Friday, July 2, 2010

Stock Market Review - 07/02/2010

'The' Ten Minutes

The chart below is the DIA chart for the past five days. The Dow continues to descend further into 'correction' mode and the 'hope' camp continues to lose confidence. Governments have been manipulating economic stats for so long that nobody believes them - good or bad. Today (Friday, July 2, 2010), the government announced that the US economy lost 125,000 jobs in the most recent lying period. Obama held a conference to chirp about it and reassure to oafs that if they just keep trudging, economic recovery would soon be upon them. Of course, there really isn't a need to keep trudging when the government promises to take care of health care, retirement, financial reform, food stamps, and oil spills. Unfortunately, the government has traded whatever sense it ever had for the power of the printing press. They pump out money to banks and boasts of triumphs for elected leaders. Unfortunately, our elected leaders do nothing but continue to surrender power to unelected leaders, czars, and regulators that are supposed to take care of us. Frank and Dodd authored a financial reform package that didn't even mention the two biggest kingpins of financial catastrophe - Freddie and Fannie. Letting Frank and Dodd do anything in the realm of financial reform is like hiring the Skipper and Gilligan for a three hour tour.

'Financial reform' is of course, a euphemism for more taxes. So now in addition to the health care tax, and soon to be cap and trade tax, we have a financial tax. Investors know taxes are kryptonite for economic growth so it makes sense that the indices are falling. But the fall is not easy.

Most investors are the 'buy and hold' variety and very few have the skills or savvy to short the indices. Plus, all the government intervention of the past decade has rattled the conviction of the short sellers. So, we now have a herky-jerky market. The real difficulty is that buying and selling comes in bursts. You can be right in positions for 36 hours and 50 minutes of the 37-hour trading week. But ten minutes of buying or selling can completely destroy and impact your portfolio. Those bursts of trading are no question institutional traders as the volume can testify. As such, the 'market' is no more. We now have a stock 'casino' and momentum is your friend or foe. As an example, look at the final ten minutes of trading in the chart below. The Dow was down 100 points in the morning, climbed all the way back to positive territory, and then surrendered 50 points in the final ten minutes of trading. And this trading, came on heavy volume on a Friday afternoon before the July 4 weekend. The selling was well timed and very purposeful.

The coming week looks interesting. The world governments have been trying to save the Euro as it looks poised to complete its double top and lose another 30%. The manipulators, including our Federal Reserve, have been 'swapping' dollars for Euros with the ECB so the ECB can sell dollars and buy Euros. The ECB also extended $130 billion in Euro loans to European banks. That has now ended. What will the currency do next week? In the meantime, US 10-year Treasury yields have fallen to less than 3% on their way to, I believe, 2.2%. What does that say for the stock casino? Most importantly, there does not seem to be anything that could rally the casino in any meaningful way on the horizon. This could lead to a long, hot summer of melting stocks. The trick is to be ready to pounce in one direction or another when the important ten minutes of trading hits the market. Good luck and protect yourselves at all times.

Intraday DIA - 5 days ending 7/2/10, 10-minute bars
Chart Courtesy

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