Bear Mountain Bull

The market was stuck in the mud today, with lower energy prices unable to push it higher and poor economic data unable to push it lower: the S&P 500 traded in a range of just over 4 points today.

The majors all moved higher into the close to end just in positive territory: the Dow Industrials gaining 16 points (+0.2%) to 10569 and the S&P 500 adding 1 point (+0.1%) to 1229. The Nasdaq again got the best of it, picking up 11 points (+0.5%) to 2152. The Russell 2000 was higher by 3 points (+0.4%) to 668, the Dow Transports were up 0.6% and the Utilities fell 0.1%. Bonds fell for the second straight day, and yields have moved sharply higher, leaving the 5 year at 4.19% and the 10-year at 4.33%.

Market internals were positive on good volume. Advances led declines by 11 to 8 on the NYSE and 5 to 4 on the Nasdaq. Up/down volume was about 5 to 3 on both exchanges, with new highs/lows at 208/52 on the NYSE and 125/55 on the Nasdaq.

A good showing across groups, as investors seemed unwilling to tear down anything but energy stocks. Airlines led the way up, gaining 2.3%, followed by disk drives (+1.9%, helped by an earnings report from SNDK), semiconductors (+1.9%), biotechs (+1.6%), chemicals (+1.4%, they’ve been trashed of late), housing stocks (+1.4% - up on higher interest rates, go figure), steel stocks (+1.4%), REITs (+1.2%, repeat interest rate curiosity here), telecoms (+1.1%) and computer hardware (+1.0%). Losers were oil services (-1.5%), gold & silver stocks (-1.4%), oil stocks (-1.4%) and natural resources (-1.0%).

A bit of relief on energy prices today, with crude oil dipping 55 cents to $66.24/barrel, and gasoline and natural gas prices slipping as well. The dollar rallied late from a big fall, moving the dollar index up 0.1% to 89.46. The spot price of gold slid to just under $469/ounce.

BMB Note: September leaves us with the major indices all hovering at or near their 50-day averages, and those averages are pretty much moving sideways at this point. Not much of a clue as to future action, is it? Your guess is as good as mine (maybe better!), but I still believe there’s more risk than reward here, so pick your spots carefully. The downdraft isn’t strong: but I still think, in many areas, the path of least resistance is lower.

Today’s update from the Minerals Management Service (GOM = Gulf of Mexico):

Today’s shut-in oil production is 1,467,577 BOPD. This shut-in oil production is equivalent to 97.83% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 7.941BCFPD. This shut-in gas production is equivalent to 79.41% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-9/30/05 is 40,828,134 bbls, which is equivalent to 7.457 % of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-9/30/05 is 196.481 BCF, which is equivalent to 5.383% of the yearly production of gas in the GOM (approximately 3.65 TCF).

From Larry McMillan’s (The Option Strategist) weekly newsletter (sign up):

So where does all of this leave us? We have two bullish indicators breadth and put-call ratios. We have two indicators in a relatively neutral status (within trading ranges): $VIX and the charts of the major indices. To us, it adds up to further trading range activity in the US markets — especially considering that this most recent, strong rally day was likely the result of the calendar (quarter end) rather than a true shift in investor bullishness. I expect to see sellers emerge at the 1240-1245 area on $SPX because sales there were profitable the last two times that the average got that high. Eventually, if $SPX can break on through 1245, that would change things because those sellers would turn to buyers and other investors would be drawn in on the buy side as well. Unless that happens, we remain skeptical of the rally.

I know, we’ve been giving Phil Flynn from Alaron Trading a lot of air time lately on the energy issues, but there’s a lot happening on the energy front these days, and you need to be informed. Maybe you haven’t even heard about this push to impose a “windfall profits” tax on our oil companies - one of the most absurd things I’ve heard of in a while. Now there’s a way to ensure certain that this energy crunch doesn’t get any better anytime soon. Brilliant.

Obviously, Phil is as annoyed with our politicians these days as I am:

And with all the challenges facing the energy industry, can you even possibly imagine that some in Washington are talking about imposing a “windfall profit” tax on the industry? What they should call it is a windfall stupid tax because any politician that would propose such a thing is obviously stupid.

