SyHardingBlog

2008: The market had one of its worst years ever last year, the Dow down 31.3%, S&P 500 down 36.1%, the NASDAQ down 40.5%. Even ‘best investor in the world’ Warren Buffett down 31.8%.

But we were one of very, very few who were up for the year, verified by Hulbert Financial Digest!

Sy Harding’s Street Smart Report non-seasonal Market-Timing Strategy: up 9.2%
Sy Harding’s Street Smart Report Seasonal Timing Strategy (STS): down only  - 3.6%
Sy Harding’s Street Smart Report Aggressive STS portfolio: up 3.2%

Seasonal Timing Strategy (STS) Long-Term record: Peace of mind? Significantly out-performing the market over the long-term, with no big down years, while taking only 50% of market risk? Click here for details of STS.

Or our non-seasonal Market-Timing Strategy, up 9.2% in 2008.

 

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Big Week for Economic Reports Not Encouraging for Green Shoots.

This week was a heavy week for economic reports, and they have not provided much support for the popular thought that the recession is bottoming, or that consumers will soon be spending us out of this economy. They did indicate however that the improvements in March and April were temporary and bad numbers are returning.

This week the Conference Board reported its Consumer Confidence Index for June declined to 49.3 from 54.8 in May, after three months of improvements.

The S&P Case-Shiller Home Price Index reported home prices fell another 0.6% in April and that home prices have now plunged 33% from their peak in 2006.

It was reported that mortgage applications were down 18.9% last week.

The ADP jobs report was also a negative surprise, showing that another 473,000 jobs were lost in June, considerably more than had been forecast.

The National Association of Realtors reported its Pending Home Sales Index rose a hardly discernible 0.1% in May. (Pending sales are quite different from the actual home sales numbers, because they are based on sales contracts signed, some of which are cancelled, and some of which are unable to obtain financing).

The Institute for Supply Management reported that its ISM Mfg Index ticked up to 44.8% in June from 42.8% in May. That was short of forecasts that it would tick up to 45.6%. A number below 50 indicates that manufacturing is still slowing.

Auto sales for June were reported yesterday, and were dismal: Ford - 10.9%; General Motors - 33.6%; Chrysler - 42%; BMW  - 20.3%; Honda  - 29.5%; Nissan  - 23%; Porsche  - 66%; Toyota  - 32%; Volkswagen  - 18%.

This morning the Labor Department’s Employment Report for June was released and showed another 457,000 jobs were lost in June, considerably higher than the 350,000 that were forecast, and were lost at a considerably faster pace than May’s 322,000 jobs lost. And the unemployment rate increased from 9.4% to 9.5%.

 

Yesterday:

The U.S. market put in one of those negative patterns yesterday, of strength in the morning and weakness in the afternoon, which I wrote about in my latest book on market patterns.

The Dow was up 133 points at its mid-day high and then gave up more than half of its gains to close up just 57 points, or 0.7%. The rest of the market followed the same pattern. The S&P 500 closed up 0.4%. The Nasdaq closed up 0.6%. The Russell 2000 closed up 1.8%. The DJ Transportation Avg closed up 1.4%.

Last Night:

Asian markets were mixed again last night, the DJ Asia-Pacific Index closing down fractionally, down 0.4%.

Among individual markets, Australia closed up 0.1%. Hong Kong was closed down 1.1%.  Taiwan closed up 1.3%. Singapore closed down 1.0%. India closed down 0.2%. Malaysia and South Korea closed unchanged. Japan closed down 0.6%. China closed up 1.3%.

Scroll down to Saturday for an interesting look at how individual global 1.3%. kets have fared over the last three weeks).

This morning:

European markets are quite negative, down an average of 2% to 3%.

Oil is down $1.64 a barrel at $67.65, back under $70 as it continues to struggle at that level.

Gold is down a big $12 an ounce at $929, as its wild volatility continues, now down $11 for the week so far.

The dollar is down.

Bonds are up.

In the U.S.:

The big week for economic reports ends today with what we always refer to as The Big One! The Labor Department’s Monthly Jobs Report has the record for coming in with a surprise in one direction or the other than any other set of economic reports, and so has the record for creating the most triple-digit moves by the Dow in one direction or the other.

As noted at the top of the message, the report showed that 457,000 jobs were lost in June, considerably higher than the 350,000 that were forecast, and were lost at a considerably faster pace than May’s 322,000 jobs lost.

The pre-open indicators have plunged since the report, now pointing to the Dow being down 110 points or so in the early going.

Interesting Chart of the Morning.

Gold has become very volatile in the last several days, with daily rallies and declines of $12 and $14 an ounce.

We remain on our recent sell signal for gold, but told subscribers it had become a bit oversold short-term beneath its 21-day m.a, and might rally back up to test the m.a. as now being short-term overhead resistance on rally attempts, where before it was short-term support.

Gold rallied back exactly to the m.a. yesterday, and is back to the downside this morning.

Please scroll down to see other recent ‘Interesting Charts of the Morning’.

