were about 1,000,000 plus people out last Saturday in front of the Whitehouse calling for a change in direction for the country but of course you wouldn’t have seen it unless you watched Fox as all other media outlets ignored it. It was only +1,000,000 people plus so how can that be news worthy.

The market started the day higher but it didn’t seem to have any oomph to it so it fell back pretty quick and when oil really started selling off after a bigger than expected inventory build seeing it move down -$3.00 per barrel, it moved down even more. The Dow saw lows of -40.00 points, S&P 500 -5.00 points and the Nasdaq Composite -5.00 points. Of course after the Fed came out with the same old, same old so the dollar and bonds fell and stocks went up, the Dow saw quick highs of +90.00 points, S&P 500 +9.00 points and the Nasdaq Composite +25.00 points before pulling back once again. The final hour seemed to have the market see the rug pulled out from underneath it as sell programs hit and the market closed right at its lows, a bad sign for the start tomorrow.

At the close the Dow was down by -81.00 points to about 9748 S&P 500 -11.00 points to about 1061.00, S&P 100 -4.00 points to about 490 and the Nasdaq Composite -15.00 points to 2131. Oil closed down about -$3.00 to around the $69.00 level.

The Fed kept its target for its federal funds rate set at a range of zero to 0.25%, saying the improving economy and making a few changes to their debt-buying plans is looking good. In a statement after their closed-door meeting, Fed officials said that economic activity has "picked up" with improved conditions in financial markets. They also announced that it has extended its purchase of mortgage-backed securities and agency debt into the first quarter of 2010. Analysts had expected the move, which smoothes out the purchases. The Fed has purchased $857 billion of their scheduled $1.25 trillion in mortgage-backed securities, according to Morgan Stanley. It's also bought $129.2 billion of the planned $200 billion in so-called agency debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks, which finance mortgage purchases. Those programs were officially expected to end in December. As expected, the Fed repeated that it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The vote by the committee was unanimous even though there had been comments of a possible dissenter.

Economists expect the Fed to hold interest rates close to zero into sometime in 2010 and some see no action at all until 2011. They also see signs that growth could remain slow for a long time which makes you wonder why stocks are up so much then. Even bond analysts don’t expect any change to the Fed's Treasury-buying program, and see policy makers repeating they anticipate purchasing $300 billion in debt by the end of October and that is why they have remained within a low yield. The Fed has just $11 billion left under that program, according to Cantor Fitzgerald. Businesses are still cutting back on fixed investment and staffing, "though at a slower pace," the Fed said. The Fed expressed confidence that inflation would remain in check. "With substantial resource slack likely to continue to dampen cost pressures and with longer-term inflation expectations stable, the Committee expects that inflation will remain subdued for some time," the statement said. The Fed also removed language from its August statement expressing concern about rising prices for energy and other commodities.

Tuesday, September 22, 2009 4:03 p.m est.

Yesterday the market decided that it needed to take back some of Friday’s expiration related trades and was lower but today it popped higher once again as the dollar fell and oil made up some of its -$2.50 loss yesterday. It seems to be a broken record, dollar up, market, oil down. It’s always wonderful how trends emerge until everyone starts talking about them and then a new trend emerges! The Dow saw highs of +65.00 points, S&P 500 +9.00 points and the Nasdaq Composite +15.00 points.

At the close the Dow was up by +50.00 points to about 9830 S&P 500 +7.00 points to about 1072.00, S&P 100 +3.00 points to about 494 and the Nasdaq Composite +8.00 points to 2146. Oil up about +$1.80 to around the $72.00 level.

Last week I was talking about how the market will now face more of an upward battle because its starting to hit previous resistance levels from the crash. This along with upside Program Numbers are indicating that at the least it should turn flat. Another great indication that the market could flatten out is that the S&P 500 is now trading +20% above its 200 day moving average. By watching the relative distance to its moving average you can see that its highly likely it could at the least move back to a basic long term trend. On November 20th 2008 the S&P 500 closed almost -40% below its 200-day moving average. It had never done that in the entire history of the index! Of course then it recovered with the sharpest rally ever in this time frame. Last week, the S&P 500 closed +20.27% above its 200 day moving average. This is incredibly rare and hasn’t happened in over 20-years. It only took 206 trading days for the S&P 500 to go from being down -39.79% below its 200 day moving average to being +20.27% above it! The only other time we saw a move that fast from the abyss to the heavens was in the 30’s and 70’s. The current rally in this time frame is the record setter overall.

All of this is interesting and you would think that the market should be in for a huge correction then but alas what happens, flatness! Sometimes the market went higher, slightly (1933). Sometimes it went lower (1929,) slightly, it corrected more later on and sometimes it just moves sideways, (1975). This is what I believe were going to see here although there is still higher chance of some sort of correction this expiration cycle. Basically the big move is done and even if we do continue higher we should finally see some volatility start anytime here.

The value of homes rose a whopping +0.3% in July compared with June, the Federal Housing Finance Agency reported. Prices fell -4.2% in the past year and were down -10.5% from the peak in April 2007. Prices in July were at the same level as March 2005. June’s increase was revised lower to a +0.1% gain from +0.5% previously reported. Prices rose in five of nine regions, led by a +1.6% gain in the Pacific states, where prices have fallen -9% in the past year. The biggest monthly drop was -0.9% in the East South Central states (Kentucky, Tennessee, Mississippi and Alabama). The index is based on repeat sales financed through Fannie Mae or Freddie Mac.

Friday, September 18, 2009 4:03 p.m est.

The market popped higher this morning because it was a quadruple witch expiration with the expiration for the cash, futures contract and options on the S&P 500 come in with a reading of 1071.57, right at the top of the range. The Dow saw highs of +65.00 points, S&P 500 +6.00 points and the Nasdaq Composite +11.00 points out of the gate and then went negative not soon after, no manipulation there of course. It stayed flat for most of the day after that but then neared old highs in the final hour. At the close the Dow was up by +30.00 points to about 9814 S&P 500 +2.00 points to about 1068.00, S&P 100 +1.30 points to about 492.50 and the Nasdaq Composite +6.00 points to 2133.00. Oil closed down about +$.50 to around the $72.00 level.

Thursday, September 17, 2009 4:03 p.m est.

This morning the S&P 500 tagged the 1073 level on this move to the moon with the Dow seeing highs of +60.00 points, S&P 500 +7.00 points and the Nasdaq Composite +10.00 points. It didn’t look like it was going to stop but when President Obama started a news conference on the defense shield and then healthcare, sell programs hit, yes I know its hard to believe, but they actually are out there and pulled it down. At its lows the Dow saw -45.00 points, S&P 500 -7.00 points and the Nasdaq Composite -15.00 points but of course it did come back into positive territory in the final hour.

Everyone of course is now saying that the S&P 500 is going to 1100 as there is nothing there to stop it and that it may even get to 1120. As I was saying yesterday, all I’m looking for is a little volatility and maybe were finally seeing it, or at the least a less pronounced move to the upside start here. I was once again scanning my historical hourly charts and see that the higher you get from the 1050 level along with the S&P 100 at 500, you see there is more and more resistance as there was a lot of sideways trading there in the past which means that it will take more than just a momentum push to get through as there are likely many traders sitting around with old trades that they would love to get out of so we’ll see but psychology has always been stronger than momentum in the end.

At the close the Dow was down by -8.00 points to about 9784 S&P 500 -3.00 points to about 1066.00, S&P 100 -.70 points to about 491.00 and the Nasdaq Composite -7.00 points to 2127.00. Oil closed up about +$.50 to around the $73.00 level.

Guess what, American households were $2 trillion richer on June 30th than they were three months earlier, the first time in two years that household net worth has increased, the Fed said in its quarterly flow of funds report. Household wealth rose in the second quarter at a +17% annual rate, or $2 trillion, to $53.1 trillion after falling at a -13% rate in the first quarter and the reason why, the rally on Wall Street! Maybe in their books that’s true but everyone I know says that there stocks and mutual funds are barely off lows so that’s interesting. Although barely rising, rising home prices contributed as well. Consumers continued to pay down debts or have their debts written off at a record pace is more like it. In the second quarter, household debt fell at a -1.7% annual rate to $13.7 trillion, matching the record percentage decline in the fourth quarter.

Jobless Claims fell -12,000 to a seasonally adjusted 545,000 last week, the lowest since mid-July. Continuing claims however rose by +129,000 to a seasonally adjusted 6.23 million. The number of people claiming benefits of any kind was 9.53 million, not seasonally adjusted. Economists expected initial claims to rise to 563,000.

New construction of houses increased in August up +1.5% in August to a seasonally adjusted 598,000 annualized units roughly in line with the 600,000 pace expected by economists. This is the highest level of starts since last November. Starts of new single-family homes fell -3.0% to 479,000 in August, for the first decline in six months. Starts of large apartment units jumped +25.3% to 119,000. Building permits, a leading indicator of housing construction, rose +2.7% to a seasonally adjusted annual rate of 579,000, also the highest level since last November.

Wednesday, September 16, 2009 4:03 p.m est.

Well today was the day the market hit the plus +60% level off of the bottom in the shortest amount of time of any rally in the past. As I say, that’s all fine as I never really care if were in a bull or bear market but all I’m asking for is a little bit of volatility where we see true oversold conditions, not just glimmers before the market turns back up. Whenever you get a glimpse of an actual correction the market moves so fast its to late to do anything. I think the reason volume remains so low now is because no one wants to get in until there is a decent correction because some day it will pullback and hopefully by then we’ll get some decent volatility occurring. The Dow saw highs of +120.00 points, S&P 500 +16.00 points and the Nasdaq Composite +30.00 points.

At the close the Dow finished up +110.00 points to about 9790 S&P 500 +16.00 points to about 1069.00, S&P 100 +7.00 points to about 492.00 and the Nasdaq Composite +30.00 points to 2133.00. Oil closed up today +$1.50 to around the $72.00 level.

There is an interesting aspect to everything that is going on right now as the market is saying were in a new bull market and earnings are going to be astronomical next year! Did you know if you just look at current earnings readings the P/E on the S&P 500 is 137! No that’s not a misprint by the way, that’s how bad they are. Even if you look at the Fed’s model were starting to get up there as it is currently pricing in about a 20 handle which is getting to the high side. So if you believe the press reports though that say jobs are scarce, another round of foreclosures is about to hit, commercial real estate is about to implode, and capitalism is near dying why do we still see stocks like Tiffany near a breakout while Walmart is about to break down! Walmart is supposed to be the beneficiary of tough times, with its discounts and its just in time inventory management and global platform and Tiffany is supposed to be hurting during times like these. So why are these stocks acting in this fashion? In the middle is Sam's Club, where margins are tight, is suffering, as its prices have gone way up you don’t see many customers. This may be because of the contraction in small business whose owners often buy large lots of materials for their shops, especially restaurants, there. It seems though that the market seems to be expecting a return to extravagance as the economy is supposed to heat up but if Sams club is an indication about what small business is doing that doesn’t add up as most of the economy is based on small business. Markets know best though because obviously the crash we saw last year was completely overdone. Strangely that sounds a lot like the situation were in now!
Consumer prices increased a seasonally adjusted +0.4% in August, pushed higher by a +9.1% increase in gas prices. In the past 12 months, the consumer price index has fallen -1.5%, largely because energy prices have dropped -23% over that period.
Core consumer prices which exclude food and energy prices to get a better look at underlying inflation rose +0.1% in August. The core CPI is up +1.4% in the past year, the smallest year-over-year gain since February 2004. Both the CPI and the core CPI came in inline with economists. Core prices were held down by a -1.3% decline in new car prices, reflecting the discounts given to buyers that were subsidized by the government's cash-for-clunkers program. It was the largest monthly decline in car prices in 37 years.

The volume of mortgage applications filed last week fell a seasonally adjusted -8.6% compared with the week before, the result of a drop in both applications to refinance an existing loan as well as those to purchase a home, the Mortgage Bankers Association reported. The average rate on 30-year fixed-rate mortgages rose for the week ended Sept. 11, while rates on 15-year fixed-rate mortgages and one-year adjustable-rate mortgages fell. The drop in applications follows a +17% week-over-week jump recorded the week of September 4th. Refinance applications fell -7.4% last week, compared with the week before; applications for mortgages to purchase a home were down a seasonally adjusted 10.3% last week, compared with the previous week, the MBA said.
The four-week moving average for all mortgages was up 2.9%. Applications were down -18.7%, compared with the same week in 2008. Refinance applications made up a 61% share of all activity, up from 59.8% the previous week. ARMs made up 6% of all application activity, up from 5.8% the previous week. According to the survey, the 30-year fixed-rate mortgage averaged 5.08% last week, up from 5.02% the previous week. Fifteen-year fixed-rate mortgages averaged 4.41% last week, down from 4.45% the previous week. And one-year ARMs averaged 6.61%, down from 6.69% the previous week.

At the same time the confidence of home builders improved marginally in September as the expiration of a tax subsidy for first-time buyers approached. The housing-market index rose to 19 in September from 18 in August, the National Association of Home Builders said. It was the third straight increase in the gauge that measures whether builders think the market is good, fair or poor. At 19, the index shows that about one in five builders thinks the market is good. Two of the three components of the index improved in September. The current sales index rose two points to 18, while the buyer traffic index rose by one point to 17. The prospective sales index, however, fell by one point to 29. Builders are starting to see some glimmers of light at the end of the tunnel in terms of improving sales activity," said NAHB chief economist David Crowe. However, the slippage in the future sales index shows the market remains fragile. The builders said the $8,000 tax credit for first-time buyers should be extended past its scheduled Nov. 30 expiration. They also said credit remains tight for construction loans, and they complained that new appraisal policies are killing a fourth of sales. Over time, the builders' index correlates with the government's data on housing starts, which will be released tomorrow for August activity. Economists are predicting an increase in starts to a seasonally adjusted annual rate of 600,000 from 581,000 in July.

