Bear Mountain Bull

The Nasdaq is dancing atop longer term support here around the 1900 area. If it can’t hold here, a trip back to last August’s lows appears likely.

Chart courtesy of StockCharts.com

	Utilities continue to be the sector that almost no one is talking about – but they’re the best over the past 8 weeks, and second-best year to date. They’re holding up real well in a terrible market, and are actually trying to break to new highs. But again, if interest rates start to move higher, they’re likely to get hurt.
	Health care stocks are still holding their ground as well.
	Financials had a good week, for a change, but they’ve been beaten up pretty badly. I’ll be more interested if I see them break their 3-month downtrend. Interest rate concerns could hold them down for a while.

Here are this week’s numbers:

Charts courtesy of StockCharts.com

The Investor’s Edge: How to Empower Yourself for a Lifetime of Investment Decisions by Gary Kaltbaum

Gary Kaltbaum provides us with some good information, but BMB believes the book comes up a bit short of the target.

Read the review here.

Well, well. The market had the chance to just totally crumble today – and it didn’t! I think some champagne is in order…

The day started off pretty well, then began to fail, with the major indices pushing down pretty hard on their support levels – in the case of the Nasdaq, even pushing further down from the new ‘05 lows set yesterday, below the 1900 level. But an afternoon rally, probably helped by sagging crude oil prices, pushed the indices back up, well into positive territory, and we can chalk up another Save!! for the market.

The Dow Industrials made another triple-digit move – these big moves up and down are making me ill – finishing with a gain of 122 points (+1.2%) to 10193. The S&P 500 added 14 points (+1.2%) to 1157, and the Nasdaq moved up 17 points (+0.9%) to 1922. The Russell 2000 gained 4 points (+0.8%) to 579, the Dow Transports gained 1.1%, the Dow Utilities were 1.3% higher, and the bond market finished the day lower after moving higher early, with the 10-year note yield at 4.20%.

Market internals were, yes, positive on good volume for a change!! Advances led declines by 2 to 1 on the NYSE and 18 to 13 on the Nasdaq. Up/down volume was 7 to 3 on the NYSE and 2 to 1 on the Nasdaq, and new highs/lows came in at 39/136 on the NYSE and 23/222 on the Nasdaq. A long way to go to get those highs/lows turned around…

Mostly green on the screen today, with HMOs leading the way up 3.5%, followed by paper (+2.5%), chemicals (+2.5%), hospitals (+2.4%), housing (+2.0%), steel stocks (+2.0%), gold & silver stocks (+1.7%), REITs (+1.5%), and health care (+1.5%). Disk drives failed to play along, falling 1.8% on the day.

Crude oil prices plunged more than $2 and finished the week below $50 at $49.72/barrel, a level not seen since February. The dollar index was just slightly higher, and gold prices moved up to above $434/ounce.

Well, the market made another effort to hold its ground today. We’ll see how next week goes…

Once again, an early rally has faded. Little good news in the morning numbers, with consumer sentiment fading (are you surprised?) and the Chicago PMI showing slightly slowing growth. Personal income and spending were both up.

There just isn’t much to get this market moving, and it’s likely to continue to leak lower until there is, especially if it breaks support at current levels. The bond market looks to be very overbought, and interest rates have plunged. That can’t be making the Fed very happy, as they have been trying to get interest rates up for nearly a year now. I wouldn’t be surprised if they remove the “measured” language from their statement at next week’s FOMC meeting to try and scare bond traders a bit and get longer term rates back up again. Bond prices have gone straight up since the third week in March, the 10-year yield has plunged from above 4.65% to 4.15% today, and the dollar has started to fade again. That’s not what the Fed was hoping for, and now they’re going to have to deal with it.

This week, Martin Goldberg examines the stocks in the Dow Jones Transportation index.

When it comes to the market, transportation or otherwise, he’s not very impressed. He says “sell ‘em all.” In light of the recent action, it’s hard to argue with him.

This market is hopeless.

