Monday Morning Market Comments and Links (for traders)

MORNING MARKET COMMENTARY
for Monday, July 6, 2009
Dow & S&P 500 Are Back in Negative Territory For 2009

The major averages got smacked on Thursday after the Labor Department announced a weaker-than-expected jobs report for June. Volume totals were reported lighter on the NYSE and on the Nasdaq exchange as the holiday-shortened week came to a close. Decliners trumped advancers by nearly a 4-to-1 ratio on the NYSE and by a 5-to-1 ratio on the Nasdaq exchange.

The Bank Index ($BKX -3.01%) has slumped under its 50-day moving average (DMA) line in recent weeks. Since financial shares are a valuable leading indicator, any breach of recent chart lows would raise concerns and hurt the near-term market outlook. On the other hand, any subsequent rally above the 200 DMA line (the red line) would be a very encouraging sign for all investors with market interest.

Two articles caught my attention these past few days. The first describes how FNM and FRE are starting to provide 125% mortgage loans. Isn’t this type of activity what got us in trouble in the first place? The next is an amusing expose from the WSJ (subscription required) outlining the inner workings of our friends at the Federal Reserve. You can see clearly from it who’s running the show there and on Wall Street.

The Nasdaq is up 11.9% year to date, while the Dow is down 8.05%. Since 1972 (when the Nasdaq was started), this is the second biggest outperformance for the Nasdaq versus the Dow in the first half of the year. In the four biggest years of underperformance (2001, 1973, 1974, and 2002), both indices continued lower by quite a bit in the second half.

How Different Investments Did Last Week

Media Digest 7/6/2009 Reuters, WSJ, NYTimes, Barron's from 24/7 Wall St.

The Trend Trader for Monday, July 6th

Sector Update for July 6th from Dr. Brett

Wall Street Breakfast What you need to know in early trading today.

7 Stocks You Need to Know for Monday TradingMarkets.com

Stocks in focus for Monday Marketwatch

Bloomberg Futures

International real-time economic calendar

I don't make jokes. I just watch the government and report the facts. -- Will Rogers

"Prepare Your Coffin" (I love San Francisco)

I recognized half the locations and guessed on the other half.

Court Rules California Can't Raid Transit Funds

If public transit is getting the short end of the federal stimulus stick, our trains and buses may be getting a windfall from the state—only it's completely against Sacramento's wishes. The San Jose Mercury-News is reporting that an appeals court has barred state officials from tapping public transit funds for other programs, which the state was doing to help balance the budget.

"Department of Finance spokesman H.D. Palmer said Tuesday's decision by the 3rd District Court of Appeal could force the state to repay about $3.4 billion. That's the amount it has diverted or plans to divert from the Public Transportation Account over three fiscal years." Palmer is not pleased, saying the administration would appeal to the state supreme court and ask the appeals court to stay its decision pending the outcome. The ruling came from a lawsuit filed by the California Transit Association. If ultimately successful, it could take back $2.5 billion the state has taken from the transit fund since 2007 and $952 million the administration is planning to use in the fiscal year that starts today. [Gold Line pic via Light Rail Now] Calif. Appeals Court Bars Transit Raids [Mercury-News]

HUD sends $32M to jump start AZ affordable housing, an article from The Phoenix Business Journal, reports that Arizona will receive $32.3 million to jump start affordable housing projects that have been in limbo during the recession. The announcement was made yesterday by U.S. HUD Secretary Shaun Donovan. The money will help fund affordable housing projects that were in development but unable to attract funding as a result of tight credit markets. Specifics of what projects will benefit from the allocation were not announced. Story HERE

Pending Home Sales Rise Again, an article from Realtor Magazine Online, reports that pending home sales displayed a sustained upward trend, rising for four consecutive months, according to the National Association of Realtors. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in May, increased 0.1% to 90.7. This is 6.7% higher than in May 2008. There hasn't been four consecutive months of gain since October 2004. "Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions," said Lawrence Yun, NAR chief economist. Story HERE

Small Homes Are In, But Big Homes not Gone, an article from Realtor Magazine Online, reports that McMansions have fallen out of favor, according to a survey by the American Institute of Architects. When 500 architects were surveyed, only 4% thought their clients wanted more space in their new homes, compared to 16% in 2008. According to the National Association of Home Builders, 59% of builders surveyed in May plan to build smaller homes in the coming year. However, big homes shouldn't be dismissed - the builder association expects homes to stabilize at 2,500 square feet over the next five years. Story HERE

Dow & S&P 500 Are Back in Negative Territory For 2009

The major averages got smacked on Thursday after the Labor Department announced a weaker-than-expected jobs report for June. Volume totals were reported lighter on the NYSE and on the Nasdaq exchange as the holiday-shortened week came to a close. Decliners trumped advancers by nearly a 4-to-1 ratio on the NYSE and by a 5-to-1 ratio on the Nasdaq exchange.