The current account deficit narrowed to $98.8 billion in the second quarter, or 2.8% of gross domestic product. In percentage terms, this is the smallest deficit since the first quarter of 1991. In dollar terms, the deficit is the lowest since the fourth quarter of 2001. The deficit was $104.5 billion in the first quarter. The narrowing in the deficit was accounted by a reduction in the deficit on goods. Net financial inflows increased to $58.3 billion in the second quarter from $35.4 billion.in the first quarter. Foreign-owned assets in the second quarter increased $16.4 billion in the second quarter after a drop of $67.8 billion in the first quarter.

Tuesday, September 15, 2009 4:03 p.m est.

You know each morning I wake up shaking my head about how the market continues to rise on fumes so I always have one refreshing moment each day when I hear from Art Cashin on CNBC. Every other person on there are blowhards and I rarely take the volume off of mute unless he is speaking but like him I have been around for a long time so whenever I hear what he is saying, for a brief moment I stop pulling out my hair! This morning the hosts were once again trying to make him look bad because he has been cautious since August but he stuck to his guns and said “I’ve been around for 50-years” and things just don’t look good to him right now. That always gives me a bit of relief as it tells me I’m not the only crazy one! The thing I guess I don’t understand is who is it that has the brains or guts I should say, to jump on a rally after a +58% move from the bottom since only March and not take any profits along the way!!!! This move has so far beaten every rally off of a bottom going back to the 1929 crash in this time span! I find it really hard to believe that extra push down we had last year was purely sentiment.

The good news is that retail investors have been jumping on the bandwagon the past couple of months which generally always signal a top but of course when is the question. My numbers have been pointing cautiousness from about 1000 on the S&P 500 but it has continued higher. As I have said, I don’t mind the market rallying even if the economy is barely growing, the problem is that the straight up fashion we are seeing is just setting us up for another big fall. I always think that people are getting tired of one direction markets but I guess not. Anyhow, I too have a bad feeling about the market overall similar to Cashin but if we were to see a decent pullback anywhere in here or at least some flattening out, that would resolve the markets condition to continue its upward trend. Unfortunately when will it come is the question. My hourly charts are still sitting at an 80 degree level! We seem to only move from extreme overbought levels to overbought levels and then back again.

Yesterday it was looking like the market was going to pullback first thing in the morning as it was down pretty hard after President Obama said over the weekend he was going to put tariffs on Chinese tire imports, possibly starting a trade war with them. Of course it didn’t last long though as the market turned up once again closing with slight gains. Today it opened flat and once again was on its way to a decent correction but it turned up again with the Dow seeing highs of +90.00 points, S&P 500 +7.00 points and the Nasdaq Composite +15.00 points.

There was some hard selling right at the close so the Dow finished up +57.00 points to about 9683 S&P 500 +3.30 points to about 1052.00, S&P 100 +.60 points to about 485.00 and the Nasdaq Composite +11.00 points to 2102.00. Oil continues to swing between $68 and $75 closing up today +$2.00 to around the $71.00 level.

Retail sales rose a seasonally adjusted +2.7% in August, the biggest increase in more than three years, helped by government subsidies for cars, higher gas prices, and busy crowds at the malls. Sales were stronger than the +2.3% expected by economists largely because of widespread sales gains outside of gas stations and auto lots. Sales were down -5.3% compared with a year earlier. Auto sales surged +10.6% on the back of the government's cash-for-clunkers program. Excluding autos, sales rose +1.1%, the most since February. Gas station sales rose +5.1% on higher prices and if we exclude auto and gas sales, they rose a much smaller +0.6%.

Manufacturing activity in the New York area improved in September to the highest level since prior to beginning of the recession in late 2007, the New York Fed said. The bank's Empire State Manufacturing index rose to 18.9% in September from 12.1% in August. The new orders index climbed, while shipments dipped. The employment index remained in negative territory. 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 September national factory survey due out in two weeks may show. In August, the ISM manufacturing index increased to 52.9%, the first time the index has been in growth territory since January 2008.

Producer prices rose by +1.7% in August, powered by the biggest gain in energy prices since November 2007. Minus volatile energy and food prices, however, the producer price index rose just +0.2%. Economists were expecting producer prices to climb by +1.5% in August. They estimated core prices would rise by +0.1%.

Friday, September 11, 2009 4:03 p.m est

Here is a very interesting analogy I read this morning about the current debt crisis.
It is the month of August, on the shores of the Black Sea. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.
Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.
The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.
The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.
The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.
The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her “services” on credit.
The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.
The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.
At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.
No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.
And that, ladies and gentlemen, is how North America is doing business.

This illustrates how just a small amount of consumer spending can resolve quite a bit of the overhanging debt and reveals that unless saving occurs we can never get out of this mess. When people quit living in a revolving door lifestyle things will get better. Job losses have slowed, but the unemployment rate has resumed its climb. Consumer Confidence has also moved up a bit but remains near historic lows. Even economic activity has picked up but very little. Still, the problem is that debt levels are in the stratosphere, and 100 Euro isn’t going to solve the problem. The U.S. and other developed nations have national debt levels in the range of 50% of GDP, threatening their credit ratings and if that comes pass this +56% plus rally will come to a quick, abrupt, halt. Time will tell for sure but for this day what is important is that we have made it through another year of no terrorist attacks as 9/11 passes and that is something to be thankful for.....

The market started the day on the upside as Fed Ex raised their earnings outlook although they said they didn’t actually know how things were going to really turn out in the economy for the fall but that isn’t really important is it!!! The Dow saw highs of +25.00 points, S&P 500 +4.00 points and the Nasdaq Composite +10.00 points. When oil started selling off the market went with it and the Dow was off -60.00 points, S&P 500 -6.00 points and the Nasdaq Composite -20.00 points.

Of course we couldn’t end the day down so the final hour saw some buying come back in to see the Dow close interestingly close to where it closed the day before 9/11 of 9605, eight years later! At the close the Dow was down by -22.00 points to about 9605 S&P 500 -1.50 points to about 1043.00, S&P 100 -1.00 points to about 482.00 and the Nasdaq Composite -3.00 points to 2081.00. Oil sold off strong today for no real reason off -$2.60 to around the $69.00 level.

Consumer sentiment umped in early September to 70.2% from 65.7% in August, according to the Reuters/University of Michigan index. This is the highest reading since June, and is significantly better than the 68% that was expected by economists. Sentiment had fallen in the past two months. Consumers are still facing several challenges, including large job losses, weak income growth, falling house prices, rising energy prices, and too much debt. It seems that confidence is following the stock market higher. The current-conditions index rose to 71.8% in September from 66.6% in the previous month while the expectations index rose to 69.2% from 65% in August. The expectations index is one of 10 leading economic indicators.

It was higher crude oil prices that drove import prices up by +2% in August, the fifth increase in the past six months. Import prices have risen +7.6% so far in 2009 as energy prices have rebounded. Despite the recent gains, import prices are down -15% over the past 12 months. Imported fuel prices rose +9.8% in August, but are down -39.6% in the past 12 months. Prices of non-fuel imports into the States rose +0.4% in August, the largest gain in a year. Economists were expecting import prices to rise +1% in August after falling -0.7% in July. Prices of exports from the United Stats rose +0.7%.

Thursday, September 10, 2009 4:03 p.m est.

Last night there was no big surprises in President Obama’s speech to Congress last night so the market was looking to move higher this morning and after an initial spill with the Dow off -40.00 points, S&P 500 -6.00 points and the Nasdaq Composite -5.00 points it turned around on this unbelievably poor volume as we barely made it over a billion shares today, is this Christmas and no one told me!!! The Dow saw highs of +90.00 points, S&P 500 +11.00 points and the Nasdaq Composite +25.00 points while treasury secretary Geithner testified before an oversight panel about the Tarp program. He is unbelievable as he never really answers any real questions about how much has been lost etc and how the problem all started because Americans spent too much on credit yet the government is borrowing trillions of dollars and setting up cash for clunkers and appliances to get everyone to again spend instead of save. With the market still rising even though indications are that the economy is flattening out once again or barely moving ahead I just keep on shaking my head as I’m obviously missing something and I don’t know what it is except that there must be a huge amount of manipulation going on and if that is true,look out below.... The only question is what will cause it or will just be that the buyers turn into short sales! If we were to stop here mind you and consolidate for a few months it would be easier to accept.
At the close the Dow was up by +80.00 points to about 9627 S&P 500 +11.00 points to about 1044.00, S&P 100 +4.00 points to about 483.00 and the Nasdaq Composite +24.00 points to 2084.00. Oil seems to be stuck in-between $68 and $72 as it closed up around the $72.00 level.

It was interesting that the Treasury Department reported yesterday that lenders have reworked only 12% of the American home-owners eligible for mortgage modifications under the “Home Affordable Modification Program”, an increase of only 3% from last month’s report that 9% had been modified. They also warned that even if the program ramps up and is successful in reaching its target of 500,000 eligible homeowners, that millions more foreclosures should be expected. A spokesperson said analysts expect 6 million Americans could lose their homes in the next three years. That’s pretty bad for an economy that’s got so many other things to deal with on the way to recovery.

This may be why were seeing bonds on fire lately. Yields have fallen sharply from near 4% in June on the 10-year to well under 3.5% currently. Everyone thought that inflation was going to come back with the heavy stimulus, right? Economic growth was going to be the theme, and with that a straighter yield curve. So far that still hasn't occurred and it appears that the bond market sees little chance of a strong economic recovery and may even be discounting some deflation. This seems to make bonds a better investment and that equities may not be able to go much higher without some more stimulus. The bond market may be daring the Fed\ to provide more stimulus or at least continue their purchases of treasury securities.

Jobless Claims fell -26,000 to a seasonally adjusted 550,000 last week, the lowest since mid-July, not very much considering all of the stimulus that has been provided. They have been in a fairly narrow range for the past eight weeks. Continuing claims fell by -159,000 to a seasonally adjusted 6.09 million, the lowest number since April though but again that may be because of people falling off the board.

It was also reported that the trade deficit widened by +16.3% in July to $32.0 billion and is the biggest percentage increase in the deficit since February 1999. The trade deficit was well above forecasts of a deficit of $27.5 billion. Imports rose at a record pace in July, outpacing a further gain in exports. Trade activity is still well below last year's level. The deficit with China was $20.42 billion in July compared with $25.01 billion in the same month last year.

Wednesday, September 9, 2009 2:03 p.m est.

The market is higher once again today on lower and lower volume but that doesn’t seem to matter as long as the dollar is falling. The Dow saw highs of +80.00 points, S&P 500 +11.00 points and the Nasdaq Composite +30.00 points as it presses near old highs that were just made at the end of the month and in only four trading sessions. At 2:00 p.m est the Fed released their Beige Book on different Fed districts and it revealed that the economy was still “stabilizing” and that factory owners were cautiously optimistic. The residential real-estate market was also showing signs of improvement in most regions, the Fed said and another glimmer of hope came from an uptick in demand for temporary workers. However, there were still signs of continued sluggishness of consumer spending. The majority of districts reported flat retail sales even with the "cash for clunkers" program and credit remained hard to get. As we go into the final two hours of trading all indices have cut their gains in half.

Since March we have seen quite a move and is basically moving lockstep with many other big runs after huge sell offs and has even surpassed them. The upside has measured as much as +49% print low to print high for the Dow, +56% for the S&P 500 and a huge +63% for Nasdaq in about five-and-a-half months. This has truly been one of the most spectacular moves in history. It makes it very scary to want to have any downside trades on right now, especially being in the period were now in as September is considered the worst month ever to own stocks! The other thing is that volume continues to move lower instead of stronger and bullish advisors measured by Investor’s Intelligence have gone from 26.4% on March 11th to 51.6% as of August 26th. On the same day, bearishness fell to only 19,8%, the lowest since October 17th, 2008. With indicators remaining overbought I’m still waiting to see a stronger correction come as the best we’ve had of late was after the June 11th highs with a modest -7% decline on a closing basis and just last week we only saw -5% fall. The biggest factor that there hasn't been anything to really give the market a jolt with some real fear that it could fall to zero! That would provide a decent entry point for some downside trades. A decent -10% correction would be a decent oversold amount but of course as I say I worry it could be even more.

Here’s a shocker! It was reported that the auto bailout money is not likely to be recovered! Although I doubt you really are shocked about this, according to The Washington Post: "The federal government is unlikely to recoup all of the billions of dollars that it has invested in General Motors and Chrysler, according to a new congressional oversight report assessing the automakers' rescue. The report said that a $5.4 billion portion of the $10.5 billion owed by Chrysler is "highly unlikely" to be repaid, while full recovery of the $50 billion sunk into GM would require the company's stock to reach unprecedented heights "

Tuesday, September 8, 2009 4:03 p.m est

So schools back in for sure now, the long weekend and summer are done so everyone is basically back to work, Congress and the Senate are settling in and the market saw incredibly weak volume! The Dow saw highs early on and drifted around those levels for most of the day and hit them again in the final hour with the Dow seeing highs of +90.00 points, S&P 500 +10.00 points and the Nasdaq Composite +25.00 points.

At the close the Dow was up by +56.00 points to about 9497 S&P 500 +9.00 points to about 1025.00, S&P 100 +4.00 points to about 476.00 and the Nasdaq Composite +19.00 points to 2038.00. Oil was up strongly over +$3.00 for no real reason around the $71.00 level. So far this is a very boring start to the week so we’ll see how the rest of the week goes. All of this low volume is getting the market back into the strongly overbought zone once again.

Friday, September 4, 2009 4:03 p.m est.

