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.

	The Dow’s breakout of last week appears to have failed…
	…as has that of the S&P…
	…and the Nasdaq was unable to hold above its 50-day moving average.

Charts courtesy of StockCharts.com

Well, the big news of the day didn’t come from the stock market, but rather from crude oil and the bond market. Crude oil ran up to near a new trading high well above $55 but pulled back before the end of the day, finishing up 18 cents at $54.77/barrel. The biggest shakeup came in bonds as Treasuries sold off hard, pushing the yield on the 10-year up from 4.37% to 4.52%, a level not seen since last August.

The huge move in the bond market caused some problems in the stock market, sending the Dow down 107 points (-1.0%) to 10806 and making Dow 11,000 a somewhat distant dream at this point. The S&P 500 dropped 12 points (-1.0%) to 1207 and the Nasdaq fell 12 points (-0.6%) to 2061. The Russell 2000 lost 7 points (-1.1%) to 631, the Dow Transports dropped 0.8%, and the move to higher interest rates pushed the Dow Utilities lower by 1.9%.

No surprise to see market internals decidedly negative, the exception being light volume on the Nasdaq once again (Update: the original data I saw was incorrect - Nasdaq volume actually increased from yesterday). Advance/decline figures were worse than 1 to 3 on the NYSE and 1 to 2 on the Nasdaq. Up/down volume wasn’t any better, at 1 to 3 on the NYSE and just better than 1 to 2 on the Nasdaq. New highs/lows were 125/29 on the NYSE, and those numbers continue to converge on the Nasdaq, today at 80/67.

Not too many winners today, with networkers recovering 1.2%, followed by chemicals (+0.8%) and gold & silver stocks (+0.6%). On the down side, hardest hit were the REITs (-3.1%), oil services (-2.8%), oil stocks (-2.6%) (apparently some profit taking in the energy stocks today), housing (-2.2%), steel stocks (-2.0%), utilities (-1.9%), airlines (-1.8%), natural gas (-1.6%), commodities (-1.6%), and banks (-1.5%).

The dollar index fell by more than 0.4%, and gold prices held above $440/ounce.

The flat tax has become the tax model chosen by many former Communist nations in Eastern Europe. Bravo for them. If only more “developed” nations had the nerve to institute a flat tax. Here in the US, our gutless Congress can’t even manage to bring themselves to make changes to an inevitably bankrupt Social Security system, let alone address something as controversial as a flat tax.

I’m all for it. Especially every spring as I flounder my way through the chaos of incomprehensible tax forms.

If you’re racking up tons of debt, don’t necessarily think that bankruptcy is going to be an easy road out. A new law in the works would force some of those filing for bankruptcy to repay more of their debt.

Crude inventories up more than expected, gasoline down a little more than expected, and distillates down more than expected. Oil prices initially responded by moving slightly lower, and are now back to $54.80/barrel.

As of this morning, the yield on the 10-year Treasury has jumped to 4.46%. Looks like the Fed might finally be getting its wish as we see long-term rates beginning to move higher. All of you folks that bought new houses or refinanced with adjustable rate mortgages, thinking you were getting such a great rate, might be in for a surprise over the next year or two.

I was always of the belief that it made a lot of sense, with interest rates at 40-year lows, to just lock in a fixed rate for 15 (preferably) or 30 years. I believed that interest rates had nowhere to go but up, and I still believe that to be the case.

We can hope that the bond market doesn’t fall apart, sending rates through the roof, like it did back in the spring of 1987. You all know what happened to the stock market later that year…

Crude oil prices stand poised to push through $55 at $54.81. Today’s move will most likely be dictated by the weekly inventory data, due out at 10:30 ET. If inventories come in worse than expected, watch out.