But an early rally in U.S. stocks faded about midday in New York after Treasuries rose as investors swooped in to take advantage of sharp losses on Friday.

Oil rose to a 10-month high near $75 a barrel and other commodities also surged as optimism that major economies were pulling out of recession drove hopes of rebounding demand. .

Global stocks as measured by MSCI’s all-country world index <.MIWD00000PUS> rose 1.2 percent and was on track for a fifth straight session of gains.

The yen fell while the U.S. dollar slid against commodity currencies, such as the Australian and New Zealand dollars, as investors became more comfortable with riskier trades given the upbeat assessment of the world economy.

“Economic data is in favor of a stronger recovery than expected. We can be quite bullish on risky assets,” said Romain Boscher, head of equity management at Groupama Asset Management.

Euro zone industrial new orders in June rebounded 3.1 percent month-on-month, or more than expected, the European Union statistics office Eurostat said.

In the United States, economic activity improved again in July from extremely weak levels earlier this year, suggesting the recession is waning, a report from the Federal Reserve Bank of Chicago showed.

In addition, China’s latest data for July indicated that while growth was moderating after a strong second quarter, the recovery remained on track to achieve the government’s goal of 8 percent growth for the full year.

“The Chinese news was good and we had some positive news out of Europe as well,” said Rob Montefusco, a trader at Sucden Financial in London. “Technicals are pointing upwards.”

But U.S. stocks pared earlier gains. About 1 p.m. (1300 GMT), the Dow Jones industrial average <.DJI> was up 15.34 points, or 0.16 percent, at 9,521.30. The Standard & Poor’s 500 Index <.SPX> was up 1.11 points, or 0.11 percent, at 1,027.24. The Nasdaq Composite Index <.IXIC> was down 1.49 points, or 0.07 percent, at 2,019.41.

European shares hit their highest closing level in nearly 10 months, boosted by banks and miners.

The FTSEurofirst 300 <.FTEU3> index of top European shares ended 0.9 percent up at 975.19 points, the highest closing level since early November.

Banks were among top gainers, with DJ STOXX banking index <.SX7P> rising 1.8 percent.

Japan’s Nikkei average <.N225> jumped 3.4 percent, booosted by hopes for a global recovery and lifted by camera maker Canon Inc <7751.T> and other exporters.

Investors increased their risk-taking in the wake of stronger-than-expected U.S. existing home sales data and upbeat comments from Federal Reserve Chairman Ben Bernanke.

Copper prices rose to their highest in more than a week, helped by strong investment demand and bets the economic crisis is petering out.

Jesper Dannesbee, a senior commodities strategist at Societe General, said real demand has not improved that much it but will improve gradually through the year.

“This is follow through from Friday. There is a general appetite for risky assets driven by cheap money and lax monetary policy,” Dannesbee said.

Gold edged below $950 an ounce, under pressure from a firmer dollar, but remained rangebound as support from higher oil prices and investor demand prevented it falling further.

Spot gold was at $949.80 per ounce

U.S. Treasury debt prices rose, with the 30-year bond gaining more than a full point, as investors did some bargain hunting after Friday’s sharp losses and after the Federal Reserve bought government debt.

The benchmark 10-year U.S. Treasury note was up 19/32 in price to yield about 3.49 percent.

Benchmark euro zone government bonds ended flat as data bolstered the recovery view, but caution on its sustainability eased the selling pressure.

“The stock market has been the barometer for growth and potential inflation,” said Troy Buckner, managing principal of NuWave Investment Management in Morristown, New Jersey. “And yes. it’s been an extreme correlation between equity market movements and commodities, especially copper, aluminum and crude oil.”

But Buckner said that prices have climbed “too far too fast,” leading his firm to short crude and heating oil, while reducing long positions in copper and aluminum.

Euro zone government bonds ended flat as economic data bolstered the view the global economic recovery is under way but caution about the recovery eased selling pressure. Investors worried whether new U.S. debt issuance this week would be welcomed by buyers.

U.S. crude rose 51 cents to $74.40 a barrel.

Aug 24 (Reuters)

Think of it this way – if the foundation of your house was faulty… or if the wood beams holding your home up were weakened… it’s only a matter of time before your house finally crumbles.

The economy and the stock market are the same way.

Right now, the only thing that has changed is evidence that the economy isn’t shrinking as fast. I reckon that means the economy is still shrinking.

