What is up with the Stock Market?

Yo Suckas!

I am very confused. I have read a lot around here about the volatility of the current market, and I have some questions.

How is it that oil just hit 80$ a barrel and the market is booming this week?

Why does it seem that every indicator says the market should be falling, yet it continues t rise?

If you really, really wants to know the state of affairs of our nation's economy and have the time to read and resarch this link will give you pleanty of explanations of how our markets are manipulated by the biggest main banks in the world to keep it afloat.

The link provides more links into articles of what is facing America's economy and who is causing the damage and the ones that will benefit from it.

www.economyincrisis.org...

They are so many variable involved it's hard to explain it all. Alot of it has to do with the value of the dollar, oil, special interests. I may not be able to explain it adequately but I'll give it an attempt.

when the dollar is down, the stock markets are up, when the stock markets are down, the dollar is usually up. That being said spoken in very general terms, there are always additional factors in the mix, movements in other currencies and markets can sometimes have both the dollar and the market down or vice versa.

oil prices tends to correlate with stock market futures, many of these things don't happen immediately but take time to actually play out in the market. Usually higher oil prices mean lower stock markets but as I've witnessed many times, the markets can be very selective and easily turn a blind eye to certain factors.

hope that helps in even the slightest bit.

ive been taking a pretty big hit on the market lately. really big...

Im still shocked to see how VMWare is still holding up at over $70. Shoot, it was close to $85 last week!

This is GREAT stuff guys. SOLID!

How high do we expect oil to go? And isn't September usually the worst month for the market?

Thanks for all the info!

oil can easily reach $100 a barrell, two hurricanes in the gulf, military action against Iran, are just two of the possible scenarios that could cause such a rise.

Why is the market rebounding? Easy

The market is rebounding because investors are already discounting the fact that the FED will cut rates on Tuesday next week. In fact they have priced into the market a 70% chance that the FEDs cut by 50 basis points of .5%.

This is mostly due the beating they took over the last month, and the liquidity crisis. its very hard to explain this one wiht a good spin though. The liquidity crisis was a direct result of what most on Wall Street considered "free money". After 9-11 Greenspan and the FED saved the economy. They did it by lowering the FED funds rate. This provided TONS and TONS of liquidity. This is normally a very inflationary thing to do, but the FED was not fighting inflation after the attacks. Secondly, the Bush tax cuts were a huge boon to the economy (say what you want about them, they worked). All this liquidity that poured intot he market is why the FED has been on an outright war against inflation, it was them that caused it. The problem with the FED fighting the war on inflation they are looking at the wrong economic indicators. All the information they were basing their decisions on were about where has the markets been, most of the 6 motnhs old. The current crisis is a crisis that changes daily and the FED has been fighting the wrong war.

The most concvincing arguement about this was the last FED meeting. Wall Street was already calling for .25 rate cut, and they probably needed it. A rate cut at that time of that amount would have done a lot of good for the markets. The FED instead stayed pat, not a problem. But their statement was what scared the hell out of me. In their statement they never mentioned anything about the ONGOING liqiuidity crisis, or the sub prime mortgage debacle. Instead they concentrated on inflation and felt that was still the most importanat factor they faced in preserving our economy.

By time they realized what was going on, it was too late. They missed their opportunity. The vote was unanimous, so none of the Fed guys can say they thought different. Because of the statement they made, when things hit the fan, they could not step up and cut rates, it would have shown complete incompetence (which the statement had already done anyway). Instead they lowered the discount rate. A nice jesture, but not good enough.

Well next Tuesday will be interesting, time for the FED to eat crow. I, personally don't think they will. At most they will cut .25 points. They will still talk about inflation, but they will mention the liquidity crisis. Out of all the things the FED has in their arsenal to protect the Economy, lowering the discount rate is by far the most inflationary. The FED directly pumps money into the system.

About the markets, if the FED does not cut 50 basis points the markets will sell off. If they do not cut rates at all.....then look out below. I actually feel the markets still needs what we call a day of capitulation..

Everyone finally sells and puts an end to selling pressure. Tis been up, up and away far too long and we need that corection to keep things going.

My targets a re a bit scary, but thats what we need to clean out the system. I no longer trade, or work on Wall Street, so this is not a recommendation or anything, just an opinion. I think we need to see 12,250 on the DOW and 1325 on the S&P 500. When we tick those marks, watcha nice bottoming out phase....then the correction to upside can proceed.