As indicated the employment report this morning came in worse than expected but after an initial decline the market turned higher on miniscule volume. The Dow saw highs of +110.00 points, S&P 500 +14.00 points and the Nasdaq Composite +35.00 points. At the close the Dow was up by +95.00 points to about 9440 S&P 500 +13.00 points to about 1016.00, S&P 100 +5.00 points to about 472.00 and the Nasdaq Composite +35.00 points to 2019.00. Oil basically closed unchanged for the day around the $68.00 level. Hope you have a great long weekend!

The unemployment rate jumped to a 26-year high of 9.7% in August as employment fell by -216,000 for the 20th consecutive month. Jobs have dropped by -6.9 million to 131.2 million since the recession began in December 2007. Unemployment has increased by 7.4 million during the recession to 14.9 million. The -216,000 decline payrolls was close to market expectations of a -233,000 drop, but the unemployment rate rose higher than the 9.5% level expected and previous months were revised higher. The unemployment rate was 9.4% in July. It was the smallest decline in payrolls since August 2008 though and if your a big Obama fan, smaller declines mean green shoots everywhere and that eventually there will be jobs created! According to a separate survey of households, employment fell by -392,000 and unemployment rose by +466,000 to 14.9 million. There is good news though as average hourly earnings rose +6 cents, or +0.3%, to $18.65 an hour. In the past year, average hourly earnings are up 2.6%. The manufacturing workweek was unchanged in August at 39.8 hours.

Long-term unemployment got worse however and the number of people working part-time who want full-time work rose by +278,000 to 9.1 million which is bad news. Even worse is that an alternative measure of unemployment that includes discouraged workers and those forced to work part-time rose to +16.8% from +16.3%, the highest on record dating back to 1995!

Most industries lost jobs in August but of 271 industries, 35% were adding workers in August, according to a survey of hundreds of thousands of business establishments. Private-sector employment fell by -198,000 in August. Employment in the private-sector is now lower than it was 10 years ago. Goods-producing industries cut -136,000 jobs, including -65,000 in construction and -63,000 in manufacturing. Service-producing industries cut -80,000 jobs in August while retail cut -10,000. Financial services cut -28,000, and business services lost -22,000, including -6,500 temporary-help workers.
Health-care industries added +28,000 jobs though which is good.

Thursday, September 3, 2009 4:03 p.m est.

Yesterday the market floated around but closed lower as selling took hold in the final hour to close near lows but they weren’t too bad. Today the market bounced back even though it looks like employment has flattened out according to Jobless Claims and yesterdays ADP report coming in worse than expected. This means that tomorrows report could have some surprises for traders. The Dow was up +50.00 points, S&P 500 +7.00 points and the Nasdaq Composite +15.00 points before turning down once again to touch the prior days lows with the Dow off -30.00 points, S&P 500 -3.00 points and the Nasdaq Composite -15.00 points. Since then it has bounced back again moving to new highs near the end of the day.

At the close the Dow was up by +64.00 points to about 9344 S&P 500 +9.00 points to about 1003.00, S&P 100 +3.00 points to about 466.00 and the Nasdaq Composite +16.00 points to 1983.00. Oil continues lower closing around the $68.00 level.

The number of people filing for Jobless Claims fell by -4,000 to a seasonally adjusted 570,000 last week. The four-week average rose +4,000 to 571,250 however, the highest in eight weeks. Meanwhile, continuing claims rose by +92,000 to a seasonally adjusted 6.23 million. The insured unemployment rate rose to 4.7% from 4.6%. The four-week average of continuing claims fell -27,250 to 6.22 million, the lowest since April. The number of people collecting benefits of any kind was 9.65 million, not seasonally adjusted.

It’s looking like the employment report out tomorrow may come in worse than expected as it appears that the private sector lost -298,000 jobs in August, according to the ADP employment report released yesterday. The decline in employment was more than the forecasts of a decline of -250,000 which also includes the government sector. The August ADP fits with the trend of "less bad" economic data. Employment losses are falling but are likely to persist for several more months, according to Joel Prakken, chairman of Macroeconomic Advisers LLC that prepares the report.

Layoffs planned by major corporations dropped -21% during August from July's pace of job-cut announcements, according to Challenger Gray & Christmas. The August total of 76,456 was the second lowest of 2009 as compiled by the Chicago-based outplacement firm in its tally of job-cut announcements. Layoff announcements sank to 74,393 in June, a 15-month low, then rose to 97,373 in July. Job cuts ran 14% lower than the 88,736 layoffs announced in August 2008. Including the latest month, job-cut announcements have dropped on a month-to-month basis six times in seven, Challenger Gray said. Still, the firm's unscientific count of announced job cuts for all of 2009 has now cracked the 1 million mark, exceeding 1.07 million, 60% more than at this point a year ago. Challenger Gray's total for all of 2008 was nearly 1.224 million. The job-cut figures aren't seasonally adjusted, and count only a fraction of the actual number of layoffs that take place each month, mostly in small- and medium-sized firms.

Mortgage applications slid last week even as mortgage rates edged lower, with requests for loans to buy homes declining for the first time since early July. The Mortgage Bankers Association's applications index fell by a seasonally adjusted 2.2% in the week ended August 28, as demand for both purchase and refinance loans slipped. Fixed 30-year mortgage rates averaged 5.15% last week, down -0.09 percentage point. This was still above the record low of 4.61% set in March yet a year ago this borrowing cost was 6.39%. Stability has seemingly returned to the three-year housing market that has endured the deepest crash since the Great Depression. The view that the worst may have passed is gaining traction.

Pending home sales, based on contracts signed in July, jumped +3.2% to a two-year high, the National Association of Realtors. Economic stimulus that has boosted consumer optimism, signs that home prices have neared a bottom, and federal programs such as a soon-expiring first-time home buyers tax credit have turned more fence-sitters into house purchasers, industry experts said. The NAR estimates that as many as 2 million first-time buyers will use the tax credit this year, and about 350,000 sales would not have occurred without it. Buyers need to close their loans by Nov. 30 to qualify.

Non-farm productivity was stronger than initially thought in the second quarter as companies slashed costs to protect profits. The Labor Department said non-farm productivity rose at a 6.6% annual rate, rather than the 6.4% pace it reported last month. That was the biggest increase since the third quarter of 2003 and isn’t good news as it means that companies are getting people to work harder instead of hiring more people. Productivity rose at a 0.3% pace in the first quarter. Analysts had forecast productivity, which measures the hourly output per worker, rising at a 6.4% rate in the second quarter. Despite the increased productivity, output fell at a -1.5% rate in the second quarter, the department said, unchanged from its previous estimate, as over 6 million jobs have been cut since the recession began in December 2007. Output, measured on a year-on-year basis, was -5.5% lower. Compared with the same quarter last year, non-farm productivity was up +1.9%.

Hours worked fell at a 7.6% rate in the April-June period from the first quarter, unchanged from last month's estimates. Unit labor costs, a gauge of inflation and profit pressures closely watched by the Fed, fell -5.9%, the biggest decline in nine years.

Analysts had expected unit labor costs to fall -5.8% in the second quarter. Unit labor costs dropped -5% in the January-March quarter. Unit labor costs fell -1.2% year-on-year. Compensation per hour rose at a +0.3% pace rather than +0.2% as reported last month and, adjusted for inflation, was down -1% instead of a -1.1% decline.

Tuesday, September 1, 2009 3:30 p.m est.

This morning I noticed a slight trend change in the market as overnight Globex futures were lower but then as usual turned higher as we got into overnight trading. This morning however they had turned lower once again even though economic data was positive. That was the first clue. It looked like the selling was abating as the market turned higher as fast as it went down with the Dow up +45.00 points, S&P 500 +5.00 points and the Nasdaq Composite +25.00 points however so the earlier move just seemed to be an abnormality. Sell programs hit mid morning though and within a few minutes the Dow was off triple digits and stayed there so that early morning change turned out to be a good clue after all! The market continued to grind lower and midday saw lows with the Dow off -200.00 points, S&P 500 -22.00 points and the Nasdaq Composite -45.00 points and going into the final half hour saw lows once again. Oil also sold off moving below the $70 level closing around the $68.00 level.

There is an interesting factor that happened last week that may be playing into today’s sell off as the U.S. dollar, as measured in terms of Libor rates, a global benchmark for multiple commercial interest rates, is now cheaper to borrow than the Japanese Yen, a significant change of what has up to now been the natural order of the currency markets the past couple of decades. This new order may be a significant development with wide economic repercussions, or may just be another anomaly related to the fallout of the sub-prime mortgage crisis. According to The Wall Street Journal: "On Wednesday, banks seeking dollars had to pay 0.37188%, which is the three-month dollar Libor, while yen borrowers needed to pay 0.38813%. It is the first time since May 1993 that the rates have flipped.
There is an interesting historical parallel because the reason the Yen was cheap to borrow for so long is that Japan's economy was weak and the expectation that low interest rates there would be in place for a long time was a no brainer. What’s interesting is what happens to the effect of the carry trade on the way the currency markets trade and whether any effect of that carries on into the way the world does business. The carry trade was a trading strategy where investors borrowed yen at nearly zero interest rates, invested them in foreign bonds with higher yields and pocketed the difference after paying back the loan. In essence it was borrowing free money, trading with it, and giving it back after you were done with money in your pocket.

Still, the fact that this is happening should give anyone who lives in America something to think about because it looks as if the market is starting to consider that the economy may be similar to that of Japan's in the 1980s and 1990s when the carry trade started to gather momentum as an investment alternative so the U.S. economy may have a much longer trek ahead than many are expecting.

According to The Journal: "The reversal may be more symbolic than a sign of a lasting change -- currency analysts say the rates are so low and the gap so small that it is unlikely to cause investors to make a large shift in strategy. But it does indicate that investors believe U.S. interest rates could stay low for a prolonged period." This basically means that if this gap widens, and the dollar becomes cheaper to borrow, it could be the telltale sign for investors view of what may lie ahead for the U.S. economy.

Of course this will also hurt Japan. If the Yen starts to appreciate as a result of this new dynamic, it will hurt the export led Japanese economy, further eroding any of the very small gains it has made over the last 20 years. This is something that could have wider repercussions over time, such as increasing China's influence in Asia even further, and perhaps putting Japan in a position where it becomes a second division economy in the world. One thing for sure is what the Journal points out: "The historic shift -- and the decrease in the three-month dollar Libor -- underscores how global financial markets are now awash in liquidity, especially dollars, as central banks have flooded their economies with low rates and cheap financing. That is a significant change from last October, as credit markets seized up after Lehman Brothers Holdings Inc. collapsed."

What this could all mean is that we may be in the early stages of a significant redefinition of the global economy where the U.S. and Japan are not being seen as the absolute first tier anymore and if you look out further, you can see that all of America's budget deficits and bizarre politics are leading the world toward a reassessment of the economic pecking order. Basically it's not a good combination so we could look back to August 26th, 2009 as the day during which everything changed.

Conditions for the nation's manufacturers expanded for the first time in 19 months in August, the Institute for Supply Management reported as their ISM index rose to 52.9% in August from 48.9% in July. This is the first time the index has been above break even point since January 2008. The consensus was for the index to rise to 50.5%. Readings above 50 indicate expansion.

Boosted by low prices and a home-buyer tax credit, Pending sales of existing homes rose in July for the six straight month, the longest streak on record, a real estate trade group reported. The pending home sales index rose +3.2% in July, the National Association of Realtors said. The index is +12% above July 2008. Pending homes sales in July rose in the South and West. The index is based on sales contracts on existing homes. The NAR reports on sales of existing homes once the sales closes, usually six to eight weeks later.

Friday, August 28, 2009 11:40 a.m est.

Yesterday the market moved down hard first thing in the morning as economic data didn’t show any progress especially on the job front. The Dow saw lows just after the FDIC released data stating that there are still 416 banks in trouble. The Dow was off -90.00 points, S&P 500 -12.00 points and the Nasdaq Composite -35.00 points. Another interesting factor which I’m talking about lower is that the dollar was up which of late has been a trading guide. If its up the market is down and vice versa. When it turned lower the market suddenly shot up making closing with slight gains.

This morning before the open the dollar remained lower, economic data was again neutral to down but after Intel said it was raising its earnings outlook for the third quarter Globex futures shot up almost +1%. Interestingly, the response wasn’t that great when stocks opened as the market was only slightly up and has now turned lower with only the Nasdaq remaining higher. The Dow has seen lows of -40.00 points, S&P 500 -3.00 points and the Nasdaq Composite +5.00 points. Normally this announcement would have shot the Dow up over +200 so could this be an indication that we have seen the rally from buy on the rumor and sell on the news, maybe. As I have mentioned this week, Smart Money has seen some heavy selling this past week and it seems that some of the financials are blowing off to the upside more from short selling than actual buying. It will be interesting as we enter September next week.

I find the market at an interesting point right now as everyone is talking about the U.S dollar trade. Traders always seems to figure out a way to hedge everything and it seems this has been the play. Since the start of this 5 month rally the market seems to only go up if the dollar is falling and yesterday was a perfect example of that. The market was tanking as the dollar rallied and as soon as it turned lower the market went up. That was the same thing for today. The difference now however is that everyone is talking about it so I’m sure its about to change. Either that or it’s because it looks like the dollar is about to turn higher longer term as it has been building a base. By the way, low dollar values are not good in the long run as it eventually causes inflation. The other worry is that because the dollar is so low if it were to breakdown due to rising debt, the stock market could utterly collapse once again. This could also be coming as t-bill rates are once again nearing the 0% level and the TED spread is also getting close which means that credit is tightening once again. This is what hurt the market last fall and something to watch....