Now let me admit that before I jumped to that conclusion, I had to double check my logic.

So I consulted with my five year old niece, Amanda. I asked her “Amanda, if something is shrinking fast and then starts shrinking slower, does that mean it’s still shrinking?”

And she said “yeah you big dummy!”

So if the economy hasn’t even bottomed yet, odds are the stock market will continue moving down. Luckily, right now you’re presented with a golden opportunity.

This is a weekly chart of the Dow Jones Industrial Average. What I want to draw your attention to are those three blue boxes.

What they show is that when the Slow Stochastic and OBV are both above 80, we see stock prices move down over the next 7-12 weeks.

The first time this happened was from October 2007 to November 2007. The Dow dropped 8.5% in 7 weeks. The second time was in April of 2008 to July of 2008. The Dow dropped 15.7% in 11 weeks.

Right now, both the Slow Stochastic and OBV are above 80. The probability of stocks dropping between 8.5% – 15.7% is pretty high.

My prediction is that we’ll see the Dow Jones drop to 6,500 and retest the March lows. That’s a 17% drop.

If the Dow ends the week in the positive, all bets are off.

On February 2, I said:

If the VIX is rising, that means the Dow Jones should be falling, possibly breaking under 8,000 sometime in the next few weeks and head towards 7,000.

The play should be obvious. But I’m going to point it out anyways because I’m feeling saucy.

If the Dow Jones drops under 8,000 as the VIX spikes, buy a put on the Diamonds ETF (NYSE:DIA), which is an ETF that tracks the value of the Dow Jones Industrial Average.

As I write, the Dow is trading at 7,140. So if you sold puts on DIA, you’d have made 11% in about 40 days time.

Now is the time to get out of this trade (if you haven’t already).

Why?

On Feb 24, I talked about how “big round numbers” can be huge psychological turning points for the market. I said that 7,000 was one of those turning points because it market a ten-year long resistance line.

Well, 7,000 has been breached, as you can see from the chart above.

The Dow briefly flirted with 6,500 (which was also one of my targets) and then zoomed up right past 7,000 again.

This is pretty freaking bullish. Quite frankly, it gets me really agitated.

No, it’s not because I’ve shorted every stock in the world. It’s because there’s nothing to really get excited about.

It seems that the news, which is being seen as positive, really isn’t.

First, Citigroup says that for the first two months of the year, it made a profit. Man, that’s complete BS if I’ve ever heard it.

Then Bank of America said it won’t be accepting anymore TARP money.

If banks don’t have to count hundreds of billions in toxic asset write downs… of course they’d have a profit (so would most other banks).

So, why would these two banks not count write downs in their estimates?

Maybe mark-to-market accounting rules will be suspended this week. Then the banks won’t have to worry about write downs anymore.

From the Wall Street Journal…

After facing a barrage of criticism Thursday, the chairman of the Financial Accounting Standards Board told a U.S. House panel that he will work to expedite issuing guidance to companies on the application of mark-to-market rules.

The FASB said they’d have it done in three weeks.

If these rules get suspended or relaxed, this market is shooting higher on the back of the financials. Heck, it’s already shooting higher on the mere thought of these rules being relaxed.

Considering the financials were the sector that led the Dow Jones down to its recent lows, it should come as obvious that the financials will lead the Dow Jones higher in the weeks ahead.

Go long the Dow Jones by buying the Diamonds ETF (NYSE:DIA).

7,000 is your stop. But I have a feeling this market is pushing past 8,000 in the weeks ahead, if these rules are relaxed.

U.S. stocks tumbled on Wednesday as investors feared more credit losses in the banking sector, while bleak December retail sales compounded worries about the toll on consumers from the deepening recession.

Citigroup , down more than 15 percent to $4.98, was a standout drag on the financial sector, while shares of JPMorgan and Bank of America fell 5 percent and 3.5 percent respectively.

The fall in Citigroup, a Dow component, followed a deal by the embattled bank to sell a controlling stake in its crown jewel unit, the Smith Barney retail brokerage, to Morgan Stanley for $2.7 billion.

Analysts reckon the Smith Barney sale was a precursor to a break-up of Citigroup and that the bank must be urgently seeking to replenish capital due to mounting losses.

“You’d think the news on banks is baked in, but there’s still a lot of headwinds,” said Rich Parker, head of trading, Stanford Group, in New York.

