Oh, pigs whiskers! What a terrible day on the stock market.
The point drop wasn’t all that much—149 on the Dow Jones Industrial Average and 18 on the Standard & Poor’s 500. (At least not by recent standards.) And the percentage loss while painful—1.4% and 1.6% on the two indexes, respectively—wasn’t terrifying.
But the decline came just as the market seemed like it was about to shake off the downward trend that set in from the April 23 high. Stocks even looked like they might be on the verge of a small but still profitable summer rally.
But the retreat on June 22 puts all that progress at peril. Instead of breaking out to a new range that might have carried them to 1140 or even 1150, stocks turned south at the first challenge near 1120 on the S&P 500. And then they crumbled until they fell back through the 1108 level that they had struggled so hard to surmount and finally finished the day below 1100 at 1095.
None of this means that stocks have given up on any chance of a summer rally and that investors are doomed to suffer as the market falls back to 1060 or 1050. Technical analysis isn’t fate.
But technical analysis is a good tool for reading investor psychology and right now it’s not saying anything very positive.
The U.S. market looks like it’s moving to price in a weaker than expected economy—at least that’s how I read declines in homebuilding stocks, retail stocks, and consumer discretionary stocks.
If you believe that the economy is going to be weaker than expected, you look to the bond market for safety and income—and Treasury bonds did well today—and you wait to buy stocks until you see either lower prices or evidence that the economy is doing better than you expected.
Good Point Ed, but I wasn’t really talking about cap and trade. I guess I just want more regulation. Does that make me a socialist? haha
orline/specialcraig,
Aside from the situation in the Gulf, we don’t have a pollution problem. For a pollution problem, go visit China.
So the purpose of cap and trade is…? Reduce CO2 emissions? Considering mankind isn’t even responsible for the majority of CO2 emissions on this planet, then the whole thing is silly. Add the fact that all the plant life on Earth REQUIRES CO2 in order to live, and the whole purpose of “cap and tax” becomes even sillier.
Considering all the costs of cap and tax will be passed to the consumer, this whole scheme becomes moot. If you want companies to stop polluting (isn’t that what the EPA was for?), then regulate it. Ban it. Put limits on it. But cap and tax is just a means for heavy polluters to continue doing what they do, while passing along their costs to us. Great deal for businesses, lousy for consumers.
Let’s not forget how politically-connected industries will get themselves exempted from cap and tax, leaving small businesses at a heavy competitive disadvantage. If you don’t think that’s how the law will be written, then you haven’t been paying attention…
Good posts Sigli and Ed, and your right on Drmdrd. Don’t consume as much, and you wont be effected. It’s similar to I don’t see why so many people would be against legislation that would prevent pollution, if the company doesn’t pollute, then it wouldn’t effect them. If the company is heavily polluting, do we really want that? I guess if you are making a handsome profit off it then yeah, if your stuck with a polluted environment, then no, but you have no money to lobby, your busy cleaning up a mess.
I’m selling my house a week from today (closing date). I’m very happy that I got it done before things got worse!
need cap and trade. Double your electric bill? Use less electricity. Every time I show a house, i am shocked by how many people have energy efficient light bulbs and how often the AC is running with no one in the house while a stray window is open here and there. Wake up…Need to consume less.
sigli,
Sorry. I’ll try and remember to use my special “Sarcasm Decoder Ring” (Copyright 2010, Jubak Assett Management. All rights reserved). 🙂
Ed,
I guess I’ll have to turn the sarcasm meter a little harder with you too. It must not be on predictable yet.
You’re preaching to the choir, but we can discuss stuff anyway.
I’d expand this a little to point out that “The Rich” were protected from losing their wealth through mass loan default. I’d rather have seen government do what it was meant to and coordinate an orderly bankruptcy. “The Rich” would have lost and “The Poor” liberated from their debt and given a fresh start. Instead, we bailed out “The Rich” by putting more burden onto “The Poor”.
What’s done is done and now the bill has to be paid. I find it ironic that redistribution actually protects the status quo (as my comment above alludes to) and prevents the wealth divide from resetting as recessions tend to cause.
(Just don’t let the libs read this. It’ll spoil all their fun as they see we’re not dirty, rich, capitalist pigs! who are actually very interested in the small guy)
I assume you all saw the new home sales date today and the existing home sales date yesterday. I posted several real estate related comments over the weekend. I hate to say “I told you so”. The US is over-built and real estate price is at least 20% over-priced on average. The housing bubble created a lot of artificial demand, thus unrealistic high prices. The government’s incentives keep the price artificially high. This only prolongs the pain. (You can see this from whenever incentive is drawn, real estate sinks.) Artificially high prices also keep Fanny and Freddie lending or guaranteeing more money than they should!
BedWobbles:
Didn’t the Yuan-rally ended in the same day?
As I remember, that day started very high (even before the market opened) and I went away (because I had sold everything that I could). But when I came back late the day, it was all RED! Everything was in negative territory. Man, we get to remember what happened.
I also remember that day the whole world was singing choir over the Yuan depeg, except one person. (I went though several major financial media sites every morning before market.) Only one person on reuter or bloomburg (I forget which one) was saying “it’s much ado about nothing!”. The Yuan rally did not even survive the same day!
