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.

Yup, believe it or not, “booyah” was around before Cramer. It was around even before Stuart Scott.

Check this out - scroll down to “Memorable Minnesota Meals”.

BMB is not alone in his lack of enthusiasm for this market ‘rally’. Here’s Dave Landry at TradingMarkets.com:

I try to limit my market related T.V. to watching the ticker at lunch. And in that brief period, I noticed that the media was very excited because we were “about to make new highs for the year.” Hmm, I thought, it doesn’t “feel” like a bull market–at least not in my portfolio. The market then promptly reversed and sold off hard. This action forms an outside day down in the S&Ps. I’m sure some “candle people” out there will have some sort of name for this–an engulfing black cloud crow or something. Whatever you call it, it’s certainly not bullish. Therefore, proceed with caution on the long side. Ideally, wait for the the S&P (and other indices) to break out decisively to new highs and then look to get long if it can hold new highs (on a pullback).

You won’t notice it if you just hear the headline numbers on the news tonight, but today’s action was rather ugly. Internals started lower this morning, then picked up midday and pulled back to just above flat on the NYSE. Then somebody pulled out the rug, and things fell apart from there.

The major indices didn’t suffer much damage: the Dow fell 11 points (-0.1%) to 10686, the S&P 500 dropped 5 points (-0.4%) to 1229 and the Nasdaq lost 14 points (-0.7%) to 2187. The Russell 2000, however, did get hurt, losing nearly 8 points (-1.2%) to 656, indicating a little more damage done below the surface of the market. The Dow Transports fell back by 1.3%, but the Utilities were higher by 0.4%. Bonds rallied, pushing yields down, but the curve remains quite flat: 2-year at 4.47%, 5-year at 4.50% and the 10-year at 4.56%.

The market internals were not good at all, and volume picked up - not an encouraging combo. Advances/declines were worse than 1 to 2, and up/down volume just better than 1 to 2 on both exchanges. New highs/lows were a lousy 80/214 on the NYSE and a flat 80/81 on the Nasdaq.

The only real winners on the day were the hospitals, picking up 1.3%. The losers were led by the airlines (-2.5%), retailers (-2.3%), disk drives (-2.3%), gold & silver (-1.9%), transports (-1.5%), brokers (-1.4%), insurers (-1.3%), and software (-1.2%).

Crude oil prices slipped another 71 cents, to $56.98/barrel. The dollar index held steady, and gold didn’t move much either, holding near $468/ounce.

BMB Note: Not a good day for the bulls. Lousy internals on a pickup in volume. I haven’t been overly excited about this ‘rally’ that came straight up off the lows, and I’m even less excited about it after today. If the yield curve continues to flatten and/or inverts, there will be some major concerns brought into the open about where things are headed, since the bond market is obviously coming down on the side favoring an economic slowdown, maybe even a recession. Things will have to look better than this before I do much buying, and if they deteriorate from here, I’ll look for shorts. But I’ll let the market decide which way to go.

I haven’t heard much discussion of the flattening yield curve recently in the media, but Briefing.com mentioned it in their market summary with a half-hour left in today’s trading:

3:30PM : Stocks extend their reach into negative territory with only a half hour left in the trading day. While a decline in borrowing costs may have helped minimize losses throughout Financial early on, the fact that 10-yr yields have fallen to a more attractive 4.55% has been overshadowed by a flattening to within 9 basis points of 2-yr note yields (4.46%) - the narrowest yield curve since January 2001 and significantly narrower than the 187 basis-point spread nearly a year and a half ago (when the Fed began the first of its 12 consecutive rate hikes) and the 116 basis-point spread at the beginning of 2005. Such narrowing raises concerns of a more restrictive lending policy and has been evidenced in the banking industry’s disappointing performance of -0.8% in 2005 compared to the brokerage group’s 26.6% year-to-date surge. Respective losses of 1.1% and 1.5% today have contributed to a 1.1% decline in Financial.

More on the emotions of trading from “Reminiscences of a Stock Operator”:

The speculator’s chief enemies are always boring from within. It is inseparable from human nature to hope and to fear. In speculation when the market goes against you you hope that every day will be the last day — and you lose more than you should had you not listened to hope — to the same ally that is so potent a success-bringer to empire builders and pioneers, big and little. And when the market goes your way you become fearful that the next day will take away your profit, and get out — too soon. Fear keeps you from making as much money as you ought to. The successful trader has to fight these two deep-seated instincts. He has to reverse what you might call his natural impulses. Instead of hoping he must fear; instead of fearing he must hope. He must fear that his loss may develop into a much bigger loss, and hope that his profit may become a big profit. It is absolutely wrong to gamble in stocks the way the average man does.

The future of Australian energy is on the rocks. Literally.

Another pretty quiet day so far, with the major indices are sitting just in positive territory. Advance/decline figures have been negative most of the morning, but managed to work their way back to flat on the NYSE, with the Nasdaq still slightly negative. Up/down volume is positive, however, diverging from the advance/decline numbers.

Energy stocks are getting the biggest bump of the groups. Retailers are being hurt, especially by a 7.5% decline in Target (TGT). Also, the disk drive index is down, mainly due to a 3% fall in Sandisk (SNDK) shares after a downgrade.

Crude oil prices are unchanged. Bonds are higher, yields are down and the curve is flattening: 2-year at 4.46%, 5-year at 4.50%, and the 10-year at 4.55%.

The cost of mailing a first-class letter will increase from 37 cents to 39 cents, effective January 8th.

That’s a 5.4% increase, for those of you keeping score at home. But remember, there’s no inflation.

• October retail sales fell 0.1%, hurt by a big drop in auto sales.
• New York manufacturing index got a boost, but the prices paid index hit a record high.

According to the Labor Department, wholesale prices in October increased 0.7%, but fell 0.3% excluding food and energy.

Index futures are up a bit this morning, but it doesn’t look like the data had much of an impact on the bond market.