The Nasdaq 100 turned in the best performance for the month of February among the three major indexes, gaining 4.47% to the second place S&P 500’s 2.86%.  Everyone must have read the summary numbers for February over the weekend and then came in as buyers today as the Nasdaq 100 continued on its winning streak up 1.52% (+27.72, 1,846.40).  The S&P 500 closed up a solid 1.01% (+11.22, 1,115.71) and the Dow Jones Industrial Average gained 0.76% (+78.53, 10,403.79) on the day.

Merger Monday was in full gear as four deals were announced last night and this morning and TrackedInsights Taryn Cooper covered them all earlier today.  Rumors of the biggest deal on the planet, Germany bailing Greece out with loans, prompted the Greek 10-year bond to drop 9 basis points (6.34% to 6.25%, +0.64) and stabilized equity markets around the world.  The Chilean IPSA Index fell 1.7% to 3,761 in reaction to the 8.8 magnitude earthquake Saturday morning, which was the fifth largest recorded since 1900.

When an earthquake hits Chile, what do you buy?  The answer is not peppers, it is copper.  Chile produces 35% of the world’s copper and if any of those mines collapsed this will slow the production and supply of the base metal, sending prices higher.  The iPath Dow Jones-UBS Copper ETN (NYSE: JJC) jumped 2.73% in the first five minutes of trading this morning but faded back, closing up 1.76% (+$0.79, $45.49).

Economists expected Personal Income and Consumer Spending to increase by 0.4% month-over-month, but we got income going up 0.1% and spending up 0.5%.  This means the consumer must have been taking on debt over the last month.  In general, the market likes it when the consumer spends more, even though signs point to them taking on more debt.  If the consumer is out there spending, that means the stocks they trade are doing more business.  Damn the torpedoes!  Who is paying their debts back these days anyways?  There is a problem here though, as Personal Income increased only 0.1% (0.4% expected) with the prior M-o-M increase being 0.4% and before that 0.5%.  The growth trend we have experienced over the past few months is slowing down as workers are receiving less income, which can be attributed to less people working.

The ISM manufacturing Index was reported at 10 a.m. and missed expectations (56.5 vs. 57.4, prior 58.4).  A reading over 50 indicates manufacturing is expanding but the number below that of last month shows it is expanding less quickly.  Construction Spending was also released at the same time and was down 9.3% Year-over-Year and down 0.6% Month-over-Month.  The MoM expectation was -0.8%, so the number was beat, but it is still declining.  While a decline in construction spending means less construction workers on the job, this is probably good in the long run as a contraction in housing supply (or a slower expansion), will mean a lower relative supply of homes in the future and a firming of home prices.

Gold had an uneventful day, gaining marginally, as all the metals action seemed to be in copper today.  The fact that gold did not drop is a story on its own as the dollar traded its highest level since last July, before fading back to gain just 0.38%.  Even the news of Germany buying Greek debt did not hold the euro up as the pound dropped sharply against the dollar with the summer election for Prime Minister in the U.K. is too close to call.  The U.K. has deficit problems of their own, and it seems once you throw in the weak economies of Spain, Portugal and Ireland, the chances of another bailout being needed seems almost certain.  Italy’s budget is always an adventure and it is starting to look like the only decent economy left in Europe is Germany.

Nymex crude dropped 78 cents as the $80 a barrel level is proving to be a difficult fence to jump.  The barrel was trading at $78.88 (-0.98%) at 4:48 p.m.

The Dow Jones Industrial Average edged up 4.23 points to 10,325.26.  The S&P 500 tacked on a small 1.51 point gain (+0.13%, 1,104.49) and the Nasdaq 100 was up 5.77 points (+0.31%, 1,818.68).  On the month the DJIA added 257 points (+2.55%), the S&P 500 climbed 30.71 points (+2.86%) and the Nasdaq 100 showed that the place to be in February was in technology, gaining 77.75 points (+4.47%).

Across all markets, bonds and commodities did the best with interest rates dropping in 14 of 17 major economies worldwide.  EVEN the Greek 10-year was lower by 30 basis points as bond prices rose on news the German Government might buy Greek debt through a state owned bank.  This strengthened the euro against the dollar causing commodities to rise.

Yesterday, I mentioned the CurrencyShares Euro Trust (NYSE: FXE) was something to keep your eye on thinking that the news in Greece has got to get better sometime.  The timing was spot-on (better to be lucky than good sometimes, but being right gets paid) as the FXE closed higher today than all but one day in the last two weeks of trading.  If the bad news has washed itself out, any further positive developments about the Greek Tragedy of 2010 will be bullish for the euro, commodities and stocks.