Just like with anything in economics. The markets are all about supply and demand. Too much stock out there, markets go down. Too many people own stock right now that are not prepared for hared times. When they panic and sell.....be the smart buy and buy from them. When the markets go up, shorts are squeezed. this is often very painful because they are FORCED to cover at any price.

Your lesson for the day is now over.

Buy low...sell high!

But didn't we already see a 10% correction last month? Shouldn't the market just go back to steady growth?

Originally posted by Dolomite

How is it that oil just hit 80$ a barrel and the market is booming this week?

the price of oil has an big effect on only a small sector of all the stocks
on the NYSE.

what does oil price have to do with Apples' new I-Pod?
and the expanding demand for $500. hand held wireless devices?

if one can't afford a car, or to gas it up, an alternative would be to connect with others by text messaging and easy walk-around internet/video atthe touch of a button, and only paying $100+ a month for "Freedom"

there's tons of other businesses that investors are 'betting' become popular
and resulting in the shareprice rising (hopefully exponentially)

the market is a crap-shoot essentially, the long term small investor is
along for the ride (volitalility), and anticipates long term growth to protect them from their money getting more worthless as time goes by.

avoid the trade-trade-trade suggestions by brokers who make their living by constantly rebalancing your portfolio

St. Udio

Just a heads up on the what does oil have to do with I-pods theory. Ipods are generally made up of plastic. Petroleum is the most important raw material in the manufacturing of plastics.

Oil affects everything......1 way or another.

The market is not necessarily a crap shoot, as it is a zero-sum game. For everywinner, there always has to be a loser. The key to making money in the market is cutting your losing trades as soon as you can and letting your winners run. Try not to use stops unless your very much in the money and your protecting profits. Specialists love to see stops in the market, they will always be triggered.

You are right about the trade-trade-trade mentalitly. Avoid it at all costs, comissions, fees and costs will kill profits.

buy low-sell high!

Who knows what's going on with them, things look pretty grim to me right now. Potential recession in the works, big time problems with housing and real estate, dollar at near record low, commodities at multi year highs (wheat, corn, oil, and gold), systemic issues in the credit markets, and let's not forget things in Mideast seem to be building to a head again. Yet the Dow is only 5% off of its all time high. Still the street is crying/begging/demanding a funds rate cut. A funds rate cut will not help someone whose ARM is about to reset into a higher rate. CNBC has been parading face after face saying a rate cut is needed consequences be damned. Runaway inflation and foreign capital flight are two potential consequences if they should cut rates. A large violent correction will happen if they hold or raise.

This week is the pre-game for next week. FED meeting, OPEX, several big investment banks reporting 3rd quarter earnings, and commercial paper rollover ( i think that was the 4th one). Anything happening since near close yesterday should be viewed as positioning for next week. I think long term the market will be OK, short term may be a little bumpy in the near future.

Personally i've got some puts against home builders and mortgage companys in my gamblin' account ( I'll call it a trading account when I win more), and think you'll see another string of bankruptcies in those sectors before January. Don't for a second think that any alleged bailout by Congress is to help out people about to be forclosed on, they'll say it is but its really to bail out lenders. If you don't have a home yet give it 12-24months and you may get what you want alot cheaper especially in "bubble states" CA, FL, MI, and AZ. I think most of the rest of the country can make it through this housing mess, but those states require lower real estate prices to make owning a home affordable to someone with a median wage.

Anyone who is willing try this out, take a look at the legal notices in your local newspaper, particularly foreclosures and bankruptcies. I think most papers run them on Friday (it may be last Friday of the month though) compare to previous months or years. Lots of misery relating to housing right now.

As always I could be wrong about anything financial, but I've just about recouped my tuition costs by going to the dark side against housing.

wait.. they are cutting rates AGAIN? Where the hell have I been, I haven't heard of this!

There is FED meeting tuesday Scientist. The market is taken it as a given that it will be a 25 basis point cut if not a 50. The pro-rate cut camp has taken it as a given that there will definately be a rate cut Tuesday at least 25 if not 50. Many say that this weeks rally has already priced in a 25 cut. I'd love to see them hold or even raise so that we could get the pain over with rather than holding it off indefinately.

The recent cut that happened on OPEX in August was only a discount window cut. There hasn't been a rate cut in a while now. The street has basically dared the Fed not to cut. If the fed cuts, markets may not even pop because it seems the markets have already priced that in this week.

