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.

Try to make your investment decisions on a rational basis, not an emotional one. Even where Google is concerned.

As the S&P small and mid-cap indices are looking to retest their highs, and the S&P 500 and Dow Industrials have broken back above their 50-day moving averages, the Nasdaq - and in particular, the Nasdaq 100 - continues to struggle. The Nasdaq 100 ETF (QQQQ) has yet to break above the bottom of the gap formed back on Jan. 20. The index is underperforming now, and will likely be the hardest hit if things turn south again.

Chart courtesy of StockCharts.com

The markets put together a very nice rally today following a disappointing jobs report - go figure. Maybe the market was happy because they didn’t think the Fed would be any more aggressive about raising interest rates - who knows. You wouldn’t think that less jobs than expected would be good news, but the market isn’t always logical. Matter of fact, I’m not sure that it ever is.

The Dow got a big boost from Altria and a tobacco ruling, finishing 123 points higher (+1.2%) at 10716, the S&P 500 gained 13 points (+1.1%) to 1203 and the Nasdaq bounced back with a 29 point advance (+1.4%) to finish at 2087. The Russell 2000 gained 8 points (+1.3%) to 637 and the bond market soared today after the jobs report, pushing the 10-year Treasury yield down to 4.08%.

Market internals were impressive today, with one nagging exception, that being volume - although volume did increase from yesterday on the NYSE, today’s volume dropped a bit on the Nasdaq. The good days in the market just aren’t attracting huge volume, and that has to be a concern for the bulls. Advances/declines were strong, at more than 3 to 1 on the NYSE and 2 to 1 on the Nasdaq. Up/down volume came in at more than 3 to 1 on both exchanges. There were 559 new highs to only 45 new lows.

Only winners across the industry groups today, with the best being semiconductors (+4.4%), disk drives (+4.0%), housing stocks (+3.9% on hopes of continued low interest rates and more accumulation of mortgage debt by the American consumer - hooray!), computer hardware (+2.3%), biotechs (+2.1%) and REITs (+1.8%).

Crude oil didn’t move much on the day, closing at $46.48/barrel, the dollar made gains (+0.5%) despite the poor jobs report, and gold prices fell to $414/ounce - news that the IMF may be selling some of its gold to pay third world debt didn’t help the metal any.

You gotta give Bernie Schaeffer credit - in mid-December, when everyone and their mother thought interest rates were going higher, he said they were going lower.

Boy, was he ever right, at least for now. At the beginning of December, the 10-year Treasury was yielding over 4.3%. Today - after the jobs report released this morning - the yield has fallen to 4.06%.

He nailed it — The Uncrowded Trade.

Now, as short-term rates rise, long-term rates are falling and the yield curve continues to flatten. If we get to the point where the yield curve inverts - i.e., short-term rates are higher than long-term rates - look out. That is almost a sure sign of a pending recession.

The January non-farm payroll report didn’t live up to expectations.