Bear Mountain Bull

It was pretty much a snoozer today, with little movement on light volume, until the last hour when things headed south and volume picked up. The Dow Industrials fell 75 points (-0.7%) to 10467, the S&P 500 dipped 7 points (-0.6%) to 1192, and the Nasdaq dropped 8 points (-0.4%) to 2068. The Russell 2000 held up the best, falling less than a point at 617. The Dow Transports lost 0.7%, the Dow Utilities edged higher, and bonds continue to defy gravity, finally pushing the 10-year Treasury yield down to 4.00%.

Market internals were mixed, with advances slightly higher than declines on the NYSE and even on the Nasdaq. Up/down volume was negative, at 2 to 3 on the NYSE and 3 to 4 on the Nasdaq. New highs/lows were 133/22 on the NYSE and 88/40 on the Naz.

There was little movement in the industry groups, with airlines the big winner of the day gaining 1.1%. On the down side, computer hardware dropped 1.2%, followed by oil stocks (-1.2%) and networking (-1.0%).

Crude oil prices moved back above the $52 mark to $52.09. The dollar was a big winner – or should I say, the euro was a big loser – after voters in France rejected the EU constitution over the weekend. The dollar index was up 1.5%. Gold finished the day around $417/ounce.

Mixed readings on economic data today, with consumer confidence showing an increase, but the Chicago manufacturing number was less than spectacular.

There sure is a lot of talk about a housing bubble these days. Is it a bubble? I don’t know. You decide. As for me, I’m just staying put in the house I’ve got. That’s right, just one.

Bubble or not, it seems to me that the housing market is asking for trouble sooner or later. But the fact that everyone is talking about it being a bubble probably means it isn’t quite over. The time to really worry is when everyone starts saying, “I guess it’s not a bubble after all!”.

Maybe we’ll know by Super Bowl time. The 2000 Super Bowl was full of commercials from soon-to-be-dead dot-com companies — the crash began less than two months later. Maybe the 2006 Super Bowl will have commercials from real estate agents, get-rich-in-real-estate courses, housing developers and mortgage lenders.

Even if you don’t live in one of the “hot” housing markets, you can still participate in the game. In his article on the current housing market, Clif Droke tells us about it:

According to a report by CNBC on May 26, a U.S. government-designated online financial market called HedgeStreet.com “is offering home owners the opportunity to protect themselves against the uncertainties of the red-hot housing market.”

According to CNBC, the web-based service lets speculators place bets on the expected future direction of home prices in six U.S. markets. “The idea,” the article states, “is to hedge against a housing bubble bursting, which in many of the nation’s hottest housing markets would likely lead to a sudden drop in home prices.” The article further states that HedgeStreet lets individual investors buy and sell small futures contracts known as “hedgelets,” betting on whether median home prices in the designated housing markets will go up or down in three to six months time.

I thought I had seen it all when the CME introduced futures contracts on the weather. But this takes the home price mania to a new extreme.

Items of note on the latest industry moves:

• Another week where the big winners were the recent big losers. This week it was energy and precious metals.
• Only two groups in the red over the last 4 weeks. Tech stocks dominate the ‘best’ list for that time period.

	Most sectors didn’t move much at all, but energy stocks had a big week. Of course, it’s just another week where a poor performing sector had a nice move off the bottom. The XLE is threatening to break out of its downward trending channel, but it’s gone straight up in the past couple of weeks. I’d like to see a little pullback to set a higher low and then a move higher.
	Tech stocks were second best, continuing their very strong move. They still look overbought to me, but have pushed right through to the top of their spring resistance range. They’re bound to slow down and/or pull back sooner or later, and I wouldn’t be chasing them here.
	Health care stocks haven’t moved a lot lately, but still have the strongest looking chart of all the sector SPDRs.

Here are this week’s numbers:

Charts courtesy of StockCharts.com

As was expected, the market showed up, milled around for a while and went home early today. Volume was extremely light, and the three major indices all made very slight gains. The Dow gained 5 points (+0.1%) to 10543, the S&P 500 added 1 point to 1199 and the Nasdaq was higher by 4 points (+0.2%) to 2076. The Russell 2000 gained 2 points (+0.4%) to 617, the Dow Transports fell 0.4%, the Dow Utilities were up 0.5% and bonds moved lower before an early close, with the 10-year Treasury yield ending the day at 4.10%.