Has no effect on mortages though. Those rates are set by Prime (and the bond market) or LIBOR, which could conceivably go up even with a Fed Funds rate cut. Would just allow banks to borrow cheaper to keep the bubble going a little longer.

hm, looks like ill be holding out until next week. I almost pulled completely out of a few stocks today. Thanks! That will teach me to ignore motleyfool and morningstar for a week straight!

I would like to propose that the recent market turmoil is the result of a few things. Mainly years of "cheap money" coming home to roost. Interest rates were lowered at the beginning of this decade, in the dotcom bust and after 9-11. They stayed at an unnaturally low rate for a very long time. It allowed people to continually refinance tapping home equity to spur consumption. Property values started rising faster than there normal rate. Lenders loosened underwriting standards, allowing more people to "qualify" for buying a house, further driving up real estate prices due to demand. Many people opted for (or were conned into depending on your point of view) adjustable rate mortgages (ARM's) and other crazy stuff like Negative Amoritization loans. Product like that are fine with low rates but they reset after a period of time (2-5 years i think). As the ARMs reset at higher interest rates and people started to default then the depths of the greed started to show.

Institutions "packaged" these loans into bundles and then sold them as investment grade insturments. The ratings agencies gave these bundles high quality ratings, and sold them to investors around the world. As the delinquencies and forclosures started to mount up it siezed up the credit markets that provide short term funding. People holding these instruments found that their "AAA" rated paper was essentially "junk" paper. Central banks around the world have been injecting liquidity over a month now to keep the credit markets moving. What caused them to sieze up is no one trusted what was being sold.

Mix this with a softening economy, real inflationary pressures in oil and food, a weakening dollar, and geo-political instabillity and you've got a real recipe for trauma. The markets are inexplicably holding up well so far but the crisis isn't over yet. Many of the worst loans havn't even reset yet and won't till January or possibly July.

I've spent more time reading up on this than I have on ATS lately and I find it fascinating. There is a real provable "conspiracy" here. In my opinion of the greed sort. Many people believe that we will see most if not all of the publicly traded homebuilders go bankrupt, all the smaller lenders mostly have, and maybe some of the the bigger lenders and regional banks. This is gonna make the dotcom bust look like a down day. The only question is when, how fast and who gets the bill (most likely the taxpayer). Countrywide the US's largest mortgage lender is doing its best impression of Enron at the moment. As 3rd quater reports come out people will begin to have a better idea of how much mortgage crap institutuions have on there books. Another problem is these insturments are almost totally unregulated and opaque so lots of institutions have them and off the balance sheet lots of times.

I've spent many hours reading up on this over the past few weeks, and know that I'm probably not the best to explain it. I recommend that anyone interested in it do their own research and come to their own conclusions. It looks bad to me, but I'm still a novice in financial matters.

Here is a statement about it from an institution I assume is not a novice.

Bank of England

Rumors abound but like I said in a previous post, this week is the pre-game next week it's probable that we will see some fireworks.

Some interesting numbers today. Banks sidled-up to the lender of last resort (U.S. Fed) and borrowed an average $3.16 billion per day in the week ending Sept. 12 (yesterday)...compared with a $1.34 billion daily average for the previous week. These figures don't exactly tell me that the liquidity problem is reversing. I wouldn't place too much emphasis on yesterday's market action either. Overall, low volume rallies show a lack of enthusiasm and exaggerate price movements. Like y'all said, looks like traders are waiting for confirmation from the Fed on Tuesday.

On the oil/stock-market thing, here's a comprehensive little 2003 missive by John Mauldin that includes discussion on The Connection Between Oil and Stock Prices.

If you read through to the segment titled; The Dollar and Oil...you will find this statement:

"We will visit the implications of the continuing fall of the dollar many times over the coming year, as we have in past years. It is the dominant story of the economic period.".

Dollar weakness comes as no shock...what does shock is the amount of surprise over it

I'm with you traderonwallst...mental stops only during periods of high volatility. On the other-hand, for intermediate-term traders, or longer term investors that prefer to manage their own accounts...folks that can't/don't hover-over their laptops 24/7...sometimes setting stops is a matter of practicality.

