Another big triple-digit move yesterday, this one to the downside, the Dow losing 348 points, 3.2%. The rest of the market was even more negative, the NYSE Composite losing 4.8%, the Nasdaq losing 4.5%, the Russell 2000 losing 5.1%, the Transportation Avg down a huge 8.7%.

The credit crisis is circling the globe, with lenders growing ever more distrustful of the ability of their customers to repay loans. The Fed reported yesterday that lenders have reduced short-term loans (commercial paper) to companies by a record $94.9 billion just over the last week, bringing the total to $208 billion just over the last 3 weeks. Short-term loans are the lifeblood of small businesses needing to increase production for the holiday season, and of stores needing to hire extra help and bring in inventory for their most important selling season. 

Investors are also leery of loaning to businesses. Prices of investment-grade bonds fell 7% in September alone.

This morning:

Asian and Pacific markets were down fairly sharply last night. The DJ Asia-Pacific Index closed down 1.9%.

China closed up 0.4%. Taiwan closed up 0.7%. But Hong Kong closed down 2.9%. India closed down 3.8%. The Philippines closed down 1.8%. Thailand closed down 1.3%. Singapore closed down 2.6%. Japan closed down 2.7%. Indonesia closed down 1.3%. Australia closed down 1.5%.

South American markets are looking no better, for the most part at new bear market lows.

European markets are basically flat this morning, up on average of less than 0.2%. But have also been no safe haven.

Nor have Middle East or African markets been safe havens.

Commodity rich Canada has become as volatile as the U.S. market, its markets so influenced by the price of oil, gold, and other commodities.

Remember Wall Street's assurances that foreign markets would be the safe havens for U.S. investors if the U.S. market ran into problems? Don't hear that from them much any more. Now their talk is about catching the bottom because foreign markets have been so much worse than the U.S. market.

Oil is up fractionally after its big decline so far this week, up $0.47 at $94.44 a barrel at the moment.

Gold is down another $2.40 an ounce this morning, after its big decline of the week. Gold has now lost 5.2% so far this week.

In the U.S.:

The big economic number of the week, monthly jobs for September, was just released. It came in worse than forecasts, showing 159,000 jobs were lost in the month, the largest monthly decline since 2003. But it is being taken as a helpful number for the moment since it makes it more likely the House will pass the $700 billion bailout plan.

Pre-open indicators, which were negative earlier have turned somewhat positive, now pointing to the Dow being up 25 points or so in the early going.

But up and down volatility will continue.

A scary thing is that all these reports coming out about how many $billions banks are borrowing from the Fed's discount window, how many more $billions the Fed is pouring into the system every week to provide liquidity, etc., is beginning to make even the $700 billion bailout plan look like a small amount. 

Interesting chart of the morning:  The major indexes are again short-term oversold beneath their short-term 21-day moving averages to a degree sufficient to bring another bounce back up toward the m.a., unless the market is whacked again by more bad news from the financial sector or the bailout plan. 

But will many traders be willing to hold positions they take today, over the weekend, given the stuff that happens over weekends these days. And yes, the market's daily moves are still due almost exclusively to short-term traders, including the big program trading firms, while investors, including institutions, continue to stand aside.

If you haven't read my newspaper column from last weekend and want to, please do so soon, as it will be replaced with a new one for this weekend later today. To read it, (titled 'Keep a Journal of These Times!').  Click here.

Scroll down to previous blog updates for recent "interesting charts" and commentary.

Although tomorrow is a Saturday and the markets are closed, I will be back in the morning with a weekly wrap-up and outlook for Monday and next week.

Have the troubled financial firms found another way to trick investors? Last week Goldman Sachs wanted to raise $10 billion from investors by selling more stock. They made Warren Buffett an offer no one in their right mind would refuse, $5 billion of preferred stock at a discount, that will also pay him a juicy 10% coupon yield, plus warrants as a sweetener on the side that allow him to buy common stock 8% lower than the current price at some time in the future, if the stock goes up. It worked great. After announcing Buffett was investing in their stock, they had no trouble selling the new issue of common stock.

