The Commentary       Today's date July 14, 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!!

Wednesday, July 14, 2010 4:03 p.m est.

Here is an interesting read from Matt Ridley's article "Down with Doom: How the World Keeps Defying the Predictions of Pessimists":

"When I was a student, in the 1970s, the world was coming to an end. The adults told me so. They said the population explosion was unstoppable, mass famine was imminent, a cancer epidemic caused by chemicals in the environment was beginning, the Sahara desert was advancing by a mile a year, the ice age was retuning, oil was running out, air pollution was choking us and nuclear winter would finish us off. There did not seem to be much point in planning for the future. By the time I was 21 years old I realized that nobody had ever said anything optimistic to me - in a lecture, a television program or even a conversation in a bar - about the future of the planet and its people, at least not that I could recall. Doom was certain.

The next two decades were just as bad: acid rain was going to devastate forests, the loss of the ozone layer was going to fry us, gender-bending chemicals were going to decimate sperm counts, swine flu, bird flu and Ebola virus were going to wipe us all out. In 1992, the United Nations Earth Summit in Rio de Janeiro opened its agenda for the twenty-first century with the words `Humanity stands at a defining moment in history. We are confronted with a perpetuation of disparities between and within nations, a worsening of poverty, hunger, ill health and illiteracy, and the continuing deterioration of the ecosystems on which we depend for our well-being.'By then I had begun to notice that this terrible future was not all that bad. In fact every single one of the dooms I had been threatened with had proved either false or exaggerated. The population explosion was slowing down, famine had largely been conquered, India was exporting food, cancer rates were falling not rising, the Sahel was greening, the climate was warming, oil was abundant, air pollution was falling fast, nuclear disarmament was proceeding apace, forests were thriving, sperm counts had not fallen. And above all, prosperity and freedom were advancing at the expense of poverty and tyranny.
I began to pay attention and a few years ago I started to research a book on the subject. I was astounded by what I discovered. Global per capita income, corrected for inflation, had trebled in my lifetime, life expectancy had increased by one third, child mortality had fallen by two-thirds, the population growth rate had halved. More people had got out of poverty than in all of human history before. When I was born, 36% of Americans had air conditioning. Today 79% of Americans below the poverty line had air conditioning. The emissions of pollutants from a car were down by 98%. The time you had to work on the average wage to buy an hour of artificial light to read by was down from 8 seconds to half a second.

Not only are human beings wealthier, they are also healthier, wiser, happier, more tolerant, less violent, more equal. Check it out - the data are clear. Yet if anything the pessimists had only grown more certain, shrill and apocalyptic."

Yesterday at the close the market pulled back a bit from its highs with Dow up about +147.00 points to the 10363.00 level, S&P 500 +17.00 points to about 1095.00, S&P 100 +7.00 points to 497.00 and the Nasdaq Composite up +44.00 points to 2242.00. Oil was up strong closing up about +$2.00 to be around the $77.00 level.

Today the market was mixed as it started the day lower with the Dow off about -45.00 points, S&P 500 -7.00 points but the Nasdaq remained a bit higher as Intel had very good earnings last night. In the end tech seemed to win out as the market turned higher with the with the Dow seeing highs of +40.00 points, S&P 500 +4.00 points and the Nasdaq Composite up +25.00 points. After the Fed reported that the economy appears to be slowing and that it could take up to 5 years for a full recovery to actually occur. The market started to sell off with the Dow making new lows of -60.00 points, S&P 500 -8.00 points and even the Nasdaq seeing lows of -10.00 points.

At the close of course the market is into ignoring bad news so it came back again with the Dow and Nasdaq closing higher for the seventh straight day. At the close the Dow was up about +4.00 points to the 10367.00 level, S&P 500 -.20 points to about 1095.00, S&P 100 +.50 points to 497.00 and the Nasdaq Composite up +8.00 points to 2250.00. Oil was down a bit after strong gains yesterday down about -$.25 to be around the $77.00 level.

Fed officials concluded at their June policy meeting that the pace of the recovery was likely to be slower than they had earlier hoped, but they saw no immediate need for more easing of monetary policy, according to a summary of their June 22-23rd meeting. Officials agreed that it would be a good idea to study what steps "might become appropriate" if the economy took a sharp downturn. Fed officials did not appear overly alarmed about a slowdown. None of the 17 top Fed officials are forecasting a double-dip recession and only a few cited some risk of deflation. The Fed's formal forecasts made slight downward revisions to growth and inflation in 2011 and 2012 and saw a slightly higher unemployment rate in 2011.

Retailers fell -0.5% in June to a seasonally adjusted $360.2 billion, further proof that the economy has slowed. Sales fell for the second straight month after seven consecutive increases. They were up an upwardly revised +1.1% in May. Details of the June report were mixed as the declines were heaviest in sales of durable goods and gasoline. Sales of soft goods were generally healthy. Economists expected total sales to fall -0.4% in June. Excluding the -2.3% drop in motor vehicle sales, retail sales fell -0.1% to $299.2 billion, in line with the -0.2% decline expected.

Tuesday, July 13, 2010 1:53 p.m est.

The market rallied today once again for the sixth day in a row with the Dow seeing highs of +180.00 points, S&P 500 +19.00 points and the Nasdaq Composite up +45.00 points on pathetic volume which could mean the rally may be running out of steam. Yesterday for example saw the market up but internals were awful suggesting that very few stocks are holding the market higher. Since making the highs the market has started to pull back so it will be interesting to see how we finish the day. At the close Intel will be reporting so that may have an effect tomorrow. One thing to note is that earnings have been continually lowered the past two weeks as things aren’t looking as good as first hoped so it may not be as hard to beat estimates now.

The economy does seem to be leveling off once again after a lackluster recovery but one thing to consider is the fact that there are two very different economies in America. The top 10% earners have 4.2% unemployment so corporations and the rich have been doing very, very well in 2010. The working class, on the other hand, has 25% unemployment, deeply in debt and their assets, mainly through foreclosure are falling at a rate of 10% per year, even as the top 0.01% of our population grew their assets by an average of $500,000,000 each in 2009. In 2007, Forbes said that 2006 was "the Richest Year in Human History" as 178 people became Billionaires and $3.5Tn of wealth was added to the holdings of the "best" 946 people in the World. That’s $3.7 billion each and 7% of the entire planet Earth’s GDP is going to less than 1,000 people. Basically what it means is that the few people with money are supporting the economy so it may be wise for President Obama to be careful about how much more he wants to take away from them!

The trade deficit widened by +4.8% in May to $42.3 billion and was unexpected. The forecast was for the deficit to narrow to $38.8 billion from $40.3 billion in April. Imports rose faster than exports in May. The deficit for the year now totals $197.8 billion, up from $143.8 billion in the same period last year. The deficit with China widened to $22.3 billion in compared with $17.5 billion in the same month last year.

Monday, July 12, 2010 4:03 p.m est.

The market was pretty quiet today as traders awaited the start of earnings reports with Alcoa kicking it off tonight. The market moved in both positive and negative territory all day with the Dow seeing highs of +20.00 points, S&P 500 +3.00 points and the Nasdaq Composite up +20.00 points meanwhile seeing lows with the Dow seeing lows of -50.00 points, S&P 500 -7.00 points and the Nasdaq Composite up -15.00 points. The final hour saw the market move back into the green and at the close the Dow was up about +18.00 points to the 10216.00 level, S&P 500 +.80 points to about 1079.00, S&P 100 +1.00 points to 490.00 and the Nasdaq Composite up +2.00 points to 2198.00. Oil closed down about -$1.00 to be around the $75.00 level.

This is an expiration traded week and so far all of our trades are looking like we’ll see full profits. The last 12 expirations have clearly favored the bulls, with seven of the 12 positive for an average gain of +1.2% for the week but with the big move we saw last week that may not be the case this week. I would think that volatility could kick up as earnings start flowing in more and more as the week progresses. As I said last week, head and shoulders patterns aren’t nearly as recognized as they used to be, but one type of pattern that rarely anyone talks about is this W formation where the final down leg is lower than the first down. So far it has come to pass as we have seen a sharp rally higher for the final leg of the W so this pattern may still be in play but if it does continue to work out we should see some sideways action likely for this week before we either continue higher or start to move lower once again.

Friday, July 9, 2010 4:03 p.m est.

Here’s some good news about the war against terrorism that you won’t hear about in the mainstream media;
Civil war..among Muslims According to The Wall Street Journal: "Practitioners of mainstream Islam in Lahore are fighting back after an attack last week on one of their holy shrines by suspected al Qaeda-linked militants, which left more than 40 people dead." The report added: "One group, Sunni Tehreek, took to the streets in Lahore on Friday armed with automatic weapons, and have been moving to forcibly take over mosques from hard-line Muslim groups. The message, the group's Lahore leader says, is that mainstream Muslims—or the majority in Pakistan—are able to defend themselves against al Qaeda extremists."

According to the New York Times: "Less than a day after a suicide bomber killed more than 50 people in a crowd of Shiite pilgrims at a police checkpoint in Baghdad, more explosions struck worshipers on Thursday, killing seven and wounding about 60 despite intensive efforts by Iraqi security forces to foil such attacks. At least five other Shiites were killed and dozens of others wounded in and around Baghdad on Wednesday, as hundreds of thousands of people took part in the annual procession to Kadhimiya’s gold-domed shrine to honor the eighth-century Imam Musa al-Kadhim."

Yesterday the market had the feeling it was going to pull back but once again it rallied at the end of the day to close near highs with the Dow up about +121.00 points to the 10139.00 level, S&P 500 +10.00 points to about 1070.00, S&P 100 +5.00 points to 486.00 and the Nasdaq Composite up +16.00 points to 2175.00. Oil was up again closing up around by +$.60 to be around the $75.00 level.

So far today the market had become mixed at the open but once again slowly rallied all day but as I was saying last week we had gone too far in one direction on the way down, now the market has moved a bit far on the upside in the short term, so its overbought. One thing for sure is that the dreaded head and shoulders pattern appears dead at this time! The great news is that as we go into expiration next week were setting up to see full profits which is great news!

Yesterday, at the close the market was at its highs with the Dow up about +275.00 points to the 10018.00 level, S&P 500 +32.00 points to about 1070.00, S&P 100 +14.00 points to 484.00 and the Nasdaq Composite up +66.00 points to 2175.00. Oil was up all day closing up around by +$3.00 to be around the $75.00 level.

Today, at the close the market was again near highs with the Dow up about +59.00 points to the 10198.00 level, S&P 500 +8.00 points to about 1078.00, S&P 100 +3.00 points to 489.00 and the Nasdaq Composite up +21.00 points to 2196.00. Oil was up all day closing up around by +$1.00 to be around the $76.00 level.

One of the big reasons the rally started this week was because Treasury Secretary Geithner told CNBC’s Larry Kudlow that capital gain and dividend taxes aren't going up in an online interview. I think this was all planned by the government for a possible second stimulus, especially when the market rallied in a big way after Dallas Fed head Richard Fisher, also in a speech noted that Congressional policy is leading to uncertainty for businesses who want to create jobs. The Obama adminstration has done little to earn the trust of the business community or anyone who actually works for a living and pays the taxes from which their salaries come from so any potential handouts, or backing off in policy, is likely to come with very large conditions attached.

If Congress and the president do start to pullback on their tax hike rhetoric maybe for a year or two, the economy could get a boost, especially if the rumor comes true that there may be an extension of Bushes tax cuts. But if there is no movement from the Democrats along this front, beyond the capital gains action described by Geithner, the potential for a persistently slow economy is likely to remain in place, as well as the risks of the much talked about double dip. The Fed understands that and is becoming a bit more active. According to The Washington Post: "With Congress tied in political knots over whether to take further action to boost the economy, Fed leaders are weighing modest steps that could offer more support for economic activity while their target for short-term interest rates is already near zero. They are still resistant to calls to pull out their big guns massive infusions of cash, such as those undertaken during the depths of the financial crisis but would reconsider if conditions worsen." What also helped was that the Fed said they were willing to be more aggressive on policy if needed although they may have to start giving away money like the Japanese did to help their economy with negative interest rates. The Washington Post reported the following: '"If the economic situation changes, policy should react," James Bullard, president of the Federal Reserve Bank of St. Louis, said in an interview Wednesday. "You shouldn't sit on your hands. . . . I think there's plenty more we could do if we had to."

Most people need jobs at this point, not capital gains as many have burned through their savings just to live day to day and that is likely why the Fed, who can see that the economy is starting to slow again is getting more aggressive. What’s most interesting is that what we're seeing now is the beginning of a division between the Fed and perhaps the Treasury away from the White House and Congress. This is significant, especially since the election is about five months away. If the economic data continues to show that weakness is increasing, expect the Fed to become very active. If the White House doesn't get it, there could be some major political consequences this fall which I think there already will be anyhow.

Jobless Claims fell -21,000 in the latest week to 454,000. They have bounced up and down over the past six months not really showing any real overall improvement. Economists had expected them to fall to 458,000. The four-week average, a better gauge of employment trends than the volatile weekly number fell by -1,250 to 466,000.

Wednesday, July 7, 2010 11:03 a.m est.

The market looked like it was going to move back down today but as we got closer to the open Globex futures turned higher. Although slow going at first after an hour of trading the Dow saw highs of +170.00 points, S&P 500 +18.00 points and the Nasdaq Composite +35.00 points. The question now is will it hold until the close. If it does we may have seen the bottom at least until expiration which is now 7.5 trading days away. I’m going to start reporting intraday this week as there is a heat wave going on back east and basically I think the market is going to get quieter and quieter as we go along here. Of course if there is a surprise I’ll be reporting.
Have a great day!

Tuesday, July 6, 2010 4:03 p.m est.

The market took off today with the Dow seeing quick highs of +140.00 points, S&P 500 +16.00 points and the Nasdaq Composite +40.00 points as the market was very oversold and had been down for so many days in a row because the world was coming to an end, but, when data came out of Asia and Europe that things weren’t too bad economically why not rally for at least one day. As volume dried up the market slowly drifted off highs until the final hour when it finally hit negative territory. The Dow saw lows of -40.00 points, S&P 500 -5.00 points and the Nasdaq Composite -15.00 points but buying in the final hour brought it back to close with decent gains.

At the close the Dow was up about +57.00 points to the 9744.00 level, S&P 500 +5.00 points to about 1028.00, S&P 100 3.00 points to 467.00 and the Nasdaq Composite up +2.00 points to 2094.00. Oil was up all day but since it closed one hour before the market it never made its gains back closing lower by another -$.15 to be around the $72.00 level.

The market is likely to continue to be like this all week as the bears and bulls try to figure out the exact direction as everyone is talking about how the market is going to break down as it looks like a huge head and shoulders pattern has formed. From my experience these patterns need to be ignored as they were great indicators in the 80’s however every one and their mother now talks about them so its not nearly as accurate and numerous times in the past they haven’t worked out as well as they looked like they should. Generally whenever everyone is going one way its smarter to go the other way in case someone yells out, mooooooo, and we all know what happens to those cows in the end!!!!

The service sector continued to grow in June but at a slower pace, according to a survey of companies by the Institute for Supply Management. The ISM non-manufacturing index fell to 53.8% last month after holding at 55.4% for the past three months and is the lowest level since February. Economists had expected the ISM index to move lower to a reading of 54%. The employment index showed that job growth is contracting, falling to 49.7% for June from 50.4% the prior month while the business-activity index fell to 58.1% from 61.1% in May. The new-orders index fell to 54.4% from 57.1% in May while the prices-paid index fell to 53.8% from 60.6%.

Friday, July 2, 2010 4:03 p.m est.

The market bounced first thing this morning after a mixed jobs report came out first thing this morning causing Globex futures to move sharply higher by +10.00 points but then after reviewing the report it fell a few points. After they closed for the cash market to take over the market opened higher with the Dow seeing quick highs of +40.00 points, S&P 500 +6.00 points and the Nasdaq Composite +15.00 points but it didn’t last long as the end of the world is coming with the Dow seeing -110.00 points, S&P 500 -10.00 points and the Nasdaq Composite -20.00 points. Buying in the final thirty minutes of trading took the market back into the green but selling in the final three minutes of trading saw it close in the red for the seventh day in a row.

At the close the Dow was down about -46.00 points to the 9686.00 level, S&P 500 -5.00 points to about 1023.00, S&P 100 -2.00 points to 464.00 and the Nasdaq Composite down -10.00 points to 2092.00. Oil was up but then turned down again closing lower by another -$1.00 to be around the $72.00 level.

Looks like the war is on for the bulls and the bears, technicalists (new word) and fundamentalists. All of the technical analysts are saying that since we broke prior support we “have” to go down to the next support level of 980 on the S&P 500 although some are saying 1000, 1010, which we almost touched at the lows yesterday. The problem I always have with technicals is that charts always look great looking backwards but they rarely predict the future and people are always rejiggering the lines to fit their outlook. Sure there are support and resistance levels but to make them gospel is crazy in my view! When you look at historical charts you can see this occur all over the place. I think technicals are great for establishing overbought/oversold levels but not for predicting the future to a tee. This is why I always like to say the market doesn’t go up forever and it doesn’t go down forever, such as -9% in 8 days. If it were to continue to go down the market would be at zero by the end of the year!

On the same note the fundamentalists are saying companies are full of cash, earnings are moving up and are looking decent for the upcoming earnings quarter, interest rates are at extreme lows and GDP this quarter will come in around 3%. Very interesting, so who’s right, I always like to sway to my own numbers and after hitting them yesterday I think we should at least see a bounce into expiration which is nine trading days away after today and with the market getting “technically” extreme on the oversold side its due for a bounce!!!

Employment fell for the first time this year down -125,000, as a quarter million temporary census workers were laid off for June, the Labor Department said today. Private sector payrolls expanded by a modest +83,000, lower than the +100,000 to +150,000 gain expected by economists. Employment rose a revised +433,000, after a previously reported gain of +431,000 jobs in May that was led by census hiring.

The unemployment rate dropped to 9.5% in June from 9.7% in the previous month but it wasn’t from people being hired, it was because they fell off the board as their free money expired with a sharp -652,000 decline in the labor force in June. Economists had expected the unemployment rate to remain steady. 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 decreased to 16.5% from 16.6%. The number of temporary workers increased +20,500. Payrolls at temporary-help agencies often picks up before companies take on permanent staff. Average hourly earnings were flat in June up +2 cents to $22.53. Economists had been expecting a +0.2% gain. Earnings are up +1.7% in the past year with the average workweek 34.1 hours.

Thursday, July 1, 2010 4:03 p.m est.

The market was down once again this morning and selling continued to grow as the day went on as no seemed to want to hold stocks. Lows were hit mid-morning with the Dow seeing lows of -160.00 points, S&P 500 -21.00 points and the Nasdaq Composite -50.00 points but then it rallied as the day went on but this time it didn’t make back into positive territory but the Dow saw -20.00 points, S&P 500 -1.50 points and the Nasdaq Composite -2.00 points midday and then again in the final hour before selling off a bit more into the close.

At the close the Dow was down about -42.00 points to the 9733.00 level, S&P 500 -3.00 points to about 1028.00, S&P 100 -2.00 points to 466.00 and the Nasdaq Composite down -8.00 points to 2101.00. Oil really took a hit today closing down about -$3.00 to be around the $72.50 level.

It looks like the Stock Traders Almanac got it wrong this time around as they said that the first day of July has been up 17 of the last 20-years! I’m not a big follower of those types of things but they are interesting. I’m also not a huge believer in technicals especially when it comes to different levels but do follow them when things get to extremes like we are now in with an incredibly oversold market. What I do follow though are my Program Number levels and this morning the first one was hit on the S&P 100 and 500 so we could be starting to see a bottom around here. Everyone is worried about the employment report and estimates are all over the place mostly on the downside, so the big question will be has any negative news tomorrow have already been discounted. It could be an interesting end to the week going into a long weekend.

Globex futures had been up last night until it was reported that one of China's two key manufacturing surveys fell in June, coming in below economists forecasts. The China Federation of Logistics & Purchasing said its purchasing managers index fell to 52.1%, compared to 53.9% in May. The result missed a 53.1% forecast in a Reuters poll of economists, but managed to stay above the 50% mark separating expansion from contraction. I find it humorous that when they were reporting their GDP figures in the double digits everyone said they fudged their numbers but now they’re numbers are like gospel, what a joke!

Another thing that didn’t help the market this morning was that Jobless Claims jumped by +13,000 in the latest week to 472,000. Economists had expected initial claims to fall to 455,000. The four-week average of initial claims rose by +3,250 to 466,500, the highest level since early March. Continuing Claims rose +43,000 to seasonally adjusted 4.62 million. About 4.92 million jobless workers received extended federal benefits, down from 5.30 million. The figures are not seasonally adjusted. Extended benefits are offered to some workers after they use up eligibility for state unemployment compensation, usually after 26 weeks. Congress has extended benefits for up to 99 weeks in the states hardest hit by the recession but the extension has already expired, however, and lawmakers have not been able to agree on a proposal to renew it. As a result, thousands of workers who have exhausted regular benefits are no longer receiving extra cash.

There was good news though as employers reduced their planned layoffs in the first half of 2010 to the slowest pace in a decade, according to outplacement firm Challenger Gray & Christmas. In June, planned job reductions were essentially unchanged from May at 39,358, which was 47% less than in June 2009. This was the third straight month in which there were fewer than 40,000 layoffs announced.

The expansion in the manufacturing sector slowed a bit just like China’s, haha, after three months of very rapid growth, according to a survey of purchasing managers at companies across the nation. The Institute for Supply Management index fell from 59.7% in May to 56.2% in June and is the lowest since December. Economists were expecting a drop to about 59%. Readings over 50% indicate most firms are growing. The new orders index fell from 65.7% to 58.5% in June and the production index fell from 66.6% in May to 61.4% in June. Still, the key factor is that it is still positive after a huge run off lows.

New sales contracts on existing homes fell sharply in May after a federal subsidy for buyers expired at the end of April, a trade group reported. The pending home sales index fell a strong -30% in May after rising +23% between January and April, the National Association of Realtors reported. The index, which measures signed sales contracts on previously owned homes, was down -15.9% compared with the same month a year ago. The pending home sales index is a leading indicator for sales of existing homes, which are recorded at the time of the closing.

Wednesday, June 30, 2010 4:03 p.m est.

The market started the day a bit lower with the Dow seeing lows of -40.00 points, S&P 500 -3.00 points and the Nasdaq Composite -5.00 points but then it rallied as the day went on with the Dow seeing highs of +45.00 points, S&P 500 +8.00 points and the Nasdaq Composite +20.00 points before it gave it all back once again in the final hour with the Dow seeing new lows of -120.00 points, S&P 500 -13.00 points and the Nasdaq Composite -30.00 points.

At the close the Dow was down about -97.00 points to the 9773.00 level, S&P 500 -11.00 points to about 1031.00, S&P 100 -5.00 points to 468.00 and the Nasdaq Composite down -26.00 points to 2109.00. Oil was mostly flat all day but closed down about -$.30 to be around the $75.50 level.

Bearishness continues to be rampant and its know wonder with the market falling about -9% in only eight trading days. One of those only saw a miniscule gain to boot. Nonetheless everyone is talking about how the W formation has broken and support is now all gone technically. That’s when the bears usually start their touting and I’m hearing that everywhere. The only thing that they don’t look at is that historically W formations have actually seen the last leg down of the W be lower than any of the prior lows so its still something to watch. It may be more important to see what happens after the employment report comes out on Friday.

Globex futures had been rallying as Europe had said that they didn’t need o borrow as much money as expected but when it was reported that private-sector firms created only +13,000 more jobs in June, according to the ADP employment report they fell back. Private-sector job growth was revised higher in May to +57,000 from +55,000 earlier however. Friday’s estimates on employment has it falling by -130,000 including the loss of some -250,000 temporary workers at the Census Bureau. Private-sector employment has increased five months in a row however which is also good news. We’re not screaming ahead that’s for sure but it is slowly getting better.

Manufacturing activity in the Chicago region slipped a bit in June but remained at relatively high levels, according to the purchasing managers index for the Chicago region. The Chicago purchasing managers index fell to 59.1% from 59.7% in May. The drop was in line with forecasts. The report signals continued solid growth in the manufacturing sector as readings over 50% indicate overall business expansion. The Chicago PMI is the last of a series of regional indicators that some economists say give clues to the national Institute for Supply Management manufacturers' survey for June to be released tomorrow. Based on other regional readings, economists expect the June ISM manufacturing composite to slow a bit to 59% from a May reading of 59.7%.

Tuesday, June 29, 2010 4:03 p.m est.

To start the week the market was higher all day but mostly flat so when some selling hit in the final hour it took it down a bit at the close but today the market fell out of bed at the open as everyone is suddenly worried about a double dip recession because China reported that the Conference board cut its leading indicator index. China has six indicators that measure economic activity in China to growth of only +0.3% for the month of April, down from the previously reported +1.7% gain over night. After it was reported that Consumer Confidence was poor it sent the market even lower with the Dow seeing lows of -330.00 points, S&P 500 -39.00 points and the Nasdaq Composite -95.00 points in the final hour but buying a few minutes before the close brought it off the lows a little bit.

The negativity is extreme out there as there is absolutely no good news about anything right now which usually means your nearing a low which will be the third time in the last month so the bulls and bears are are really fighting it out right now. The Arms index closed at 5.45 today which I’ll have to check but that may be another record but may also have something to do with the volume being average.

At the close the Dow was down about -268.00 points to the 9871.00 level, S&P 500 -33.00 points to about 1042.00, S&P 100 -14.00 points to 473.00 and the Nasdaq Composite down -86.00 points to 2135.00. Oil was down once again after being up nicely yesterday closing down about -$2.40 to be around the $76.00 level.

Consumers are increasingly worried about jobs and the economy, the Conference Board said, as it reported that its Consumer Confidence Index fell to 52.9% in June, the lowest level since March from a downwardly revised 62.7% in May. “Increasing uncertainty and apprehension about the future state of the economy and labor market, no doubt a result of the recent slowdown in job growth, are the primary reasons for the sharp reversal in confidence,” said Lynn Franco, director of Conference Board's consumer research center. " Until the pace of job growth picks up, consumer confidence is not likely to pick up.” The Conference Board's prior reading for May was 63.3%.

Consumers view on the present situation and their expectations deteriorated in June, with both reaching the lowest levels since March, according to the Conference Board. Their view on the present situation fell to 25.5% from 29.8% in May, while the expectations barometer fell to 71.2% from 84.6%. Respondents saying current business conditions are “good” fell to 8% in June from 9.7% in May, while those saying jobs are "hard to get" rose to 44.8% from 43.9%. Respondents saying they expect business conditions to be worse in six months rose to 14.9% from 11.9% in May, while the percentage of those expecting better business conditions fell to 17.2% from 22.8%. Those expecting fewer jobs rose to 20.8% from 17.8%, while those expecting more jobs fell to 16% from 20.2%. Confidence has double-dipped in the last two recoveries in early 1992 and early 2003 without the economy falling back into recession and the June pullback in confidence is far less severe than either of the past two periods. Besides that the confidence index remains substantially higher than its recent low.

Consumers with plans to buy a home within six months fell to 1.9% in June, the lowest level since 1982 other than 1.7% in December. In May 2.1% had plans to buy a home. Those with plans to buy a car fell to a record low of 3.7% from 6% in May, the data goes back to 1967. Those with plans to buy major appliances fell to 22.9% from 26% in May. While the recession may have technically ended last summer, consumers remain skittish about job and income prospects and are refraining from consuming in a sufficient enough manner as to create substantial growth in GDP.

Home prices rose +0.8% in April compared with March in 20 major cities, according to the Case-Shiller home price index by Standard & Poor's and is the first increase after six straight monthly declines. Prices have moved up +3.8% in the past year. They rose in 18 of the 20 metropolitan areas tracked by Case-Shiller compared with March.