*Fed custodial accounts showed another decline in holdings of foreign treasuries this week.*

obe1

AGREED. But 1 thing to remember about the low Dollar. Its not always percieved as a negative in the buildings of lower manhattan or the manufacturing circles of the mid west. When the dollar is low, MANUFACTURERS who build things for export do dramatically better than those who only sell at home. The world is becoming global and US companies are leading the way. There was a time when Corporations demanded the government prop up or save the US$, not anymore. Companies like John Deere, Cummings, Ingersol-Rand, GE, Untied Technologies....I could go on and on. They are manufacturing in this country.....and selling those good over seas. Most of them now received more revenue from outside the US then from within. When US products are cheap, they are bought around the world. Due to the currency devaluation.....OUR PRODUCTS are cheap around the world. On top of it, these top tier manufacturers are the leaders in their industries. They happen to make the best products also. There does come a point when a SEVERELY low dollar will begin to hurt the stock market, but don't look for it any time soon. As long as the money keeps rolling in, Companies are not going ot be complaining any time soon.

There was a time when barrels of OIL were purchased in US$ only. This was an accepted practice around the world. Well, alot of the increase in the price of oil I believe is due to this. Most of the oil is produced outside the US, by non-US companies. US companies then refine it and sell it around the world. The producing countries have now demanded that oil be purchased in non-US$ currency. Russia is making Japan pay for it in YEN. They are trying to capture the profit in currency trading too. For a while now, oil producing countires have been losing money due to having to receive payment in US$ and then translate it into their own currency. They were raising the prices of oil to cover their currency loss as the US$ decreased in prices.

Another benefit of a lower $US is tourism. We might not be the favorite country in the world right now, but people are visiting us like never before....WHY? Its a cheap vacation. Prices might seem expensive for us here, but visitors from around the world, get a bang for their buck when they come here. When they exchange their currency, it buys more!!!!

And they spend more. I have not seen so many tourists here in NY City in atleast 10 years now. (Hey wait, that could have to due with the whole illegal immigration thing, but thats for another board...haha)

Buy Low - Sell High!

reply to post by traderonwallst

I can only imagine the degree of lobbyist skulduggery that takes place behind closed doors. If the walls of congress could speak they would have been shredded long ago. Absolutely...fatten-up the coffers of corporate exporters, stick-it to the foreign holders of U.S. debt, and inflate-away the value of $40.6 Trillion in unfunded entitlements obligations to it's own citizens...hell, it's the Ponzi Trifecta!

Higher oil prices are another scheme...we actually rely on them, but it's a delicate balance. Middle Eastern producers (Saudi Arabia), working in consort with Western oil companies and the U.S. Gubmnt, repatriate those Dollars through the purchase of treasuries and other U.S. assets, helping to fuel stock bubbles...real estate bubbles...credit bubbles.

When OPEC asserted it's control over oil prices in 1973, it placed itself front & center as the fall-guy for public discontent over rising prices. The Big Seven oil companies could pull their strings from behind the curtain and deflect responsibility. Now rising prices get tossed about like a hot potato...it's a downstream bottleneck problem...no, it's an upstream production issue...you're both wrong!...it's speculators driving-up prices in the futures market. Ad infinitum.

While the deeper complexities of oil dynamics and their roll in global economics fly above my personal grasp...in the end...I think I know who pays the piper.

With regard to where the stock market goes from here, the Weimar republic may seem like a dramatic comparison, but in terms of quality, not quantity, I believe it could eventually serve as a blueprint. Price inflation affects all asset classes...including stocks. By 1923 the Mark had zero value, while the German market printed record highs.

Anytime the federal reserve is required to pump 'billions' of dollars into the market is not a good thing. Iraq is drawing our infrastructure down and China/Walmart is not helping with the influx of cheap goods. Jobs are down, wages are down, middleclass is ready to go the way of the dinasaurs.

Show time for the Markets today. Fed announcement 2ish EST today. After markets closed, Bank of America warned on 3rd quater earnings, and E-trade will miss earnings by an estimated 31%. E-trade reports at end of month but BoA not until Oct 17th. Like I said wallstreet is daring the Fed not to cut. Either BoA is trying to sneak this under the comotion surronding the Fed, or even more interesting, in the position of being in better shape than their competitiors(was assumed that they would weather crisis better because of being less mortgage dependent) and signaling to the FED and market that the whole subprime mess/ credit crunch is worse than advertised.I'm leaning towards the latter, and that is probably the scarier of the two.
If the Fed does not cut rates, you will hear a howl the likes of which hasn't been heard since 2000 and 1987. I shifted out of all but my most stable holdings into cash till this blows over. (Allright i ket a put on a mortgage lender with a very tan CEO that i'd love to see go bankrupt, but I got till January for that one to pay off).

I could be wrong (wouldn't be the first time) but if I'm not tommorrow may be fun if you like seeing wild swing in the market.