Real Unemployment Rate Soars to 11.8%

As Alan Abelson points out in this week's issue of Barron's, 240,000 payroll slots went up in smoke in October, and that total would have been higher by 71,000 were it not for these mythical jobs that were "created" via the infamous birth/death model.

Abelson also notes that--

"The category that gives you a better feel for the way things really are out there on the the job front is dubbed U-6 and includes marginally attached workers, part-timers who can't find a full-time job and the officially unemployed. In October, that measure reached 11.8%, the highest since 1994, when it was designed, compared with 7.9% a year ago."

MrKen is ever so thankful that he's retired!

To read this week's Barron's magazine for free follow this link:
http://online.barrons.com/public/main

Crude Oil, the Dollar & Gold -- A Disconnect

MrKen wonders when crude oil will correct and move lower. Is crude a "bubble" or not? In Friday's Wall Street Journal ((5/16/08)--"Bernanke's Bubble Laboratory"--the charts of the Nasdaq Composite (3/95-2002), Las Vegas Home Prices (8/01-2/08) & Crude Oil (6/03-present) are plotted on one graph. The chart of Oil and the Composite (which peaked in march 2000) look eerily similar. With the Fed sopping up excess liquidity recently, according to Barron's 'Up and Down Wall Street Daily' (5/16/08)by Randall Forsyth:

"The popular perception is that Bernanke has opened the floodgates. "The Fed is providing an extraordinary amount of liquidity," according to the head economist of a major bank.'

"The data, however, do not bear this out. The Fed itself actually has turned tight and growth in the money supply slowed from its breakneck pace in the past month. And, coincidentally, the dollar has pulled out of its nosedive and gold has pulled out of its ascent."

"...Specifically, the monetary base -- bank reserves plus currency, as measured by the St. Louis Fed -- contracted by 0.5% in April, according to calculations by Free Market Inc., a Chicago economic consultancy. Over the past three months, this measure of the Fed's own actions has grown at a mild 2.1% annual rate..."

--will crude oil soon follow the precious metals lower, despite bullish forecasts by Goldman, Sachs & UBS?

Kopin Tan writes in his column in this week's Barron's (5/19/08) "In Stocks, Summer Nonchalance Arrives Early"--

'...CRUDE OIL'S price tag isn't the only thing that's the subject of buzz; some of its recent relationships are also much talked about.'

'Take crude oil and gold, which have moved in lockstep over much of the past two years. Since mid-March, however, gold has pulled back more than 10%, partly as traders unwind their flight-to-safety trades while the credit crisis recedes. In contrast, oil has continued to climb, tacking on another 20% to an already impressive rally as the two commodities grow ever further apart.'

'Something unusual, too, is happening between crude oil and the dollar. These two have tended to move in opposite directions, and the dollar's weakening had in fact helped drive oil higher. Yet both have rallied over the past month.'

'If we expect these relationships to revert to their typical behavior, then crude's straying from the norm with both gold and the dollar suggests it may be well the errant one.'

'That has been true in the recent past. Bespoke Investment Group found just three instances since 1986 when oil has rallied 10% or more over a two-month period while gold fell by double-digit percentages. In the two months following such divergences, oil has declined two out of the three times to register an average loss of 22.5%. Gold, on the other hand, has rallied each time to post an average gain of 5.9%.'

'Exorbitant oil prices curb consumption and act as their own check, and few will be surprised if oil takes a breather after soaring nearly 150% over the past 16 months...'

Curtesy of Barron's -http://online.barrons.com/public/main?mod=topnav
& http://online.barrons.com/article/SB121094212709898613.html?mod=rss_
barrons_up_and_down_wall_street_daily&page=2

Stock Market 'Pennant' Formation to Resolve Soon?

Here is some detailed technical analysis of the DJIA and its 'pennant formation', curtesy of Forex Capital markets, which appeared on the Yahoo Finance site on 2/25/08:

pennant

In technical analysis, refers to a chart pattern occurring when the trading range formed by successive highs and lows narrows over time.