The Federal Deposit Insurance Corp. said yesterday that more lenders ran into financial trouble during the second quarter as the recession continued to make banks hold soured loans. The FDIC said that the number of troubled banks rose to 416 at the end of June from 305 at the end of March. This is the largest number of banks on its "problem list" since June 30, 1994, when 434 banks were on the list. Assets at troubled banks totaled $299.8 billion, the highest level since Dec. 31, 1993, the agency said. Banks insured by the FDIC swung to a total quarterly loss of $3.7 billion from last year when they reported a total profit of $4.8 billion.
Thankfully the FDIC said it has "ample resources" to protect depositors. "No insured depositor has ever lost a penny of insured deposits ... and no one ever will," they asserted. More than 28% of all insured institutions reported a net loss in the second quarter, compared with 18% in the year-ago quarter. "Deteriorating loan quality is having the greatest impact on industry earnings as insured institutions continue to set aside reserves to cover loan losses," Bair said. The quarterly report "makes clear that banks are neither at the beginning or the end of the problems presented by a difficult economy," said James Chessen, chief economist at the American Bankers Association. "They are in the middle and significant challenges still remain."

Today it was reported that Personal Incomes were unchanged in July as the impact of federal stimulus payments waned and wages rose for the first time in a year, the Commerce Department reported. Consumer spending increased +0.2% last month, led by higher outlays for autos and other durable goods. Spending rose for the third month in a row. With spending rising faster than incomes, the personal savings rate fell to 4.2%, down from 4.5% in June and that is a bad sign in my view in the long run. On the surface, the report was slightly weaker than expected, but with upward revisions to figures for May and June, income and spending levels were higher than forecast. Incomes and spending were revised higher in May and June as they incomes dropped -1.1% in June, not the -1.3% originally reported while real spending rose +0.1% in June, rather than falling -0.1% as initially reported. Economists had been looking for incomes to rise by +0.2% in July, with spending pegged to increase +0.3%. Real disposable incomes are up +0.7% since bottoming in March, but are down -3.5% from the peak in May 2008, when taxes were cut. Real consumer spending has risen +0.3% from the bottom in April, but is down -1.6% since the recession began in December 2007.
Consumer sentiment improved in late August but remained below levels reached in July, according to the Reuters/University of Michigan index. The sentiment index rose to 65.7% in late August from 63.2% earlier in the month, which was the lowest reading since March. Sentiment stood at 66% in July. Sentiment has now fallen two months in a row. The increase in the index was above expectations as forecasts had expected sentiment to rise to 64%.

Yesterday it was reported that Jobless Claims fell by -10,000 to a seasonally adjusted 570,000 last week, marking the first drop in initial claims in three weeks but remaining high overall. Economists were expecting initial claims to drop back to 565,000. A year ago, initial claims were at 433,000. Claims had risen by +26,000 over the past two weeks. Although claims have fallen below the 600,000 level that prevailed earlier this year, economists are disappointed with the pace of improvement in the data along with many analysts, including top Federal Reserve officials, now think it is likely that the recovery will be "jobless" as businesses hold off hiring until the economic expansion is assured. The four-week average of initial claims fell by -4,750 to 566,250 while continuing claims fell by -119,000 to a seasonally adjusted 6.13 million last week and is the lowest level since early April however more and more people are now falling off the list as their claims run out. The four-week average of continuing claims fell by -27,000 to 6.24 million.

The recession eased its grip on the economy in the second quarter of the year, as real gross domestic product fell at a -1% annualized rate after plunging -6.4% in the first quarter, the Commerce Department reported. The economy contracted four quarters in a row for the first time since the Great Depression of the 1930s so it should bounce right back right! Compared with a year ago, real GDP is down -3.9%. The revisions to second-quarter GDP released on Thursday offset each other. The negative -1% growth rate was identical to the government's first estimate released a month ago. Economists were expecting the decline in GDP to be revised lower to -1.5% annualized.

The details of the GDP report suggest the economy is poised for a stronger rebound in the third quarter of the year. Businesses cut their inventories at a faster pace than first reported, meaning the inventory cycle may turn faster and stronger than previously believed if you think that they will start building them again because of demand. Inventories fell at a record annual rate of $159.2 billion in the second quarter. Economists are looking for real GDP to rise at a +3% annual clip in the current quarter, but it largely be because inventories won't be falling so fast. Consumer spending is also expected to add to growth in the third quarter hopefully but I’ll wait to see it!

Wednesday, August 26, 2009 Midday

The market has been basically flat the past couple of days. Today it started the day down as Durable Goods orders were better on the surface but weaker overall. The Dow saw lows of -60.00 points, S&P 500 -7.00 points and the Nasdaq Composite -10.00 points. After New Home Sales came in better than expected the market of course turned around with the Dow seeing highs of +40.00 points, S&P 500 +5.00 points and the Nasdaq Composite +15.00 points but the gains didn’t hold and are currently lower to flat once again.

As I said on Monday, the big debate continues right now about if this is just a bear market bounce or the start of a new bull. It is hard to believe that it is the start of a new bull considering that in every other bull market, the economy had started a little bit higher before the market took off. I still don’t think Greenshoots are an economy turner! There is also a lot of questions out there about what is coming down the pike economically with housing and deficits and no one knows for sure. After having this many consecutive up months we are pushing the boundaries percentage wise. Even more importantly is that within time and percentage gains the never ending, up trending, over exuberant market should at least start to lean over slowing the upward climb so gains can consolidate. This should at least cause volatility to begin making further upside moves more in line with historical averages. We are also entering the September/October time period and the final days of the last expiration cycle could have been a flush moment to kill the bears. Another big factor is that company insider selling continues to fall to record lows which is never a good sign especially if this is supposed to be the start of a new bull market and Smart Money is selling pretty hard now. All I really care about though is that we start to see a normal market where it goes up and down putting everyone on equal footing once again. I have a feeling that once everyone gets back from holidays that were going to see this because another factor is that volume continues to shrink not rise on this rally.

It was a doubling in aircraft bookings during July drove orders for Durable Goods up by +4.9%, the largest increase in two years. I guess I should get my order for a plane in before everyone else does as it has such an effect on the general population! Excluding the +18.4% increase in transportation goods, orders rose +0.8%, the third gain in a row and the longest upward streak in four years, whoohoo! Orders for durable goods expensive manufactured goods designed to last three years or more, had fallen -1.3% in June, revised up from the -2.5% drop originally reported. Orders were down -26% in the first seven months of 2009 compared with the same period last year. Economists were looking for a +4% gain in durable-goods orders last month. Shipments of durable goods rose +2% in July after a +0.7% increase in June. Inventories fell -0.8%, a sign that manufacturers are getting their once-bloated stockpiles of goods back in line with demand, which should help growth in the second half of the year but the question remains how much. Will be because of demand or just replenishment. These numbers did prompt Morgan Stanley economists to increase their forecast for third-quarter gross domestic product growth to +4.3% from +3.9%. "We now see overall business investment rising 1%," wrote economists David Greenlaw and Ted Wieseman. July's strong gains in orders and shipments are consistent with other evidence pointing to a revival of manufacturing output following the steepest drop in 60 years earlier in the year.

While the increase in durable-goods orders for July was concentrated in transportation, gains were seen as well in most other industrial sectors, including electronics, electrical equipment, and metals. Orders for machinery fell sharply, however. Orders for nondefense, nonaircraft capital goods dropped -0.3% in July, a reversal after hefty gains in May and June. Shipments of core capital equipment the best monthly gauge of business investment rose -0.5%. Orders for transportation goods rose +18.4%, including a 107% gain in civilian aircraft while cars and parts were up +0.9%. The cash-for-clunkers program had a tiny impact on July orders and shipments, but could have a larger effect in August. Orders for machinery fell -6.6% while electronics excluding semiconductors rose +1.6%, despite a -2.8% drop in computers. Orders for electrical equipment increased +5.3% while orders for primary metals rose +2.6%. Orders for fabricated metals gained by +2.8%.

Sales of new homes rose for the fourth month in a row in July, increasing an estimated +9.6% to an annual rate of 433,000. The seasonally adjusted sales rate was the highest since last September and was the fourth consecutive increase in sales adding more houses to an already bloated inventory. It had sunk to a record-low sales pace of 329,000 in January. Sales for last month, while -13.4% lower than in July 2008, are up +31.6% from the January bottom, the data showed. Sales are being helped by more affordable prices, low mortgage rates and government incentives to buy homes. Still, unemployment, rising foreclosures and falling prices are keeping some buyers on the sidelines. "New home sales have clearly moved off of their cyclical lows, but there remains ample reason to doubt whether this increase in sales can be sustained over coming months, particularly given that the first-time buyer tax credit is set to expire Nov. 30," wrote Richard Moody, chief economist for Forward Capital. Government statisticians have low confidence in the monthly report on new-home sales, which is subject to large revisions and large sampling and other statistical errors.

In most months, the government isn't sure whether sales rose or fell. The standard error in July, for instance, was plus or minus 13.4%. The government says it can take up to five months to establish a statistically meaningful trend in sales and over the past five months, sales have been on a 373,000-unit annual pace, up from 358,000 in the five months through June. For all of 2008, 485,000 homes were sold. In 2007, it was 776,000. Sales in April, May and June were revised higher in the latest report. Sales increased +9.1% in June to a 395,000 pace, up from 384,000 reported earlier. Economists had expected July's sales of new homes to come in at 395,000. Meanwhile, inventories of unsold new homes fell -3.2% to 271,000, the lowest in 16 years. This represented a 7.5-month supply at the July sales rate, the lowest in two years. Builders have cut back on production of new homes, but they still face rising inventories of unsold existing-homes as foreclosures continue to mount up.

The number of homes for sale under construction fell -1.8% to 112,000, the lowest on record since the data were first collected in 1963 but it's taking a record 12.4 months to sell a home once it's completed. The median sales price of a new home fell to $210,100, down -11.5% compared with a year earlier. Sales rose in three of four regions, led by a +32% rise in the Northeast and followed a +16% gain in the South while they rose +1% in the West but fell -8% in the Midwest.Yesterday it was reported that Confidence among consumers increased in August as they became less worried about the outlook for the labor market. The Conference Board’s confidence index rose to 54.1%, more than forecast and the first gain in three months, from 47.4% in July, a report from the New York-based group showed today. The figure reached a record low of 25.3% in February. Consumers this quarter have benefited from government efforts such as the “cash-for-clunkers” plan and extended jobless benefits aimed at helping spending, which accounts for 70% of the economy and I know if I didn’t have a job as long as I know I’m getting benefits I’d spend money, not! Nonetheless, the unemployment rate that’s projected to reach 10% by early 2010 and stagnant wages will make the gains difficult to maintain. “Consumers were more upbeat in their short-term outlook for both the economy and the job market in August, but only slightly more upbeat in their income expectations,” Lynn Franco, director of the Conference Board’s consumer research center, said in a statement. “As long as earnings continue to weigh on consumers’ minds, spending is likely to remain constrained.” Confidence was projected to rise to 47.9% from a previously reported 46.6% in July, according to economists. Forecasts ranged from 42% to 51%. The index averaged 57.95% last year.

People who said jobs are plentiful rose to 4.2%. The proportion of people who said jobs are hard to get decreased to 45.1% from 48.5%. The proportion of people who expect their incomes to rise over the next six months increased to 10.6% from 10.1%. The share expecting more jobs increased to 18.4% from 15.5%. Today’s confidence figures run counter to the Reuters/University of Michigan preliminary index of consumer sentiment, which this month declined for a second straight time as concern over jobs and wages grew.

Home prices in 20 cities fell in June at a slower pace than forecast, signaling the real-estate crisis that triggered the worst recession since the 1930’s is dissipating. Greenshoots I guess still mean things are great! The S&P/Case-Shiller home-price index declined -15.4% from a year earlier, the smallest drop since April 2008, the group said today in New York. The gauge rose from the prior month by the most in four years.

The Conference Board’s measure of present conditions increased to +24.9% from 23.3% the prior month. The gauge of expectations for the next six months jumped to 73.5%, the highest since December 2007, from 63.4%. I think this could also mean that people are just tired of prices falling. The price declines in each of the 20 cities over the past year, based on the Case-Shiller data for June are:

Las Vegas, down 32.4%; Phoenix, down 31.6%; Detroit, down 25%; Miami, down 23.4%; San Francisco, down 22%; Minneapolis, down 19.8%; Tampa, down 19.5%; Los Angeles, down 17.8%; Chicago, down 16.7%; Seattle, down 16.1%; San Diego, down 16%; Portland, down 15.2%; Atlanta, down 13.7%; New York, down 11.9%; Washington, down 11.8%; Charlotte, down 9.6%; Boston, down 5.9%; Denver, down 3.6%; Cleveland, down 3%; and Dallas, down 2.2%.

Friday, August 21, 2009 4:03 p.m est.

It looks like were seeing one of those manipulated expirations once again as Globex futures last night were down hard as China and Japan were down over -2% overnight but right at the Chinese low Kathy Matsui, chief equity strategist at Goldman Sachs, you know that old company that used to be owned privately before it went government, jumped on the phone and made comments about calling for a +73% increase in Japan’s corporate profits next year buoyed by cost cuts, a weaker yen and rising demand. “People are going to be surprised at how sharp the recovery will be,” she said in a phone interview. “Our forecasts for both the March 2010 and March 2011 financial years exceed consensus estimates largely due to our expectations of stronger global growth, continued restructuring benefits, and a weaker yen,” Matsui wrote in a report titled “Back in Black.” This amazing 200% reversal of forecast, timed on the eve of option expiration, took the S&P futures from 996 all the way back to 1,010 just before the open. You know everyone says don’t fight the Fed but when the Fed teams up with GS, JP Morgan and Credit Suisse, all of whom made huge bullish calls this week with amazing timing, Another thing that turned futures around was that Fed chief’s Ben Bernanke’s speech was leaked that was to come out just after the open where he is basically saying that the recession is over now.

