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.

Fleckenstein just shakes his head over the bond and stock markets’ reaction to last week’s mediocre jobs report. Both markets went up - even though they were really hoping for different outcomes.

The markets have morphed from a scenario where the Nasdaq was leading the move higher to one where the Dow Industrials are now leading the way — and that isn’t necessarily a good thing.

The chart shows the Nasdaq/Dow ratio - a rising line indicates the Nasdaq outperforming the Dow, and a falling line indicates Dow outperformance. The Nasdaq led the rally beginning in September, but the indices swapped roles in December, with the Dow starting to carry the day versus the Nasdaq. Currently, the Dow is poised to test its December highs and possibly exceed them, while the Nasdaq remains 5% down from its peak. This divergence between the indices is somewhat disturbing, and indicates a lack of overall strength in the market as it appears that fewer stocks are making moves higher. If the Dow moves to new highs and the Nasdaq fails to make its own new highs, that would be termed “non-confirmation” of the new highs - and it would likely be only a matter of time before the Dow cracks under the load and begins to head lower.

Chart courtesy of StockCharts.com

Items of note on the latest industry moves:

• Energy stocks still dominate the ‘best’ list.
• This week saw strong moves in the gold & silver stocks and semiconductors. Both groups had been lagging of late, the gold stocks especially so. Could be an indication of a near-term bottom in the metals stocks.
• The semiconductors are now sporting nice 1-week and 4-week numbers, the only group in the tech sector showing any real sign of strength.