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.

The dollar enjoyed surprise success in ‘05, but ‘06 hasn’t started off very well. Today the dollar index broke strong support just below the 89 mark and smashed through as its 200-day moving average, setting it up for another move down off last November’s highs. Dollar weakness could be a factor that pushes the Fed to continue hiking short-term interest rates.

Chart courtesy of StockCharts.com

It wasn’t real impressive, but it was a lot better than Friday. The major indices didn’t gain much ground, but the tone was mostly positive on the day. The Dow Industrials got back only a small fraction of Friday’s losses, gaining 21 points (+0.2%) to 10689. The S&P 500 picked up 2 points (+0.2%) to 1264, and the Nasdaq gained one point to 2249. The Russell 2000 did a little better, recovering 3 points (+0.5%) to 708. The Dow Transports were up 0.4% and the Utilities were higher by 0.1%. Bonds were just slightly higher, with yields trickling down: the 6-month yields stands at 4.47%, with the 2-year at 4.35%, the 5-year at 4.29% and the 10-year at 4.36%.

Market internals were mostly positive, but volume fell back from Friday’s high levels. Advances led declines by 12 to 7 on the NYSE, but by only 8 to 7 on the Nasdaq. Up/down volume was positive by 3 to 2 on the NYSE, but was slightly negative on the Nasdaq, by 9 to 10. New highs/lows were 156/35 on the NYSE and 123/39 on the Nasdaq.

Action in the industry groups was pretty positive, with steel stocks (+2.8%) leading the way, followed by oil services (+2.3%), airlines (+1.7%), brokers (+1.6%), commodities (+1.4%), disk drives (+1.4%), natural resources (+1.4%) and paper stocks (+1.1%). The losers were led by the HMOs (-0.7%) and retailers (-0.7%).

Energy prices fell today, with crude oil backing down to near $68/barrel. Gasoline is trading near $1.79/gallon, and natural gas had a rough day, falling to $8.65/mBTU. The dollar continues to come under pressure, with the dollar index falling 0.5% to 87.93. Gold is trading near $559/ounce.

BMB Note: Well, not much more bad to say about the market just yet. At least we didn’t get the follow-through to the downside today, but we’re certainly not out of the woods yet. I continue to play defensively, not looking to add many new longs at this point, and monitoring existing positions.

Many folks are paying close attention to the energy markets these days, and rightfully so. But away from the limelight, the sugar market is taking off. From FuturesBlogs.com:

The normally calm Sugar market has become a monster, with its second consecutive 100+ point day. Massive short-covering is behind the recent move, much of it coming from commercials who are covering their hedges and buying the Mar/May spread. Speculators continue to pile into the market, now holding over 135,000 net long positions, according to floor sources. Tight supplies continue, with a smaller than expected Brazilian harvest, increased cane usage for ethanol, and strong demand from Middle and Far East buyers. Traders are now looking at 20 cents as a new price target. Even with this massive rally, prices are still well below the 1981 high of 33.85, and it remains to be seen if this bull market has its sights on that lofty target.

The day started with the major indices getting a minor pop at the open, but now they are split, with the Nasdaq just below the flat line. Advance/decline figures started off strong, but have been in steady decline since the opening bell. In news, Japan’s Nikkei suffered another 300+ point selloff. Ford announced a Q4 profit (helped by the sale of Hertz), but is also announcing a major restructuring as I type this.

Groups moving higher thus far include the steel stocks and the brokers, while biotechs and transports lead the losers. Bonds are lower, yields up, and energy prices are generally lower, especially in natural gas. The dollar is lower, gold slightly higher.

Schaeffer’s looks at sentiment and technical indications after Friday’s mess:

Summing it up, it’s likely that we’ll see some early buying as some sentiment and technicals are pointing to some strength. The big question is whether the strength will turn into a “dead-cat bounce,” as those who didn’t sell on Friday play catch-up and sell into any strength the market presents… Any improvements to this week’s earnings results will likely bring buyers back into the mix. That said, investors will not wait very long for the earnings picture to improve. Any continuation of the unimpressive results from last week will likely cause this market to hit pockets of selling that it has not experienced in some time.

Gary Kaltbaum goes over what Friday’s action means for the market, and what you need to watch for from this point.

In the latest edition of the ChartWatchers newletter from StockCharts.com, John Murphy examines the VIX, Carl Swenlin sees trouble ahead for gold/gold stocks, and Arthur Hill isn’t thrilled with the Dow’s latest collapse.

It’s no secret to readers of Bill Fleckenstein’s readers that he isn’t an Intel fan, and when it comes to folks in the financial world, he’s not alone in questioning the numbers from IBM. Also, you’ve likely heard all the talk about how an increase in business capital expenditures is going to pick up the slack when the consumer can no longer bear the burden of holding up the economy. Fleck says it isn’t happening.