Markets Remain Volatile Despite Solid Economic Reports

The extreme volatility which reappeared last week was back again on Monday, as stocks whipsawed though an up-down-up session, with the major indices finally deciding on a positive close at the end of the day.

After a major sell-off last Friday, stocks started out modestly positive, except for the NASDAQ, which has been a laggard recently. Once data on construction spending, pending home sales and the ISM Index came out at 10:00 am, all of the indices moved markedly higher, with the Dow sporting a gain of more than 140 points.

Construction spending for September registered an increase of 0.8%, blasting estimates for a decline of 0.2%. Pending home sales were up 6.1%, following a reading of +6.4% in August, regarded as an impressive string of increases in the pressured real estate market.

The ISM Index was the real popper of the grouping, however, with the October reading coming in at 55.7, after a solid showing of 52.6 in September.

Around noon, rumors that the US government was seeking to get back its money owed through the TARP program from Citigroup (C) rattled the markets, sending all of the indices temporarily into negative territory around 1:00 pm. Through the remainder of the afternoon, stocks vacillated and moved slightly higher, registering shaky, but modest gains at the close.

Dow 9,789.21, +76.48 (0.79%)
NASDAQ 2,049.20, +4.09 (0.20%)
S&P 500 1,042.88, +6.69 (0.65%)
NYSE Composite 6,784.94, +45.49 (0.67%)

Simple indicators displayed the confusion quite adequately. 3309 stocks advanced, while 3190 declined. There were 78 new highs, but 103 new lows. These figures indicate that the market is unable to determine direction, despite strong signs of economic recovery, probably due to many individual issues being overpriced.

Volume was steady, in line with previous sessions. There still has not been a spike in volume on a positive day, though with the increased volatility, it would be difficult to ascertain whether or not the volume was a contributor to overall gains. Taking today, for instance, up and down volume were virtually even, so it would be difficult to say that any of it was influential one way or the other.

NYSE Volume 7,318,034,000
NASDAQ Volume 2,340,403,500

Commodities took advantage of the weaker dollar to advance. Oil advanced $1.13, to $78.13. Gold was up $13.60, to 1,054.00, and silver added 19 cents, closing at $16.44.

As the number of companies reporting 3rd quarter earnings slows - over 80% of the S&P 500 have already reported - investors will have to rely on economic data and events to move markets. On Wednesday the FOMC of the Federal Reserve issues a policy statement, in which the Fed is widely expected to keep key interest rates the same, though some analysts are looking for a change in wording, especially where the Fed says they expect to keep rates low for "an extended period." A change in that wording could signal that the fed sees signs that it is time to tighten, or raise, interest rates, a move which could roil markets.

Before that, auto sales data for October is due out on Tuesday. Also on Wednesday, ADP issues their montly reading on private sector employment for October, a precursor to Friday's Non-farms payroll report.

Marathon Oil (MRO), Polo Ralph Lauren (RL) and European financial giant UBS (UBS) report prior to tomorrow's opening bell. Tech bellwether Cisco Systems (CSCO) reports after the close on Wednesday.

How Much Gold Should You Own?

With gold recently soaring past the $1000 mark and making a new high over $1050, more than a few formerly-gold-averse investors have become more interested in adding precious metals investments to their portfolios.

Some have opted to buy the exchange-traded fund (ETF), the SPDR Gold Trust (GLD), though there are any number of reasons to avoid that route and invest in gold coins or purchase gold bullion directly, one of which is the pretty well-determined suspicion that the "Trust" doesn't actually hold or own as much actual gold as it would need to handle a rush of redemptions for investors wanting physical gold in their hands. The other reason is that the ETF doesn't match the moves made by the metal itself. Gold futures and spot prices haven't correlated to similar moves in the ETF.

That's why it is advisable to buy gold coin from a reputable dealer, either in person near your home or on the internet. Either choice is preferable to playing either the ETF or buying mining stocks. Physical gold - or silver or platinum - is easy to store, needs almost no care, and can be instantly converted to cash if necessary, without paperwork or tax issues.

How much a capable investor should hold depends on their needs. Younger, more speculative types may want as little as 5% of their portfolio in gold or silver coins or bullion, while older, more safety-oriented investors may want to hold as much as 20% of their portfolio in gold. In any case, it's an investment that should be part of everyone's diversification.

Cable or Satellite, Which is the Better Deal?

Since the change over to Digital signals for all broadcast channels, you may have noticed the difference, even if you are a cable subscriber. The picture often freezes or jumps or melts down into what I call, "Impressionist TV," of which Monet, Chagal and contemporary painter, Leroy Neiman, would be proud to show in their homes. But in your home, a jumpy or frozen picture is annoying and unwanted, and when the cable goes down, it all goes, so is there an alternative?

To a large degree, viewers of satellite or Direct TV report many fewer problems than cable viewers, and there are other advantages, regardless of which satellite service you enjoy. The value proposition from satellite DirectTV is that you receive more channels for a lower price and you can also choose movie or sports programming that suits your lifestyle within a variety of affordable plans.

Cable, for what it's worth, seems only interested in getting the maximum amount of money from subscribers. There are few tiered offerings of any value, because most of them start with the "standard" 100 or so channels for a high price and nothing below it of comparable quality.

Directv via satellite offers more choice, better value, and, in the end, a more reliable picture, without the stalls, freezes and jumpiness that is now becoming pandemic among cable and former analog viewers. If you want to enjoy your home theater or large screen TV, satellite is quickly becoming the choice.