On the flip side of this, the PowerShares DB US Dollar Index (NYSE: UUP) closed lower than all days but one in the past two trading weeks.  Looks like the dollar is a bit high here, and with the possibility of Washington D.C. passing the $1 trillion health care bill next week via ‘reconciliation’, the path of least resistance for the greenback is down.  If the carry trade cowboys get involved here, shorting the dollar and buying stocks, March may indeed come in like a lion.

New York spot gold rose $10.00 an ounce to $1,116.60 (+0.90%, 4:22 p.m.).  A break out here would be at about the $1,130 level with support at $1,060.  The SPDR Gold Shares (NYSE: GLD) chart is starting to look very interesting with resistance at $111.  The only thing I do not like about the chart is the stochastics are too high, but a close (2 closes even better) through $111 and I am a buyer.  The GLD closed up $1.12 (+1.03%, $109.43).

Nymex crude is pushing $80 again up $1.51 today to $79.68 a barrel (+1.93%, 4:26 p.m.).  Analysts think that crude will trade more off of supply and demand fundamentals and less as a reaction to the dollar in the future.  This sounds like it means that oil will trade on the premise of a better functioning economy and not on gloom and doom and fiscal nightmares.

Existing Home Sales were reported this morning at down 7.2% (January) to a seven month low (5.05M vs. 5.5M expected).  Last month sales dropped off a cliff (-16.7%) and analysts did not have to think too hard as to why.  NO JOBS.  An economy can turn up or down on simple expectations.  You have a job and things are good, but then a friend gets the axe and your brother calls to tell you his company just shut down.  You may still have a good job, but you are not dying to go buy a new house at this point.

The federal tax credit for new home buyers seems to not have helped as much lately and I have a theory – all the new home buyers that were going to buy a home already did.  I do not think they are going to squeeze a lot more out of that program.  Also, in December you go Christmas shopping not house shopping and it is cold in January.  Hopefully, sales pick up in the coming months but with all this snow in February I would not bet on a strong number.

I saved this for last to go out on a good note: The USA Men’s Hockey Team beat Finland 6 -1 in the semifinals today and will play the winner of tonight’s Canada-Slovakia game for the Gold.  Team USA vs. Canada will be a great game to watch.  Win or lose that one, Team USA is cranking out the medals faster than Freeport-McMoran (NYSE: FCX) and this has been a great Winter Olympics for our athletes and for us.

Have a great weekend.

The Dow Jones Industrial Average traded as low as 10,185 (-188, -1.82%) before staging an impressive 137 point rally off the lows to finish with a loss of only 53.13 points on the day (-0.51%, 10,321.03).  The S&P 500 dropped 2.30 points (-0.20%, 1,102.94) and the Nasdaq 100 showed some relative strength, closing in the green fractionally (+0.40, +0.02%, 1,812.91)

The ‘non-partisan’ politicians were at it again in Washington D.C. as top Republicans and Democrats got together for a televised health care summit.  If you watched this it was an exercise in people talking and not listening.  While this is not unusual with our hot-air oversupplied elected officials, the ‘discussion’ turned a bit hostile at times with Obama interrupting McCain, McCain snapping back with ‘let me finish’ and other unpleasantness.  My favorite part had to be when Obama criticized Cantor for bringing all 2,400 pages of the bill to the meeting discussing that bill.  I never knew how thick a document that is 2,400 pages was until today and it seemed Obama did not want the rest of the country to see it either.

At the $1 trillion price tag put on the health care bill, each page is worth (spends) about $417 billion.  Maybe the U.S. Treasury should just start printing copies of the health care bill and forget about printing dollars.  We could pay off the national debt in no time but just try carrying the change home when you go buy a six-pack of Coke.

Goldman Sachs Group Inc. (NYSE: GS) is in hot water over the role they played in structuring a large loan to Greece in 2001 such that it looked like a currency transaction.  Greece no doubt did this to hide the debt from the European Union and Goldman did it for a very large commission.  Goldman stock dropped $1.89 to $156.44.

Apple Inc. (NSDQ: AAPL) CEO Steve Jobs told shareholders the company was going to sit tight on its $40 billion cash hoard as having that kind of money in the bank provides “tremendous security and flexibility.”  Apple has never been too active in buying other companies, preferring to develop their own technology, rarely buys stock back and does not pay a dividend.  With economic times like these sitting on a mountain of cash is a great idea but just try keeping track of the 160,000 accounts you need to keep $250,000 or less in for FDIC protection.

New York spot gold bounced back for a gain today for the first time in three days.  The precious yellow metal added $8.20 to $1,105.40 (+0.75%, 4:39 p.m.).  Over the past few days I have seen a lot of stories and heard chatter on the financial TV shows about the coming demise of gold.  With central banks worldwide being net buyers, a $1.56 trillion budget deficit and U.S. national debt skyrocketing I don’t believe it for a second.  Want to see gold go through the roof?  If that health care plan gets passed or that massively deficient budget gets ratified hang on tight – we are going for a wild upside ride.