Yesterday it was reported that the savings rate for households rose to the highest level in eight months in May, as incomes grew faster than spending. Real (inflation-adjusted) spending increased a seasonally adjusted +0.3% in May after no gain in April, led by sizable increases in purchases of durable goods and services. Real after-tax incomes rose +0.5% in May, compared with an upwardly revised +0.6% gain in disposable incomes in April. Compared with a year ago when tax cuts helped household incomes, real disposable incomes are off -0.2%. In nominal terms (not adjusted for price changes), incomes rose +0.4% in May while spending increased +0.2%.

The savings rate rose to +4% from +3.8%. Households are saving three times as much out of their disposable incomes as they did just before the recession began in late 2007.

Consumer prices were unchanged in May, as measured by the personal consumption expenditure price index. Prices are up +1.9% compared with a year ago. Core consumer prices which exclude volatile food and energy prices rose +0.2% in May and are up +1.3% in the past year. The report shows people are slowly rebuilding their finances after the worst downturn in generations. Consumer spending is growing modestly, while inflation rates are very low.

Friday, June 25, 2010 4:03 p.m est.

The market was slightly higher at the open but once again selling took hold and took the market into the red as traders analyzed the new financial bill that is being created and likely to pass. After the University of Michigan's sentiment report came out at its best level since January of 2008 it came back into the green though with the Dow seeing highs of +25.00 points, S&P 500 +5.00 points and the Nasdaq Composite +10.00 points. Selling took hold once again though and took the Dow to lows of -75.00 points, S&P 500 -6.00 points and the Nasdaq Composite -15.00 points before it bounced back again with the Dow seeing new highs of +55.00 points, S&P 500 +10.00 points and the Nasdaq Composite +25.00 points before selling took hold once again in the final hour.

It was interesting that the market was even down as bank stocks were higher as they have either got what they wanted or most likely they have a figured out a way to get around the new rules to screw everyone in the end! The good thing though is that it’s about time that somebody did something to get things more in line whether it’s a good bill or a bad bill. The reason I say this is because it doesn’t really matter as much as the concept that financial institutions needed to be regulated! Since the Clinton administration killed the Glass Steagall act that had been place since the 1929 crash we’ve seen nothing but disaster after disaster with extreme levels of volatility! This is a positive for the market in the end and likely the reason why banks are up over +3% even though the bill clearly shows that it will cost them money in the end.

At the close the Dow was down about -5.00 points to the 10147.00 level, S&P 500 +3.00 points to about 1077.00, S&P 100 +.50 points to 487.00 and the Nasdaq Composite down +6.00 points to 2223.00. Oil was up strong all day after it was announced that the storm in the Gulf could possibly turn into hurricane, up about +$2.50 to be around the $79.00 level.

All we’ve heard all week is how bad things are out there but it was reported this morning from the Business Roundtable, a group of CEOs from large U.S companies that said that they are showing that 39% of CEOs expect to hire new employees in the second half of 2010 according to their survey. In conjunction with positive double digit sales growth from a high number of companies so far this year, private employment numbers could see a significant and surprising rise. Also, 79% of CEOs surveyed said they expect sales to rise in the second half of 2010. If you rewind the picture to the March crash period of 2009, both the sales numbers and sentiment has improved dramatically since then.

And although the Retail sector has been crushed the past week due to some of the big commercial stores having poor earnings, if you have the cash people are buying! Adobe for example reported strong revenue growth of +34% year-over-year and Oracle had a +39% rise in revenues from $6.86 billion to $9.51 billion. Apple has now sold over 3 million Ipads in less than 3 months, with swarms of demanding consumers lined up for the iPhone 4 release. Amazon is also doing well from their expanding online shopping dominance, +46% worldwide revenue growth in their Q1 2010 report. At the least people still have the money to line up for breakthrough gadgets like the iPhone 4.

Consumer sentiment was the most optimistic in more than two years in June, but remained far below normal levels, according to a survey released by Reuters and the University of Michigan. The index rose to 76% in late June, up from 73.6% in May and 75.5% in mid-June. The average level of the index is around 87% however. Economists were expecting the index to come in at 75.5%. Consumers expect a very slow pace of economic growth, the survey said but the current conditions index improved to 85.6% from 81%, while the expectations index rose to 69.8% from 68.8%.

Gross domestic product for the first quarter was revised down to an increase of +2.7% annualized from the earlier estimate of a 3% rise. Economists expected first-quarter growth to be unrevised at up 3%. The revision to first-quarter GDP was largely due to weaker consumer spending and the widening trade deficit. A key measure of inflation was revised slightly higher but remained subdued. Core prices increased +0.7% in the first quarter, up from +0.6% reported earlier. Corporate profits increased a revised +8% quarter-to-quarter, compared with a +5.5% rise previously estimated which is good news.

There is also good news in the longer term in my view as the world is seeing more and more middle class people. I’m always watching what’s going on overseas as that is basically where all of our manufacturing has gone and since the market is mainly made up of world wide corporations this should help to support the market because if we are weak here, they should make it up somewhere else. In Asia almost every day now there is another incident of workers waking up and realizing how much they are being screwed due to the internet giving them access to how people in the Western world are living. For example in India Garment workers have been having violent protests and shut down factories this week until they got a better pay deal of a gigantic $73 a month, up from $30. Nissan had to settle wage issues and Honda was forced to halt production in China as a strike hit an auto parts supplier. Yes this does take away from profits but it also gives people more money to spend which could be substantial because they have nothing while we have everything!

It also indicates that we are becoming a world economy and in the end could be inflationary and could mean we’ll finally move out of this 0% policy, but for now its a good thing to see and at the least should help support stocks in the longer term. The other thing I think it indicates however is that recoveries will take longer and longer as its hard to move a giant ship fast! This is why I wouldn’t expect the economy to zoom ahead anytime soon which should mean not to much upside for the market either. In the end, this will result in a mostly sideways market which in the longer term is great news for our style of trading.

Thursday, June 24, 2010 4:03 p.m est.

The market sold off right from the start and was down all day. Going into the final hour there was a move that almost saw it come back but in the final few minutes of trading lows were hit with the Dow seeing lows of -170.00 points, S&P 500 -21.00 points and the Nasdaq Composite -35.00 points.

At the close the Dow was down about -146.00 points to the 10153.00 level, S&P 500 -18.00 points to about 1074.00, S&P 100 -8.00 points to 487.00 and the Nasdaq Composite down -37.00 points to 2217.00. Oil was down all day but basically closed unchanged up +$.15 to be around the $76.50 level. Interestingly the volume remains low, maybe its because everyone is watching the World Cup and Wimbledon. As I mentioned at the start of the week, the history of the week after quadruple witches expiration is down and it looks like this one is going to go down as another one. I would be more worried about it if we were seeing strong volume but instead its just been a slow bleed as the overbought condition we saw last week is getting reversed. It will be interesting to see how we trade going into month end next and if there will be any short covering tomorrow as we go into the weekend.

Jobless Claims fell by -19,000 last week to a seasonally adjusted 457,000, the lowest in six weeks, confirming that labor markets remain very weak. The four-week average of new claims was roughly unchanged at 462,750. The number of people who were collecting state benefits fell by -45,000 to 4.55 million. Continuing claims rose by +155,000 to 9.66 million.

Durable goods fell in May, falling -1.1% on weaker demand for airplanes, steel and communications equipment. The decrease was not as severe as the expected -1.4% drop forecast by economists. It is the first decline in total orders in the last six months and the largest since August 2009. The underlying report was not as weak as the headline suggests. Excluding aircraft, orders rose +0.9%. Shipments fell -0.4% in May, and were up +0.4% excluding transportation goods while inventories rose +0.8%.

Wednesday, June 23, 2010 4:03 p.m est.

The market had a weak start to the day moving slightly higher with the Dow seeing highs of +25.00 points, S&P 500 +1.00 point and the Nasdaq Composite +5.00 points but it turned red pretty quick and then really sold off after abysmal housing starts data came out. The Dow saw lows of -70.00 points, S&P 500 -11.00 points and the Nasdaq Composite -25.00 points. As traders awaited the Fed’s decision about interest rates it slowly drifted back up with the Dow actually seeing green. After the Fed announced that they once again would leave rates alone between 0-.25%, the market sold off a bit but didn’t sell off strongly and rally actually started that saw the Dow see highs of +70.00 points, S&P 500 +5.00 point and the Nasdaq Composite +15.00 points.

Of course they maintained their pledge to keep rates at this historic low level for an "extended period" to support the recovery. In a statement after their two-day meeting, the Fed downgraded their outlook though which is interesting. They said financial conditions "have become less supportive of economic growth" largely as a result of the European debt crisis. There was one person who didn’t like the decision, Thomas Hoenig, the president of the Kansas City Federal Reserve Bank. Hoenig has gone against every statement this year.

Unfortunately it didn’t hold and was mixed at the close with the Dow up about +5.00 points to the 10299.00 level, S&P 500 -3.00 points to about 1092.00, S&P 100 -2.00 points to 494.00 and the Nasdaq Composite down -8.00 points to 2254.00. Oil was down all day by about -$1.50 to be around the $76.35 level. The interesting thing that I’m noticing is that volume is remaining low even on sell offs and yesterday the Arms indicator closed above 3.50 which is historically a short term oversold indication that people are washed out so as we go into month end we could be seeing support around this level.

Sales of new homes plunged a record 33% in May to a record-low level after a federal subsidy for home buyers expired. Sales dropped to a seasonally adjusted annual rate of 300,000, the lowest since records begin in 1963! The results were much worse than the the -20% decline expected and sales fell sharply in all four regions. The worst was a massive decline of -53% in the West. Home builders reduced their inventories of unsold homes by only -0.5% to 213,000, also the lowest level in 39 years. The median sales price in May was $200,900, down -9.6% from a year earlier and the lowest since December 2003.

Tuesday, June 22, 2010 4:03 p.m est.

The market started the day higher once again today even though housing data was poor, with the Dow seeing highs of +50.00 points, S&P 500 +4.00 points and the Nasdaq Composite a strong +20.00 points as Apple was up strongly once again. It didn’t last though and selling took it down again in the final hour with the Dow seeing lows of -160.00 points, S&P 500 -20.00 points and the Nasdaq Composite -40.00 points.

At the close the Dow was down about -150.00 points to the 10294.00 level, S&P 500 -18.00 points to about 1095.00, S&P 100 -7.00 points to 496.00 and the Nasdaq Composite down -27.00 points to 2262.00. Oil started the day up once again but sold off after a judge lifted the moratorium on drilling in the Gulf. Note below how the Obama administration doesn’t really want drilling their anyhow and has already said that they will fight the decision. Oil closed down by -$.80 to be around the $77.20 level.

It may take until 2014 before the economic recovery actually takes hold according to a report in Investor's Business Daily. This is nothing new, as each recovery since 1981 has taken longer and longer. According to the report: "It took 28 months for employment to return to its pre-recession peak following the 1981 downturn; 32 months after the 1990 slump; and 47 months after the 2001 recession," which means that "Today’s jobs slump, already at 29 months, could last five years or more, analysts say. Employers are expected to stay cautious amid a sluggish economic recovery."

What doesn’t help is that there is plenty of fear about Washington’s policies, such as higher taxes, and other possible things like “cap and trade,” a costly health care reform package, and a general shift in foreign policy. The problem is that this trend has been in place for several decades now, and is centered around two major concepts: the rise in automation, and the increase reliance on jobs being sent overseas in order to cut costs and increase corporate profits. An interesting example I read about is that as Obama has shut down oil rigs in the Gulf he has just made a loan to Brazil for two billion dollars for drilling over there and guess where some of the rigs are going at five hundred million per day to rent!

The report notes that: "Job losses were especially harsh in the last recession: Employment plunged as much as -6.1% from the December 2007 peak, the worst since the Great Depression. But the U.S. economy has struggled to erase even shallow job losses. In the 2001 recession and aftermath, employment never fell more than -2%, yet it took nearly four years to get back to its old highs." Stronger productivity gains in recent decades have let firms make do with less, analysts say. “Once companies are producing as much as they were prior to the recession they’ll need fewer workers,” said Sophia Koropeckyj, a labor economist at Moody’s and that many jobs have been lost or shifted overseas.” According to the report, if you take out the job gains from temporary census workers, the economy has only added a massive +500,000 jobs in 2010. It would take +8 million jobs " just to get back to the December 2007 peak, when the recession started."

And guess what, there is a connection between employment and GDP. The report notes: "Employment shrank -6.1% from peak to trough in the current recession as GDP fell -3.8%. By contrast, employment shrank just -3.1% in the 1981-82 downturn, just a bit more than the -2.9% GDP contraction. However, while the 2001 jobs slump of 2% was relatively mild, it came on a scant -0.3% drop in GDP."

The report reveals a bunch of reasons of why the economy remains slow, including high deficits, the threat of higher taxes, and most important, the permanent loss of jobs, noting "weekly jobless claims remain above the level that would suggest net hiring" as small businesses continue to have trouble getting credit. Companies are making money, with fewer workers as they sit on record high amounts of cash which is why they have had decent earnings.

I have been talking about this for years as a great book out there is called “The End of Work,” by futurist Jeremy Rifkin. He had an interesting concept that automation would lead to where we are today and if you watch video of all of the broken down auto manufacturing plants in Detroit it brings it all to life and looks pretty much right on the money. It's not so much that robots have put people out of work, which is part of the story it's that "productivity" has caused workers to do more with less. Millions of jobs have actually disappeared forever, being replaced by machines. Corporations can run leaner and meaner, and can squeeze profits out of leaner sales during hard times because they don’t have the carrying costs of employees, salaries, health care and other benefits, and retirement liabilities meanwhile with the government electing to give out handouts in the form of Medicaid, Medicare to those under retirement age, and by extending unemployment insurance its just making things worse as it has run up a huge tab with the social safety net.

What's missing is something to create more workers and better yet, something or someone to drive them into creating their own job. Without work, crime rises, and innovation lags, leading to a potential world of social disorder as the number of those in the have not column overwhelms those in the have column. Although this seems far off, eventually this trend will lead to a point of no return, where there won't be enough workers to pay taxes to support the ever growing social safety net, and the society will fall apart.

If you don’t think it hasn’t happened in modern times it has as it did in Argentina as the government there had one of its many meltdowns, as cities divided into neighborhoods that would use their own currency for internal commerce and barter for trade with other neighborhoods. This could happen in America and is in some ways already! There are so many different ways that certain States want to run that they just want to separate!

Just today Britain announced a higher Value Added Tax to a nice round number of 20% and a move of Capital Gains tax from 18% to 28% to get more money from the rich, strangely the people who do the most hiring! It’s really no wonder that it’s taking longer and longer to recover as the only thing we can look forward to is higher taxes, worse medical care, and a really poor standard of living for the middle class.

Existing Home sales and condos fell -2.2% to a seasonally adjusted annual rate of 5.66 million in May despite the help from a federal tax credit for home buyers, according to data by the National Association of Realtors. Economists were expecting sales to rise about +6% to a 6.11 annual rate, theorizing that the expiration of the tax credit at the end of June would force some buyers to get in early. Inventories of unsold homes fell -3.4% to 3.89 million, an 8.3-month supply at the May sales pace which was about the only good news. The median sales price in May was $179,600, up +2.7% from a year ago.

Friday, June 18, 2010 4:03 p.m est.

Today had to be the quietest quadruple witch expirations ever as the market basically opened flat on the day and barely moved all day. It dip a bit into the red but started to rally after the S&P 500’s expiration number was calculated with the Dow seeing highs of +50.00 points, S&P 500 +5.00 points and the Nasdaq Composite +20.00 points as Apple made another new high. It didn’t hold though and basically closed where it opened.

At the close the Dow was up about +15.00 points to the 10450.00 level, S&P 500 +1.30 points to about 1117.00, S&P 100 +1.00 points to 504.50 and the Nasdaq Composite up +3.00 points to 2310.00. Oil started the day down up closed up by +$.50 to be around the $77.00 level.

Thursday, June 17, 2010 4:03 p.m est.

This was very interesting; According to Reuters: "More than 90 U.S. banks and thrifts missed making a May 17 payment to the U.S. government under its main bank bailout program, signaling a rising number of lenders are struggling to meet their obligations." According to the report: "It was the first missed payment for 23 of the banks; for the others, it was at least their second miss. The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November."

Nonetheless its no wonder that the end of free checking is near. According to The Wall Street Journal: " Bank of America Corp. and other banks are preparing new fees on basic banking services as they try to replace revenue lost to regulatory rules, in a push that is expected to spell an end to free checking accounts for many Americans. Free checking accounts, which have been widely available for more than a decade, have been a boon to middle-class consumers and attracted low-income customers to the banking system for the first time." The unintended consequences of Congressional action will continue, and no one can stop them, until November.

Yesterday the market closed mixed after rising and falling on poor economic data and today wasn’t much different as the Dow saw highs out of the gate of +30.00 points, S&P 500 +4.00 points and the Nasdaq Composite +15.00 points but it quickly fell into the red with the Dow seeing lows of -90.00 points, S&P 500 -9.00 points and the Nasdaq Composite -20.00 points early on. The final hour saw lows hit once again but expiration related trading saw a rally going into the close.

At the close the Dow was up about +25.00 points to the 10434.00 level, S&P 500 +1.40 points to about 1116.00, S&P 100 +1.00 points to 503.50 and the Nasdaq Composite up +1.00 points to 2307.00. Oil was down all day closing lower by -$1.00 to be around the $76.00 level.

There was absolutely no good news economically today as Jobless claims rose by +12,000 last week to a seasonally adjusted 472,000, providing further evidence that labor markets remain very weak. The four-week average of new claims was roughly unchanged at 463,500. Continuing claims fell by -350,000 to 9.47 million while the number of people collecting federal benefits fell by -170,000 to 5.28 million. This once again is a pathetic number and illustrates how we are seeing another jobless recovery meanwhile Congress is arguing over extending benefits even longer so why go out and get or create a job!

Manufacturing activity increased in the Philadelphia region for the 10th straight month in June, but that’s about it as it was at a much slower pace than in May and almost going negative, according to a monthly survey of companies from the Fed’s Bank of Philadelphia. The Philly Fed index fell from +21.4% to +8% in June! Economists were expecting the index to strengthen to +22%. Readings over zero indicate growth, with the smaller number in June indicating fewer firms were growing than in May. The new orders index rose from +6.1% to 9% in June thank goodness. The shipments index fell from +15.8% to +14.2% in June however. The most important reading was that the employment index dropped from +3.2% in May to negative -1.5% in June.

Consumer prices decreased in May for the second straight month as gas prices fell. The consumer price index fell a seasonally adjusted -0.2% in May after a -0.1% decline in April. Energy prices fell -2.9%, food prices were flat and shelter prices rose +0.1%. The core CPI which excludes volatile food and energy prices in order to get a look at underlying inflation rose +0.1%, just the second monthly increase this year. The report matched economists expectations.

Slower economic growth is expected for the rest of the year, as the index of leading economic indicators rose +0.4% in May, following no growth in April. Economists had expected the index to gain +0.7%. Five of the 10 indicators that make up the index rose in May, with the largest positive contribution from the interest rate spread while the largest negative contribution came from stock prices.

On Tuesday I was talking a bit about poor housing sentiment and it was illustrated yesterday as home builders sharply reduced construction as a federal tax break for home buyers expired, according to estimates. Housing starts fell -10% to a seasonally adjusted annual rate of 593,000 in May, the lowest level since December. The details were even worse, as starts of single-family homes plunged -17% to a seasonally adjusted rate of 468,000, the lowest in a year. Building permits also fell sharply for the second straight month, with total authorizations falling -5.9% to a 574,000 annual pace after falling -10% in April. Single-family permits fell -10% for the second month in a row to a 438,000 pace.
Wholesale prices fell a seasonally adjusted -0.3% in May, the largest decline since February as prices for energy and food goods fell. The core rate in May, which excludes volatile energy and food prices, rose +0.2%, the seventh monthly gain in a row. Economists had expected overall producer prices to fall -0.6%, and for the core to gain +0.1%. In May gas prices fell -7%, while the index for fresh and dry vegetables fell -18%. Over 12 months, overall producer prices are up +5.3%. The core is up +1.3% over 12 months, the largest gain since September. Core producer prices for intermediate goods, viewed as a leading indicator of inflation, rose +0.3% in May. Over 12 months, core intermediate goods prices are up +6.1%, the largest gain since October 2008.

Tuesday, June 15, 2010 4:03 p.m est.

The market rallied today on little volume once again with the Dow seeing highs in the final hour up +220.00 points, S&P 500 +26.00 points and the Nasdaq Composite +65.00 points. There was no good news economically to move the market so it was surprising that it was up that strong which makes me think it is all about window dressing for the quarter and maybe even this expiration. It will be interesting to see if this is the top for the week.

At the close the Dow was up about +214.00 points to the 10405.00 level, S&P 500 +26.00 points to about 1115.00, S&P 100 +11.00 points to 503.00 and the Nasdaq Composite up +62.00 points to 2306.00. Oil was up all day closing up about +$1.88 to be around the $77.00 level.

It appears that the Fed is worried about the potential for a second down leg in the recession and is having secret meetings in order to plan for the possibility of such an event according to the Wall Street Journal. It's great that they’re actually thinking ahead, given the unevenness of the recovery. According to The Journal: "Federal Reserve officials are beginning to debate quietly what steps they might take if the recovery surprisingly falters or if the inflation rate falls much more." And although, they publicly stand behind the recovery, The Journal reports that "fiscal woes in Europe, stock-market declines at home and stubbornly high unemployment have alerted some officials to risks that the economy could lose momentum and that inflation, already running below the Fed's informal target of 1.5% to 2%, could fall further, raising a risk of price deflation." Basically they’re worried that the U.S. could follow what has happened to Japan since 1989 and is starting to consider possible solutions, should that develop. I have been talking about this since the internet and housing bubble popped since 2000 and unfortunately I still believe were headed that way as we get back to the basics of living decades ago.

The Fed is a bit scared, and it should be as it has poured everything into this recovery attempt and it isn’t getting much of a bounce for all of the trillions of dollars that have been spent. As Pimco puts it, this is a "structural" problem as more and more people are either getting better welfare subsidies or jobless claims being extended and extended. In some States they are up to two years now! Why go out and get a job if the government will support you! At best its looking like flat economic growth will be hear for another 10-years with the potential for lots of pockets of weakness until people want to pick themselves up by their bootstraps and create their own jobs. It’s interesting that the Fed has decided to leak that it's worried about the future which may be a warning sign about what lies ahead.

Here’s an example of how the government has affected the way people think. People always look to see what free money they can get from the government before they buy anything and this morning it was reported that now that the tax credit has expired, people don’t look to be buying homes again. Sentiment among home builders fell hard in June after the tax break for home buyers expired, according to a monthly survey released by the National Association of Home Builders. The housing market index dived to 17% in June from 22% in May, the NAHB reported. All three components of the index fell in June, and home builders were more discouraged in all four regions of the country. The index was lower than the 21% that was expected by economists and was the lowest since it hit 15% in March.

Import prices recorded their largest decline in nearly a year in May as petroleum costs fell. Import prices fell -0.6%, the biggest decline since July, after rising by a revised +1.1% in April. Although the decline was less than economists' expectations for a -1.2% fall, it was the first drop since February. Excluding petroleum, import prices rose +0.5%t after rising by the same margin in April. Strength in the U.S. dollar is also helping to keep inflation pressures muted and this should allow the Fed to renew its low interest rate pledge at next week's policy meeting to help the economy's recovery.

Manufacturing in New York State showed the sector continued to grow in June although employment fell sharply, the New York Fed said. The New York Fed's "Empire State" general business conditions index edged up to 19.57% from 19.11% in May, but was down from 31.86% in April. Economists had expected a June reading of 20%. The employment gauge dropped, although it remained positive to 12.35% from 22.37% in May, while the average employee workweek index rose to 8.64% from zero. This is bad news and could be scary if it doesn’t change soon. The index of business conditions six months ahead fell to its lowest since July 2009, dropping to 40.74% from 42.11%. The survey of manufacturing plants in the state is one of the earliest monthly guideposts to the overall factory conditions.

Monday, June 14, 2010 4:03 p.m est.

It was a pretty quiet day in the market as volume has fallen off the board as the market has risen the past week and that may not be a good sign for the week overall. Early on though why not rally so the Dow saw highs of +120.00 points, S&P 500 +15.00 points and the Nasdaq Composite +40.00 points. Midday Moody’s downgraded Greece bonds basically to junk so the market pulled back but it almost looked like it was going to move back up again but the final hour saw selling hit with the Dow seeing lows of -25.00 points, S&P 500 -3.00 points and the Nasdaq Composite down -1.00 point. This could be an interesting week as expiration traded weeks are usually on the upside but interestingly quadruple witch expirations have much more of a possibility of being negative. At the least if volume stays like this the upside will likely limited nonetheless.

At the close the Dow was down about -20.00 points to the 10191.00 level, S&P 500 -2.00 points to about 1090.00, S&P 100 -2.00 points to 491.00 and the Nasdaq Composite down +.36 points to 2244.00. Oil was al over the place today finally closing up about +$1.40 to be around the $75.00 level.

Friday, June 11, 2010 4:03 p.m est.

It was kind of an indecisive day as the market sunk on news that Retail sales were poor last month but then it rallied on a bit better than expected sentiment which wasn’t that great but it gave traders an excuse to buy on this pathetic volume once again so we may be starting to see the same action as a couple of months ago! The Dow saw early lows of -90.00 points, S&P 500 -10.00 points and the Nasdaq Composite down -25.00 points but when it rallied the Dow saw highs of +10.00 points, S&P 500 +2.00 points and the Nasdaq Composite +15.00 points but when it couldn’t gather any real steam it fell back again. The final hour saw it rally back again to make slightly higher highs with the Dow up +45.00 points, S&P 500 +5.00 points and the Nasdaq Composite +25.00 points.

At the close the Dow was up about -39.00 points to the 10211.00 level, S&P 500 +5.00 points to about 1092.00, S&P 100 +2.00 points to 493.00 and the Nasdaq Composite up +25.00 points to 2244.00 as it couldn’t get anything going on the tech front. Oil was down most of the day closing lower by about +$1.50 to be around the $74.00 level.

Retail Sales fell for the first time in eight months in May, tumbling a surprising -1.2%. Sales were mixed across sectors, dominated by large declines at hardware stores, auto dealers, gas stations, department stores and clothing stores. Modest gains were found in most other types of stores. Economists were forecasting a +0.2% gain and this was the first decline in sales since September 2009. The big surprise in May was auto sales, which fell -1.7% by dollar value, according to estimates. Automakers had reported a modest increase in unit sales. Excluding autos, retail sales still fell -1.1%, the largest decline since March 2009.

Consumer sentiment rose in early June, hitting the highest level since January 2008, according to the Reuters/University of Michigan index. The consumer sentiment index increased to 75.5% in June from 73.6% in May. Economists had been expecting the sentiment index to hit 74% in June. The index hit a 30-year low of 55.3% in November 2008. Expectations rose to 70.7% in June from 68.8% in May, while their view of current conditions rose to 82.9% from 81%.

Thursday, June 10, 2010 4:03 p.m est.

Yesterday the market was higher all day but there didn’t seem to be much commitment with the Dow up triple digits +130.00 points, S&P 500 +16.00 points and the Nasdaq Composite +40.00 points but after slowly drifting lower all day what seemed to kill it in the final hour was when Goldman Sachs came out and downgraded the Euro. The Dow basically closed at its lows seeing -40.00 points, S&P 500 -6.00 points and the Nasdaq Composite down -12.00 points.

Today everyone decided to take it beak up but on very weak volume with the final hour seeing a big push higher and the Dow and S&P 500 closing basically at highs up about +273.00 points to the 10173.00 level, S&P 500 +31.00 points to about 1087.00, S&P 100 +13.00 points to 492.00 and the Nasdaq Composite up +60.00 points to 2219.00 as it couldn’t get anything going on the tech front. Oil was volatile again but did end the day higher by about +$1.10 to be around the $75.50 level.