Yesterday G.E., after having had to assure Wall Street for the third time in a month that its finance arm would not face a funding squeeze, announced it was going to raise $15 billion of capital by selling additional common shares. 

And G.E. was also able to announce that Warren Buffett is investing in G.E., always a big influence on investors, as in if Buffett is buying, it must be a buy. As did Goldman Sachs the prior week, G.E. had pre-arranged with Buffett so they could make that announcement, allowing Buffett to buy $3 billion in preferred stock, plus giving him warrants allowing him to buy $3billion of common stock at $22.25 a share any time in the next five years. Buffett dutifully came out and made positive noises about G.E. being "the symbol of American business in the world, with strong global brands and businesses."

What an inexpensive way for firms to move their stock in difficult times, using the image of "the smartest investor in the world". And all Buffett has to do is sit there and wait for them to come to him, to pay billions for the use of his name. What a deal. Which firm will be next? 

This morning:

Asian and Pacific markets were mixed again last night. The DJ Asia-Pacific Index closed down 1.8%.

But China closed up 0.6%. Hong Kong closed up 1.1%. India closed up 1.6%. The Philippines closed up 1.7%. Thailand closed up 0.6%. Singapore closed up 0.2%. However, Japan closed down 1.9%. Indonesia closed down 1.3%. Australia closed down 0.8%. Taiwan closed down 1.1%. South Korea closed down 1.4%. Malaysia closed down 0.2%.

European markets are up this morning, from about 1% in London, to just fractionally in Germany.

Oil is down a big $2.83 at $95.70 a barrel at the moment.

Gold is down a big $17 at $851 an ounce.

Here is part of a chart we have been showing subscribers regarding the very overbought short-term condition of gold above its 21-day m.a.

In the U.S.:

Debate continues about the financial system meltdown and bailout plan. Now that the Senate passed its version of the plan, concern moves to whether the House will reverse itself and vote for it tomorrow.

Meanwhile, the economic numbers show no sign of bottoming. Yesterday we learned that the ISM Mfg Index plunged again in September, dropping to 43.5% from 49.9 in August, the biggest monthly drop in 24 years. Any number under 50 indicates the economy is contracting, above 50 that the economy is still growing. And auto sales reported for September were really bad. GM sales plunged 15.6%, Ford’s 34.6%, Chrysler’s 33%. U.S. sales for foreign autos were at least as bad, Toyota down 32%, Nissan down 36.8%, Honda down 24%.

However, the market doesn't wait until the economy has bottomed and is growing again. The market looks out six to nine months, and moves now on what it expects conditions will be next summer. Thus does it always top out when things look great (because it sees trouble ahead), and always begins to rally when the economy is still in recession, when it can look out and anticipate conditions will be better six to nine months ahead.

So the real question is when will the market be able to look out six months this time and anticipate recovery will be underway? We will continue to let the market and our technical indicators and charting tell us.

The ban on short-selling that was due to expire today, was extended as expected, the SEC saying it will be removed no later than October17. 

As the Wall Street Journal says about it this morning, "The decision two weeks ago to ban short-selling of nearly 1,000 stocks failed to prevent big declines in share prices in some of the best-known financial companies, has made an already edgy stock market more volatile, and has raised trading costs for all investors."

More bad economic numbers were just released. New unemployment claims were again a shock, jumping by 48,000 in the week ended Sept 20, the latest reporting week. Unemployment claims are now at their highest level since the September, 2001. That does not bode well for tomorrow morning's important monthly job's numbers for September.

And that report weighed some on pre-open indicators, now pointing to the Dow being down 75 points or so in the early going.

But up and down volatility will continue, and anything can happen by the close.

Interesting chart of the morning:

To read my weekend newspaper column titled 'Keep a Journal of These Times!'  Click here.

Scroll down to previous blog updates for recent "interesting charts" and commentary.

Subscribers: Another reminder that a 10-page in-depth 'Mid-Week Signals and Outlook' update is on the website for you from yesterday, as well as a hotline from last night.

It was a big up-day yesterday after Monday's big down day. Not unusual. 