Market internals were mostly positive, with advances/declines nearly 2 to 1 on the NYSE and 8 to 7 on the Nasdaq. Up/down volume was 3 to 2 on the NYSE, but just less than even on the Nasdaq. New highs/lows were 99/15 on the NYSE and 78/30 on the Nasdaq.

Gold & silver stocks led the way higher, adding 3.7%, followed by natural gas stocks (+1.6%), oil stocks (+1.5%), steel (+1.4%), commodities (+1.2%) and oil services (+1.1%). Semiconductors were one of the only groups moving lower, falling 0.7%.

Crude oil finished higher, at $51.85/barrel heading into the holiday weekend, the dollar index fell 0.5% and gold moved above $419/ounce.

The day before a long Memorial Day weekend in the market – and the beginning of the typically lazy summer trading season. Nothing much happening today, as traders pretty much take the day off to start their weekends early. Not much is moving, with the exception of the gold & silver stocks, which are up 3.4% at this point.

Oh yeah, and crude oil prices moved above $52/barrel for a time, now dipped back to $51.75. Just in time for the start of the summer driving season…

Tonight, Martin Goldberg has his tongue firmly planted in his cheek as he projects today’s market and economy a few years into the future.

I know how he feels. It seems like we’ve been stuck where we are for so long, you think it’s never going to change. Maybe it won’t. But I’ll bet it will.

This market has a very short memory. These days, investors don’t get very fearful of falling prices, and even their minor fears fade very quickly. The CBOE Equity put/call ratio had been rising pretty steadily while the market was falling – the rising ratio indicating greater ‘fear’ in options players. Once the recent rally began, that ratio began to fall like a rock, and here you can see that the 10-day moving average is already nearing the low levels seen at the market top in December and minor top in February. The 21-day moving average is racing as fast as it can to get down there too.

The Nasdaq rally has dissuaded most, if not all, fear in the tech stock arena. The VXN, the Nasdaq’s equivalent of the VIX, has fallen to all-time lows. When no one seems to be fearful, I get worried.

VXN chart courtesy of StockCharts.com

The market started higher on the revised GDP data this morning and stayed there for the rest of the day, putting in another healthy performance. Volume was fair moving toward a holiday weekend. The Dow Industrials gained 80 points (+0.8%) to 10538, the S&P 500 added 8 points (+0.6%) to 1198 and the Nasdaq got a 21 point boost (+1.0%) to 2071. The Russell 2000 moved higher by 8 points (+1.4%), the Dow Transports were higher by 1.0%, the Dow Utilities gained 0.2% and bonds moved slightly higher, with the 10-year Treasury yielding 4.08%.

Market internals were positive, with advances/declines better than 2 to 1 and up/down volume near 4 to 1 on both exchanges. New highs/lows were 93/23 on the NYSE and 85/45 on the Nasdaq.

Airlines led the way up, gaining 4.8%, followed by steel stocks (+3.0%), housing stocks (+2.7%, on strong earnings and guidance from Toll Brothers), semiconductors (+1.9%), internets (+1.4%), defense stocks (+1.4%), biotechs (+1.3%), transportation (+1.2%) and computer technology (+1.2%). Gold & silver stocks gave back 1.0% of their gains for the week as one of the only losing groups on the day.

The price of crude oil was nearly unchanged at $51.01/barrel. The dollar index got a boost of 0.6%, and the price of gold fell slightly to under $418/ounce.

…how many members of Congress are deeply opposed to ever using our military, or they will try and try to slash the defense budget — but when it comes to closing down military bases in their home states, they’ll fight tooth and nail to keep them open?

All politics, all of the time.

First quarter GDP grew at 3.5%, up from the preliminary report of 3.1%, the government said today.

The index futures are indicating a higher open in the market today, but crude oil is trading above $51/barrel. So much for oil prices crashing.

