U.S. stocks ended off earlier lows but still lost more than 1 percent Wednesday as China, earnings and the dollar's gains clipped the market's momentum after Tuesday's rally.  The Dow Jones Industrial Average shed 122.28, or 1.1 percent to close at 10,603.15, erasing all of the prior session's gains. It was the worst one-day percentage drop so far this year. The S&P 500 fell 1.1 percent and the Nasdaq dropped 1.3 percent.  Most Dow components finished lower, with IBM, Kraft and Alcoa at the bottom of the pack. Bank of America, Merck and Disney were among the few gainers.  Spooking investors was a report that the China Banking Regulatory Commission had asked several banks to stop issuing loans.  While the CBRC's chairman denied that he had asked banks to stop lending, Bank of China, one of the country's big banks, said it was taking steps to rein in loans.  The dollar hit a one-month high against the euro amid worries about Greece's financial situation, and rose against other currencies as the election of a Republican for a U.S. Senate seat in Massachusetts raised expectations for spending cuts in Washington.

As we commented earlier today to customers…..The legions of worry warts still abound as every minor sell down continues to be met with the response, "Is this the top ?"   The answer is probably not, especially while pervasive concern continues to be the dominant investor theme.  Now that said can we have a correction of five10 percent?  Of course.  However,  we continue to find it hard to believe that top is in play when everyone continues to call for it!  After all tops are formed when everyone becomes so comfortable with stocks they invest all their available liquidity without a hesitation or care in the world.  And clearly that is not the current sentiment.  Again, it is very likely we will have some semblance of a decent size pullback soon seeing the S&P 500 has run up 10% from just November 2009, 31 % since July 2009 and 64 % from the March 2009 lows.   So do we think a major top is in?  The answer again remains no.  In regards to protecting capital from a drawdown or a correction or what is the risk to putting new money to work today and the answer changes.  The answer in this scenario is the run up in equities puts investors at risk to a correction, not a top, but a correction.  Our guess is that the correction would be similar in size and scope to the June/July 2009 correction that saw the S&P fall 9.00%.  This correction would likely create more pessimism and fear and then create one last leg up that would create the overconfidence associated with a top or a very long and protracted trading range.  At this point the best thing to do it to place trailing stops on current positions and or buy an inverse ETF to hedge out some temporary drawdown possibilities.   From a trend perspective the trend remains up and must be respected.   If the S&P 500 violates its up trend near 1050 we would suggest getting more active with a hedging strategy or tightening up stop loss levels.  However, this remains a market fraught with caution not speculation thus we continue to believe corrections should be relatively shallow.

Loading mentions Retweet

Stocks and commodities rallied and the dollar slumped on the first trading day of 2010 amid signs that manufacturing is improving around the world. Oil climbed above $81 a barrel after freezing weather hit the U.S.  The Dow Jones Industrial Average closed up 155.91 points, or 1.5%, to 10,583.96, posting its biggest gains in point and percentage terms since Nov. 9.  The technology-heavy Nasdaq Composite  gained 1.7%. The Standard & Poor's 500 index  climbed 1.6%, with all its sectors posting gains.   Its materials and energy categories led the gains, up 2.8% each as gold futures rose to a two-week high and crude-oil futures climbed above $81 a barrel while the dollar sank.  Investors were encouraged after the Institute for Supply Management showed a bigger-than-expected uptick in manufacturing activity during December, helped by improving production and ordering activity.   Factory employment also showed gradual improvement.   Also comforting some were Federal Reserve officials' comments from the weekend that played down the idea of lifting its easy-money policy in early 2010.  Nevertheless, Chairman Ben Bernanke said the Fed needs to "remain open" to raising rates to avert or pop future asset bubbles.  Trading activity picked up from the anemic pace of the last few months of 2009, hitting a two-week high, though it remained below last year's daily average. Most traders and money managers believe it will take a few more days for Wall Street's trading desks to return to full strength and that the gradual return of participants will tend to boost the market in the near future.

Loading mentions Retweet

Tech Ticker's Best of 2009: Guest of the Year, Barry Ritholtz: by Aaron Task

On March 10, Barry Ritholtz, CEO of Fusion IQ, came on Tech Ticker and said the "mother of all bear market rallies" was upon us.

Given the appearance was within 24 hours of what proved to be a historical market bottom, that call alone would have put Ritholtz in the running as our top guest of 2009 and winner of the coveted (and fictitious) "Purple Microphone" award. Ritholtz's call was more notable because, until then, he'd been steadfastly bearish on the market, meaning he was one of the few pundits to successfully navigate the downturn of 2008 and play the upside of 2009.

But unlike many other bears who turned bullish last spring, Ritholtz didn't abandon bullishness as the rally continued through the rest of 2009:

In May he said: Don't Call It a Suckers Rally

In mid-September he said: The Rally May Only Be in 6th or 7th Inning

And as of last week, he was still saying you have to give the rally the benefit of the doubt, suggesting the S&P could hit 1300 before faltering.

While other Tech Ticker guests were bullish on stocks in 2009, many did so because they believed a V-shaped recovery was afoot and that the housing market had bottomed. Ritholtz was able to walk the intellectual tightrope between being bullish on stocks and being skeptical about a robust recovery, especially in housing. As 2009 comes to a close, both calls are looking prescient.