The market has rarely been able to show follow through the day after a big triple-digit move in either direction. As I showed you in yesterday morning's interesting chart of the morning, the market was made very short-term oversold by Monday's mini-crash.

Yesterday's big rally alleviated some of that oversold condition. The important consideration short-term is whether the Dow's short-term 21-day m.a. will continue to be overhead resistance on rally attempts (as it is usually downside support on brief pullbacks when the market is in rally mode).

Most markets reversed their directions of Monday, the extreme moves having made them either short-term oversold or overbought. Bonds plunged back down 2.4% yesterday, while gold plunged back down 3.8%. 

This morning:

Asian and Pacific markets were mixed last night.

China, Hong Kong, and Singapore were closed for holidays. Indonesia closed down 1.3%. India closed up 1.6%. Australia closed up 4.0%.  Japan closed up 1.0%.  Taiwan closed up 0.8%. Philippines closed down 1.5%.  South Korea closed down 0.6%. Thailand closed down 0.4%. Malaysia closed down 0.2%.

European markets are mixed this morning, London up 1.5%, France basically flat, and Germany down about 0.5%.

Oil is down $1.30 at $99.34 a barrel at the moment.

Gold is up $2 an ounce at $872 after yesterday's big decline as the need for a safe haven went away?.

In the U.S.:

Worries and debate continues about the financial meltdown, whether the Senate will pass its version of a bailout plan today, whether that will put pressure on the House to go back and hammer out a bill they can pass.

And in the background of it all is the question of how long it would take after passage for money to flow to the banking institutions, how well it will work, and whether any of it will also trickle down and reverse the slowing economy. 

There is a heavy load of potential market-moving economic reports due out this week. But for now the financial meltdown remains center stage. 

It will be good for investors to get this focus on the bailout plan behind us one way or the other, so we can see how the market will respond to the economy, whether it can look ahead six to nine months, as it usually does, and anticipate either economic recovery or still more negative conditions. 

We have subscribers substantially in cash, with a couple of downside positions in inverse etf's and a position in gold. I believe this is still a time to do nothing, until this short term shakes out. The risk of a serious whipsaw no matter which way one moves are extremely high right now.

Pre-open indicators are off earlier lows but still somewhat negative, pointing to the Dow being down 70 points or so in the early going.

But anything can happen by the close. The chart showing Monday's oversold condition of Monday at the top of the message, shows there is still room for a further rally before the Dow would reach the resistance at its 21-day m.a. Yet it has also recovered enough that it is not as oversold.

To read my weekend newspaper column titled 'Keep a Journal of These Times!'  Click here.

Scroll down to previous blog updates for recent "interesting charts" and commentary.

Subscribers: The in-depth 'Mid-Week Signals and Outlook' update will be on the website for you later today.

Yesterday's mini-crash.

Did I say yesterday morning that I expected the market would probably close down. What an understatement.

The market suffered a mini-crash. There is no need to go into the reasons why. It was all over the news all day yesterday and all evening last night. But briefly, markets around the world were down quite sharply in the early going even when it was expected that the government’s big $700 billion rescue plan was going to be passed by the House, apparently on concern that it either would not work, or would not be enough to stop the financial meltdown.

And then when it was announced that the house had defeated the bill, the bottom dropped out of the market. There were attempts to get it rallying back some before the close, but those efforts also failed, and the major indexes closed on their lows of the day.

The Dow closed down 777 points, or 7%. The S&P 500, NYSE Composite, and Nasdaq each closed down 9%. There were 3,070 stocks down and only 158 up on the NYSE, almost a 15 to 1 ratio. That’s almost crash-like negative breadth.

And volume increased to more than 2 billion shares traded on the NYSE, and 3 billion on the Nasdaq, indicating a fair amount of panic and bailing out. 

Among the dismal statistics, the Dow is now back to its level of October 2005, having given back its last three years of gains. The S&P 500 is down 29.3% since last October, and is back to its level of October, 2004, having given back its last four years of gains.

And market-timing doesn’t work? Sure.

As we have noted often over the last 21 years, it is not comfortable to be making profits when so many are panicked and hurting. 