The market pulled back on relatively light volume today, as oil prices jumped to near $51/barrel and bonds sold off. The Dow Industrials dropped 46 points (-0.4%) to 10458, the S&P 500 fell 4 points (-0.3%) to 1190 and the Nasdaq broke its winning streak by losing 12 points (-0.6%) to 2050. The Russell 2000 took it worse than the other majors, dropping 7 points (-1.0%) to 606. The Dow Transports fell 0.9%, the Utilities dipped 0.3%, and the bond market finally weakened today, with the 10-year Treasury yield rising to 4.09%.

Market internals reflected the down day, with advances/declines around 1 to 2 on both exchanges, and up/down volume about 7 to 12 on each. New highs/lows were 53/34 on the NYSE and 58/59 on the Nasdaq.

Some of the energy stocks got a boost on the move in oil prices, with oil services up 1.7% and oil stocks up 1.0%, but that’s about it for the winners on the day. Losers were led by steel stocks (-2.4%), paper stocks (-2.0%), defense (-1.4%), REITs (-1.3%), broker/dealers (-1.3%), transportation (-1.3%), airlines (-1.2%), chemicals (-1.2%) and semiconductors (-1.1%).

Crude oil moved up by more than a dollar after the government released its weekly inventory numbers, to $50.98/barrel. The dollar index was unchanged and the price of gold moved slightly higher to $419/ounce.

Stocks were ripe for a pullback, and they got a little one today. Volume wasn’t heavy (of course, we’re headed into a holiday weekend and then into summer, so volume will be drying up for a while), and the price action wasn’t severe. The reversal in the bond market was pretty sharp, and could trigger a move higher in long-term rates. Bonds were getting pretty overbought, so a turnaround there was/is overdue as well. We’ll have to wait and see how things develop.

The market is struggling today, especially after crude oil prices moved back above $50 per barrel:

Crude tops $50 a barrel level after weekly supply data By Ciara Linnane
NEW YORK (MarketWatch) — July crude futures climbed back above the $50 a barrel level Wednesday after the Department of Energy reported an unexpected decline in weekly inventories. Crude supplies fell by 1.6 million barrels in the latest week, against expectations of a climb. Gasoline supplies rose by 0.6 million barrels, while distillate supplies were up by 1.9 million barrels. Crude was last trading up 43 cents, or 0.9%, at $50.10 a barrel. Unleaded gasoline futures were up 0.2% at $1.43 a gallon, and heating oil futures were up 0.4% at $1.392 a gallon.

Another rather lackluster day in the market, with another day of rather light volume. Traders waited until the afternoon’s release of the minutes to the last Fed meeting, but that event sparked very little action. The Dow Industrials dropped 20 points (-0.2%) to 10504, the S&P 500 gained less than a point to finish at 1194, and the Nasdaq moved higher for the eighth session in a row (first time since December ‘99 – does this feel like 1999 to you? I didn’t think so.), gaining 5 points (+0.2%) to 2062. The Russell 2000 was unchanged at 613, the Dow Transports moved higher by 0.2%, the Dow Utilities higher by 0.1%, and bonds rallied again to push the 10-year Treasury yield down to 4.03%. So much for getting consumers to save more…

Market internals were mixed, with advances/declines just short of even on both exchanges, and up/down volume at just less than flat on the NYSE but almost 3 to 2 on the Nasdaq. New highs/lows were 82/22 on the NYSE and 70/48 on the Nasdaq.

Gold & silver stocks made the biggest move, by far, of the day, adding another 2.5% to yesterday’s gains. Semiconductors were higher by 1.6% and natural gas stocks gained 1.0%. REITs fell 1.2%, followed by paper stocks (-1.1%) and airlines (-0.9%).

Crude oil prices have now risen more than a dollar in two days, finishing today at $49.67/barrel. The dollar index was unchanged and gold prices moved up to $418/ounce.

Don’t believe everything you hear. We were told this morning on CNBC that Google is trading at new multi-year highs.

I hate to break it to them, but GOOG just came public last August.

Current thoughts on the market from Gary Kaltbaum.

Housing sales just seem to keep going and going. Of course, with interest rates staying incredibly low and finance companies willing to lend money to anything that moves, I can understand it.