I am amazed that there are some in Congress representing the people of this country that have no sense of history and haven’t learned from the mistakes we made during the energy crisis of the seventies. This lack of understanding and foresight is a danger to the average American and does more to hurt us than any dollar of profit the oil industry has ever made. One of the reasons the US oil industry is so vulnerable to the aftermath of a hurricane is that US regulations and bad policy has discouraged aggressive expansion of our US oil infrastructure. Lets talk about not drilling. Lets talk about making it impossible to build a refinery due in large part to all the never ending permits required by law and the cost of those permits. Because of the ignorance or downright negligence of the anti-energy lobby and the extreme environmentalists, our economy is at great risk and peril. This is not something I am saying just due to the hurricanes but something I have said for many years. And now when the US oil industry needs investment and help more than ever before, politicians looking to score political points are wasting precious time and energy. This is just when we the people need them to do their jobs the most.

The truth is that a tax on profits made by the energy industry hurts the average American. This will discourage investment and push oil production and investment dollars offshore. It will cost the US jobs and therefore tax revenue and could artificially keep oil prices high driving the economy into a recession. Now is not the time to allow political opportunists to try to paint the oil industry as the bad guy. The government should be working shoulder to shoulder with the US oil industry to help them get back on line so Americans won’t freeze to death this winter or go broke paying their heating bills.

After this crisis is over it will be high time to hold these politicians that have made a career of beating the US oil industry into the ground accountable. We must put a stop to the anti-big oil propaganda that has permeated this country. We all benefit from the oil industry and yet there are many in this country that try to do whatever it can to bring down this industry.

So remember when you pay those record heating bills and record gas prices to blame the ones who are really responsible. The same guys that want you to believe they are investigating the bad guys for gouging on your behalf are the real criminals those who would tax energy company profits are the ones who want to take control of the US energy industry. They’re the same people who blocked drilling in the Alaska National Wildlife Refuge. The same ones that blocked the building of new refineries. The same ones that have created so much red tape for the oil industry that you could wrap presents with it from now to the end of time. Don’t let them get away with this negligence! Hold them accountable!

Go get ‘em Phil (you can sign up for his free newsletter here)! Let ‘em have it!

It’s really quite sad that our Congress - both House and Senate - continues to be such an embarrassment. Sometimes I really wish that members of Congress were barred from talking to the media. Or barred from doing anything at all.

Some economic news out this morning hasn’t done much to move the market in either direction - the Dow and S&P are currently just in the red, with the Nasdaq slightly positive. Not a lot happening as of yet, with semis, biotechs and housing up, paper stocks down.

The news: personal income and spending down, the final Michigan consumer sentiment reading for September was unchanged from the preliminary reading, and good news from the Chicago PMI.

Another fine presentation from Phil Flynn, and his unique perspective on the energy markets:

The Energy Report for Thursday, September 29, 2005

Once again the trusty Energy Report will bring you the good, the bad and the ugly.

The Good: The Department of Energy reported that US gasoline supplies rose by a surprising 4.40 million barrels. The increase represented strong output by refiners, large imports, and demand still running on the soft side but improving.

The Bad: The Department of Energy reported a draw in distillates. This is raising concerns that refiners in their quest to keep up with gasoline demand will do so at the expense of distillates. And this raises concerns that winter heating oil stocks will be tight as the season progresses. This is also increases fears that refiners will soon have to shut down for retooling to get ready to go in to heating oil mode thereby further denting our distillate supply.

The Ugly: A surprise drop in crude supplies that is showing quite clearly that the loss of crude production in the Gulf is taking its toll on supply. Gulf oil output is still 100% shut down. There are also reports calling hurricane Rita the most damaging storm to offshore oil rigs and platforms in history. Ugly indeed.

The Good: Durable goods orders posted a much better than expected increase. This seemed to suggest business spending and confidence was on the rise.

The Bad: This was in August before Katrina.

The Ugly: Manufacturers may have to swallow the increased energy costs as natural gas hit a new all time record high.

The Good: Natural Gas is in an explosive bull market. This is great for traders with a lot of cash and risk tolerance. Gas hit a record high on an explosive October expiration.

The Bad: The run up in price could hurt businesses and consumers. There are fears of shortages and rumors that Rita did much more damage to offshore oil and natural gas rigs and the force majeure is still in place at the NYMEX. This could lead to even higher prices down the road as our nation’s inability to import LNG - liquefied natural gas - is severely limited. Not to mention that one of our major import terminals is shut down.

