Bear Mountain Bull

Internals were positive, but volume backed down, and was only a bit better than Monday’s very light levels. Advances/declines were 7 to 3 on the NYSE and 12 to 7 on the Nasdaq, with up/down volume 5 to 1 on the NYSE and 7 to 1 on the Nasdaq. New highs/lows were 189/15 on the NYSE and 58/27 on the Nasdaq.

Leaders — Homebuilders (+2.97%), Disk Drives (+2.42%), Retailers (+2.19%), Paper (+2.14%), Semis (+2.07%), Biotechs (+1.69%), Comp. Hardware (+1.54%), Network (+1.46%)
Laggards — Insurance (-0.37%), Utilities (-0.28%), Drugs (+0.19%), HMOs (+0.44%), Health Care (+0.56%), Comp. Tech (+0.62%), Chemicals (+0.62%), Telecoms (+0.70%)

Treasury Yields — 6-Month: .18%,  2-Year: .49%,  5-Year: 1.43%,  10-Year: 2.62%,  30-Year: 3.71%

Energy Prices — Crude oil: $74.97/barrel,  Gasoline: $1.92/gallon,  Natural Gas: $3.80/mmBTU

US Dollar Index — 82.398

Precious Metals — Gold: $1251.20/ounce,  Silver: $19.67/ounce,  Platinum: $1545.00/ounce

BMB Note:  
The song remains the same — mainly because the record has been skipping for a few months now. This bounce may provide a few short setups for those willing to take a stab if the market decides to turn back down. But with the indices still rangebound, no point in overloading either side of the boat right now. For those looking to jump in on the long side, things might be a wee bit overbought after gaining 50 S&P points in a little more than two days.

Jobs number out in the morning, and then we slide into a long weekend. That’s alright — football’s getting cranked up.

From Jeffrey Cooper, posted at Minyanville:

Another day, another panic day.

Yesterday was a 90% Upside Day, the 13th such so-called panic-buying day since the April 26 high.

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Trouble is that while the first trading day of the new month was the 13th panic-buying day since the April high, there have been 14 panic-selling days since the April high.

Who can keep track?

It seems the only uniformity, the only trend in the market, is the trend for panic-buying days and panic-selling days to go tit for tat. To match each other.

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This is clearly a market that acts as if it’s being remotely controlled by someone with big footprints, stampeding price from one side of the house to the other.

Monday was a 90% panic-sell day, on the heels of Friday’s 90% panic-buying day.

Three out of the last four sessions have been 90% days.

This kind of volatility is a market in disarray. It’s not a sign of a healthy market.

Volatility often precedes significant moves.

Couple this with six Hindenburg Omens since August 12, and it’s unprecedented action.

The word “panic” derives from the Greek, pertaining to the shepherd god, Pan, because he could scare herds to sudden and seemingly senseless mass exodus.

Risk runs high when frenzy runs deep.

I call it nutso.

…but I wouldn’t expect much action to be taken anytime soon.

“SEC Investigating HFT Quote Stuffing And Sub-Pennying”

It doesn’t get much more ’sideways’ than this.

Charts courtesy of StockCharts.com

Internals continue to be ‘all or nothing’, swinging madly from wildly positive to wildly negative — obviously, today was of the positive variety, but volume looks lighter than yesterday, at least on my charts. Advances/declines were 17 to 3 on the NYSE and 4 to 1 on the Nasdaq, with up/down volume better than 19 to 1 on both exchanges. New highs/lows were 248/11 on the NYSE and 46/43 on the Nasdaq.

