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.

Former Fed Chairman Paul Volcker speaks out on the fragile condition of the U.S. economy.

There are many others speaking out too, issuing the same warnings. The problem is: I don’t think anyone is listening.

The major indices strengthened their near-term support levels today with a late-day rally on an increase in volume.

	The Dow bounced off of 10350, a move above 10600 would be encouraging.
	The Nasdaq bounced off of 1970, back above its 200-day MA. Looking for a move back above 2020 for some hope.
	The S&P never made it down to the 1160 level, and now looks for a move back above 1192.

Charts courtesy of StockCharts.com

Hmm, a rather bizarre day, as the Fed released the minutes of its March meeting at 2:00 Eastern time, and the markets got the idea that interest rates wouldn’t be rising any faster than they have been. This spurred a rally in both stocks and bonds, pushing the major indices from a lousy start to a modest positive finish. The Dow Industrials were down 81 points when those minutes came out, and rallied to finish up 59 points (+0.6%) on the day at 10508. The S&P 500 gained 7 points (+0.6%) to 1188 and the Nasdaq added 13 points (+0.7%) to 2005. The Russell 2000 moved up 6 points (+1.0%) to 613, both the Dow Transports and Utilities gained 1.0%, and the bond market rallied as well, pushing the 10-year yield down to 4.36%.

Market internals, too, turned positive during the last two hours of trading, and volume increased from the low readings of recent days. Advances/declines were 5 to 3 on the NYSE and 17/13 on the Nasdaq. Up/down volume came in at 11 to 6 on the NYSE and 7 to 3 on the Nasdaq, with new highs/lows of 61/88 on the NYSE and 28/138 on the Nasdaq.

Leading the move higher were housing stocks, up +2.7% (um, guys, they didn’t say interest rates were going to go down, and as a matter of fact, they didn’t say there weren’t still going to go up either!), followed by REITs (+1.5%), banks (+1.2%), biotechs (+1.2%), transports (+1.1%), steel stocks (+1.1%), utilities (+1.1%) and retailers (+1.0%). Moving lower were oil services (-1.9%), oil stocks (-1.4%) and natural gas stocks (-1.4%).

Crude oil prices fell nearly $2 on the day, finishing at $51.86/barrel. The dollar index rose 0.3%, and gold prices fell slightly to $428/ounce.

BMB commentary: Maybe it’s just me. I don’t understand why the dollar would move higher on a day when a record trade deficit is revealed. Nor do I understand why the bond market would rally, pushing interest rates lower, when the Fed says that inflation is still a concern, but that they would continue to raise rates at a ‘measured’ pace. Sounds to me like rates are still going higher, not that this is any secret. I can only guess that there was some covering of bond shorts going on by those who were guessing that the Fed would get more aggressive in their rate-raising venture. But we told you in this space a while ago that we didn’t think there was any way that the Fed would risk upsetting the rickety apple cart that is the US economy, with its fragile markets and consumer debt load/housing bubble, by raising interest rates too quickly.

You would think that there were more important matters - especially where energy policy and conservation is concerned - than ceiling fans. After all, half the country doesn’t even use them.

But, this is how your lawmakers are wasting your money spending their time.

The minutes of the March FOMC meeting were released about a half-hour ago, and the Fed seems to still quite concerned about the inflationary environment. But the markets seemed to find something they liked in the minutes’ release, as the major indices came bounding off the low levels they’d been at all day to move to nearly unchanged on the day.

A drop in crude oil prices to below $52/barrel probably hasn’t hurt either.

Do you feel like the odds aren’t necessarily in your favor as an individual investor. Well, I hate to break it to you, but you might be right.

America’s trade deficit hit another all-time high in February.

What’s it going to take to slow this trend? Well, some savings - and less spending - by Americans and their government would help. We continue to borrow and spend. And the dollars sent overseas come back to buy our debt in the form of US Treasuries. At least we hope so. If it doesn’t, the dollars are sold into the currency markets and drive the value of the dollar lower and lower.

The experts think that it’s going to take a lower dollar to help close the trade gap. The dollar has been falling for probably four years now - and the trade deficit is at a record high. Does it seem like the lower dollar is helping to you?

What will help is reduced spending and increased savings. And to get that, we need to have higher interest rates. At least, that’s my take.