I commented yesterday to keep a close eye on the SPDR Gold Shares ETF (NYSE: GLD) and a support level of $104.  The GLD closed slightly above its 50 day exponential moving average today ($108.31 vs. $108.15) and this is a positive sign.  The numbers to watch on the GLD are $104 and $111.  A close above $111 would be signaling a possible break out and a close below $104 a possible break down.

Nymex crude does not seem to be able to hold the $80 level as the barrel dropped $1.74 today on weaker economic expectations (-2.18%, $78.26, 4:44 p.m.).

The PowerShares DB US Dollar Index (NYSE: UUP) gapped up on the open but traded lower all day long losing 0.21% (-$0.05, $23.71).  If you think this Greek tragedy is blowing over keep an eye on the CurrencyShares Euro Trust (NYSE: FXE).  A very large volume spike last Friday could have marked this as a reversal low and it has pretty much been trading sideways all week.  If it rises above $136 I would get very interested.  Besides, how many more days can they strike in Greece anyway?  All the bad news could be out.

Tomorrow we have GDP at 8:30 a.m. (5.7%, 0.6%), Chicago PMI at 9:45 a.m. (60.0), Consumer sentiment at 9:55 a.m. (73.7) and Existing Home Sales at 10 a.m. (5.5M)

Fed Presidents Naranyana Kocherlakota (Minneapolis), William Dudley (New York), Charles Evans (Chicago) and Fed Gov. Daniel Tarullo speak at the annual U.S. Monetary Policy Forum in New York tomorrow.

The Dow Jones Industrial Average gained 40.43 points (+0.39%, 10,309.24) with 20 of 30 stocks up on the day.  The broader S&P 500 added 4.38 points (+0.38%, 1,099.24) with biotech (+1.63%) leading the way.  The tech heavy Nasdaq 100 closed up 8.80 points (+0.48%, 1,810.86).  DJIA component Home Depot broke out of a small bullish head and shoulders pattern yesterday and, with today’s move, is most of the way to the $30.68 target price level of the pattern.

Philadelphia Fed President Charles Plosser has been the dissenting voice on interest rate policy (he voted to raise rates this past meeting) and he is not a big fan of the fact that The Fed owns more toxic mortgage related paper than anyone else.  Both these stands on issues may be working towards the same goal, as when the Fed stops buying toxic mortgage securities soon AND if they started to sell them to decrease their holdings, the most likely result would be rising mortgage rates.  The Treasury market fell today (rising interest rates) with the 30-year rising by 7 basis points to 4.71%.  The 30-year fixed mortgage is currently at 5.08% and if you are thinking about refinancing or buying a home, the sooner the better.

There was a lot of news out about gold as George Soros, John Paulson and pension funds are reported to be buyers.  Soros commented last month that gold was in a bubble and turned around and bought so much of the SPDR Gold Trust (NYSE: GLD) he became the fourth largest holder.  I don’t think I will believe what he has to say too much anymore.  Paulson upped his exposure to gold by 10% and was buying the banks, as was Soros.  Yesterday, the euro strengthened against the dollar and gold was up over $16 an ounce.  Today the euro dropped back down to its lowest level against the dollar since May of 2009, giving up all of yesterdays gains, and New York spot gold dropped $3.80 an ounce.  This leaves the dollar-euro relationship right where it was last Friday with gold up $12+ an ounce.

Breaking News – 4:54 p.m. EST – New York spot gold drops another $8 an ounce ($1,106) as the IMF announces they will be selling the remaining 191.3 tonnes of gold in the open market.  Last fall India bought 200 tonnes from the IMF out of an allocated 400 tonnes to be sold.

Nymex crude was up again, rising 43 cents (+0.53%, 4:12 p.m.) to $77.44 a barrel.  Since October, oil has risen to over $80 a barrel twice and then retraced to $70.  The latest move back above $75 looks like another inevitable move to $80+.

Tomorrow’s economic reports are the Producer Price Index (0.8%, 0.1%) and Jobless Claims (440k) at 8:30 a.m., Leading Indicators (0.5%) and the Philadelphia Fed Survey (17.0) at 10 a.m. and a whole lot of bond auctions for the 3-Month, 6-Month, 2-Year, 5-Year, 7-Year and 30-Year TIPS maturities.  Two Fed Presidents and one Fed Governor will be speaking Thursday as Elizabeth Duke speak at 5 p.m., Dennis Lockhart at 7 p.m. and James Bullard at 9 p.m.