“The global economy is now beginning to emerge from its worst crisis in generations, but the downturn might have been much worse if central banks hadn't acted so forcefully last fall, Fed Chairman Ben Bernanke said. In a speech at the Kansas City Fed's annual retreat in Jackson Hole, Wyo., Bernanke summarized a hellish year and explained modestly how he and his central bank colleagues saved the world from a bigger disaster. "The world has been through the most severe financial crisis since the Great Depression," he said. "As severe as the economic impact has been, however, the outcome could have been decidedly worse." If the Fed, other central banks and other government leaders hadn't acted in a coordinated and aggressive way in September and October of 2008, "the resulting global downturn could have been extraordinarily deep and protracted," Bernanke said.

Bernanke spoke to a selected group of top policy makers and economists. His speech, however, was aimed at a much wider audience: The president, the Congress and a public that's angry and confused. Bernanke's term as chairman of the Fed runs out in January, and the financial world is watching to see if President Barack Obama reappoints Bernanke or hands to job to someone else. Past financial panics have exacted an "enormous toll in both human and economic terms," Bernanke said. "In this episode, by contrast, policymakers in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation." The policy response "averted the imminent collapse of the global financial system, an outcome that seemed all too possible to the finance ministers and central bankers."

Bernanke's speech emphasized the policy response after the crisis erupted last September with the collapse of Lehman Bros. and the failure of other financial institutions, including Fannie Mae, Freddie Mac, American International Group, Merrill Lynch and Wachovia. His history of the crisis essentially begins in September 2008, and ignores the actions and decisions that led to disaster. Of the origins of the crisis, Bernanke's only remark was that, until just before the crisis, "there was little to suggest that market participants saw the financial situation as about to take a sharp turn for the worse."

Bernanke made almost no comments about the future course of the U.S. or global economies, other than repeating phrases from the latest communique from the Federal Open Market Committee that the economy seems to be leveling out. He cautioned that any recovery is likely to be gradual at first, with high unemployment. Use of some of the Fed's liquidity programs has declined, he said, a "clear market signal that liquidity pressures are easing and market conditions are normalizing." He said nothing about how the Fed would unwind its support for the banking system. That day seems to be in the distant future, however. "Although we have avoided the worst, difficult challenges still lie ahead,' including securing a sustainable economic recovery and rebuilding the institutional framework to make sure a similar crisis can be averted.”

I guess there is no need to think that the market could actually trade on its own and maybe see trading in both directions! It almost makes me wonder if the sell off on Monday was staged to suck in more shorts! What’s interesting about this move though is that it has been on non-existent volume and we are now moving into the September trading period where the market will have to deal with the first of many economic, housing, mortgage obstacles let alone September being one of the most down months of the year. At the least with more traders coming back to work I’m sure were going to see volatility kick up so trading will get back to moving in both directions. I’ll have more out over the weekend.

The final hour saw new highs with the Dow seeing highs of +175.00 points, S&P 500 +21.00 points and the Nasdaq Composite +35.00 points. At the close the Dow was up by +156.00 points to about 9506 S&P 500 +19.00 points to about 1026.00, S&P 100 +8.00 points to about 476.00 and the Nasdaq Composite +32.00 points to 2021.00. Oil was up about +$1.00 around the $74.00 level.

Another thing that helped the market was that re-sales of single-family homes and condos rose +7.2% in July to a seasonally adjusted annual rate of 5.24 million, the highest level since August 2007, the National Association of Realtors reported. Re-sales have gained for four consecutive straight months, the longest streak of increases since 2004. “Momentum is building,” said Lawrence Yun, NAR's chief economist. Economists had expected sales to rise to an annual rate of 5 million. Inventories of unsold homes remain elevated, with a 9.4-month supply at the July sales rate, matching the prior month's result. Without seasonal adjustment, the median sales price fell -15.1% in the past year to $178,400. Distressed properties accounted for 31% of sales in July. The biggest problem though is that although there is a lot of buying going on in the cheaper markets due to the first time buyer credit, over $300,000 were seeing bigger and bigger price declines which isn’t good as that is where the money is to buy those flat screen t.v’s etc, oh but I forgot were now going to see “cash for clickers!” (old remote controls)

Thursday, August 20, 2009 4:03 p.m est.

The market did an exact repeat of yesterday as economic data first thing was pretty bad so we saw a brief sell off but it turned around even before some sort of positive data came out. The Dow saw highs of +85.00 points, S&P 500 +13.00 points and the Nasdaq Composite +25.00 points and remained around there for the rest of the day. Volume was even worse than yesterday. What I find most interesting is that everyone still calls it a bull market move even though its rising on vapors! Once again it was on pathetically low volume so going into expiration yesterday things could get interesting. At the close the Dow was up by +70.00 points to about 9350 S&P 500 +11.00 points to about 1007.00, S&P 100 +5.00 points to about 468.00 and the Nasdaq Composite +20.00 points to 1989.00. Oil basically closed unchanged from yesterday, up -$.12 around the $72.00 level.

Jobless claims came in up instead of down by +15,000 to 576,000 last week and was the highest level since July 25th. The four-week average rose, by +4,250 to 570,000, and continuing claims climbed as well up by +2,000 to 6.24 million. This despite people are falling off of the unemployment line left and right.
Manufacturing firms in the Philadelphia region said business was improving in August, the first increase in nearly a year, the Fed’s Bank of Philadelphia reported. The Philly Fed index rose to 4.2% from negative -7.5 in July, the bank said and was the highest reading since November 2007 and the first positive reading since September 2008. “The region's manufacturing sector is showing some signs of stabilizing,” the report said. Readings over zero in the diffusion index indicate that most firms said business is getting better, or at least getting no worse. It was the first positive reading in the index since September 2008 and just the second positive since the recession began in December 2007. Economists estimated the index would come in at negative -1.5%. The new orders index edged six points higher, from negative -2.2 to +4.2%, also its highest since November 2007. The shipments index increased 10 points to +0.6%. Employment indexes remained negative however. The prices paid index rose to 10%, the first time since last October that most firms reported paying higher prices. Looking ahead, most firms saw better times, with the expectations index rising to 56.8% from 51.9%.

Another thing was that the index of Leading Indicators rose +0.6% in July, the fourth straight gain in the index, which is designed to forecast turning points in the economy. The research group said the recession appears to be ending. The Leading Economic Index is based on 10 components, six of which increased in July: interest rate spread, average weekly initial jobless claims, average weekly manufacturing hours, index of supplier deliveries, stock prices, and new orders for non-defense capital goods. The funny thing is that most of the gains were because of the market going up. Meanwhile, readings fell for consumer expectations, real money supply and building permits.

There was an interesting article out today about mortgages as the percentage of residential mortgages either in foreclosure or with at least one payment past due hit 13.16% in the second quarter, the highest percentage ever recorded by the Mortgage Bankers Association, the industry group reported. During a conference call with reporters, the group’s chief economist said he expects that mortgage delinquencies will continue to grow as the nation's employment picture worsens, and the percentage of borrowers behind on their mortgages will climb until the middle of next year. Foreclosures will likely peak six months later, at the end of 2010, according to MBA estimates. The delinquency rate for mortgages on one- to four-unit properties rose to a seasonally adjusted 9.24% of all mortgage loans outstanding in the second quarter, up from 9.12% in the first quarter and 6.41% in the second quarter of 2008, according to the MBA's national delinquency survey. The delinquency rate doesn't include mortgages in the foreclosure process.

Mortgages somewhere in the foreclosure process reached 4.3% of all mortgages, up from 3.85% in the first quarter and 2.75% in the second quarter of 2008, the MBA said. However, mortgages entering the foreclosure process during the second quarter actually fell slightly to 1.36% of all loans, down from 1.37% in the first quarter. Foreclosure starts were still up from 1.08% in the second quarter of 2008. The survey covers 45 million loans on one- to four-unit residential properties, representing between 80% and 85% of all first-lien residential mortgage loans outstanding in the United States. Records date back to 1972.

"While the rate of new foreclosures started was essentially unchanged from last quarter's record high, there was a major drop in foreclosures on subprime ARM loans. The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase," said Jay Brinkmann, MBA's chief economist, in a news release. Brinkmann said he isn't reading into the flat foreclosure start figures for hopeful signs. In Illinois, there was a significant drop in foreclosure starts, which likely resulted from a state law that slowed down the foreclosure process, he said. He's also keeping in mind that during much of 2008, foreclosure starts were also flat, until they spiked earlier this year when various foreclosure moratoria lifted.

“As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago they accounted for one in five,” Brinkmann said in the release. In a phone interview, Brinkmann said that prime fixed-rate mortgages account for two-thirds of all mortgages outstanding in the country. Forty-one states had increases in the foreclosure start rate for prime fixed-rate loans, while 43 states had decreases in that rate for subprime adjustable-rate loans, he said. The MBA also reported a jump in foreclosures on loans backed by the Federal Housing Administration. The foreclosure starts rate for FHA loans was 1.15%; the FHA percentage remained somewhat lower than other loan types due to the increase in the number of FHA loans outstanding, Brinkmann said. Until the nation's employment situation improves, it is unlikely that there will be meaningful reductions in the foreclosure and delinquency rates, he said. And until prices recover in areas with steep home price declines, borrowers who owe more on their mortgage than their home is now worth will continue to be in danger of foreclosure -- especially if they're faced with a life event including divorce or job loss. Loan modification programs are playing a role in holding the foreclosure rates below where they would otherwise be, but the "issue is that many of the foreclosures involve homes that are vacant, borrowers who no longer have jobs, or loans where there was fraud involved," Brinkmann said in the news release. “Therefore, in measuring the effectiveness of industry or government loan modification programs it is necessary to compare the results not with the total foreclosure and delinquency numbers reported here but with the smaller subset of borrowers who can and want to qualify," he added.

The programs were set up and developed based on the industry's experience in dealing with subprime ARMs or pay-option ARMs -- loans that originated with high debt-to-income ratios, he said in an interview. The modification is made to reduce payments to a more manageable level. But if a borrower loses a job, the problem isn't paying too much income to a loan each month -- it's that he or she has no income at all.

California, Florida, Arizona and Nevada still have a "disproportionately high share of foreclosure starts," Brinkmann said, but the share has fallen slightly from last quarter. Yet Florida is continuing to establish itself as the worst state in the country for mortgage performance, he added. In Florida, 22.8% of mortgages outstanding were delinquent at least one payment or in foreclosure. Other poor performing states include Nevada, where 21.3% of mortgages were delinquent or in foreclosure, Arizona, where 16.3% were delinquent or in foreclosure, and Michigan, where 15.3% were delinquent or in foreclosure. Brinkmann said Florida's troubles likely stem from the overbuilding of condos in the state, as well as the makeup of its economic base -- the leisure and hospitality industry, which has struggled in the downturn. Nevada also has been affected by those factors.

Wednesday, August 19, 2009 4:03 p.m est.

The market started the day down pretty hard this morning as China sold off once again putting itself in what many analysts call bear market territory being down -20% and Warren Buffet making some sobering comments about the rebound of the economy and that he worried about inflation due to the amount of debt accumulation that the consumer and government have ramped up. What a shocker he sees little flattish growth! After a +100% rebound I’m not so sure but the market is full of lingo’s now. The Dow saw lows of -90.00 points, S&P 500 -10.00 points and the Nasdaq Composite -25.00 points. It didn’t last long though as it turned around just about as quick as it went down and the Dow saw quick highs of +100.00 points, S&P 500 +10.00 points and the Nasdaq Composite +20.00 points and remained around there for the rest of the day. Once again on pathetically low volume so were likely going to see volatility remain. It pulled back a bit in the final hour but held gains at the close with the Dow up by +60.00 points to about 9279 S&P 500 +7.00 points to about 997.00, S&P 100 +3.00 points to about 463.00 and the Nasdaq Composite +13.00 points to 1969.00. Oil popped higher with the possibility of hurricanes still brewing as it closed up +$3.00 around the $72.00 level.

Tuesday, August 18, 2009 4:03 p.m est.

The market rebounded today but gains were made in the first few minutes of trading and then stayed there basically for the rest of the day. Volume was almost half of what it was yesterday, only 900 million at the close which is pathetic even for the new bull market, so not really much of a recovery. The Dow saw highs of +100.00 points, S&P 500 -11.00 points and the Nasdaq Composite -30.00 points. At the close the Dow was up by +83.00 points to about 9217 S&P 500 +10.00 points to about 990.00, S&P 100 +4.00 points to about 460.00 and the Nasdaq Composite +25.00 points to 1956.00. Oil was strong as there are possible hurricanes brewing down south. It closed up +$2.30 around the $69.00 level.

One of the things that has been revealing that the economy isn’t going gangbusters is that demand for commodities has been falling with yesterday’s move being strongly down. Right now, the market is not happy with what it sees in the commodity arena, which is why the CME group shares and the overall commodity markets are getting hit hard. Maybe the economy has bottomed but commodities seem to be pointing to a flat recovery.

Economic data didn’t help once again as Housing starts were flat in July, as a small increase in new construction of single-family homes was offset by a large decline in multifamily units. Starts fell -1% in July to a seasonally adjusted annual rate of 581,000 from an upwardly revised 587,000 rate in June. Single-family starts rose +1.7%, while multifamily starts fell -13%. Economists were expecting starts to rise to a 596,000 rate.

Building permits for single-family homes rose +5.8% in July to a seasonally adjusted annual rate of 458,000, the fourth increase in a row and a strong sign that building activity may have finally stopped falling at least. Seasonally adjusted single-family permits are up +27% since bottoming in March. Single-family starts have increased five straight months and are up +36% since March. The problem however is that there are still to many homes on the market as inventories haven’t gone down much. On the bright side after 14 straight quarters of declines, many economists expect that residential investment will finally add positively to gross domestic product in the current quarter, which began in June.