The Ugly: An ugly weather front is once again developing. Traders are worrying about tropical storm Stan. Even the slightest threat that another storm could come in to the Gulf of Mexico is enough reason for all shorts to abandon their position.

Not only can Mr. Flynn be quite creative in his commentary, he also really knows his stuff. (You can sign up for his free newsletter here.).

It’s Thursday - time for Martin Goldberg’s column. This week, it’s all about interest rates, gold, and today’s rally:

Oil was up and interest rates were also up. So generally speaking, the background was negative for stocks today. Yet they rallied on high volume. With a fundamental background which is as unfavorable for the US consumer, it is positively difficult to respect this rally – yet this is exactly what must be done. The short term desire of speculators and pressure on hedge funds to not miss a rally, trumps most reality and longer term fundamental data out there. That reality deserves respect along with the Houston Astros pitching staff.

We may be just now finding out that the pipeline damage from Katrina (you remember, the one before Rita) is worse than originally thought.

Hmm. Maybe there’s some truth to this ‘window dressing’ talk…

The market put together a nice little broad-based rally today, for no real reason that I can tell. The Dow Industrials moved up 80 points (+0.8%) to 10553, the S&P 500 added 11 points (+0.9%) to 1228 and the Nasdaq was the winner of the day, gaining 26 points (+1.2%) to 2141. The Russell 2000 did even better, picking up 9 points (+1.4%) to 665. The Dow Transports were up 1.7% and the Utilities up 0.9%. Bonds moved lower, pushing yields up: the 5-year to 4.14% and the 10-year to 4.29%.

Internals were strong on good volume. Advances led declines by 11 to 5 on the NYSE and 3 to 2 on the Nasdaq, with up/down volume even stronger at 14 to 5 on the NYSE and 7 to 3 on the Nasdaq. New highs/lows were 184/91 on the NYSE and 97/75 on the Naz.

Too many groups higher to list them all: of the 34 groups I track daily, 31 were up on the day, and 18 of those were up 1% or more. Leading the way were disk drives (+2.4%), gold & silver stocks (+2.0%), housing stocks (+1.9%), software (+1.9%), brokers (+1.9%), tranportation stocks (+1.7%), natural gas stocks (+1.6%) and semiconductors (+1.6%). The only real losers of the day were the HMOs (-2.3%), and much of that damage was inflicted on a few stocks.

Crude oil prices moved higher by 44 cents to $66.79/barrel. The dollar seems to be running into a bit of resistance, as the dollar index fell just slightly today to 89.42. The strength in gold continues, with the spot price moving up to near $472/ounce.

BMB Note: So what does today tell us? It doesn’t tell me much at all - since success in this market is sector/group dependent, the fact that everything was up today doesn’t change my view much. And I’ll never complain when I make money on the day. But of course, I am always suspicious of a market that goes up across the board for no reason, and it is the end of the quarter. Who knows? If this does turn out to be more than a day or two of a bounce, we’ll deal with that when it comes. On the whole, there’s a lot of damage to repair to get this market in good shape again.

And another thing — if you’ve got some stocks that were not up today, you may have reason to be concerned about them.

Today’s update from the MMS shows a bit of improvement on both the crude and natural gas production - but not a lot (GOM = Gulf of Mexico):

Today’s shut-in oil production is 1,478,780 BOPD. This shut-in oil production is equivalent to 98.59% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 7.979 BCFPD. This shut-in gas production is equivalent to 79.97% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-9/29/05 is 39,360,557 bbls, which is equivalent to 7.189% of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-9/29/05 is 188.540 BCF, which is equivalent to 5.165% of the yearly production of gas in the GOM (approximately 3.65 TCF).

A bit of a turnaround, and the major indices have a little rally going. Internals have turned positive, and the Nasdaq is leading the way. Precious metals, disk drives, brokers, software and housing stocks doing well, and mainly just the HMO index is struggling.

So how much of little bounces like this can be attributed to end-of-the-quarter “window dressing” by fund managers?

After an initial move down, the major indices have flattened out, holding just in negative territory. Winners so far are gold & silver stocks and natural gas stocks. Losers are HMOs and airlines, with the action in HMOs being influenced by AGP’s warning of a third quarter loss. Also being hurt are CNC and MOH.

Crude oil prices just refuse to back down, now pushing $67/barrel, with gasoline and natural gas prices up as well. Natural gas inventory numbers are out in a few minutes, and could have an impact.

