What a Week for Stocks; Metals, Not So Much

Once word that the Greek government was going to pass the severe austerity measures on its people, so as to get another $17 billion in loans from the EU/IMF, stock traders were treated to a rare "all green" week of trading, as though risk had been taken entirely out of the equation.

Even the end of QE2 and the regime of free money for primary dealers didn't slow down the express train to the upside in equities. It was truly one of the best weeks ever for US markets in terms of gains, logging in five straight days of positive returns.

Here's how they fared.

INDEX	CLOSE 6/24	CLOSE 7/1	POINTS +/-
DOW	11,934.58	12,582.77	+648.19
NASDAQ	2,652.89	2,816.03	+163.14
S&P 500	1,268.45	1,339.67	+71.22
NYSE COMP	7,974.72	8,425.46	450.74

On Friday, after closing out the second quarter with very positive vibes, stocks continued to rally on the first day of July and the third quarter with the best performance of the entire week, in hopes that there will not be many more natural disasters - such as Fukushima, Midwest tornadoes or Northwest floods - and that the messy situation in Greece is at least solved for now.

Apparently, there is little worry over when and whether congress will reach a deal on the debt ceiling, now that legislators have put off their usual Independence Day week-long recess, to supposedly work towards some kind of compromise on the matter.

Today's results:

Dow 12,582.77, +168.43 (1.36%)
NASDAQ 2,816.03, +42.51 (1.53%)
S&P 500 1,339.67, +19.03 (1.44%)
NYSE Composite 8,425.46, +106.36 (1.28%)

Advancing issues had their way, beating decliners, 5104-1468. NASDAQ new highs: 148; new lows: 26; NYSE New highs 168; New lows: 4. Combined: 316 new highs, 30 new lows. Volume was even softer than what has normally been a lightly-traded market, leading some to conclude (perhaps rightfully so) that the movements of stocks in the age of whirring computers and unsolvable algorithms are highly manipulated by the big brokerages.

NASDAQ Volume 1,604,401,500
NYSE Volume 3,721,877,750

While stocks were soaring along, commodities - with the notable exception of oil - took it hard. Crude oil futures declined 48 cents, to $94.94, after gaining most of the week. Gold finished at its worst level in six weeks, down $20.20, to $1,482.60, and silver was pounded down once more, losing $1.13, to $33.70, a loss of more than 3%.

By the way, just in case someone comes along and tries to tell you that oil is priced so high because we're running out of it, you do have the right to punch that person in the nose or kick in the groin, as appropriate. The worldwide collusion in the price of oil and gasoline to consumers has been going on for some time (a long time) and the "peak oil" theory is about as useful as science as an ace bandage is to a torn ACL.

In a word, it is "bunk." For more information, see and read the work of F. William Engdahl.

Seriously, do you really believe that those "fossil fuels" - coal, natural gas and oil - come from the remains of dinosaurs? Considering the amount that's been dug, mined, stripped, pumped and drilled out of the earth the past 200 years alone would lead one to believe that the Jurasic period was a shoulder-to-shoulder affair.

Wall Street Whacked Again; Europe Overwhelms Positive Employment and Gulf Oil Spill

Following the worst recession since the Great Depression, the bulk of Americans still suffering through the slow, painful "recovery" process probably is cheering every daily decline in the stock market. Where Main Street to a large extent has plumbed the depths of poverty, Wall Street has had the pleasure of using taxpayer dollars to dig their way out of the mess they themselves caused, so it's not surprising that after Thursday's "fat finger" debacle many Americans are throwing a fat finger right back at the titans of finance and their profligate ways.

News outlets claimed that a mistaken trade, hitting a a "B" instead of an "M" - as in billions vs. millions of shares - caused yesterday's 998 point plummet, thus the "fat finger" excuse, which, by the way, has been largely discredited. The truth of what happened on May 6, 2010 may never be fully known, but the idea that insiders purposely sold huge quantities in a coordinated assault has some merit.