“The write-downs are starting to really scare people outside of the banking area as well. Is there a balance sheet out there that you can really trust? By all indications, it seems the recession is going to be a historically long one.”

The Dow Jones industrial average slid 277.01 points, or 3.28 percent, to 8,171.55. The Standard & Poor’s 500 Index tumbled 29.99 points, or 3.44 percent, to 841.80. The Nasdaq Composite Index dropped 48.07 points, or 3.11 percent, to 1,498.39.

The sell-off marked another hindrance to the market’s push to recover from its November bear market low. The benchmark S&P 500 began 2009 up more than 20 percent from that low but is now up about 11.5 percent. The S&P financial index fell nearly 6 percent.

Sales at U.S. retailers fell 2.7 percent in December, government data showed on Wednesday, as a deteriorating economic climate forced consumers to cut back on spending during the key holiday period.

Consumer spending accounts for about two-thirds of U.S. economic activity and as such is a key pillar of corporate profits. The S&P retail index declined 3.7 percent.

Investors also sold off shares of economic bellwethers including big manufacturer Caterpillar Inc , down 6 percent. On Nasdaq, shares of iPhone maker Apple Inc led the slide, falling 2.4 percent to $85.64.

Even more unnerving to investors was a forecast by Morgan Stanley analysts that HSBC , Europe’s biggest bank, is likely to halve its dividend and may need to raise up to $30 billion of capital.

Additionally, Germany’s Deutsche Bank posted a loss of about $6.4 billion for the last three months of 2008, hitting markets in Europe.

JPMorgan is due to post quarterly results on Thursday after it moved up its reporting date, followed by Citigroup on Friday after it also moved up its results date.

Thomson Reuters data show expectations for JPMorgan have crumbled: A month ago it was expected to earn 27 cents per share in the fourth quarter. Two days ago that view was down to 5 cents. Before the bell, the view was a penny before special items.

On Tuesday, Federal Reserve Chairman Ben Bernanke said more steps were needed to stabilize banks, reviving the idea of authorities sopping up toxic assets from banks’ books.

NEW YORK, Jan 14 (Reuters)

U.S. stocks slipped in thin holiday trade on Friday after a streak of gains as investors nervously eyed post-Thanksgiving sales to gauge how retailers will fare this holiday season, while worries about global demand hurt technology and energy shares.

Chevron (CVX) fell 1.9 percent tracking oil lower as OPEC gathered to discuss potential further supply cuts to combat falling demand. U.S. crude dropped below $53 a barrel.

Technology shares slid after signs of a downturn in global chip demand as STMicroelectronics cut its fourth-quarter outlook. Industry sources said Taiwan companies want to slash costs. The semiconductor index shed 1.1 percent.

The U.S. stock market was closed Thursday for the Thanksgiving holiday and is trading for half the day on Friday. On Wednesday, stocks ended higher, capping the Dow’s biggest four-day percentage gain since 1932.

Stores across America hope to ring in billions of dollars in holiday sales beginning on the “Black Friday”, the day after Thanksgiving. But retailers fear a looming recession and mounting job losses could cost them dearly during the period that brings in up to 40 percent of annual sales.

“It’s a light volume day so you’re going to see some choppy trading, with so many people out,” said Robert Finkel, consumer trader at Stifel Nicolaus in Baltimore.

“I’m watching how things go from a retail standpoint today – we’ve heard a lot of speculation about how bad it’s going to be, now we’ll get some proper feedback.”

The holiday weekend will test the strength of consumer sentiment, a main driver of the U.S. economy, as the country faces its worst financial crisis since the Great Depression.

The Dow Jones industrial average fell 2.39 points, or 0.03 percent, to 8,724.22. The Standard & Poor’s 500 Index was down 2.39 points, or 0.27 percent, at 885.29. The Nasdaq Composite Index shed 14.26 points, or 0.93 percent, to 1,517.84.

The S&P’s retail index dipped 1.6 percent.

Chesapeake Energy Corp (CHK) fell 14.7 percent to $17.26 after a shelf offering to issue up to 50 million shares.

U.S. aluminum company Alcoa Inc’s (AA) fell after an executive said the company is not actively seeking to raise its stake in miner Rio Tinto Ltd (RIO) .

There is no U.S. economic data due on Friday nor any major companies scheduled to report earnings.