The morning economic data was pretty much ignored, as Q2 final GDP was unchanged and weekly jobless claims fell.

Bonds are falling back, pushing yields back up this morning.

According to this article in the Financial Times, Hurricane Rita caused record damage to oil rigs in the Gulf of Mexico:

Hurricane Rita has caused more damage to oil rigs than any other storm in history and will force companies to delay drilling for oil in the US and as far away as the Middle East, initial damage assessments show.

Hmm. Interesting. If that’s true, how come we haven’t heard these stories from the US media?

Another not-very-pretty day. A huge spike in energy prices: some areas of the market held up quite well, but others did not.

The Dow Industrials finished with a 17 point gain (+0.2%) to 10473. The S&P 500 gained 1 points (+0.1%) to 1217 and the Nasdaq lost 1 point to 2115. The Russell 2000 suffered a bit more, losing 3 points (-0.5%) to 656. The Dow Transports somehow managed to gain 1.1% and the Utilities gained 1.0%. Bonds had a good day, pushing yields back down, with the 5-year falling to 4.11% and the 10-year to 4.26%.

Market internals were mixed with advances/declines just above the flat line on the NYSE and just better than 2 to 3 on the Nasdaq. Up/down volume was much better, running 11 to 8 on the NYSE and just above flat on the Nasdaq. New highs/lows were 155/105 on the NYSE and 91/83 on the Nasdaq.

The winning groups were a rather curious mix, with networking stocks leading the way (+2.2%), followed by gold & silver stocks (+2.2%), natural gas stocks (+1.5%), natural resources (+1.2%), oil stocks (+1.2%) and telecoms (+1.1%). Losers were retail stocks (-1.3%), paper stocks (-1.2%), REITs (-1.0%) and housing stocks (-0.9%).

Crude oil prices moved higher by more than a dollar to $66.35/ barrel. In addition, we saw a large increase in both natural gas and gasoline prices, with each moving higher by about 8%. Not good. The dollar index fell just slightly to 89.53 (-0.1%), and the price of gold moved back up to near $469/ounce.

BMB Note: I don’t like the looks of this picture at all. The major indices are quite misleading at this point, as they hide a lot of the bad things going on behind the scenes. The huge jump in energy prices today is obviously very bad news, and we saw retail and restaurant stocks get blasted again as a result. We see the up/down volume numbers much better than the advance/decline figures, especially on the Nasdaq, as more money chases fewer stocks. I don’t like the way that looks. And the pullback in long yields as short yields move higher, flattening the yield curve, isn’t good news either. And even as long yields stay low, housing stocks are crapping out. Oh, and there was a big rebound in gold prices today. The markets look very nervous to me. If they’re not, I think they should be, because they’re making me nervous.

But what will you read in the paper tomorrow morning? Oh, the Dow was up 17 points and the Nasdaq was down 1. Ho hum. That’s it? That’s all you’ve got to say?

Oh, and let’s add a late report of new accounting violations at Fannie Mae into the mix, as long as we’re at it. That should make you feel better.

Hmm. I just noticed that CNBC is now showing the 2-year bond yield on the screen, along with the 5 and 10 year. Why is that? Because the 2-year yield is listed at 4.09%, and the 5-year at 4.10%, only 0.1% difference. The yield curve can’t get much flatter without inverting, can it?

And an inverted yield curve isn’t generally considered to be good news.

Gary Kaltbaum says that in spite of all the bad areas of the market, there are some good things happening.

Today’s update from the MMS on shut-in products from the Gulf shows no help at all on the oil front, and the numbers on natural gas continue to go the wrong way (GOM = Gulf of Mexico):

Today’s shut-in oil production is 1,511,715 BOPD. This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 8.027 BCFPD. This shut-in gas production is equivalent to 80.27% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

A surge in energy prices prompted a bit of a lunchtime selloff, sending the major indices slightly into negative territory. Retailers, REITs and housing stocks have been hit, while gold & silver stocks, networkers (?), and energy stocks have moved higher.

Crude oil prices have moved up by a buck-and-a-half. Unleaded gas is up more than 8 cents ( to $2.25/gallon, and that’s the futures contract price, not the price at the pump. You have to add a small profit margin and a boatload of taxes on top of that…) and natural gas has zoomed up more than 71 cents per mBTU. Ouch. No wonder consumer stocks are getting hit again.