It’s interesting that the market ignored what Bernanke said yesterday as he wasn’t all that positive on the future especially with the spending habits of the governments. The economy is strong enough to withstand the fiscal tightening that is ahead, Fed Chairman Ben Bernanke said. "Although the support to economic growth from fiscal policy is likely to diminish in the coming year, the incoming data suggest that gains in private final demand will sustain the recovery in economic activity," Bernanke said in remarks prepared for the House Budget Committee. Budget experts project that, under current trends, the federal budget deficit will shrink by as much as $500 billion next year. Bernanke said there were still "significant restraints" on the economy however. Looking through all the noise, the housing sector has "firmed only a little" since mid-2009. It will take the economy a significant amount of time to restore the 8.5 million jobs lost in the crisis he also noted so how much growth will there really be. He was basically negative overall and stressed that all of the spending that the government was doing needs to be constrained and strangely you would have thought that would have killed the market but it didn’t. This makes me think that the way the market is moving its mostly due to expiration related trades which comes next week.

Trade of goods and services across borders were soft in April making the trade deficit rose to the highest level in more than a year. Imports of goods and services dropped -0.4% to a seasonally adjusted $189.1 billion while exports declined -0.7% to $148.8 billion. The trade deficit (the difference between exports and imports) rose to $40.3 billion in April from a downwardly revised $40 billion in March and was the largest deficit since December 2008.

The number of people applying for Jobless Claims fell -3,000 to 456,000 last week. Economists had expected an initial claims level of 445,000. The four-week average of initial claims rose +2,500 to 463,000 while continuing claims the latest data available, fell -255,000 to 4.46 million, the lowest level since December 2008. The four-week average of these continuing claims fell -49,250 to 4.62 million, the lowest level since January 2009. States did not explain to the Labor Department why continuing claims dropped, and it may take a couple of weeks to understand the volatility of the data. The total number of people collecting some type of unemployment benefits in the week ended May 22nd was about 9.8 million, up +40,000 from the prior week so it makes you wonder if the good continuing claims number is coming from people just dropping out of the system.

Tuesday, June 8, 2010 4:03 p.m est.

The market was very volatile today moving strongly both ways each hour with it seeing early highs with the Dow up +50.00 points, S&P 500 +6.00 points and the Nasdaq Composite +10.00 points and then saw lows the next hour with the Dow seeing -70.00 points, S&P 500 -9.00 points and the Nasdaq Composite down -40.00 points. The final hour saw a big push higher and the Dow and S&P 500 closed the day at highs up about +123.00 points to the 9940.00 level, S&P 500 +12.00 points to about 1062.00, S&P 100 +5.00 points to 482.00 but the Nasdaq Composite didn’t make it closing down -3.00 points to 2171.00 as it couldn’t get anything going on the tech front. Oil was volatile again but did end the day higher by about +$.50 to be around the $72.00 level.

One of the reasons the market started the day higher was that Fed Chief Ben Bernanke said he didn't expect to see a double-dip recession in the U.S. In an interview with ABC News reporter Sam Donaldson at a dinner last night, Bernanke said, “My best guess is we'll have a continued recovery [but] it won't feel terrific,” said the Fed chief. "We've seen consumer coming back. We've seen firms spending more. There are some signs the private sector is picking up the baton and moving the economy forward.” Sounds good but that it will be tepid and that’s good for us as it will help to keep the market in a sideways pattern.

This makes sense as the employment report on Friday was very poor and employers hiring plans for the upcoming third quarter stayed almost flat from the previous quarter, with a seasonally adjusted net +6% of firms saying they intend to hire, up from +5% in the second quarter, according to the latest Manpower Employment Outlook survey. Hiring plans are up from a record-low negative -2% in 2009's third quarter on a seasonally adjusted basis, according to the firm”s survey of more than 18,000 employees. "This is the third quarter in a row where we've seen an improved outlook," said Jonas Prising, president of Manpower of the Americas. "It is not unusual to see a slow start like this when you return from a very difficult recessionary environment, and job growth as we know is a lagging indicator." The net employment outlook was 6% for the first quarter, on a seasonally adjusted basis.

For the past three quarters, Prising said, "Employers have said, 'Yep, I'm going to be holding on to my workforce and I intend to hire more but not much more. “That's what we're seeing, very slow but steady progress on the job-creation front." In a strong economy, the Manpower employment-outlook reading tends to hover in the mid-20s. Before the record low of negative -2% for the third and fourth quarters of 2009, the survey's previous low point was a net +1% hiring outlook for the third quarter of 1982 and it started the survey started in 1962.

The Manpower survey measures the percentage of firms planning to hire minus those intending layoffs. Manpower doesn't measure the number of jobs. The economy gained a seasonally adjusted +431,000 jobs in May, but those positions were mainly for temporary Census hiring.

Prising said it was too early to call this a jobless recovery but if growth is still tepid a year from now, “we will have a jobless recovery. For now, I think it's too early to say."

Asked whether the job market had changed structurally, leading to a permanently higher unemployment rate, he said, "There is a possibility there is a structural change [leading to] a higher level of unemployment then we had before." If that is the case, he said, "this will primarily affect the unskilled workforce, who will be suffering then for the longer term, as well as those who have been unemployed the longest. It's much harder for the long-term unemployed to come back into the workforce," Prising said.

Monday, June 7, 2010 4:03 p.m est.

The market ignored overseas markets and started the day higher but as the day wore on and boredom set in it turned lower and the final hour saw some heavy selling. The Dow had seen highs of +50.00 points, S&P 500 +7.00 points and the Nasdaq Composite +15.00 points with lows on the Dow seeing lows of -125.00 points, S&P 500 -16.00 points and the Nasdaq Composite down -50.00 points. It’s looking like volatility is going to continue this week but as we get closer to expiration I think we’ll see a floor continue to build here around the 1050 level on the S&P 500. Sentiment is abysmal and technically it is quite oversold in the medium term.

At the close but the Dow finished the day down about -116.00 points to the 9816.00 level, S&P 500 -15.00 points to about 1050.00, S&P 100 -9.00 point to 477.00 and the Nasdaq Composite -45.00 points to 2174.00. Oil was all over the place moving up and down all day and in the end it closed basically unchanged around $71.50.

We’re definitely in the summer doldrums now because even though we saw big losses today it seemed very orderly and volume wasn’t that strong. Another reason we could be seeing this sideways action is because mutual fund investors are getting out once again. According to Marketwatch.com: "individual investors' comfort with stock investing seems to have been short-lived. After seeing steady inflows in March and April for the first time in almost a year the market volatility in May led to large outflows for stock mutual funds." Again, it seems as if the little guy bought the top. According to the report: "Investors still scarred by losses in late 2008 and early 2009 seem to have been spooked by a price correction and the spike in stock-market volatility last month, as concerns about European sovereign debt, the so-called flash crash, geopolitical tensions on the Korean peninsula and the troubles surrounding the oil spill in the Gulf of Mexico roiled the markets." Plus “In the week ending May 26th, U.S.-focused funds saw $13.4 billion head out the door and international funds lost $3.9 billion, the largest outflows in each category since the week ending March 11th, 2009, according to the Investment Company Institute, a fund industry trade group. Stock funds saw consistent outflows through May. In the week ending May 5, U.S. funds lost $2.4 billion while international funds saw $992 million of net inflows; the week ending May 12th saw $7 billion pulled out of domestic funds and $3 billion from international, and the week of May 19th saw net outflows of $745 million and $339 million from domestic and international funds, respectively."

Friday, June 4, 2010 4:03 p.m est.

Well it appears that it was a buy on the rumor sell on the news type of movement this week as the market sold off strongly today on the poor jobs report. Selling continued all day with lows hit in the final hour with the Dow seeing lows of -365.00 points, S&P 500 -43.00 points and the Nasdaq Composite down -95.00 points. It bounced a little at the close but the Dow finished the day down about -323.00 points to the 9931.00 level, S&P 500 -38.00 points to about 1064.00, S&P 100 -16.00 point to 483.00 and the Nasdaq Composite -84.00 points to 2219.00. Oil was down hard all day on the worry that the economy is going no where fast closing down about -$3.00 to be around $71.50. Although the market was lower it seemed to be a very organized sell off and volume wasn’t that strong so we could remain in the sideways pattern we’ve been in for awhile, especially if we bounce on Monday.

Employment came in up +431,000 in May, but virtually all the new jobs were temporary jobs for the census, leaving private-sector hiring very weak. Excluding the +411,000 temporary Census workers, payrolls rose by only +20,000. The funny thing was that when President Obama spoke earlier today he bragged about how strong the report was until the end where he finally said that most of the gain was due to the temporary hiring of Census workers. According to the survey of 400,000 business establishments, private-sector payrolls increased by +41,000, the fifth straight gain. The report was weaker than the +500,000 plus increase expected by economists. The payroll count in March and April was revised lower by -22,000 making it 208,000 in March and 290,000 in April. The unemployment rate fell to a seasonally adjusted 9.7% from 9.9% in April, according to a separate survey of 60,000 households. Economists were expecting the jobless rate to fall to 9.8%. The decline wasn't particularly good news, however, because the drop was due to -322,000 people dropping out of the labor force. While unemployment dropped by -287,000 to 15 million, employment also fell, -35,000 to 139.4 million. The participation rate dropped by two tenths to 65%. An alternative measure of unemployment, which includes discouraged workers and those forced to work part-time because of the weak economy, fell to 16.6% from 17.1%.

There were some bright spots in an otherwise dismal report. Total hours worked in the private sector rose by +0.3% while the average workweek increased by six minutes to 34.2 hours. Average hourly earnings rose by +0.3% to $22.57. Details of the report were mixed as industries saw 54% were hiring, down from 67% in April. Payrolls in goods-producing industries rose by +4,000, including 29,000 in manufacturing, the fifth straight increase. Manufacturing hours rose to 41.5 hours from 41.2. Construction employment dropped by 35,000. Private-sector services industries added +37,000 jobs in May, down from +156,000 in April. Temporary-help agencies added +31,000 jobs, accounting for the bulk of the new jobs. Health-care added +13,000 jobs, transportation industries added +11,000 jobs. Retail cut -7,000 jobs. Financial industries cut -12,000 jobs. Employment in state and local governments fell by -28,000.

Thursday, June 3, 2010 4:03 p.m est.

The market was up pretty strong to start the day although economic data was mixed. The Dow saw highs of +80.00 points, S&P 500 +8.00 points and the Nasdaq Composite +25.00 points but as the day wore on and traders go more and more worried that the employment report may not turn out that strong after all, it fell back with the Dow seeing lows of -75.00 points, S&P 500 -7.00 points and the Nasdaq Composite down -10.00 points. The final hour saw another push up though on very weak volume with the Dow finishing the day up about +6.00 points to the 10255.00 level, S&P 500 +4.00 points to about 1103.00, S&P 100 +1.00 point to 499.00 and the Nasdaq Composite +22.00 points to 2303.00. Oil was up closing about +$1.70 to be around $75.00.

Companies hired +55,000 additional workers in May, the fourth straight increase in private-sector jobs, payroll giant ADP said. Economists were expecting the ADP report to show +100,000 jobs added though. The report comes one day before the government releases its estimates of employment and the unemployment rate. The forecasts look for a gain of about +500,000 in May, including about 400,000 workers hired temporarily to conduct the 2010 Census. Service-producing industries added +78,000 jobs, the fifth straight increase, ADP said. Goods-producing industries lost -23,000 jobs, despite a gain of +15,000 in manufacturing.

Jobless Claims dropped -10,000 to a seasonally adjusted 453,000 last week. Analysts had expected claims to fall to 450,000 from the previously reported 460,000, which was slightly revised up to 463,000. The four-week moving average of new claims, considered a better measure of trends, rose +1,750 to 459,000. A Labor Department official said there were no special factors affecting the report. The claims data has no impact on the government's closely watched employment report for May due on Friday as it falls outside the survey period. Employment increased +513,000 last month, buoyed by hiring for the decennial census, after a +290,000 increase in April, according to a Reuters survey and that will mark five straight months of job gains. Continuing Claims rose +31,000 to 4.67 million, the highest since early April. The level was above market expectations for 4.60 million. The insured unemployment rate, which measures the percentage of the insured labor force that is jobless, was unchanged at 3.6% for a seventh straight week.

Productivity growth was much slower than initially estimated in the first quarter, as businesses started adding workers to maintain output. Non-farm productivity rose at a +2.8% annual rate, instead of the previously reported +3.6% pace and was the smallest advance in a year, following a +6.3% growth pace in the fourth quarter. Analysts had forecast productivity, which measures the hourly output per worker, rising at a +3.4% rate in the January-March period. Following a rapid expansion in the previous three quarters as businesses squeezed more output from a small group of workers, productivity is slowing down and analysts expect the trend to continue as companies increase payrolls. Some companies have held off hiring new workers, opting instead to add hours for the existing workforce, but analysts believe this policy cannot be adopted indefinitely. Hours worked increased at a +1.1% rate, instead of +0.8%. The increase in hours was the highest since the second quarter of 2007 and marked an acceleration from the +0.7% pace in the fourth quarter. Unit labor costs, a gauge of inflation and profit pressures closely watched by the Fed, fell -1.3% rather than -1.6%. That follows a -7.8% drop in the fourth quarter. Analysts had expected unit labor costs to fall -1.4% in the first quarter. Weak unit labor costs still pointed to muted inflation pressures and augur well for the central bank's pledge to keep benchmark interest rates low for an extended period.

Services industries were growing for the fifth straight month in May, the Institute for Supply Management reported. The ISM non-manufacturing index was unchanged at 55.4% in May. Economists were looking for the index to fall to 55.2%. Readings over 50% indicate more firms were expanding than contracting. In May, 16 of 18 industries were growing. The new orders index fell -1.1% to 57.1%, and the employment index rose above 50% for the first time in 29 months.

Wednesday, June 2, 2010 4:03 p.m est.

The market is starting to feel like its getting into the summer doldrums as it was mostly flat today until the final thirty minutes where a rumor hit that Vice President Biden and a Pittsburgh Fed head said that this Friday’s employment report is going to be incredible. It’s interesting as yesterday the market sold off strongly going into the close after being mostly flat all day so maybe there were some rumors then too. This could end up being a buy on the rumor sell on the fact type of thing. Anyhow the market basically closed at its highs with the Dow seeing highs of +240.00 points, S&P 500 +29.00 points and the Nasdaq Composite +60.00 points.

The Dow finished the day up about +225.00 points to the 10250.00 level, S&P 500 +28.00 points to about 1098.00, S&P 100 +12.00 points to 498.00 and the Nasdaq Composite +59.00 points to 2281.00. Oil was up all day closing up about +$.68 to be around $73.00.

Employers fired as many staff in May as the previous month, according to the latest job-cut report released by global outplacement consultancy Challenger. The Challenger report indicated that the pace of job losses edged slightly higher in May, as employers announced plans to cut -38,810 jobs from their payrolls. This was +1.3% more than the four-year low of 38,326 job cuts announced in April, but 65% lower than one year earlier, when planned job cuts totaled 111,182. The Challenger report serves as an indicator of sentiment ahead of two key jobs reports, and will be analyzed to evaluate the economy's ability to create jobs and drive the recovery. Friday’s much-anticipated employment report is projected to have substantially increased, and investors will be awaiting the ADP private sector employment report on tomorrow as well. Economists are forecasting half a million jobs were created in May, after a +290,000 rise in April but the question is if they are just census workers or not. May’s Challenger report marks the 12th consecutive month that fewer than 100,000 job cuts were announced. Employers laid off 258,319 workers in the first five months of 2010, which is 69% less than the 822,282 announced during the same period last year.

Pending sales of previously owned homes rose more than expected in April, scaling a six-month high as prospective home owners took advantage of a popular homebuyer tax credit. The National Association of Realtors said its Pending Home Sales Index, based on contracts signed in April, increased +6% to 110.9, the highest since October. \It was the third straight month of gains in the index, which leads existing home sales by a month or two. Pending home sales rose by a revised +7.1% in March, a figure previously reported as a +5.3% increase. Analysts had forecast pending home sales rising +5% in April. Compared to April 2009, the index was +22.4% higher. Pending home sales were helped by a government tax credit for home buyers. Prospective buyers had to sign contracts by the end of April and close by the end of June to be eligible for a federal tax credit. Pending home sales are measured at the time of contract signing. Existing home sales, which are counted at contract closing, are likely to increase until next month. Given that the tax credit has pulled forward some sales, activity is expected to slow but the strengthening economy and job market are seen supporting the housing market in the absence of additional government aid. Lets hope...

Tuesday, June 1, 2010 4:03 p.m est.

It appears that the market is now directionless as it started the day down as everyone was worried once again about Europe and that the economy is slowing down worldwide except Canada where they raised interest rates by a quarter point to a whopping .50%! The Dow saw quick lows of -100.00 points, S&P 500 -10.00 points and the Nasdaq Composite -15.00 points but it didn’t last long before a rally started and the Dow saw highs of +75.00 points, S&P 500 +6.00 points and the Nasdaq Composite +25.00 points. It seemed like it was going to be a turn around Tuesday but selling took hold once again in the final twenty minutes of trading after remaining around the unchanged level for most of the day and the market closed near lows.

The Dow finished the day down about -113.00 points to the 10024.00 level, S&P 500 -19.00 points to about 1071.00, S&P 100 -7.00 points to 486.00 and the Nasdaq Composite -35.00 points to 2222.00. Oil started the day down and then was higher but then sold off along with the market finishing lower about -$2.00 to be around $72.00. I would suspect that the market will remain directionless for the rest of the week as it continues to consolidate gains and decide what its next direction is. For it to be considered the end of the rally it would have to fall a lot further and it is getting pretty oversold down here and volatility is starting to flatten even though the market has been down pretty good both Friday and today so I think its more in step with consolidating at least for a while longer.

Conditions for the nation's manufacturers fell in May after reaching its highest level in almost six years in April, the Institute for Supply Management reported. The ISM index fell to 59.7% in May from 60.4% in April but was still better than expected. The forecast was for the index to fall to 59%. Readings above 50% indicate expansion. Below the headline, the report was strong though as employment index improved to 59.8% from April's 58.5%. New-orders held steady at 65.7% in May.
What seemed to pull the market off of lows though was that the expiring special tax credits for homebuyers and the recent surge in home sales have carried over to unexpected strength in construction activity. Construction outlays in April surged +2.7%, following a +0.4 percent% rebound the month before. The consensus had expected no change for April. The April ease was led by a jump in private residential which gained +4.4% after no change the prior month. Public spending increased +2.4% in the latest month while private nonresidential construction rebounded +1.7%. On a year-ago basis, overall construction outlays rose to minus -10.5% in April from minus -12.5% in March. Apparently, the surge in home sales in recent months has cut into new home inventories enough to give homebuilders enough confidence to bump up the pace of new construction, however, gains are still coming off low levels.

Friday, May 28, 2010 4:03 p.m est.

Not surprisingly the markets were lower today as we were going into a long weekend but when Fitch lowered its ratings on Spain's debt to AA+ from AAA the market started to sell off. Interesting timing considering were going into a long weekend. The country's outlook is still stable overall though. The Dow saw lows of -160.00 points, S&P 500 -17.00 points and the Nasdaq Composite -35.00 points and cut most of the losses in the final hour but the final minutes of trading saw it move back down again because everyone worried about another surprise coming out. The decline this month was the worst since 1962. At the close the Dow was down about -122.00 points to the 10137.00 level, S&P 500 -14.00 points to about 1089.00, S&P 100 -6.00 points to 493.00 and the Nasdaq Composite -21.00 points to 2257.00. Oil was up early on but sold off to finish lower about -$.50 to be around $74.00.

June is one of the most up months of the year and this one may follow that pattern because it was down so much for May. It is also generally up for this expiration cycle so were at least likely to see support come in at the lows that were set the other day. One thing for sure is that as this bottom has seen lots of volatility as bulls and bears fight it out. Because the market has been mostly sideways this past week you can tell that they are mostly deadlocked though and I don’t think this is going to change for awhile so its looking like a very profitable cycle!

Personal income outpaced consumer spending in April. Personal incomes rose a seasonally adjusted +0.4% in April for the second straight month. The gain was in line with economists forecasts. Real after-tax incomes rose +0.5% in March, the largest increase since May 2009. Economists say higher income will help make the recovery sustainable. Consumer spending was flat in April. This was weaker than forecast by economists. With incomes running faster than spending, the personal savings rate rose to +3.6% of disposable income from +3.1% in March. It was the highest savings rate since January. Inflation was tame as core inflation rose +1.2% in the past year, the slowest rate since last September.

Manufacturing activity in the Chicago region in May pulled back from five-year high levels reached in April, according to media reports of the purchasing managers index for the Chicago region. The Chicago purchasing managers index fell to 59.7% from 63.8% in April. This was the highest level since April 2005. Economists had been anticipating a retreat but this was a slightly bigger decline than expected. Still, the report signals solid growth. Readings over 50% indicate overall business expansion. The Chicago PMI is also considered a leading indicator to the national Institute for Supply Management manufacturers' survey for May to be released on Tuesday. Economists expect the May ISM manufacturing composite to slow a bit to 59.3% from a strong April reading of 60.4%.

Consumer sentiment rose in May from the prior month, according to the Reuters/University of Michigan consumer sentiment index. The UMich index rose to 73.6% in late May from 72.2% in April. An earlier estimate for May was 73.3%. Economists expected a final May reading of 73.4%. The long-term average is about 87%.

Thursday, May 27, 2010 4:03 p.m est.

The markets are getting really volatile now because after yesterdays late day sell off it took off this morning to make new highs from yesterday. The final hour was different than yesterday though as there was a buying push into the close and the market virtually closed at its highs with the Dow seeing +260.00 points, S&P 500 +36.00 points and the Nasdaq Composite +85.00 points.

At the close the Dow was up about +285.00 points to the 10258.00 level, S&P 500 +35.00 points to about 1103.00, S&P 100 +15.00 points to 499.00 and the Nasdaq Composite +82.00 points to 2278.00. Oil was up nicely once again all day closing up about +$3.00 to be around $74.50.

The economy grew at a +3.0% pace in the first quarter, lower than the +3.2% previously reported owing mainly to smaller increases in consumer spending and investment in business software. Economists expected first-quarter growth to be revised up to +3.5%. The latest revision incorporates data that is not available for the first reading of GDP. Consumer spending, the largest contributor to GDP, grew at +3.5% annualized rate in the first quarter, down from the initial estimate of +3.6%. The increase in business investment, meanwhile, was reduced to +13.1% from the original estimate of +14%.

Jobless Claims fell -14,000 to a seasonally adjusted 460,000. Economists had expected 458,000. The four-week average, a better gauge of employment trends than the volatile week-to-week number rose +2,250 to stand at 456,500. For the week ended May 15th, continuing claims fell -49,000 to 4.61 million. The four-week average of these ongoing claims also fell -11,500 to 4.64 million, the lowest level since January 2009. In the week ended May 8th, about 5.34 million jobless workers, not seasonally adjusted, were receiving extended federal benefits, down about -2,700 from the prior week. Altogether, 9.87 million people were collecting some type of unemployment benefits, down about -78,000 from the prior week.

Wednesday, May 26, 2010 4:03 p.m est.

The market started the day on the upside as economic data was very positive with the Dow seeing highs of +140.00 points, S&P 500 +17.00 points and the Nasdaq Composite +50.00 points. As the day went on the rally faded though and because of that traders started to look at the fact that the long weekend is coming so they likely didn’t want to commit new capital in case something happens so selling ensued and the Dow saw lows of -100.00 points, S&P 500 -9.00 points and the Nasdaq Composite -25.00 points.

At the close the Dow was down about -23.00 points to the 10043.00 level, S&P 500 +.38 points to about 1074.00, S&P 100 -.14 points to 488.00 and the Nasdaq Composite -3.00 points to 2211.00. Oil was up nicely all day and held onto gains closing up about +$.80 to be around $71.00.

Orders for Durable Goods rose +2.9% on stronger demand for airplanes and communications equipment. Excluding the +16.1% increase in transportation goods, orders fell -1.0%. The increase exceeded the expected +2.5% rise forecast by economists. Total orders have risen in four of the past five months. March orders were revised to show almost no change from the prior estimate of a -0.6% decline. Shipments rose +1.4% in April, and were up +1.8% excluding transportation goods. Inventories rose +0.7%. Non-defense capital goods, excluding aircraft, often called core durable-goods orders, fell -2.4% in April after a +6.5% gain in March.
New home sales jumped nearly +15% in April to the highest level since May 2008 as homebuyers rushed to meet the deadline to qualify for tax credits. Sales jumped +14.8% in April to a seasonally adjusted annual rate of 504,000 which follows an almost +30% gain in March. Sales in April were far beyond the 425,000 rate that economists. The government has been supporting sales and home prices for about two years, providing up to $8,000 to qualified buyers. The tax credit's cutoff for contract closings is June 30th but initial agreements needed to be signed by April 30th. The question is what will happen when the subsidy disappears and the market must stand on its own? Already there are some signs of slowing as the Mortgage Bankers Association reported that purchase applications fell for the third consecutive week in the week ended May 21st.

By region, sales gains were strongest in the Midwest and West. Sales rose +31.6% in the Midwest and +21.7% in the West, they rose +10.8% in the South while sales were flat in the Northeast. Compared with April 2009, last month's sales were up +47.8%, a rate not seen since January 1992. In April, the number of unsold new homes on the market dropped -7% to 211,000, the fewest since October 1968 which is good news. That represents a 5 month supply at the April sales pace, the leanest inventory since December 2005. The median sales price of $198,400 in April was down -9.5% compared with a year earlier however.

Tuesday, May 25, 2010 4:03 p.m est.

I have to say I woke up this morning with a huge smile on my face as the market was down hard once again! I know your thinking he’s crazy but as I have said numerous times the market never goes up forever and it especially never goes down forever but what I’m so elated about is that were getting back to a normal market once again,,,,,yessss! Here we are in 2010 with computers that trade thousands of trades in a nanosecond and it still frustrates me how the market still goes too far in either direction. Today was a great example of a normal market though as we saw selling in the morning and then the afternoon saw buying so even if the doomsters are right and the market moves down another -10% it likely won’t be one big swoosh as they are calling for. Its actually going up and down becoming a market of stocks not a stock market!

Worries about Korea going to war which in my view had nothing to do with the fall today and European woes still persisting saw the market open down pretty good. The Dow saw lows of -290.00 points, S&P 500 -33.00 points and the Nasdaq Composite -75.00 points just after the open. It quickly turned around though and grinded higher for the rest of the day with the S&P 500 actually making into it positive territory.

At the close the Dow was down about -23.00 points to the 10043.00 level, S&P 500 +.38 points to about 1074.00, S&P 100 -.14 points to 488.00 and the Nasdaq Composite -3.00 points to 2211.00. Oil was down hard early on but came back to close down only about -$.20 to be around $70.00.

Home prices fell -0.5% in March compared with February in 20 major cities, according to the Case-Shiller home price index released by Standard & Poor's. However, prices have moved up +2.3% in the past year, marking the second consecutive gain. Prices fell in 13 of the 20 metropolitan areas tracked by Case-Shiller compared with February. The data are not seasonally adjusted. "The housing market may be in better shape than this time last year; but, when you look at recent trends there are signs of some renewed weakening in home prices," said David Blitzer, chairman of the index committee at Standard & Poor's. "It is especially disappointing that the improvement we saw in sales and starts in March did not find its way to home prices," he said in a statement. There's been recent renewed weakness in housing prices as tax incentives end and foreclosures rise, S&P noted.

Nationally, home prices are back at spring 2003 levels, according to S&P. "Now that the tax incentive ended on April 30th, we don't expect to see a boost in relative demand," Blitzer said. The biggest month-to-month decline came in Detroit, where March prices dropped -4.1%. The biggest monthly rise was in Cleveland, where prices gained +1.8%. In the past year, prices were higher in 10 of 20 cities, led by a +16.2% rise in San Francisco. The largest annual decline was -12% in Las Vegas. Looking ahead, prices should be firmer in May and June due to increased sales from the tax credit.