To read my weekend newspaper column ‘A CASE FOR U.S. TREASURY BONDS’ Click here.

NOTE: Although tomorrow is a holiday, I will be back tomorrow morning with a wrap-up of the week, the market action in Asia tonight, European action tomorrow morning, and an outlook for Monday and next week. However, there will not be a blog update on Saturday.

Street Smart Report Online Subscribers: The Mid-Week Market Signals and Recommendations update is on your website from yesterday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Consumer Confidence Declining Again.

The Conference Board reported its Consumer Confidence Index for June declined to 49.3 from 54.8 in May, after three months of improvements.

As I’ve been writing lately, I’ve been puzzled by all the talk that consumers have become more optimistic, which in turn was feeding the hope that they will soon start spending us out of this recession, in the same way they spent us out of the mild 2001 recession.

But this is not a mild recession, but one of the worst. And consumers are a long way from being able, or willing, to spend us out of this one any time soon. In fact, they’re still bogged down from that last borrow and spend binge.

We have said from the beginning that the problems began in the real estate industry and spread into the rest of the economy, and the eventual recovery will begin in the real estate sector; when consumers are no longer seeing the value of their homes plunging, when they are no longer seeing their neighbors lose their homes to foreclosures, when they see ‘For Sale’ signs thinning out on their streets, when they no longer fear losing their jobs.

Only then might they stop saving and paying down debt out of concerns for the future, and begin spending to a degree that will have the recession bottoming.

That is not happening!

Instead, we see home prices still falling, foreclosures still soaring, jobs still being lost, at a slower but still frightening pace of several hundred thousand a month, credit card, auto-loan, and now prime mortgage defaults rising.

And yesterday’s 2nd economic report, the latest reading on the S&P Case-Shiller Home Price Index, poured more cold water on the situation, reporting that home prices fell another 0.6% in April. It was not as bad as the 2.2% decline in March, but a decline nonetheless.

Home prices have now plunged 33% from their peak in 2006. And with the growing number of foreclosures dumping homes on the market at fire-sale prices, they will likely continue to decline.

Mortgage rates are not helping. They declined to 4.75% in April which created a little spurt in home sales, but have risen to a national average of 5.6% again.

And not surprisingly, it was reported this morning that mortgage applications were down 18.9% last week.

Yesterday:

The U.S. market was mixed yesterday, with a reversal of the previous day’s pattern. Yesterday there was more selling in the blue chips than in the small stocks and speculative indexes. The Dow closed down 91 points, or 1.1%. The S&P 500 closed down 0.9%. But the Nasdaq closed up 0.3%. The Russell 2000 closed down 0.5%. The DJ Transportation Avg closed down 0.2%.

Last Night:

Asian markets were mixed again last night, the DJ Asia-Pacific Index closing down fractionally, down 0.2%.

Among individual markets, Australia closed down 1.9%. Hong Kong was closed for a holiday.  Taiwan closed up 2.3%. Singapore closed up 1.0%. India closed up 1.0%. Malaysia closed up 0.2%. South Korea closed up 1.5%. Japan closed down 0.2%. China closed up 2.0%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are fairly positive, up an average of just over 1%.

Oil is up $1.36 a barrel at $71.25.

Gold is up $11 an ounce at $938, bouncing back from yesterday’s big decline, and after three down days in a row, now down only $1 for the week so far.

In the U.S.:

Today is an intense day for economic reports; the ADP jobs report, Auto Sales,  the ISM Mfg Index, Construction Spending, and Pending Home Sales.

The first of them, the ADP jobs report was released an hour ago, and was a disappointment, perhaps a bad sign for tomorrow morning’s big jobs report from the Labor Department.

The ADP report showed there were 473,000 more jobs lost in June. That’s compared to economists’ estimates that tomorrow’s big Labor Department  Monthly Employment Report for June will show ‘only’ 325,000 jobs were lost.

But so far the disappointing report has had little effect on futures and other pre-open indicators.

Our pre-open indicators this morning are positive, pointing to the Dow being up 50 points or so in the early going.

The other economic reports of the day will be released later this morning.

The weekly pattern is for the ‘monthly strength period to start yesterday, and to run through next Monday. If it is to happen this time it got off to a poor start yesterday.

Interesting Chart of the Morning.

The NYSE Composite broke below the support at its 21-day m.a. a couple of weeks ago, for the first time since the big rally began in early March. It has rallied back some since, but closed right at its 21-day m.a. on Monday. Yesterday it declined from the m.a.

Too early to tell just yet, but is the 21-day m.a. going to begin to be overhead resistance on short-term rallies, as it usually is in corrections?

Given that the ‘monthly strength period’ is due to run through early next week, we have a question mark on the chart.

 

Please scroll down to see other recent ‘Interesting Charts of the Morning’.