The goal of the traders causing the plunge (probably computer programmed) was to sell enough shares of enough companies to trigger momentum trading by other computers and individuals in addition to triggering stop loss trades that would exacerbate the situation. Then, as the market plunged, notably to almost a 1000-point loss on the Dow, scoop up quantities of the same stocks after their values had been decimated, in effect, reversing the old saw of "buy low, sell high," on its head, selling high and the buying low.

If this was a coordinated, widely-spread-out trading scheme - and there's no evidence indicating that it wasn't - it seemed to have worked to perfection. Two other elements lead one to believe that it could also have been a staged event. First, the near-1000-point drop bottomed just after 2:30. Had it occurred before that time and gone down more than 1000 points, the NYSE would have shut down. Likely not wanting to tempt fate, the schemers plied their scam just after 2:30 and stopped the skid just before the 1000-point-down level was attained.

Second, CNBC and networks worldwide were airing scenes of protesters in Greece being beaten back and dispersed by riot police at precisely the moment the stock market was skidding out of control. If this were labeled a terror attack, it would fit the definition precisely, because it terrorized not only people invested or watching on TV, but the traders on the floor and in brokerages around the world.

Additionally, CNBC had commentators in place in Greece and on the Iberian peninsula, plus they brought Jim Cramer (Mad Money) onto the set for a rare appearance. At the depth of the decline, host Erin Burnett brought up a chart of Proctor Gamble, which had plunged some 20 points in a manner of minutes. Cramer cooly called it a buy and it immediately reversed course and headed back near the unchanged mark.

Commentators on CNBC also started the "fat finger" rumor and produced an additional three hours of coverage later in the evening, complete with "Markets in Turmoil" graphics and coverage from around the financial universe.

So, was the sudden collapse and subsequent, immediate 600-point rally all about finances or all about ratings? The timing seemed to synch perfectly with the anarchist overtones emanating from Athens, and the swiftness of the entire affair (less than 20 minutes) was riveting television. CNBC reported today that their web site traffic shot through the roof during and after the event.

Whatever the cause of Thursday's melt down and up, the message was loud and clear: something is amiss on Wall Street when stocks can go to zero in the space of a couple of heartbeats and nobody knows exactly why. Investors were skittish and tentative on Friday, even after the government produced the best non-farm payroll report in four years.

The employment report for April showed the US economy creating 290,000 jobs in April, with only 66,000 of those coming in the form of temporary census workers. The BLS also upgraded the previous two months, showing even more job growth than had previously been reported. That kind of upbeat news still could not shake off the tremors from Thursday's wild ride nor the unsettled affairs in Greece and across Europe, where LIBOR (London InterBank Overnight Rate) - the rate of interest banks charge each other for overnight loans - shot up dramatically.

As the European overtone kept markets subdued, US bond yields held steady or declined and the dollar gained against most other currencies, expressing the view that the United States was the best of a bad bunch as far as investments were concerned. With all the reporting on Wall Street and Europe overwhelming the news wires, the story of oil continually gushing into the Gulf - with the oil slick making landfall yesterday in Louisiana - was sadly sent to a back burner.

Traders were extremely cautious though not entirely on the sell side. The Dow dropped 279 points early in the day before rallying briefly into positive territory just 45 minutes later. The rally had no momentum, however, and stocks sold off in jumpy fashion through the remainder of the session.

Dow 10,380.43, -139.89 (1.33%)
NASDAQ 2,265.64, -54.00 (2.33%)
S&P 500 1,110.88, -17.27 (1.53%)
NYSE Composite 6,916.18, -95.74 (1.37%)

Market internals confirmed the ugly truth. Advancers were once again beaten severely by decliners, 4838-1775, and new lows exceeded new highs for the second straight day, 184-94, a significant development, signaling, in very certain terms, a continuance of the downturn. Volume was once again at fantastic heights, similar to Thursday's trading. It's obvious that much of the smart money has been heading for the exits en masse over the past two weeks and now the dumb money is following.

