Jack's Wrap - Ism Tells A Scary Story...

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And that doesn't mean the market won't bottom some time soon due to the amount the markets have already fallen. This leg down in the bear since October of 2008 has been pretty darn good. 25% or more. I know it seems like with the news out there things should be worse but this isn't bad for the bears if this is indeed a much longer term bear than we might all think. We could have a rally over the coming months but that by no means suggests that the bear is over. it may need a good rest and we'll find out about that soon enough. The Ism came out today and showed the economy is contracting at a very rapid pace. One not seen in quite some time The kind of economic decline associated with a very nasty recession. 50.0 is the flat line. Neither contraction nor acceleration of the economy. August came in at 49.9%. September crumbled at 43.5%. A very dramatic drop in just one month. Extreme really. It tells us that things are just starting to dramatically accelerate in terms of how fast we're deflating around the world. A move down to 48 or even 47 would have seemed bad but at least not exploding. 43.5 really tells the truth about where this economy is terms of weakness and job losses. As the world deflates jobs are lost as demand wanes. Too much supply means fewer and fewer jobs needed and available. Bottom line is things are getting very bad so even if we rally in the months ahead once this bill gets passed, it doesn't mean the worst is behind us and I just want you all to keep that somewhere locked away. Don't get too happy too fast even if things start to improve in the stock market. Economic news is really getting bad and fast. If this continues, we will be stunned beyond belief at the monthly job losses and unemployment levels in the next few months. It won't take long for the message to be made loud and clear to everyone.

We started lower after yesterday's technical reflex bounce from very oversold 60 minute charts. The market then had to deal with the news on the Ism thirty minutes in to the trading session. It tanked hard with the Dow down a drop over 200 points. Then we got the news that Warren Buffet was buying Ge on the cheap with a 10% dividend thrown in for good measure because of how desperate Ge was. The market exploded back up on this news as it's prone to do on any  drop of good news, even though it really wasn't good news. Spin doctor time. However, when all was said and done, the market couldn't close green and the Nas took a decent 22 point hit to the down side. The banks/financial's are rallying and holding up the Sp and Dow due to the belief that the bill will be passed in short order here. They're trading up on hope. It's keeping a floor under the market.

The commodity world continues to get slaughtered. Just when you thought they can't keep going lower, many such as X down 65%, they keep going lower as that bubble has permanently burst. After hours, Mos, already down from 162 to 65, is down 10 more on earnings. 54/55 as I write this. This would make it down 65% as well. Many others down in sympathy such as Pot and Mon to name just a few. This is basically the story for the whole commodity world. You were more than appropriately warned right here at the top. Hopefully you haven't been chasing as everyone on Cnbc said no problem 50$ ago that they would go right back up. They want your dollars so they can dump their shares. Again, these will never come back folks. Lots of rallies. At some point a good rally in that sector for some months is likely. It won't matter longer term. The story is over. All froth ends badly and permanently. See Nas 5170 on March 9, 2000. Oil closed below 100 today. Let's hope that'll hold but the bulls will want to grab 100 right back so watching that area carefully to see if 100 wants to go away for good now or will wait some months first. 70-80 within 9-10 months.

So here we are. The market has been annihilated over the past 12 months. It seems to be getting exhausted to the down side. Some decent short term divergences are here but the daily's still aren't great. We could go down further but any move lower would probably be the first good buying opportunity in quite some time as the daily charts would start to look just like the 60 minute charts. Ibm got slaughtered today and this monster hadn't gotten hit yet and it is usually true that when the very best get crushed you know you're late in the game. If the bill some how doesn't get passed you'll see another 500-1500 down side points on the Dow. It's very unlikely that'll happen but you never know. i don't want to buy in front of that decision in case the unthinkable happens and thus waiting for now seems the best way. Even if it goes up on it being passed it'll pull back and afford an opportunity to enter soon enough. Soon we'll have this nonsense out of the way. Then we can deal with the big jobs report on Friday. it better not look like the Ism number today because once the bill stuff is over, the market will focus on what really matters, the economy and the deep recession we are entering.

Peace

Jack

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