What is the ‘monthly strength period’? As described in more detail in my books, it is the period surrounding the end of each month when extra money usually flows into the market, fueling some strength for a few days. The extra chunks of money come from those who ‘dollar cost average’ into the market on a monthly basis, from employers’ monthly contributions into their employees’ 401K plans, from those who receive bonuses and commission checks on a monthly basis, etc.

To read my weekend newspaper column ‘A CASE FOR U.S. TREASURY BONDS’ Click here.

Street Smart Report Online Subscribers: The new issue of the newsletter is on your website from Monday evening, and the Mid-Week Market Signals and Recommendations update will be on your website later today.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Interesting Chart of the Morning:

An update of a chart we’ve been showing you periodically.

The DJ Transportation Avg frequently leads the market in both directions.

There’s a reason for that. The Transportation sector usually leads the economy in both directions. As the economy recovers from slowdowns one of the first areas to benefit are the Transports, as more raw materials and finished goods begin to be shipped, and business steps up its travel plans, to call on potential customers and suppliers.

In the opposite direction, when the economy begins to slow, one of the first areas to notice it is the Transportation sector, when shipments of goods begin to slow and business cuts back its travel costs.

The DJ Transportation Avg. is also one leg of the long-time watched Dow Theory buy and sell signals, the other leg being the Dow Industrial Average. When Transports and Industrials are both moving up, it’s a positive for the market. Goods are being produced and shipped. When there is a negative divergence, with the Transports rolled over to the downside while the Industrials continue to rally, trouble usually lurks for the market. 

So it is potentially meaningful that the DJ Transports topped out in early May. along with the rest of the market. And then, while the Dow Industrial Average (and the rest of the market) rallied back to their early May peak and then broke out to the upside and rallied on to new highs, the Transportation Avg did not.

It came back to its previous peak, but short-term momentum indicators did not confirm, making lower highs, and then triggering a short-term sell signal.

The jury is still out on whether the negative divergence will continue, with the Transportation Avg having rallied back up just about to the potential short-term resistance at its 21-day m.a.

Yesterday:

The U.S. market was mixed yesterday, the blue chips making gains while, for a change, the small stocks and speculative indexes did not do so well. The Dow closed up 91 points, or 1.1%. The S&P 500 closed up 0.9%. The Nasdaq closed up 0.3%. The Russell 2000 closed down 0.5%. The DJ Transportation Avg closed down 0.2%.

Last Night:

Asian markets were mixed last night after Sunday night’s decline.

Among individual markets, Australia closed up 1.7%. Hong Kong closed down 0.8%.  Taiwan closed up 0.6%. Singapore closed up 0.4%. India closed down 1.7%. Malaysia closed down 0.1%. South Korea closed up 0.1%. Japan closed up 1.6%. China closed down 0.4%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are somewhat negative, down 0.2 to 0.3% on average.

Oil is down $0.38 a barrel at $71.11, back above $70 again.

Gold is down $2 at $938 an ounce at the moment.

In the U.S.:

The first of this week’s potential market-moving economic reports due this week was just released.

The Case-Shiller Home Price Index improved from –18.7 to minus 18.0, indicating that home prices are still declining, but at a slower pace.

Tomorrow will be a very heavy day for economic reports. Auto Sales, the Challenger Layoff Report, the ADP jobs report, the ISM Mfg Index, Construction Spending, and Pending Home Sales all come out tomorrow morning in this holiday-shortened week. And then the big one, the Labor Department’s Monthly Employment Report for June will be released Friday morning.

Our pre-open indicators this morning are fractionally negative, pointing to the Dow being down 10 points or so in the early going, meaningless as to it direction or close.

But the weekly pattern is for the ‘monthly strength period to start about now and to run through next Monday.

 

Please scroll down to see other recent ‘Interesting Charts of the Morning’.

To read my weekend newspaper column ‘A CASE FOR U.S. TREASURY BONDS’ Click here.

Street Smart Report Online Subscribers: The new issue of the newsletter is on your website from last evening.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

What happened to the new era?

In 1999, when I wrote Riding the Bear – How to Prosper in the Coming Bear Market, I said the market was in a bubble, and that when it burst the subsequent bear market would be one of the worst since that of 1929-32.

I was ridiculed, and referred to as a dinosaur. The popular book of the time was Dow 40,000. Didn’t I realize it was a new era? The longest running bull market in history, that of the 1990’s, which lasted ten years, had a new generation of investors convinced that was so. We were in a new era in which bear markets were events of ‘the old days’, of the times before the Fed learned to control the economy.

But after the severe 2000-2002 bear market was followed by a typical bull market that lasted a more normal five years, and was then followed by another severe bear market, talk of a new era have disappeared.

Now not only is the R word in everyone’s vocabulary, talk of Great Depression II is commonly bandied about, and the Fed is taking much of the blame for the problems.

The cycle between boom times and recessions, and the cycles between euphoria and fear that accompany them have obviously not gone away. Nor have the cycles between bull markets and bear markets gone away.

So if history is a guide after all, when do most bear markets end?

In the 2nd year of new Presidential Administrations.

