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.

A few of the sectors that helped take this market higher are started to look just a bit tired — specifically the banks, biotechs, internets and transports:

Charts courtesy of StockCharts.com

We told you yesterday that we might see some pulling back, and that’s exactly what we got today. The major indices drifted lower throughout the day, then came off their worst levels in the last half-hour, but finished in the red. The Dow 30 Industrials closed down 46 points (-0.4%) at 10811, the S&P 500 fell 6 points (-0.5%) to 1257 and the Nasdaq dropped another 9 points (-0.4%) to 2252. The Russell 2000 gave up 5 points (-0.7%) to 683. The Dow Transports lost 0.4% and the Utilities fell 0.7%. Bonds were lower today, pushing yields back up: the 5-year to 4.44% and the 10-year to 4.52%.

As you might expect, market internals fell on the negative side, with volume down slightly from yesterday. Advances/declines came in near 7 to 12 on each exchange, with up/down volume running right around that same rate on each as well. New highs/lows were 115/82 on the NYSE and 106/47 on the Nasdaq.

Winners were limited to the gold & silver stocks (+1.9%) and paper stocks (+1.4%). Losers were led by housing stocks (-2.3%), HMOs (-1.6%), semiconductors (-1.2%), steel stocks (-1.0%), banks (-1.0%) and oil stocks (-1.0%).

Crude oil prices fell back after the morning inventory report, finishing the day session at $59.21/barrel, down 73 cents. Natural gas was higher, moving up to $13.70/mBTU. The dollar index was higher by 0.5% to 91.90. The spot price of gold moved up to near $515/ounce.

BMB Note: Ok, so we were right on the pullback, at least for a day. The rally seems to have stalled a bit, as the majors haven’t made much progress for nearly two weeks now, and were pretty firmly rejected at attempted new high points yesterday. Caution is still the word, as we wait to see what happens here. I thought Dave Landry put it pretty well in his column last night, after yesterday’s late day selloff:

So what do we do? I’m concerned that the indices probed to new highs (for the year) but then reversed to close poorly. I’m also concerned about the fact that they haven’t made any forward progress in nearly 2 weeks. Therefore, I think it’s important for the market to make new highs and stay there. Until then, use caution on new positions and honor your stops on existing positions. On the short side, I think it’s too early to get bearish.

Today’s action really didn’t do much to change that way of thinking. At this point, it’s about managing existing positions and waiting to see what the market’s next move will be.

Every now and then, common sense prevails. The supreme court was asked to decide whether it was okay to dock a person’s social security checks in order to pay back old student loans. The guy in question seemed to think that A) It had either been too long so the debt should just magically disappear, or B) It wasn’t fair to ask someone living on social security to pay back loans he had made when he was younger and more able to pay them back. The Supreme Court unanimously decided the debt should be paid. A lower court chimed in and announced that 10 years didn’t mean escape either.

There’s a lot of people that don’t pay back student loans. For some reason these loans from the government are viewed as a nuisance rather than an obligation. Luckily for the taxpayer, the Supreme Court realized that letting one guy off just because he was on Social Security, might mean none of us would pay them back. Last time I checked the verbage, lo these many years ago, there was no escape clause, such as, “If you feel like it. If you get a good job.” Or “If you put it off long enough, we’ll just let it go.”

The Anderson Forecast released today says that a decline in the housing industry could cost 800,000 jobs. I have no idea whether the number is correct, or even close, but I do know that a big slowdown in the booming housing market would not be good news:

A sustained decline will hit the U.S. housing market next year, costing the nation as many as 800,000 jobs, according to a new economic report released Wednesday.

The slowdown is likely to last several years, with as many as 500,000 construction jobs and 300,000 financial sector positions lost, the quarterly Anderson Forecast predicted.

The housing stocks have reacted poorly to the report, sending the housing index down 2.25%.

Nothing seems to be able to get the market moving in either direction at this point. In the news of the day, we see planned layoffs up in November for the third month in a row, Ford may be planning to follow GM with large numbers of job cuts and plant closings, and the energy deparment reported rises in inventories for crude oil and its products (isn’t it a little odd that crude oil, distillates and gasoline ALL rose the same amount, 2.7 million barrels?? Did somebody mess up a cut-and-paste when doing the report or something?).

The major indices are all hugging the flat line, with internals slightly negative. Following through on yesterday’s strong moves are the gold & silver stocks. Also moving higher are natural gas stocks and commodities. On the losing end so far are HMOs and housing stocks.

Energy prices have dipped a bit after the inventory report, with crude and gasoline near UNCH but natural gas up 30 cents. The dollar is higher, but gold doesn’t seem to mind, as it has moved higher as well, now above $515/ounce.