I posted here before that I usually do not take Creamer seriously because he has a SHOW to run. (He has to do things drawing attention to his show.) But his recent articles, I have to admit, very interesting. Compare the current market to its May correction low (1045?), it’s exactly as he said. The 2% is all yours, Ben! Good luck!
Ed:
I always said more is better as long as it’s civil. Actually the pending tax hike and many more taxes on the way is what exactly I was thinking. I just simply try not to be “political” and avoid the hot political potato, “tax”. You know everything when “tax” becomes the subject, people from all corners start to boil. Besides, I really want to know what Jim thinks would cause the double dip.
sigli,
Given the choice between letting the wealthy keep their money, or letting the government take it from them so they can give it back to the wealthy, I’d prefer letting the wealthy keep their own money. Mostly because only the “well-connected” wealthy would get money.
Believe me, I hate the fact the government gives ANY money to wealthy people. But taxing them more will only incentivize them to bribe politicians to get more tax breaks. Then the people who are on the arbitrary border of wealth will end up paying more in taxes, while the truly wealthy keep theirs.
Simply put, our political system works to their advantage. Until we disconnect the politicians from the influence of political donors, there is no tax rate you can levy that will be more effective at increasing taxes on the rich. All you are doing is creating work for tax accountants.
I’ve been thinking for some time (like many of the regular posters here) that this economy is very shaky. Too many things going against it still…housing market very weak, unemployment still very high, medical costs still rising, consumer debt going down while savings going up (above pre-recession levels), oil spill, messy war in Afghanistan, global growth slowing because of European debt loads (20% VAT in the UK? Ouch!) government inability to stimulate the economy and de facto tax increases at year end as the Bush tax cuts expire. Regardless of which side of the political spectrum you sit on this isn’t a joyous economic outlook. Double dip is looking increasingly likely.
Ed,
You shouldn’t worry so much about tax and redistribution when they’re bailing out the billionaires. They take it from the rich, send it to the poor and tell them to give it right back to the rich. It’s a free lunch! Shuffle, shuffle, shuffle!
“financial regulation that will cost the consumer more money to have a bank account.”
Canadians complained about their high banking costs until they didn’t have to bail out all their banks like the low fee US counterparts. Canadian banks didn’t need to make risky investments because they were doing it the traditional way–by charging fees. Sometimes regulation helps capitalism. 🙂
Jim,
Great stock photo. I think that everytime someone makes a trade that image of a car flying off a cliff into the ocean should pop up as a warning. Kind of like the surgeon general’s warning for financial markets.
YX,
Cramer posted “don’t trust the rally” and the next morning of the yuan un-peg his post suggested the rally was alive and watch out for “panic buying”. Each time I start to warm up to Cramer, he does something that solidifies his clown status.
Stumpy,
keep stockpiling gold and ammo. The end of times is near……
Stumpy-1
Well said right down to the hilarious “hopey changey” thingy..LOL.
I suppose in this mess, we must utilize a sense of humor! 😉
Let’s see,
Housing news -worse than expected.
Jobs news -only jobs created recently are Census jobs and they are going away soon.
Taxes -going up next year for sure, so in my opinion companies are front-loading with the same effect as cash for clunkers, and the housing credit.
And the icing on the cake is that our representative (I use that term loosely) idjits in Washington are NOT going to produce a budget this year.
If you were China, would you continue to buy bonds from a country that cannot produce a budget? So, weaker bond sales added to that mix as well.
My question is why no budget from congress?
(please add to the list as you see appropriate)
Not producing a budget means several things;
1. “Plausible Deniability” going into the November elections.
2. The potential for spending, literally “to infinity”.
3. The ability to NEED to pass a VAT (a democrat’s dream) in a November/December lame duck session because “we didn’t realize the economy was in this shape”.
4. The need to raise the debt ceiling without any sort of accountability as to exactly WHERE that money is going.
5. That a stinking bunch of cowards are running the country.
It is apparent to me that Jefferson is spinning so fast in his grave that the rotation of the earth may be affected soon…
So, how’s that hopey changey thing working out for everybody…
What double-dip? We haven’t emerged from recession. I expect one day it will be officially recognized that we still are in recession.
ddldmd,
ROFL! Now THAT was funny! 🙂
yx,
Not that you asked me, but I’ll chime in anyway (I’m just obtrusive that way!). I expect a double dip recession to begin next year (maybe sooner). Raising taxes in the middle of a weak economy is a sure-fire way to send it into a recession. Or in the case of 1937, back into a depression.
should that be piigs whiskers?
Jim:
The problems with your suggestions at the end of this post: (1) I am not comfortable abut bond (Treasury included) either. (2) Even if I see a low price in stock, it’s still useless if the market doesn’t move up. I would be buy low and stay at low.
I think I mentioned Creamer’s “why not to trust the rally” posting one or two days ago. He said in that post “the 2% is all yours!”
Jim:
What’s your thought on the chance of “double dip” recession? What do you think would cause the double dip?
Jobs, Housing, the Oil spill, Capitalism, wealth building. None of it seems to have any sense of urgency with the current adminisration. One gets the feeling they could care less about these things. What is important to them?… Entitlement Health care, Cap and trade to double everyones electric bill, An open border with amnesty, and financial regulation that will cost the consumer more money to have a bank account. What we need is Leadership in this country and were not getting it. The market does not like what it is seeing. Socialism is never good for Capitalism. Its like oil and water.