From the low in the 2nd year of every Presidential Administration since at least 1918, a rally has taken place to the high the following year. In that rally even the conservative Dow has gained an average of 50%.

Efforts to get toxic waste off the books of banks are stumbling.

The Wall Street Journal reports this morning that the Treasury’s plan (the Public-Private Investment Program) introduced in March, to encourage businesses and investors to buy the troubled assets on the books of banks at bargain prices, faces problems. Large banks are balking, concerned about selling the assets (bad loans and mortgages) at what might turn out to be fire-sale prices if everything recovers, while investors are reluctant to buy if it means getting involved with a government program, where they may be criticized or even punished if they wind up making a big profit.

Last Night:

Asian markets were mostly down last night, the DJ Asia-Pacific Index closing down 0.9%.

Among individual markets, Australia closed down 0.4%. Hong Kong closed down 0.4%.  Taiwan closed down 1.1%. Singapore closed down 0.1%. India closed up 0.1%. Malaysia closed unchanged. South Korea closed down 0.4%. Japan closed down 1.0%. China closed up 1.6%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are up, from 1% to 2%, following their quite negative week last week.

Oil is up $0.70 a barrel at $69.91.

Gold is down $1.50 an ounce, $937.60.

In the U.S.:

This week will be a four-day week in the U.S., with markets closed for Independence Day on Friday. The week has a quite heavy schedule of important potential market-moving economic reports coming out, including the first look at the employment picture in June, with the ADP Employment Report for June on Wednesday, and the Labor Department’s Monthly Jobs Report on Thursday. On the housing industry there will be Construction Spending and Pending Home Sales. To see the full schedule click here, and look in the left side of the page it takes you to.

Our pre-open indicators this morning are fractionally positive, pointing to the Dow being up 10 points or so in the early going, meaningless as to it direction or close.

But the next weekly pattern is for the ‘monthly strength period to start about now and to run through next Monday.

Interesting Charts of the Morning:

Global markets (minus the U.S. market) in general appear to be in the beginning stages of a correction, showing little inclination to fight it since topping out in early May.

But the U.S. market’s pullback in early May was only temporary.

It is one world economically, and global markets do tend to move in tandem with the U.S., as shown in the charts prior to now.

So the current divergence is curious, particularly since the economic, housing, and financial industry problems, are supposedly not as severe globally as in the U.S.

Please scroll down to see other recent ‘Interesting Charts of the Morning’.

To read my weekend newspaper column ‘A CASE FOR U.S. TREASURY BONDS’ Click here.

Subscribers: The new issue of the newsletter will be on your website later today.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Four more banks failed!

Bank regulators closed four more banks yesterday (two in Georgia, and one each in Minnesota and California). That brings the total to 44 so far, far short of the total by the time previous bank crises ended. I wonder if regulators have changed their estimates of several months ago that at least 200 banks would fail before this crisis ends.

Record volume on NASDAQ yesterday.

The Russell Indexes had their annual “reconstitution” yesterday, when lagging stocks are replaced in the indexes. Trading volume on the Nasdaq reached a record high at the close as etf’s and mutual funds indexed to the Russell 1000, 2000, or 3000 sold the exiting stocks and bought the replacements. There were 427 stocks replaced.

On that increase in Durable Goods Orders.

The market got a seemingly positive economic report on Thursday. Durable Goods Orders (big ticket items) rose an unexpected 1.8% in May. Good news, except that durable-goods shipments declined 2.1%. So more goods were produced but apparently went into rising inventories. Rising inventories are not usually a good sign for the economy.

Yesterday:

The market traded in a narrow trading range, the Dow within a 70 point range all day between its high and low, and not managing to see positive territory. The trend of the last two weeks of more selling in the blue chips than in the speculative issues continued.

The Dow closed down 34 points, or 0.4%. The S&P 500 closed down 0.2%. The NYSE Composite closed down 0.1%. But the Nasdaq closed up 0.5%. The Russell 2000 closed up 0.8%. The DJ Transportation Avg. closed up 0.1%.

For the week: A mixed week, not just in the U.S., but globally, with Europe down sharply and Asia mostly to the upside.

THIS WEEK (Jun. 26) DJIA 8438 - 1.2% S&P 500 918 - 0.3% NYSE 5906 - 0.5% NASDAQ 1838 + 0.6% NASD 100 1480 + 0.6% Russell 2000 513 + 0.2% DJ Transprts 3263 + 1.4% DJ Utilities 355 +1.2% XOI Oilstocks 912 - 1.8% Gold bullion 939 + 0.6% Gold Stocks 143 + 1.4% Canada 10389 + 1.0% London 4241 - 2.4% Germany 4776 - 1.3% France 3229 - 2.9% Hong Kong 18600 +3.8% Japan 9877 + 0.9% Australia 3899 + 0.1% S. Korea 1394 + 0.8%