Equities – Dow Jones Industrial Average

US equity markets have been in a downward trend since October as deteriorating economic data leads fears of a recession to build. Upcoming news could weigh on stocks, as housing sales and prices are forecasted to tumble while consumer confidence is anticipated to plunge, which does not bode well for the domestic economy as consumer spending represents approximately 70 percent of GDP. Meanwhile, a daily chart of the Dow Jones Industrial Average shows price consolidating within a pennant formation, and given the sharp declines that preceded the recent moves, a bearish breakout is likely. However, if price holds above near-term support at 12,300 and manages to find a bid tone to break above 12,500, the index may target trendline resistance at 12,660.

Written by Terri Belkas, Currency Analyst, Forex Capital Markets LLC, DailyFX.com

Tell us what you think about this article. Email tbelkas@dailyfx.com

Curtesy of http://biz.yahoo.com/fxcm/
080225/1203952532617.html?.v=1
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And Barron's column "Streetwise" (2/25/08), by Michael Santoli, has some interesting observations on the tediously narrow range that has held the stock market captive this month---

"...As a sharp trader friend likes to say, "When nobody know what's going on, people turn to market technicals..."

"...it seems most everyone is turning in their spreadsheets for some charts, with talk of the Dow's "triangle" or "wedge" or "pennant" pattern all too common."

"To translate, this talk basically means that the Dow coiled itself into a tightening band. And the sages helpfully tell us that the pattern tends to be resolved by the index breaking hard--one way or the other. So, let's get this straight: Often, after a period when nothing much happens, something happens."

"If professional investors are bored, then individuals are...fleeing equities...investors have pulled nearly $60 billion from stock mutual funds this year, while adding more than $70 billion to money-market funds and small CDs..."

But "corporate insiders have been on a selling strike for nearly two months. The dollar-based ratio of insider sales to buys has been in the bullish zone pretty much all year...and down 90% from a year ago."

Robin Carpenter of www.CarpenterAnalytix.com is quoted in Santoli's column as saying--

"For what it's worth, my own expectation is that we are close {in time} to an upturn of some consequence, but that the market needs one more down-thrust of some energy."

To view this week's Barron's for free, go to http://online.barrons.com/this_week

Bear Market in Stocks Turns Vicious

Wall Street extended its 2008 plunge Thursday (1/17), sending the Dow Jones industrials down 306 points and to their lowest level since last March after a regional Federal Reserve report showed a sharp and unexpected decline in manufacturing activity. -- Yahoo Finance

Back on Dec. 24, I commented on some bullish sentiment readings on the stock market, as reported in Barron's Financial Weekly. These had occurred shortly after the Dow Theory major bear market signal given on November 21 (which I discussed on Dec. 4 & 18), when the Industrials closed at a new low. Indeed, a short-lived bounce occurred.

But the current bear market quickly has resumed -- and turned vicious, as bear markets are wont to do--with the Standard & Poor's 500 Index also piercing its August low. In addition, all the averages are now well below their 200-day moving averages.

MrKen is very bearish on the markets himself & will begin trading within the next 10 days. I have been reviewing potential candidates for selling short--the only possible long positions I like are some of the gold & silver mining stocks**...Stocks almost always fall faster than they rise & MrKen is a pessimist at heart, anyway. :>)

Some comments on the dire state of the equity markets follow from Barron's (The Trader, by Kopin Tan 1/14/08)

"...Might Tuesday's (1/8) low--the S & P finished at 1390 that day--form a meaningful shrt-term bottom? The AAII survey showed a flash of panic, with the percentage of bears reaching 59%, the highest reading since 1990. But the VIX forecast as measured by the VIX volatility index had pushed to just 26--well below August's 37. At the International Securities Exchange, investors bought just 0.72 calls for every put--more fearful than the recent average near 1.16, but still more complacent than the 0.51 low registered before August's rebound."

"Andrew Burkly, Brown Brothers Harriman's market strategist, isn't entirely ready to buy this low, partly because the market's long term upward trend may be changing. 'If the market has transitioned to a primary downtrend, oversold signals need to be deeper to be significant,' he notes."

"Burkley says measures like selling intensity, price momentum and investor sentiment are moving toward extremes, but most are still less extreme than levels seen last August. 'A deeper oversold condition is necessary to indicate that the risk/reward balance for equities has turned favorable.'