Still, nobody's perfect. In mid-June, Ritholtz dismissed the "second-half recovery" story and said stocks were more apt to retest the March lows in the fall vs. hit new high, although he subsequently reverted back to the bullish (and right) side. 

Link to the video is here:

http://finance.yahoo.com/tech-ticker/tech-ticker%27s-best-of-2009-guest-of-the-year-barry-ritholtz-397372.html

Loading mentions Retweet

U.S. retail sales rose an estimated 3.6 percent this holiday season as online gift-buying, last- minute spending and an extra shopping day spurred a recovery from last year, the worst in four decades.  Helping lift sentiment, MasterCard's  SpendingPulse unit said a late boost from procrastinating consumers and an extra day of shopping between Thanksgiving and Christmas increased total retail sales, excluding automobiles and gas, by 3.6% over the year-earlier period through Christmas Eve. Macy's  climbed 1.1% , while Saks rose 1.3% and American Eagle Outfitters advanced 2.9%.   Also providing a boost, online retail giant Amazon.com  said over the weekend that sales on its peak holiday-shopping day topped 9.5 million items.  This news helped stocks rise for the 6^th straight session, despite choppiness throughout the day.  The Dow Jones Industrial Average gained 26.98 points, or 0.3%, to 10, 547.08, its highest close since Oct. 1, 2008.  The technology-heavy NASDAQ added 5.39 points, or 0.2%, to 2,291.08.  The Standard & Poor's 500 added 1.3 points, or 0.1%, to 1,127.78.  Volume was light across the board which is to be expected the last trading week on the decade. 

The market is back to levels not seen since the fall of 2008, around the time of the collapse of Lehman Brothers.  Year-to-date the Dow is up just over 20%, the S&P 500 is up 25% and the NASDAQ is up 45%.  But all three major indexes are up even more substantially since hitting multi-year lows on March 9 amid the height of the financial crisis.

Loading mentions Retweet

According to AP - Prisoned Ponzi master Bernie Madoff was moved a hospital in Durham, N.C. after he suffered "serious injuries consistent with an assault" according to a report from a local ABC affiliate.

Mr. Madoff, who is now being treated at the medical facility in the Butner, N.C. prison where he is serving his 150-year sentence, was treated at Duke hospital in Durham last Friday for the injuries and discharged earlier this week, according to WTVD ABC 11, which cited unnamed sources.  However, a lawyer for the hospitalized Madoff says his client has experienced dizziness and high blood pressure. The Bureau of Prisons said Thursday that the 71-year-old disgraced financier remains under medical care for a seventh day.  Prison officials have declined to reveal why he was transferred from a North Carolina federal prison to a hospital. But bureau spokeswoman Traci Billingsley did say there have been no assaults at the prison in the past week.  Lawyer Ira Sorkin tells The Associated Press that Madoff has "had some dizzy spells and some high blood pressure."

Duke University Medical Center says Madoff was released Monday. Billingsley says he is now in a prison medical facility.  Madoff has been imprisoned since March after pleading guilty to fraud and admitting cheating thousands of investors out of billions of dollars.

Loading mentions Retweet

Off the topic of finance for a few minutes.  Below is a great link that shows a time lapse video of the construction of the outdoor rink at Fenway Park which will host a game on January 1^st 2010 between the Boston Bruins and the Philadelphia Flyers.

http://video.nhl.com/videocenter/console?id=54660

Loading mentions Retweet

Stocks and the U.S. dollar rose while government bonds and the cost of insuring against corporate defaults declined on evidence economies around the world are improving.  The Dow Jones Industrial Average was up 51 to close at 10,464.  The S&P 500 gained 4 points to close at 1,118 and the NASDAQ rallied 15 points to close at 2,252.  Both the Nasdaq Composite and the S&P 500 climbed to new 2009 closing highs.  Gold fell to a seven-week intraday low.  The gains came as used-home sales for November were particularly strong, having risen more than double the increase economists had expected. The report was a boon to stocks exposed to the housing sector, especially home builders, as strength in existing-home sales tends to come ahead of major improvements in new-home sales.    Equities in the world’s largest economy advanced even after the U.S. Commerce Department said gross domestic product expanded at a 2.2 percent rate in the third quarter, slower than the 2.8 percent pace originally reported by the government.

Loading mentions Retweet

Call it a Santa Claus rally, call it window dressing, call it portfolio manager benchmark chasing, call it manipulation, call it all of the above or whatever you like but stocks are clearly trying to levitate higher through year end.

During the holiday season it is hard to call a market as it seems like trading desks are half staffed and even the bears go into hibernation for a bit. After all it is winter. 

That said the direction for stocks remains up. While common logic suggests a pullback should occur or a correction is needed stocks continue to climb the wall of worry and doubt. Until that wall is replaced by complacency, acceptance and over confidence stocks will likely continue to trend higher a bit longer.

Internals remain solid (not exceptional) however the new 52 week high list is expanding again, which is bullish. 

We continue to expound the mantra - hold ‘em if you’re long ‘em. Just make sure you plan an exit strategy such as; trailing stops or strategic pruning. As much as we want to see the cracks in the foundation and not sound like a broken record for now there aren't any.

Below 1,085 remains the level to watch on the SP 500 short term level. Should we break that level we could sell off a bit. On the upside we do not see any major resistance in the SP 500 until 1,193.

Loading mentions Retweet