LAST WEEK (Jun. 19) DJIA 8539 - 3.0% S&P 500 921 -2.6% NYSE 5934 - 3.3% NASDAQ 1827 - 1.7% NASD 100 1471 - 1.2% Russell 2000 512 - 2.7% DJ Transprts 3219 - 4.2% DJ Utilities 351 - 2.0% XOI Oils 929 - 6.0% Gold bullion 933 - 0.6% Gold Stocks 141 - 2.8% Canada 10287 - 3.3% London 4345 - 2.2% Germany 4839 - 5.2% France 3221 - 3.2% Hong Kong 17920 - 5.1% Japan 9786 - 3.4% Australia 3894 - 4.1% S. Korea 1383 - 3.2%

WEEK ENDED (Jun. 12) DJIA 8799 + 0.4% S&P 500 946 + 0.6% NYSE 6148 + 1.1% NASDAQ 1858 + 0.5% NASD 100 1489 - 0.7% Russell 2000 526 - 0.8% DJTransprts 3361 + 0.4% DJ Utilities 358 + 4.1% XOI Oils 988 + 0.8% Gold bullion 939 - 1.7% Gold Stocks 145 - 3.3% Canada 10644 + 0.8% London 4442 + 0.1% Germany 5107 + 0.6% France 3326 - 0.4% Hong Kong 18889 +1.1% Japan 10135 + 3.7% Australia 4062 + 2.3% S. Korea 1428 + 2.4%

 

What’s next?

Next week will be a four-day week in the U.S., with markets closed for Independence Day on Friday. The week has a quite heavy schedule of important potential market-moving economic reports coming out, including the first look at the employment picture in June, with the ADP Employment Report for June on Wednesday, and the Labor Department’s Monthly Jobs Report on Thursday. On the housing industry there will be Construction Spending and Pending Home Sales. To see the full schedule click here, and look on the left side of the page it takes you to.

The next weekly pattern is for the ‘monthly strength period’ to begin on Tuesday and to run through the following Monday, usually fueled by quarter-end ‘window-dressing’ by mutual funds and money-managers (buying what was up for the quarter so their quarter –end holdings statement will make it look like they were in them for the full quarter).

Interesting chart of the morning: The price of oil dropped briefly below $70 a barrel last week, but there’s no sign of a rollover to lower prices showing up on the charts so far, with the 30-day moving average acting as support on the brief pullbacks again since April’s stumble.

Scroll down to see other recent interesting charts and commentary. 

Meanwhile, to read my weekend newspaper column titled ‘A CASE FOR TREASURY BONDS’ click here!

I’ll be back Monday morning with a look at events over the weekend that might impact markets, Sunday night action in Asian markets, and an outlook for Monday and for next week.

Subscribers: The next issue of the newsletter will be out on Monday!

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term signals and market moves that are most important to investors. So, you might want to consider a subscription to our independent research. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my latest book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information.

A Bernanke Rally yesterday?

The market rallied yesterday as Fed Chairman Bernanke seemed to be sliding easily through the tough questioning in the Congressional hearing over the Fed’s handling of the financial crisis, and particularly whether the Fed forced Bank of America to buy Merrill Lynch?

Relief over that? Was it expected that perhaps the Fed Chairman was going to be impeached or something?

It’s similar with the discussions of whether Bernanke will be re-appointed when his term expires in December, or will be replaced by Lawrence Summers. Don’t waste your time thinking about it. No way would the Administration be foolish enough to shake the financial community with that kind of move in the midst of the worst financial crisis in 75 years.

Swapping Upgrades?

Isn’t it interesting how the banks, also being brokerage firms in this new age, have been upgrading each other’s stock over recent weeks? This morning it was UBS upgrading Deutsche Bank, and Credit Suisse lifted UBS to outperform.

Unemployment Now a Big Problem for the Housing Recovery? 

The Wall Street Journal this morning points out that “Rising unemployment is complicating the Obama Administration’s effort to reduce foreclosures and stabilize the housing market.”

The article notes that the first wave of mortgage delinquencies was caused by borrowers who took out subprime mortgages and various forms of creative financing, and the foreclosure-prevention plan was designed around reworking the mortgages to lower monthly mortgage payments to make them more affordable for those people.

But now the big rise in unemployment is beginning to create foreclosures, for which the fix is more difficult.

Investor Sentiment:

Investor sentiment is a so-called ‘contrary sentiment’. That is, sentiment is usually very bullish at market and rally tops, and very bearish at correction and bear market lows.

Our work has shown that when bullishness, as measured by the poll of its members by the American Association of Individual Investors, reaches a level of 55% bullish and bearishness drops below 25%, a rally is in danger of ending.

And when bearishness reaches a level of 55% bearish and bullishness drops below 25%, a new rally could begin at any time.

So it was interesting that the AAII weekly poll last night showed bearishness has risen to 48.8%, and bullishness has dropped to 28%.

Yesterday: A big rally day.

The Dow closed up 172 points, 2.1%. The S&P 500 closed up 2.1%. The NYSE Composite closed up 2.0%. The Nasdaq closed up 2.1%. The Russell 2000 closed up 2.9%. The DJ Transportation Avg closed up 4.4%.