PICTURED BELOW: The Broker/Dealer Index ($XBD -3.13%) sank below ts 50 DMA line again, and a breach of recent chart lows would hurt the broader market outlook. If it eventually rallies above its June chart high (104.41) the market outlook would improve and there would be a greater likelihood of further upward momentum.

Chart of the Day: "Today, the Labor Department reported that nonfarm payrolls (jobs) decreased by 467,000 in June. The stock market declined sharply on the news. Today's chart puts that decline into perspective by comparing job losses during the current economic recession (solid red line) to that of the last recession (dashed gold line) and the average recession from 1954-2006 (dashed blue line). As today's chart illustrates, the current job market has suffered losses that are nearly three times as much as the average. In fact, if this were an average recession/job loss cycle, the number of jobs would have begun to increase three months ago." - chartoftheday.com

via chart of the day

There are two theories on our upcoming hyperinflation:

1. Our government has printed so much money that hyperinflation is inevitable. Watch out Weimar Republic and Zimbabwe. We'll beat you.

2. Our economy has so many factories and so many people out of work that inflation won't happen. If any inklings that things are getting out of hand emerge, the Fed will raise interest rates and arrest the inflation. Meantime, today's critical task is saving the U.S. from a really serious depression and from strong deflation.

If you believe HyperInflation Theory 1 , you should:

A. Only invest short-term , because in two to three years, treasuries will be paying 8-9%+ and muni bonds 15%. And then you'll want to pile in. You won't want to be fixed income then because their value will be zippo.

B. Booming overseas economies like China and India will be the place to invest.

C. Buy gold and gold miners.

If you believe the No-HyperInflation Theory 2 , you should:

A. Buy cheap, decent quality "value" equities.

B. Buy high-yielding "distress" corporate bonds because the company will do OK. and the bonds will eventually be worth more, i.e. closer to par. And you'll make a killing.

Most people believe the hyperinflation theory. I have also. But extensive reading in the past few days -- I won't bore you -- has convinced me that the No-HyperInflation Theory is most likely. I say this, though I'm not turned on by all the monies the government has spent.

Thursday Morning Market Comment and Links (for traders)

MORNING MARKET COMMENTARY
- Thursday, July 2, 2009
Major Averages Rise With Quieter Volume Totals

US stocks rose after a slew of stronger-than-expected economic data was released on Wednesday. Volume totals were reported lower on the NYSE and on the Nasdaq exchange, which signaled a lack of buying from the institutional crowd. Advancers led decliners by nearly a 3-to-1 ratio on the NYSE and by a 2-to-1 ratio on the Nasdaq exchange. The Gold & Silver Index has recently found support near its 50-day moving average (DMA) line, and it has generally trended higher since its 50 & 200 DMA lines crossed over in April.

It's nearly the Fourth of July weekend, but the real fireworks in the market could still be a week or so away. When I look at a chart of the S&P 500 (see below), I see a market that wants to make its way above 950.

If we can breach the highs of the year, namely the 950 market on the S&P 500, then I think we'll see a market explosion that could send us straight up to the 1,000 mark.

On the other hand, if we see the S&P 500 flame out here, i.e., we see stocks fall below the 890 mark on the index, I think we could be in for a serious crash and burn.



My take here is that stocks will see fireworks, and that we will see a surge to 950 and beyond. Of course, nobody knows for certain, but I suspect that this summer will be a very happy one for stocks.

What this means is that if you have positions in the market right now, then you should be in good shape going forward. But if I am wrong, and if the market experiences a blue summer, then you'll want to make sure and have a sell discipline in place to protect your hard-earned assets from adversity.

I'm now much less afraid of a major drop in the stockmarket. One huge reason is that 90% of the Doom and Gloom (D&G) has happened and/or is known and predicted. Despite all the D&G, the stockmarket has actually held up well.

I do not trivialize how difficult these markets are. All my money managers have done terribly this year. Most missed the March rally. Most are flat-to-slightly up on the year.

First half asset class performance in perspective- (Capital Spectator, Economist)

"While the year started off horribly for the market, it is heading into July in a nice uptrend even though it has been floundering for a few weeks now. While some investors are getting frustrated with the market's inability to break to new highs, they easily forget how bad things were just a few months ago. Up 1.78% in '09 with everything that has happened -- we'll take it!" - Bespoke Investment Group

How Wall Street looks after itself -- NOT you

The Trend Trader for Thursday, July 2nd

Wall Street Breakfast What you need to know in early trading today.