Here's a list of the 20 cities in the Case-Shiller index, with percentage changes over the past year: San Francisco, up +16.2%; San Diego, up +10.8%; ; Cleveland, up +6.7%; Minneapolis, up +6.5%; Los Angeles, up +6%; Washington, up +5.6%; Denver, up +4.1%; Boston, up +3.8%; Dallas, up +3%; Phoenix, up +2.4%; Atlanta, down -1.3%; Miami, down -1.7%; Chicago, down -2.3%; New York, down -2.4%; Portland, down -2.8%; Tampa, down -3.5%; Seattle, down -3.6%; Charlotte, down -3.9%; Detroit, down -4.6%; and Las Vegas, down -12%.

Consumers are regaining confidence about the economy and their chances for finding a job, the Conference Board said as it reported that its consumer confidence index rose to 63.3% in May from 57.7% in April. It was the third consecutive increase and the highest level since March 2008. The separate expectations index rose to its highest level since August 2007, before the recession began. Although still weak by historical standards, consumer confidence "appears to be gaining some traction," said Lynn Franco, head of consumer research at the private research organization. "The improvement has been fueled by growing optimism about business and labor market conditions." This is good news and indicates that although were not rocketing higher, were not going down anymore which should be supportive for the market.

Monday, May 24, 2010 4:03 p.m est.

Did the market see lots of volatility last week because you wouldn’t think so far today as the market seemed to be very organized in its movement as it barely moved after an initial sell off with the Dow seeing lows of -100.00 points, S&P 500 -10.00 points and the Nasdaq Composite -10.00 points at the open. After that though it slowly gained strength as tech stocks were strong. The Dow saw highs of only +10.00 points, S&P 500 +3.00 points and the Nasdaq Composite +15.00 points. After hitting those highs it mostly drifted sideways becoming mixed for the day. The final hour saw more selling but it was interesting to see the Dow back down to new lows of -100.00 points while the Nasdaq was only off +2.00 points. Going into the close the Dow saw selling accelerate with new lows of -145.00 points, S&P 500 -15.00 points but still the Nasdaq only saw lows of -20.00 points.

At the close the Dow was down about -130.00 points to the 10063.00 level, S&P 500 -14.00 points to about 1073.00, S&P 100 -6.00 points to 488.00 and the Nasdaq Composite -16.00 points to 2213.00. Oil was quiet today closing up about +$.20 to be around $70.00.

The mixed market is an indication that traders are undecided and why were likely to see a mostly sideways action. It could also be a tell tale week as the market is incredibly oversold but the worries of Europe may come back tomorrow after their holiday today. I’m looking for an exciting expiration cycle though as were one step closer to having a normal market once again. I think for the summer we could see a trading range being set up as traders take some time to compare incredible earnings and an albeit slow but recovering economy to problems overseas. The bull versus bear fight is now on full tilt so volatility will likely remain.

It definitely seems that the market is setting new ranges to trade in as it went up to far to fast and it came it down to much this past cycle. Until we get our set bottom it may be best to stick with mostly conservative trades this time around for the downside and or even follow the technical trades as we are likely to get both sides this cycle which could be a first.

The fall last cycle was much stronger than a normal retreat which is something you want to be aware of as it could be a one month wonder and we go right back up or it could be a multiple month contraction. For the short term with how oversold the market is for the first to maybe second week of trading we should see some more upside and then a strong decline could occur again so always be looking for when you can take profits! June has always been the most up cycle of the year except there was one time in the June cycle of 2002 where there were two hard declines back to back. We are considered to be in a bull market though which is a difference as that fall occurred at the end of a long correction.

The main point is that the market ran up to quickly and now risks are being priced back into the market and we’re getting, not so much a correction as a proper price adjustment to more rational levels. I’m still of the belief that were in for a period of HEALTHY consolidation down around these levels that gives the global economy time to recover and, more importantly, adjust to the new trading levels.

Re-sales of homes were up +7.6% in April to a seasonally adjusted annual rate of 5.77 million as buyers rushed to complete sales before a tax credit expires, according to data released by the National Association of Realtors. Sales were stronger than the 5.63 million pace expected by economists. Inventories surged +11.5% to 4.04 million in April, which isn’t good though as it represents an 8.4-month supply at the April sales pace. This suggests that prices won't rise much over the next year or two. The median price is up +4% in the past year at $173,100.

Friday, May 21, 2010 4:03 p.m est.

The market looked as if it was going off a cliff once again this morning after being up earlier on in Globex trading. I knew this as I seemed to wake up every 45-minutes to check quotes! The CNBC app for the Iphone is great for quick Globex quotes if your interested! The questions that seemed to be out there once again was about the EU and Greece but I think it had more to do with expiration. Right after the open the Dow saw lows of -150.00 points, S&P 500 -16.00 points and the Nasdaq Composite -40.00 points only five minutes after the open as it seemed that traders just wanted to test the flash crash levels of a week ago because after it hit them it started to rally and rallied pretty hard with the Dow seeing highs of +130.00 points, S&P 500 +18.00 points and the Nasdaq Composite +45.00 points. From there it drifted slowly lower and the final hour saw the Dow turn negative once again and the S&P and Nasdaq almost went into the red. Just as fast though in the final minutes of trading the market rallied back to old highs.

At the close the Dow was up about +125.00 points to the 10193.00 level, S&P 500 +16.00 points to about 1088.00, S&P 100 +6.00 points to 494.00 and the Nasdaq Composite +25.00 points to 2229.00. Oil also rallied after the open but faded into its close down about -$1.00 to be around $70.00.

Technically the market is screaming oversold here and sentiment is at bearish extremes. With the VIX trading around 45 which by the way has only been hit 10 times in the last 20-years, you know its getting overdone! For example put prices are incredibly high. You can go all the way out to the 950 level on the S&P 500 for $15, that’s insane!!! Everyone thinks its the end of the world it seems and they almost sound worse then during the 2008 crash. The one thing to note about the worries over in Europe is the fact that money has come back into the U.S dollar and bond markets in droves as the Euro struggles lower, which by the way isn’t even as low as it was last year so don’t listen to the media idiots! This should tell you that America is a good investment so stocks should hold up well. Sure things may slow down a bit but earnings have been well above expectations and trade with Europe is barely 20% and Greece is likely negative so once everyone gets back to forgetting about their problems, things should get back to normal!

Yes we could slow down a bit and this is likely why we have seen this correction but I believe this just comes back to my belief that were going to move into a trading range for a while. Last month we hit the high and now although the correction went a bit further than the garden variety 10%, I think this is the bottom of a slight upwards channel that we’ll be in for the summer now.

Thursday, May 20, 2010 4:03 p.m est.

The market was in worry mode once again today as Greece was on strike again and comments out of Germany weren’t that positive about their upcoming vote on Greece’s stabilization funds. The Dow saw lows of -360.00 points, S&P 500 -42.00 points and the Nasdaq Composite -95.00 points midday but started to turn around after it looked like the vote on the new financial bill would move to cloture and be voted on either tonight or tomorrow morning. The market was able to cut losses in half but as worries about Germany’s vote on accepting the financial deal for Greece came back to mind, it fell back again into the close.

At the close the Dow was down about -376.00 points to the 10068.00 level, S&P 500 -43.00 points to about 1072.00, S&P 100 -19.00 points to 488.00 and the Nasdaq Composite -94.00 points to 2204.00. The futures June oil contract expired today and going into it selling was fierce taking it all the way down to the $65 level before rallying back to close down about -$1.70 to around the new level of $70.81.

You know it seems that its getting smarter and smarter to trade Program Numbers at the start of the cycle and then walk away till expiration like the old days when everything was done by pen and pencil! Just like the mini mistaken crash we had a couple of weeks ago because of the speed of the market I’m getting tired of how fast the so called guru technicians, fundamental analysts, economists and strategists change their minds like the wind joining the crash camp left and right going from all bull, Dow 13,000 to crash, Dow 5000 all in a matter of weeks. This is good in the longer term of course but still doesn’t make people feel very good in the shorter term. The European problem has been around for months now along with the debt problem but suddenly the end is near! There doesn’t seem to be an in-between with these dare I say, idiots!!!! I have been saying this a lot lately about our own city government that we need to get back to reality and so does the market otherwise the public is never going to come back in. The only good thing is that for the coming cycle downside trades are going to be incredible going way out...... With expiration coming tomorrow and the vote from Germany likely to be passed due to all of this financial instability, the fireworks that we saw on the downside today could be seen on the upside tomorrow as bearishness is unbelievable.

I think that globally were going back to the old way of life where stocks see normal yearly gains like banks providing a service for profit instead of diverse derivative swaps and commodities go back to providing products to manufacturers instead of being driven up and down by speculation. There could actually be investors going back to investing in companies that produce the goods and services that people want in the most efficient possible manner and, hopefully, those companies will employ people to help the economy go round and round!

Jobless claims were up +25,000 in the latest week to 471,000, the highest level in a month while the four-week average rose by +3,000 to 453,500. Economists predicted initial claims would drop to a seasonally adjusted 440,000 from last week's reading of 446,000. A Labor Department official said there were no unusual factors to explain the increase.

The economic recovery may "lose a little steam," though it will continue through the summer, the Conference Board said. The index of leading economic indicators fell -0.1% in April, the first decline since March 2009 following a slightly downwardly revised reading of a +1.3% gain for March. Analysts had expected a gain of +0.2% in April. While strengths among leading indicators have been widespread in recent months, the index's six-month growth rate has "moderated" since December, according to the Conference Board. In April, four of the 10 leading indicators rose, with the largest positive contribution from the interest rate spread. The largest negative contribution came from building permits.

Business conditions improved in the Philadelphia region for the ninth straight month in May, according to a survey of manufacturing firms released by the Fed’s Bank of Philadelphia. The Philly Fed index rose to 21.4% in May from 20.2% in April. Readings above zero indicate more firms were growing than contracting. The index has been above zero for nine consecutive months and has risen for the past four months. Economists were expecting the index to rise slightly to 21.7% in May. Details of the report were mixed with new orders falling by 8 points to 6.1% while the shipments index rose 10 points to 15.8%. The employment index was 3.3%, suggesting some job growth this month. The prices paid index fell to 35.5% from 42.7% while the prices paid index rose to 3.5% from 1%, indicating that pricing power is still low. Nearly 60% of firms expected to increase production in the next six months. Of those, 30% said they would expand by hiring new workers, 25% said they would increase working hour of current employees and 8% said they would expand through greater productivity.

The Federal Deposit Insurance Corporation said that the banks and thrifts it insures earned $18 billion in the first quarter, well above the $5.6 billion they earned a year ago, and the highest profit since the first quarter of 2008. "First quarter results for insured commercial banks and savings institutions contained positive signs of recovery for the industry. While new accounting rules had a major effect on several components of the industry's balance sheet and income statement, there was clear improvement in certain performance indicators," the agency said in its Quarterly Banking Profile. The group said the biggest earnings growth came at the biggest financial institutions it insures, but overall, 52.2% of its members posted net income growth.

Wednesday, May 19, 2010 4:03 p.m est.

Interesting news; The President's approval ratings collapsed in overnight poll. According to Rasmussen.com: "The Rasmussen Reports daily Presidential Tracking Poll yesterday showed that 25% of the nation's voters strongly approve of the way that Barack Obama is performing his role as president. Forty-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17. That matches the lowest rating earned by the president since the passage of his health care proposal two months ago." His daily read has seen him drop another -3% to only a 44% approval rating. What makes this interesting is that for the last several weeks his polls had been improving on the daily polls. This was attributed to the re-energizing of Mr. Obama's political base after the health care victory. There is no way of knowing if this decline is a one day thing or something more so its something to watch since it's primary season and the mid-term election season is starting to get closer.

Incumbunts got hit hard in primary elections according to news.yahoo.com: "Veteran Sen. Arlen Specter of Pennsylvania, who switched parties hoping to prolong his career, lost last night. Political novice Rand Paul rode support from tea party activists to a rout in Kentucky's Republican Senate primary." The setback for the incumbents and/or those perceived to be professional politicians come at an interesting time, especially when the president's polls collapsed in Rasmussen's daily poll, as we noted above.

It was interesting that the market started the day lower once again as the dollar was actually lower and the Euro was gaining strength. It briefly touched positive territory early on but as European Indices sold off into their close and because our markets have been followers of late instead of leaders, our market started to sell off. After hitting lows midday, the Dow seeing -190.00 points, S&P 500 -21.00 points and the Nasdaq Composite -50.00 points it turned around and maybe their rally at the end of the day will put them back in that leadership role as we start moving into expiration the next couple of days.

The final hour saw most of the same as the market moved mostly sideways but did make an attempt at going positive once again. It didn’t make it though and at the close the Dow was down about -67.00 points to the 10444.00 level, S&P 500 -6.00 points to about 1115.00, S&P 100 -2.00 points to 507.00 and the Nasdaq Composite -19.00 points to 2299.00. Oil was down again hard once again -$1.50 at one point but it turned around to close a bit higher by $.50 to be around the $69.75 level.
The percentage of loans in foreclosure or with at least one payment past due was a non-seasonally-adjusted 14.01% in the first quarter, down from 15.02% in the fourth quarter of 2009, the Mortgage Bankers Association said but the seasonally adjusted delinquency rate for mortgages on one to four-unit residential properties, which includes mortgages at least one payment past due but doesn't include those in foreclosure, rose to 10.06%, from 9.47%. Mortgages in the foreclosure process hit a record high at a non-seasonally-adjusted 4.63%, up from 4.58% in the fourth quarter. "The issue this quarter is that the seasonally adjusted delinquency rates went up while unadjusted rates went down," said Jay Brinkmann, MBA's chief economist. "Delinquency rates traditionally peak in the fourth quarter and fall in the first quarter and we saw that first quarter drop in the data. The question is whether the drop represents anything more than a normal seasonal decline or a more fundamental improvement."

Demand for loans to buy homes fell strongly to a 13-year low last week, following the expiration of federal tax credits, while near-record low mortgage rates helped refinancing, the Mortgage Bankers Association said. Mortgage purchase applications fell -27.1% to the lowest level since May 1997 in the absence of the popular government support, the group said which is very bad news. Housing was trying to flatten out after more than a year of homebuyer tax credits worth up to $8,000 expired on April 30th.

Requests for home purchase loans have fallen almost -20%over the past month despite low borrowing costs. Overall loan requests were down -1.5%, on a seasonally adjusted basis helped by a +14.5% jump in mortgage refinancing applications as home loan rates neared historic lows. Average 30-year mortgage rates fell 0.13 percentage point last week to 4.83%, the lowest since last November, the MBA said. The record low was 4.61% in March 2009, based on the group's survey, which has been conducted since 1990.

Refinancing applications jumped to a nine-week high and accounted for about 68% of all applications last week but buyers took a low profile after rushing en masse to take advantage of the tax incentive. The big problem is that low borrowing costs and stabilizing home prices are being offset by near double-digit unemployment and a looming supply of foreclosed properties yet to hit the market. The worst of the housing crisis is over but recovery will be long and slow, most economists agree. With the tax credits gone, home shoppers will take more time to find the right property.

Consumer prices fell -0.1% on a seasonally adjusted basis in April as energy, housing, auto and apparel prices declined and was the first decline in the consumer price index since March 2009. The consumer price index is up +2.2% in the past year. The core CPI which excludes the less important food and energy prices in order to get a better view of underlying inflation was unchanged in April, lowering the year-over-year increase in core inflation to 0.9%, the lowest rate since January 1966. The report was better than expected as economists were looking for the -0.1% drop in the headline CPI, but were expecting a +0.1% gain in the core rate.

Tuesday, May 18, 2010 4:03 p.m est.

The market started the day higher as the dollar fell back a bit and Europe and the Euro were stable. The Dow saw highs of +100.00 points, S&P 500 +10.00 points and the Nasdaq Composite +20.00 points. When rumors started to fly that the Fed is considering raising rates even though Europe is in turmoil, selling ensued and when the German government announced that they wouldn’t allow short selling in certain stocks and CDO’s the market fell. This seems to be deja vu as Europe is doing the exact same things that we did after the crash in 2008! The Dow saw lows of -140.00 points, S&P 500 -19.00 points and the Nasdaq Composite -45.00 points going into the final hour.

At the close the Dow was down about -115.00 points to the 10511.00 level, S&P 500 -16.00 points to about 1121.00, S&P 100 -7.00 points to 509.00 and the Nasdaq Composite -37.00 points to 2317.00. Oil was down again now closing below the $60 level down about -$1.00 to be around the $69.00 level.

Housing starts increased for the second straight month in April to an 18-month high but building permits fell sharply, casting doubts on the momentum of the housing recovery. Housing starts rose an estimated 5.8% in April to a seasonally adjusted annual rate of 672,000 from an upwardly revised 635,000 in March. This is the highest since October 2008, when the financial crisis worsened. Starts of single-family homes rose +10.2% in April to a 593,000 annual rate, the highest since August 2008 while building permits fell -11.5% to a seasonally adjusted annual rate of 606,000, the lowest in six months. Permits for single-family homes, considered by many analysts to be the number in the housing release, fell -10.7% to a 484,000 annual rate. Starts were higher than the 650,000 expected by economists. Housing starts are up +40.9% compared with April 2009 while permits are up +15.9% compared with a year earlier. The government cautions that its monthly housing data are volatile and subject to large sampling and other statistical errors. In most months, the government can't be sure whether starts increased or decreased. In April, for instance, the standard error for starts was plus or minus 13% so large revisions are common.

The industry has slashed production of new homes to work off a massive inventory of unsold homes. The number of homes under construction fell -2% to a seasonally adjusted 482,000, the lowest on record dating back to 1970. The number of homes completed surged 19.2% in April to a seasonally adjusted annual rate of 769,000. Builders have grown more optimistic about a recovery, in part because a generous tax subsidy for buyers has reinvigorated the market, at least temporarily. In May, the home builders' sentiment index rose strongly for the second straight month to 22%, a 33-month high but the index remains very depressed by historic standards. Builders face tough competition from foreclosures of existing homes, and buyers remain cautious about the job market. In some areas, prices are still falling.
Meanwhile wholesale prices fell a seasonally adjusted -0.1% in April, as the cost of energy and food eased. The more closely followed core rate, which excludes volatile energy and food prices, rose +0.2%. Economists had predicted a -0.2% decline in overall produce prices and a +0.1% increase in the core rate. The core intermediate PPI, which is viewed as a leading indicator of inflation, jumped +1.1%, the largest one-month gain since July 2008.

Monday, May 17, 2010 4:03 p.m est.

It was another volatile day as it started higher but lost strength as the day went on as the dollar continued to rise. The Dow saw highs of +45.00 points, S&P 500 +6.00 points and the Nasdaq Composite +20.00 points. The selling was stronger though and the Dow saw lows of -190.00 points, S&P 500 -21.00 points and the Nasdaq Composite -45.00 points midday. As the dollar pulled back a bit and the Euro stabilized the turned around and moved into positive territory in the final hour. At the close the Dow was up about +7.00 points to the 10626.00 level, S&P 500 +1.00 points to about 1137.00, S&P 100 +.15 points to 516.00 and the Nasdaq Composite +7.00 points to 2354.00. Oil was down pretty hard today moving into the $60 level for a while closing down about -$1.25 to be around the $70.50 level.

With all of the things going on that are considered oh so negative, the one thing that no is looking at is the fact that this is an expiration traded week which has been generally positive the past few years. The market is quite oversold in the medium term anyway and just last week the S&P 500 hit the 1100 level, which is not only where the 200-day moving average is but also where the -10% correction level is from the recent highs. There is also a huge supply of out-of-the-money put open interest that will expire this Friday. Should the market find any type of stability, whether technical or news-based, the unwinding of short positions could create a good short covering rally. Another reason that it could at least be flat is that history has shown that after the volatility index spikes above the 40-level the market generally sees a trend change for the next few weeks. During the crash it moved all the way to a historical 80 plus level, but this isn’t a crash even though the media is trying to make it sound like one. Yes Europe is a problem but it isn’t America’s strongest trading partner. With decent earnings here and traders rushing to the safety of the American dollar it provides a psychological safety net which should help to support the market.

Manufacturing activity in the New York region improved at a slower pace in May, the New York Fed said. The bank's Empire State Manufacturing index slowed to 19.1% in May from 31.9% in April. The drop suggests the pace of growth slowed in May. New orders and shipments moved lower but remained in positive territory. The index for the number of employees rose to its highest level since 2004 though which is good news. 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 May national factory survey due out in two weeks may show. In April, the ISM manufacturing index showed continued good news for manufacturers, jumping to 60.4%, the first time it had exceeded the 60% threshold since June 2004.

Friday, May 14, 2010 4:03 p.m est.

The market was in sell off mode this morning which wasn’t surprising as indices worldwide have rallied strongly all week and when your in a volatile mode and have a weekend to wonder about what may occur, profits will be taken and this being Friday was a good time to do it. The big difference about this sell off was that volume was incredibly low indicating that traders are too worried just yet. The Dow saw lows of -250.00 points, S&P 500 -31.00 points and the Nasdaq Composite -70.00 points going into the final hour but buying just before the close pulled the market up nicely just before the day ended.

At the close the Dow was down about -162.00 points to the 10620.00 level, S&P 500 -22.00 points to about 1136.00, S&P 100 -9.00 points to 516.00 and the Nasdaq Composite -48.00 points to 2347.00. Oil sold off once again and is now approaching the 60’s level down about -$3.00 to be around the $71.50 level.

For the market, although today’s sell off was bad do to the continued unrest in the EU, the story is getting old, at least for the coming week going into expiration. For the longer term though social unrest is starting to spread as there is big trouble in Thailand and the number of strikes in Europe is starting to increase. The market actually rarely pays attention to the currency markets but it has created volatility in the past and reminds me of a lot of 1997. If you look at history, some of the biggest market volatility came from currency problems such as in 1997 when the Thai Bhat debacle occurred which started the word, "contagion." Long Term Capital Management, a hedge fund run by Nobel Prize winning types lost its shirt on weird options based on currency bets that went wrong. A year later, Russia defaulted, and we had another currency related crisis so this time around we have the Euro which is a bit bigger to contend with.

Greece is just the tip of the iceberg as there is Italy, Ireland, Spain, Portugal, California, New Jersey, Nevada, Illinois, and other large economies with budget deficits and real estate related problems. There is a poor collection of policy makers in power everywhere, with little knowledge of how the world's economy really works and are driven more by ideology with most of it leaning left toward policies that have been proven to be faulty time after time. Italy for example has more debt than any country in Europe. According to The Wall Street Journal: Europe's nearly trillion-dollar rescue fund has eased the economic pressure on nations at the euro-zone's periphery, but a deeper problem is making it difficult for those countries to escape their huge debts—a lack of growth. The problem is a particular concern for Italy, Europe's most heavily indebted country." "So far, markets have deemed Italy less risky than other Southern European nations despite a public debt equivalent to 115% of gross domestic product, about the same as Greece. On Thursday Italy had to pay almost one percentage point more than Germany to borrow, about the same as Spain, and lower than Greece's spread of 4.65 percentage points but the stakes in a potential Italian debt crisis are much larger. Italy's outstanding public debt is €1.7 trillion, seven times the size of Greece's." This means that the things that could go wrong has the potential of going wrong. Bad economies, bad policies, and really bad problems that are difficult to fix.

Back to the shorter term though one key thing that no one is talking about is that what is going on with the Euro is what was going on with the American dollar not that long ago and when you look at longer term charts neither currency is near lows that were seen a while ago. What is going on now is mostly psychology which is really what trading is all about so volatility will likely continue but I don’t think were going to see another mini crash like we saw last week especially as next week is an expiration traded one.

Retail sales rose a seasonally adjusted +0.4% to $366.4 billion in April, the seventh straight increase and the 12th gain in the past 13 months, led by strong sales at hardware stores and garden centers. Excluding the +0.5% increase in auto sales, sales rose +0.4% to $303.5 billion. The figures were stronger than the expected -0.2% decline in overall sales and the expected +0.2% gain excluding autos. Adding to the upside surprise, sales in February and March were each revised higher by two-tenths of a percentage point. Compared with April 2009, sales were up +8.8%.

Manufacturing output rose +1% for the second month in a row in April on broad-based increases in most factory sectors. Total output of the nation's mines, utilities and factories increased +0.8% last month, as expected, despite a -1.3% decline in utility production in response to mild temperatures. Industrial production was +5.2% higher than it was a year earlier. The capacity utilization rate jumped in April to 73.7% from 73.1% for total industry, and rose to 70.8% from 70% in manufacturing.
Consumer sentiment rose in early May, according to the Reuters/University of Michigan index. The consumer sentiment index rose to 73.3% from 72.2% in April. Economists had expected the sentiment index to hit 73.5% in May. The index's long-term average is 87%. Current conditions ticked up to 81.1% while expectations rose to 68.3% from 66.5%. Looking ahead, one-year inflation expectations rose to 3.1% in early May from 2.9% in April. Consumers have been concerned that the economy's recovery will be slow and have little impact on their personal finances.

Thursday, May 13, 2010 4:03 p.m est.

Interesting; Wall Street Journal/NBC News poll shows that “76% of Americans believe that the economy remains in recession; an even larger 81% describe themselves as dissatisfied with the economy.” That must be why 56% of Americans say the country is still on the wrong track, notwithstanding recent positive economic news and why Obama's own job approval rating has been sitting below 50% for a while now slowly falling more and more.

The market was lower this morning but not too bad so as the day went on the market eventually got into positive territory with the Dow seeing highs of +25.00 points, S&P 500 +2.00 points and the Nasdaq Composite +10.00 points. Volume however was insanely light so selling final took hold in the final hour with the Dow seeing -125.00 points, S&P 500 -16.00 points and the Nasdaq Composite -40.00 points.

At the close the Dow was down about -114.00 points to the 10783.00 level, S&P 500 -14.00 points to about 1157.00, S&P 100 -6.00 points to 525.00 and the Nasdaq Composite -31.00 points to 2394.00. Oil strangely sold off once again down about -$2.00 to be around the $74.00 level.

Jobless Claims fell -4000 to 444,000 last week but the data was revised up by +4,000 for the prior week. The four-week average of initial claims dropped by -9,000 to 450,500. Economists predicted claims would dip to a seasonally adjusted 440,000. Continuing claims fell by almost -217,000 to 5.14 million.

Tuesday, May 11, 2010 4:03 p.m est.

Government control is it good? Fannie Mae admitted that it may never again become profitable. According to The Washington Pos: "Fannie Mae, the government-controlled mortgage finance giant, said Monday that it cannot imagine a day when it would turn a profit, as the firm announced a $11.5 billion loss and said it would request $8.4 billion from taxpayers to stay afloat. The new demand for taxpayer aid brings the total bill for Fannie and its sister company Freddie Mac to $145 billion." Yet, Fannie and Freddie continue to buy defaulted mortgages from banks and mortgage companies. Freddie Mac's latest earnings report noted that Freddie has bought some $56 billion worth of defaulted mortgages, over 120 days delinquent, since February. These toxic assets are not expected to ever come off of the balance sheets from these two companies, for all intents and purposes. It seems that this will never end as The Post points out: "The Obama administration has pledged to provide an unlimited amount of funds to Fannie and Freddie to keep them solvent. The government has pledged to pump money into the firms whenever their net worth -- assets minus liabilities -- dips into negative territory." We suspect that whomever is the next president won't want to, and probably won't be able to change a thing.

Not surprisingly the market started the day lower. Its not surprising because what I find interesting is that it wasn’t that long ago that the greatest crash in modern history happened so it is still right there in people’s minds. This is why with any sign of weakness that is vaguely out of the ordinary bulls quickly jump the fence to become raging bears as they did this past weekend. Most people have hated this rally as it was so strong so fast and although I figured it would happen even I have hated it the past 6%! The good thing is that we are finally starting to see the volatility I’ve been waiting for. The Dow saw lows of -110.00 points, S&P 500 -13.00 points and the Nasdaq Composite -30.00 points. It didn’t have the feel of a renewed sell off though and bounced back as oil seemed to find strength along with the dollar falling. By midday the Dow saw highs of +90.00 points, S&P 500 +11.00 points and the Nasdaq Composite +35.00 points.