I tried to find some good excerpts from Phil Flynn’s energy newsletter today (sign up here - it’s free!), but Phil was really on a roll. You’re just going to have to read the whole thing:

America can sleep well tonight knowing that we have Senator Chuck Schumer and Congresswoman Nancy Pelosi on the job. Yesterday they brought to America’s attention the highly disturbing and gut wrenching fact that US oil companies are making profits! Can you imagine, making profits! Eee gads! What could be more un-American than making profits! How dare they? Not only are they making profits, the unfeeling cold hearted oil industry is making record profits at that. This comes at a time when America needs all the oil and refineries we can get after the devastation that was left by Katrina and Rita. Forget for a moment that oil companies were making record profits before the storms. The truth is making any kind of profit at a time like this is as un-American as making profits in the first place.

In fact this making profit thing disturbed me so much that I had to investigate it further. Much to my chagrin this profit issue is a lot more widespread than even I or Senator Chuck Schumer and Congresswoman Nancy Pelosi originally feared. This quest for profit has sadly infected every business in this country! Yes it’s a sad day when companies go into business to make profits. What terrible shame. Senator Schumer and Congresswoman Pelosi said that after the storms these oil companies were making even more profit then they were before the storm. Of course I don’t know how they know this but it must be true if they said so. And don’t try to feed us that line that the oil companies have to cover the cost of rebuilding refineries, pipelines and platforms! They should just do that because, well because, Schumer and Pelosi say they should that’s why! The bottom-line is they are still making profits. What heathens! It is obvious, due do these undisputable facts, that the oil companies must be exploiting the hurricanes for their own evil quest to make profits! And because of the outrageous conduct of the oil industry wanting to make profits, Schumer and Pelosi want an investigation. Maybe they can pull it off to tax them and then have the government get those profits back!

Extreme outrage at this profiteering brought to my attention by these fine politicians gave me the drive to further my investigation. If this profit issue was running rampant throughout the country maybe other industries were also engaging in such extreme behavior made possible by the hurricanes. I am sure the Senator and the Congresswoman will be shocked by what I found. In fact if you analyze the profits from other industries there are many that may be profiting even more than the oil companies. Why don’t we hear about it? Well because these other industries are a tricky bunch. If you look at the profits in terms of dollars invested what you are going to find is there are many businesses getting a much larger return on investment than oil. Maybe they should also come under the scrutiny of Senator Schumer and Congresswoman Pelosi.

For example for every dollar invested in the energy industry is returning a profit of approximately 7.7 cents. What an outrage making 7.7 cents on the dollar! Who else is rolling in the dough? Even more outrageous is the banking industry! Do you realize that every dollar invested is returning a whopping 19 cents! No wonder they are building new banks on every corner! And don’t you think their profits might rise as people take loans to rebuild after Katrina and Rita! How Shameful! Then there is the pharmaceutical industry which has a return of 18.6 cents on every dollar invested! Don’t you think with those outrageous profits they should be giving stuff away for free!

And how about those software companies that typically return of 14.6 cents on every dollar invested. Don’t you think they will profit as the damaged businesses will have to by new equipment to replace old equipment. Stuff like computers that, believe it our not, might include software!

Cable and network news stations exploited this tragic event for profit. They covered the disaster and in some cases even ran commercials! Do you realize that news shows ratings can go up in a disaster? This coverage was a blatant attempt to get people to watch and at the same time try to make a profit!

I could go on and on! And I have come to the conclusion that this country is being plagued by people in quest of profit! In fact I have also found that people who invest in business expect (your not going to believe this) a return on that capital. (Unless you invest in Air-America) So maybe by making it less likely that you can get a return on your investment by taxing the heck out of these companies we can stop once and for all this profit-making idea and people will stop investing in businesses if they have less of a chance of a return. Now we’re sure Schumer and Pelosi have exactly what they were after.

We all know this pursuit of profit making has made our economy the strongest most envied economy in the world. It has made countless goods and services available to Americans and people around the globe. We have to learn to stop showing off!

You can see Phil live today on CNBC just after the closing bell.

Durable goods orders were up, a much better report than last month’s - which was revised downward even further.