For the month, the Dow is down more 6 percent, the S&P 500 down more than 8 percent and Nasdaq down 11 percent.

By Kristina Cooke
NEW YORK, Nov 28 (Reuters)

U.S. stock futures pointed to another monumental beating on Friday – with leading contracts falling as much as rules allow — as a plunge in Asia reignited concerns about the health of the global economy.

S&P 500 futures dropped 60 points to 855.20 and Nasdaq 100 futures fell 85 points to 1,168.50. Dow industrial futures fell 550 points.

All three contracts fell so much that they reached pre-specified limits that can’t be broken until pit trading opens.

Thursday’s session for U.S. stocks was erratic but generally positive, with the Dow Jones Industrial Average closing 172 points higher and the S&P 500 rising 11 points, though the Nasdaq Composite slipped 11 points.

Read on at MarketWatch.

That’s because DCT circles the market like a vulture. We wait for vulnerable stocks to show signs of failure at short-term highs, and then fully exploit their downside potential.

This “vulture” strategy is working pretty well so far. Year-to-date, Death Cross Trader has closed 10 out of 15 positions at a gain. That’s an accuracy rating of 66.7%!

On a cumulative basis — taking into account both winners and losers — you could have made gains of 243% during the first quarter of 2008 with Death Cross Trader.

If you average that over three months, it’s 81% gains per month, while the entire market fell!

We even managed to get a triple-digit winner, making 119% on the drop of FedEx Corporation (FDX:NYSE). Some other big moneymakers included 68% on Texas Instruments (TXN:NYSE) and a whopping 40% gains in only two days on AMR Corporation (AMR:NYSE).

Death Cross traders are loving it! And I mean that literally. Subscriber D.J. just wrote in to say, “I love your newsletter!”

Subscriber A.E. dropped me a note after our recent gains to say, “Amazing. Just using your service is making me money. Keep up the good work.”

And subscriber P.G. just made “a quick $800” on our last recommendation!

These are people just like you, making substantial gains by playing the downside of the market. And from the looks of it, the weakness in stocks is far from over…

While the markets have been rallying to kick off the second quarter, I suspect the enthusiasm could be shortlived. Technically, the name of the game is a final push toward the indexes’ 200-day moving averages.

This is a customary move in a falling market… Consider it a last chance to take any gains off of the table before the real drop starts.

There’s no doubt in my mind that we’ll continue to see a major breakdown in the market. My money is on Dow 10,216 (at least!), a Nasdaq valued at 1,750 and an S&P at 1065.

In that kind of climate, you better be holding some strong recession-proof stocks… or playing along with the successful downside positions you’ll find in Death Cross Trader.

I remember university. When I wasn’t diligently studying economics, that’ll be most of the time, then, I was doing what everyone does at that time of life. Trying to pack as much enjoyment into those three short years before I had to go out into the world and actually work for living.

Naturally that involved a lot of parties. And while they were fun, as much time was spent feeling tired and stressed as actually enjoying myself. Especially as the night wore on, the booze ran out, and you wondered whether you should just quit and go to bed.

But then… someone would turn up, late back from a club, bearing fresh supplies, and the fun would all kick off again!Yesterday felt a bit like one of those moments. Tired and flagging, the markets got a second wind as a mood of optimism engulfed the financial world. The FTSE went up 150 points, while the Dow Jones Industrial Average was up almost 400, the best start to a second quarter since 1938. Wow!

Meanwhile, reporting season is upon us, meaning all those sly banks have to ‘fess up to their losses and the system can finally purge itself of all but the happiest of happy thoughts.

Lehman asked investors for $3 billion and got $4 billion. Lehman’s shares went up 8.5%. Other banks rose too…

They think it’s all over…

So is this the turning point? There are still losses we don’t know about, but some investors feel that they’ve already been priced in.

“We’ve been hearing that argument for the last six months!” says a world-weary Manraaj Singh.

“At some point all the losses will be priced in,” adds Bill Bonner. “Are we at that point yet? I don’t know. A new trend’s not going to announce itself like an ambassador to the Court of St. James. Instead, it’s going to sneak in like a thief in the night. We’re not even going to realise it’s been here until we wake up the next morning and find the silver missing.”