Selected earnings estimates for February 18, 2010:

AEE 0.27 before market open, APA 1.96 bmo, ABX 0.57 bmo, CBS 0.25, DAI 0.02, DDR 0.32 after the close, HRL 0.52 atc, IM 0.52 atc, KEG -0.13, PDE 0.17 bmo, PEG 0.60 bmo, RS 1.02 bmo, SFY 0.28 bmo, WMT 1.12 bmo, WCG 0.44 bmo, WMB 0.34 bmo.

The Dow Jones Industrial Average closed up 150.25 points (+1.51%, 10,058.64) and regained the 5-digit, 10,000 level with 27 of 30 components finishing higher.  The S&P 500 climbed 13.78 points (+1.30%, 1,070.52) and the high tech Nasdaq 100 gained 18.96 points (+1.09%, 1,753.84) but was the weakest of the three indexes as low tech airlines +8.49%, metals +3.23% and materials +3.01% led the market higher.

The airlines were very strong as United Airlines reported unit revenues in January that blew away Wall Street estimates.  UAL Corp. (NSDQ: UAUA), the holding company for United Airlines, saw its stock rise by 17.52% (+$2.29, $15.36) and logged their strongest single day in the market since August of 2009.  UAUA bottomed at $3.07 on July 10th of last year and has since performed fantastically rising 400% in just over 6 months.  AMR Corporation (NYSE: AMR), the parent of American Airlines and American Eagle, closed up 13.79% (+$1.01, $8.33) and they are up 247% from their low trade of $2.40 last March.  Airlines, once commonly referred to as flying holes in the sky for money, can be a nice investment but just like with everything in life, it is all about timing.

Commodities stocks and commodities were especially strong today as not only do they gain on a rising market, but they get supercharged by the fact that they are denominated in dollars.  The dollar fell relative to the euro, but it would be more appropriate to say the euro gained against the dollar, as last week’s relative jump in the dollar had more to do with euro weakness on worries the Greek economy was sliding south.

The Market Vectors Junior Gold Miners (NSDQ: GDXJ) jumped 5.35% (+$1.19, $23.41) as the major miner index (NYSE: GDX) climbed 4.38% (+$1.79, $42.57).  Hard commodity ETF’s easily outperformed even a strong day in the broader market as the falling dollar provided extra fuel for a bigger move.

SLX – Market Vectors Steel +4.35%

KOL – Market Vectors Coal +3.33%

JJC – iPath Dow Jones – UBS Copper +3.21%

USO – United States Oil Fund +3.07%

DBA – PowerShares DB Agriculture Fund +0.19%

New York spot gold was last seen trading at $1,075.50, up $14.10 an ounce (+1.33%, 4:09 p.m.).  Gold is performing very logically according to the charts as it now has tested the support level at $1,060 and seems headed higher.  The SPDR Gold Shares ETF (NYSE: GLD) is experiencing the same bounce (+$1.37, +1.31%, $105.41) and now has its 50 day exponential moving average over head at $108.10 as resistance.  The rules of technical analysis say two closes above this level is a breakout, so if you did not buy the bottom on support another buy signal showing even more strength may be coming soon.

Nymex crude added $2.03 a barrel and was trading $73.95 (+2.84%) at 4:07 p.m.  If oil makes another run at $80 it will continue the sideways trend channel ($67 to $80) it has been bouncing up and down inside in since last July.  The USO has fluctuated between $35 and $41 a few times now and looks headed back up again.

Tomorrow we get the MBA Purchase Applications report at 7 a.m., International Trade numbers (-$35.7B) at 8:30 a.m. and the Treasury Budget (-$46B) at 2 p.m.  Bernanke’s appearance in front of the House Financial Services Committee has been postponed due to severe weather.  Left to guess I would say severe global warming with all the hot air in D.C., but they are due to get another major snowstorm.  Philly Fed President Charles Plosser gives a speech to the World Affairs Council of Philadelphia at 12:45 p.m. and I guess people in Philly drive better in the snow because it is not canceled.  Strangely, Fed Governor Daniel Tarullo’s testimony in front of the Senate Banking Committee in D.C. at 9:30 a.m. is not canceled, proving that either senators are better drivers than congressmen or they are full of more hot air.

Selected earnings estimates for Wednesday, February 10:

A quick look show it is ‘insurance day’ as quite a few insurance and reinsurance companies report tomorrow: RE, MMC, PRE, PL, PRU, ALL and TRH.