The selling started early, following the not-so-great GDP number, and just gathered steam throughout the day. The major indices all headed lower, and are now testing their recent lows of last week. As a matter of fact, the Nasdaq did set a new closing low for the year today. Oh joy.

The Dow Industrials got smacked for 128 points (-1.3%) to 10070, the S&P 500 shed 13 points (-1.1%) to 1143, and the Nasdaq unloaded 26 points (-1.4%) to drop to 1904. The Russell 2000 dropped 12 points (-2.0%) to 575, the Dow Transports fell 0.9%, the Utilities lost 0.4%, and the bond market continued to rally in defiance of the Fed, pushing yields on the 10-year Treasury down to 4.15%. Yes, that’s right, 4.15%. The same level they were in summer of ‘03. The yield curve just gets flatter and flatter by the day.

As you might expect, the market internals were pretty gross, and volume picked up again on a down day. This continues to be the pattern, and there is no hope of prices moving higher if that pattern isn’t broken. Advancers were swamped by decliners, at 5 to 11 on the NYSE and 1 to 3 on the Nasdaq. Up/down volume was worse, at around 1 to 4 on each exchange. New highs/lows came in at 32/138 on the NYSE and 29/217 on the Nasdaq. Boy, that’s pretty ugly.

Red, red, and more red. The biggest losers of the day were the networking stocks, dropping 3.2%, followed by housing stocks (-2.8%), steel stocks (-2.5%), paper stocks (-2.2%), broker/dealers (-2.2%), biotechs (-2.1%), disk drives (-1.7%), gold & silver (-1.7%), natural gas (-1.7%), oil services (-1.6%) and transportation (-1.3%).

Crude oil started the day lower, but spiked in the afternoon on news of a collision blocking a Texas ship channel, finishing up a little on the day at $51.77/barrel. The dollar index magically moved higher by 0.3%, even on the poor GDP news, and gold prices fell to near $431/ounce.

More Stuff contains a little bit of everything — a ‘catch-all’ category for things that didn’t seem to fit anywhere else! Included will be reviews of books that didn’t quite make it to the Recommending Reading page, a list of books that I am hoping to read and review soon, links to articles and information found on other web sites, and anything else I decide to put here.

• Book Reviews
  • The Investor’s Edge — Gary Kaltbaum
  • Options as a Strategic Investment — Lawrence McMillan
  • Trade Like Jesse Livermore — Richard Smitten
  • The Triumph of Contrarian Investing — Ned Davis
• Foreign Lands — Compilations of BMB posts discussing cultures and experiences in other areas of the world.
  • China and Hong Kong
  • Middle East

• Rates & Yields — A collection of recent posts regarding interests rates and returns on cash.
• Hobby Electronics — Random blurbs on one of BMB’s other hobbies – tinkering with electronics.

GDP figures for the first quarter were released this morning, and indicated that economic growth has slowed to the lowest pace in about two years.

The market stumbled out of the gate this morning on the poor durable goods order numbers, but rallied midday to move back into positive territory. The major indices pulled back from their highs as the afternoon wore on, but finished the day with modest gains. The Dow Industrials gained 48 points (+0.5%) to 10199, the S&P 500 added 5 points (+0.4%) to 1156 and the Nasdaq moved 3 points higher (+0.2%) to 1931. The Russell 2000 lost less than a point, the Dow Transports gained 0.4%, the Dow Utilities gained 0.7%, and bonds moved up on the poor economic news, sending the yield on the 10-year note down to 4.23%.

Market internals were mixed, volume was average on the Nasdaq and above average on the NYSE. Internals were slightly positive on the NYSE, with advances/declines at 17 to 15 and up/down volume just better than even. The numbers weren’t as good on the Nasdaq, where advances trailed declines by 4 to 5 and up volume was just less than down volume. New highs/lows were 41/124 on the NYSE and 28/202 on the Nasdaq.