So beware. We could be seeing a ‘value trap’ — a short-term rise that will suck in early optimists. It’s tempting to think a lot of ‘value’ is being uncovered right now. Tempting to try and be clever and pick up what we think are bargains.

But if we get a long-term bear market, shares could get a lot cheaper before it’s all over. You don’t want to be holding them if that happens.

“It’s going to be a real stock-picker’s market,” says Theo Casey, one of our investment panel. “Undervalued shares could stay ‘undervalued’ for a long time yet. There’ll be some shares out there worth buying, but don’t blindly grab onto anything.”

Manufacturing inflation hits 13-year high; pound at all-time low against the euro

Step off the market merry-go-round, and the picture for the UK’s real economy looks less rosy.

Input costs for UK manufacturers last month saw their largest rise since April 1995. Meanwhile, the pound has hit an all-time low against the euro, adding fuel to the inflationary fire.

This makes a case for the Bank of England to keep interest rates on hold. It’s a chance for Mervyn King to look strong, to stick to his role as an inflation fighter, despite a weakening housing market and fears of recession.

He may just take it — the Bank’s credibility could do with a boost, plus Merv may want to keep his powder dry, and unleash a mega-cut when the going gets really tough.

The markets, so one report goes, have already priced in a 70% chance of a quarter-point-cut. We could see a few disappointed faces in the Square Mile next Thursday lunchtime.

Gold falls, but oil stays above $100

Gold is down to $888, but oil has stayed above the magic $100 mark (excepting a short spell yesterday when it poked its nose just below for old time’s sake).

“I find it interesting that gold fell but oil didn’t,” muses Bill Bonner. “Oil has real demand behind it, while gold is monetary.”

“Absolutely,” agrees Garry White. “You make loads of stuff from oil. Plus,” he adds, “there’s a real supply crunch going on. We all seem to focus on US oil inventories, but we should be looking at capacity in producing nations too.”

The Gulf is experiencing a power crisis, and it’s hitting production capacity.

“The fundamentals are in the driving seat now!” says Garry. “And the fundamentals are tight.”

Which is great news for Garry’s oil play, which is looking mouth-wateringly cheap right now. Find out why oil is one of Garry’s Power Trends — 5 trends that could see smart investors make an absolute killing in the months ahead.

Hope for Zimbabwe

Could Mugabe finally go? The opposition Movement for Democratic Change is claiming victory in the country’s elections.

But the Zimbabwe Election Commission still hasn’t announced a result, giving rise to fears that Mugabe’s Zanu-PF party might try to rig the vote.

“It would be fantastic news if we finally see change there,” says Manraaj Singh.

I asked him what he thinks is the investment case for Zimbabwe. If we do see an end to Mugabe’s 28-year reign, will Zimbabweans finally see a stable, growing economy?

“The investment case is very good,” says Manraaj. “The infrastructure is already in place and so are the human resources. What’s needed is legal clarity and a currency that you can actually get your head around.”

It’s good to be hopeful. But until anything happens, I’m wary of tempting fate.

Until tomorrow

Ben Traynor

The rally in financial stocks led the three major indexes to post gains of more than 3%.

At the New York close, the blue-chip Dow Jones Industrial Average Index had posted a gain of 391.96 points (3.20%), to close at 12,654.85. The tech-laden Nasdaq Composite Index increased 82.14 points (3.60%), to reach 2,361.24. And the broader Standard & Poor’s 500 Index rose 47.17 points (3.57%), to hit 1,369.87.

All sectors were up with the financial sector (up 4.47%), the services sector (up 3.29%) and the technology sector (up 3.18%) posting the biggest gains.

In today’s going, stocks edged higher after a shaky start on hopes that Friday’s employment report will bring good news.

The Dow Jones industrial Average rose 21.25 points to 12,673.25, with 17 its 30 components trading lower.

Read on at MarketWatch.com.

“The stock market is beginning to offer some attractive bargains,” says Chris Mayer.

“Several great mutual funds, long closed to investors, are now open again for new investors. These include the Tweedy Browne Global Value Fund, the Longleaf Partners Fund, the First Eagle Global and Overseas funds, the Third Avenue International Value Fund and the First Pacific Crescent Fund. They’re open because they have more ideas than they have money. They want to buy.

“I’d give these funds a look, because they don’t tend to stay open for long. The opening of these funds, captained by investors with long track records of success, is also an indicator that the smart money is buying.”

Read on here.