Yet it was a good day for our portfolios. The regular Seasonal Timing Strategy portfolio is 100% in cash, awaiting its next re-entry signal. So neither the decline so far this year, nor the mini-crash today, had any effect on it.

In our Aggressive Seasonal Timing Strategy, the 20% position in the ProShares Short S&P 500 Index, gained a big 8.3% yesterday.

Our non-seasonal Market-Timing Strategy portfolio is now 70% in cash, which did us no harm yesterday. Meanwhile, the 10% position we have in the gold etf GLD closed up 3.4%, the 10% position in the ProShares Short Russell 2000 closed up a big 7.6%, and the 10% position in the ProShares Short S&P 500 Index, gained a big 8.3%.

This morning:

Asian and Pacific markets plunged in reaction last night.

China closed up 0.4%. Hong Kong closed up 0.7%. India closed up 2.0%. But Australia closed down 4.3%.  Japan closed down 4.1%.  Taiwan closed down 3.5%. Indonesia closed down 1.3%. Philippines closed down 1.5%.  South Korea closed down 0.6%. Singapore closed down 0.1%. Thailand closed down 0.8%. Malaysia closed down 0.2%.

European markets are mixed this morning.

Oil is up $1.23 a barrel at $97.60 a barrel at the moment, after its big decline yesterday.

Gold is down a big $18.80 an ounce at $884.60 after yesterday's big $27 an ounce gain.

In the U.S.:

Worries and debate continues about the financial meltdown. There is a heavy load of potential market-moving economic reports due out this week. Consumer Confidence #'s today. The ADP Jobs Report, Construction Spending, and the ISM Mfg Index on Wednesday, Factory Orders on Thursday, and what we always refer to as 'The Big One', the monthly jobs #'s for September, and the ISM non-mfg Index on Friday. 

But for now the financial meltdown remains center stage.

That was a huge decline yesterday. The market most often bounces the day after a big decline. And it looks like that will be the initial move today.

Pre-open indicators are very positive, pointing to the Dow being up 250 points or so in the early going, retracing about 25% of yesterday's decline.

But anything can happen by the close. This is a serious situation, such as the country has not faced in a generation or two. Market-neutral hedge funds can't sell some 900 financial-related stocks short to balance their positions, so have to sell short in the rest of the market. That may have had something to do with losses like the 18% one-day decline in Apple Computer, and similar declines in others. 

To read my new newspaper column titled 'Keep a Journal of These Times!'  Click here.

Interesting chart of the morning: The bad news is that the S&P broke out of its previously orderly bear market trading band to the downside yesterday. But short-term it is very oversold beneath its 21-day m.a.

Scroll down to previous blog updates for recent "interesting charts" and commentary.

Subscribers: The new issue of the newsletter is on the website as well as a hotline message from last night.

This morning:

The dominoes continue to fall. Friday saw by far the biggest bank failure in U.S. history, with the FDIC seizure of what's left of Washington Mutual, and sale of most of the assets to J.P. Morgan for $1.9 billion.

This morning we learn that in Europe, the huge Dutch-Belgium Fortis NV bank, which has been in existence since the 1800's, couldn't get through the current financial meltdown, couldn't find a buyer, and Belgium, Luxembourg, and the Netherlands had to rush in with a rescue package over the weekend. Also in Europe, the U.K. bank Bradford & Bingley had to be nationalized over the weekend.

In the U.S. the FDIC apparently stepped in over the weekend to broker a buyout of most of the assets of Wachovia Bank by Citigroup. Wachovia was reported to be the next big shoe expected to drop. CitiCorp will absorb up to $42 billion of Wachovia's losses on its $312 billion pool of loans, while the FDIC will take all losses beyond that.

The $700 billion rescue plan was finally hammered out over the weekend. 

Asian and Pacific markets plunged in reaction last night.

China closed up 0.4%. But Australia closed down 2.0%.  Japan closed down 1.3%. Hong Kong closed down 4.3%. Taiwan closed down 2.2%. India closed down 3.6%. Indonesia closed down 1.3%. South Korea closed down 1.3%. Singapore closed down 2.2%. Thailand closed down 2.9%. 

