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.

Housing stocks have gotten a nice bounce over the past few days, helped by a large drop in interest rates as well as (I presume) the thought that they may benefit from the rebuilding efforts needed in the Gulf area. Can this provide the boost needed to send the housing stocks higher yet again? They’ve had a huge run up — but in recent weeks, have been as weak as they’ve been in a long time. This should be an interesting, and revealing, test of the whole real estate market/bubble. If another shot of lower interest rates can’t juice things higher, chances are real good that the best times are behind us. It seems to me that there is a big difference between the effects of low rates in a strengthening economy versus the effects in a weakening period. And it’s starting to look like this economy might be a little on the tired side.

Chart courtesy of StockCharts.com

It isn’t at all obvious from looking at the major indices, but a lot of retailers got smacked around pretty good again today. Bebe Stores took it particularly hard after they cut their sales forecast. Statements like that are usually not real good for your share price. It cost BEBE more than 23% today.

Chart courtesy of StockCharts.com

On the whole, the market continues to hold up well under pressures from high energy prices and the aftermath of Hurricane Katrina. The major indices moved higher then lower today, and ended the day mixed but near the flat line. The Dow Industrials dropped 22 points (-0.2%) to 10460, the S&P 500 gained 1 point (+0.1%) to 1222 and the Nasdaq fell 4 points (-0.2%) to 2148. The Russell 2000 moved higher by 2 points (+0.3%) to 668, the Dow Transports fell 0.3% but the Dow Utilities were higher by 2.2% as interest rates fell even further. The bond market rallied the short maturities more than the longer ones today, pushing the 5-year yield down to 3.82%, but the 10-year held pretty steady at 4.02%.

Market internals were mixed on another strong volume day. Advances/declines were positive on the NYSE at 3 to 2, but just slightly negative on the Nasdaq. Same for up/down volume: 11 to 9 on the NYSE but 2 to 3 on the Nasdaq. New highs/lows were 281/26 on the NYSE and 144/42 on the Nasdaq.

Another day when many groups were up - but that is not obvious from looking at the major indices. I guess that just shows how little of an effect some of these groups actually have on those indices. Moving higher were oil stocks (+3.6%), gold & silver stocks (+3.5%), steel stocks (+2.9%), natural resources (+2.4%), commodities (+2.4%), biotechs (+2.3%), natural gas stocks (+1.9%), broker/dealers (+1.5%), utilities (+1.4%) and oil services (+1.2%). Losing ground on the day were - you guessed it - airlines (-5.8%). Following them down were retailers (-1.1%) and semiconductors (-1.1%).

Crude oil prices wobbled today, but finished higher by 53 cents at $69.47. As we said earlier in the day, it’s the moves in gasoline prices that have received the most attention in the last couple of days, and rightfully so. The dollar was trashed again today, as US economic news remains somewhat disappointing. The dollar index fell 1.2% to 86.57. Gold prices took advantage of the weak dollar by moving above $442/ounce.

BMB Note: The major indices have held up well during a tough week. The problem is that they haven’t really gone anywhere, while some sectors have done very well. Once again we see that you need to have your money in the right places in the market to make the most of it. If you were in energy stocks this week, you’re happy. If you’ve been in retail, you’re likely not. If you’re just tracking the indices, well, you’re pretty much where you started.

The headline of this article says that retailers’ August same-store sales numbers released today were ’solid’. But the truth is that there were some good, some bad, as there always are. And if you read the article, many are concerned about the outlook for the future.

The market doesn’t seem to have been all that pleased with the numbers. Looking over the group of retail stocks I watch, I see many more down than up, and the S&P retail index is down 0.6%.

The major indices started slightly higher out of the gate, but that fizzled after the first half-hour, and the indices are now near or just below the flat line. In the energy markets, it’s not about oil for now — it’s about the refined products, like gasoline and heating oil. Prices on those distillates continue to rise, even through crude oil prices have leveled off.

Leading groups are oil stocks, gold & silver stocks and biotechs. Losing, again, are the airlines. Also falling a bit so far are housing and retailers.

The morning’s economic reports haven’t been encouraging either: manufacturing activity declined in August. even before Katrina. Also, in what should be a surprise to no one, the U.S. savings rate has turned negative, falling to the lowest point since the records have been kept (1959). No surprise on my face.

The dollar is getting hammered again, and gold is on the rise.

Not a lot of good news. Sooner or later, we’ve known that this country would have to start paying the piper for its excesses. Maybe the piper’s bills have started arriving…