Total starts are down -38% compared with a year ago, with single-family starts down -23%. Starts are down about -70% from the peak at the height of the housing boom. In all of 2008, 906,000 housing units were started. In 2007, it was 1.36 million. Completions of new housing units fell -0.9% in July to a seasonally adjusted annual rate of 802,000. It typically takes six to nine months for a home to be built. Starts fell in three of four regions in July. Starts fell -16% in the Northeast, -2% in the West and -1% in the South while they increased +13% in the Midwest.

Producer prices fell -0.9% in July, after seasonal adjustments, as prices for energy and food dropped. The core producer price index, which excludes volatile food and energy prices, fell -0.1%. Economists had expected the overall producer price index to fall -1%, and for the core to gain +0.1%. In the past year the producer price index, which tracks inflation at the wholesale level, has dropped a record -6.8% indicating weakness in selling as prices continued to fall.

Monday, August 17, 2009 4:03 p.m est.

The market fell out of bed this morning from many different worries of the rebound in the economy failing, Chinese stock market falling pretty hard but mostly on more news about failing banks. Is this the start of a much needed correction maybe, maybe not if it is a true bull. It will be interesting to watch the rest of the week! The Dow saw lows in the final hour of -200.00 points, S&P 500 -26.00 points and the Nasdaq Composite -60.00 points. At the close the Dow was down by -187.00 points to about 9135 S&P 500 -25.00 points to about 980.00, S&P 100 -11.00 points to about 456.00 and the Nasdaq Composite -55.00 points to 1931.00. Oil closed down about -$.70 around the $69.00 level.

Over the weekend the FDIC said that U.S. banks that have failed so far are in far worse shape that those that failed in the last bank crisis, when 747 banks failed from 1989 to 1995. Seventy-eight banks have failed so far, but the FDIC has a growing list of more than 300 banks on its troubled-banks watch list. The worst one in a while was this past weekend when the Colonial BancGroup went down. The FDIC estimated the Colonial failure will cost its Federal Deposit Insurance Fund $2.8 billion.

Building and hardware chain Lowe’s 2nd quarter earnings report this morning, which showed both its earnings and revenue fell, earnings down 19%, missed estimates. The biggest concern though is that management lowered its expectations for the rest of the year, projecting concern about the economy and a further decline in sales and earnings, and that it is postponing its plans for opening more stores in 2010.

All this while predictions that the recession bottomed last quarter, and recovery began in July even though Lowes report was confirmed after the Retail sales report on Thursday, revealed they fell again in July, a sizable miss for economists estimates that they would rise +0.8%. Then on Friday the Reuters/University of Michigan Consumer Sentiment Index unexpectedly fell in the first half of August to 63.2% from 66%, not only significantly below forecasts but it fell to the lowest reading since March!

We are now halfway through the 3rd quarter in which economists are predicting, and the market was betting that the economy bottomed in June, and recovering this quarter may be slip sliding away, led by the consumer who isn’t buying as sentiment sours. A report I saw this weekend had one consumer respond to an analyst’s observation that “Consumers are not in a mood to spend,” saying “Mood, shmood. Aint got no money.” To which another added, “Can’t get a loan, can’t afford my present payments anyway, who knows might even lose my job. What world do these economists live in that these reports were ‘unexpected?”
It was also reported last week that 32.2% of home-owners with mortgages now owe more on their mortgages that their homes are worth, almost one in three, due to a combination of declining home prices and remortgaging near the home price peaks to take out equity so its probably no surprise then that it was reported that mortgage foreclosures rose to another record high in July and public debt ratios remain near lofty levels of 132%!

Business improved for manufacturers in New York in August, according to the Empire State index released by the New York Fed. The index rose to +12.1% from negative -0.6% in July. This is the first positive reading since April 2008, and the highest since November 2007. Readings over zero mean most firms said business was improving compared with the prior month. Two key components of the index, new orders and shipments, rose to their highest levels in more than a year. This is good news but after all of the bad months it is important to see if the trend has really changed or not.

Friday, August 14, 2009 4:03 p.m est.

The poor economic data continued today and once again the market pulled back on the news. It was off quite a bit more however especially after the consumer sentiment report came out much worse than expected. The Dow saw lows of -170.00 points, S&P 500 -18.00 points and the Nasdaq Composite -40.00 points.
The final hour saw another buy program come in minutes before the close so the market came back quite a bit. At the close the Dow was down by -77.00 points to about 9321 S&P 500 -9.00 points to about 1004.00, S&P 100 -3.00 points to about 466.00 and the Nasdaq Composite -24.00 points to 1985.00. Oil closed down pretty hard about -$3.00 around the $68.00 level.

You know the biggest thing I don’t understand is that if everyone knows that company earnings have been from cost cutting, not revenue, why has the market gone up so much? Its obvious that people are thinking that the consumer is going to dive in here and buy buy buy and we’ll back on to our next bubble as our economy is now based on 70% of retail. This morning well respected Mohamed El-Erian from Pimco said that the market is “on a sugar high” as it is way ahead of itself and even though Pimco looks way into the future thinking there is a possibility of a rally to come, he still thinks that it shouldn’t be up this much because we are still seeing falling employment, stagnating wages and companies are only seeing good earnings from cost cutting. With economic data looking as if it is actually moving down again it was no wonder the market finally fell today. The past few days have also seen the Chinese market pull back over -10% because it has been skyrocketing upward, so maybe this is a clue to what may happen to our markets which would be healthy!

Consumer sentiment unexpectedly fell to 63.2% from 66% in July, according to the Reuters/University of Michigan index. This is the lowest reading since March, and is significantly worse than the 69% that was expected by economists. Sentiment has fallen two months in a row. Consumers are still facing several challenges, including large job losses, weak income growth, falling house prices, rising energy prices, and too much debt. “Until these variables improve measurably, there will not be a consistent improvement in confidence,” wrote Charmaine Buskas, an economist for TD Securities. “The consumer will not be much of a help during the early stages of the economic recovery,” added Joshua Shapiro, chief economist for MFR Inc. The current-conditions index dropped from 70.5% to 64%, the lowest since April. The expectations index fell from 63.2% to 62.1%, the lowest since March. The expectations index is one of 10 leading economic indicators. Consumers' expectations for inflation also declined. Over the next year, consumers expect prices to rise 2.8%, down from 2.9% expected last month.
Consumer prices were unchanged in July, after seasonal adjustments, and were down -2.1% year-over-year in the sharpest annual decline since 1950. Analysts had expected no change in the monthly consumer price index. For July, energy prices fell -0.4%, and food prices fell -0.3%, while prices rose for goods such as new vehicles, tobacco, medical care and apparel. The core CPI, which excludes often-volatile food and energy prices, rose +0.1% in July, matching analysts' expectations. Of note, shelter prices in July fell -0.2%, the largest decline since 1982, while prices for meat, poultry, fish and eggs fell -1.3%, the largest decline since 1979.

Led by a resurgent auto sector, Industrial Output rose in July for the first time since October, the Fed said. The seasonally adjusted output of the nation's factories, mines and utilities increased +0.5% after a -0.4% decline in June. Output is down -13.1% in the past year. It was only the second increase in industrial production since the recession began in December 2007. Capacity utilization increased to 68.5% from a record-low 68.1% in June. The gain in industrial output in July was entirely due to increased motor vehicle production, which jumped +20.1%.

Thursday, August 13, 2009 4:03 p.m est.

Yesterday after the Fed released their decision about interest rates, the market took off to lose a large portion of gains by the close. Today globex futures were nearing recent highs but after some poor economic data that was quite bad came out the market had a poor start to the day. The Dow was off -60.00 points, S&P 500 -5.00 points and the Nasdaq Composite -15.00 points but of course short covering pulled the market up once again for a time with the Dow seeing highs of +40.00 points, S&P 500 +7.00 points and the Nasdaq +15.00 points. Volatility is becoming the watchword though as the market went back into the red once again going into the final hour.

In the end though at the close the Dow was up by +36.00 points to about 9397 S&P 500 +7.00 points to about 1013.00, S&P 100 +3.00 points to about 469.00 and the Nasdaq Composite +11.00 points to 2009.00. Oil closed up about +$.80 around the $71.00 level.

Rational, this is a word that is used when a person or thing is thinking with a sound mind. The market is rational most of the time so even if we have moved from a bear to a new bull market as it seems that everyone is claiming, a 52% move in five months is still over the top. I happen to really not care if we have moved into a new bull market or not and having looked at some recent bull market starts, such as the 1975, 1982, 1995,1999 periods you find that not one of them have moved this far this fast. Does that mean that this is just a bear market rally that is going to fail miserably, once again I don’t really care. I do care about the short term though and each day continues to see momentum waning and volume continue to fall. There was only 682 million shares traded today, are you kidding me that is unbelievable so if this is a bull I would be expecting to see at 1.7 billion! The way were setting up it’s looking more and more like it will be a quick shock that will finally give the market that 3-10% correction that could occur within a couple of days.

Much of the fuel for the 52% rally in the S&P 500 has come from short covering. As this rally is getting a little long there are signs that short covering will have a much smaller impact. Following July’s leg higher, it seems that traders on the short side have cut and run. The average stock in the S&P 500 had 4.97% of its float sold short as of the end of July and is the lowest level since January 30th, and marks a decline of -17% from the peak levels in July 2008. Of course the bears will use this number as proof that investors are crowded on the long side. While bulls would probably prefer to see higher levels of short interest, they are likely to note that short interest still remains high from a longer-term perspective.

Yesterday, the Fed promised again to keep interest rates exceptionally low "for an extended period of time," even as it drew encouragement from the stronger economic outlook. "Economic activity is leveling out," they said. In its statement after a two-day closed-door meeting, the Fed said it would slow its purchases of long-term bonds and let the program die a natural death by October, a decision that could send long-term yields higher, great timing! The Fed said its policies are working and expressed no desire to tighten its extremely loose monetary policy however so the fed funds target rate will remain at 0% to 0.25%. The most disconcerting statement they made was that they were seeing “sluggish income growth” which isn’t a good sign for those who even have a job ad explains why retail sales are still looking poor. This isn’t good if were supposed to be coming out of this recession.

Retail sales fell -0.1% in July despite a boost from the government's cash-for-clunkers subsidy. It was the first decline in seasonally adjusted sales in three months that haven’t been exceptional anyhow unless your talking about gas increases which to me is more of a tax than a retail sale. The report shows that consumer spending is still weak despite attempts by the government to stimulate demand as sales at most kinds of stores fell in July. Economists were looking for sales to rise +0.8% after an upwardly revised +0.8% increase in June. Retail sales, which account for about one-third of final demand in the economy, are down -8.3% in the past 12 months. The figures are not adjusted for price changes. Falling gas prices led to a -2.1% decline in sales at gasoline stations. Excluding gas, retail sales rose a whopping +0.1. Gas prices have risen since. The government subsidy that gives owners of older, less-efficient vehicles up to $4,500 toward the purchase of a new one had a major impact, as auto sales rose +2.4% but less than expected. Analysts expect the program will have an even-larger effect on sales in August though, hopefully. The program was running for just one week during July. Excluding autos, retail sales fell -0.6%, against an expectation of a +0.1% increase which is huge. Sales excluding autos rose +0.5% in June and are now down -8.5% in the past year.

Except for the gain in autos, sales of durable goods were down and nondurable goods were mixed. Sales at building materials stores dropped -2.1% and are down -12% through the first seven months of 2009. Sales at electronics and appliance stores fell -1.4%, and are down about -10% year-to-date. Furniture store sales fell -0.9% and are down about -14% so far in 2009. Sales at general merchandise stores fell -0.8% in July and are down -1.2% through the first seven months of the year. Wal-Mart, the largest retailer, reported surprisingly strong profits this morning but it was mostly due to cost cutting not increased sales. Sales at food stores fell -0.3% while restaurants and bars rose +0.4%. Sales at non- store retailers, such as online stores or catalogs, rose +0.1%. Sales at health and personal care stores rose +0.7% and has held up best during the recession, with sales up +3.3% year-to-date. Sales at clothing stores rose +0.6% in July. Sales at stores that cater to leisure-time activities, such as hobbies and sports, fell -1.9%.

Jobless Claims were up by +4,000 to 558,000, after seasonal adjustments last week. Economists were looking for an initial claims level of 543,000. The four-week average rose +8,500 to 565,000. Continuing claims fell -141,000 to 6.2 million, the lowest level since April. The four-week average of continuing claims fell -27,750 to 6.26 million. The insured unemployment rate dipped to 4.7% from 4.8% in the prior week.

Yesterday, Imports of goods and services rose for the first time in nearly a year in June, driven by higher oil prices, the government said. Excluding oil, however, imports fell to the lowest level in five and a half years. The trade deficit rose to $27 billion in June from a 10-year low of $26 billion in May. Most of the increase in imports and exports in June was driven by higher prices, not higher volumes. In inflation-adjusted terms, the trade deficit fell to the lowest level in nearly 10 years.

Friday, August 7, 2009 4:03 p.m est.

The market rallied today on better than expected employment numbers but strangely when you look at the numbers on the inside it would have been much worse than expected but who cares when your exuberant! The unemployment rate unexpectedly fell back to 9.4% with employment falling by -247,000, the 19th consecutive month of job losses, a little better than economists estimates of a -275,000 decline. Most industries continued to lose jobs in July, but at a much slower pace than they did in the autumn and winter. Goods producing industries lost -128,000 jobs, the fewest since last September while service-producing industries cut -119,000 jobs. Since the recession began in December 2007, -6.7 million jobs have been lost, according to the survey of hundreds of thousands of work sites around the nation. Payrolls have fallen by an average of -331,000 in the past three months, compared with an average of -645,000 in the six months before that. Job losses in May and June weren't quite as bad as first reported as they were revised up by +43,000 for the two months. The average work week rose to 33.1 hours after falling to a record-low 33 hours while total hours worked in the private-sector were unchanged. Average hourly earnings rose by +3 cents, or +0.2%, to $18.56.
The biggest problem with the report was what the separate survey of households showed. An alternative measurement of unemployment that includes discouraged workers and workers forced to work just part-time fell to 16.3% in July from 16.5% in June with unemployment falling by -267,000 to 14.5 million and the labor force declining by -422,000. Nearly 5 million people, more than a third of the unemployed had been out of work for longer than six months.