As you might expect, some of the weakest groups got the biggest bounce:
Leaders — Hospitals (+6.33%), Paper (+5.38%), Steel (+4.98%), Oil Services (+4.82%), Disk Drives (+4.41%), Banks (+4.14%), Oil (+4.06%), Metals (+4.05%)
Laggards — Gold/Silver (-0.48%), Telecoms (+1.67%), Health Care Products (+2.00%), Utilities (+2.09%), Drugs (+2.21%), Health Care (+2.27%), Comp. Tech (+2.48%), Network (+2.50%)

Treasury Yields — 6-Month: .18%,  2-Year: .50%,  5-Year: 1.41%,  10-Year: 2.57%,  30-Year: 3.64%

Energy Prices — Crude oil: $73.97/barrel,  Gasoline: $1.89/gallon,  Natural Gas: $3.75/mmBTU

US Dollar Index — 82.488

Precious Metals — Gold: $1244.70/ounce,  Silver: $19.36/ounce,  Platinum: $1529.00/ounce

BMB Note:  
As soon as I saw the market jump up and hold this morning, it was pretty much just another “shut down, turn off” kind of day for me. Not much point in watching too closely, since I knew that all today’s bounce would do is prolong the seemingly endless trading ranges on the indices, at least for the time being.

We’ll look to see if this bounce produces any pullback setups on the short side in the weak areas, but we won’t be real eager to take them. You’d like to have “market-sector-stock” all on your side, and right now, the ‘market’ part of that equation isn’t giving anybody at all an edge, and hasn’t all summer.

For that big IPO — you can just see them lining up, crawling all over each other to buy this stock can’t you?

“GM posts double-digit drop in August sales”

Saving is good — economists are wrong:

To explain why saving is good and why economists are wrong, we have to ask why we keep having these boom-bust cycles. Here’s where common sense really has been thrown out the window by mainstream economists. Almost all economists believe that you can make the economy prosper by printing huge amounts of new money and throwing it at the economy to make it grow.

Does it make sense that by printing more pieces of impressive looking green paper that you can create wealth? If that were the case, why aren’t the Zimbabweans the richest people on the planet? Yet, this is what economists believe and this is what the Fed practices.

To cut this short, this is exactly what the Federal Reserve did starting in 2001. Over a five-year period, the Fed reduced its federal funds rate from 6% to 1%. Money flooded the economy. Housing projects that made no sense but for the cheap money and the false appearance of paper prosperity, were hugely over produced. When the Fed stopped the gusher of money in 2006, the whole thing collapsed and pulled the economy down in the biggest bust the world has ever experienced.

From another superb Todd Harrison column:

Verbal Kint once famously offered that the greatest trick the devil ever pulled was convincing the world he didn’t exist. The same can be said about our current financial construct: as the tape chews through victims and claws at aggregate returns, we would be wise to remember that nobody makes money in bear markets — not even the bears.

Let’s start here — since I haven’t even begun to look for cool and clever stuff to post yet this morning.

While the S&P range has compressed to just 25 points over the past six sessions…

…former ‘horseman’ RIMM looks more like horse manure….

…and the banks have been stinkin’ it up as well:

Charts courtesy of StockCharts.com

Internals were mixed, with volume higher (a bit of ‘churning’, perhaps?). Advances/declines were 5 to 4 on the NYSE but just below flat on the Nasdaq, with up/down volume 3 to 2 on the NYSE but 1 to 2 on the Nasdaq. New highs/lows were 147/97 on the NYSE and 20/141 on the Nasdaq.

Leaders — Paper (+2.40%), Metals (+1.90%), Airlines (+1.58%), Steel (+1.37%), Gold/Silver (+1.25%), Banks (+1.09%), REITs (+0.93%), Insurance (+0.64%)
Laggards — Disk Drives (-2.84%), Semis (-1.94%), Oil Services (-1.40%), Comp. Hardware (-1.14%), HMOs (-1.01%), Network (-0.96%), Defense (-0.87%), Hospitals (-0.73%)

Treasury Yields — 6-Month: .18%,  2-Year: .48%,  5-Year: 1.34%,  10-Year: 2.47%,  30-Year: 3.52%

Energy Prices — Crude oil: $71.75/barrel,  Gasoline: $1.89/gallon,  Natural Gas: $3.81/mmBTU

US Dollar Index — 83.118

Precious Metals — Gold: $1246.80/ounce,  Silver: $19.35/ounce,  Platinum: $1521.00/ounce

BMB Note:  
Ho hum. Another day where the indices bounce around but go nowhere, another defense of that 1040 mark.