MT 0.27 before market open, BHP, BSX 0.13 after the close, CCE 0.21 bmo, CSC 1.23 bmo, CLB 1.20 atc, DF 0.37 bmo, ELN -0.08 bmo, RE 3.38 atc, ICE 1.14 bmo, LVLT -0.10 bmo, LPX -0.19 bmo, MMC 0.37 bmo, MICC, PRE 2.81 atc, PL 1.02, PRU 1.11 atc, SIAL 0.72, SON 0.50 bmo, S -0.19 bmo, ALL 1.01 atc, NYT 0.38 bmo, TRH 1.83 atc, VALE 0.32 atc, WYN 0.37 bmo.

The S&P 500 dropped 9.45 points (-0.89%, 1,056.74) and the Nasdaq 100 was down 11.24 points (-0.64%, 1,734.88) and was the leader by being the smallest loser.

I guess the sky stopped falling over in Europe as the euro stabilized against the dollar and Greece was mentioned by the talking heads on CNBC slightly less than the babbling about former Merrill Lynch & Co. chief John Thain getting a new job over at CIT Group Inc.  Various cures for what ails Greece have been proposed from applying for loans from the International Monetary Fund to getting more on their credit card from other EU members.  I vote the EU members bail the EU members out as we pay into the IMF and the chances of Greece paying that money back anytime soon with a strike or protest every other day does not look to good to me.  The Greeks are proud of the fact they invented democracy and the rest of the world is pretty happy they gave it to us, but constantly striking, protesting and having your voice heard pays less taxes than actually going to work.

The dollar slipped marginally, but stayed up at level it has not seen since August of last year.  With the dollar at this relatively high level and basically scared up a tree by the crisis in Greece (and other countries), commodities are looking like a bargain if you think the dollar will come back down when (if) Europe stabilizes.

New York spot gold lost $2.70 an ounce and last traded at $1,062.30 (-0.25%, 4:24 p.m.) as this percentage loss outperforms the 1%+ the DJIA lost.  CNBC has had gold up all day over $10 an ounce and I am guessing the futures contract they are watching is longer dated than the spot market.  If you are invested in or trading the gold ETF’s you will find that they correlate more closely with the spot market than whatever CNBC decides to display.

Oil gained $0.48 to $71.65 a barrel (+0.65%, 4:27 p.m.) as the steep slide down from last Wednesday’s peak is halted.  Oil reversed in this general neighborhood last December with the United States Oil Fund (NYSE: USO) bottoming at $35.48 on December 11th before running up to $41.17 on January 8th (+16%).  For all you channel and range traders out there, today’s close at $35.09 does hit short term bottoms from last December, September and August.

We have a relatively light economic calendar this week with no speeches or testifying for Timothy Geithner.  Fed Chairman Ben Bernanke testifies in front of the house Financial Services Committee on Wednesday about how he is going to let all the air out of the liquidity balloon without crushing job creation (like that is happening now anyway).  As long as I don’t hear ‘then we pray’, it sounds like a plan to me.  Ben is a pretty smart guy and the fact that our economically challenged politicians are going to quiz him on whatever he decides to do and then possibly even understand his answer is comical.

Tomorrow at 7:45 a.m. we have the ICSC-Goldman Store Sales, at 8:55 a.m. we get the Redbook and Wholesale Trade numbers come out at 10.

Selected earnings estimates for Tuesday, February 9th:

AGU 0.24, AFG 0.98 after the close, BIDU 1.68 atc, BJS 0.04, CAM 0.53, CHD 0.80 before market open, CVH 0.56 bmo, EOG 0.98 atc, IT 0.26 bmo, IFF 0.62 bmo, LGF -0.23 atc, MLM 0.33, TAP 1.10, NYX 0.48 bmo, PCH 0.04 bmo, PHM -0.19 bmo, RNR 2.50 atc, TIN 0.03 bmo, KO 0.67 bmo, VSH 0.12 bmo, VMC -0.01, DIS 0.39 atc, XL 0.70 atc

Sell, Sell, Sell Mortimer!

And then at 1:59 p.m.

Buy, Buy Buy Randolph!  Buy it all!

The DJIA bottomed at 9835.09 (-167.09, -1.67%) at 1:59 p.m., which just happened to be the exact same minute that the PowerShares DB US Dollar ETF (NYSE: UUP) peaked at $23.77.  For anyone that thinks the carry trade is not a factor, think again.  As the market and the dollar are trading inversely these days, looking at the charts shows you have a hammer in stocks, and a shooting star in the dollar.  The market bottomed at 1:59 but that was not the buy signal unless you cleanly picked the bottom as Randolph and Mortimer might have if they got the real orange juice report.  The buy signal came at about 3:00 p.m., when the DJIA broke up through the intra-day downtrend line that had been putting a lid on stocks since the sell-off began yesterday after the open.