The final hour the market became volatile moving in and out of positive territory and in the end it closed mixed. The Dow was down about -37.00 points to the 10748.00 level, S&P 500 -4.00 points to about 1156.00, S&P 100 -2.00 points to 525.00 and the Nasdaq Composite +.64 points to 2375.00. Oil did rally early on but by the time it closed it was down about -$.25 to be around the $77.00 level.

It appears that small business owners are slightly less pessimistic about their outlook, and in the face of continuing weak sales don’t plan on increasing capital spending or employment, a monthly survey of small businesses showed. The National Federation of Independent Business' optimism index rose 3.8 points in April to 90.6%, but the gain is not enough to signal that a solid recovery is in place, the association said. Nevertheless, the latest report showed the optimism index rising above 90% for the first time in months. The index was below 90% for 22 of the last 25 months, including 18 consecutive months prior to the April reading. Nine of the 10 index components were up compared with March. Despite the index's rise, the survey showed that hiring by small businesses remains weak, with few saying they plan to create new jobs. Plans to make capital expenditures over the next few months were unchanged at 19%, the NFIB said. It said small business owners continued to liquidate inventories and that weak sales gave little incentive to rebuild stocks. The weak economy continued to put downward pressure on prices, with more business owners saying they plan to cut prices than those reporting plans to raise prices. It was the 17th consecutive month in which more businesses reported reducing prices than raising them, the association said. "Reported capital spending remains at record low levels and plans to make outlays at historic lows,'' the survey concluded. ''Looks like no money gets spent unless something breaks or the roof leaks.'' The index is based on 2,176 respondents in a random sampling of NFIB member firms through the end of April.

Inventories rose for a third month in March, and sales climbed even more, a signal companies will need to step up orders to try to meet demand. The +0.4% gain followed a 0.6% increase the prior month. Sales gained +2.4%, the most since November. The amount of goods on hand compared to sales dropped to the lowest level on record, indicating factories will need to keep increasing production. A report later this week is projected to show purchases at retailers climbed again in April, pointing to a rebound in consumer spending. Economists forecast wholesale inventories would rise +0.5%, according to projections. At the current sales pace, wholesalers had enough goods on hand to last 1.13 months, down from 1.16 in February and the least since comparable records began in 1992. The value of goods sold increased to $348 billion, the most since October 2008.

Monday, May 10, 2010 4:03 p.m est.

Wow whee is about all I can say, I said on Friday we could see a bounce back just as fast as we went down but today was record breaking as Globex futures had never rallied that hard in an overnight session and we’ve only seen opens this big three other times! Not surprising considering that we have only seen volatility readings as strong as we did on Thursday only 15 times since 1928! Anyhow this is the result when a central bank throws $1 trillion at countries and banks! According to The Wall Street Journal: "The European Union agreed on an audacious €750 billion ($955 billion) bailout plan in an effort to stanch a burgeoning sovereign debt crisis that began in Greece but now threatens the stability of financial markets world-wide. The money would be available to rescue euro-zone economies that get into financial troubles. The plan would consist of €440 billion of loans from euro-zone governments, €60 billion from an EU emergency fund and €250 billion from the International Monetary Fund."

Europe did the only thing that they could do, agree to monetize their problems, print money basically. Central banks will be buying bonds from the market, providing liquidity, and short covering and some buying will at least help support the stock market and the potential for some kind of sustained rally. The question is whether the money leads to some kind of economic recovery in Europe or not although if the U.S. is a guide, then conditions in Europe will improve, at least some, although it could take some time to see that improvement. Then, we'll have to look through the details of the improvement and recovery. However, there will be consequences because as this thing progresses, those who are paying the most for this bill, the Germans, will start to make changes in their political structure. Already this weekend, Angela Merkel's FDP party took a hit in some regional elections as opposition to the Greek bailout, and Merkel's pace of deciding on how to go about deciding what to do about it backfired on the German Chancellor.

The Dow saw highs of +450.00 points, S&P 500 +53.00 points and the Nasdaq Composite +120.00 points in the first 10-minutes of trading. From there it pulled back and then almost made it back to old highs but by midday profit taking had pulled the market back. The final hour saw the market pull back quite a bit more but buying in the final fifteen minutes brought right back up near highs to close the day.

At the close the Dow was up about +404.00 points to the 10785.00 level, S&P 500 +49.00 points to about 1160.00, S&P 100 +21.00 points to 527.00 and the Nasdaq Composite +109.00 points to 2375.00. Oil of course bounced hard as the U.S dollar fell but as it gained strength once again it started to fall back but still closed with a decent gain of about +$2.00 to be around the $77.00 level.

This Eurozone package to rescue its financial system should at the least support stock markets as everyone figures out how well its going to work at least for this expiration cycle but I think the best news is that I think the market will quiet down and set some trading ranges meaning that were going to be mostly sideways for the rest of the summer. The rally today was nice but the market blast this morning with the 450 point upside gap didn’t really give a lot of time to commit cash at decent prices unless you were a High Frequency trader so I wouldn’t doubt to see the market move down a bit from here but volatility should at least get back to normal now, at least for this expiration cycle! I think 1220 on the S&P 500 should be the top for now and around 1100 for the bottom as it is a support area. The 1220-1230 level is a 5 decade upper trend line on a log chart if you do not consider the 1995-2000 bubble which also popped during the last decade. It seems that every effort to grow the economy faster at this point has turned into a bubble and failed above that line so there is a strong possibility that we hit an important resistance a month ago and now need time to reevaluate and consolidate gains.

Technically the market was hugely oversold on Friday. For example, shorter term the McClellan Oscillator on the NYSE plunged to an extremely oversold reading of -388 which is far under a -200 level where you usually find buying spots. The Nasdaq dropped to -303, which also is under the buying zone level of -200. Thursday and Friday had all the markings of a panic plunge that should clear the air, but that one day plunge was too violent for me but I’m glad it happened as you can bet on it that a lesson will be learned to prevent this from happening again and means that we won’t likely see it happen again in the future. The SEC has already been meeting with the leaders of indices and it looks like they already have a solution to last Thursday’s problem.

Friday, May 7, 2010 4:03 p.m est.

The market continued its volatile ways today with it quickly moving from positive to negative, to positive back to negative again. The day started a bit lower even though the employment report came out positively but quickly enough the market turned positive with the Dow seeing highs of +65.00 points, S&P 500 +8.00 points and the Nasdaq Composite +15.00 points. Just about as fast though it turned down again with the Dow seeing lows of -275.00 points, S&P 500 -33.00 points and the Nasdaq Composite -85.00 points as it appeared to want to test the normal lows of yesterday. Just about as quick though it bounced back into positive territory once again. From there it seemed to move into drift mode as things quieted down and drifted lower into the close.

At the close the Dow was down about -140.00 points to the 10380.00 level, S&P 500 -17.00 points to about 1111.00, S&P 100 -7.00 points to 507.00 and the Nasdaq Composite -54.00 points to 2266.00. Oil continued to sell closing down about -$2.00 to be around the $75.00 level.

Rampant bullishness that was all over the street last week has now turned to rampant bearishness so it will be very interesting to look at this weekend. Volatility levels that were hit today were at levels not seen since November 2008! I was saying a few weeks ago that we were moving too fast to the upside and that if we didn’t start to see some type of correction occur that we were going down hard and that is what is happening now. The market has broken some support levels but I also figured that the lower rising trend line should have been about where it goes and that is where we are sitting now. When I looked at the technicals I was very surprised to see how oversold the market had gotten in such a short time however at the moment its all about nervousness and that is what traders are, nervous! After today technicals will be incredibly oversold. Volatility could get even sharper in the next little while as it also means that the market can go up just as fast as it came down because it was so quick and this was a hard move down from the top. We may be seeing a trading range coming into play between 1220 and 1100 on the S&P 500 now which could last for a few months as we have already seen a -10% correction, about -6% in the last four days alone. I may have more our over the weekend after I get a good look at the numbers.

The economy added +290,000 jobs in April, which was much better than expected despite temporary hiring for the 2010 Census. Excluding Census workers, +224,000 jobs were created, with the unemployment rate edging up to 9.9% from 9.7%, the Labor Department reported. Economists expected the economy to add +185,000 jobs, with the jobless rate holding steady at 9.7%. The data for February was also revised to show a +39,000 increase, compared to an originally reported decline of -14,000. Job gains in March were also revised up a huge +230,000 from 162,000. Meanwhile, the average workweek in April rose +0.1 hour to 34.1 hours and hourly earnings ticked up 1 cent to $22.47. This was good news actually and is much better than expected.

Thursday, May 6, 2010 4:03 p.m est.

Wow, I know I have been looking for some volatility but today’s was a doozy! A bad print or an accident in a trade of Proctor and Gamble a very stable consumer stock, went from $60 to $40 in the blink of an eye, an obvious computer error which has been reported to be linked to the Nasdaq market as the NYSE only reported a low of $56 on the stock. There have also been a few more stocks reported with the same problems. Of course this caused the Dow to actually show a loss of -998.50 points in that five minute period. This type of an error is likely to give strength to those who are working on financial reform to kill the flash trading made by high frequency traders to get in-between brokerages and traders as it was all computer related. It was an apparent error though because in the next five minutes P&G was trading normally again and that pulled the market back up cutting losses more than in half. The worries about the Greek debt problem started the sell off as the Euro basically crashed causing the U.S dollar, bonds and gold to rally hard for safety. Another concern was that monthly retail sales were down for the month indicating that the economy may not be moving as fast as people have been thinking. The Dow saw lows of -999.00 points, S&P 500 -95.00 points and the Nasdaq Composite -200.00 points on those errors midday but I would say they should have been only a third of that in actuality when you look at the close.

There were other problems reported also as Goldman corporate bonds signaled investor concerns about the company. According to Bloomberg: "Goldman Sachs Group Inc. bond yields show the firm’s credit is more hazardous than Citigroup Inc.’s for the first time since February 2009 as speculation grows legal and regulatory risks will depress its revenue. Debt from the most profitable Wall Street firm yielded 2.73 percentage points more than Treasuries on average as of May 4, according to Bank of America Merrill Lynch indexes. That compares with a spread of 2.29 percentage points for Citigroup, which got a $45 billion bailout in 2008 and repaid $20 billion in December. At the end of March, Citigroup spreads were 0.45 percentage point wider than Goldman Sachs’s."

Even international markets were showing weakness as Chinese stocks hit eight month lows as worries about home ownership climbed. According to Bloomberg: "China’s stocks plunged, driving the benchmark index to an eight-month low, on concern government measures to curb property speculation and cool inflation will hurt economic growth. China Vanke Co., the largest listed developer, fell -4.1% as brokerages said home prices may drop -30%."

At the close the Dow was down about -350.00 points to the 10518.00 level, S&P 500 -38.00 points to about 1128.00, S&P 100 -21.00 points to 510.00 and the Nasdaq Composite -94.00 points to 2308.00. Oil continued to sell off for the third day in a row off about -$3.50 to be around the $76.00 level.

Its easy to say now that the market is pretty oversold in the short term and for that matter in the mid-term also. With the employment report coming out tomorrow morning, Germany voting on the Greek bailout and the United Kingdom’s election going through I would expect volatility to continue however I think we could see a bounce to end the week as we are in the shortest term, extremely oversold and are bouncing off of support levels that the bulls are likely going to defend strongly.

Jobless Claims fell by -7,000 last week to a seasonally adjusted 444,000 while four-week averages fell by -4,750 to 458,500. Continuing claims fell by -59,000 to a seasonally adjusted 4.59 million last week. A total of 10.4 million people (not seasonally adjusted) were receiving some kind of unemployment benefits, about +16,000 higher than the previous week.

With major cost-cutting efforts now in the past, the productivity slowed in the first quarter from 6.3% to a still-healthy 3.6%. Output increased 4.4% while hours worked rose 0.8% in the first quarter. Unit labor costs fell -1.6%, a sign that disinflationary pressures are still strong. In the past four quarters, non-farm productivity has increased 6.3%, the fastest increase in 48 years.

Tuesday, May 4, 2010 4:03 p.m est.

The market started the day poorly after news out overnight had Asian stocks selling off strongly and then European stocks after Germany was making a lot of noise about Greece’s relief package. Union workers in Greece were picketing and going on strike as their benefits were still being cut even though the country was getting an $147-billion dollar bailout. I guess Germans don’t like the fact that workers in Greece can retire at 55 where they have to work until 67 to get any money from the government!

Meanwhile in China stocks dropped to seven month lows as manufacturing slowed in one survey and rose in another. According to Reuters: "China's key stock index fell to a seven-month low on Tuesday morning after China's central bank said it would raise banks' reserve requirement ratios to fend off property and consumer price inflation." The report added: "Banks weighed on the index after the central bank's Sunday announcement of a +0.5% point hike in the ratio of funds banks must keep with the central bank as reserves, the third such increase this year under a campaign to absorb excess cash in the economy at a time when inflation is rising." Bloomberg added: "Chinese manufacturing grew at a slower pace in April, easing overheating risks in the world’s fastest-growing major economy, a survey of more than 400 companies showed. A purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics fell to a six-month low of a seasonally adjusted 55.4 from 57 in March. A number above 50 indicates an expansion." The problem is that the direction of manufacturing remains unclear. According to Bloomberg: "A government index, released May 1, showed manufacturing picking up pace and the fastest gain in 22 months in input prices. HSBC’s survey uses a different sample of businesses."

This all caused Globex futures to sell off strongly and it continued all day as the final hour saw the Dow see lows of -280.00 points, S&P 500 -34.00 points and the Nasdaq Composite -90.00 points. At the close the Dow was down about -225.00 points to the 10927.00 level, S&P 500 -29.00 points to about 1174.00, S&P 100 -12.00 points to 535.00 and the Nasdaq Composite -75.00 points to 2424.00. Oil sold off strongly even though the well still isn’t plugged in the Gulf and it may have been because the U.S dollar was incredibly strong today. It closed down about -$3.75 to be around the $82.00 level.

As I said yesterday, “I’m still looking for a mostly sideways market for a few months so we could continue to see this up +180 down -180 days all over the place which is perfect for us,” and it was as we are now able to get both sides on for trades nicely and downside premium is huge even waaaaay out there. We do seem to be leaning more to the downside right now but I would suspect that the employment report may be a positive for the market now as yesterday’s Income and ISM report was for the big push up.

Monday, May 3, 2010 4:03 p.m est.

The market popped higher today for no real reason except that there wasn’t any real bad news out except that the oil sick in the Gulf is still growing and there was a near miss of a terrorist attack in Times Square with a car bomb over the weekend and that couldn’t happen again in short order so why be cautious, oh and the fact that the Euro was once again falling on the news that today Greece is getting a bailout is never a reason to go slow. The Dow saw highs of +180.00 points, S&P 500 +18.00 points and the Nasdaq Composite +45.00 points.

At the close the Dow was up about +143.00 points to the 11151.00 level, S&P 500 +16.00 points to about 1202.00, S&P 100 +7.00 points to 547.00 and the Nasdaq Composite +38.00 points to 2499.00. Oil had moved higher earlier on but it lost most of its gains as the day wore on. It closed up about +$.05 to be around the $86.00 level.
The move in the market today seemed more like early month investing by mutual fund managers as it is that time of month and it didn’t have the feel of a real rally. At the end of the week we get the employment report so volatility will likely increase as we get closer to Friday but if we remain higher until then I would suspect the market won’t take the news well unless its fantastic. It remains overbought in the longer term and sentiment this past weekend shot through the roof on the bullish side which is always a warning that the end may be closer than the start. I’m still looking for a mostly sideways market for a few months so we could continue to see this up +180 down -180 days all over the place which is perfect for us!!!

Helped by spending on autos and other durable goods, real Consumer Spending increased +0.5% to a record high in March, at last surpassing the pre-recession peak set in November 2007. After-tax, inflation-adjusted incomes increased +0.2% in the month, with transfer payments such as unemployment benefits accounting for much of the gain. The tepid income gains should hamper the economic recovery, economists say. With spending growing much faster than incomes in March, the personal savings rate fell to 2.7%, the lowest since September 2008.

Manufacturing expanded in April at the fastest pace since June 2004, indicating the world’s largest economy accelerated as it entered the second quarter. The Institute for Supply Management’s factory index rose to 60.4%, exceeding forecasts, from a March reading of 59.6%. The ISM’s production index jumped to the highest since January 2004 while new orders increased to a three-month high. Inventories at factories fell. The employment index increased to the highest since level since January 2005.

Construction Spending unexpectedly increased in March, propelled by gains in state and local government projects, a Commerce Department report showed. The +0.2% rise followed a -2.1% drop in February.

Thursday, April 29, 2010 4:03 p.m est.

The market was up again today as there was nothing negative out today but volume dropped off quite a bit. The Dow saw highs of +160.00 points, S&P 500 +19.00 points and the Nasdaq Composite +45.00 points. At the close the Dow was up about +122.00 points to the 11167.00 level, S&P 500 +15.00 points to about 1207.00, S&P 100 +7.00 points to 549.00 and the Nasdaq Composite +40.00 points to 2512.00. Oil was up again about +$2.00 to be around the $85.00 level.

Jobless Claims fell by -11,000 to a seasonally adjusted 448,000 and matched expectations of economists. The four-week average considered a better gauge of underlying trends than the volatile weekly number rose +1,500 to 462,500. Continuing Claims dropped -18,000 to a seasonally adjusted 4.65 million. The four-week average of continuing claims fell -9,000 to 4.64 million, the lowest level since January 2009. In the week ended April 10th, about 10.39 million people were collecting some type of unemployment benefits, down -148,000 from the previous week's 10.54 million.

Wednesday, April 28, 2010 4:03 p.m est.

Of course the market bounced back this morning with the Dow seeing highs of +60.00 points, S&P 500 +9.00 points and the Nasdaq Composite +15.00 points until it was reported that S&P was now downgrading Spain. The Dow saw lows of -25.00 points, S&P 500 -2.00 points and the Nasdaq Composite -15.00 points. Then everyone remembered that the Fed was going to announce more free money comments in the afternoon so the market bounced back again almost back to the highs. The interesting thing was that tech stocks didn’t join in and was at the unchanged level. After the Fed announced no change in rates and had the exact same speech as usual the market was basically the same. It was the quietest reaction ever and may have been because of the problems we have been seeing in the EU.

The Fed's policy statement said the economic situation is “likely to warrant exceptionally low levels of the federal funds rate for an extended period.” Basically it was a cut and paste statement. The Fed's description of the economy was a teensy tiny bit little more upbeat but still very cautious. It said that the "labor market is beginning to improve," but quickly noted that employers are still reluctant to add to payrolls. The statement repeated that inflation is likely to be subdued and it had no statement about asset sales. Thomas Hoenig, the president of the Kansas City Federal Bank was once again the one dissenter, saying that the extended period language was "limiting the Fed's flexibility to begin raising rates modestly."

Going into the final hour the market finally made new highs with the Dow up +85.00 points, S&P 500 +12.00 points but the Nasdaq Composite wasn’t joining in only seeing gains of +6.00 points but by the close it had pulled back. At the close the Dow was up about +53.00 points to the 11045.00 level, S&P 500 +8.00 points to about 1191.00, S&P 100 +4.00 points to 542.00 and the Nasdaq Composite +.26 points to 2472.00. Oil was up about +$1.25 to be around the $83.00 level.

It seems that Standard’s Poor’s is getting tough as they downgraded Spain today to double AA from +AA and changed their outlook to negative! Greece is still having problems also as 1-year bonds traded over 30% today while the 2-year at one point was over 24%. Their 10-year was at 10% which reminded me of the day when an incredible mortgage rate was 10%! I wonder what houses would be worth today if we had 5-year mortgages at that level once again! Anyhow it now appears that Venezuela or Nigeria are lower risk as they have lower rates than Greece! Maybe Greece needs to start drilling for oil!

The news is getting worse for the EU as people are already talking that Italy and Ireland are about to be downgraded also so this is getting interesting! It almost seems like having debt is bad! According to The New York Times: “Increasingly, investors wonder if Portugal, Spain and even Ireland may not be able to borrow the billions of dollars they need to finance their government spending." The report added: "Investors are already demanding nearly 10% in returns on Greek’s 10-year bonds. The cost of insuring all three countries’ debt against a default are also at record levels, a clear sign that investors are shunning them."

Talking about debt, Barclays said today that there are 536,000 foreclosed homes on the books of American banks. Yet, Realty Trac Inc. estimates that there may be as many as 758,000. The discrepancy is because, as The Wall Street Journal points out "thousands of banks and others that own the properties disclose those holdings in varying ways, if at all." What it means is that no one really knows how many foreclosures are out there lurking.

One would think that the only safe place in the world right now is China but the situation in the Chinese real estate market should be of significant concern. According to Reuters: "China will place a moratorium on capital raising by real estate firms as part of a broader campaign to rein in property price rises, state media reported on Wednesday." The report suggests that the effects could be significant as "The move could stand in the way of about 110 billion yuan ($16.1 billion) in share issues planned by 45 companies, unnamed sources close to the China Securities Regulatory Commission told the China Daily." Reuters also said that something is fishy: "The suspension will allow the authorities to examine whether companies have used illegal methods to manipulate market prices" as "Beijing, wary about the risks of an asset bubble, has been trying to cool the real estate market, raising mortgage rates and down payment requirements for second homes and pushing local governments to control speculative buying" The attempt to hold back the real estate market has other components, including "new guidelines to make it harder for property developers to obtain funding from trust companies, the 21st Century Business Herald quoted an unnamed executive at a trust company as saying." Meanwhile "Real estate firms seeking loans from trust firms must meet the minimum capital requirement and provide proof of their qualifications for developing a project." This is because "Real estate firms have been turning to trust companies because they have looser capital requirements than banks."

It’s interesting that the Chinese government is attempting to stop what it considers to be a "real estate bubble," and if things don’t turn out well, then the money flows around the world are likely to become extremely volatile, with the currency markets likely to be like your on a roller coaster. The last significant currency crisis was in 1997 and 1998 when the Thai Bhat, and then the Ruble imploded with wide global repercussions and caused our stock markets to see a ton of volatility!

Tuesday, April 27, 2010 4:03 p.m est.

If you can believe it, the market has now seen two big down days in little over a week! Could it be that things are getting back to normal!!! The market was lower this morning after housing data wasn’t that great and it got worse once traders at Goldman Sachs started testifying before a senate panel. The market fell hard however after Standard & Poor's cut its rating on Greece to junk and Portugal. If this is followed by Moody's, Greek bonds will no longer be able to be used as collateral in borrowing from the European Central Bank. The Dow saw lows of -240.00 points, S&P 500 -31.00 points and the Nasdaq Composite -60.00 points in the final hour. Interestingly, Goldman’s stock was the only financial up on the day about +$1.00.

At the close the Dow was down about -213.00 points to the 10992.00 level, S&P 500 -28.00 points to about 1184.00, S&P 100 -12.00 points to 538.00 and the Nasdaq Composite -51.00 points to 2471.00. Oil was hit pretty hard closing down about -$2.00 to be around the $82.00 level.

Greece’s credit rating was moved to junk status and downgraded Portugal two notches from A+ to A-. The ratings agency cut Greece’s long-term rating to BB+ from BBB+ as they said the ratings outlook for both countries was negative. “We believe that the [Greek] government's policy options are narrowing because of Greece's weakening economic growth prospects, at a time when pressures for stronger fiscal adjustment measures are rising,” S&P said. "Our updated assumptions about Greece's economic and fiscal prospects lead us to conclude that the sovereign's creditworthiness is no longer compatible with an investment-grade rating," S&P said. Greek government borrowing costs were sent soaring last week, effectively ending the country's ability to borrow on the open market, strategists say. The government on Friday requested the activation of a 45 billion euro ($61 billion) rescue package provided by fellow euro-zone countries and the International Monetary Fund. As a result, the decision by S&P to cut Greece's rating was no surprise, said Ben May, European economist at Capital Economics. But the move will add to nervousness about the ability of Greek banks to borrow, he said. S&P is the only agency to cut Greek debt to less than investment grade. Greek government debt will remain eligible for use as collateral at the European Central Bank as long as one agency maintains an investment-grade rating of BBB- or better. But pressures for more aggressive and wide-ranging fiscal retrenchment are growing, the agency said, in part due to recent increases in borrowing costs. S&P said it now estimates Greece's debt-GDP ratio will hit 124% of GDP in 2010 and 131% in 2011!

The Portuguese downgrade, meanwhile, “reflects our view of the amplified fiscal risks” the country faces, said Kai Stukenbrock, S&P credit analyst. He said the agency's revised base economic growth scenario indicates Portugal could struggle to stabilize its debt ratio until 2013. The nation's public finances remain "structurally weak, not withstanding the government's substantial public sector reforms of recent years." Portugal's deficit hit 9.4% of gross domestic product in 2009, up from 2.7% in 2008. The ratings move drives home the fact the fiscal crisis has spread beyond Greece.

Wow, did you know that the 2-year Greek bond traded at 15% overnight and Portugal’s were also on the rise! It was under 4% just six months ago. At the same time it was interesting that President Obama came out today talking about how he was going to cut the deficit. If you think Greece has a debt problem you only need to look in the mirror to realize that the spending the American government is doing is not sustainable and if not taken care of soon we could see interest rates like Greece’s. S&P has been threatening America about its triple AAA credit rating for a while now so Obama’s timing on this is quite interesting. I know your laughing now but I still remember buying my first house with an interest rate on a second mortgage north of 20% for one year when people were saying interest rates will never go under 20% ever again! Hmmm I think I’m hearing the same thing now except its the other way around. The good news is that for now our bonds are a safe place for cash so yields fell today! However, what if that happened here, something to think about.......

Home prices fell -0.9% in February compared with January in 20 major cities, according to the Case-Shiller home price index. However, prices were up +0.6% in the past year, the first time since December 2006 that prices were higher than the year before. On a not-seasonally adjusted basis, prices fell in 19 of 20 cities in February compared with January. David Blitzer of S&P cautioned that prices could fall further, with foreclosures still mounting and the federal subsidy for buyers expiring.

Consumer confidence rose in April, reaching its highest level since September 2008, as views about current and future conditions improved, the Conference Board said. The consumer confidence index rose to 57.9% compared with 52.3% in March. Economists had expected an April reading of 53.5%. The present situation index in April rose to 28.6% from 25.2% in March, while the expectations index improved to 77.4% from 70.4%. "Looking ahead, continued job growth will be key in sustaining momentum," said Lynn Franco, director of the Conference Board's consumer research center.

Monday, April 26, 2010 4:03 p.m est.

The market started the week mostly flat with a slight downside bias but decent earnings from Cat helped to boost the Dow so it was the strongest index and helped to turn the market around. Tech and banking stocks were under pressure though so they weren’t that strong with the Dow seeing highs of +55.00 points, S&P 500 +3.00 points and the Nasdaq Composite +6.00 points. Worries about the EU and Greece’s solvency started to get traders worried and the fact that the banking sectors credit spread swaps moving back to levels not seen since the 2007 top caused the market to sell off. The final hour saw the Dow make lows of -5.00 points, S&P 500 -7.00 points and the Nasdaq Composite -10.00 points.

At the close the Dow was up about +1.00 points to the 11205.00 level, S&P 500 -5.25 points to about 1212.00, S&P 100 -2.00 points to 550.00 and the Nasdaq Composite -7.00 points to 2523.00. Oil started the day up but closed down about -$1.25 to be around the $84.00 level.

Friday, April 23, 2010 4:03 p.m est.

Once again it was reported this morning that the Germans who are -$4.5 trillion in debt were going to rescue Greece once again and to help them out the French, who are -$4.4 trillion in debt, the English -$9.2 trillion and, of course, the Italians -$4.0 trillion in debt. Interesting, I wonder where they’ll get their money for this, borrow it from China of course! Oh ya I forgot they’re starting to run a deficit too so can debt be far off! It was also announced that Greek taxpayers may have to pony up to continue to cover the incredibly high government pension plans that are causing all of their problems. That should go over well!