Last Night:

Asian markets closed up. The DJ Asia-Pacific Index closed up 1.6%.

Among individual markets, Australia closed up 1.3%. Hong Kong closed up 1.9%.  Taiwan closed up 0.1%. Singapore closed up 0.6%. India closed up 2.9%. Malaysia closed up 0.2%. South Korea closed up 0.1%. Japan closed up 0.8%. China closed up 0.2%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are mixed, from fractionally negative to fractionally positive.

Oil is down some, $.40 a barrel at $69.83.

Gold is up $5 an ounce at $944.

In the U.S.:

The important economic reports this morning were just released.

Personal income rose a big 1.4% in May, but spending rose only 0.3%, an indication that concerned consumers are still saving, not spending.

Our pre-open indicators are somewhat negative, pointing to the Dow being down 50 points or so in the early going.

Interesting Chart of the Morning:

In the sell-off of the last 10 days, the major indexes had dropped below previous short-term support, for instance the 21-day m.a. on the S&P 500.

Yesterday’s big rally day popped the S&P back up almost to the m.a. again. Will the m.a. now be overhead resistance, as it usually is in corrections, or will the S&P break out above the m.a.?

 

 

Please scroll down to see ‘Interesting Charts of the Morning’.

To read my newspaper column from last weekend titled ‘WALL STREET VERSUS MAIN STREET’ Click here.

NOTE: Although tomorrow is Saturday and the markets are closed, I will be back tomorrow morning with a wrap-up of today and the week, and an outlook for Monday and next week.

Subscribers: The next issue of the newsletter will be out on Monday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Commentary:

Warren Buffett surprised me yesterday with his remarks about the economy.

Having suffered unusually large losses last year, and down significantly so far this year, he has been out on the interview circuit for the last year or so with very bullish and confident remarks regarding the economy and buying the market. His buys have not worked out for sure, but he had not given up on the positive theme.

But in an interview on Bloomberg yesterday, he painted a quite gloomy picture, predicting that things will continue to get worse before they get better.

Among his comments he said, “It looks like we’re going to need more medicine [more stimulus from the government], not less. We’re going to have more unemployment. The recovery hasn’t got going.”

Has last hour buying gone away?

Once again yesterday it was last hour selling that brought the market down from its intraday highs, rather than the last hour buying that had been so obvious during the rally.

Or was it disappointment that the Fed’s FOMC announcement mid-afternoon did not provide the bullish remarks about the economy traders hoped for?

Mortgage rates up again!

According to Bankrate.com’s weekly national survey reported this morning, the rate for 30-year fixed mortgages rose to 5.8% this week, while the average rate for jumbo 30-year mortgages rose to 7.03%.

That’s not going to help the important real estate industry begin to recover.

We have said from the beginning that the problems began in the real estate industry and spread into the rest of the economy, and the eventual recovery will have to begin in the real estate industry; when consumers are no longer seeing the value of their homes plunging, when they are no longer seeing their neighbors lose their homes to foreclosure, when they see ‘For Sale’ signs thinning out as homes begin selling. Only then might they stop saving and paying down debt out of concern, and begin spending again to a degree that will have the recession bottoming.

That is not happening!

Yesterday:

The Dow closed down 23 points, 0.3%. But the S&P 500 closed up 0.6%. The NYSE Composite closed up 0.6%. The Nasdaq closed up 1.5%. The Russell 2000 closed up 1.1%. The DJ Transportation Avg closed up 1.5%.

Last Night:

Asian markets closed up. The DJ Asia-Pacific Index closed up 1.0%.

Among individual markets, Australia closed up 1.3%. Hong Kong closed up 2.2%.  Taiwan closed up 1.2%. Singapore closed up 1.0%. India closed down 0.5%. Malaysia closed up 1.5%. South Korea closed up 2.0%. Japan closed up 2.1%. China closed down 0.1%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are down fairly sharply, down on average of 1% to 2%.

Oil is up some, $.33 a barrel at $69.00.

Gold is up $2 an ounce at $933, which has it unchanged for the week so far, after its decline of the last couple of weeks.

In the U.S.:

The important economic reports this morning were just released.

The final revision of 1st quarter GDP revised the last report from showing the economy declined 5.7% to a decline of 5.5%. Not meaningful and a disappointment to those hoping that later data would show the recession was not quite as severe in the 1st quarter as previously thought.

And in the employment picture, new unemployment claims rose 15,000 last week, and ‘continuing claims’ (those of people previously unemployed and still not able to find a job) rose 29,000. Last week’s improvements in both numbers were apparently an aberration.

The reports have pre-open indicators worsening.

Our pre-open indicators are pointing to the Dow being down 60 points or so in the early going.

Interesting Chart of the Morning:

Like most global markets, as a group emerging markets have broken below the short-term support at their 21-day moving averages for the first time since the rally began in early March.

 

Please scroll down to see ‘Interesting Charts of the Morning’.