European markets are down sharply this morning, on average of almost 3%.

Oil is down a big $5.20 a barrel at $101.65 a barrel at the moment.

Gold is up $2.40 an ounce at $880.20 at the moment this morning.

In the U.S.:

Okay, the bailout plan has been hammered out, and will be voted on later this morning by the House and probably Wednesday by the Senate.

So now the questions and debates have changed to focusing on how long will it take the Treasury to begin spending the money, whether this Herculean effort will work, whether it will work just to bail out the financial sector, or will help the sliding economy, (and maybe what more could be done if it doesn't work).

I told you on Saturday that "Investors might want to keep in mind the old market adage "Buy on the rumor, sell on the fact". And that seems to be happening.

Pre-open indicators are quite negative, pointing to the Dow being down 165 points or so in the early going.

I expect a lot of volatility today as the Fed, Treasury, and White House pull out all the stops to sell the effectiveness for the bailout plan, while traders and investors remain skeptical. The market will probably close down.

Meanwhile, a very heavy load of potential market-moving economic reports due out this week. Consumer Confidence #'s tomorrow. The ADP Jobs Report, Construction Spending, and the ISM Mfg Index on Wednesday, Factory Orders on Thursday, and what we always refer to as 'The Big One', the monthly jobs #'s for September, and the ISM non-mfg Index on Friday.

To read my new newspaper column titled 'Keep a Journal of These Times!'  Click here.

Scroll down to previous blog updates for recent "interesting charts" and commentary.

Subscribers: The next issue of the newsletter will be out later today

Are you suspicious of market-manipulation when, for apparently no reason, the Dow shoots up from negative territory in the last hour of the day, especially on a Friday, and closes up triple-digits all by itself?

You should be. Because that's what it is. Especially on low volume days, the program-trading firms can move the Dow wherever they want with their big automated computer buy and sell programs. As a former manager at such a firm said several years ago in a book which I cannot locate now, "We can't control it all day, and can't hold it at a specific level for a long period of time. But tell me where you want it for a few minutes and give me half an hour and we can put it there within a few points."

I've been ranting about this for 20 years, and finally gave up. The manipulation of the program-trading firms is so obvious regulators must be aware of it. They have certainly received enough complaints from me. But totally ignore the situation.

Who are the big trading firms? They are the large brokerage firms and banks trading for their own account and those of a few of their largest customers. The top ten for largest trading volume this week were Goldman Sachs, Credit Suisse, Morgan Stanley, Merrill Lynch (now a division of BankAmerica), Deutsche Bank, RBC Capital (Royal Bank of Canada), BNP Paribas, SIG Brokerage LP, UBS Securities, and Bear Stearns.

Between them they accounted for 39% of all the trading on the NYSE, a typical week. There was no 'directional' conviction. As usual there were 789 million shares in buy programs and 755 million in sell programs.

So back to yesterday's market:

The Dow closed up, as noted surging up from negative territory in the last hour of the day. It's easier to manipulate enough of the 30 stocks of the Dow to move it and to some extent the S&P 500 on which the same stocks appear. But look at how the rest of the market closed.

The NYSE Composite closed down .5%, the Nasdaq down .2%, the Nasdaq 100 down 1%, the DJ Transportation Avg down .3%, the DJ Utilities down .9%. Market breadth was even more revealing. There were more than twice as many stocks down as up on the NYSE, and 650 more stocks down than up on the Nasdaq. But the Dow closed up, and investors coming home from work would therefore hear that "the market" closed up for the day. Wall Street is reforming its misleading ways of always keeping investors bullish and buying what they're selling??? Sure they are.

By the way, with the changed landscape of the last few months, with those same financial firms now so beholden to the Fed and Treasury for hundreds of billions of bailout money, and easy access to all the money they want to borrow from the Fed's discount window, do you doubt the Fed's ability to make a few phone calls and ask for help in closing the market positive to avoid panic, or to start a day off positive when bad news comes out?

This was an ugly week.