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Quote of the Day

Tuesday, May 22, 2012

May 22, 2012 -- "Management is doing things right -- leadership is doing the right thing." Peter Drucker.

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On October 9, 2007, the Dow was at 14164.53. Now, almost five years later, the Dow is at 12489, down almost 1700 points from its high. What does that tell us, if anything? It tells us that time was working for the bear market.

 

I've taken the position that a bear market started in 2007 and that the bear market was interrupted by a nervous Fed in 2009, which was printing money as fast as it could. I believe the bear never died, and that in April of 2012 the bear revived, and the bearish forces kicked in again.

 

For this reason, I believe the proper position is to be on the sidelines with zero stock holdings. We are entering the second half of the bear market.

 

The Dow has been down 12 out of 14 days. This lopsided series rendered the Dow severely oversold. Therefore, today's rally should have come as no surprise. Indeed, the surprise was that it took the market so long to finally rally a bit.

 

I guess you've noticed that the new highs and new lows on the NYSE have reversed. This is another indication that the momentum of the market has topped out and is now turning down.

 

Thus on a typical rallying day the Dow may be up by as much as 75 points, but as the session drags on the Dow gradually sinks to where it has given up most of its gains by the close.

 

Today was a good example -- the Dow was as high as 60 points during the day, but near the close (I am writing this one hour before the close) the Dow is up only 7 points.

 

The Facebook disaster continues, and the real winner was the Zuck and his fellows. The last quote I got on FB was 31.11, meaning that almost ALL the eager Facebook buyers are showing a paper loss. When you buy a bubble, you are almost certainly creating a loss. If everybody wants an item, let them have it. An IPO is like an auction on steroids. You're bidding against hundreds (sometimes millions) of eager people. And the winner is often a loser.

 

TODAY'S MARKET ACTION:

 

My PTI was down 2 at 6361. The moving average is 6375, so my PTI is bearish by 14.

 

The Dow was down 1.67 to 12502.81.

 

Transports were up 4.85 to 5007.96.

 

Utilities were up 2.26 to 467.90.

 

NASDAQ was down 8.13 to 2839.08.

 

S&P 500 was up 0.64 to 1316.63.

 

There were 1,580 advances and 1,483 declines on the NYSE.

 

There were 23 new highs and 47 new lows.

 

Total Volume on the NYSE and associated exchanges was 4.06 billion.

 

Bonds: Yield on the 10 year T-note was 1.782. Yield on the long T-bond was 2.873. Yield of the 91 day T-bill was 0.091.

 

Dollar Index was up 0.571 at 81.66. Euro was down 0.70 at 127.20. Yen was down 1.21 at 124.83. Currency Prices as of 1 PM Pacific Time.

 

June gold was down 12.1 to 1576.6. July silver was down 0.142 to 28.179.

 

June light crude was down 1.01 to 91.85.

 

My Most Active Stocks Index was up 1 at 213.

 

The Big Money Breadth Index was down 4 at 986.

 

GDX was down 0.47 at 42.54.

 

HUI was up 13.316 at 409.71.

 

CRB Commodity Index was down 3.30 at 286.50.

 

The VIX was up 0.47 at 22.48.

 

Permanent Portfolio Fund (PRPFX) was up 0.30 at 46.55 (previous day closing). YTD Return: 1.00%

 

 

Late Notes -- Gad zooks, the Dow ended down a few points. The Dow has been down 13 out of 15 sessions. Another week or so and we'll have an all-time record. Seriously, these are strange and stressful times -- and fascinating too. If this keeps up, the Dow will drag down the whole market. The bulls must be getting gray hairs. This is not a market to short. The danger of a short (upward) explosion is too near. Every down day in the Dow suggests that we are nearer and nearer to a short covering rocket to the high side.

 

I haven't seen a slow-motion crash like this since 1980.

 

Reminds me of the old song,"Have I been around too long?"

 

Love,

 

Richard