The major indices moved higher from the start and so far have been able to hold in positive territory. Winners are in networking, semiconductors, biotechs, brokers and utilities. Losers are housing stocks, down 1.5% thus far. Bonds are mixed, with the 5-year yield up and the 10-year down bit.

It’s Wednesday, so that means we get inventory reports on crude oil, gasoline, etc. Numbers just out - crude inventories down, gasoline up. Crude oil is up about 40 cents on the day, gasoline unchanged. Another big move up in natural gas, up 29 cents per mBTU.

Keep an eye on the tech sector, as it has been one of the areas that has held up relatively well as much of the market has weakened. But the latest action in semiconductors isn’t too encouraging, as the SOX looks ready to break down and complete a double top. The index is trying hard to hang on to that 455 area, but if it fails, you can expect a drop to 440, if not 420. If techs break down, this market is in for a rough ride.

Chart courtesy of StockCharts.com

Well, that wasn’t much of a day at all. Stocks took a morning hit on bad consumer sentiment and new home sales data, hovering just below the flat line for most of the morning. A feeble afternoon rally was mounted as Greenspan gave a speech, but that fizzled into the close, and the major indices finished mixed. The Dow Industrials were higher by 13 points (+0.1%) to 10456. The S&P 500 was flat at 1216, and the Nasdaq lost 5 points (-0.2%) to 2116. The Russell 2000 fell 1 point (-0.1%) to 659. The Dow Transports were up marginally and the Utilities gained 0.4%. Bonds were down slightly, pushing yields up a bit, the 5-year to 4.13% and the 10-year to 4.30%.

Market internals were unimpressive on average-to-good volume. Advances trailed declines by about 4 to 5 on each exchange, and up/down volume came in at about the same 4 to 5 level on both. New highs/lows were 88/111 on the NYSE and 89/56 on the Nasdaq.

The only group making headway higher was the HMOs, with a gain on 1.1%. On the down side were gold & silver stocks (-1.6%), semiconductors (-1.2%) and computer hardware (-1.1%).

Crude oil prices fell back by 75 cents to $65.07/barrel, with gasoline and natural gas prices near unchanged. The dollar continued its climb, moving the dollar index up to 89.63 (+0.6%). Gold fought back from an early selloff, and finished the day just under $464/ounce.

BMB Note: A pretty unimpressive day, and the poor close wasn’t encouraging at all. The situation remains the same: the market is split, with some areas doing well and others most definitely not doing well. The only way to make money in this environment is to know which is which.

Today’s update from the MMS indicates little change from yesterday’s statistics on shut-in production in the Gulf (GOM = Gulf of Mexico):

Today’s shut-in oil production is 1,512,937 BOPD. This shut-in oil production is equivalent to 100% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 7.856 BCFPD. This shut-in gas production is equivalent to 78.56% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

Not too impressive so far this morning. An early move to the upside has given way, especially since a few economic numbers came out in the past few minutes — and the news wasn’t particularly good.

• Consumer confidence dipped to 86.6 (Sept.) from 105.5 (Aug.)
• New home sales fell 9.9% to 1.237 million annualized

I’ll post links to more info on the above numbers when available.

Major indices have now dipped slightly into the read. Not huge moves in any groups yet, with HMOs up and housing, gold & silver stocks, disk drives and telecom down.

Oil down a few cents, gasoline up a few cents. Bonds slightly higher, yields down a bit.

Dr. Joe Duarte says there are a number of reasons to be cautious on the energy sector:

But, there are some signs now that the bull market in energy is starting to reach an important, and potentially final, if not dramatic stage.

* A well-respected bull with real money of his own invested in the oil sector for years is turning cautious.
* Hot money is finally coming into energy.
* OPEC is raising production quotas on a regular basis, and prices are not being affected.
* And Wall Street, not known for its altruistic nature toward the retail investor, is turning bullish on Exxon Mobil, the one, big oil stock that has missed most of the party, as a significant technical divergence in the sector is clearly apparent.

Something different is clearly in the air. In other words, it’s time to be very cautious in the energy sector.

As for me, I’m pretty cautious in any sector I’m invested in. While I believe that we are in a period where energy prices are likely to be rising for many years, that doesn’t mean that energy stocks will always be kind to you. Take, for example, the recent correction from March to mid-May. Even long-term bull markets can go through rough periods, and sometimes, very rough. Ask any gold investor. Am I getting out of energy? Absolutely not. But I will get out when it’s time.