Trading ranges have tightened up over the past week or so — maybe we’ll see some sort of move out in the not-too-distant future. And then again, maybe not.

Some say we can expect another ‘flash crash’, and maybe fairly soon:

Somebody, says Eric Scott Hunsader, CEO of Nanex, is intentionally slowing down some aspects of the market to skim profits from clueless competitors. This won’t stop, Hunsader says, until the SEC or the exchanges step in and do something about the copious quote volume wars currently taking place.

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Consider that in 2004, our equity markets saw one quote for every 10 shares traded. Now the ratio is one to one, a ten-fold increase. CQS (Consolidated Quote System) in 2004 carried 25 million quotes per day. Now it’s at 800 million a day and growing. Just in 2010, in fact, volumes have doubled.

“There is no extra trade volume here,” Hunsader says, “it’s just noise.”

Noise that, if allowed to continue growing, will surely topple the markets again—likely before the end of the year.

Link via Joe Saluzzi on Twitter.

…from the Fed.

James Kostohryz at Minyanville:

Some financial pundits have been musing that the Fed is preparing to embark on another massive program of quantitative easing (QE) to try to save the economy and that the most recent Fed committee meeting and Bernanke’s Jackson Hole speech signal a move in that direction.

I think that all of this speculation overlooks a basic fact: A QE2 wouldn’t work. And since the Fed knows it, it won’t happen on a scale that could be considered meaningful.

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Fed committee members aren’t dumb (they’re not?? — BMB). I believe they realize that, at this point, they have little power to substantially stimulate the economy. In my view, Fed committee members understand that they would squander institutional credibility if they announce bold “action” and their policies get no results. Therefore, I don’t expect any sort of Fed action that will be perceived as a sort of major QE2.

I think it’s likely that the Fed will throw some “QE2 light” stuff out there just so it can protect itself from the charge that it’s doing nothing. But it’s my view that it’s unlikely to do anything truly substantial.

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So why is QE1 widely regarded as a failure? One problem, as I pointed out in The Greatest Fed Bubble of Them All, is that people tend to expect way too much of the Fed. Some people think that the Fed can lead the US out of recession and into full employment. Other people think the Fed created the recession and massive unemployment. They’re both wrong. At the end of the day, the Fed is a marginal player.

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…taking all of the above into consideration, I reach a radical conclusion — at least radical in today’s age of hyperbolic media predictions: There won’t be high rates of inflation or deflation. Under current circumstances and in a scenario of sluggish growth, the aggregate price level (aka inflation) will remain pretty stable, albeit with some disinflation/deflation bias.

If that conclusion seems too “boring,” you should seriously question whether you currently have the right temperament to be a successful investor. The related psychological tendencies toward dichotomous thinking and the proclivity to expect extreme outcomes are massive impediments to successful investing.

Some say the double dip is already a reality.

Others say we won’t see a ‘double’ dip — because we never got out of the first dip…

I have informed more people than I care to count that I do not believe we are going to have an economic double dip. Am I turning positive on the economy? Do I see blue skies and fair winds on our economic horizon? No, regrettably not. The reason I do not believe we will have an economic double dip is very simply I do not believe that our “real” economy, not the government sponsored version, ever really came out of the initial recession.

	The Nasdaq has formed an even tighter range as it huddles beneath a significant resistance area…
	…along with the Russell.

Charts courtesy of StockCharts.com

Internals were negative, but volume was light. Advances/declines were about 4 to 15 on both exchanges, with up/down volume 1 to 13 on the NYSE and 1 to 5 on the Nasdaq. New highs/lows were 133/36 on the NYSE and 23/77 on the Nasdaq.