Anyhow, the market started the day slightly lower but then turned around after New Home Sales were way above expectations although in comparison to last year how hard can it be to beat. The Dow saw lows of -30.00 points, S&P 500 -3.50 points and the Nasdaq Composite -10.00 points. Tech and financial stocks didn’t really turn around and the Nasdaq remained in the red for most of the turnaround and didn’t see green until the final hour. The market basically closed at its highs of the day and new 52-week highs.

At the close the Dow was up about +70.00 points to the 11204.00 level, S&P 500 +9.00 points to about 1217.00, S&P 100 +3.00 points to 553.00 and the Nasdaq Composite +11.00 points to 2530.00. Oil closed up about +$1.50 to be around the $85.00 level.

Inflation is rising, home prices are lower than last year, housing starts are low, unemployment is just under 10%, wages are falling, defaults on credit cards and mortgages are rising, commercial rents are going uncollected but those declines are being covered up by banks using accounting tricks to hide their losses and we’re even seeing countries going broke around the world yet we continue to see the market continue to move virtually straight up. Of course you would think this is ridiculous but momentum can do it, but, and that’s a big but,,,, it’s now getting way ahead of itself fundamentally and even technically. I have been saying that it should start seeing some volatility but because we haven’t seen it with the past +6% come in the past month alone I’m thinking that we could see a deeper correction now. I have been waiting to just see some some normal volatility return and then we could continue on up but when this type of movement starts to happen it makes me nervous to want to trade the downside. I thought that it would start at the 1150 level which seemed like yesterday and now here we are at 1217. Now 1150 should be support at least for awhile. We’re now right at levels where the big decline started back 2008 so it will be interesting to see what happens next week especially with the Dow being up five days straight and eight weeks in a row. Just reading that makes me feel like the market is getting extended!

Helped by a soon-to-expire tax break, low mortgage rates and favorable weather helped, sales of new homes surged +27% in March to a seasonally adjusted annual rate of 411,000 after hitting a record low in February!!! It was the largest percentage gain in sales since April 1963, the government said and the highest sales pace since July, and much stronger than the 335,000 expected by economists but again don’t forget we just came off record lows! Sales in December, January and February were revised higher. In February, sales were at a 324,000 annualized pace, revised up from 308,000 but still the lowest on record, dating to 1963. Sales are up +24% compared with March 2009.

Government statisticians have low confidence in the monthly report, 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 March, for instance, was plus or minus 21.1%. The government says it can take up to five months to establish a statistically significant trend in sales. Over the past five months, sales have been on a 358,000 seasonally adjusted annual pace, up from 355,000 in the five-month interval through February. Sales of new homes had fallen four months in a row before March's surprising boom. A federal tax credit for home buyers that expires soon seemed to have little impact on sales until March. In order to qualify for the credit, a buyer must sign a sales contract before April 30th, and must close before June 30th. New-home sales are recorded at the time of the contract signing, not the closing, so April's sales figures would be the last to show any impact from the subsidy.

Inventories of unsold homes fell by -5,000, or -2.1%, to 228,000, the lowest in 39 years but it would still take 6.7 months to sell off the inventory which is the lowest months inventory since December 2006. Home builders have been slashing their inventory of unsold homes for more than a year. The number of homes for sale that are under construction fell to a record low of 100,000. One of the reasons though is because builders have cut back on production of new homes as they still face headwinds from unsold existing-homes as foreclosures continue to mount up. If a home isn't sold before it's finished, it's taking a record 14.4 months to sell it after completion, a reflection of the mismatch between more expensively priced homes in the inventory and lower-priced homes that have been selling. The median sales price of a new home sold in March was $214,000, up +4.3% compared with a year earlier. Cheaper homes were selling better than expensive ones of course as just 12% of homes sold for more than $400,000. Sales were up in all four regions: up +36% in the Northeast, up +4% in the Midwest, up +44% in the South and up +6% in the West.

Demand for Durable Goods dropped for the first time in four months as orders for new aircraft plunged -67%. See I told you the other day that the reason inflation is down is because no one is ordering their new plane, so get out there and buy buy buy because its hurting Durable Good s orders! Orders for durable goods fell -1.3% in March to a seasonally adjusted $176.7 billion after a +1.1% gain in February. Excluding transportation goods, however, new orders rose +2.8% to $136.5 billion, the fastest growth since the recession began in December 2007. Outside of civilian aircraft and defense goods, demand was brisk for most types of durable goods. Orders for core capital equipment goods, the kinds of equipment businesses invest in to maintain or expand their productive capacity, rose +4%, the largest increase since June.

Thursday, April 22, 2010 4:03 p.m est.

The market was in worry mode first thing this morning as Greece and now other Eurozone countries such as Portugal, Spain, Ireland are having problems getting cheap interest rates for bonds, and their are worries about Hungary, Bulgaria, Romania, Russia and even Argentina’s bond auctions as it looks like they are in trouble again. The market sold off with the Dow off -110.00 points, S&P 500 -15.00 points and the Nasdaq Composite -40.00 points. This is becoming a roller coaster because one day Greece is going in the tank and then the EU makes a statement that everything will be fine so the market turns around like it did today. The Dow saw highs in the final hour of +25.00 points, S&P 500 +4.00 points and the Nasdaq Composite +20.00 points. The big problem that no one is paying attention to are the facts and that is Greece and now other countries in the EU are paying higher and higher interest rate for their bonds. Greece’s today actually moved over 11%! American politicians aren’t worried about the debt that the Obama administration is mounting however even though it surpasses Greece’s tenfold so of course the market is going to come back! Just to note, our bond interest rates are on the rise also so its something to watch.....

At the close the Dow was up about +9.00 points to the 11134.00 level, S&P 500 +3.00 points to about 1209.00, S&P 100 -1.00 point to 549.00 and the Nasdaq Composite +15.00 points to 2519.00. Oil closed up about +$.50 to be around the $83.50 level.

Jobless Claims fell by -24,000 last week to a seasonally adjusted 456,000, the first drop in three weeks. The four-week moving average, a less volatile measure, increased to 460,250 from 457,500. Continuing claims dropped by -40,000 to a seasonally adjusted 4.65 million.

Higher prices for vegetables helped drive wholesale prices higher by a seasonally adjusted +0.7% in March, reversing a drop in February. The producer price index has risen by +6% in the past year, led by a +23% rise in energy prices. Excluding often-volatile food and energy prices, the core PPI increased +0.1% in March and is up +0.9% compared with a year earlier. The big thing in PPI report was that wholesale food prices, which rose +2.4%, matching the biggest gain in 26 years! Prices of fresh and dried vegetables soared +49.3%, the most in 16 years but heh that’s not inflationary what do we need oil and food for when we have to worry about how much are next plane purchase will be!

Helped by a federal subsidy to buyers, re-sales of homes and condos rose +6.8% in March to a seasonally adjusted annual rate of 5.35 million. Sales were up +16.1% compared with March 2009. Existing-home sales rose in all four regions of the country in March. "The tax credit has done its work," said Lawrence Yun, chief economist for the National Association of Realtors, said in releasing the data. Median home prices rose +0.4% in the past year to $170,700, the NAR said. Inventories of unsold homes increased +1.5% in March to 3.58 million, an 8-month supply at the current sales pace.

Wednesday, April 21, 2010 4:03 p.m est.

Lots of good news today as earnings were mostly above expectations in all of the companies that reported especially Apple as it was way above expectations so the stock opened up about +$14. There was even a report that said that foreclosures were getting better. The Dow however only saw highs of +35.00 points, S&P 500 +4.00 points and the Nasdaq Composite +15.00 points before what happened to be an impossibility, profit taking. Could it be, I know its hard to believe but that’s sure what it looked like. The market really sold off midday with the Dow off -50.00 points, S&P 500 -7.00 points and the Nasdaq Composite -12.00 points. The final hour saw it come back a bit though as the bulls aren’t going to go down easily.

At the close the Dow was up about +8.00 points to the 11125.00 level, S&P 500 -2.00 point to about 1206.00, S&P 100 -1.00 points to 550.00 and the Nasdaq Composite +4.00 point to 2504.00. I guess one of the only things that had bad news was that oil inventories were bigger than expected so it fell on the day. It closed off about -$.50 to be around the $83.50 level.

There was lots of talk today about oil and gold moving sideways for the rest of the year so will the stock market be next? As I have mentioned I think it is at least for the short term as it has had such a good move in a short period of time and considering how good earnings have been and they have been met with selling, not including Apple who’s earnings were absolutely blown out, the market seems to be struggling here. We may actually be in the same trading pattern we saw last December where the market had a very tight 3% range for about a month as it consolidates gains.

Interestingly, it was reported this morning that the Shiller P/E ratio now has the S&P 500 35% overvalued, a full one standard deviation event. The April data was just updated and showed the inflation-adjusted normalized P/E, what you’ve actually made as opposed to consensus earnings “forecasts”, which is historically more than 20% higher than we get actually. This is not nosebleed territory, but is quite expensive as the historical average is about 15-20 times. This implies that the market is currently about 20% overvalued benchmarked against the historical norm. It would be nice to say that a higher-than-normal P/E is justified by low inflation and low interest rates but when you look at real bond yields they are not that far from their long-run averages. Unfortunately equity valuations are and something is going to give at some point.

Tuesday, April 20, 2010 4:03 p.m est.

The market was higher on the day as everyone awaited Apples earnings after the bell tonight. The Dow saw highs of +60.00 points, S&P 500 +11.00 points and the Nasdaq Composite +25.00 points. At the close the Dow was up about +25.00 points to the 11117.00 level, S&P 500 +10.00 point to about 1207.00, S&P 100 +3.00 points to 551.00 and the Nasdaq Composite +20.00 point to 2500.00. Oil remained down once again as it has quickly gotten back to near the $80 level, off about +$2.00 to be around the $83.65 level. Earnings from most prominent companies were good last night also but saw selling today after being higher overnight. After the bell Apple blew away earnings and is currently higher in after hours but is losing steam so it will be interesting to see how tomorrow starts as Globex futures are flat so far.

Monday, April 19, 2010 4:03 p.m est.

The market was lower to start the day as overseas markets were really being sold off however they were down last week also which had nothing to do with Goldman so that is interesting. The Dow saw lows of -40.00 points, S&P 500 -9.00 points and the Nasdaq Composite -30.00 points. It seemed that there was more selling in tech and banking stocks though as the Dow turned around midday and it helped to pull the S&P and Nasdaq up along with it but not that much. The Dow saw highs of +80.00 points, S&P 500 +6.00 points and the Nasdaq Composite remained down but by only less than a point. Interestingly tech stocks have been much higher than the rest of the market, then the S&P 500, and finally the Dow so it may be just playing catch up.

At the close the Dow was up about +73.00 points to the 11092.00 level, S&P 500 +5.00 point to about 1197.50, S&P 100 +3.00 points to 548.00 and the Nasdaq Composite -1.00 point to 2480.00. Oil remained down once again as it has quickly gotten back to near the $80 level, off about -$1.60 to be around the $81.65 level.
There is a strong possibility that the market will be mostly sideways this cycle similar to December where it moved sideways within a very tight band of about 3% in either direction as it consolidates all of the recent gains. It’s also hitting pre-crash levels, the 200-day moving averages, its v62% fibonacci re-tracement level and within a year it is up +80%. As I have said it could continue to grind higher but now that there has been a problem, (Goldman) put out there, people will question other possibilities that we are also about to enter the quietest period of time for trading, the summer. IBM for example just reported earnings and the stock had been higher on the day and in after market trading it is now down. It seems that much of the rally we have seen may have been discounted.

Another reason we may just move sideways is that the Economic Cycle Research Institute says its Weekly Leading Index declined to 131.2 for the week ending April 9th. This was down from last week’s reading of 131.9. The annualized growth rate of the index fell to 12.6% down from 13.4% last week and is the lowest reading in 36 week’s. Lakshman Achuthan, managing director of ECRI, says economic growth is slowing, however the chance of a double dip remains out of the question: “With WLI growth easing to a 36-week low, the pace of economic growth will begin to throttle back in the next few months. A double dip recession remains out of the question”. This is interesting as his indicators have been very accurate this past decade as they have come out well in front of normal indicators.

Friday, April 16, 2010 4:03 p.m est.

Hallelujah, finally were going to see some normal market conditions once again! At the least there is a real possibility that we are very close to a top in the market for awhile. Of course I can say this now as the big guys who have been driving this market straight up finally got their excuse to sell today after Goldman Sachs was charged with fraud. How long have I been saying that going up like the way the market has been is dangerous and never ends well. Markets for some strange reason always seem to move up sharply near the end of some type of crisis that is approaching, 1987 summer rally before the crash, 1990,1998 currency problems, 2000 internet bubble, 2008 housing bubble and today fraud charges against Goldman Sachs for mortgage manipulation. In comparison this is nothing like these other big corrections but my point is that we were moving in a nicely trending upward market until Feb. 9th when all of a sudden there was only buying so hourly charts looked like sticks! As I said, “if this isn’t resolved soon it could be really bad in the end.” Today’s fall may be the start of a bigger correction but because it happened before it went tooooo crazy, rationality should return and we’ll go back to a trending market once again. Of course this is all early but the point I’m making is that whenever you see the market going in one direction to long it always seems to get hit by some surprise and comes back to reality.

Of course considering the timing today it makes me wonder about manipulation as the market was down just a little bit on poor consumer sentiment news at the open and then the Dow actually turned higher for a few minutes just before the Goldman news hit which helped the S&P 500 expiration number come in higher than where it should have been. I’m not going to talk much about the Goldman thing because it will be all over the news tonight but the timing was unbelievable about when it was released. The good thing is that it basically confirms that the Dodd bill to regulate the financial area is basically guaranteed now and that will help to hold the market in check for the future which will be great for trading in the longer term.

The Dow saw lows of -160.00 points, S&P 500 -24.00 points and the Nasdaq Composite -45.00 points. It did come back a bit in the final hour but still closed lower in the end. At the close the Dow was down about -125.00 points to still hold around the 11020.00 level, S&P 500 -19.00 point to about 1192.00, S&P 100 -9.00 points to 545.00 and the Nasdaq Composite -35.00 points to 2481.00. Everything sold off and so did oil down about -$2.25 to be around the $83.25 level.

Although everyone thinks that the economy is getting so much better it appears that Consumer sentiment has fallen deeply the last two weeks in a surprise that indirectly may point to trouble in the labor market. The mid-month consumer sentiment index fell to 69.5% versus 73.6% in March. Deterioration is deepest in the leading component, expectations, which fell -5.6 points to 62.3% and a level last seen mid-year last year when payrolls were still declining severely. Current conditions also fell, down -1.7 points to 80.7%. One-year inflation expectations are no help, rising 2 tenths to 2.9% percent though the gain is seasonally tied to rising gasoline prices at this time of year.

Housing Starts expanded for the third straight month in March. Starts rose +1.6% in March to a seasonally adjusted 626,000 annualized units, strongest than the 610,000 pace expected by economists. This is the highest level of starts since November 2008. Starts were revised to an increase of +1.1% in February to 616,000 units. This compared with the prior estimate of a -5.9% drop to 575,000 units. Building permits, a leading indicator of housing construction, rose +7.5% to a seasonally adjusted annual rate of 685,000 and is the highest level of permits since October 2008.

Thursday, April 15, 2010 4:03 p.m est.

The market started the day slightly lower with the Dow seeing massive lows of -30.00 points, S&P 500 -2.00 points and the Nasdaq Composite -5.00 points. It didn’t last though as tech stocks remained strong so the Dow saw highs of +35.00 points, S&P 500 +4.00 points and the Nasdaq Composite +15.00 points. The final hour saw profit taking hit once again but by the close the market came back a bit.

At the close the Dow was up about +22.00 points to 11145.00, S&P 500 +1.00 point to about 1212.00, S&P 100 +.85 points to 554.00 and the Nasdaq Composite +11.00 points to 2516.00. Oil traded a bit lower about -$.40 to be around the $85.50 level.

Manufacturing activity in the New York region improved at a fast pace in April, the New York Fed said. The bank's Empire State Manufacturing index was up a strong 31.9% in April from 22.9% in March. The index is close to its recent high of 33.4% hit in October and was the fastest pace since May 2004. The details of the report were strong. The new orders and shipment indexes increased and the inventory index rose to a record high. The index for the number of employees rose to its highest level in more than two years. The price index also increased to its highest level since late 2008. 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 March national factory survey due out in two weeks may show.
Jobless Claims jumped +24,000 to a seasonally adjusted 484,000 in the latest week, but the increase appeared to stem largely from the Easter holiday and other onetime factors that they say may have distorted the data. The four-week average of initial claims increased +7,500 to 457,750. Economists had forecast claims to drop to 430,000. Continuing claims climbed +73,000 to 4.64 million.

The output of the nation's factories, mines and utilities rose +0.1% in March. The increase was not as strong as expected. Economists had expected a +0.8% increase. There was a sharp fall in utility output that held down production. Factory activity alone rose +0.9% after rising +0.2% in February. Manufacturing remains quite strong. Despite the small gain in March, industrial output is up at a 7.8% rate in the first three months of the year. Factory production rose at a 6.6% rate in the first quarter. Capacity utilization - a gauge of slack in the economy rose to 73.2% in March from 73% in February and is the highest level since November 2008.

Wednesday, April 14, 2010 4:03 p.m est.

This morning there was a shocker reported that didn’t seem to affect the market whatsoever from Ben Bernanke. In his speech he said that the way the current deficit is shaping up that in only 10-years the total interest paid on debt will be 100% of the trade deficit! You think that Greece has a problem, with the size of America that is terrible. Of course the market doesn’t pay much attention to anything that could be a problem in the future because right now its all about momentum and “hopes” for a brighter future. Sure the economy is expanding but even Bernanke said today he doesn’t think that the 9 million jobs that were lost are going to be filled very quickly. Nonetheless I still believe that there is a possibility that the S&P 500 could finish the year at 1350, a mere 12% from here. The problem however is that were now up +80% from the bottom and instead of seeing normal volatility with basic profit taking we’ve been climbing nearly straight up since the first week in February and volume has been falling not rising. Ya I know its all been with small steady gains each day but on hourly charts it looks parabolic. I’ve been doing this type of trading for over 25-years now and I have never been more frustrated than ever before because this becoming the most irrational rally I have ever seen and is seriously starting to concern me. Yes there have been parabolic rises before but they have all come from bottoms and never after huge advances.

It makes me think about this spoof article I saw yesterday and in some ways its almost true.
It’s BULLISH No Matter What! …
The price of oil is rising – BULLISH! More profits for the energy companies, and more investments in "clean energy."
Most of the new jobs created in March were part-time or temporary – BULLISH! Since the economy has turned the corner full-time job offers are practically a sure thing.
But didn’t wages go down too? – BULLISH! Revenues - Costs = Profits!
41 states have revenue shortfalls – BULLISH! Various states have always complained about shortfalls. It’s another sign that things are getting back to normal.
8 million people are still unemployed – BULLISH! That’s 8 million spenders, not savers.
Interest rates are rising – BULLISH! Yet another sign that the economy is getting stronger.
Stocks may be going up but on very low volume – BULLISH! That means the "dumb money" hasn’t even bought into this rally yet.
People have a lot of concerns and uncertainty about the future – BULLISH! Not until the "wall of worry" ends will this party be over.
So much new liquidity will cause inflation – BULLISH! Stocks are one of the best hedges against inflation.
The wars in Iraq and Afghanistan are bankrupting us – BULLISH! Don’t get mad, get even. Debit the Treasury and Credit the defense companies.
Inflation in China is picking up – BULLISH! That should dampen any bubbles that some people worry about.
Gold is going up in price – BULLISH! This is a broad-based rally.
Wait, maybe gold is going down – BULLISH! That means economic fears are dissipating.
Actually the gold price seems to be consolidating and moving sideways – BULLISH! A sell off or rally would mean things are overheating.
Iran seems determined to develop it’s nuclear program – BULLISH! More nuclear power plants means less demand on oil which means lower energy costs which means more profits.
Israel may be forced to handle Iran themselves militarily – BULLISH! That will kick-start the construction industry when we rebuild both sides.
The Health Insurance Reform bill is an abomination – BULLISH! If insurance premiums rise there will be subsidies; if doctors check out they’ll be replaced with cheap foreign ones; if care is rationed then costs will be controlled and profits ensured.
And now the student loan programs are nationalized – BULLISH! Good riddance for the banks. Now the government can garnish wages and lower the deficit.
The markets are being purposely manipulated with government money – BULLISH! What’s not to like? That means the market ain’t going down no matter what.
Big Media is spewing propaganda about the economy – BULLISH! Perception is reality. People only know what they’re taught. Advertising works.
Greece may default – BULLISH! Greek bond holders will make up their loses in the stock market.
Japan is a bug in search of a windshield – BULLISH! Just imagine how much more deficit spending we need to do to beat them.
The Euro is getting weaker – BULLISH! King dollar is back.
A $400+ trillion financial mine field of derivatives are set to go off – BULLISH! Let’s start the rumor that if the stock market tanks we’ll all be dead.

As we move into the final two days of this expiration cycle even though it doesn’t seem like it could ever happen we could see some selling these final two days. We’re sitting right at Program Trade Levels and short term extremely overbought so it would make sense. There is also a ton of open interest on both sides at the 1200 level on the S&P 500 so that should make further gains tougher to achieve.

The Dow saw highs of +110.00 points, S&P 500 +13.50 points and the Nasdaq Composite +40.00 points in the final hour. At the close the Dow was up about +103.00 points to 11122.00, S&P 500 +13.00 points to now clear and confirm the +80% move at about 1210.60, S&P 100 +6.00 points to 553.00 and the Nasdaq Composite +39.00 points to 2505.00. Oil traded strongly higher on lower inventory levels up about +$1.90 to be around the $86.00 level.

Consumer prices rose +0.1% on a seasonally adjusted basis in March due mainly to an increase in prices for fresh fruits and vegetables. The overall gain matched expectations of economists. The core CPI, which excludes food and energy prices was unchanged in March, while analysts had expected a +0.1% gain. In March, overall food prices rose +0.2%. Bad weather pushed up fresh fruits and vegetables prices, which rose +4.6%. Energy prices were unchanged in March. In the past year, the CPI has risen +2.3%. The core rate is up +1.1% in the past year, the smallest gain since early 2004. The last time the year-over-year core increase was smaller was in January 1966. Shelter prices were down 0.1% last month.

Retail sales rose +1.6% in March, aided by strong demand for autos, building materials and new clothes totaling $363.2 billion, the fifth gain in the past six months. Retail sales are +7.6% higher compared to one year earlier. Excluding autos and trucks, March retail sales climbed +0.6% to $300.5 billion. Economists forecast sales to climb +1.3%, with sales excluding autos up +0.6%. Also, retail sales in February were revised slightly higher.

Overall economic activity has increased at a “somewhat” faster pace since mid-March, according to a report on the latest anecdotal information received by the Fed. The report, known as the Beige Book, found growth in 11 of the central bank's 12 regions. Only the St. Louis Fed reported softened conditions. In general, the report confirmed testimony on the outlook from Fed chairman Ben Bernanke earlier in the day. Consumer spending had increased and there were some encouraging signs of hiring even though the labor market remained weak. Bank loan volumes and credit quality decreased, the Fed said. There were no signs of an upturn in consumer inflation.

Tuesday, April 13, 2010 4:03 p.m est.

The market started the day lower after Alcoa had average earnings last night and even though there was a big sell off in the morning with the Dow seeing lows of -60.00 points, S&P 500 -8.00 points and the Nasdaq Composite -15.00 points. But then traders realized that earnings are going to be incredible this quarter so buying came back in as they awaited Intel’s report after the bell. The Dow saw highs of +40.00 points, S&P 500 +3.00 points and the Nasdaq Composite +15.00 points in the final hour.

At the close the Dow was up about +13.00 points to 11019.00, S&P 500 +.80 points to about 1197.30, S&P 100 +.18 point to 547.00 and the Nasdaq Composite +8.00 points to 2466.00. Oil traded lower all day once again closing off about -$.40 to be around the $84.00 level.

Although everyone is thinking the economy is gathering steam an interesting economic indicator that reveals how 70% of all business in America are doing isn’t showing very much faith. While most economists are assuming that the “Great Recession” has ended, the real guidance of the business cycle has just said that it is too soon to tell. It is rare for the National Bureau of Economic Research (NBER) to make such a statement. Usually when they make a business cycle announcement, it declares the ending or beginning date of a recession. To be sure, most of the economic indicators that they monitor began to turn up about nine months ago. However, over the past 30 years, the NBER has never announced the end of a recession less than a year later.

On more than one occasion the NBER took almost two years to make it but their data emphasized the role of employment in the decision-making process. He pointed out that the percentage decline in employment during the current recession is the largest since data was first collected in 1939. Too many economists have apparently jumped the gun this time around, and declared the end of the Great Recession on their own. There are also accounts that some members of this committee think that there is a chance that the economy might well turn down again, creating a double-dip recession.

The trade deficit widened in February more than anticipated as imports climbed, adding to evidence of a rebound in economic growth. The gap increased +7.4% to 39.7 billion from a revised $37 billion the prior month. Imports climbed +1.7% as Americans bought more computers and televisions made abroad, while exports rose to the highest level since October 2008. The need to replenish depleted inventories and gains in consumer spending mean purchases of goods and services from overseas will keep growing in coming months. Exports will probably also advance as global growth accelerates. The trade gap was projected to widen to $38.5 billion from an initially reported $37.3 billion in December, according to economists. Projections ranged from deficits of $35.8 billion to $41.6 billion. Companies are beginning to replenish inventories after last year’s record drawdown, also helping demand for foreign- made goods and materials. Efforts to stabilize inventories accounted for two-thirds of the 5.6% growth rate in the fourth quarter of 2009. The trade gap with China fell to $16.5 billion, the lowest since March 2009, from $18.3 billion in the prior month. Americans imported the fewest Chinese-made goods in almost a year, yeah! China reported a trade deficit of $7.24 billion in March, the first in six years but still showed a $9.9 billion surplus with the U.S.

Monday, April 12, 2010 4:03 p.m est.

The market was up once again today with trepidation as it is an expiration traded week and last quarters earnings will start to come out tonight with Alcoa being the first company to report. Expectations are quite high for earnings as has been revealed in the rally in the market so the question is if this has been an anticipatory rally or will the whisper numbers be met and the rally can continue. Last quarters earnings were met with selling even if though they beat so it could be interesting. Besides that there is a lot of economic data coming out so at the least volatility may finally pick up this week. What’s interesting about that is I read an interesting comment this weekend that puts our current situation in an interesting perspective! With the S&P 500 hovering at the 1200 level it means that it has seen an +80% move in barely over a year on falling volume. After the internet bubble imploded and the market finally bottomed in March 2003 with the S&P 500 around 800, it took four years to move higher by 80%! As I have said I can see us going higher but this puts it into perspective that we need to start seeing some volatility come in otherwise this was just another bubble that will implode as fast as it went up!

Today the Dow saw highs early on and remained higher for the rest of the up +35.00 points at its highs with the Dow clearing 11,000 once again, S&P 500 +5.00 points and the Nasdaq Composite +10.00 points. The final hour saw selling come in and the Dow went slightly negative before recovering into the close. At the close the Dow was up about +10.00 points to 11006.00, S&P 500 +2.00 points to about 1196.50, S&P 100 +1.00 point to 547.00 and the Nasdaq Composite +4.00 points to 2458.00. Oil traded lower all day closing off about -$.55 to be around the $84.50 level.

Friday, April 9, 2010 4:03 p.m est.