That all sounds rosy though don’t you think but the huge problem that I see and it seems that no one else does is that the participation rate was down -637,000 people in the labor force so the rate of unemployment would have increased from 9.5% to 9.8%. Since the start of the year we have seen an average of -85,000 going off each month so this is astronomical, but I haven’t heard a peep from any financial media about it! This basically means that the only reason the report was decent was because people fell off the board and aren’t being counted but heh you can always trade in your perfectly good used car, err I mean “Clunker” to get a discount on your new loan to pay the government who borrowed the money from China to give to you. I know it sounds like a downward spiral occurring but heh, as I said yesterday, debt is the American way!

The markets reaction to the numbers was positive but as analysts continue to point out although there are less jobs being lost they are still lost jobs and until we see job creation its still bad. This is still just continuing signs of things getting less worse not better! Interestingly President Obama said that he still expects to see 10% unemployment this year which could mean three things. One is that if it gets better he can play it as a positive, two he knows that the Trim Tabs revisions will come to pass likely due to that -637,000 number or three he knows that things are going to get worse just as Treasury Secretary Timothy Geithner said last week that the unemployment rate may not peak until the second half of 2010!

The Dow saw highs of +190.00 points, S&P 500 +21.00 points and the Nasdaq +40.00 points but final hour selling pulled it back quite a bit. At the close the Dow was up by +114.00 points to about 9370 S&P 500 +13.00 points to about 1010.00, S&P 100 +5.00 points to about 468.00 and the Nasdaq Composite +27.00 points to 2000.00. Oil closed down today which was strange considering everyone was so excited that were entering a new bull market because the economy is about to get better! It closed down around the $70.00 level.

The market this week continued its rise despite being severely overbought. The bulls have won every encounter so far but considering there are record amounts of insider company selling and Smart Money still unloading, I still think there day is still coming. Technically we are now bumping up against residence levels that I didn’t think we would see for at least a couple more months which may be indicating that this is a blowoff move.

Everyone keeps saying that this rally is apparently being fueled by institutional traders who hold too much cash but as I mentioned earlier in the week, over half that cash won’t be moved into the market and I have been hearing that for years now anyhow. Short covering is also about done now as the number of unhedged shorts has diminished greatly.

The biggest factor though is that because we have moved up too far to fast, the moving averages are all rising now even the 200-day, barely but the S&P 500 has risen to heights about 50 points (968) above its 20-day moving average which is an extreme so at the least the market should pull back a bit to get back to normal trading levels. This would help to relieve the overbought condition without harming the overall uptrend if it were to continue.

We still have 10-days left to expiration anyhow so were basically in the middle, providing us with time to get back to normal trading. Then, maybe the rally may continue into September as this is the new bull market you know!!!! Although when I think waaaaaay back all of five months, we have gone from predicting we were moving into a depression, to only a recession, to now a full recovery by the third quarter!!!
Something to think about!

Thursday, August 6, 2009 4:03 p.m est.

The market started the day on the upside but worries about the employment report started to hit home as the government came out of the blue to announce that unemployment could hit the 10% mark in the near future. That is quite strange the day before a big report but it may have been because Trim Tabs announced that there could be a huge revision of employment from January to May which could come out tomorrow. One thing that has been ignored in recent reports is that private reports on employment is showing about a -16% unemployment rate. This is going to be very interesting tomorrow.

The Dow saw lows of -75.00 points, S&P 500 -11.00 points and the Nasdaq -25.00 points. At the close the Dow was down by -25.00 points to about 9256 S&P 500 -6.00 points to about 997.00, S&P 100 -3.00 points to about 463.00 and the Nasdaq Composite -20.00 points to 1973.00. Oil took a hit after the SEC announced that they would be stopping any speculative trading but was still able to come back to close mostly unchanged around the $72.00 level.

It was interesting to listen to an analyst today say that the consumers having debt is the American way! I think it would be best to say then that the American way of living is with stress then and that is hard to believe! Psychology is always key as it seems right now that people are in the denial phase of what happened just a few months ago, thus the move we have seen only being matched to the 1930’s move!

This morning for example Gap reported their earnings and although they were down along with double digit losses in sales, they were “optimistic” that they would be better next quarter so of course the stock rallied at the open. Other retailers all reported poor sales last month falling -5% to -25% with Cosco for example down -7% but even there people were only looking at the future as the retail sector started the day strongly.

Last night Cisco reported a -46% drop in profit in a quarter but because Chief Executive John Chambers said this “could” turn out to be the "tipping point" the stock had its -3% losses cut! Analyst Roger Kay of Endpoint Technologies Associates said it best about how at the least we are a hopeful bunch, in an e-mail interview, “I think establishing a floor is what this quarter was about. Maybe our ambitions have been scaled back, but flat is the new up.” I’m not a against a decent rally in a normal market but economically we have been decimated so the run in the market to his degree to me seems a bit overdone!

There are still headwinds to be dealt with such as the percentage of homeowners who owe more than their house is worth will nearly double to 48% in 2011 from 26% at the end of March, portending another blow to the housing market, Deutsche Bank said today. Home price declines will have their biggest impact on prime "conforming" loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements. "We project the next phase of the housing decline will have a far greater impact on prime borrowers," Deutsche analysts Karen Weaver and Ying Shen said in the report. Of prime conforming loans, 41% will be "underwater" by the first quarter of 2011, up from 16% at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties' value, up from 29%, it said. "The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding," the analysts said. Prime jumbo loans make up 13% of the total market.

Jobless claims fell by -38,000 to 550,000 last week, while the number of people who continued to collect benefits rose by +69,000 to 6.31 million the prior week. The four-week average of new claims dropped to 555,250, the lowest level since January. On Friday, the Labor Department will report on July unemployment figures. Economists expect the jobless rate to rise to 9.7% and for -275,000 jobs to be lost. This is good news but the problem is that we haven’t seen a turn up in actual employment yet so until we do, again I think its premature to look too far ahead.

Wednesday, August 5, 2009 4:03 p.m est.

The market started the day down once again as economic data wasn’t good at all with the Dow seeing lows of -120.00 points, S&P 500 -12.00 points and the Nasdaq -30.00 points. About midday it started to turn back however as financials had a different idea and oil decided to ignore the inventory build. The final hour saw the market come back almost completely with the S&P 500 moving slightly into the green but could it be that some traders were getting skeptical about this move as the market turned down again going into the close.

At the close the Dow was down by -40.00 points to about 9280 S&P 500 -3.00 points to about 1002.00, S&P 100 -1.00 points to about 466.00 and the Nasdaq Composite -18.00 points to 1993.00. Oil closed up +$.30 today closing around the $71.70 level.

In yet another report showing the economic downturn isn’t coming to fast unless losing less than half the jobs as a year ago is good, it was estimated that -371,000 jobs in the July ADP employment index, the smallest decline since October. The goods producing sector lost -169,000 jobs, while the service sector lost -202,000, according to ADP. On Friday, the government will report on its estimate for employment, with economists looking for a loss of about -275,000 jobs, which would be the fewest since last August. For June, private-sector jobs fell by a revised -463,000, ADP said.

What seemed to hurt the market though was that non-manufacturing industries contracted for the 10th consecutive month in July, the Institute for Supply Management said. The ISM non-manufacturing index fell to 46.4% in July from 47% in June.

Economists expected a small increase to 48%. The index had risen three months in a row bottoming at 37.4% in November. Readings under 50% indicate that most firms say business is still getting worse, or at least not getting better. The index has been below 50% for 10 straight months. Seven of 18 industries were growing in July, led by real estate, entertainment and agriculture. "The majority of respondents' comments reflect a sense of uncertainty and cautiousness about business conditions," ISM said.

Orders for Factory goods rose +0.4% in June, outperforming expectations from Wall Street analysts, the Commerce Department reported Wednesday. Economists polled by had expected orders to fall -1%, following a gain of +1.1% in the prior month. Orders for durable goods fell -2.2%, an improvement from the government's prior estimate of a -2.5% drop. Orders for nondurable goods rose -2.7%. Excluding transportation equipment, new factory orders rose +2.3%. Orders for core capital goods, which are used by businesses to expand or update their productive capacity, rose for the second consecutive month, gaining +2.6% in June. Meanwhile, overall shipments rose +1.4%, following 10 consecutive months of declines. Shipments of durable goods fell -0.1% in June, and were down for 11 consecutive months, the longest streak of declines since comparable data were first published in 1992.

The new orders index fell to 48.1% from 48.6%. The business activity index fell to 46.1% from 49.8%. The prices-paid index dropped to 41.3% from 53.7%. The employment index fell to 41.5% from 43.4%.

Tuesday, August 4, 2009 4:03 p.m est.

The market started the day down today as incomes continued to drop with the Dow seeing crushing lows of -40.00 points, S&P 500 -6.00 points and the Nasdaq -15.00 points. Because its only allowed to fall first thing in the morning of course it came back with the Dow seeing slight highs of about +35.00 points, S&P 500 +4.00 points, and the Nasdaq +5.00 points during lunch. Midday gains were cut in milliseconds after Senator Reid announced that the Senate will approve a health care plan for sure this year and that they will approve new cash for clunkers funding before they leave for their August recess! Could it be the market is actually thinking that all of this spending is a bad thing?

At the close the Dow was up by +35.00 points to about 9320 S&P 500 +3.00 points to about 1006.00, S&P 100 +1.00 points to about 467.00 and the Nasdaq Composite +3.00 points to 2011.00. Oil rocketed higher on the news that manufacturing was doing better and auto sales were strong last month due to the “cash for clunkers” program showing strong interest. Oil closed down -$.30 today closing around the $71.30 level.

With the S&P 500 up over 50% from the March low its enough for nearly two and a half bull markets if you use the +20% per year benchmark to measure such a move. It also came in just five months and one of those was mostly sideways. Of course you would have to be an idiot not to think that the market is ripe for a correction of some sort. When the S&P 500 reaches big marquee numbers such as 1000, you have to expect some sort of pullback, contraction, or sideways movement. It would take nothing to see a quick -5% correction at anytime but the question is where it will start. Another thing to consider are support levels, such as the 20, 50 and 200 day moving averages. Thus the 929 (20-day) and 957 (50-day) areas are important, (871) 200-day. On the resistance side, 1000-1011 is resistance. One thing that the 1000 level does blatantly reveal is just how much the market has moved in such a short period of time. With the Employment report out Friday we have likely seen any good news factored in. Besides that there is still a lot of angst in Congress about health care reform and other legislative agenda items which seemed to affect the market today. We are also moving into the Dog Days of August so even though it seems the market will never go down again, it can still deliver some surprises even at least for a correction which would come at a good time in this expiration cycle.

The markets reaction to Seator Reid is interesting considering an article I found yesterday has some bleak numbers in it, but heh were only looking at positives right now anyhow right! “The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab. The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since theGreat Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever. The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression. "Our tax system is already inadequate to support the promises our government has made," said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation. "This just adds to the problem."

While much of Washington is focused on how to pay for new programs such as overhauling health care — at a cost of $1 trillion over the next decade — existing programs are feeling the pinch, too. Social Security is in danger of running out of money earlier than the government projected just a few month ago. Highway, mass transit and airport projects are at risk because fuel and industry taxes are declining. The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies' spending by 11 percent in 2010 and military spending by 4 percent.

For this report, the AP analyzed annual tax receipts dating back to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.

Is there a way out of the financial mess?

A key factor is the economy's health. The future of current programs — not to mention the new ones Obama is proposing — will depend largely on how fast the economy recovers from the recession, said William Gale, co-director of the Tax Policy Center.

"The numbers for 2009 are striking, head-snapping. But what really matters is what happens next," said Gale, who previously taught economics at UCLA and was an adviser to President George H. W. Bush's Council of Economic Advisers. "If it's just one year, then it's a remarkable thing, but it's totally manageable. If the economy doesn't recover soon, it doesn't matter what your social, economic and political agenda is. There's not going to be any revenue to pay for it." A small part of the drop in tax receipts can be attributed to new tax credits for individuals and corporations enacted in February as part of the $787 billion economic stimulus package. The sheer magnitude of the tax decline, however, points to the deep recession that is reducing incomes, wiping out corporate profits and straining government programs.

Social Security tax receipts are down less than a percentage point from last year, but in May the government had been projecting a slight increase. At the time, the government's best estimate was that Social Securitywould start to pay out more money than it receives in taxes in 2016, and that the fund would be depleted in 2037 unless changes are enacted. Some experts think the sour economy has made those numbers outdated. "You could easily move that number up three or four years, then you're talking about 2013, and that's not very far off," said Kent Smetters, associate professor of insurance and risk management at the University of Pennsylvania. The government's projections included best- and worst-case scenarios. Under the worst, Social Security would start to pay out more money than it received in taxes in 2013, and the fund would be depleted in 2029. The fund's trustees are still confident the solvency dates are within the range of the worst-case scenario, said Jason Fichtner, the Social Security Administration's acting deputy commissioner. "We're not outside our boundaries yet," Fichtner said. "As the recovery comes, we'll see how that plays out. "The recession's toll on Social Security makes it even more urgent for Congress to address the fund's long-term solvency, said Sen. Herb Kohl, D-Wis., chairman of the Senate Aging Committee. "Over the past year, millions of older Americans have watched their retirement savings crumble, making the guaranteed income of Social Security more important than ever," Kohl said. President Barack Obama has said he wants to tackle Social Security next year, after he clears an already crowded agenda that includes overhauling health care, addressing climate change and imposing new regulations on financial companies.