Leaders — Disk Drives (+0.44%), Comp. Hardware (-0.63%), Gold/Silver (-0.70%), Health Care Products (-0.72%), Drugs (-0.72%), Airlines (-0.85%), Biotechs (-1.03%), REITs (-1.05%)
Laggards — Banks (-2.74%), Semis (-2.54%), HMOs (-2.48%), Homebuilders (-2.41%), Broker Dealers (-2.34%), Steel (-2.28%), Retailers (-2.22%), Paper (-2.17%)

Treasury Yields — 6-Month: .18%,  2-Year: .49%,  5-Year: 1.38%,  10-Year: 2.53%,  30-Year: 3.58%

Energy Prices — Crude oil: $74.26/barrel,  Gasoline: $1.93/gallon,  Natural Gas: $3.83/mmBTU

US Dollar Index — 83.184

Precious Metals — Gold: $1237.00/ounce,  Silver: $19.03/ounce,  Platinum: $1527.00/ounce

BMB Note:  
That was pretty lame ‘follow-through’ on Friday’s big up day, wasn’t it? Most of those gains have faded yet again.

The indices are right back to dancing near the bottom of their trading ranges — 1040 remains an important looking barrier on the S&P. But, as we all know, those indices haven’t broken down yet.

And Gary Kaltbaum isn’t talking bath soap:

Ben Bernanke cannot influence the economy. We are no longer in the past where the Fed waves their magic wand, lowers rates and everything will be better. Mr. Bubble has rates already at zero…making banks flush while screwing savers. Mr. Bubble has already used tons of funny money to buy a massive amount of bonds to bring long rates down.

There is nothing he can do to create demand. There is nothing he can do to stop people from saving. There is nothing he can do to stop people from paying down their credit cards. Simply put, there is a cultural shift going on because the financial crisis scared the heck out of people. The economy is still blah and housing remains in the basement. I would say the only thing housing has going for it is that TIME MAGAZINE now has a front cover entitled “RETHINKING HOMEOWNERSHIP!” So maybe…just maybe…nah! The only think Mr. Bubble can do is move markets every now and then. More then than now.

As far as the market, it has held A low. Notice I capitalized A…and did not say THE low. To be clear, a break below recent lows, WHICH I BELIEVE ARE VITAL SUPPORT LEVELS, then expect some real vicious technical selling to show up. So here are those important levels. NASDAQ at 2100 which held to the penny…S&P at 1040…which held to the penny…RUSSELL 2000 at 580-587 which held by a smidge…SMALL CAP 600 at 316. And very importantly, go look at the IYF and XLF which are ETFs for the FINANCIALS.

Notice both held right at the yearly lows. You will know market is toast if they break below. IYF under $48 area and XLF under the $13 area. The RKH which is REGIONAL BANKS broke lows recently and is much worse than the bigger banks. I expect every one of you to study these charts.

Notice I did not mention the DOW. Again, the DOW always holds up best when market is correcting as investors who have to be fully invested park money in the largest and most liquid stocks in the market. Thus, I pay attention to the DOW but give less weight. It is not representative of the whole market.

My best guess is this low holds for now. After all, it is end of month window dressing time…but of course, none of that goes on because it is illegal. Yeah…that’s the ticket! I would be surprised with any other outcome before the holiday. After the holiday could be another story as September is the worst month of year. But don’t get all comfy that the market will be cheesed in September. The market has a way with screwing with everyone. Also, look at the BOND MARKET. There has been a direct inverse relationship between bonds and stocks. There is a chance the recent action in bonds is a near-term top from its recent parabolic move.

I am looking at the market two ways here…as a big sell if the market wedges up into resistance which would mean a ton of names would do the same. On the other end, there has been a decent amount of stocks that held the 50-day on this dump to the downside. Actually, not sure if 100 names in the whole market is a decent number. And there are about 15-20 growth leaders still showing amazing strength though many that used to be strong have gone by the wayside. On the upside, I am going to be watching how the market reacts as it gets near the 50-day average which is only a couple percent higher. The 50-day ominously remains below the longer term 200-day. In bull phases, it is the other way around.

To sum it up, market held very important support. It is a potential low…and could be the low. Playing it by the book, the market will need a follow through day from here..We will know if a low is in by simply seeing the market continuing to hold and leadership breaking into new high ground AND STAYING THERE. It was good to see volume heavier Friday so maybe good things can happen. At least, for the first time in a while, I am open to it. But the mantra will stay the same…this market is going to remain a tough proposition whether it is bouncing up or sinking like a stone…so be patient.

