Friday, October 1, 2010

Markets extend September gains

Stocks fell in early AM trading but recovered, adding to the strong Sep advance. Dow was up 41, advancers over decliners 2-1 & NAZ a more modest 2. Banks stocks had another good day although the Financial Index remains near its lows for the year & far below its record levels of 500+ made 3 years ago.

S&P 500 FINANCIALS INDEX

Value	195.21
Change +	2.03 (+1.1%)

MLPs want to take the Alerian MLP Index to a new record of 343. Today it rose 3 to 340½, sooo close! Below is a 4 year chart to show the previous high &; how long it took to break thru that ceiling (while most stocks are still down). The comparable index, including reinvested income, has been setting record levels throughout 2010. The REIT index gained 1 to the 211s, up nicely in Q3 & YTD. Junk bond funds pretty much inched their way higher today & are up nicely in Q3 & YTD. The weak dollar has taken the € up to almost $1.38, difficult to imagine during the European debt crisis last May. Treasury yields are another big story (the 2 year note reached a new record low today) but their yields were little changed today & down sharply to or near record low levels in 2010.

Treasury yields

U.S. 3-month		0.15%
U.S. 2-year		0.42%
U.S. 10-year		2.52%

Alerian MLP Index -- 3 months

Dow Jones REIT Index -- 3 months

10-Year Treasury Yld Index -- 3 months

Oil rose after economic data from the US & China bolstered optimism that demand is growing for oil in the 2 largest energy-consuming countries. Gold climbed to another record on demand for an alternative to the slumping dollar.

CLX10.NYM

...Crude Oil Nov 10

...81.60

...

1.63 (2.0%)

GCV10.CMX...

Gold Oct 10...

1,316.00

...

8.20 (0.6%)

$$ Gold Super Cycle $$

Click Here

GLD (ETF) --- YTD

A large investor using an automated trading software to sell futures contracts sparked the brief-but-historic stock market "flash crash" on May 6. A 104 page report by the SEC said an unnamed investor used a trading algorithm to sell orders for futures contracts called E-Minis, which traders use to bet on the future performance of stocks in the S&P 500 index. The contracts were sold quickly & in large numbers on a day when the market was already under stress due to concerns about the European debt crisis. The selling was initially absorbed by "high frequency traders" & other buyers but the algorithm responded to an rise in trading volume by increasing the number of E-Mini sell orders it was feeding into the market. A lack of buyers & rapid selling of E-Mini futures contracts began to affect the underlying stocks & the broader stock indices. As a result, the DJI plunged nearly 1000 points before regaining much of the lost ground to close lower, the largest one-day drop on record. Circuit breakers put in place since then have prevented similar occurrences. Let's hope it never happens again.

Trading Software Sparked Flash Crash, Report Says- CNNMoney

Economic news was mixed but generally viewed as favorable. Stock averages are up YTD while MLPs have been going wild. When the MLP index peaked in Jul 2007, the Dow was just under 14K. Quite a difference in performance since then!! Next week Sep sales reports (i.e auto companies) are due & the important jobs report on Fri.

Dow Jones Industrials -- 3 months