Modest gains were seen in a few groups, like paper stocks (+1.5%), HMOs (+1.3%), banks (+1.3%) and broker/dealers (+1.1%). On the flip side, many commodity related stocks took it on the chin again today, with gold & silver stocks down 4.0%, followed by steel stocks (-3.6%), oil services (-3.3%), oil stocks (-2.5%), commodities (-1.4%), natural gas stocks (-1.3%) and airlines (-1.0%).

Crude oil prices tumbled $2.59 to $51.61/barrel after the government released its weekly inventory numbers this morning. The dollar index moved higher by 0.2%, and gold prices were pushed down to $432/ounce.

Still not much good happening in this market. Matter of fact, I’m not sure if there’s anything good.

The Investor’s Edge: How to Empower Yourself for a Lifetime of Investment Decisions by Gary Kaltbaum

Full Disclosure: BMB is a Gary Kaltbaum fan. I have a great deal of respect for his opinions. I read his TradingMarkets columns, I watch his appearances on Fox News Channel’s business block, and I am a regular listener to his radio show. He is one of very few money management professionals who simply does not give you any B.S. To top it off, most of the time he is right, and he will admit it if he’s wrong.

So naturally, I was really looking forward to reading his book. But I’ll have to admit that I was somewhat disappointed. The book is subtitled “How to Empower Yourself for a Lifetime of Investment Decisions”. After listening to Mr. Kaltbaum’s opinions and advice for some time, I don’t doubt that he indeed does have the knowledge to empower the investor for a lifetime of investment decisions. The problem is, he only managed to get part of that knowledge into the book. For some reason, he forgot to finish it!

The book starts out great. As a matter of fact, the first six chapters of the book are quite good. Kaltbaum lays out some of the main tenets of his investing discipline – don’t lose big, don’t try to predict the markets, etc. He goes on to show the reader how to read a stock chart (good intro!), how to identify long bases and cup with handle patterns, and how to recognize a ‘breakout’ pattern, which he describes as his “bread and butter.” He also helps you to identify and take into account market direction and sector strength, some of the keys to buying the strongest stocks in the market. All of this is very good information.

Then we get to Chapter 7, where we’re going to “put it all together”. Great! This is where we’re going to learn how to enter a position, how to watch for a pullback if we missed the original breakout, when and where to add to the position, how to manage the position, where to place trailing stops as the stock moves higher, how to recognize when the stock starts to breaks down and when to consider selling the stock, right? Right??

Nope. Not even close. What did we get in Chapter 7?? 50 pages — count ‘em, 50 ! — of charts and checklists of stock after stock breaking out and moving higher, and a feeling of gee-whiz, see-how-easy-this-is excitement. Not at all what I expected. I know it’s not that simple.

The final two chapters give tips on recognizing when a stock might be a good potential short candidate, talk about how your time and effort must be spent in order to find good investment opportunities, and give Gary’s 10 rules for investment success. Again, the book closes with some good information.

But, in my opinion, a lot of information that I — and the author — consider to be very important to the investor was left out of the book.

(Read more…)

The market will start out with a negative tone this morning after the March durable goods orders number came in much worse than expected.

BMB mentioned a few days ago that the gold market seemed to be rumbling just a bit. No one is really talking about it, and neither are they talking about the decline in the dollar that has accompanied the move.

Gold prices have moved back above the $430 mark in the past week, and have also moved back above the 50-day moving average.

I was going to put together a few charts, but I see that Clive Maund has already done a great job of it, so I think I’ll just defer to him. Take it away, Clive.

Morgan Stanley’s Stephen Roach says that the Fed shirked its duty as a responsible central bank in 1997, when it gave in to political pressure and allowed the stock market bubble to continue to inflate. They’ve never reassumed that responsibility, leaving the asset-bubble economy to cruise out of control by leaving interest rates too low for far too long. Now they find themselves in a predicament:

The day is close at hand when US monetary policy must get real. At a minimum, that will require a normalization of real interest rates. Given the excesses that now exist, it may even require a federal funds rate that needs to move into the restrictive zone — possibly as high as 5.5%. Yes, this would cause an outcry — perhaps similar to that which occurred in the spring of 1997 on the occasion of the Original Sin. But in the end, there may be no other choice. Fedspeak has taken us into the greatest moral hazard dilemma of all — how to wean an asset-dependent system from unsustainably low real interest rates without bringing the entire House of Cards down. The longer the Fed waits, the more perilous the exit strategy.