To read my newspaper column from last weekend titled ‘WALL STREET VERSUS MAIN STREET’ Click here.

Subscribers: The mid-week intermediate-term ‘Markets Signals and Recommendations’ update, and a hotline update, are on your website from last evening.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Commentary:

One of the most notable changes of the last two weeks is not so much that the market has shown it’s capable of also going down, but its propensity to go down in spite of better economic news. Reports like last week’s PPI and CPI reports showing inflation remains benign, the unexpected decline in continuing unemployment claims, yesterday’s report of rising existing home sales, etc.

Yet the Dow has been down 6 of the last 7 trading days, and has declined 5.4% in the process.

That’s quite a change from its previous tendency to rally continuously in spite of ongoing negative economic news. And it does bring to mind the old adage that a market that rises in spite of bad news is in rally mode, while a market that can’t rally in spite of good news is in bearish mode.

There does seem to be a cooling down of expectations, realization that although the economy is not declining as swiftly as it was last winter the recession continues, with numerous black clouds overhead capable of dumping out rain down the road.

A number of short and intermediate-term support levels have been broken.

Scroll down to yesterday’s post to see the short-term and intermediate-term support levels that have been broken.

Yesterday:

The market traded in a very narrow range between its intraday lows and intraday highs.

The Dow closed down just 16 points, 0,2%. The S&P 500 closed up 0.2%. The NYSE Composite closed up 0.6%. The Nasdaq closed down 0.1%. The Russell 2000 closed down 0.6%. The DJ Transportation Avg closed up 0.3%.

Last Night:

Asian markets closed up for a change. The DJ Asia-Pacific Index closed op 0.9%.

Among individual markets, Australia closed up 0.3%. Hong Kong closed up 2.0%.  Taiwan closed down 2.3%. Singapore closed down 1.9%. India closed down 0.3%. Malaysia closed up 2.9%. South Korea closed up 0.2%. Japan closed up 0.4%. China closed up 1.0%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are up on average of 0.5% to 1%.

Oil is down some, $.41 a barrel at $68.83.

Gold is up $14 an ounce at $939, which has it up $6 for the week so far after its decline of the last couple of weeks.

In the U.S.:

The important economic report this morning was Durable Goods Orders for May, which came in with a very positive surprise, rising 1.8%, about double the consensus forecast of economists. And the April number was revised upward.

It has had only muted reaction in pre-open indicators.

Our pre-open indicators this morning are pointing to the Dow being up 60 points or so in the early going.

After being down 6 of the last 7 days, the market should be able to put in a positive day today.

Interesting Chart of the Morning:

An update on a chart we showed you a couple of weeks ago when what has happened was only threatening.

The DJ Transportation Avg, which frequently leads the market in both directions continues to bear watching. Already back to its early May low.

Please scroll down to see ‘Interesting Charts of the Morning’.

To read my newspaper column from last weekend titled ‘WALL STREET VERSUS MAIN STREET’ Click here.

Subscribers: The mid-week intermediate-term ‘Markets Signals and Recommendations’ update will be on your website for you later today.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Subscribers: The mid-week intermediate-term ‘Markets Signals and Recommendations’ update will be on your website for you tomorrow.

Commentary:

The market has now been down 5 of the last 6 trading days, the Dow losing 516 points, or 5.8%, in the process.

A number of short and intermediate-term support levels have been broken.

For those watching those potential support levels:

Index            Short-term 21-day m.a.      200-day m.a.       Yesterday’s close

DJIA                             8,594                           8,525                          8,339

S&P 500                        924                              900                            893

NYSE Comp.                 5,998                           5,639                         5,725

DJ Transport Avg          3,240                        3,283                            3,069

Nasdaq Comp.             1,809                        1,645                              1,766

Russell 2000                  512                            490                               492

Yesterday:

The market declined in its sharpest one day decline in a couple of months.

Yesterday, the Dow closed down 200 points, or 2.4%. The S&P 500 closed down 3.1%. The NYSE Composite closed down 3.5%. The Nasdaq closed down 3.4%. The Russell 2000 closed down 3.9%. The DJ Transportation Avg closed down 4.7%.

Last Night:

Asian markets closed down sharply. The DJ Asia-Pacific Index closed down 2.4%.

Among individual markets, Australia closed down 3.0%. Hong Kong closed up 0.8%.  Taiwan closed down 2.3%. Singapore closed down 1.9%. India closed down 0.3%. Malaysia closed down 0.3%. South Korea closed down 2.8%. Japan closed down 2.3%. China closed down 0.1%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are up some after sharp plunges yesterday, up on average of 0.5% to 1%.

Oil is up some, $.62 a barrel at $68.07.

Gold is up $4 an ounce at $923 bouncing back some from yesterday’s big decline.

In the U.S.:

The important economic report today will be Existing Home Sales, which will be released at 10 a.m.

We are in the consensus, expecting that fire-sale prices of foreclosed homes and the government incentives produced an impressive increase in low-priced home sales. The more important number will be whether it cuts very much into the glut of unsold homes.

