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.

In his speech from New Orleans Thursday night:

“And all who question the future of the Crescent City need to know: There is no way to imagine America without New Orleans, and this great city will rise again.”

New Orleans’ “rising” sure would make things a lot easier. About 25 or 30 feet should be enough.

Martin Goldberg says it’s a little early to make a definitive call just yet, but he does point out that some of the ‘consumer’ based stocks - retail & restaurants - look to be in some serious trouble. And for some of them, there’s a lot of room to fall.

It was the US consumer that led the bull market and now the consumer is running out of gas. He has run out of savings. He is running out of available credit. He is running out of confidence. In the aggregate, practically all he has left is his “home equity” which is probably at risk. You cannot rule out that for the US stock market, the sky may be falling.

Remember the college drinking games? Remember “Shots to Bob”? You know - for those of us old enough to have seen the show - the game where everybody watched the Bob Newhart Show and took a drink every time someone on the show said “Bob”?

I can see it. College guys today gather around the TV to watch Cramer’s show - maybe during the evening rerun - and they all take a drink each time he hits that stupid bull button.

You just know they’re doing it.

How fitting is it that the theme of Cramer’s show tonight is mental health?

First stock is PSYS. I checked - yup, up 5.2% already today. I am just amazed that these people haven’t figured his game out yet, and keep buying the stocks when he mentions them on the show. You’d think that one day they’d realize that they just don’t seem to be making much money on these stocks…

Pretty much a mixed bag today. The major indices never got anything going in either direction, and finished mixed on the day. Watch for a little volatility for a day or two, as options expiration is tomorrow and there is some S&P rebalancing going on as well.

The Dow Industrials ended with a 14 point gain (+0.1%) at 10559. The S&P 500 was up less than a point to 1223, and the Nasdaq was lower by 3 points (-0.2%) at 2146. The Russell 2000 fell less than a point to 665. The Dow Transport got back a bit, up 0.4% and the Dow Utilites were higher by 1.0%, despite higher rates. Bonds had a rough day, moving lower and pushing yields up to 3.99% on the 5-year and 4.21% on the 10.

Market internals weren’t real pretty again today. On the NYSE, advances/declines and up/down volume ran about 4 to 5. Things were a little worse on the Nasdaq, with 2 stocks up for every 3 down, and up/down volume just better than 1 to 2. New highs/lows were 119/51 on the NYSE and 68/43 on the Nasdaq.

Not too many big movers in the groups today. On the up side were gold & silver stocks (+1.7%), biotechs (+1.0%), HMOs (+0.9) and utilities (+0.9%). Losing ground were the ever-troubled airlines (-3.0% - if you’ve been messing with either Northwest or Delta stock you should have your head examined), semiconductors (-1.0%) and broker/dealers (-0.9%).

Crude oil prices slipped 34 cents to $64.75/barrel. The dollar index was higher by 0.5% to 88.11, but gold moved higher anyway. The spot price of gold moved above $455/ounce - the December futures contract closed at a 9-month high above $459.

BMB Note: Not much good to say about today, but not a lot of bad either, other than the move higher in interest rates. The continued strength in gold tells you something about what the market thinks is coming - namely, economic weakness, dollar weakness or inflation, or some combination of thereof. In any case, it’s not coming across as a strong vote of confidence for stocks.

Things - or rather, the people - are looking grim in Germany. The government is making sure of that.

“A broad smile, however nice it may be, is therefore unacceptable,” the Interior Ministry said in a statement.

Yeesh.

If you’re interested in getting in on the move in precious metals but don’t know which stocks to pick, take a look at Vanguard’s Precious Metals and Mining Fund. VGPMX not only has holdings in precious metals companies (gold, silver, platinum, etc.) all over the world, it also invests in various other mining companies, many of which have benefitted from the run up in oil prices, e.g., coal miners. It also has the freedom to take positions in the various metals themselves if the managers so choose. The fund’s initial investment requirement might be a little steep ($10,000), but it has been a tremendous performer over the past 5 years or so. Check out their latest holdings listing here. Or check to see if your fund provider has a similar fund. For me, it’s been a great way to play the commodities boom - BMB does hold shares of this fund.

Chart courtesy of StockCharts.com

Currency traders are watching developments in Germany pretty closely this week. The election being held there over the weekend is likely to have an impact on the Euro’s future direction.

The latest activity report from the Philadelphia Federal Reserve has been released, and it doesn’t sound like real good news. From MarketWatch.com:

Philly manufacturing activity slows in Sept. By Greg Robb
WASHINGTON (MarketWatch) - Manufacturing in the Philadelphia region slowed significantly in September, but remained barely above negative territory, the Federal Reserve Bank of Philadelphia reported Thursday. The Philly Fed’s activity index fell to 2.2 in September from 17.5 in August. The decline was much larger than expected. Economists were expecting the index to slip to 12.3, according to a MarketWatch survey.

Initial market reaction was a slight dip. BMB will post a link to more info when available.

Update: Here is a link to the full survey itself.

Update II: It seems as though the possible economic softness isn’t what made an impression on the bond market, but rather the inflation fears. Bonds have taken a plunge today, and have sent yields higher than they’ve been in a few weeks.

The selling in retail just isn’t letting up, especially in the apparel area. Here’s a few for today, as of the time of this post: ANF -3.8%, AEOS -3.4%, ANN -3.0%, BEBE -2.7%, SHLD -2.5%, ARO -2.4%, JOSB -2.1%.

When you get a chance, take a gander at the chart of Abercrombie & Fitch (ANF). That’s what a total collapse looks like, folks.

Hope you don’t own it - if you do, please learn to develop a sell discipline. Too many ‘investors’ are interested in buying stocks, but have no plans to either take profits or get out if things move against them. Remember: let your winners run, and cut your losses short. If you can’t be watching your holdings all day, use stop orders to protect yourself. NEVER LOSE BIG.

After an initial bump after the bell, the major indices have settled back near the UNCH level. A look at the groups shows about half up and half down. Moving higher this morning are HMOs, precious metals stocks and oil services. Moving lower are the troubled airlines, broker/dealers and computer hardware.

The dollar and gold are both higher, bonds are down - yields up - just a bit.

• Consumer price index up 0.5%. Note the headline choice is the 0.1% number, ex-food and energy.
• Weekly jobless claims up 71K post-Katrina. No big surprise there.
• Business inventories fell in July, mainly due to vehicles and parts.

Index futures are looking for a higher open. Crude up 30 cents, and gold is up nearly $4 at the moment to $454/ounce.