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.

Martin Goldberg examines this latest “rally without a pullback” from a technical perspective (of course!).

The tremendous optimism toward the market seems to have faded considerably. The CBOE equity-only put/call ratio is climbing again, the 10-day moving average having made an obvious trough in mid-late July. The 21-day MA looks like it, too, may have bottomed and begun to turn northward. As we’ve told you before, the extreme valleys in this indicator tend to coincide with market tops, and the peaks with market bottoms.

The VIX has also begun to head higher, but hasn’t moved up to a real significant degree at this point. What is a little ominous in this chart is the similarity of the recent action to the move last fall leading into the January top in the market. Just a couple of things to be aware of. Technically, the market remains quite strong, as we haven’t seen any large trend breaks or violations of support, and the market internals certainly have not broken down as yet. You just might want to keep in mind some of these secondary indicators when deciding whether to keep buying stocks at these levels or not.

VIX chart courtesy of StockCharts.com

We’re starting to see some significant weakness in the high-flying retail sector, and it doesn’t seem to matter whether it’s apparel, footware, home improvement or department stores. Today’s July retail sales report was kind to some and devastating to others. Some stocks have already broken pretty badly, others are just beginning to roll over and could possibly be saved by another of the many market whipsaws that have come about in recent months. But I’d be pretty careful around the retailers right now. Here are some examples:

Charts courtesy of StockCharts.com

Yeesh. That wasn’t very nice at all. The market put on an ugly face this morning, and wore it all day, taking the majority of stocks down a notch or two. The Dow Industrials fell 87 points (-0.8%) to 10610, the S&P 500 dropped 9 points (-0.7%) to 1236 and the Nasdaq had the worst day of the three, losing 25 points (-1.2%) to 2191. The Russell 2000 fared even worse than the majors, scaling back by 12 points (-1.7%) to 672. The Dow Transports dropped 1.0%, the Dow Utilities lost 0.6%, and bonds trickled lower pushing yields a bit higher, the 5-year to 4.14% and the 10-year to 4.31%.

Market internals were pretty gross, with NYSE volume running about the same as yesterday but Nasdaq volume falling off. Advances/declines were less than 1 to 2 on the NYSE and 3 to 7 on the Nasdaq, with up/down volume running about 3 to 8 on both exchanges. New highs/lows were 349/21 on the NYSE and 160/17 on the Nasdaq.

No real winners today, but plenty of losers. Here’s the list: airlines -3.1%, semiconductors -2.4%, biotechs -2.3%, retailers -2.2%, REITs -1.9%, broker/dealers -1.9%, networkers -1.8%, tranportation -1.6%, steel stocks -1.5%, chemicals -1.1%, software -1.1%, disk drives -1.0% and computer hardware -1.0%. Yuk.

Crude oil prices moved right back up after yesterday’s dip, gaining 52 cents to $61.38/barrel. The dollar index fell another quarter-percent to 87.78, and gold prices settled just under $438/ounce.

The market started weak and stayed weak today. Better hope that tomorrow morning’s July jobs report in the morning isn’t too bad, or it could spark a selling spree, seeing as how the market feels a little shaky anyway. We will see.

Not a lot of good things happening with stocks so far today, with the major indices all down 4-5%. No sectors are up significantly, and the ones getting hit the hardest are retail (-2.0%), biotech (-1.6%), semiconductors (-1.5%), and REITs (-1.2%). Bonds are up, pushing yields down a bit, the dollar is holding steady, crude oil is back up to $61.50 and the price of gold is up about $2/ounce.

BMB has noticed a few of the high-flying retail stocks start to fade the past few days (like AEOS, TGT), others look like their upward momentum has stalled (ANF, BEBE,KSS), and few others are already hurting (ARO, PLCE).

The July retail sales numbers will probably help some and hurt others. Take ANF for instance: their same store sales were up 22%! Sorry, not good enough.

I think we may be seeing the beginning of the end of the broad-based run in retail stocks.

Update: Why is it whenever retail sales are down that it’s blamed on the weather? I have a really hard time believing that it’s always the weather’s fault…