In Illinois: “Being broke costs state $550 million”

In Greece: “Greeks “In Over Their Heads In Debt” Means Non Performing Loans Poised To Surge”

And everywhere else: “It’s Not A Question Of IF Sovereign Nations Will Default, But HOW”

First and third links from Instapundit.

US Treasuries:

US sovereign debt should only enjoy such historically low yields due to an overabundance of savings, low inflation, and low debt. None of those preferable conditions currently exist. Hence, US Treasuries are the most over-supplied, over-owned, and over-priced asset in the history of the planet! Once the debt dam breaks, it will send the dollar and bond prices cascading lower, and consumer prices and bond yields through the roof.

While Wall Street and Washington are petrified of the deflation boogieman, the real menace lurking in the shadows is the Fed’s bond bubble – and it’s going to eat small investors alive.

• Not much to see in the group charts — have a look for yourself: set #1 — set #2 — set #3 — set #4.
• For a more detailed breakdown of group movement over various time periods, try the Industry Group Tracker at WSJ Online, the industry group tools at Finviz.com, or the list of Morningstar industry groups at FreeStockCharts.com.

Not much change in the market this week, thus not much change in the Sector SPDRs either:

The numbers as we close out August and move into September:

Charts courtesy of StockCharts.com

Have bonds reached an exhaustion point for now?

Charts courtesy of StockCharts.com

Internals were positive, with volume a bit heavier. Advances/declines were 7 to 1 on the NYSE and 4 to 1 on the Nasdaq, with up/down volume better than 9 to 1 on each. New highs/lows were 142/71 on the NYSE and 22/83 on the Nasdaq.

Leaders — Metals (+3.81%), Steel (+3.66%), Oil Services (+3.60%), Disk Drives (+3.42%), Chemicals (+3.05%), Homebuilders (+3.01%), Airlines (+2.80%), Paper (+2.66%)
Laggards — Health Care (+0.96%), Comp. Tech (+1.03%), Retailers (+1.13%), Telecoms (+1.19%), Health Care Products (+1.22%), Drugs (+1.26%), Hospitals (+1.51%), Internet (+1.64%)

Treasury Yields — 6-Month: .18%,  2-Year: .56%,  5-Year: 1.50%,  10-Year: 2.65%,  30-Year: 3.70%

Energy Prices — Crude oil: $75.40/barrel,  Gasoline: $1.96/gallon,  Natural Gas: $3.61/mmBTU

US Dollar Index — 82.904

Precious Metals — Gold: $1237.90/ounce,  Silver: $19.09/ounce,  Platinum: $1531.00/ounce

BMB Note:  
Stocks lurched lower on some bad news this morning, but somebody/something stepped in and saved the day for Big Ben’s Bash out west, and after 90 minutes we already had a 150-point range in the Dow.

But, of course, it doesn’t change anything. The indices have bounced yet again off the lower end of their ranges — the S&P teased that 1040 mark twice this week.

We haven’t seen much of anything in the way of setups — I guess that’s what happens when the market keeps moving sideways. Yeah, it’s dull, but probably less frustrating than fighting the chop. Someday it’ll change. At least that’s what they tell me.

…than never.

Larry McMillan’s commentary finally makes its way onto the web (click here to view column with charts):

For the first time in a while, there has been some follow-through in the market ($SPX) after a technical level was breached. In this case, the support at 1060 has been breached. This should lead to a test of the 1020 support level soon.

Equity-only put-call ratios established sell signals in early August, and as long as they continue to rise, that will be bearish for stocks.

Market breadth has been very negative, but oversold conditions have arisen, and thus sharp, but short-lived rallies are possible.

Volatility indices ($VIX and $VXO) probed higher this week, and they have now established an uptrend on their charts. Such an uptrend is bearish for stocks.

In summary, the bearish trend remains in effect, although sharp, but short-lived oversold rallies are possible.

CSCO, RIMM, HPQ, YHOO all on the new-low list this morning, and then this from ZH: “Intel Cuts Revenue, Gross Margin Forecast, Shares Halted”

It’s Friday — why didn’t they wait until after the bell? That’s what everybody else does…