NYSE Volume 10,830,781,000.00
NASDAQ Volume 4,174,408,500.00

The unsettled nature of trading and uncertain future for Europe took oil down yet another notch, with crude futures closing down $2.00, to $75.11. The metals have divorced themselves from the energy complex, with gold rallying another $13.40, to $1,210.00, and silver adding 94 cents, to $18.43. Wall Street's high-velocity, highly volatile trading suggests that gold will continue to be a safe haven for wealth.

The week was among the ten worst ever for stocks, with the Dow suffering a 628-point decline. All of the major indices closed today at levels below the start of the year. They are all in negative territory for 2010.

The Dow Jones Industrials are down 7.4% from their April 26 high of 11,205.03. The NASDAQ is already technically in a correction, having fallen 10.5% from its recent high, while the S&P 500 is off 8.8%.

Stop losses? Maybe it's time to stop trading equities for the relative safety of bonds and metals. Unless conditions in various locales improve remarkably over the coming weeks, this slide should eviscerate much of the progress made in 2009. Think Dow 9000 and possibly lower, near-to-medium term.

Sensational! Spectacular! WOW!

Finally, something to get excited about.

In case you missed it, US stock markets nearly collapsed wholesale on Tuesday.

Check out these figures:
Dow: 12,216.24, -416.02; NASDAQ: 2,407.86, -96.66; S&P 500: 1,399.04, -50.33

Like I said in the headline, WOW! But it wasn't as though we weren't warned. Just yesterday, right here, my headline read The Correction Has Begun. If my word wasn't enough of a warning to start taking those profits and paring losses, then maybe former Fed Chairman Alan Greenspan's remarks to an economic conference in Hong Kong yesterday might have given us a clue that something was in the works.

And boy was it. This was telegraphed like a club boxer's left hook.

The fact of the matter is that today's response from, first, the Chinese stock market, then Europe's markets, and finally the US markets, was entirely well-organized and a classic prototype of blatant manipulation.

In the long run, it means little. The biggest hit in the US, on a percentage basis, was taken by the NASDAQ, which lost nearly 4% on the day. We'll survive. That stunner was, however, dwarfed by China's 9% decline, which, according to the so-called experts, was the real reason for US stocks to take a beating.

What utter hooey! If the Chinese economy stutters and stumbles, we should, as a nation, applaud long and loud. Maybe we can get a better deal on plasma TVs if they feel a little pain for a change. We're all in it together, though the US trade deficit and government overspending does play into the whole mess.

Our loose fiscal policies are the prime factors behind the whole worldwide bubble economy and we're mortgaged to the hilt. But if China takes a hit, should we worry? Maybe a little, since they hold our debt and could start calling it in or floating their currency - the yuan - a little higher, or both. But it certainly isn't the end of the world and nothing's really changed since yesterday, right?

Oh, no. That's where you would be wrong. This story by Seymour Hersh in the New Yorker makes some very poignant and troubling claims about the state and nature and inner doings of our political leadership. I won't tip it off here, but leave it to you to read it for yourself.

Well, here's a clue. Hersh is the preeminent investigative reporter of our day. He broke the Iran-Contra story and he's been on to the shenanigans of the Bush administration from the start of the Iraq War. So, would the hoi poloi in the White House and on Wall Street and in London's City get a little bit twitchy if the leaders of the world's superpower were about to get a serious spanking by the media and maybe the Congress?

Here's the timeline:
Hersh's article hits the newsstands and the web on 2/25.
Greenspan warns of a US recession on 2/26.
China's markets implode, Europe and US markets follow on 2/27.

Welcome to the winter of our discontent. My advice: Watch for falling stocks... and politicians. Yesterday, I said the Dow should settle out in the 10,350 to 11,100 range. We've still got at least another 1100 points to go.