Apple stock was up nearly 6% today on the story that they may be looking to use Intel chips to power the Mac — why any Mac buyer would really care is beyond me, but that’s the market. And I pity the poor engineers that would have to port the entire Mac OS from PowerPC to the x86 architecture, but I digress… AAPL has had a nice bounce off the May low, but has worked its way right back up to some potentially stiff resistance. You see, anyone who bought Apple between mid-Feb. and mid-April and is still holding the stock is under water. Those folks may very well be looking for a chance to get back to break even, and may be more than willing to sell if the stock moves back into that range. We will see.

Chart courtesy of StockCharts.com

The market continued its move higher today with gains in all the major indices, but today’s move came on very light trading volume. Not to mention that the move fizzled quite a bit in the last hour, probably because CNBC jinxed everything with their “alerts” touting that the major indices were at their highest levels in 2 months. The indices reversed as if on cue, and the ‘alerts’ quickly disappeared, replaced after the close by “Nasdaq up for seventh day” and “Dow/S&P up 5 of 6 days.” I remember back in March when they were “alerting” on the new yearly highs in the Dow – which promptly fell 1000 points in the next 6 weeks.

The Dow Industrials gained 52 points (+0.5%) to 10524, the S&P 500 added 5 points (+0.4%) to 1194 and the Nasdaq moved up 10 points (+0.5%) to 2057. The Russell 2000 added 3 points (+0.6%) to 613, the Dow Transports gained 0.2%, the Dow Utilities fell 0.5% and bonds rallied yet again, pushing the 10-year Treasury yield down to 4.07%. I have no idea who thinks buying a 10-year note at just over 4% is a good investment, but they’re doing it. Not me.

Market volume was very light today, but the rest of the internals were positive. Advances led declines by nearly 2 to 1 on the NYSE and 8 to 7 on the Nasdaq, with up volume leading down volume by 7 to 3 on the NYSE and almost 2 to 1 on the Nasdaq. New highs/lows came in at 97/10 on the NYSE and 79/30 on the Nasdaq.

The disk drive index led the way higher today, with a 2.2% gain, followed by gold & silver stocks (+1.5%), housing (+1.5%), paper (+1.4%), computer hardware (+1.4%), oil services (+1.4%), oil stocks (+1.2%), steel stocks (+1.2%) and commodities (+1.1%). Airlines led the few losing groups with a drop of 0.8%.

Crude oil prices moved higher by a half-buck, finishing at $49.16/barrel. The dollar index fell 1/4% today, and gold prices held near $417/ounce.

It’s really no big surprise to see that the sentiment indicators have begun to reverse. A move in the Dow of more than 300 points can do that…

The question now are: how much of the rally has already been exhausted? Is this just the beginning of a big move, or is it merely a sucker rally to pull investors in, only to smash them again later.

Bill Fleckenstein says that the recent selling in the precious metals and the associated mining stocks is likely overdone. It sure seems overdone to me, but what do I know? I believe that the selling in other commodities and energy stocks is overdone too, but the market seems to disagree at this point.

And Fleck passes along this nugget of investment wisdom:

Obviously, if you don’t learn from your mistakes, you eventually won’t have any money with which to invest. To quote noted market observer Ray DeVoe: “Good judgment comes from experience, but experience comes from bad judgment.”

Or, I might put it this way: Good judgment comes from bad judgment. It’s a bit like lifting weights, in that you gain through pain.

Items of note on the latest industry moves:

• All groups in the green this week.
• Health care stocks and utilities, the groups that have been holding up the best, were the laggards this week.
• Energy and other commodity stocks remain under pressure.
• Transportation stocks get a boost as oil prices stay down.
• Retailers jump on who knows what. Obviously the market thinks the consumer will continue to spend.
• REITs have continued to be strong and housing stocks bounced back as interest rates remain incredibly low.
• Many tech stocks have gotten nice bounces off their lows.

The latest issue of the Chart Watchers newsletter from StockCharts.com is available for your viewing pleasure.

In this issue:

• John Murphy comments on the Nasdaq leading the latest market rally
• Richard Rhodes says that the recent decline in oil stocks is just a correction
• Carl Swenlin looks at the ‘climactic’ action in the Nasdaq this week
• Arthur Hill sees that the Nasdaq is overbought – but that’s not necessarily bearish