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.

	These aren’t the good ol’ days for CSCO anymore. The stock made a bit of a run in the spring rally and has held pretty much between 19 and 20. Until today.
	And looking back a bit, it hasn’t been the go-go days for quite some time. The stock hasn’t moved much outside of a range from 17.50 to 20 for more than a year - and that’s down from the ‘04 high above 29. For the most part, yesteryear’s great stocks are not today’s great stocks. Your money would be better off in cash.

Charts courtesy of StockCharts.com

Hmm. Now that was interesting.

The market showed its vulnerability today, enjoying a nice jump in the morning before giving way under the pressure of higher oil prices. The Dow Industrials were up triple digits before reversing and giving up all of those gains, and then some, finishing with a loss of 21 points (-0.2%) at 10594. That’s about a 165 point reversal from the intraday high. The S&P 500 lost 2 points (-0.2%) to 1229 after being up 11. The Nasdaq took it the hardest, dropping 16 points (-0.8%) to 2158 after hitting 2186 intraday. The Russell 2000 dropped less than a point, closing at 660. The Dow Transports were higher by 0.1%, the Dow Utilities were up 0.2%, and bonds started higher then fell througout the day, pushing yields slightly higher - the 5-year to 4.24% and the 10-year to 4.40%.

Market internals were mixed on pretty strong volume. The NYSE looked a little better than the Nasdaq today. On the big board, advances led declines by 9 to 7 and up/down volume was just above the flat line, while on the Nasdaq the advance/declines numbers were negative at 13 to 17, and up/down volume was pretty poor at 1/2. New highs/lows were 190/38 on the NYSE and 104/43 on the Naz.

Looking across the industries, we see the winners come mainly from the energy/commodities camp: oil services (+2.0%), natural gas (+1.9%), commodities (+1.9%), natural resources (+1.7%), steel stocks (+1.5%), gold & silver stocks (+1.4%), oil stocks (+1.4%) and HMOs (+1.3%). Losers were the networkers (-2.2%, led by a nearly 7% fall in Cisco on their earnings report), internets (-2.0%), computer tech (-1.4%), and semiconductors (-1.2%).

In crude oil futures, the initial reaction to the weekly inventory data was pretty tame. But as the day wore on, oil traders decided that the news wasn’t so good, especially on the gasoline side. Prices pushed to record highs once again, ending the day at $64.90/barrel, up $1.83. Big ouch. And don’t be looking for any bargains at the gas pumps real soon - the September contract for unleaded gasoline is above $1.89/gallon. The dollar index finished lower by 0.3% at 87.65, and the price of gold moved back above $437/ounce.

Obviously, today’s reversal will be blamed on the high oil prices, and I certainly can’t say that wasn’t a factor. But a big reversal on strong volume isn’t real encouraging no matter what the reason.

The bond market will continue to struggle, and yields/interest rates will continue to climb, if foreign demand for US Treasuries continues to fall. Here’s Bloomberg on today’s auction of 5-year notes:

Treasuries fell after a measure of demand from international investors for U.S. bonds declined for the second time this week at a government debt auction.

Foreign central banks and investors that bid through so- called primary dealers bought 22 percent of the debt sold, the smallest percentage since June 2003. The $13 billion sale of five-year notes was the second of three this week totaling $44 billion. Treasuries fell Aug. 8 after demand for three-year notes from the same group, known as indirect bidders, dropped.

The Chinese open up a little bit more to the currency markets, and give a little insight as to the currency basket that the yuan is now pegged to.

The media loves to try and blame the ’speculators’ for the current high oil prices. However, a lot of people don’t believe that the bull market in crude is due only to speculation, thinking that maybe there really are some supply and demand issues. Here’s a quote from Deborah White, a senior commodities economist with Société Générale in Paris, from an article in yesterday’s NY Times:

“Other than the weather, and hurricanes, and refineries going down, and Saudi Arabia and Iran, and strong economic statistics, there really is no reason why crude oil prices should be so high,” Ms. White said. “It must be speculation, don’t you think?”

Hah.

BTW, crude is currently trading at $64.22/barrel.

So far, a solid positive opening. Although oil prices are sneaking back up ($63.85), the market has come out pretty strong across the board. Those groups that needed some help are doing well so far - REITs, housing, retail, utilities. Bond yields have pulled back slightly. The dollar is weak, and gold is higher.