At about 3:00 p.m. the market fired higher and the volume on the S&P 500 ETF (NYSE: SPY) spiked as you could almost see traders hitting the buy button to cover their short positions from yesterday.  The S&P 500 jumped from 1,051 to 1,064 in under 15 minutes and the DJIA ripped from 9,890 to 9,999 – 109 points straight up and the rally was on!

The Dow Jones Industrial Average closed up 10.05 points (+0.10%, 10,012.23) after being off as much as 167 during the day.  This is only 10 points on the day but a victory nonetheless as the sell-off was reversed.  The S&P 500 gained 1.91 points (+0.19%, 1,065.15) and the Nasdaq 100 logged the biggest gain today up 13.13 Mockingbird Lane points (+0.75%, 1,746.12)

Nymex crude traded below $70 and was down $3.64 a barrel before bouncing back with the decline in the dollar and was trading $71.74 (-$1.40, -1.91%) at 4:10 p.m.

Gold finished strong after being weak in the morning.  New York spot gold gained 80 cents ($1,064, 4:21 p.m.) an ounce and once again held support at $1,060.  Gold also put in a nice hammer like stocks did, and this hammer pierced support forming what is called a ‘hammer and spring’, which is a powerful reversal indicator.  One of the guys on Fast Money was saying gold was ‘broke’ yesterday and I completely disagree.  After listening to everyone tell me for years now that gold was ‘over’ or in a ‘bubble’, I stayed put and watched the shiny yellow metal climb from the high $600’s in March of 2006 to the $720 bottoming out in November of 2008 to $1,060 now.  I guess I was wrong and up 55%.  Gold has pulled back from the $1200 peak but there is no direction but up if that $1.56 trillion budget deficit gets passed.  It is all about macroeconomics at this point – the one investing wave that might take awhile to play out, but is virtually unstoppable.

Looking at the Tracked.com Industries page we see that the strongest sector today was Metals, up 3.42%.  In this sector are the gold, copper, iron, aluminum, etc… producing companies and they got supercharged as traders are betting that the intra-day top in the dollar today will be the top for awhile.  When you see the market finish up a quarter of a percent (S&P 500) after being down big, and the metals rip for multiple percentage points, what you are seeing is traders trying to get on the commodities train which means they expect weakness in the dollar.  How much worse can the news get on the euro and in Greece anyway?

By buying the companies that mine and produce gold and copper, you get levered to the price of the commodity and ‘buy it cheap.’  If gold is selling for $1,064 on the commodities exchange and you buy a gold miner that digs it out of the ground for $350 dollars an ounce, you are in effect buying gold a lot cheaper than if you bought gold.

This week the DJIA (-55, -0.55%) finished off better than last week (-129, -1.26%).  Last week finished down but finished off better than the week before that (-437, -4.12%).  We are still losing ground, but the pace of the decline is slowing.  Always try to look at the silver lining. (I have friends that might fall over if they ever heard me say that)

Want more good news?  It is Friday afternoon!  Go have a great weekend!

How does this affect stocks here in the United States?  For almost a year now, as the Federal Reserve slashed interest rates to near zero to prop up our faltering economy, huge dollar carry trades have been made.  The ‘carry trade cowboys’ have been shorting the dollar and buying stocks and commodities.  This is the linkage – as the dollar jumped higher today on money flooding out of Europe, the short positions in the dollar got squeezed and forced to buy in or cover.  When you short a financial instrument, you are selling it to someone and the money they pay for it is given to you.  Now the cowboys to buy their dollar shorts in and in order to do this, they are raising money by selling their stocks and commodities they bought with the short proceeds.

You didn’t think last year’s massive rally was based upon economic fundamentals did you?  Company earnings?  Other than a slightly repaired banking system, the economy is still in deep weeds with 10%+ unemployment.  About the only economic numbers that have been changing for the United States is that unemployment and our debt has been going up.  This has been happening globally and the weaker economic countries like Greece are to the point where no one wants to lend them any more money.  If a lender shows up, they want to oversee how the money is spent and to make sure budgets are adhered to, etc…  You can think of this as an intervention if you like.

Have you ever seen the person an intervention is called for happy?  The people of Greece are not too happy as they see this intervention, or meddling, of the European Union as objectionable.  To be more precise they see the EU/Greek Governments plan of freezing their budgets and no pay raises as objectionable, and as a highly unionized country, they are going on strike.  This certainly does not help tax collection and so on and on it goes, the vicious circle of an economy you certainly don’t want to be lending money to.  So you sell Greek bonds, you sell the Euro as Greece is not the only member country this is happening to, you notice that the other EU countries have loaned Greece a lot of money so you sell them too.