The market was up again today to end the week as the market is slowly making gains. This was the sixth straight up week for the S&P 500 which hasn’t been done since the March bottom of 2009! What’s interesting is that weekly volume has gone down as the market rises! At this pace I guess we’ll have to wait till it gets to zero before we’ll see it turn lower! The Dow saw highs midday and then pulled back before new highs were hit in the final hour of +75.00 points with the Dow clearing 11,000 for about 5 seconds, S&P 500 +9.00 points and the Nasdaq Composite +20.00 points on guess what, declining volume! The interesting thing was that the last time the Dow moved over 11,000 the following Monday saw a -800.00 point decline. Can’t see it happening now but something to be aware of. At the close the Dow was up about +70.00 points to 10997.00, S&P 500 +8.00 points to about 1194.00, S&P 100 +3.00 points to 545.00 and the Nasdaq Composite +17.00 points to 2454.00. Oil finished the week down about -$.50 to be around the $85.00 level.

Thursday, April 8, 2010 4:03 p.m est.

Interesting points: I just tried my friends new Ipad and I have to admit I liked typing on it more then on my Macbook Pro which now sounds clunky!. Typing on it reminds me of Star Trek and I felt like I could fly on the keys just like Data did, very cool! I have small hands so it was easy for me to type so I have to say it was a cool machine and can see why it became popular so quick!

Finally the truth comes to the main steam: The North Pole ice expanded during winter. According to The Washington Post: "A cold snap prompted Arctic sea ice to expand until March 31st, the National Snow and Ice Data Center announced, marking the latest date for the maximum Arctic sea ice extent since the start of satellite record keeping in 1979." The report added: "By the end of March, it reported on its Web site, "the total extent of the ice approached 1979 to 2000 average levels for this time of year." They further added: 'Myron Ebell, director of energy and global warming policy at the Competitive Enterprise Institute and a climate skeptic, said the fact that sea ice can fluctuate like this shows environmentalists need to be cautious when drawing conclusions based on its extent. "The extent of Arctic sea ice is perhaps the most over-hyped indicator of global warming in a very crowded field," Ebell wrote in an e-mail. "Whether there is more or less sea ice cover this year than last year or twenty years ago is largely the result of changes in ocean currents and wind patterns. If more warm water or air from the tropics is making its way to the Arctic, then there will be less ice."' Wow, a system that is predictably unpredictable. In case anyone wonders, Dr. Lorenz performed the first Chaos Theory equations in 1961. Chaos is now applied to varied systems including the weather, biology, ecology, the financial markets, satellites, quantum physics, and the theory of relativity.
Yesterday the market saw some heavy selling but by midday it looked like it was going to make it back until selling took the Dow into triple digit losses in the final hour. It made up some by the close but it was still a poor day. Interestingly every time the market sell offs now volume rises but volatility levels barely nudge up which indicates complacency remains extremely high which never ends well. Today the market sold off to new lows with the Dow seeing -50.00 points, S&P 500 -8.00 points and the Nasdaq Composite -20.00 points early on but this time it turned around as the dollar weakened so the Dow saw highs of +55.00 points, S&P 500 +6.00 points and the Nasdaq Composite +10.00 points midday. At the close the Dow was up about +30.00 points to 10927.00, S&P 500 +4.00 points to about 1186.00, S&P 100 +2.00 points to 542.00 and the Nasdaq Composite +6.00 points to 2437.00. Oil has pulled back the past couple of days to close around the $86.00 level.

A couple of things seemed to start the selling yesterday. First, Kansas City Fed President Hoenig called for raising rates sooner rather than late but he has said this before and a couple of other Fed officials including Mr. Bernanke said just the opposite, but selling did seems to start after he spoke. The second thing may have been more of the instigator as ex Fed chairman Paul Volker started talking about incorporating a VAT (value added tax). This would be great if it was to replace personal taxes but speaking from experience up here in Canada with our 6% GST (goods and services tax) I can say it hasn’t helped lower any other taxes, it’s just another one that everyone has just accepted. Currently there is a push to put through a HST tax which combines provincial and GST tax, to be about 13% and finally there are some people rebelling. Again there is talk about it replacing personal taxes but somehow I doubt it! Besides that, didn’t President Obama say he wasn’t going to raise taxes! The interesting thing is that right now only 53% of all people in the U.S are paying taxes which may be why they need to raise them. And why would that be, 47% of all people working don’t even pay any taxes! A VAT tax may start out small, but since it’s largely invisible, politicians will likely feel free to keep raising it. The big thing to remember is that now that the Obama administration has made it clear they like spending, more tax revenue would not make Congress retire the debt, they would just spend more.

This morning it was reported that Jobless Claims rose +18,000 to 460,000 last week. Economists had expected a result of 442,000. The four-week average of claims a better gauge of employment also rose +2,250 to 450,250. Continuing claims fell -131,000 to 4.55 million while the four-week average of these ongoing claims fell -36,000 to 4.65 million, the lowest level since January 2009. There were 5.8 million jobless workers, not seasonally adjusted, were receiving extended federal benefits, down -223,000 from the prior week. Altogether, 11.1 million people were collecting some type of unemployment benefits, down about -373,000 from the prior week. A Labor Department official said interpretation of the data around this time period is clouded by events such as Easter that make it difficult to properly adjust for seasonal factors.

Tuesday, April 6, 2010 4:03 p.m est.

On Friday even though the market was closed the employment report was released and the reaction the market had yesterday was positive of course because even if it was neutral it had to be taken positively. The market closed with nice gains as the Dow moved ever closer to the 11,000 level. Today it pulled back with the the Dow seeing -50.00 points, S&P 500 -5.00 points and the Nasdaq Composite -15.00 points early on but once again as the day went on the market moved back into positive territory with the the Dow up +15.00 points, S&P 500 +4.00 points and the Nasdaq Composite +15.00 midday. The final hour saw the market pull back a bit so at the close the Dow was down about -3.00 points to 10970.00, S&P 500 +2.00 points to about 1189.00, S&P 100 +1.00 points to 542.00 and the Nasdaq Composite +7.00 points to 2436.00. Oil has been strong the past two days closing up another +.25 today to be close to the $87.00 level.

I’ve decided to not talk about how overbought the market is or how low the volume is because at the moment its all about momentum and until that ends the market will continue this incredibly slow advance higher. As I have said, this is all fine but unless we see a bit of volatility, the market is setting itself up for a bigger fall and as we approach key pre-crash levels, 11,000 on the Dow, 1200 on the S&P 500, it makes me a bit wary. If we could see even a normal 3-5% correction it would relieve the pressure enough to allow it to build again. One of these days soon I believe we will see the pressure relieved and as we approach earnings season that may just be it.
As were about to hit earnings season expectations are high that there will be a huge surge. This is interesting considering that more Americans filed for bankruptcy protection in March than during any month since the law changed in October 2005, result of high unemployment and the housing crash. Federal courts reported over 158,000 bankruptcy filings in March, or 6,900 a day, a rise of +35% from February. Filings were up +19% over March 2009. The previous record over the last five years was 133,000 in October. A surge in bankruptcies generally follows economic contraction by 6 to 18 months, and March is a historically busy month for bankruptcy filings. The biggest reason is that it appears people aren’t trying to save their homes. The problem is that they realize their payments are not affordable, and bankruptcy judges do not have the power to adjust the mortgages to make them more affordable.

Helped by hiring for the Census the economy created +162,000 jobs in March, the largest seasonally adjusted increase in three years. Non-farm payrolls rose for just the third time in the past 27 months, aided by the hiring of +48,000 temporary workers to conduct the Census. Excluding the Census workers, payrolls rose by +114,000. This was great however a more accurate gauge that the market chooses to ignore is that while everyone is treating the report as gospel, the ADP count showed that private payrolls fell -23,000, completely at odds with the Bureau of Labor Statistics. The ADP is a pretty simple concept and does not have any “plug” factors to try and assume how many new businesses were created or destroyed in any given month.

Meanwhile, wages are now deflating and the -0.1% decline in March could be bad as the Gallup Daily tracking finds that +20.3% of the workforce was underemployed in March, a slight uptick from January and February. Anyhow, the unemployment rate was steady at 9.7%, with the labor force rising by +398,000. The report was largely in line with expectations as economists were forecasting a +190,000 increase, with about half of those coming from temporary hires at the Census Bureau. Economists expected the unemployment rate to remain at 9.7%. Manufacturing hours increased by half an hour to 41 hours per week, with 3.7 hours of overtime on average. The average workweek increased by two-tenths of an hour to 33.3 hours. Total hours worked rose by +0.7%, reversing the storm-related 0.6% decline in February. Average hourly earnings fell by 2 cents, or -0.1%, to $18.90. It was the first decline on record, dating to 2006. Ahead of the report, economists cautioned against reading too much into it, in light of the temporary hiring by the Census and the likely rebound from two massive snowstorms during the survey week in February.
A year ago, payrolls were falling by an average of more than -700,000 per month. Since the recession began in December 2007, -8.2 million jobs have been lost. They were broad based, with 60% of all industries adding workers in March. Goods-producing industries' payrolls rose by +41,000, the first increase since March 2007. Manufacturing payrolls increased by +17,000, with 58.5% of manufacturing industries hiring. Construction employment rose by +15,000, likely a rebound from unseasonably bad weather in February while service-producing industries added +121,000, including +39,000 in government.

Long-term unemployment worsened in March. Of the 15 million people officially classified as unemployed, a record 6.5 million, or 44.1%, had been out of work longer than six months. The U6 alternative gauge of the unemployment rate, which includes discouraged workers and those forced to work part-time, rose to 16.9% from 16.8%. According to a survey of 400,000 business establishments, private-service producing industries added +121,000 jobs. Temporary-help jobs, a sign of future hiring, rose by +40,000 in March, pushing the total increase in this category to more than +300,000 since September. Health care added +27,000, retail +15,000 jobs, while financial industries cut -21,000 jobs. According to the survey of 60,000 households, employment rose by 264,000 to 138.9 million, keeping pace with the 398,000 increase in the labor force. The participation rate rose a tenth to 64.9%. Unemployment rose by 134,000 to stand at 15 million. The number of people working on a part-time basis because of the slack economy rose to 9.1 million. One million workers were counted as discouraged workers.

Remember, we need about 125,000 new jobs a month to just keep up with the growth in our population. Though if you look at today's employment release, they added a huge 398,000 people to the civilian labor force, a huge number when compared to the +162,000 new jobs which is a discrepancy you didn't read about in any report. What kept the unemployment rate from rising significantly was that they deducted -238,000 people who are no longer considered unemployed, due to the fact that they have given up looking for jobs. The U-6 unemployment rate rose to +16%, however. The U-6 rate includes people who have part-time work but wish they had full-time work. That part-time number rose above 9 million again this month, in a rather large monthly jump.

On Monday we got Pending Home Sales which were up +8.2%. The index had fallen -7.8% in January and was down -20% from the peak in October, just before the scheduled expiration of the original tax credit for first-time home buyers. Following February's surprise increase, the pending home sales index is up +17.3% compared with a year earlier. Economists were generally looking for a decline or a small increase in the index in February, in part because of extreme weather in the eastern half of the nation. However, the index showed sales contracts increased about +9% in the Northeast and South, and about +22% in the Midwest. Sales contracts fell about -5% in the West.

Activity in the service sector of the economy improved a lot in March, indicating that the recovery is broadening out, according to a survey of companies by the Institute for Supply Management. The ISM non-manufacturing index rose to 55.4% from 53% in February. The gain was stronger than expected as economists forecast it to be 54%. Order growth was the strongest since August 2005. Fourteen industries reported growth, while only two reported contraction. Readings above 50% in the ISM index indicate that activity at more firms is expanding rather than contracting. The index had bounced around the 50% level for months before jumping higher in February and March. The service sector had lagged behind the factory sector in 2009 and the March report showed some catch-up, analysts said. The employment measure rose 49.8% in March just shy of the 50% growth threshold. It has been below 50% since December 2007. It hit a low of 31.1% in November 2008. The job index is usually closely watched as a hint of the government's unemployment report for the month, but this month the jobs data was released first. The business activity index rose to 60% from 54.8% in the previous month while the new-orders index jumped to 62.3% from 55% in February.

The price index rose to 62.9% in March from 60.4% in the previous month while inventories rose to 46.5% from 45.0% in February.

Thursday, April 1, 2010 4:03 p.m est.

Easter is upon us and is a very special season of remembrance for many including my family. Everything is made new and with it being spring there is new life everywhere. It is a time we use to reflect on not only the grace we have been given, but the grace we should extend to every person not only those we love, but even people with different views, different religions, and people who intentionally hurt us. May you have a wonderful Easter holiday.......

The market shot out of the gate this morning as it was the start of a new quarter, month and the hopes for a great employment report coming out tomorrow and besides China had decent economic indicators so why not. This was all on more absolutely pathetic volume which is never a good sign. Smart money the past week has been getting out of the market in droves however so as we have been talking about, next week could be very interesting after the employment report comes out tomorrow. The Dow saw +100.00 points, S&P 500 +12.00 points and the Nasdaq Composite +25.00 points in the first fifteen minutes of trading but it then faded as the day went on. The Nasdaq Composite turned red midday with a loss of -15.00 points and the Dow fell to only seeing highs of +10.00 points, S&P 500 +1.00 point. At least we’re starting to see some volatility come in intraday which is another sign that things are changing. Of course the gamblers came out in the final hour and pushed the market back up to close the day with decent gains.

At the close the Dow was up about +70.00 points to 10927.00, S&P 500 +9.00 points to about 1178.00, S&P 100 +3.50 points to 538.00 and the Nasdaq Composite +5.00 points to 2402.00. Oil was strong today closing up +1.34 to be around the $85.00 level.

Jobless Claims fell a huge -6,000 last week to a seasonally adjusted 439,000. Economists had expected 443,000. The four-week average fell by -6,750 to 447,250, the lowest level since September 2008. Wow that was sooooo long ago! Continuing claims were -12,500 to 4.68 million, the lowest level since January 2009. About 6 million jobless workers, not seasonally adjusted, were receiving extended federal benefits, up +264,000 from the prior week but heh that’s not bad news is it! Altogether, 11.4 million people were collecting some type of unemployment benefits last week, up about +215,000 from the prior week.

The manufacturing sector expanded for an eighth straight month in March, helped by stronger orders and production. The ISM manufacturing index rose to 59.6% from 56.5% in February, the ISM said and the highest reading since July 2004. Seventeen of 18 industries were growing in March. The orders and production indexes rose above 61% however the employment index fell to 55.1% and at this point that may be more important. Economists were looking for the index to only move to 57.5%. Readings over 50% in the ISM indicate that more companies said business was improving than said it was worsening.

Wednesday, March 31, 2010 2:03 p.m est.

Bad news from economic data this morning hurt the market with preliminary employment data from ADP actually see a -28,000 decline in jobs and then the Chicago Purchasing Managers report actually fell so the Dow saw early lows of -80.00 points, S&P 500 -8.00 points and the Nasdaq Composite -15.00 points. Of course it is the final day of the quarter so stocks came back with the Dow seeing -5.00 points, S&P 500 +2.00 points and the Nasdaq Composite +5.00 points. Since then they have fallen back so the close could be interesting.

Companies in the private sector lost -23,000 jobs in March, according to the ADP employment report. The report comes two days before the Labor Department reports on their employment data for March. The decline in ADP employment was a surprise. Economists had forecast a gain of +40,000 in March ADP. Economists are also expecting a sizable jump for employment of an increase of +189,000. The ADP report does not include federal workers and everyone knows that the surge will be in federal workers related to the 2010 Census.

Manufacturing activity in the Chicago region in March fell from high levels reached in February, according to media reports of the purchasing managers index for the Chicago region. The Chicago purchasing managers index fell to 58.8% from 62.6% in February. Economists had been anticipating a retreat but this was a bigger decline than expected then a fall to 59.9%. Still, the report signals solid growth. Readings over 50% indicate overall business expansion. The Chicago index had surged over the winter as the manufacturing rebound gathered strength. The Chicago PMI is also considered a leading indicator to the national Institute for Supply Management manufacturers survey for March to be released on tomorrow. Economists expect the March ISM manufacturing composite to increase to 57% from a February reading of 56.5%.

Tuesday, March 30, 2010 4:03 p.m est.

The market started the day higher once again even though there was another indication that housing is flat to down and consumer sentiment also remained flat. The Dow saw highs of +50.00 points, S&P 500 +5.00 points and the Nasdaq Composite +15.00 points as cellular stocks such as Apple rallied as they talked about making a phone for Verizon. Selling took hold midday however as the dollar got stronger due to a poor bond auction in Greece. The Dow saw lows of -30.00 points, S&P 500 -5.00 points and the Nasdaq Composite -10.00 points. The final hour saw another push into positive territory but by the close the Dow was only up about +11.00 points to 10907.00, S&P 500 +.00 points to about 1173.00, S&P 100 -.30 points to 537.00 and the Nasdaq Composite +6.00 points to 2410.00. Oil was mostly flat all day closing around the unchanged level at $82.50 level.

Yesterday’s move was interesting but maybe another sign that were close to a top as leaders of late were weak, while laggards moved higher. When this kind of thing happens in the market, it's a sign that some kind of change lies ahead. There could be a sector rotation in the works, or that the overall market's trend is about to change but either way it may mean the upside is getting limited. Usually it takes a few days for the real trend to emerge which means that by next week we should have a better idea.

Home prices in 20 major cities fell a not-seasonally adjusted -0.4% in January compared with December, according to the Case-Shiller home price index. Prices were down -0.7% in the past year. David Blitzer, chairman of the index committee for Standard & Poor's, which compiles the Case-Shiller index, said the rebound in housing prices seen last fall is fading. On a seasonally adjusted basis, prices rose +0.3% in January.

Consumer Confidence rebounded in March after falling sharply in February, with the index rising to 52.5% from 46.4% in February. Confidence had fallen sharply from 56.5% in January. Economists expected the index to rebound to 51%. The February confidence index was revised up from the initial estimate of 46%. The present situation index rose to 26% from 21.7%, while the expectations index improved to 70.2% from 62.9% but the jobs number was poor.

Monday, March 29, 2010 4:03 p.m est.

The market moved higher first thing this morning but as the day went on selling pulled the market back. The Dow saw early highs of +70.00 points, S&P 500 +8.00 points and the Nasdaq Composite +20.00 points and for the rest of the day it traded with about half the gains. Interestingly, stocks completely ignored the terrorist attack in Moscow over the weekend.

At the close the Dow was up about +45.00 points to 10896.00, S&P 500 +7.00 points to about 1173.00, S&P 100 +2.00 points to 537.00 and the Nasdaq Composite +9.00 points to 2404.00. Oil was up strong today after there was a terrorist attack in Moscow over the weekend up by +$2.35 around the $82.30 level.

The media continues to talk about how the market will continue moving up this week because the Employment report that is coming out this Friday will be incredibly strong. This is interesting but from a historical context, the last four trading days in March, which also happen to be the last days of the first quarter, have been consistently weak since 1992. Weekly declines have occurred 77.7% of the time for an average loss of -1.1% according to the Stock Traders Almanac. This tendency does not appear to be influenced by overall market trend as it there have been numerous bull and bear markets over the years. Markets are near highs, volatility is trading near multi-year lows and there are numerous indicators remaining in overbought condition so this may not be the best time to take a long weekend.

As I have said, the market is likely to continue higher but I strongly believe that the upward slope we’ve been on is going to moderate and we’ll move back to normal gains once again. You can’t go up 75% and expect it too keep going straight up forever. The biggest reason I believe this is mainly because of time. Looking at historical charts of sharp reversals off of bottoms, time wise this is around when the angle of ascent changes. Some people say that stocks are a safer investment than cash because interest rates are at 0%, and that the Fed is openly willing to print money so the strength will continue. This is likely the reason that mutual funds cash position is now at record lows and the lowest level since each of the last two stock market peaks and another reason why the trend should change. That is not a good sign and may explain why volume is so low because people are putting most of their money into bonds still. I’m not calling for a crash but we could see a retracement before we head higher once again. With this week seeing end of month, end of quarter trading and a highly anticipated employment report, it looks like a good time to cash out and enjoy the long weekend.

Personal Income after-tax incomes for February was basically unchanged. After-tax incomes had fallen -0.4% in January, after adjusting for inflation. With spending rising faster than incomes, the personal savings rate fell to 3.1% of disposable income, down from a 3.3% rate in January and 4.2% in December. Adjusted for inflation, real spending on goods increased +0.9% in February, while spending on services increased +0.3%. Personal incomes were unchanged in February from January, with the seasonally adjusted annual rate holding level at $12.2 trillion. In current dollars, consumer spending rose +0.3% to a seasonally adjusted annual rate of $10.4 trillion for the second month of 2010.

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

Once again, the market saw volatility today as it was up then down, then up and then down again. This is exactly what I want to see except on a daily basis. Three steps up, one down, or three down, one up, whatever, just some normal volatility so I can say were normal again! Anyhow the Dow saw early highs of +70.00 points, S&P 500 +9.00 points and the Nasdaq Composite +20.00 points. It didn’t last though and the Dow saw lows -30.00 points, S&P 500 -5.00 points and the Nasdaq Composite -20.00 points before bouncing back once again. The final hour saw selling once again.

At the close the Dow was up about +9.00 points to 10850.00, S&P 500 +.86 points to about 1166.59, S&P 100 +.35 points to 535.00 and the Nasdaq Composite -2.00 points to 2395.00. Oil traded lower once again but not by much -$.40 around the $80.10 level.

Things may actually be changing as there were some changes in the overall market mid week as the 10-year bond started getting closer to 4.00%. Yesterday it hit 3.90% after another poor bond offering. Along with that the dollar has been rallying pretty hard as the Euro has been getting crushed because of the problems with a few countries. That is what caused the turn for stocks yesterday. There have been some key developments in the last few days that have shaken the bond and currency markets. Most people don’t even pay attention to bonds and currencies but the past year have seen the falling dollar help stocks and vice versa. The bond market often leads the general trend that central banks follow with regard to interest rates and currently, central banks have little interest in raising interest rates but the bond market seems to be starting to disagree. Much of what the bond market is worrying about may have to do with the large amounts of treasury debt, and the odds of it continuing to rise as the current government seems to be in the first stage of what could be a significant increase in entitlement spending, thus adding more debt to the multi-trillions of dollars it already owns. This morning they announced a new system to help bail out possible foreclosures forcing the banks to lower payments. Then there was also the announcement that it looks like the medicare bill not even a week old may actually create a deficit instead of help it!

Corporate bonds are also seeing lower yields than those issued by the U.S. government and this means that people have more faith in business’s paying their debt than in the U.S. government. Although that’s not really that surprising it is very significant. Meanwhile, so far two European countries, Greece, and now Portugal are officially in trouble, and maybe on their respective way to defaulting on their own debt as people refuse to pullback their horns and still want everything they have been spoiled with the past couple decades. I mean really, people in Greece were demonstrating because the government wanted to raise the retirement age in Greece from 61 to 63!!! There has been a deal reached with Greece but nothing so far for Portugal. Spain is a third European country, which may be in significant trouble, although at this point, at least in the view of the markets and the ratings agencies, it's still okay. My question is who’s next!!! Nonetheless, there are two members of the European Union that are in a lot of trouble and a third one may be joining them at some point in the future.

One of the biggest thing that is causing higher rates suddenly though is the news that Social Security is going to pay out more money than it takes in this year, and that it may become insolvent by 2010, SIX years ahead of schedule!!! This is likely getting those who are 40 years old or less, to stop paying into the fund!

News no matter good or bad has had the stock market riding a wave of momentum lately and it's been impressive but looks more like a blow off then rational trading as the market has shrugged off most of the world's worries, seeming to bet only on an economic recovery that is showing slight signs of improvement. One of the reasons for the rally is the continuing assurance from the Fed that low interest rates will be in place for a long time but with the 10 and 30 year bond starting to push higher its going to get hard for the Fed to keep them down and you know what happened after they raised the discount rate in January!

It was reported this morning that the economy grew at the fastest pace in six years during the final three months of 2009, fueled by a huge inventory adjustment, strong business investments and modest consumer spending. Real gross domestic product increased at a +5.6% annualized pace in the fourth quarter, revised down from the +5.9% pace reported a month ago. In the past year, real GDP has risen +0.1%. For all of 2009, GDP fell -2.4%. The revision was largely in line with expectations of economists who figured GDP would be revised down to +5.7%.

Consumer sentiment was unchanged in March amid signs that the labor market is approaching a trough but remains average, according to the University of Michigan and Reuters. Their consumer sentiment index remained at 73.6% in March, matching February's level. In mid-March the estimate was 72.5%. Economists were looking for a final March result of 73%. The index hit a 28-year low of 55.3% in November 2008 and is well below the robust .

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

There was an amazing feat happen yesterday, the market was actually down to start the day and it remained there all day! At its low the Dow was seeing -70.00 points, S&P 500 -8.00 points and the Nasdaq Composite -20.00 points after new record low New Home sales came out and there was more talk about regulatory bills being put out by the famous Barney Frank. You’ve gotta love how well the guy can switch from putting in the policy’s that caused the housing bubble and now putting in new ones to make it harder to buy a home!!! The market almost bounced back but after the five year bond auction came out much worse than expected with higher yields the market started to fall back again as traders worried about what China is going to do about America’s enforcement of currency levels etc.

A rallying market is great but looking over history these blow off rallies never end well if they go too far and we are right at the cusp of it being to much. As my partner said to me this morning this is still an “unhealthy market otherwise we would be seeing normal market conditions. I have been anticipating the market flattening out and actually moving up and down but this straight up angle is proving me wrong and maybe things underneath the market are worse than I thought. My two biggest worries right now are the fact that more and more countries keep coming up on the warning screen about defaults or credit rating changes. Tuesday night for example Portugal’s credit rating was lowered to AA- from AA which hurt EU countries indices such as Spain’s who could announce an outright default similar to Greece any day now.

Money continues to float all over the world and although our markets have held up well mostly because of supportive economic data and boat loads of cash, we too have way to much debt so sharp sell offs could come at any time. Once we get a few of those and fear is equal to greed I still expect the uptrend to continue but more like a normal 30 degree angle instead of the current 80 degrees!

Today saw the same action as the market shot up on no new surprises from Ben Bernanke when he spoke so the Dow saw +120.00 points, S&P 500 +14.00 points and the Nasdaq Composite +40.00 points. When the seven year bond auction came off much worse than expected and the EU announced that they might not want the help from the IMF to save Greece, the market started selling off and actually turned red in the final hour.

Basically this unpopular health care legislation has failed to derail the rally, the potential for Social Security to run out of money ahead of schedule isn't bothering it either as the New York Times reported yesterday and the notion that politics in Washington is only going to get worse, seems to be helping it instead of hinder it. As I said above this is not healthy and we need to see both sides instead of extremes. Add in the fact that Goldman Sachs appears to be topping and once again you wonder if we’re near the top! In the past, this stock has been an excellent predictor of the future of the market. The best example of its predictive value came in 2007 when the stock started falling months ahead of the sub-prime mortgage crisis. Goldman is the biggest bank and when Goldman does well, it helps the market. Even with today’s rally Goldman has failed to make a new high in the last few days, something to watch...

At the close the Dow was up about +5.00 points to 10841.00, S&P 500 -2.00 points to about 1166.00, S&P 100 -.00 points to 535.00 and the Nasdaq Composite -1.00 points to 2398.00. Oil traded higher and then lower closing near the unchanged level around the $80.50 level.

This morning it was reported that Jobless Claims fell -14,000 to 442,000. Economists thought claims would drop to 450,000, but the latest figure reflects annual revisions to the data that put claims -10,000 lower than they would have been under the old methodology. The four-week average fell by -11,000 to 453,750. Continuing claims fell -345,000 to 5.7 million.

Yesterday it was reported that Sales of New Homes fell slightly in February - the fourth straight monthly drop - to yet another record low. New-home sales fell -2.2% to an annual pace of 308,000, seasonally adjusted, which is the lowest rate since the government began tracking the data in 1963!!!!! Helloooooo out there.......( that’s the echo you hear from all of the empty houses!) Economists forecast annualized sales of 318,000. Sales for January were revised to a seasonally adjusted annual rate of 315,000, up from 309,000 as previously reported. The median price of a new home sold in February shot up +6.1% to $220,500 in February from January's revised level of $207,900 tough which is good news.

