Today was yet another day from the Twilight Zone. Rising crude oil prices and a continued rising of the Dow Transportation Index. The disconnection between oil and the transports has been nothing short of just freaky. It has defied historical connections between these two entities. Rising oil costs means higher expenses for airlines, trucking companies, etc. And with that comes reduced profit margins, unless they are passing 1 for 1 the costs on to the customers. But, if they begin doing that then their business will decline as the costs become too high and companies cut back on expensive shipping.

The transport index finally reached exhaustion as it attempted to close at a new high. And following that tickle of new highs it sold down very quickly, as did the rest of the market.

(Dow Transports Index - 5 minute chart of 5/19/08)

Many stocks printed a sharp reversal pattern on the daily charts today. Follow through is needed to confirm what is appearing to be the next down ward leg of the broad markets. It is too early to call the bear market rally over, but it does appear that it is on life support now.

(S&P 500 - Weekly Chart)

On the weekly chart of the S&P 500 it would appear that the Fibanocci 62% retracement level is setting up as the ‘line in the sand’. So many various resistance levels have all been challenged to only go on to test the next one. Based on today’s sudden and high volume selling today I feel comfortable saying that the area in the red circle is going to be the end of this bear market rally. Can’t call it dead yet, but like I said above… It is nearing end of life.

(S&P 500 Futures - 5 Minute Chart of 5/19/08)

The momentum stocks all took some large losses today, especially in the Nasdaq. Our short position on Apple is getting better each day now.

(AAPL - Daily Chart)

There was speculation that the catalyst for today’s sell off was news from SanDisk Corporation (SNDK). At 1:50 PM today this news hit the wires:

[SNDK] Sandisk Corp - US retail sales in April remained "soft," in-line with Q1 - conference call comments

- notes high oil prices hurting consumer discretionary spending

While the timing of the market sell off is very coincidental to the news release from SanDisk, I doubt that it was the primary catalyst. It may have had an ‘added effect’ but I feel it was a technical sell today more than anything else.

Tomorrow we have to see what the market does with this sudden reversal in the major indices. A small rally to see if anyone bites? Or a continued sell right from the open? I watching the live S&P futures currently and they are remaining near the closing price of the S&P today. At this time no one is jumping in to buy up the futures here.

Back to the subject of oil again. A private trucking company near me announced today they are closing their doors. This company, in business since 1981 could no longer stay in business due to the weak economy and fuel costs. Now you know why we find it ‘weird’ that the transport index would go up as oil was rising. The following is the press release from the private company near Rebel HQ.

Date: 05/19/08

NJ Based Motor Carrier Discontinues Operations

Jevic Transportation Inc Cites Economic Conditions as Final Straw

Delanco, NJ…. Effective Monday May 19th 2008 Jevic Transportation, Inc, a less-than-truckload transportation services provider, is discontinuing operations. They are headquartered in Delanco, NJ.

Although the company will not be making pick-ups, a company spokesperson has said they are running a delivery operation until all freight “in our system is delivered”.

“We owe that to the many loyal customers who have been the backbone of Jevic over the last 27 years,” says Pete Robinson, director of marketing and corporate communications. “Our customers were what drove us and made Jevic the market innovator in freight transportation.”

Since going private two years ago, the company worked diligently to bring the company back to strong profitability.
In April, Jevic aggressively realigned the organization to improve costs and improve efficiencies. The realignment was going as planned and freight delivery costs were improving.

“Sadly, escalating fuel costs, higher insurance costs, a slowing economy and, ultimately a tightening of the credit market were to much for us to overcome, “ Robinson says. “It’s a sad day for everyone here in Delanco and around the country.”

With this action approximately 1,500 employees are no longer employed.

The company was founded in 1981 and grew rapidly during the eighties and early 90’s. At one time it had facilities in Delanco NJ; Chicago IL; New England, New York NY; Charlotte NC; Atlanta GA; Houston TX; Cleveland and Cincinnati OH; and Los Angeles CA.

The company was known for its unique operating model which handled freight less than conventional carriers, lowering lost and damaged shipments dramatically, while still delivering to the entire 48 states. This “Breakbulk-Free” model, as it came to be known, was the platform for the myriad innovations, which solidified the carrier’s reputation for customer service.

Jevic was the first nation-wide LTL carrier to offer what has become a standard offering in the industry - time-definite and day definite services, branded “100% Guaranteed”, which provided expedited delivery. They also offered the Jevic “Heat Fleet”, the largest fleet of heated trailers in the United States, used to protect freezable freight en route to destination in cold winter months.

““We are certainly grateful for the emails and calls we are receiving from our customers wishing everyone well.” states Robinson. “Jevic” is more than trucks - it was the people, that’s for sure.”