Media Digest 7/2/2009 Reuters, WSJ, NYTimes, Barron's

7 Stocks for Thursday by Trading Markets

Stocks in focus for Thursday MarketWatch

The Great Depression compared to the Great Recession

Relocation.com Names San Francisco Bay Area's Best R. E. Agent Blogs

Relocation.com just named its favorite San Francisco real estate blogs. They're a good sampling, even though most of them are not actually about San Francisco. Among them are blogs about Marin, Foster City, San Mateo, Marin again, San Carlos, and Foster City again. The Front Steps seems to be the only pick that's set right here in The Big City.

To be fair, Relocation.com's press release switches back and forth between "SF" and "SF Bay Area," two terms that mean wildly different things. So much depends upon the words "Bay Area," glazed with rainwater beside the white chickens.

- The Front Steps from Alex Clark
- Marin Real Estate Guide from Ginger Wilcox
- Absolutely Foster City from Jim Minkey
- San Mateo Real Estate from Vicki Moore
- Living Well in San Mateo from Raymond Stoklosa & Chris Williamson
- The White Oaks from Chuck Gillooley
- Marin County Real Estate from Mark Lomas

New Programs Target Low-Income Buyers, an article from Realtor Magazine Online, reports that many new state and local initiatives are expected to roll out over the next few weeks. Under the federal Neighborhood Stabilization Program, these initiatives will help middle- and low-income families buy foreclosed homes in hard-hit neighborhoods. Only households earning no more than 120% of the median income will be eligible. The money must be used for primary residences in neighborhoods with the highest incidences of foreclosures and subprime loans. A lease-to-own program will be part of the offerings. Altogether, $5 billion has been available for these initiatives.

["20th st bw," courtesy Flickr user potential past]

· Pez Sues Burlingame Museum [SF Business Times]
· Critical Mass Bikers Get Naked and Set Fires [Everything is Everything]
· Photos of a Lovely SF Park [SFist]
· The Tenderloin Says Goodbye to its YMCA [SF Examiner]
· Home loan delinquencies on the rise. More foreclosures to come?

See How Your Fund is Rated

On the first day of each month check your (OEM) Mutual Funds for performance against its benchmark and its sector at: www.fundalarm.com
You may want to consider dumping two and three alarm funds.

Take a look at My Asset Allocated Fund Portfolios

The First Trading Day of the Month (Crossing Wall St.):

"So far this decade, the market hasn’t done very well except for one small phenomenon—the first trading day of the month. Through yesterday, the S&P 500 is down 39.5% for the decade. But the market has returned over 21% on the first day of the month (neither figure includes dividends).

What’s interesting is that first days of the month occur less than 5% of the time, so sitting out the rest of the time would have been a smart strategy. How’d you like a job that probably improved your performance if you took over 20 days a month?"

Posted by edelfenbein at May 22, 2009 9:39 AM

Most people don’t know what they’re doing, and a lot of them are really good at it. – George Carlin

TODAY'S OPEN: UP

Major Averages Rise On Quieter Volume-
PICTURED BELOW: The Bank Index ($BKX +1.59%) closed Moday's session just above its 50-day moving average (DMA) line with a 5th consecutive small gain. The major averages ended higher, adding to the best quarterly advance for the S&P 500 Index since 1998! The small-cap indices lagged. As expected, volume totals were lower compared to Friday's artificially high levels (Russell Indexes' re-balancing). Advancers led decliners by nearly a 2-to-1 ratio on the NYSE and trailed by a 4-to-5 ratio on the Nasdaq exchange.

Futures turn higher, Madoff to be sentenced-
"S&P 500 futures rose 3.3 points to 917.20 and Nasdaq 100 futures added 4 points to 1,480.7. Futures on the Dow Jones Industrial Average rose 23 points, with Enterprise and Teppco announcing a merger and attention also on the sentencing of Bernard Madoff for his multibillion-dollar fraud."

With volume ultra-light, or absent bullish news for that matter, propping markets can be done with ease since it takes just a little paint to push things in the desired direction. Breadth was positive but volume was beneath significant.

Healthy skepticism is useful. Saying NO is better. Cash is King is even better. Yesterday I got offered a 3-year deal whereby I lend money on raw land in California to someone who will build houses on the land. I get paid 12% for the first year, 15% for the second year and 21% for the third. Why am I suspicious? New eye-opening chart showing the incredible prices for residential real estate in the top ten markets around the world. I'm sure that will work out just fine. Right?

Most expensive housing:

"The second quarter reporting period begins next week with Alcoa's (AA) earnings release, and below we highlight the Q2 consensus earnings growth expectation for the S&P 500. As shown, analysts currently expect S&P 500 earnings to decline 33.5% versus Q2 2008. While this is an ugly number, it's a little less ugly than it was in May and early June." - Bespoke Investment Group

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