To view this week's Barron's for free, follow this link:
http://online.barrons.com/this_week

Disclaimer:

All ideas, opinions, and/or forecasts, expressed or implied, are for informational purposes only and should not be construed as a recommendations to invest, trade and/or speculate in the markets. Any investments, trades and/or speculations made in light of the ideas, opinions and/or forecasts expressed or implied herein, are committed at your own risk, financial or otherwise.

MrKen is NOT a registered Investment Advisor & NONE of the above discussion should be taken as investment advice. It is the writer's personal opinion ONLY, except where specific cites from financial publications are given.

MrKen has no market positions at the time of this post.

** Specific ideas will appear soon...

Weekly CBOE Put/Call Ratio Turns Bullish -- A Tradeable Rally?

Per Barron's Market Laboratory - Indicators (12/24/07), the weekly put/call ratio has turned bullish, especially for equity options.

"Investors rely on the equity put-call ratio, which tends to track individual trades, and the index put-call ratio, which reflects professional and institutional strategies, as contrary sentiment indicators. The higher the put trading, the more bullish the indication and vice-versa..."

"Readings in the CBOE equity put-call ratio of 60:100 and in the S&P 100 of 125:100 are considered bullish...Bearish signals flash when the equity put-call level reaches the vicinity of about 30:100 and the index ratio hits 75:100."

MrKen notes that the equity put-call ratio was .84 for the week ended 12/14/07, the highest since a reading of .91 for the week ended August 17--which preceded a rally of @ 1000 points in the Dow-Jones Industrial Average. The S&P 100 Index (OEX) ratio was at 1.26, a mildly bullish reading--but far off its levels of 1.65 for the week ended 8/24/07 and 1.88 for the week ended 10/12/07.

In addition, the AAII Index (American Association of individual investors) for last week was 35.9% Bullish & 47.2% Bearish--another contrary indicator giving off a short-term 'buy' reading.

So, it looks like Santa Claus may show up on Wall Street in the 'Nick' of time, after all!

Disclaimer: MrKen is NOT a registered Investment Advisor & NONE of the above should be taken as investment advice. It is the writer's Personal opinion ONLY, except where specific cites are given. MrKen has no market positions at the time of this post.

To view this week's Barron's for free, follow this link (MrKen has no connection to Barron's, except as a devoted reader for over 40 years):

http://online.barrons.com/this_week

'Dow Theory' Major Bear Market Signal

According to the Nov. 12 issue of Barron's, Richard Russell, the publisher of Dow Theory Letters, indicated the potential of a classic Dow Theory bear-market signal.

"The Dow Jones Industrial and Transportation averages plunged to end-of-day lows of 12,845.78 and 4,672.35, respectively, on Aug. 16. Both then rallied. But while the industrials hit a record 14,164.53 on Oct. 9, the transports didn't come near a record, thus failing to confirm the DJIA's strength. This set up the potential for a classic DOW Theory bear-market signal."

"That signal would come if both averages--and I emphasize both--slip below their August 16 lows. The Transports did dip under their low last week, ending at 4603.92 ..."

MrKen notes that on 11/21 the Industrials closed at 12,799.04, below even the low ebb of trading during the summer's credit crisis--completing the Bear Market signal.

However, before any of my gentle readers rush to sell the market short, they should be aware that many short-term technical indicators are flashing strong 'BUY' signals-- such as insider trading activity. Again, according to Barron's Michael Santoli ('What to Ask Mr. Market'-11/26), for the week of Nov. 19, the ratio of insider selling to buying was down to four, deep in buy signal territory and at a level last seen the week of Aug. 23.

And there is dissent from certain quarters. UBS strategists and others have put forth the Baltic Dry index (a measure of spot cargo demand) as the 21st century transport average. It remains strong.

Disclaimer: MrKen is NOT a registered Investment Advisor & NONE of the above should be taken as investment advice. It is the writer's opinion ONLY, except where specific cites are given. MrKen has no market positions at the time of this post.

To view this week's Barron's for free, follow this link: http://online.barrons.com/public/main?refresh=on