The market did nothing to gain any of my confidence today, as the major indices gave back most or all of yesterday’s gains, and volume picked up again on a down day. We don’t like this action.

The Dow Industrials fell 91 points (-0.9%) to 10151, the S&P 500 dropped 10 points (-0.9%) to 1152 and the Nasdaq tumbled 23 points (-1.2%) to 1927. The Russell 2000 was hit for 9 points (-1.5%) to 588, the Dow Transports dipped 1.9%, the Utilities fell 1.1%, and the bond market fell slightly, moving the 10-year note yield at 4.27.

Market internals turned negative again, with advances/declines at 1 to 2 on the NYSE and 3 to 7 on the Nasdaq. Up/down volume was a little better than 1 to 3 on the NYSE and a pathetic 1 to 4 on the Nasdaq. New highs/lows came in at 36/80 on the NYSE and 36/145 on the Nasdaq.

Across the industries, it was pretty ugly, with no real winners. Losers were led by steel stocks (-4.2%), computer hardware (-3.6%), transportation (-2.7%), airlines (-2.4%), oil services (-2.1%), chemicals (-2.0%), disk drives (-1.9%), HMOs (-1.9%), internets (-1.8%), gold & silver stocks (-1.7%), commodities (-1.5%), oil stocks (-1.4%) and hospitals (-1.3%).

Crude oil prices fell early, then recovered to finish down only slightly on the day at $54.20/barrel. The dollar index rose 0.2% for whatever reason, and gold prices moved up to near $437/ounce.

The market continues to struggle. There just aren’t many good opportunities here at all. At times like this, it’s just best to be patient. And in cash.

After the bell: Amazon reported earnings, and if I saw the headline correctly, they missed expectations pretty badly. Film at 11. Ah yes, here it is.

Consumer confidence dipped – no big surprise there – but new home starts were up more than expected. Up more than I would have expected too. Wonder who’s going to buy all those new houses…

IBM tried to rally the market with its announcement of a stock buyback program and a dividend boost, but that only helped the market for a short time.

Sorry guys. These buybacks and analyst upgrades just aren’t doing it.

The market drifted upward on light volume today. The final numbers on the major indices might look good, but there wasn’t much power behind the moves.

The Dow Industrials moved higher by 85 points (+0.8%) to finish at 10242, the S&P 500 gained 10 points (+0.9%) to 1162 and the Nasdaq added 19 points (+1.0%) to 1951. The Russell 2000 gained 7 points (+1.2%) to 596, the both the Dow Transports and Utilities were higher by 0.9%, and the bond market was pretty quiet, leaving the 10-year Treasury yield near 4.25%.

Market internals were positive, but conviction was apparently lacking as volume was very light. Advances/declines were 9 to 4 on the NYSE and 3 to 2 on the Nasdaq, with up/down volume at better than 3 to 1 on both exchanges. New/highs lows were nearly even on the NYSE at 49/52, but 39/116 on the Nasdaq.

Nearly all groups moved higher today, with the best being housing stocks (+2.2%, helped by a better-than-expected existing home sales report), broker/dealers (+1.8%), steel stocks (+1.7%), HMOs (+1.6%), computer hardware (+1.6%), natural gas (+1.6%), networking (+1.5%), hospitals (+1.5%), internets (+1.4%), chemicals (+1.4%), oil stocks (+1.4%), REITs (+1.3%) and oil services (+1.2%).

Crude oil prices, after trading above $56 overnight, finished the day at $54.57/barrel. The dollar index gained 0.4%, and gold prices held steady near $434/ounce.

A little bit of a bounce back by the market today, but not much to get excited about.

