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.

The market put together yet another solid performance today, continuing to grind its way higher. The major indices moved up mid-morning, then moved sideways the rest of the day. The Dow Industrials finished up 83 points (+0.8%) at 10679, the S&P 500 gained 10 points (+0.8%) to 1241, and the Nasdaq lagged a bit, adding 10 points (+0.4%) to 2176. The Russell 2000 tacked on 5 points (+0.7%) to 678. The Dow Transports fell 0.8%, but the Dow Utilities gained 1.2%. Bonds were modestly higher, with yields moving lower: the 5-year to 3.93% and the 10-year to 4.12%.

Market internals were positive, and volume was about the same as yesterday’s. Advances led declines by 11 to 5 on the NYSE and 3 to 2 on the Nasdaq. Up/down volume was better than 3 to 1 on the NYSE, and about 7 to 4 on the Nasdaq. New highs/lows were 253/18 on the NYSE and 136/34 on the Nasdaq.

Leading the way higher today were oil stocks with a gain of 2.6%, followed by gold &amp silver stocks (+2.6%), natural resources (2.4%), natural gas (+2.3%), oil services (+2.2%), steel stocks (+2.2%), housing (+2.0%), paper stocks (+1.8%), commodities (+1.5%), hospitals (+1.3%), and insurers (+1.2%). The only losers were the airlines (-1.3%) and transportation stocks (-0.7%).

Crude oil slid lower by 41 cents to $64.08/barrel. Gasoline and natural gas prices also pulled back. The dollar index fell 0.2% to 86.85, and the price of gold moved above $448/ounce.

BMB Note: The market seems determined to prove the bears wrong, as the price action remains positive and the S&P 500 sits just over 4 points from its August highs. Stronger volume - especially on the up days - would be much more convincing, but price is the primary concern. For the last week or two at least, the trend has been up.

Crude oil prices and/or availability isn’t necessarily going to be the problem over the next few months. Even more worrisome for the energy consumer are likely to be refined products like gasoline and heating oil, or natural gas.

The major indices are off to a mildly positive start, but the gains in the various industry groups are concentrated in the commodity/energy areas, topped by gold & silver stocks at the moment. Housing stocks are also getting a boost from a few upgraded in the sector. Losing ground early are airline and transportation stocks, as oil and gas prices remain a concern.

A lot of interesting discussion in the interest rate markets, as the inflation/no inflation debate continues. August import prices moved higher by 1.3%, but that was blamed exclusively on energy prices.

So the Fed is still left in a bind - raise rates to help stave off inflation, and help keep the dollar up, or do they pause in raising rates, which is sure to hurt the dollar, which will no doubt be inflationary. Tough call. I’ll bet these days they’re wishing they’d have raised rates a lot faster than they did.

In the meantime, gold is taking advantage of all the inflation/interest rate uncertainty, as it pushes back up to near $450/ounce, trying today to set new 9-month highs. And central banks don’t like to see gold go up in value - it makes their nothing-but-paper currencies look bad.

Even Jim Jubak is going after the Fed, saying they’re all talk and no action:

Lecturing consumers on the need to borrow less, as the Federal Reserve has done, when money is so cheap thanks to its own policies, is like standing in front of an open bar and telling your party guests not to drink more of the free liquor than is good for them.

More commentary on recent action in the Nasdaq from Deron Wagner at TradingMarkets:

Total volume in the NYSE declined by 6% yesterday, but turnover in the Nasdaq was 6% higher than the previous day’s level. This means the Nasdaq technically sustained another “distribution day,” the fifth such day of institutional selling within the past four weeks. Conversely, the Nasdaq has had only two “accumulation days” of institutional buying during that same period. Nasdaq market internals had an unusual divergence yesterday. Declining stocks exceeded advancing stocks by a margin of 3 to 2, but advancing volume in the Nasdaq marginally outpaced declining volume. This tells us that more stocks closed lower than higher, but the ones that closed higher did so on much higher volume. Most likely, the concentrated relative strength within the Semiconductor sector accounted for this.