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.

Not a lot to get real stirred up about today, but the market turned in another positive performance, so there’s not much to complain about either. The Dow Industrials finished up 55 points (+0.5%) at 10586, the S&P; 500 added 3 points (+0.2%) to 1223 and the Nasdaq was higher by 9 points (+0.4%) at 2178. The Russell 2000 gained 3 points (+0.5%) to finish at 661. The Dow Transports set another new closing high by gaining 1.1% while the Utilities picked up 0.4%. Bonds drifted higher with yields edging down: the 5-year to 4.55% and the 10-year to 4.64%.

Market internals were positive, but volume backed off further from Friday’s lower levels. The numbers were pretty consistent across both exchanges, with advances/declines about 5 to 4 and up/down volume about 11 to 8. New highs/lows were 95/90 on the NYSE and 127/45 on the Nasdaq.

Looking at the groups, we find a few winners and a few losers. On the plus side were housing stocks (+1.8%), paper stocks (+1.4%), transports (+1.4%) and banks (+0.9%). On the minus side were natural gas stocks (-2.6%), oil stocks (-1.8%), natural resources (-1.3%), disk drives (-1.1%) and oil services (-1.1%).

Crude oil prices fell further today, dropping $1.11 to $59.47/barrel. The dollar index held steady at 91.36, and gold snuck up to $459/ounce.

BMB Note: Not quite sure what to think at this point. The market is obviously still favoring the bulls, but I’m skeptical (as always) as to how far or long this goes. The Transports have moved to new highs - I just don’t foresee the major indices following suit at this point. Maybe I’ll be proven wrong. If I’m right, it would be just another in a string of moves by one or two indices that are not confirmed by the others, and it would leave us still stuck in no-man’s land, in a market without a direction, which is where I fear we are.

Now is a very nice time to see money market rates moving up, isn’t it?

P.S. Surprised that they haven’t pushed Google to 400 yet. No doubt they will. If nothing else, CNBC will be buying it to push it there just so they can come on with an “alert”.

Gary K. says the bulls are in charge until further notice, and points out the groups that are doing well. But there are a few possible ‘gotchas’ lurking as well:

On the not-so-good front:

Only about 50% of all stocks are in good shape. This could come back to haunt the market down the road. Even if major indices do break out, fewer and fewer stocks are working. Only time will tell.

The NEW HIGH LIST has expanded but not even close to where it was the last time major indices were sitting at this level…another potential negative divergence.

I’m on my second time through the book “Reminiscences of a Stock Operator”, by Edwin Lefevre. I’ll probably post a review when I’m done with it this time. But there are a lot of good quotes in the book, and I’ll throw them up here as I come across them. Like this one:

There is nothing like losing all you have in the world for teaching you what not to do. And when you know what not to do in order not to lose money, you begin to learn what to do in order to win. Did you get that? You begin to learn!

Dullsville. Not a lot happening yet, leaving the major indices hovering just above the flat line. The biggest moves appear to be in energy prices, with crude oil and natural gas falling further - crude is at $59.10, down about a buck and-a-half. That has pushed energy stocks lower again today.

Not many winners, the best being transports and housing, but those indices are each up less than 1 percent.

Bonds up slightly, yields down. Dollar up a bit, and gold up a bit too.

The weekly outlook from Schaeffer’s: the short-term outlook remains bullish, but don’t be looking for a long-term bull market to start from these levels.

In meeting with quite a few people during my media tour in New York last week, I heard a constant theme concerning the outlook for the rest of the year. The question would go like this: “So, Chris, will November and December pull it out for the market again this year?” Combine this mindset with the lighter-than-normal “fear” in the discussion above and you can begin to see the potential downfall for this market when one looks beyond the recent binge of buying. Stocks remain riskier than normal due in part to the thinking that the market is “due” its November/December rally. Just as I have pointed out in the past that the old “buy in May and go away” rule doesn’t apply to the market when everyone is telling us it does, the fact that so many feel stocks must rally because of the calendar suggests that we should be on guard. Why? Well, think about this. The market, fresh off of a strong technical bounce, begins topping out and sellers again take charge. The “December/November rally” scenario comes under question by investors who are already a bit tenuous, and this questioning yields to selling as they perhaps decide to not take the risk. This selling snowballs as more investors get cold feet (pun intended), and so on and so forth. Thus, the risk for the market to again test and break through its recent technical support levels (thereby introducing the potential of entering a new technical bear market) continue to exist and should be watched cautiously.

So far, this rally hasn’t done much but reinforce the nasty trading range we’ve been stuck in for nearly two years. I’d be surprised if it amounts to much more than that.