Bear Mountain Bull

It’s time again for a little BMB R&R, especially with the market behaving as bizarrely as it’s been. Maybe if we stop watching it start to behave a little better…

Posting will be very light and variable over the course of this week, but we’ll put up an open thread each market day for our readers to comment on the day’s market activity or to post any interesting links they might run across.

Check the space below for whatever the latest might be during this ‘off’ time, and please visit the various sites in the ‘Links’ and ‘Regular Stops’ for up-to-date market news and analysis.

BMB will be back in full swing by next weekend.

So, with all the furor over $51 oil and shrinking flu vaccine supply, the trading day ends with the major indices going pretty much nowhere. The Dow moved a little more than the others, ending down 0.38%. Volume was pretty much average - advance/decline right around 50-50, and up volume/down volume was about 40/60 on the NYSE and 60/40 on the Nasdaq.

Big winner of the day was gold, with the Gold/Silver Index ($XAU) up about 2.5%, and the Gold BUGS Index ($HUI) up just over 3% (I know you’ve always wondered where the name ‘BUGS’ index comes from - it’s an acronym for “Basket of Unhedged Gold Stocks” . You’re welcome.). Natural gas (big surprise) was up 1.4%. Losers were the airlines, down 2.9% (investors read BMB’s market wrap from yesterday and wondered why in the world they were buying airlines), and biotechs (-1.26%). Those homebuilders in the $HGX index were only down another 1.1% today, but PHM (who warned yesterday) got whacked by nearly 7% more today. Yesterday PHM crashed through its 50-day moving average, and today fell down to bounce off of its 200-day MA.

The bulls that follow Dow theory continue to be frustrated by the fact that the Dow Transports ($TRAN) keep vaulting to new highs, yet the bull move is not confirmed by new highs in the Dow Industrials. BMB asks the question: How long can the Transports continue to put in new highs with oil now above $50/barrel?

Schaeffer’s thoughts on the continued strength in the utiilty sector.

Today the market punditry whines about the market not being able to go higher due to the fact that oil is trading above $50 a barrel. While $50 oil is not good for the market longer term, we didn’t hear much complaining about oil prices ‘hurting’ the market during the rally of the last month-and-a-half. When the S&P 500 bottomed on Aug. 13 at 1060, oil was trading around $44/bbl (chart). Since that time, the S&P has rallied to its current 1135 level, while oil has continued its long uptrend, now moving solidly above $50. So why is oil the problem today, when it wasn’t a ‘problem’ over the last 6-7 weeks?

BMB does not intend to minimize the effects that higher oil prices will have on the US economy, however. There can be no doubt that sustained oil prices at these levels - or even higher - will be a drain on economic growth in the not-so-distant future.

Update: As of 3:00 EDT, NYMEX crude was trading at $51.05/barrel. Ouch.