When you sell the euro you buy the dollar, causing the cowboys to sell stocks and commodities driving down stock markets around the world.  Looking around you see that the only market going up is Treasury bonds, the ultimate instrument of investing safety and the port in the storm.  Then you notice Moody’s (the credit rating agency that pretty much missed the entire credit crisis – they went fishing I guess) is warning the United States about their credit rating.  Uh oh.

Crash!  Bang!  Ouch!

The Dow Jones Industrial Average dropped 268.37 points today (-2.61%, 10,002.18) and broke their support level at 10,090 mentioned here in past ‘Wraps’.  Next support level is at 9,820.  The S&P 500 fell 34.17 points (-3.11%, 1,063.11) breaking support at 1,070 with the next support level at 1,046 (200 day EMA).  The Nasdaq 100 closed lower by 51.71 points (-2.88%, 1,732.99) and is right on support at 1,730 with next level down at 1,674 (200 day EMA).

The PowerShares DB US Dollar ETF (NYSE: UUP) made a new high for 2010 gaining 0.64% (+$0.15, $23.55) as the CurrencyShares Euro trust ETF (NYSE: FXE) got hit for 1.11% (-$1.55, $137.16).

Commodities got clobbered as well with New York spot gold dropping $46.90 an ounce (-4.23%, 4:17 p.m.) but held support of $1,060 (mentioned in previous posts).  They are selling everything but Treasuries so covering shorts for gold here is not a bad idea but I would wait until the dust clears a little to establish new long gold positions.  Nymex crude got smoked, dropping $3.97 a barrel (-5.16%, 4:08 p.m.) to $73.01.

The 10-year Treasury rose 30 ticks (30/32) to $98 8/32 with the yield dropping to 3.59%.  The 30-year jumped $1 26/32, almost two handles (2 points), to $97 18/32 as yields dropped 11.5 basis points to 4.52%.  These are big moves for the bond market.

London -2.17%, Paris -2.75%, Frankfurt -2.45%, Tokyo -0.46%, Hong Kong -1.84%, Sydney -0.62%, and India was up 2.06%.  I have no idea why India was up – maybe they shorted Greek bonds.  Asia did not get hit as hard as their exchanges closed before the selling really started.  Most likely, they will catch up going down tomorrow.

Everything got sold.  Bad Debt is back!

Want more bad news?  Tomorrow we get the Employment Situation number at 8:30 a.m. and the consensus estimate is we did not lose any jobs in January.  I will believe that when I see it.  The overall percentage is expected to come in at 10.1%, which is an uptick from the current 10% level.

How does this affect stocks here in the United States?  For almost a year now, as the Federal Reserve slashed interest rates to near zero to prop up our faltering economy, huge dollar carry trades have been made.  The ‘carry trade cowboys’ have been shorting the dollar and buying stocks and bonds.  This is the linkage – as the dollar jumped higher today on money flooding out of Europe, the short positions in the dollar got squeezed and forced to buy in or cover.  When you short a financial instrument, you are selling it to someone and the money they pay for it is given to you.  These ‘cowboys’ have been using this money to buy stocks and commodities.  Now they need to buy their dollar shorts in and in order to do this, they are raising money by selling stocks and commodities.

You didn’t think last year’s massive rally was based upon economic fundamentals did you?  Company earnings?  Other than a slightly repaired banking system, the economy is still in deep weeds with 10%+ unemployment.  About the only economic numbers that have been changing for the United States is that unemployment and our debt has been going up.  This has been happening globally and the weaker economic countries like Greece are to the point where no one wants to lend them any more money.  If a lender shows up, they want to oversee how the money is spent and to make sure budgets are adhered to, etc…  You can think of this as an intervention if you like.

Have you ever seen the person an intervention is called for happy?  The people of Greece are not too happy as they see this intervention, or meddling, of the European Union as objectionable.  To be more precise they see the EU/Greek Governments plan of freezing their budgets and no pay raises as objectionable, and as a highly unionized country, they are going on strike.  This certainly does not help tax collection and so on and on it goes, the vicious circle of an economy you certainly don’t want to be lending money to.  So you sell Greek bonds, you sell the Euro as Greece is not the only member country this is happening to, you notice that the other EU countries have loaned Greece a lot of money so you sell them too.

When you sell the euro you buy the dollar, causing the cowboys to sell stocks and commodities driving down stock markets around the world.  Looking around you see that the only market going up is Treasury bonds, the ultimate instrument of investing safety and the port in the storm.  Then you notice Moody’s (the credit rating agency that pretty much missed the entire credit crisis – they went fishing) is warning the United States about their credit rating.  Uh oh.

Crash!  Bang!  Ouch!