Our pre-open indicators this morning are flat, pointing to a flat open.

The next few days will be important.

Interesting Chart of the Morning:

So far so good on our new sell signal for gold which ended the buy signal of April 27.

Please scroll down to see ‘Interesting Charts of the Morning’.

To read my newspaper column from last weekend titled ‘WALL STREET VERSUS MAIN STREET’ Click here.

Subscribers: The mid-week intermediate-term ‘Markets Signals and Recommendations’ report will be on your website for you tomorrow.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?

Subscribers: The mid-week intermediate-term ‘Markets Signals and Recommendations’ update will be on your website for you on Wednesday.

Commentary:

The first half of the rally was based on realization that the economy is not going to fall off a cliff into Great Depression II.

But the extension of the rally since April has been based on a conviction that the recession is not only not headed into a depression, but is already ending, and we’ll be in economic boom times again in six to nine months. And that premise is on shaky ground.

Economic reports show that the economy is still worsening, the better news being only that it is doing so at a slower pace than when it was falling off a cliff.

That is, an awful lot of people are still losing jobs, several hundred thousand a month, but not as many per month as during the winter. Retail sales are still declining, even though consumer confidence has risen some, out of the pit of total lack of confidence created by fear of Great Depression II, but not enough to halt the recessionary decline. The three year collapse of the housing industry continues, even though fire-sale prices created by soaring foreclosures and government incentives are attracting a few more buyers, with the glut of unsold homes still growing as more homes come on the market than are being sold. The financial system is not facing total collapse as was feared in the winter months, but banks face many serious problems of growing loan losses, etc., that are not being perceived in the haze and fog created by bailout $billions.

The fact that the recession is still worsening but not collapsing at its previous pace, is better than the outlook in the winter months, but is not the same as signs of a reversal in the uptrend of bankruptcies and bank closings, and reversal of the downtrend of corporate earnings, would be.

Meanwhile, the headwinds are still blowing against the economy at a time when consumer, federal, state and local government debt levels, the latest spike-up in energy and gasoline prices, and next wave of foreclosures, leaves more and more in precarious financial conditions.

The stock market anticipates economic conditions six to nine months ahead of the conditions.

For that reason, and the extreme oversold condition of the market in February, we were able to predict “a substantial rally, probably one of the biggest bear market rallies ever”, based on our work which showed the economy was not going to wind up in a depression, and that in fact the massive stimulus efforts would work to provide enough improvement in economic reports to support a strong rally.

But the rally reached our original upside target of the 200-day moving averages of the major indexes several weeks ago. And now we believe it has gotten ahead of itself by extending the rally by factoring in the next economic boom times, not just that the recession is not slowing at as fast a pace.

Last Night:

Asian markets were mixed last night, following a quite negative week last week.

Among individual markets, Australia closed up 0.4%. Hong Kong closed up 0.8%.  Taiwan closed up 1.8%. Singapore closed down 0.2%. India closed down 1.8%. Malaysia closed down 1.4%. South Korea closed up 1.2%. Japan closed up 0.4%. China closed down 0.1%.

(Scroll down to Saturday for an interesting look at how individual global markets have fared over the last three weeks).

This morning:

European markets are down fairly sharply, on average of 1.5%, following a quite negative week last week.

Oil is down $1.25 a barrel at $68.30, back under $70 again.

Gold is down a big $14 an ounce at $919, its lowest level in four weeks.

In the U.S.:

There are no important economic reports due out today. But the rest of the week has a quite heavy schedule of potential market-moving economic reports, including Existing Home Sales, New Home Sales, Durable Goods Orders, and Consumer Sentiment. And the Fed begins its next FOMC meeting tomorrow, with its report announcement coming out at 2:15 p.m. Wednesday. To see the full schedule click here, and look in the left side of the page it takes you to.. . .

Our pre-open indicators this morning are quite negative, pointing to the Dow being down 80 points or so in the early going, and looking like the Nasdaq will be more negative than the blue chips.

Please scroll down to see ‘Interesting Charts of the Morning’.

To read my newspaper column from last weekend titled ‘WALL STREET VERSUS MAIN STREET’ Click here.

Subscribers: The mid-week intermediate-term ‘Markets Signals and Recommendations’ report will be on your website for you on Wednesday.

Non-subscribers: While it’s helpful to look at daily and short-term expectations, it is the intermediate and longer-term market moves that are most important to investors.

Street Smart Report Online provides our intermediate-term signals, outlook, and recommended holdings. Sectors, stocks, bonds, gold, short-sales, long-side and inverse etf’s and mutual funds. Highly regarded and in its 22nd year. In-depth weekly reports, newsletter, hotline, and much more! As a bonus for a one-year subscription you will also receive my new book Beat the Market the Easy Way- Proven Seasonal Strategies That Double the Market’s Performance. Click here for subscription information. The cost is equivalent to the cost of two cups of coffee per week. Can you afford not to subscribe?