Medicare tax receipts are also down less than a percentage point for the year, pretty close to government projections. Medicare started paying out more money than it received last year.

Meanwhile, the recession is taking a toll on fuel and industry excise taxes that pay for highway, mass transit and airport projects. Fuel taxes that support road construction and mass transit projects are on pace to fall for the second straight year. Receipts from taxes on jet fuel and airline tickets are also dropping, meaning Congress will have to borrow more money to fund airport projects and the Federal Aviation Administration.

Last week, Congress voted to spend $7 billion to replenish the highway fund, which would otherwise run out of money in August. Congress spent $8 billion to replenish the fund last year. Rep. Richard Neal, D-Mass., chairman of the House subcommittee that oversees fuel taxes, is working on a package to make the fund more self-sufficient. The U.S. Chamber of Commerce, which doesn't back many tax increases, supports increasing the federal gasoline tax, currently 18.4 cents per gallon. Neal said he hasn't endorsed a specific plan. But, he added, "You can't keep going back to the general fund."Personal Income fell -1.3% in June, the biggest drop in four years, indicating that consumer spending will take time to recover. This reversed the +1.3% gain in May that was due to a one-time stimulus payment to Social Security recipients. Excluding the one-time payment in May, incomes fell -0.1% in June after a decline of less than -0.1% in May. Incomes are down this year despite the on-going prop to incomes from the stimulus, including tax credits and expanded unemployment benefits. The monthly report released Tuesday expands on information released last Friday with the benchmark revision to gross domestic product. The revisions show that incomes, spending and savings were all modestly higher in 2007 and 2008 than previously reported. Real disposable incomes - adjusted for inflation and after taxes fell -1.8% after a +1.5% gain in May. Disposable incomes are down -1% compared with a year earlier. The personal savings rate fell back to +4.6% of disposable income in June from +6.2% in May. The savings rate has more than tripled since the beginning of the recession, as households pared back their spending and reduced their debts. Personal incomes are down -1.7% since the recession began 19 months ago while compensation has fallen -2.8%.

Meanwhile, consumer spending rose +0.4%. After adjusting for inflation, real consumer spending dropped -0.1% in June, the third decline in the past four months. Real consumer spending is down -2% since the recession began. In June, real spending on durable goods fell -0.2%, real spending on nondurables fell -0.4% and spending on services was unchanged. Consumer prices increased +0.5% in June, the most in a year while energy prices rose +8.3%. The core inflation rate, which excludes food at home and energy rose +0.2%. In the past year, consumer prices have fallen -0.4%, while core prices are up +1.5%.
Boosted by low interest rates and prices, pending sales of existing homes rose in June for the fifth straight month, the longest streak of gains since 2003, a real estate trade group said. The pending home sales index rose +3.6% in June after an upwardly revised gain of +0.8% in May, the National Association of Realtors said. The index is +6.7% above June 2008. Pending homes sales in June rose in all regions: up +7.1% in the South, +2.9% in the West, +0.8% in the Midwest and +0.4% in the Northeast. The index is based on sales contracts on existing homes. The NAR reports on sales of existing homes once the sales closes, usually six to eight weeks later.

Monday, August 3, 2009 4:03 p.m est.

The market rallied today on news that manufacturing was pretty good and auto sales were strong and it seems to just go up to go up even though volume continues to dwindle. The Dow saw highs of about +130.00 points, S&P 500 +17.00 points, and the Nasdaq +30.00 points. At the close the Dow was up by +115.00 points to about 9287 S&P 500 +15.00 points to about 1002.00, S&P 100 +6.00 points to about 466.00 and the Nasdaq Composite +30.00 points to 2008.00. Oil rocketed higher on the news that manufacturing was doing better and auto sales were strong last month due to the “cash for clunkers” program showing strong interest. Oil closed up +$2.00 today closing around the $72 level .

Well the S&P 500 did it today crossing the much ballyhooed 1000 level. It also means that we are up +50% since the March 9th low. Nice move for a five month period which has only been seen once before, the 1929 crash, where the market rallied five months straight hitting the same +50% mark. I looked through my own hourly charts to find another period and the only thing that comes close is when we saw a similar rally in the late 1900’s after the banking crisis but it was in a much longer time frame, double to be exact!

Of course the comparison to 1929 here sounds pretty scary and is warranted considering that most economic indicators the past year have also matched the 1930 period. After that initial rally in 1930 the market turned and fell to the final low of -89% from the peak. Of course all of the wording back then was the same as now that everything is fine now blah blah blah and were on our way to recovery! My biggest concern isn’t that we may see a real recovery, it’s how come volume continues to dry up and the market remains incredibly overbought! Today we barely broke a billion shares for example!

The media continues to say that “Investors have really piled into the market, and drove the market up.” But that isn’t really what has been happening. Trading volume continues to dry up because it seems that more and more people are standing aside, leaving the market mostly to day-traders and the big program-trading firms which by themselves account for about 40% of trading volume anyway. The funny thing is that Smart Money continues to leave the race also. Volume normally slows in the summer months as investors and traders enjoy vacations and are less interested in the market, particularly since the market is usually trending down in a correction during its unfavorable seasonal period that runs from May to October anyhow but this summer, volume has declined more dramatically than normal, even though so far the market has been making gains. The old adage “Sell in May and Go Away” hasn’t seemed to apply as the S&P 500 has gained +14% in the last three weeks alone.

What the media claims is that there is a mountain of sideline money that could be piling in and could be providing important fuel to keep the rally going. Even after several $trillion of household wealth disappearing in the last two years, thanks to the bear market in stocks and the plunge in home prices, there is still $4 trillion reportedly sitting in money market funds, earning virtually nothing. As of mid-June that level had only declined -4%. However, the one thing they don’t tell you is that less than half of it is available for the market anyway. Roughly 60% of it is always parked in money market funds by businesses as their cash reserves, added to from earnings and dipped into for purchases of equipment, materials, and other non-investing business purposes and insiders are selling their stocks hand over fist right now. Basically though, the market has become very overbought technically and although it could continue higher I still believe we could see a -5% correction hit at any moment just because of the fact that the market has never gone up or down forever!

Manufacturing continued to get better in July, the Institute for Supply Management reported as the ISM index rose to 48.9% from 44.8% in June. The July index is the strongest since September. The forecast of estimates was for the index to rise to 46.2%. Readings below 50 indicate contraction but below the headline, the report was strong. The data is showing that the manufacturing downturn is coming to an end. Both production and new orders rose above 50%. The ISM index has been improving slowly since hitting a low of 32.9% in December. The index was last above 50% in January 2008.

Friday, July 31, 2009 2:03 p.m est.

The market was up once again yesterday on hopes that Jobless Claims would continue falling even though its only because people are running out of benefits! It hit highs intraday before pulling back by the close and today started the day lower on poor news from 2nd quarter GDP being down -1% and 1st quarter reports being revised even lower to -6.4%. The market wasn’t down much though and has mostly been trading sideways since then. No matter how we finish the month we are going to see one of the strongest July gains since it was last done in July of 1989, 97 and 2003. After that however the best the market did for August was match July highs and two of the three periods turned lower. As we go into next week, interestingly, we have been tracking the market crash of 1929 to a tee so next week will be key as back then the market rallied to a +48% gain before it fell off a cliff again! With yesterday’s peak we’re up about +49%! Something to think about....
Midday here, the Dow is currently up about +40.00 points to about 9190, S&P 500 4.00 points to 990 and the Nasdaq +10.00 points to 1990. Oil has rebounded from itself off the other day being up +$1.50 to about $68.50.

By the final hour because the bears couldn’t really push the market down it came back even though volume continues to shrink as the market tries to stay around here which makes it even scarier for a sharp decline but only time will tell. At the close the Dow was down by -12.00 points to about 9097 S&P 500 -3.00 points to about 980.00, S&P 100 -1.00 points to about 456.00 and the Nasdaq Composite +8.00 points to 1975.00. Oil sold off today down -$1.20 today closing around the $67 level.

The economy contracted at a -1% annual rate during the second three months of the year, much better than the contraction of -1.5% expected by economists. Whisper numbers were for -1% however but what hurt the market was that the contraction during the first quarter was sharply revised from -5.5% in 1Q to -6.4% during that quarter. GDP is the sum total of all goods and services produced by a region, and is used by economists to decide when an economy enters and exits a recession. In the past four quarters, the economy has fallen a record low -3.9%. The big story for the second quarter was that businesses slowed their efforts to cut back investment, stockpiles and investment. Of course the federal stimulus package kicked in, boosting government spending which helped the num
The cost of keeping a worker employed increased at the slowest pace on record over the past year, a strong sign that the weak labor market is keeping compensation costs low. The employment cost index rose +0.4% for all civilian workers in the second quarter, slightly more than the +0.3% in the first quarter. In the past year, employment costs are up +1.8%, the slowest increase since the government began tracking the data in 1980. Economists expected the employment cost index to rise +0.3% in the second quarter. For workers in the private-sector, employment costs rose +0.2% in the second quarter. In the past year, private-sector compensation rose +1.5%, the lowest gain on record. The report shows labor costs are a disinflationary force. Since the recession began in the fourth quarter of 2007, private-sector compensation has slowed from a +0.9% quarter-to-quarter growth to a record-low +0.2% in the two most recent quarters. Under the most-widely accepted theory of inflation, slow-growing or stagnant wages make any sustained inflation unlikely. It is only when workers have the power to demand big cost-of-living adjustments that an inflationary spiral is possible. The employment cost index is composed of two elements: wages and benefits. In the second quarter, wages - which account for 70% of employment costs, increased +0.4%, while benefits increased +0.3%. In the private-sector alone, wages and benefits each rose +0.2%. The employment cost index showed slow compensation growth in most industries and occupations in the private-sector. State and local government employment costs rose +1% in the quarter, as did compensation costs in the financial sector. Compensation for sales jobs fell -0.4%, the fourth straight decline.

Yesterday, Jobless claims rose by +25,000 to a seasonally adjusted 584,000 last week. The climb was about in line with economists' expectations and was the highest level in a month. The four-week average of claims fell by -8,250 to 559,000, and continuing jobless claims also dropped, by -54,000 to 6.19 million. The four-week average of continuing claims fell by -131,750 to 6.41 million.

Wednesday, July 29, 2009 1:45 p.m est.

Wow I’m getting enthused to write on a Wednesday as there is finally something to talk about!

The market is down so far today on poor economic data, a huge build in oil inventories so oil is off almost -$4.00 currently and it was reported that bond sales didn’t turn out as well as expected. The Dow saw lows of -90.00 points, S&P 500 -11.00 points and the Nasdaq -25.00 points. Midday here, it is sitting at these lows but with the news about bonds plus the fact that it looks like the government is making a deal on healthcare, unless the market is saved by the Fed minutes at 2:00 est., we could be headed even lower at the close.

A stat that I saw this morning was that the Nasdaq is now up just over +25% for the year while the S&P 500 is up +5% and the Dow barely over +1%. Strangely although I watch the market all day it took me by surprise although I do mainly concentrate on the S&P 500! I knew that tech has been outperforming but this one snuck up on me as no one seems to be mentioning it in the media. This of course led me to take a look at the stats and since 1995 the Nasdaq has had some huge yearly runs.

Last year the Nasdaq was down -40% and the last time it did that was in 2000 with a -39% fall. The following year it was down another -21% and although the patterns are similar to the rebound seen in 2001 it was nowhere near the strength were seeing this year so it would take something big to get it to fall again that much. Looking at the chart you wouldn’t think we even had a crash last fall though if we actually just go by yearly figures so at the least, and for now, gains could still be cut or the rally slow down because the gain was only +50% in 2003 after a total loss of -92% over three years and since then the gains have been in the single digits!

I have also been watching the Smart Money and so far they haven’t really participated in this rally where as the supposed Dumb Money, (public) has been in heavy. Another good indicator is insider buying and selling and despite a 45% rally in the market and “better than expected” earnings or should I say cost cutting across the board, we’re continuing to see unprecedented levels of insider selling and record low levels of insider buying. The buyers in recent weeks have accumulated just over $26MM in stock ($16.5MM of which was one buyer). Meanwhile, the sells amount to over $300MM. That’s a staggering 1:30 ratio if you back out the one larger buy.

Much of the rally in stocks has been based on the premise that the recession is over and that some kind of economic recovery is on the way. That's the reason for the rally in commodities. Yet of late the rally has begun to stall, especially as the rally in the market has run into selling. More interesting is the fact that shares of the CME group (futures commodities,) continue to fall, despite a rally in the overall stock market. This lack of up side activity in the shares of the world's largest commodity exchange suggests that money is willing to bet on the short term for commodities, such as copper, and perhaps crude oil, but that it doesn't necessarily see the trend lasting long enough to power higher earnings for the CME.

That suggests that the conviction of those betting on a major recovery is starting to slow. More evidence of that is the fact that the Ten Year Note yield (TNX) has been rising steadily. Bond traders are fearful of both inflation and ever rising budget deficits, as well as the potential for rising debt for at least several years as the Obama administration looks to fund its ambitious, and somewhat faltering social programs. We are facing another week of record offerings for bonds and today’s 7-year and yesterday’s 2-year note wasn’t promising even though everyone expected it to be good because they are only short term notes.

The markets are starting to show signs of caution as ongoing trends are starting to show signs of wear and tear, and key market bellwethers, such as the CME group, and bonds are showing that even if this is a recovery it will be a weak one. The market has rallied for several months now so even though everyone keeps saying there is tons of money on the sidelines which has been the word since the late 1900’s by the way, big profits have been made on paper, so people may want to take some off like they did last night in China!

Chinese stocks in Shanghai fell sharp