The Dow Jones Industrial Average dropped 268.37 points today (-2.61%, 10,002.18) and broke their support level at 10,090 mentioned here in past ‘Wraps’.  Next support level is at 9,820.  The S&P 500 fell 34.17 points (-3.11%, 1,063.11) breaking support at 1,070 with the next support level at 1,046 (200 day EMA).  The Nasdaq 100 closed lower by 51.71 points (-2.88%, 1,732.99) and is right on support at 1,730 with next level down at 1,674 (200 day EMA).

The PowerShares DB US Dollar ETF (NYSE: UUP) made a new high for 2010 gaining 0.64% (+$0.15, $23.55) as the CurrencyShares Euro trust ETF (NYSE: FXE) got hit for 1.11% (-$1.55, $137.16).

Commodities got clobbered as well with New York spot gold dropping $46.90 an ounce (-4.23%, 4:17 p.m.) but held support of $1,060 (mentioned in previous posts).  They are selling everything but Treasuries so covering shorts for gold here is not a bad idea but I would wait until the dust clears a little to establish new long gold positions.  Nymex crude got smoked, dropping $3.97 a barrel (-5.16%, 4:08 p.m.) to $73.01.

The 10-year Treasury rose 30 ticks (30/32) to $98 8/32 with the yield dropping to 3.59%.  The 30-year jumped $1 26/32, almost two handles (2 points), to $97 18/32 as yields dropped 11.5 basis points to 4.52%.  These are big moves for the bond market.

London -2.17%, Paris -2.75%, Frankfurt -2.45%, Tokyo -0.46%, Hong Kong -1.84%, Sydney -0.62%, and India was up 2.06%.  I have no idea why India was up – maybe they shorted Greek bonds.  Asia did not get hit as hard as their exchanges closed before the selling really started.  Most likely, they will catch up going down tomorrow.

Everything got sold.  Bad Debt is back!

Want more bad news?  Tomorrow we get the Employment Situation number at 8:30 a.m. and the consensus estimate is we did not lose any jobs in January.  I will believe that when I see it.  The overall percentage is expected to come in at 10.1%, which is an uptick from 10%.

The day started with the Mortgage Bankers Association (MBA) Purchase Applications falling 6.2% and refinancing activity dropping 0.8%, despite a very low current rate of 4.94% for a 30 year loan.  Next the ADP Employment report showed a loss of 254,000 jobs in the private sector when a 200,000 number was expected.  The lone star of hope came in with the GDP revision for the second quarter.  The previously reported number was a loss of 1% and expectations were that the number would be revised down in the range of -1.5% to -1.0%.  The revision was to the upside with the latest number for Q2 GDP reported at -0.7%, and the pre-market futures strengthened into the open.

At 9:45 a.m. as the market traded slightly higher, the other shoe dropped with the PMI coming in low causing the Dow to drop as much as 147 points within the next 20 minutes.  The bargain hunters and bottom pickers came into the market by 10 a.m. and the market started to slowly trade up for the next 3 hours, with the Dow going positive at 1 p.m.  The wild ride was not over as the market sold off suddenly at 2:45 p.m. with a 90 point drop within 30 minutes only to rebound and finally close down just 29.92 points (-0.30%, 9712.28).

The S&P 500 was on the same wild ride and ended up losing 3.53 points (-0.33%, 1057.08) with the star of the day, the Nasdaq 100, actually gaining 1.32 points (+0.07%, 1718.99).

The European Central Bank lent only 75.2 billion euros at their benchmark rate of 1% to participating banks, after making loans as high as a record 442 billion in June.  Banks bid for how much they think they need to borrow and this relatively low number showed strength in the EU which caused the euro to gain against the dollar.  The PowerShares Deutsche Bank Dollar Bull ETF (NYSE: UUP) dropped 13 cents for a 0.56% loss after gaining in 4 of the last 5 trading days.  This dollar drop energized gold and oil, as gold regained the $1,000 level and oil broke above $70 a barrel.

The economic calendar can get more brutal this week, with numbers for August domestic Motor Vehicle Sales (Thursday expected 8.0M expected), Personal Income and Outlays (Thurs. 8:30 a.m. 0.1%, 1.1% exp.), Jobless Claims (Thurs. 8:30 a.m. -537K exp.), ISM Manufacturing Index (Thurs. 10 a.m. 53.5 exp.), Construction Spending (Thurs. 10 a.m. -0.1% exp.), Factory Orders (Friday 10 a.m. 1.0% exp.) and last but certainly not least the Employment Situation report (Fri. 8:30 a.m. -170K) that could show the unemployment rate increased to as high as 9.9%.  Let’s face it – all these areas have been problem areas with a capital ‘P’ for the last year.

The VIX was up 1.66% on today’s wild ride and with these numbers coming in tomorrow and Friday along with a new trading month – hang on, it could get bumpy.