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.

Another rather bizarre day in the market, with somewhat mixed action, gains pretty much concentrated in the large-caps, oil reaching record high levels, and movement limited to a few areas. The Dow Industrials gained 44 points (+0.4%) to 10623 and the S&P 500 moved 6 points higher (+0.5%) to 1217. However, the Nasdaq managed to pick up only a point to 2090, and the Russell 2000 barely budged at all, remaining at 644. The Dow Transports did add 0.7% and the Utilities added 1.2%, and bonds rallied a bit pushing the 10-year yield down to 4.07%.

Market internals were mostly positive on strong volume - a mix that you would expect to result in some bigger moves in the indices, but not today. Advances led declines on the NYSE by 5 to 3, but the losers outnumbered the winners on the Nasdaq by 10 to 9. Up/down volume was 2 to 1 on the NYSE and 10 to 7 on the Nasdaq. New highs/lows continued to be strong, at 337/18 on the NYSE and 144/41 on the Naz.

Oil stocks got another big bump today, rising 2.1%, followed by housing stocks (+2.0% on strong earnings from KB Homes), biotechs (+1.9%), REITs (+1.2%) and utilities (+1.1%). Airlines fell as oil prices rose, getting hit for 2.4%, with disk drive stocks (-1.2%) and paper stocks (-1.0%) following them down.

Crude oil finished at a new record high of $58.47/barrel, up $1.89. The dollar index took a big tumble, falling 1.1% to 87.71. The price of gold moved up to near $438/ounce.

They can say what they want about the S&P being at multi-month highs. Yes, the market still looks good on the surface, but something just doesn’t feel right. The internals of the last couple of days should have produced much better price action across the board, and it just isn’t happening.

Oh, everyone is quite happy with the market, with the S&P approaching its March highs. And the Michigan consumer sentiment index for June got a nice bump up from May’s reading.

Let’s see, what happened in May to change things?? Hmm, oil prices were down, the stock market was up, and interest rates were way down. I guess we shouldn’t be too surprised that people were pleased.

So, where are we today?

• Bullish sentiment is running a little too high for my tastes, with the May rally pushing stocks back up to near their March levels, but the S&P just went positive for the year again yesterday.
• The Dow and Nasdaq are still in the red.
• Investor complacency is again running at multi-year lows as measured by volatility, and the equity put/call ratio has dipped below the March lows and is now approaching the same levels seen last December - before the big dip started on Jan. 3rd.
• The rally in tech has stalled big time, and looks like it could be rolling over.
• Oil looks to be prepared to test record highs again at more than $57/barrel.
• Interest rates apparently hit rock bottom when the 10-year dipped to 3.80%, and bond prices have fallen sharply since then, pushing rates back up.
• Commodity prices are on the rise again, and the price of gold appears to have hit a near-term bottom as some investors prefer to hold precious metals rather than paper currencies.
• The US Q1 current account deficit was the largest in history.
• The political and economic outlook for Europe is a complete unknown after France and the Netherlands nixed the EU constitution.

That’s not to say that the market isn’t in good shape, because internals are still relatively strong, and I hope you’re using this positive movement to make some money. It’s just that the breakdowns start to happen before you hear the media talking about it. Keep your eyes open to what’s happening, and be ready to take profits when need be.

It could be getting more expensive to fill up your tank again. Crude oil is trading at $57.34/barrel this morning. Double ouch.