MORNING MARKET COMMENTARY
- Thursday, September 24, 2009
Major Averages Negatively Reverse For Losses On Higher Volume
The major averages negatively reversed and closed lower as volume totals exceeded the prior session's levels on both exchanges. This marked a distribution day for the major averages and suggests a pullback of some sort may be in the cards. Decliners led advancers by nearly a 2-to-1 ratio on the NYSE and by a 3-to-2 ratio on the Nasdaq exchange. The markets have been much overvalued and overbought and were due for a correction. But, it would be surprising, with the quarter only a few trading days away, if bullish portfolio managers would allow any substantial correction.
< span style="font-size:100%;">PICTURED ABOVE: Gold ($GLD +0.16%) is consolidating above prior chart highs.
The next chart shown above is SPY, the ETF for the S&P, alphabetically speaking. While the SPX futures made a new high for the day, SPY did not. It equaled its high of 17 September, the astrological date that called for a high in the market. That little divergence was interesting to note, and it was shortly after the f! utures went to new highs that the market began to sell off, in earnest.
Next, I want to take a look at an equally important, yet not as closely followed market measure, long-term Treasury bond yields. In the chart below, we see a chart of the yield on the 30-Year Treasury Bond.
Yields, i.e., long-term interest rates, took a nosedive as the market fell in November and December 2008. As stocks got their mojo back at the beginning of the year, yields made their move higher as well. But curiously, the stock market and interest rates have diverged a bit since early August. Stocks have continued to power higher! , while yields now have fallen below their short-term, 50-day ! moving a verage (blue line).
What's scary is that almost all the subprime loans were a failure and now our government is again funding thousands of them. Those are the FHA loans, which make up 25% of loans, subprime all, with a 3.5% down payment, that already has an 8% failure rate. These are people who should not have loans. The LaRaza illegal aliens and minorities and others who are ill equipped to service these loans. Already 12-1/2% of mortgages are in foreclosure, or are late pays. Unemployment is 21%; and those foreclosures are going to increase. Foreclosures are at four million a year and climbing. Over 50% of those failures are from prime borrowers, which means more expensive homes, which means bigger losses. We will be lucky if this massacre ends in 2013.
The Trend Trader for Thursday, September 24th
Wall Street Breakfast What you need to know in early trading today.
Media Digest 9/24/2009 Reuters, WSJ, NYTimes, Barron's
7 Stocks for Thursday
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