Quick Fact Sheet
Incorporated May 18 1981 - Opens in Delran and Willingboro NJ
1989 - Chicago, IL Opened - Breakbulk-Free operation begins
1991 - Delran Operation moved to Delanco, NJ
1992 - Charlotte Opened
1993 - Atlanta Opened
1995 - New England Opens
Charlotte moves to larger facility
1997 - Houston
1999 - Cleveland and Cincinnati
1st nationwide carrier to use a satellite system for nationwide communication beginning in 1991.
Lowest Claims ratio @ 1/2 of 1% for over 25 years.
Employees – 1500+

So with that 1,500 more people will be unemployed.

Other news tonight:

 

THE US GOV’T RAISED ITS 2008 FOOD PRICE INCREASE FORECAST TO 4.5%-5.5%, A HALF PERCENTAGE POINT ABOVE PRIOR FORECAST - WSJ
- The food inflation forecast is approaching levels not seen in the US since 1990

————————–

CitiGroup(C) - WSJ REPORTS THAT THE COMPANY MAY HAVE TO PROVIDE COMPENSATION TO THE BANKS THAT LOST MONEY BY INVESTING IN CITIGROUP’S HEDGE FUNDS
- Banks invested more than $1.6B in  a Citigroup hedge fund (Falcon Strategies)
- Wachovia was the bank that had the most exposure to the hedge fund with more than $1B invested.
- Fifth Third invested $612M into the hedge fund.

————————–

ACCORDING TO A STUDY, Q1 US CELL PHONE PURCHASES FELL BY 5% Y/Y - WSJ
- The article cites data from Strategy Analytics.
- Additional data from the NPD showed a 22% drop in new handset buys in Q1.

————————–

IMF’S LIPSKY SAID THAT THE COMBINATION OF MARKET TURMOIL AND INFLATION ON THE WORLD ECONMY WILL BE SIGNIFICANT - RADIO INTERVIEW

————————–

Thornburg Mortgage (TMA) - EXPECTS TO REPORT SUBSTANTIAL NET LOSS FOR QUARTER ENDED MARCH 31
- to file its Form 10-Q and issue an earnings press release with a follow-up conference call to discuss the first quarter results by June 2, 2008.

We see reversal candles on a lot of charts this afternoon.  One of our readers, Steve, mentioned that SanDisk was being blamed for the market reversal.  Apparently, SNDK’s CEO said consumer discretionary spending was soft due to high oil prices.  I agree with him that this was not the cause of the sell off.  The news that discretionary spending is down and high oil prices are hurting everyone, is not “new” news.  The indices are pushing at resistances on technical levels, and we just keep testing them.  Volume is abysmally low, except when the selling comes in, then there is an uptick.  Do you see this as a “profit taking pullback” or “buying opportunity?”  Heaven help you.

We are here to make money in this market.  Until our real-time site is ready, I’m not making recommendations on short-term trading opportunities, but that doesn’t mean they aren’t out there.  So, in the meantime, I have tried to keep you informed of the “popular” trades, the crowded plays, so you can at least protect your profits in those sectors.  We have also tried to keep you informed of the macroeconomic picture and government decisions, because we believe traders need to understand the whole environment in which they are trading.  And, we bring you the technical analysis to go along with the fundamentals, so you can make up your own mind about the big picture.

Trading for a living is not a “red light, green light”, easy-as-pie profession.  Investing on your own can seem like a daunting task, as well.  But, it is not impossible to learn.  Trading and investing goals are different, but they do cross paths.  I do both and so does Chuck.  It is our combined skills and knowledge that we bring to you, in the hope of making all of this a little less confusing.  We know that people are going to be a little frightened as they venture into investment and trading land!  If you aren’t a little scared, you’re crazy.  The trick is to keep moving forward, regardless of the fear.  Learn all you can and then learn to trust yourself to apply the knowledge.  We are here to hold hands and soothe nerves, when necessary.  I wouldn’t be where I am today, if someone hadn’t done the same for me.  I finally reached the point where I was more concerned with making good decisions, than whether I had made money everday.  And I found the money flowed much more easily when I achieved that mind-set about trading.  We understand the fear, as well as the euphoria, and we try to help traders keep these emotions in balance, so they, too, can make “good decisions”.

Volume remains quite low, advancers barely squeezing by decliners.  Indices pushing hard against resistances.  Is that a light at the end of the tunnel?  Or is it the headlamp of the freaking freight train?  My take on the follow statement is that everyone has pretty much run out of things to say, let alone intelligent things to say:

Lowe’s (LOW):

REPORTS Q1 $0.41 V $0.40E, R $12.0B V $12.36BE
- Reports Q1 SSS -8.0%
- Guides Q2 EPS $0.54-0.59 v $0.56e; Sees Revenues +1% y/y
- Guides Q2 SSS down 6-8%, expects to open 23 new stores (+11% sq ft expansion)
- Guides FY08 EPS $1.45-1.55 v $1.54e; (Had guided $1.50-$1.58 on 2/25); Sees FY08 SSS down 6-7% y//y

Lowe’s Home Supply stores reported this morning that sales down substantially and lowers their forward guidance again.

Crude Oil set another intra-day record this morning. Other than that it is quiet in the pre market futures data, so far.