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.

Earnings from Apple apparently weren’t good enough. AAPL trading down 4 bucks in after-hours. Looks like they beat estimates by a penny on earnings but missed on revenues.

Ahhh, the ol’ beat-the-numbers game. But remember what Gary K. says - it’s not the numbers, it’s how the market reacts to those numbers.

Another formerly strong group is crumbling. Telecom stocks, as represented by the Amex North American Telecom Index (XTC components) had been helping hold the market together of late. So much for that. Take a look at some of the recent moves in the group (symbols BLS, CTL, CZN, MOT, S, SBC, T, VZ):

Charts courtesy of StockCharts.com

More yuk, plain and simple.

The majors were unable to hold on to their early morning gains, and only the Dow managed to keep its head above water. The 30 Industrials finished higher by a meager 14 points (+0.1%) at 10253. The S&P 500 dropped 2 points (-0.2%) to 1185 and the Nasdaq got smacked again, falling 18 points (-0.9%) to 2061. Small and mid-caps continue to crumble, with the Russell 2000 dumping another 8 points (-1.2%) to 630. The other Dow indices bucked the tide by finishing higher - the Transports and the Utilities each up 0.6%. Bonds were slightly lower in their first day of trading this week, pushing yields up to 4.26% on the 5-year and 4.38% on the 10-year.

Market internals were negative on good volume, with advances/declines running 13/20 on the NYSE and 3/7 on the Nasdaq. Up/down volume was 2 to 3 on the NYSE and a paltry 2/7 on the Nasdaq. New highs/lows are now reflecting the poor condition of the overall market, at 32/188 on the NYSE and 44/124 on the Nasdaq.

Energy stocks bounced back as energy prices moved higher. Leading the way were natural resources (+2.1%), oil stocks (+2.0%), natural gas stocks (+1.8%) and oil services (+1.4%). Groups losing ground included semiconductors (-1.7%), networking (-1.6%), airlines (-1.5%), brokers (-1.5%), telecom (-1.4%), biotechs (-1.3%), insurers (-1.2%), internets (-1.1%) and HMOs (-1.0%).

Crude oil prices recovered to the tune of $1.73/barrel to $63.53, with gasoline up 3 cents to $1.83 and natural gas up a whopping 58 cents to $13.56. The dollar was strong again, with the dollar index gaining 0.6% to 89.88. Gold is ignoring the strong dollar, and spiked to $478/ounce midday before slipping back to $475.

Earnings out from Apple and AMD after the bell - bound to make news no matter what.

BMB Note: Other than the fact we got a rebound in the energy stocks today, which may or may not hold, this market is in very rough shape. We’re now seeing breakdowns in the semiconductors and telecoms, and the semis are helping pull tech stocks down to join the other lousy groups, like banks, lenders, homebuilders, retailers, etc. Many of those stocks look shortable (if that’s your game), but I’d wait for bounces before jumping in as they’re rather oversold at this point. Energy stocks could possibly continue to recover from their breakdown last week, but the move down was pretty severe, and they could just as easily bounce up and then roll over to join the rest of the market. But I give the energy stocks a better chance of survival than some of the others.

There are virtually no strong areas, the exception being the precious metals. Gold bullion is having a wonderful time of it, getting a kick from all the inflation fear being tossed about, and the stocks are still looking quite strong. The metal is moving higher despite the dollar strength - I can only imagine what might happen if the dollar starts to cave.

Slowly but surely, oil and gas production is coming back on line - from today’s MMS release (GOM = Gulf of Mexico):

Today’s shut-in oil production is 1,062,530 BOPD. This shut-in oil production is equivalent to 70.84% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 6.042 BCFPD. This shut-in gas production is equivalent to 60.42% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-10/11/05 is 54,557,243 bbls, which is equivalent to 9.965 % of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-10/11/05 is 271.661 BCF, which is equivalent to 7.443 % of the yearly production of gas in the GOM (approximately 3.65 TCF).

Note, however, that in the past month-and-a-half, nearly 10% of the annual Gulf oil production and 7.5% of gas production has been lost.

Agencies keep trying to forecast future energy demand, and whether they are correct or not, they do move the markets. Phil Flynn said in his newsletter today:

Dow Jones News reported that the US government is convinced the recent spike in price has taken a bite out of demand. The report shows that the US Government is set to make one of its biggest downward revisions to demand forecasts in recent years. The Energy Information Agency of the Department of Energy will cut its estimate of 2005 world oil demand by upwards of 400,000 barrels a day to about 83.73 million barrels a day. “The revision will cut the EIA’s for the rate of world oil demand growth to 1.5% from 2.1%, a significant drop in the context of the world oil market, where 2% growth is considered fast and 1.5% ordinary.”

Well, the International Energy Agency agreed with the US government’s belief that demand will slow, but not by huge numbers, and it may not last. From Marketwatch.com:

“In its monthly oil report, IEA trimmed 2005 global oil demand growth by 90,000 barrels per day to 1.26 million barrels per day,” said Michael Fitzpatrick, an analyst at Fimat USA.

But the IEA also expects a “rebound to 1.75 million barrels per day next year — the result of a recovery in the Chinese economy, and the ‘largely temporary impact’ of the hurricanes,” he said.

“If, as IEA predicts, the Chinese economic engine revs up again, the respite provided by demand destruction may be brief,” he said.

The net result? We have energy prices making a comeback today.

The market is pretty evenly split at this point, with the Dow in the green, the S&P around the flat line and the Nasdaq in the red. market internals have a similar look, being positive on the NYSE but negative on the Nasdaq.

A rebound in some of the beaten down areas, with natural gas stocks, natural resources, oil services and oil stocks moving higher while tech stocks like semiconductors, networking and internets are falling.

Crude oil prices have moved back near $63/barrel, and natural gas is back well above $13/mBTU.