Demand for Durable goods rose a seasonally adjusted +0.5% to $178.1 billion in February, the third straight increase in a key forward-looking indicator. New orders for machinery and civilian aircraft were strong in February, while new orders for autos, defense goods and electronics declined. The +0.5% increase was weaker than the +1.7% gain expected by economists. January's orders were revised higher, from a +2.6% gain to +3.9% though.

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

The market actually saw some volatility today opening a bit higher before selling off with the Dow seeing a massive -5.00 point loss, S&P 500 -2.00 points and the Nasdaq Composite -5.00 points before turning up once again with the Dow leveling off seeing +60.00 points, S&P 500 +4.00 points and the Nasdaq Composite +10.00 points. The final hour saw another push up though and the market closed with new highs.

At the close the Dow was up about +103.00 points to 10889.00, S&P 500 +8.00 points to about 1174.00, S&P 100 +4.00 points to 537.00 and the Nasdaq Composite +20.00 points to 2415.00. Oil traded lower and then higher closing near the unchanged level around the $81.70 level. This move is just getting too uniform as it has been straight up +12% since February 8th. That is an entire yearly gain in a little over a month so either were going to see another 132% gain for the year or were going to start to see some sharp sell declines begin similar to Monday's but they'll stick longer than a few hours. The media continues to spew out levels for different indices but in reality were just at the bottom of old lows so it should start seeing some real volatility come back in sooner than later.

Existing Home Sales turned out to be quite poor this morning with them off -0.6% in February to a seasonally adjusted annual rate of 5.02 million, the lowest level in eight months, raising doubts about the durability of the housing recovery, the National Association of Realtors. Sales of existing homes have fallen three consecutive months after rising steadily through the fall in response to a federal subsidy for first-time home buyers. The tax credit has been restored and expanded to repeat buyers, but there has been no increase in sales yet. Inventories of sales on the market also jumped, rising +312,000 to 3.59 million, the highest since September. We’re now starting to move into the next set of resets being done and this may be why there is another glut building so the possibility of another downturn may come sooner than later.

Monday, March 22, 2010 4:03 p.m est.

Well after the scare over the weekend of the dreaded health care bill going through the market started the week lower but not because of that, it was more worries about higher global interest rates which pushed the dollar higher and more problems involving Greece. After the initial open with the the Dow seeing -50.00 points, S&P 500 -7.00 points and the Nasdaq Composite -20.00 points the market bounced back on that ever present low volume. The Dow saw +70.00 points, S&P 500 +8.00 points and the Nasdaq Composite +30.00 points. At the close the Dow was up about +43.00 points to 10786.00, S&P 500 +6.00 points to about 1166.00, S&P 100 +2.00 points to 533.00 and the Nasdaq Composite +21.00 points to 2395.00. Oil traded lower by -$2.00 early on but turned around midday to close up about +$.75 to around the $81.70.

As I mentioned last week, most quadruple witching expiration weeks have been positive since 2006, 70% to be exact, there is also a tendency for buyers to experience selling the week after as only 25% of post expiration weeks have been positive in 16 occurrences since 2006! We’re now sitting at the S&P 500’s 160-month moving average, a trend-line that acted as support when the S&P made a bottom in 2002-2003 and has been hit numerous times over the past twenty years so there is some tough resistance to get through there and another reason that we should start to level off here. I think that the bounce we saw today is just going to turn out to be a selling opportunity and by the end of the week we’re likely to see more downside however I also don’t really think we’re going to see any type of a crash either as we have been so strong and volume is going to get less and less as we move into summer!

I read an interesting article today that said a lot about how the market is going to act in the coming months. The main point of it is that were looking at higher taxes and uncertainty and this alone should result into market volatility as health care is changed and Dodd’s reform bill for the financial sector puts a lot of questions out there. This all after a twelve month rally that brought prices back about +70% plus from the March 2009 bottom.
“Yes, what a better time to take profits than now, when no one is sure as to what's next, except that the government is about to take more money away from the citizens in order to finance an expansion of the already stressed and overpriced social network. Even more daunting is what may happen to the financial services industry and the energy sector before November. At some point, the markets will start to focus on those two areas. We don't give advice. We just offer information. But, it would seem that this is a good time to be cautious. "

The Congress passed a bill that will change health care in the U.S. But aside from the politics, and the potential events and trends that it spawns, it will cost money that the U.S. will have to borrow to pay for the costs of the bill and will raise taxes. That means that the timing of the bill is what's most important, at least in the short term.
To be sure, many of the changes will come in 2014 and beyond. And there is enough fudge language in the bill that may stall that. There are also many things that can happen from now until some of these things are going to happen. Yet, markets, and people don't often parse through details, and make decisions based on what's happening now, or what they think is most likely to happen.

That's why the comments of John Lipsky, the first managing director of the International Money Fund (IMF) are interesting and worth looking into, as well as putting them into the context of the present. John Lipski, has a PhD. in Economics from Stanford and was the Chief Economist For Chase Manhattan Bank, before J.P. Morgan took that entity over. Mr. Lipski was also the Vice Chairman of J.P. Morgan Investment Bank until 2006. Mr. Lipski also had a previous stint at the IMF, and has plenty of experience analyzing international markets, especially currencies. That means that he's seen the world from both sides, the government side, and the private investment banking side.

According to Bloomberg: "All G7 countries, except Canada and Germany, will have debt-to-GDP ratios close to or exceeding 100 percent by 2014," when lots of the health care changes that cost money will supposedly go into effect. In fact Mr. Lipski added: "“This surge in government debt is occurring at a time when pressure from rising health and pension spending is building up.” That's right, the big money isn't going to be spent on recovering the cost of bailout. It's going to be spent on the aging population.

What's more interesting is this. According to Reuters, Lipski noted: "Reducing the ratio to the pre-crisis average of 60 percent by 2030 would require raising the structural primary balance -- before interest payments -- from a deficit of about 4 percent of GDP in 2010 to a surplus of about 4 percent of GDP in 2020 and keeping it at that level for the following decade." That means higher taxes, now, in order to pay for the huge increases that are building in the pipeline now.

On September 11th, 2001, the attack on the World Trade Center and The Pentagon changed the world. The combination of record low interest rates and the start of the "War on Terror" set the stage, as easy money fueled a once in a generation bubble in real estate.
When the bubble imploded, a financial and real estate crash occurred in 2007, the result of excessive speculation in housing and the speculation leading to a huge debt accumulation by the private sector. The government, high on distorted tax receipts added to an already overextended budgetary and debt situation.
Lower taxes, were a double edged sword. They worked because people kept more of their money when they really needed. Yet, the higher liquidity also helped to fuel the bubble combined with easy money. When the bubble burst, the lower taxes and the evaporation of the tax revenue from the former prosperity left a revenue vacuum for the government. When the federal tax receipts crashed. Two things happened to states. State tax receipts, from property taxes fell, and so did the revolving gravy train of income from the federal government to the states. This left ridiculously overextended states like California and Michigan vulnerable, and their economies crashed.

Thus, the cycle of money flows from the people to the federal government and then to the states and municipalities was disrupted by the subprime mortgage crisis and the subsequent residential real estate crash. All at once, the engine that was sustaining the whole ecosystem stalled. Now comes the retribution, in the form of health care reform. Taxes will rise. Drug prices will rise. And services charges will rise.

In other words, life as many in the U.S. have known it, is about to change, dramatically, especially for their pocketbook, with the government, the health care industry, and their physicians asking for more money up front, and all along the service chain.

According to AP: "To pay for the changes, the legislation includes more than $400 billion in higher taxes over a decade, roughly half of it from a new Medicare payroll tax on individuals with incomes over $200,000 and couples over $250,000. A new excise tax on high-cost insurance policies was significantly scaled back in deference to complaints from organized labor. In addition, the bills cut more than $500 billion from planned payments to hospitals, nursing homes, hospices and other providers that treat Medicare patients. An estimated $200 billion would reduce planned subsidies to insurance companies that offer a private alternative to traditional Medicare."
Yet, no one really knows how this is going to turn out. It may work, and it may not work. And over the long term, what's important is how it turns out.

The Wall Street Journal's Jerry Seib had some interesting thoughts. Above many things, Seib implies that this bill is about whether the government can function and deliver on its promise. Polls show that people don't believe that it can. According to Seib 'In a Wall Street Journal/NBC News poll last fall, Americans were asked how much of the time they trusted the government to do the right thing; 65% said "only some of the time," and a stunning 11% said "never." His correct conclusion is that over time there "has been an erosion over time in confidence in government's competence," and he blames the rising deficits, the lack of weapons of mass destruction in Iraq, and other government failures over the last several decades.
Seib does note that Medicare was "smoothly" implemented and that the drug benefits put together under President Bush are also functional, despite their cost. So it may be that this bill's success will be in the eye of the beholder.”

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

This morning the quadruple witch expiration cycle began with the market mysteriously ramping up at the open with the Dow seeing +40.00 points, S&P 500 +3.00 points and the Nasdaq Composite +10.00 points in the first few minutes of trading as the first trade of every stock in the S&P 500 calculated an expiration number for cash and futures options and contracts. No manipulation there of course as the number came in at 1172.95! Before thirty minutes of trading were finished though the market fell into the red. The Dow saw -80.00 points, S&P 500 -9.00 points and the Nasdaq Composite -25.00 points before bouncing back to cut losses almost in half. The final hour saw selling come in once again however that took the market down with the Dow seeing -90.00 points, S&P 500 -11.00 points and the Nasdaq Composite -30.00 points. It did come back a bit though once again right at the close as S&P 100 stocks were set to expire at the close.

At the close the Dow was down about -37.00 points to 10741.00, S&P 500 -6.00 points to about 1160.00, S&P 100 -2.50 points to 531.00 and the Nasdaq Composite -17.00 points to 2374.00. Oil traded lower two days in a row with it down about -$1.75 to around the $80.50 level once again.

So the Dow was looking to have its ninth day in a row higher this morning which hasn’t been done since November 1996! I took a look at that time period and guess what, we’re seeing the exact percentage run that occurred back then! Guess what happened after it topped out. The market turned lower and was down -6% in the next 10-trading days as volatility returned! WoW that’s all I have to say! The big question however is why has the market rallied straight up +10% in the first place this time around. It will be interesting to see what the market does after this weekend when the vote for the health care bill occurs on Sunday because this sharp rally may have occurred because of it. In the past whenever the market has rallied this way some type of news seems to come out of the blue to cause a sell off but because it had moved up so much before it sold off, it just comes back to the upward trend line and then resumes the trend with trading back to normal. This seems to go for short and long term time periods.

There are two major issues going into the weekend. One is the health care vote on Sunday and the other is the still problematic situation in Greece. They had said everything was fine but now they are meeting with the IMF about getting some cash. The health care bill, despite the spin on the Congressional Budget Office report that projects some deficit reduction over ten years, is that more likely a budget bubble and will cost way more than anticipated. Besides that the way it will be paid for is by raising taxes. Higher taxes, from a trading standpoint, are more likely to cut deficits than not cut them, assuming that the economy continues to recover at the current pace, which is slow, but mostly steady. However it has historically been proven that lower taxes actually enhance more tax revenues for the government as businesses are willing to expand etc. Tax increases give people little initiative to work hard as they know they’ll just be giving most of it away anyhow.

What I’m thinking is that after this big rally people were getting scared so they sold at least for the weekend. The stock market has had a nice run over the last couple of weeks and there is plenty of things coming to a head in the next few days and now that expiration is done why not sell. The odds of some type of correction is at hand so next week should be interesting!

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

With economic data coming in mostly in-line with estimates of course the Dow opened slightly higher as it went for its eighth straight up day while the S&P 500 and Nasdaq were slightly lower. Of course it didn’t last though and all indices were higher pretty quick with the Dow seeing +45.00 points, S&P 500 +3.00 points and the Nasdaq Composite +10.00 points just before lunch. As the S&P 500 languished and a rumor came out the Fed may raise the discount it started to sell off with the Dow seeing lows of -10.00 points, S&P 500 -5.00 points and the Nasdaq Composite -10.00 points. Even that didn’t last though as it came back once again in the final hour with the Dow seeing +50.00 points but the S&P 500 and Nasdaq seemed tired and didn’t really follow.

At the close the Dow was up for the eight time about +46.00 points to 10779.00, S&P 500 -.40 points to about 1166.00, S&P 100 +.50 points to 533.00 and the Nasdaq Composite +2.00 points to 2391.00. Oil is trading on seesaw as oil closed down about -$.80 to around the $82.00 level once again.

We remain in a momentum run and that means that the overall tendency of the market is toward higher prices. Momentum runs can last for very long periods of time and this one is starting to get long in the tooth in comparison to ones that I have looked at in history so it could end any day now. It's always hard to know when a momentum run will end but usually you start to see small and mid-cap stocks turn lower first. When the advance decline lines roll over as the market continues higher that is always a clear sign that the end is near. Another example is today’s action in trading. When the market is so overbought as it is right now the upside gets harder and harder to achieve until a decent correction occurs. Once expiration is all finished tomorrow I wouldn’t be surprised if we didn’t see at least a short term sell off next week.

Jobless Claims fell by -5,000 to a seasonally adjusted 457,000, marking the third straight decline and was in-line with expectations. The four-week average of initial claims fell by -4,250 to 471,250. Continuing claims rose by +12,000 to a seasonally adjusted 4.58 million.

Consumer prices were unchanged on a seasonally adjusted basis in February, with falling energy prices offsetting increases in prices of cars, medical care and food. Economists had predicted the flat reading on the consumer price index. The core CPI - which excludes food and energy prices rose +0.1%, also as expected. In the past year, the CPI has risen +2.1% while the core rate is up +1.3%, the smallest year-over-year increase in six years. Energy prices fell -0.5% but that will change by next month as oil has rallied so much.

Wednesday, March 17, 2010 4:03 p.m est.

The market started the day up once again with the Dow seeing its 7th straight day of gains and the S&P 500 up 11 of the last 13 trading days. Of course with no volume it crept its way higher with the Dow seeing highs of +85.00 points, S&P 500 +11.00 points and the Nasdaq Composite +25.00 points midday. The final hour actually saw some selling come in and gains were cut pretty good but once again it came back a bit at the close.

Interestingly the S&P 500 hit the +75% gain mark intraday from the bottom last March. Not bad for one year I must say. Actually in all instances going back to 1995 the market has never seen the moves it has made in any rally period except for this year. Although I continue to harp on the volume one thing for sure is that its not having any effect whatsoever on movement and if anything the low volume appears to be helping it push higher as no one is selling either. The question is are traders just sitting back waiting to sell or are they just buying little by little. One thing for sure is that we’re not seeing any short covering otherwise volume would at least be a bit stronger so those guys are likely buying time to really start selling. The question now I guess would be where will the selling start or at least consolidation begin with a bit more volatility. I continue to view even these new highs another step towards mostly a sideways to up pattern for the next little while although there are some scary scenarios still sitting out there.

The Dow closed up about +48.00 points to 10734.00, S&P 500 +7.00 points to 1166.00, S&P 100 +3.00 points to 532.50 and the Nasdaq Composite +11.00 points to 2389.00. Oil was up again today closing up about +$1.00 to around the $83.00 level once again.

Wholesale prices fell a larger-than-expected -0.6% in February after seasonable adjustments, with energy prices falling -2.9%. This was the largest decline since last July but will likely be made up next month as oil has rallied strongly in this past month. The producer price index has risen +4.4% in the past year but heh that’s not strong right! The core PPI which excludes food and energy prices rose +0.1% in February, more than expected. Core prices are up +1% in the past year. Economists expected a -0.3% fall in the headline PPI and a -0.1% decline in the core rate. The PPI had risen +1.4% in January, while the core rate was up +0.3%.

Tuesday, March 16, 2010 4:03 p.m est.

The market saw a flat open today as everyone awaited the Fed’s decision but as the day went on it slowly moved higher into it with the Dow seeing highs of +40.00 points, S&P 500 +7.00 points and the Nasdaq Composite +15.00 points. Just before the Fed reported their decision at 2:15 the market was mostly flat but after repeating the exact same thing that they have been saying for the past year it bounced to make slightly new highs with the Dow seeing highs of +55.00 points, S&P 500 +10.00 points and the Nasdaq Composite +20.00 points in the final hour.

The unbelievable thing was that going into the decision there was only 500 million shares traded and going into the final hour of trading it was only 630! The final thirty minutes saw volume at 731! At the close it was once again below a billion at 936 million!!! This is something I don’t think I have seen in over a decade and frankly is an incredibly scary situation! Yes the market is creeping higher as no one is selling but the problem is no one is buying either so when the sellers come in they will sell very hard. Bullish sentiment has jumped to extremes short term, the market is extremely technically overbought short and long term now and volatility gauges are so complacent you’d think the world is a rosy place right now. As were now flipping into expiration related trading maybe that will be where the selling comes in as there is heavy activity around the 1150 area on the S&P 50 and is where regular Program Trading levels are.

The Dow closed up for its sixth day in a row about +45.00 points to 10686.00, S&P 500 +9.00 points to 1159.50, S&P 100 +4.00 points to 530.00 and the Nasdaq Composite +16.00 points to 2378.00. While oil sold off yesterday it seems it can’t make up its mind as it rallied today up about +$2.00 to around the $82.00 level once again.

Here is the Fed’s statement:
“Information received since the Federal Open Market Committee met in January suggests that economic activity has continued to strengthen and that the labor market is stabilizing. Household spending is expanding at a moderate rate but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly. However, investment in nonresidential structures is declining, housing starts have been flat at a depressed level, and employers remain reluctant to add to payrolls. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.
With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.
The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve has been purchasing $1.25 trillion of agency mortgage-backed securities and about $175 billion of agency debt; those purchases are nearing completion, and the remaining transactions will be executed by the end of this month. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.
In light of improved functioning of financial markets, the Federal Reserve has been closing the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities and on March 31 for loans backed by all other types of collateral.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to the buildup of financial imbalances and increase risks to longer-run macroeconomic and financial stability.”

Housing starts fell about -5.9% to a seasonally adjusted annual rate of 575,000 in February as several massive snow storms hit the East and South. New construction was down in the Northeast and South, but up in the Midwest and West. Starts of single-family homes fell -0.6% to a 499,000 pace, while starts of large condos and apartment building really fell, down -43%. In the past year, starts of single-family homes are up +39%, while starts of multifamily units are down -41%. Building permits which aren't as affected by weather as starts are also dropped however -1.6% to 612,000 in February. Permits for single-family homes fell -0.2% to a 503,000 rate.

Monday, March 15, 2010 4:03 p.m est.

The market started the day lower as traders worried about threats from China about protectionism and that they are continuing to tighten their credit standards. Then there was the fact that Senator Dodd released his bill about finance reforms midday. There was more rhetoric from President Obama about health care reform and finally the Fed is having a one day meeting tomorrow to add to the stress. Banks also released their credit card defaults and although starting out fine by the end of the day they were basically higher which isn’t good for profits in the long term. All of this caused the market to see lows on the Dow of -60.00 points, S&P 500 -9.00 points and the Nasdaq Composite -25.00 points. It remained just above lows for most of the rest of the day but the final thirty minutes short covering came in so the market closed mixed on volume well below a million shares. This volume is unbelievable and strangely no one is talking about it. This tells me that the market could be setting up for a doozy of a correction which could occur at any time and this being an expiration traded week something to watch for. I’m not talking about a huge correction but we could easily see a -2-3% one day move. Today would have been a good start for it but I don’t think the news was negative enough so it may be up to the Fed announcement tomorrow.

The Dow closed up about +17.00 points to 10642.00, S&P 500 +.50 points to 1150.50, S&P 100 +.90 points to 526.00 and the Nasdaq Composite -6.00 points to 2362.00. Oil sold off with a loss of about -$1.30 to around the $80.00 level.

Industrial Production managed to increase in February, despite a series of severe storms in the Northeast as well as a sharp cutback in automotive output, the Fed reported. Industrial production rose +0.1% last month, putting the string of increases at eight straight months. The nation's factory sector is benefiting from a pickup in developing countries, economists said. The Fed said that production was likely held down by all of last month's snow, but it didn't quantify by how much. Capacity utilization, a gauge of the amount of slack in the economy, edged up to 72.7% in February from 72.5% in January. Still, this is the highest level seen for utilization since December 2008.

Manufacturing activity in the Fed’s New York region continued at a solid pace in March, the New York Fed said but the bank's Empire State Manufacturing index slipped to 22.9% from 24.9% in February. The index had plunged in December but has since recovered. The details of the report were okay though as the new orders index shot up 17 points to 25.4%. Shipments also moved higher. Inventories climbed above zero for the first time since August 2008. The index for the number of employees rose to its highest level in more than two years. The Empire State index is of interest to investors and economists primarily because it is seen as an early indicator of what the Institute for Supply Management's March national factory survey due out in two weeks may show. In February, the ISM manufacturing index inched lower to 56.5% but continued to point to solid growth in the factory sector.

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

The market started the day higher once again as Retail Sales came in better than expected but when consumer sentiment came out thirty minutes into trading worse than expected it moved into the red. After that it was neutral to down right into the close. This could be an interesting weekend as the market still remains incredibly overbought and as we move into expiration next week it should mean that volatility is going to pick up.

The Dow closed up about +13.00 points to 10625.00, S&P 500 -.25 points to 1150.00, S&P 100 -.23 points to 525.00 and the Nasdaq Composite -.80 points to 2368.00. Oil closed with a slight loss of about $.90 to around the $81.00 level.

Consumer sentiment fell to 72.5%from 73.6% in February. Economists had been expecting the sentiment index to hit 74%. The Michigan current conditions index fell to 80.8% from 81.8%, while the consumer expectations reading dipped to 67.2% from 68.4%. One-year inflation expectations rose to 2.8% in March from 2.7% in February.

Led by a big gain in electronics, retail sales increased +0.3% to a seasonally-adjusted $355.5 billion in February, despite three major snow storms in the East. Sales have risen in four of the past five months, and were up 3.9% compared with a year earlier.

Most categories of retailers recorded month-over-month increases in February, driving sales to their biggest percentage gain since November. Auto and truck sales were one exception, falling -2% compared with January. Sales at health- and personal-care stores dropped the most in six years. The figures are adjusted for seasonal factors, but not for price changes. Excluding autos and trucks, retail sales increased +0.8% to $297.7 billion in February, the largest gain since November. Consumers are still facing major challenges, including continued job losses, large levels of debt and slow income growth. But consumers also have many pent-up demands after two years of recession.

Thursday, March 11, 2010 4:03 p.m est.

The market has continued to chug along this week and although it has seemed strong it actually hasn’t gone anywhere. Yesterday it had some initial strength but by the close it was mostly flat. Technically, its incredibly overbought on very low volume so its amazing that’s even holding up. Today it did see some selling pressure early on but then it bounced back moving into slightly positive territory before slipping back once again. The final half hour of trading saw one last push to the upside and the market closed at new highs on pathetically low volume.

The Dow closed up about +45.00 points to 10612.00, S&P 500 +5.00 points to 1150.00, S&P 100 +2.00 points to 527.00 and the Nasdaq Composite +10.00 points to 2368.00. Oil closed with a slight gain of about $.20 to around the $82.00 level.

Jobless Claims were once again poor as they only fell by -6,000 to 462,000 from a revised 468,000 in the prior week. This was the second decline in a row, but isn’t showing any real job strength. Initial claims fell to a seasonally adjusted, the Labor Department said Thursday. Economists were expecting claims to fall to 460,000. The four-week average rose by +5,000 to 475,500, the highest rate since late November. Similarly, the number of people continuing to receive regular unemployment climbed +37,000 to a seasonally adjusted 4.56 million. Despite the latest weekly drop, jobless claims are +7% higher compared to the end of 2009. Companies are still reluctant to hire and the unemployment rate sits at a stubbornly high 9.7%, spurring the Senate this week to vote to extend benefits for the long-term unemployed. To help millions of workers who still can't find jobs, Washington is set to extend benefits to the end of the year. Benefits for continuing claims run out after 26 weeks, though Congress previously extended payments for up to 99 weeks. Altogether, 11.36 million people were collecting some type of unemployment benefits, down from 11.48 million.

After widening dramatically for two months, the trade deficit reversed course and narrowed unexpectedly in January, as the government's latest data on imports and exports suggest that the global economic recovery remains tentative.

The trade deficit shrank a seasonally adjusted -6.6% to $37.29 billion from $39.90 billion in December, as both imports and exports fell. The one-month improvement in the deficit marked the biggest since last September. The trade gap had jumped by +9.7% in November and by +10.5% in December. Analysts had expected the deficit to widen to $41.0 billion. Many economists had based their forecast of a higher trade gap for January on a price-related rise in oil imports, but this proved not to be the case.

On an unadjusted basis, crude imports fell to 245 million barrels, the lowest since February 1999. The deficit between exports and imports remains well above the low point of a $25.76 billion deficit hit last May.

Tuesday, March 9, 2010 4:03 p.m est.

Yesterday the market was mostly flat which was surprising as it has been strong just about every Monday for the past few months but considering that it had been up eight sessions in a row and very strong on Friday, it was time for a break. Today it started lower after the Fed started to talk about using interest rates to get out of different aspects of their stimulus projects but they promised to keep them low as they expect unemployment to remain high. Of course with volume remaining at absolute lows it turned around with the Dow seeing highs of +70.00 points, S&P 500 +7.00 points and the Nasdaq Composite +25.00 points. The final hour saw profit taking hit and the market actually turned into the red but was able to come back a bit by the close.

The Dow was up about +12.00 points to 10564.00, S&P 500 +2.00 points to 1140.00, S&P 100 +1.00 points to 521.00 and the Nasdaq Composite +9.00 points to 2340.00. Oil is holding its own about the $80 level closing with a loss of about -$.50 to around the $81.00 level.

Here’s an interesting thought:
The S&P 500 bottomed at 666.79 on March 6, 2009 while the Russell 2000, small cap stocks, closed at 666.02 on March 5, 2010. Does this mean a reversal is in the works, unlikely but it is interesting! Today does mark the one year anniversary of the current bull market so it’s interesting to watch the action in the market. It seems the higher we go the lower volume goes and to me that seems a bit too obvious of a warning sign of danger but to others I guess it doesn’t which makes me think there is some manipulation being done by certain traders. This past year saw the market move higher when fear was rampant and the market climbed a constant wall of worry. A year later, and some 65% higher we see a lot of this fear gone. Put/call ratios and market sentiment surveys are not as accurate a set of predictors as they once were due to manipulation but one thing for sure is that there are still worries out there which is positive for the market. Remember how everyone was so happy at the top in December 1999 when the Internet bubble burst and the summer of 2007 when TV shows featuring housewives and ex-lawyers who had become house flippers on every channel. If you look at the headlines, many of them are still negative. For example, local papers are still running stories about houses being foreclosed, jobs being lost, and the lack of political will in Washington to get anything accomplished. These stories are negative and bad for the regular guy but not for traders as it indicates that the bull market still has some legs. Generally, the market climbs a wall of worry and when no one is worried, it's time to sell.
However on the other side, volume is anemic and complacency levels are getting extremely high as the fears of 4 weeks ago have quickly shifted back to greed. This has been most notable in the very bullish setting portfolio managers and the volatility Index. Portfolio managers are now sitting on record low cash levels once again and haven’t been this bullish since the 2007 highs and the January highs and volatility has fallen back to levels just before the January sell-off began. It has fallen in 17 of the last 19 trading sessions and this rebound is what after the initial July 2007 sell-off. It happened again with the secondary indexes making new recovery highs in September-October 2007, just before the break. Back then, as is the case now, portfolio managers were sitting on 3.6% cash, sentiment readings were bullish and the VIX index was a teenager. I still believe that because of the big move we have had though the downside could be limited at least for a while longer as the gains are consolidated.

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 President 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 could 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 prices 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 anti inflammatory 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.