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.

Does today’s action in the bond market set the stage for a shift in the near-term direction of interest rates? The move in the 10-year yield was a large one, gapping up to break the downtrend off the November highs and moving to the highest level of yield since before Christmas.

Chart courtesy of StockCharts.com

Quite a bit of action and news after the bell tonight. Here’s the rundown from Marketwatch.com.

The oil of the future.

A much less positive tone on the street today, and the major indices all suffered small losses. The Dow dropped 2 points to 10710, the S&P 500 fell 2 points (-0.2%) to 1265 and the Nasdaq lost 5 points (-0.2%) to 2261. The Russell 2000 lost 2 points (-0.2%) to 716. The Dow Transports lost 0.8% and the Utilities lost 1.5% as interest rates moved higher. Speaking of rates, the bond market had a rough day, and rates climbed: the 6-month stands at 4.53%, the 2-year at 4.45%, the 5-year at 4.40% and the 10-year at 4.48%.

Market internals were negative, and volume ticked up a bit - we don’t like to see increased volume on the down days. Advances/declines were 8 to 11 on both exchanges, with up/down volume about 4 to 5 on each. New highs/lows were 219/45 on the NYSE and 199/34 on the Nasdaq.

Not too many groups made advances today: the best were the gold & silver stocks (+1.9%) and the steel stocks (+1.0%). On the losing side were oil services (-2.8%), disk drives (-2.4%), natural gas stocks (-2.3%), natural resources (-1.6%), housing stocks (-1.6%), utilities (-1.5%), hospitals (-1.4%) and oil stocks (-1.0%).

Energy prices fell, with crude oil backing down to $65.66/barrel. Gasoline prices fell to $1.66/gallon, and natural gas is trading at $8.45/mBTU. The dollar recovered some of its recent losses, with the dollar index moving up 0.2% to 88.41. Gold pushed back above the $560 mark to $563/ounce.

BMB Note: Certainly not a great day, but not a disaster either. It is a little bit disturbing to see volume fall off during the first two days of the week when the market drifted higher, and then increase today when things were a little shakier. Also, if the bond market really starts to have trouble, stocks will suffer. Across the industries, housing stocks have been moving lower for a couple of weeks now, and today’s existing home sales numbers didn’t help. Energy stocks had a rough day today, but it’s too early to tell if this is meaningful past some likely profit taking. We’ll see.

Still no reason to be overly aggressive on either the long side or the short side until we get a clearer picture as to where the market wants to go.

A lot of Japanese investors have been hurt by the Livedoor scandal.

I certainly don’t mean to belittle the problem, but some of the episode, and some of the mania going on in the Japanese market, harkens back to a time in the US markets just a few short years ago. And I’m not sure a lot of American investors learned many lessons from those days either.

Bond prices are slipping today, pushing yields higher, and that may be putting some pressure on stocks. According to all I’ve heard, including from this article, the 2-year Treasury auction today didn’t go real well.

You know with bonds, just as with any other product, sooner or later the buyers will stop buying. If that happens in the Treasury market, watch out. There will be some serious correcting going on, with interest rates moving considerably higher than where they are today.

Existing home sales fell 5.7% in December. This housing mania is definitely slowing, and I don’t think it matters much where interest rates are anymore.

An initial pop has faded, leaving the major indices all hovering right near the UNCH line at the moment. Advance/decline figures started strong but gave way quickly to selling. Leading the groups higher right now are the precious metals stocks and oil stocks, while disk drives and housing are leading the losers. Bonds are lower, pushing interest rates higher.

Energy prices are drifting lower for another day - inventory data out just a few minutes ago showed a surprising drop in crude of 2.3 million barrels, but an increase both gasoline (+3.3 m) and distillates (+1.8m). The dollar is pretty much unchanged, with gold slightly higher.