Gary Kaltbaum says that we could be at or near a short-term bottom. But I’m with him – let’s not get our longer-term hopes up yet. The market as a whole still looks very weak. Be careful if you’re thinking about diving in.

The weekly look at technicals and sentiment from Schaeffer’s shows investor pessimism building, but not necessarily at extreme levels just yet.

Bill Fleckenstein pokes a few holes in the statements and numbers being presented by some of the big tech companies recently.

Items of note on the latest industry moves:

• A bounce back this week for some of the groups that had been beaten down – energy, commodities.
• A pullback this week for some of the health care groups that had been doing very well.
• The 4-week and 8-week numbers illustrate the sector leadership we pointed out yesterday from the utilities and health care.
• Still only 4 groups higher over the past 8 weeks. Ouch.

	Utilities are still holding their ground — not moving higher, but almost nothing is — with help from the recent pullback in interest rates. They haven’t folded under the pressure of the weak market, but they remain susceptible to fears of higher interest rates.
	Health care stocks pulled back a bit this week, but also are holding up well in a very tough market.
	Energy stocks had the best week of all the sectors, but that really is just a bounce back from having been beaten up pretty badly of late. Energy has been stuck in this downward ‘flag’ for a couple of months now.

Here are this week’s numbers:

Charts courtesy of StockCharts.com

Stop the roller coaster. I’d like to get off.

The market’s wild ride continued today, as the major indices drifted down from the open, but selling picked up as the day wore on. The downward spiral got a little out of control in the last hour of trading, but the major indices bounced well up off their session lows before the closing bell sounded.

The Dow Industrials were down more than 140 points with about a half-hour to go in the trading day, but finished with a loss of 61 points (-0.6%) at 10158. The S&P 500 dropped 8 points (-0.7%) to 1152 and the Nasdaq fell 30 points (-1.5%) to 1932. The Russell 2000 lost 9 points (-1.6%) to 590, the Dow Transports got hit hard again, losing 2.1%, the Dow Utilities gained 0.4%, and bonds moved slightly higher pushing the 10-year Treasury yield down to 4.25%.

Market internals once again slipped to the negative side, although the numbers I see indicate that volume fell off slightly from yesterday’s up move. Advances/declines: 3 to 5 on the NYSE, 3 to 7 on the Nasdaq. Up/down volume: 3 to 7 on the NYSE, 1 to 4 on the Nasdaq. New highs/lows: NYSE 24/113, Nasdaq 46/140.

With no groups making significant moves higher, we’ll take a look at the leading losers: airlines (-5.5%), transports (-2.7%), computer hardware (-2.6%), retailers (-2.1%), networking (-2.1%), paper stocks (-1.5%), steel stocks (-1.4%), semiconductors (-1.4%), housing (-1.3%), computer technology (-1.3%) and broker/dealers (-1.2%).

Crude oil prices rose another $1.19 to $55.39/barrel – ouch. The dollar index fell another 0.2%, and gold prices held steady near $434/ounce.

So what’s the deal with this market?? It obviously is a mess, and has been making rather wild gyrations these past few weeks. Of course, the market is not predictable, but when things are this unpredictable, I prefer to just stand clear until the waters quiet down.

Following up on the NYSE’s merger with Archipelago, today the Nasdaq announced that it will be buying Instinet in a $934.5 million deal.

So far today, it looks as though the market is mainly digesting the gains of yesterday – and the losses of earlier in the week. The Dow and S&P are relatively unchanged, with the Nasdaq dipping by 0.8%.

Crude oil prices have pushed back up to $55/barrel. That’s not real good news for the market. Airlines and transports are taking a hit today, and oil services have moved higher.

The dollar seems to be slipping again – you heard plenty about the dollar rally over the past month or two, but you haven’t been hearing about its recent slide – and gold prices have moved from their lows last week in the low $420s to the upper $430s. Starting to see a little bit of life in the gold/silver stocks coming off their bottoms this week. Too early to say that it’s a move that will last, or even much of a move at all. Just rumblings.